I do appreciate Ed's challenges, and I believe he represents widely held views. The discussion continues:
Ed:
Krugman didn´t show that people take goods and services to the market... he showed where people take themselves to the market... the mobility thing... voluntarily or involuntarily...
John:
Yes, but that is not remarkable. What is interesting is why the Irish left Ireland to get to USA opportunity. Not surprising or very interesting that they moved. The question is why did Ireland not have opportunity or market enough to retain Ireland's most adventurous. Of course, English overlordism made for crushing poverty in Ireland. The problem is why people leave, not where they go.
Ed:You don´t discount bank loans and stocks... you don´t put much emphasis on them either... the core of capitalism is the general access to credit/capital within a free market... So as I see it, your free market has to have an element of capitalization...
How do you separate free markets from capitalism then???
John:
You continue to conflate the two, when it is either or, it is dichotomous. I say I am a free-market anticapitalist because free markets are grounded in human rights, of which one is property rights. In a free market property ownership is limited to what resources you can mix with your labor. Those distorting power aggregations that result in the horrors for which you want govt to ameliorate just cannot obtain in a free market. In a free market law is based on who owns the property. In capitalism, the system very much allows power to be aggregated (with its attendant evils, power corrupts, etc) and in capitalism the law is based on who owns the capital. The powers that be, the courts, the legislature, the executive all come down on the side of the capitalists now. (It was not always so in USA) The human faces to both sides in USA are Jefferson and Hamilton. Jefferson is human rights, property; Hamilton capitalism, empire, devil take the hindmost, war, etc.
Ed:And on the subject of government intervention... let´s look at the work of the economist Amartya Sen... He explored inequality, freedom and poverty among other things...
John:
Yes, I occasionally visit the University Bookstore to see what texts the econ students are reading, and a while back it was Amyrta Sen's Development as Freedom. Sounded encourging, so I read it. But like all marxists, he gets his facts exactly right, the analysis right, then veers off when it comes to policy. Ultimately he believes it is just a matter of getting the right people and the right policies in place.
(Please don't get riled at my characterization of Sen as a Marxist. He is. It is no insult, I like marxists better than capitalists. Marxism is based in materialism, atheist, believes in an elite that will set policy right to bring us to anarchy. I like where they want to go, I just don't think they will get there. Capitalists believe we are there, the best of all possible worlds, and how do we know? Because capitalism works for capitalists. End of debate.)
Ed:In a paper once, he asked... Why do famines occur?... Most people say, "not enough food for everybody"... but he saw that the 1974 famine in Bangladesh occured despite there being more food per person that year than the two years prior and the following year... the cause of the famine was unemployment of the very poor caused by weather that didn´t allow them to work in the farms that year... Thus, the very poor could not buy food... as a result, thousands died... then as people starting dying, the affluent stockpiled food, raising the prices even more, causing more people to die...
He also wrote about the famine in 1943 in Bengal... 2 to 3 million people perished... but he saw that no one in the middle class, nor upper class felt any of the effects of the famine... only landless rural laborers died... Why?
John:
You left out the important part of his answer: war. Both of those famines were preceded by nasty wars, which are usually compliments of left wing vs right wing capitalists.
Ed:His work went on to teach governments how to provide programs to keep these things from happening... He pointed out the government´s indifference to the dying...
John:
Govt indifference is rather guaranteed... the results don't matter, and to muck things up merely assures govt will get more power.
Ed:Many governments since his work now know how to prevent famines... it is through government intervention... his work has saved millions of lives...
John:
Come on... millions have still died due to govt indifference since he started "teaching..." if not in India or Bengla Desh, it is only because it is not time yet. There is only so much a govt can do.
Ed:Sen once wrote, "Economics is not solely concerned with income and wealth but also with using these resources as means to significant ends..."
So if government can use resources to significant ends, this is good...
John:
But it cannot, there are no instances in the history of mankind when govt employed resources in a manner superior to private enterprise. People say, there are insurmountable problems, therefore we need government. Experience tells us, there is govt, therefore there are insurmountble problems. History tells us this.
Ed:He also talks about how the poor in countries like China and Sri Lanka are healthier than the poor in Brazil and South Africa... First, income is unequally distributed in Brazil and South Africa, even to this day... Second, China and Sri lanka have public health policies that address the most vulnerable...
John:
I don't buy either part of this argument - health stats are political, and generally bogus. Income is unequally distributed everywhere to some degree, and my sense is on a continuum those four countries are pretty close compared to all countries, grouped tightly on a bell-curve. Hong Kong is one of the freest political entities, and excels in both income distribution and health care, and you do not need to read reports, you can see it on the streets.
Ed:Here again we see the word... vulnerable... this is a role of government... to support the most vulnerable in society...
John:
I've never met a vulnerable person who needed my help. They wanted freedom, not my help. They wanted to trade with me, not bum some money off me. Their dire circumstances was a result of govt policy. AS Sen points out it is both "freedom to" and "freedom from" that makes or breaks development.
Ed:Again ... how does the free market take care of the most vulnerable???
The answer is not simply through freedom...
John:
Yes it is. Freedom to order their lives free of interference from policy makers. You are right to lay much blame on capitalism, so do I. You are right to prefer communism to capitalism. So do I, if forced to make a choice. Communism has the advantage of failing quicker. (And by that standard, the ideal is national socialism, since those guys, from Qin Shi Huang di to Hitler, cannot keep it together for more than a dozen years, although every one of them starts out claiming they'll rule for a thousand years.)
The inherent error is to believe that govt, an impossibly small group of people somehow can come up with the right policies for everyone else. Who are these people who are exceptionally enlightened, how do they get the power to make the rules, how is it that they alone are incorruptible? Are they really angels in disguise sent to help us? Why pretend govt can do this when they cannot? Why pretend people cannot solve their own problems in freedom when they can? Yes, the story from 1 Samuel 8 is distressingly familiar, and a consolation for those who wish to oppress others, but in case of emergency, govt needs to get out of the way.
John:
Yes, but that is not remarkable. What is interesting is why the Irish left Ireland to get to USA opportunity. Not surprising or very interesting that they moved. The question is why did Ireland not have opportunity or market enough to retain Ireland's most adventurous. Of course, English overlordism made for crushing poverty in Ireland. The problem is why people leave, not where they go.
Ed:You don´t discount bank loans and stocks... you don´t put much emphasis on them either... the core of capitalism is the general access to credit/capital within a free market... So as I see it, your free market has to have an element of capitalization...
How do you separate free markets from capitalism then???
John:
You continue to conflate the two, when it is either or, it is dichotomous. I say I am a free-market anticapitalist because free markets are grounded in human rights, of which one is property rights. In a free market property ownership is limited to what resources you can mix with your labor. Those distorting power aggregations that result in the horrors for which you want govt to ameliorate just cannot obtain in a free market. In a free market law is based on who owns the property. In capitalism, the system very much allows power to be aggregated (with its attendant evils, power corrupts, etc) and in capitalism the law is based on who owns the capital. The powers that be, the courts, the legislature, the executive all come down on the side of the capitalists now. (It was not always so in USA) The human faces to both sides in USA are Jefferson and Hamilton. Jefferson is human rights, property; Hamilton capitalism, empire, devil take the hindmost, war, etc.
Ed:And on the subject of government intervention... let´s look at the work of the economist Amartya Sen... He explored inequality, freedom and poverty among other things...
John:
Yes, I occasionally visit the University Bookstore to see what texts the econ students are reading, and a while back it was Amyrta Sen's Development as Freedom. Sounded encourging, so I read it. But like all marxists, he gets his facts exactly right, the analysis right, then veers off when it comes to policy. Ultimately he believes it is just a matter of getting the right people and the right policies in place.
(Please don't get riled at my characterization of Sen as a Marxist. He is. It is no insult, I like marxists better than capitalists. Marxism is based in materialism, atheist, believes in an elite that will set policy right to bring us to anarchy. I like where they want to go, I just don't think they will get there. Capitalists believe we are there, the best of all possible worlds, and how do we know? Because capitalism works for capitalists. End of debate.)
Ed:In a paper once, he asked... Why do famines occur?... Most people say, "not enough food for everybody"... but he saw that the 1974 famine in Bangladesh occured despite there being more food per person that year than the two years prior and the following year... the cause of the famine was unemployment of the very poor caused by weather that didn´t allow them to work in the farms that year... Thus, the very poor could not buy food... as a result, thousands died... then as people starting dying, the affluent stockpiled food, raising the prices even more, causing more people to die...
He also wrote about the famine in 1943 in Bengal... 2 to 3 million people perished... but he saw that no one in the middle class, nor upper class felt any of the effects of the famine... only landless rural laborers died... Why?
John:
You left out the important part of his answer: war. Both of those famines were preceded by nasty wars, which are usually compliments of left wing vs right wing capitalists.
Ed:His work went on to teach governments how to provide programs to keep these things from happening... He pointed out the government´s indifference to the dying...
John:
Govt indifference is rather guaranteed... the results don't matter, and to muck things up merely assures govt will get more power.
Ed:Many governments since his work now know how to prevent famines... it is through government intervention... his work has saved millions of lives...
John:
Come on... millions have still died due to govt indifference since he started "teaching..." if not in India or Bengla Desh, it is only because it is not time yet. There is only so much a govt can do.
Ed:Sen once wrote, "Economics is not solely concerned with income and wealth but also with using these resources as means to significant ends..."
So if government can use resources to significant ends, this is good...
John:
But it cannot, there are no instances in the history of mankind when govt employed resources in a manner superior to private enterprise. People say, there are insurmountable problems, therefore we need government. Experience tells us, there is govt, therefore there are insurmountble problems. History tells us this.
Ed:He also talks about how the poor in countries like China and Sri Lanka are healthier than the poor in Brazil and South Africa... First, income is unequally distributed in Brazil and South Africa, even to this day... Second, China and Sri lanka have public health policies that address the most vulnerable...
John:
I don't buy either part of this argument - health stats are political, and generally bogus. Income is unequally distributed everywhere to some degree, and my sense is on a continuum those four countries are pretty close compared to all countries, grouped tightly on a bell-curve. Hong Kong is one of the freest political entities, and excels in both income distribution and health care, and you do not need to read reports, you can see it on the streets.
Ed:Here again we see the word... vulnerable... this is a role of government... to support the most vulnerable in society...
John:
I've never met a vulnerable person who needed my help. They wanted freedom, not my help. They wanted to trade with me, not bum some money off me. Their dire circumstances was a result of govt policy. AS Sen points out it is both "freedom to" and "freedom from" that makes or breaks development.
Ed:Again ... how does the free market take care of the most vulnerable???
The answer is not simply through freedom...
John:
Yes it is. Freedom to order their lives free of interference from policy makers. You are right to lay much blame on capitalism, so do I. You are right to prefer communism to capitalism. So do I, if forced to make a choice. Communism has the advantage of failing quicker. (And by that standard, the ideal is national socialism, since those guys, from Qin Shi Huang di to Hitler, cannot keep it together for more than a dozen years, although every one of them starts out claiming they'll rule for a thousand years.)
The inherent error is to believe that govt, an impossibly small group of people somehow can come up with the right policies for everyone else. Who are these people who are exceptionally enlightened, how do they get the power to make the rules, how is it that they alone are incorruptible? Are they really angels in disguise sent to help us? Why pretend govt can do this when they cannot? Why pretend people cannot solve their own problems in freedom when they can? Yes, the story from 1 Samuel 8 is distressingly familiar, and a consolation for those who wish to oppress others, but in case of emergency, govt needs to get out of the way.
8 comments:
John, I appreciate this opportunity...
John between *** ***
***In a free market law is based on who owns the property. In capitalism, the system allows power to be aggregated...***
In a free market, how do you prevent businesses from dominating market share, or doing mergers & acquisitions??
***...there are no instances in the history of mankind when govt employed resources in a manner superior to private enterprise.***
This belief is truly at the heart of your views... I don´t share it... Government provides pure public goods much better... Let me give you a story about a father providing food at his daughter´s wedding reception ..
The food is the public good ... In economic terms, it is non-excludable in consumption, meaning that he cannot prevent people who do not pay from consuming the food..
Now let´s say that the father thinks like a businessman in the free market. And when he plans the amount of food to serve,...
> he begins to think about the free-riders who come to the reception only to eat... He doesn´t want to serve food to them because they won´t pay ..
> Now the father thinks about what each individual guest would be willing to pay ... some pay more, some couldn´t even pay the cost of the food .
Taking these thoughts into consideration, and doing a MR (marginal revenue) optimization ... A business has to optimize ... the father decides on the amount to serve... and lo and behold, there isn´t enough food for everybody ... some people who deserve the food, go without, and some of the free-riders get to eat... Still, he is content because of his efficient optimization as a private enterprise.
But then, grumbling begins among the guests,... saying that the father is cheap and a bad father... that he doesn´t care for his daughter ... They say he must be poor or have money problems ... they say, in effect, he is not efficient because there isn´t enough food..
Now the daughter is sad and looks at her father with disappointment..
We now encounter the negative externalities of a private-sector father trying to provide a public good ... He won´t provide enough to satisfy MSB (marginal social benefit)... Look at Samuelson´s condition on Wiki..
http://en.wikipedia.org/wiki/Samuelson_condition
The government provides the public good as the SUM of MRS (marginal rate of substitution) whereas a private business will provide the good only at an individual´s MRS, not summing ... The summing of the MRS under the government makes the public good much more abundant and ultimately more efficient than private business in meeting social need ..
Now if the father had just counted the guests and provided enough for all, not worrying about the free-rider problem... there would have been enough for everyone, … the daughter happy … the reception more fun.... more energy, more dancing, more liveliness, more PRODUCTIVE atmosphere ..
Lots of good positive externalities to go around... DRINK UP!
This is part of creating an atmosphere for a vibrant economy ... In the past 80 years of government taxing ... you see that economic growth happened mostly with higher taxes and the govt spending that went along with that... (link)
http://www.angrybearblog.com/2010/06/presidents-tax-burden-and-economic.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FHzoh+%28Angry+Bear%29
Why does this happen? ... Because government provides public goods in a way that satisfies more public need, resulting in a more vibrant economy..
The govt looks inefficient and wasteful to a private business, but it isn´t... When the govt provides public goods well, it creates more abundance and more opportunity for MORE PEOPLE leading to more economic growth...
AS to the question how does a free market prevent mergers and acquisitions and thus market domination, the short answer is the means to do so, interest payments, do not occur in a free market. If you find this answer curious, hang on, I am in the middle of a debate with hard core economists over this, and have not finished my argument, so stand by for that, and in the meantime I've recommended a text on Islamic finance that shows how one can have an economy without interest.
As to the story of the wedding and public goods, 80 years is not much of a track record to recommend a system. It has been more like 75 years, and I say this to only point out the Soviet Union only lasted 75 years... we were the victors after WWII, and wrote the rules that benefit US empire. What you see as a vibrant economy here, most of the rest of the world saw as domination, resource extraction, war, famine and pestilence compliments of USA econ system. We never paid what the oil, gold, tin, diamonds, labor, etc cost. We partied like victors.
It is over now, and important to understand how business works, because our contrived advantages are gone, now it gets down to human action.
Hi John,
A modern economy has to have interest at least for one reason... Risk... charging interest allows a lender of capital to cover some of the costs of those who don´t make loan payments...
If a lender doesn´t charge interest, they can only lose capital... this would almost erase lending in an economy, and thus erase investment of product surplus...
As for economic dominatin by the US, I agree, the loans made to 3 world countries extracted their surplus product... those countries had to contract out US companies with the loan money...
Now, the IMF is famous for subjugating a country to its rules in lending money... but the IMF is getting better on that... some new economists there are changing that and being more flexible...
of course I am thoroughly conversant of interest and the modern economy, so you'd have to assume. In fct since I spotted the last several bubbles and acted accordingly, it is clear I understand economics and interest better than Greenspan, Bernanke, Reich, Paulson, etc..;, being 100% apprised of all the ins and outs of interest and econ, there must be something else not usually considered. I'll get around to that in time.
As to the IMF getting better at what they do, I doubt it. I expect it to be gone in the next few years as China, Russia and others settle on an alternative to USA hegemony in the rest of the world.
Then let me put your economic insight to the test... This is the question separating the two main factions in economics right now...
When do you see long term interest rates rising?
and what condition will trigger the rise?
I am afraid if you put my insight to the test you will find it wanting... first, I think charging interest is contrary to natural law; second what interest rates we have, as you pose the question, has everything to do with govt policies, which govt especially has no business in, like it has no business in lotteries. So it is kind of a trick question what you pose.
Do you like the austerity measures to cut government spending that are happening around the world?
Do you see positive results or negative ones?
Well, austerity measures for whom? Government workers? We are all under austerity measures. Let me sketch my views with an example. I am all for getting rid of the FED, except.. withoutnthe fed ther eis no way to support agribiz and frankenfoods that feeds the vast majority of americans. Without the FED, Cargill and Archer Daniels Midland and other big Ag will fail... but there are simply not enough small farmers to feed usa.., and farming require cultural capital built up over generation, something we wiped out in decades... so the difference between FED+ADM and small farms is mass starvation.
What i'd like to see is every year the rules and subsidies of five years earlier are eliminated. So ten years from now, the rules of 50 years ago are disappearing. We could rebuild a natural economy this way. Revolutin is always worse than what we have, except as in communist russia, the people in charge before are the same ones in charge after, except for few true believers.
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