Dat inequality

[CoccoBill]

This view of snake oil salesmen running off with the cash as his company dies is mostly a myth. It's not that people wouldn't try it, but that responsibilities and incentives don't align with the idea that one man can or would do this (to the degree that it's a systemic risk). Nobody at Google could do this. Nobody at Amazon, nobody at Goldman, nobody at GE. The responsibilities are way too dispersed. There are shareholders.

I didn't mean embezzlement but hiding facts from the customers. Every company is run by people, which most of the time have their own best interests first. If they're left with a choice of admitting a fault with something in their personal field of responsibilities, or hiding it and getting away with it until they've left the company, I'm pretty sure many would be tempted. Everybody at Google, Amazon and Goldman could do this, and many have. My point was, in answer to your question, that companies are run by people, and most of them couldn't care less about what their clients think when their personal ass is on the line.

Even if you scenario was true, how do you suppose regulators could regulate against it? This is more of the "perfect being the enemy of the good" thing. It's an assumption that if capitalism is flawed, government can necessarily fill the gap. That isn't true and every bit of evidence we have is that government is inherently terrible at filling these gaps. This should be an open and shut concept given the fact that there are millions of felons for smoking weed. Renton once told me that he thinks people are bred to believe in the state, so it becomes like blasphemy to suggest otherwise, and we so easily ignore colossal examples of how government destroys lives to far, far, far, far greater degrees than private enterprise ever has

What about drug laws in Colorado, the Netherlands or Portugal? I would argue that those are government regulations in place that demonstrably work well. Of course it's hard to say what would happen if all drugs were completely unregulated, maybe that could be the optimal solution. But I also don't think an issue like this can be proven one way or the other with just a single or even several case examples.

These are the assumptions, but not how it falls down. Companies "finding loopholes in their policies" is a capability given to them by government, so it's not market concern.

I meant internal company policies, such as insurance policies. We'll always have regulations, whether mandated by public or private actors. Again, the public sector policies at least in theory have the citizen's best interests in mind, the private sector aims solely for ROI.

That aside, companies trying to create more wealth is good, pretty much regardless how it's done. The reason is because there are other companies doing the same thing and consumers are choosing the winners.

Unless when the competition isn't fair, because of for example false advertizing (which again, may correct itself over time, but not as soon as it can), unethical business practices, etc. And I know, some of these may be created by government regulation, which is a case against bad regulations and lobbied governments, not against all regulations and governments. While it's easy and tempting to demonize governments, it's important to remember that at least for you in the US, your frame of reference is an overbloated lobbied caricature of one, not the "hey, I just wanna farm and get drunk, let's vote in a bunch of smart people to take care of this administrative shit for us" it was meant to be.

The last thing companies can get away with is screwing customers. Just look at how in the US (where the capitalist ideal is most held), "the customer is always right" is a thing. Restaurants exist in one of the freest markets around, and every single one of them bends over backwards to please the customer, even when the customer is wrong, because the customer really isn't "wrong" because the easiest thing in the world would be for him to go next door and help the competition

Yup, that's true. But why is that health inspections regularly find stuff like rat and poo in pizzas when the market was supposed to make them all clean? How is the market stopping someone from serving you terd pizzas for a few months, then opening with a new name in another part of town and continue doing the same after someone finding out? I would argue the cleanliness of the kitchens, effective cold storage chains and molecular consistencies of their dinners are more often revealed by official health inspections than avid customers.

As for what you said about government incentives being about public safety and stuff, that's true to a small percentage, but because there is little accountability, it becomes a burden for bureaucracies. How many videos of cops beating or killing innocent civilians in the US have you watched? How many times have you seen these cops punished? Just like with companies, in bureaucracies, the incentive is self-perpetuation. But unlike in companies, in bureaucracies, there is little accountability for results since their revenue streams are not based on results. If McDonalds was acting like the LAPD, it would be bankrupted within a month. If people try to stop the LAPD when they're hurting somebody, they get put through extensive legal trouble and usually into prison.

I feel those are more examples that are largely US specific, I think in most countries cops beating up and killing innocents is not a big issue. So again, an argument against one specific implementation of governance, not an argument against governance. And more to the point, I meant the "theoretical" incentive of a government is the citizens best interest, while for a company that is shareholder value.

The word "corruption" probably wouldn't exist except for government. Since government has little accountability, its incentives align more with fraud and coercion than with results.

You're probably right. Doesn't mean that people become corrupt when working for the government or stop being such when working for a company, just that different words are used, or at least different legal terms.

I think a lot of people from the relatively small areas where government doesn't suck nearly as much (like Scandinavia) are wrong if they are to call government a driver of the good in their societies. Those regions are healthy and unified because the populace is healthy and unified, and government was not the creator of that.

The governments are, or at least should be reflections of their populace, nothing more nothing less. If they're not, the wrong people got voted in. I'd suggest basic IQ, history and psychological testing in order to be allowed to vote.

Sorry about monsterpost.

[wufwugy]

I didn't mean embezzlement but hiding facts from the customers. Every company is run by people, which most of the time have their own best interests first. If they're left with a choice of admitting a fault with something in their personal field of responsibilities, or hiding it and getting away with it until they've left the company, I'm pretty sure many would be tempted. Everybody at Google, Amazon and Goldman could do this, and many have. My point was, in answer to your question, that companies are run by people, and most of them couldn't care less about what their clients think when their personal ass is on the line.

This all assumes monopoly power. In a market, it doesn't matter that much if some people try to screw over clients when their asses are on the line because the competitive dynamic allows for others who can do better to do better. Like with natural selection, consumer selection weeds out identified problems.

When comparing people in enterprise to people in government, it's all just about incentive structure. Every one of us acts in our own self-interest first and foremost. Capitalism is the mechanism that harnesses that fact and uses it to create a society that improves itself

What about drug laws in Colorado, the Netherlands or Portugal? I would argue that those are government regulations in place that demonstrably work well. Of course it's hard to say what would happen if all drugs were completely unregulated, maybe that could be the optimal solution. But I also don't think an issue like this can be proven one way or the other with just a single or even several case examples.

What in those regulations are beneficial? The benefit in those regions is in every way that regulations that deter freedom have been overturned. The benefit for Colorado hasn't been in its new regulations of marijuana, but in its deregulation of punishing people for marijuana

I meant internal company policies, such as insurance policies. We'll always have regulations, whether mandated by public or private actors. Again, the public sector policies at least in theory have the citizen's best interests in mind, the private sector aims solely for ROI.

One of the focal points of the Caplan lecture I previously posted is how even though public sector policies have best interests at heart, they result in overall negative things, yet even though the private sector is selfish, it results in the best interests. It's counter-intuitive, but it is true that the economic mechanism of progress is selfish actors competing with each other. Intentions are not key, incentives are key. Government intends to do well, but its incentives don't promote doing well and it ends up not doing well. Entrepreneurs do not intend to do well (unless you think being selfish is "doing well"), but their incentive is to create a product or service that people freely choose to accept, and this dynamic coupled with competition from other entrepreneurs doing the same thing results in societal benefit

Unless when the competition isn't fair, because of for example false advertizing (which again, may correct itself over time, but not as soon as it can), unethical business practices, etc. And I know, some of these may be created by government regulation, which is a case against bad regulations and lobbied governments, not against all regulations and governments. While it's easy and tempting to demonize governments, it's important to remember that at least for you in the US, your frame of reference is an overbloated lobbied caricature of one, not the "hey, I just wanna farm and get drunk, let's vote in a bunch of smart people to take care of this administrative shit for us" it was meant to be.

Well, I wouldn't say that's how the US was meant to be. It was originally set up to have an incredibly weak government, but over time, power consolidated for a handful of reasons (usually related to security). But that's a different topic

Regardless, you're going the "unless competition isn't fair" route. What mechanisms make competition less fair and what mechanisms make them more fair? I think if you flesh that out you'll find that government intervention does the former and lack of government intervention does the latter.

The belief is that government intervention helps the little guy, but it does the opposite. The overwhelming majority of intervention favors the big, entrenched guy. Helping the little guy comes by keeping government out of the market. It is a big mistake to think that businesses have the sort of capital or prestige to crush the little guy in a free market. If the pharmaceutical companies attempted to do what they've done to beat back competition without the use of government, they'd all be bankrupt. "Big pharma" should be changed to "Big government backing favored pharmaceutical companies and screwing everybody else"

Yup, that's true. But why is that health inspections regularly find stuff like rat and poo in pizzas when the market was supposed to make them all clean? How is the market stopping someone from serving you terd pizzas for a few months, then opening with a new name in another part of town and continue doing the same after someone finding out? I would argue the cleanliness of the kitchens, effective cold storage chains and molecular consistencies of their dinners are more often revealed by official health inspections than avid customers.

You're vastly underestimating the logistics it takes to start and operate successful businesses. Only somebody who wants to lose nothing but assloads of money could sell turd pizzas for a few months then close up shop and do it again. You're also underestimating consumers. Who the hell wants to eat a turd pizza? This hypothetical entrepreneur isn't going to just be able to up and sell whatever he wants to anybody he wants. A third underestimate is how much "turd" there is in your food already, despite the best efforts of regulators and businesses (mass production and oral consumption is messy). A fourth overestimation is how government could do any better. Here's what works better than government regulation of food safety: a popular journalist reports that McDonalds knew that rat poison was in its food, people have died, the majority of McDonalds' customers are now going to Burger King, McDonalds and all its stakeholders are now in the process of bankruptcy

The incentive for businesses to run a clean ship is much, much higher than the incentive for the regulators to make sure they're running a clean ship. If a business gets caught screwing its customers, it's doomed. If the government gets caught screwing anybody, it slaps itself on the wrist and takes more tax dollars. Start listing examples of big businesses that have gotten away with screwing people over, and you'll find that they've been bailed out by government.

I feel those are more examples that are largely US specific, I think in most countries cops beating up and killing innocents is not a big issue. So again, an argument against one specific implementation of governance, not an argument against governance. And more to the point, I meant the "theoretical" incentive of a government is the citizens best interest, while for a company that is shareholder value.

It's just one example. Europe has a whole bunch of other problems. Even then, an example of government acting bad in one place but not another doesn't mean the problem isn't inherent. Besides, Europe has been the biggest culprit of government fucking people in the entire world. Lest we forget wars are not waged by private enterprise. There are few better examples of the destruction wrought by government than the colonialism and war of European ones. Today, we live in a golden age like never before precisely because of capitalism

The governments are, or at least should be reflections of their populace, nothing more nothing less. If they're not, the wrong people got voted in. I'd suggest basic IQ, history and psychological testing in order to be allowed to vote.

Herein lies a good example of the problem of regulation. Because I completely disagree with this policy preference, and maybe I'm right. Or maybe you're right. Or maybe somebody else is right. But how could we find out who is right if we create a perpetuating incumbency on the issue?

I think the best salve to the issue is still allowing every citizen to have one vote, but letting them sell their votes if they so please. At first it sounds like it would be a disaster. It sounds like the Kochs would just buy up enough votes to get politicians to overturn the constitution and turn the US into a Kochtatorship, but the logistics don't back that up. What the ability for voters to sell votes would do is vastly increase the amount that people with an agenda would have to pay to get their agenda enacted, and it would likewise increase the amount of wealth (and potential ability to fight against an agenda) of those who sell their votes

Sorry about monsterpost.

It's the name of the game, yo

[wufwugy]

I feel like I'm not adequately answering many questions. I reread your first line

I didn't mean embezzlement but hiding facts from the customers.

and a simple answer to this is "does government do any better?" If we're competing on who hides more for its constituents, private enterprise or government, I think the clear winner is government

Statism is like the God of the Gaps fallacy used by creationists. Instead of "God" being the answer to anywhere science hasn't figured things out, "government" is the answer to any holes in capitalism. Just because somebody can point out an imperfection of markets doesn't mean that the automatic response of government intervention is better.

As poorly as markets work (in an ideal sense, they are very poor), government intervention is substantially worse. This may not be categorically true, but it is mostly true, and I think the onus is on intervention supporters to demonstrate exactly where and why their specific policies are better than the market. We have overwhelming evidence that the markets work incredibly well, and very little evidence that government works well. Likewise, we have very little evidence that markets cause enormous problems, and overwhelming evidence that government does

[a500lbgorilla]

I don't mean that the system evolves, but that the system functions similarly to biological evolution. The dynamic of natural selection isn't much different characteristically than what we could call consumer selection or product selection or whatever. Simplifying evolution, we have two factors: environment and mutation. These factors interact and the most able to succeed do while the others die. This doesn't create perfect specimens. Instead it creates all sorts of whack specimens. But our attempts to engineer something better with similar complexity has come as close to success as a doberman is to inventing wormhole travel.

Markets are the same. Two factors: production and consumption. They interact for a spell then the companies and consumer behavior that is most able to succeed, does. If we're sticking to this analogy, government is sorta like eugenics. Wherever it regulates, it chooses the winners and losers, not based on their own merits, but based on arbitrary concerns of the government and effects (predicted or unpredicted) of the regulations.

You're missing a rather subtle point. There is a reason why our understanding of evolution is robust and predictive in ways that our understanding of economics isn't.

We have a mechanism to calibrate our modeled understanding of evolution. It's the mechanism that allows us to discover and describe genetics. We can guess and check via the scientific method. Which is not something you can do with economics. Because you can't experiment with an economy like you can with living organisms. Economies are hard to observe, hard to isolate, hard to play with.

Science has a way to discover the mechanism of heredity/mutation/speciation - DNA. Economics does not yet have a way to discover the mechanism of the invisible hand/benefitial competition/whatever we're doing.


From VS Ramachandrans explanation of Crick and Watson's discovery of DNA


"It is well known that Crick and Watson unraveled the double helical structure of the DNA molecule: two twisting complementary strands of nucleotides. Less well known is the chain of events culminating in this discovery.


First, Mendel's laws dictated that genes are particulate (a first approximation still held to be accurate). Then Thomas Morgan showed that fruit flies zapped with x-rays became mutants with punctate changes in their chromosomes, yielding the clear conclusion that the chromosomes are where the action is. Chromosomes are composed of histones and DNA; as early as 1928, the British bacteriologist Fred Griffith showed that a harmless species of bacterium, upon incubation with a heat-killed virulent species, actually changes into the virulent species! This was almost as startling as a pig walking into a room with a sheep and two sheep emerging. Later, Oswald Avery showed that DNA was the transformative principle here. In biology, knowledge of structure often leads to knowledge of function—one need look no further than the whole of medical history. Inspired by Griffith and Avery, Crick and Watson realized that the answer to the problem of heredity lay in the structure of DNA. Localization was critical.


Crick and Watson didn't just describe DNA's structure, they explained its significance. They saw the analogy between the complementarity of molecular strands and the complementarity of parent and offspring—why pigs beget pigs and not sheep. At that moment modern biology was born."


Ain't nothing like this in any of the economic literature I've ever seen. And if there is, I desparately want to read it.

I hesitate to make this point because it becomes a very harried discussion from here on out that calls back to the philosophy of science that no one in their right mind would want to get in to, but this is the core of my difficulty with economics. I know why I can trust the theoretical explanations underlying the behavior of planes, but not why I should trust similar explanations for the behavior of unregulated free markets.

[Renton]

A general response to CoccoBill:

1) Bad Governance vs Good Governance

It isn't that the governments are bad, it's that they are ill-equipped to act accordingly. You could fire the entire Congress and replace them with the top 535 IQ people in the country, hypothetical paragons of morality with no self interest to speak of, and they still would not be able to determine the correct amount of money to invest in ethanol production, or what the proper wage for a bussboy should be. That information can only exist because of the voluntary participation of millions of individuals in the market.

2) "Those are people working both for the public and private sectors, there's nothing inherently different in their analytic capabilities. Their incentives and goals, however, differ."

You go on to describe the ways in which the private accountant could act in a corrupt manner and the public one in a virtuous manner. The facility for corruption is universal to all people, private sector or public. However, the big difference is that the public sector guy is insulated from the consequences of his corruption or in some cases completely divorced from them. This causes him to be even more corruptible.

On the other hand, actors in the private sector have their own money on the line, and stand to lose it a lot more readily if they fail. And the company they work for stands to lose even more. Yes, private companies have the capacity to defraud customers, but doing so is an enormous risk, one which resilient firms will not be willing to take.

3) Value:

This isn't in response to CoccoBill specifically, but I just want to say a short piece about value. Value is the most basic concept that is lost on laypeople who discuss economics. Most people think that all items have inherent value, and become frustrated when they realize that the value of something can change in the blink of an eye.

Value is a completely subjective attribute. It is what a given individual is willing to pay for a given item at a given moment, and nothing more. True value can only be determined by voluntary exchange. Every single thing that a government does is to arbitrarily set its own values onto things. Republics do so based on a plurality of elected representatives' opinions.

The whole point of a government is to impose such values because of an implicit given that people in voluntary exchange will misallocate. They will undervalue things like safety and security and overvalue things like jelly donuts and pussy and beer. You have to start from this point, IMO, to justify the belief in a government.

So when you're building the optimal government, it all has to begin with "Well people aren't going to value X like they *should*, so the government will seize Y amount of their assets to provide X to everyone." This is inherent waste on a colossal scale because the natural system for determining value has been undermined from the start. You have to reconcile this waste somehow with a collective benefit or gain in stability.

[Savy]

:wuf - Too much bias. Want to read your arguments but I get put off.

First paragraph about drugs, do you really think this is true? Almost all big pharmaceutical companies hate "illegal drugs" as do almost all people over the age of 40 that I've ever spoke to, which includes a lot of people who have done a lot of drugs who still think they are bad. Although clearly anecdotal evidence isn't good it's not exactly trying to break a trend which holds true.

If you want to argue where the drug trend came from in the first place I'm not sure it was government.

And I genuinely mean none of this nastily I just find Renton's posts to be slightly less bias and more open to bits he doesn't understand.

And I am quite drunk.

[wufwugy]

You're missing a rather subtle point. There is a reason why our understanding of evolution is robust and predictive in ways that our understanding of economics isn't.

We have a mechanism to calibrate our modeled understanding of evolution. It's the mechanism that allows us to discover and describe genetics. We can guess and check via the scientific method. Which is not something you can do with economics. Because you can't experiment with an economy like you can with living organisms. Economies are hard to observe, hard to isolate, hard to play with.

Science has a way to discover the mechanism of heredity/mutation/speciation - DNA. Economics does not yet have a way to discover the mechanism of the invisible hand/benefitial competition/whatever we're doing.


From VS Ramachandrans explanation of Crick and Watson's discovery of DNA


"It is well known that Crick and Watson unraveled the double helical structure of the DNA molecule: two twisting complementary strands of nucleotides. Less well known is the chain of events culminating in this discovery.


First, Mendel's laws dictated that genes are particulate (a first approximation still held to be accurate). Then Thomas Morgan showed that fruit flies zapped with x-rays became mutants with punctate changes in their chromosomes, yielding the clear conclusion that the chromosomes are where the action is. Chromosomes are composed of histones and DNA; as early as 1928, the British bacteriologist Fred Griffith showed that a harmless species of bacterium, upon incubation with a heat-killed virulent species, actually changes into the virulent species! This was almost as startling as a pig walking into a room with a sheep and two sheep emerging. Later, Oswald Avery showed that DNA was the transformative principle here. In biology, knowledge of structure often leads to knowledge of function—one need look no further than the whole of medical history. Inspired by Griffith and Avery, Crick and Watson realized that the answer to the problem of heredity lay in the structure of DNA. Localization was critical.


Crick and Watson didn't just describe DNA's structure, they explained its significance. They saw the analogy between the complementarity of molecular strands and the complementarity of parent and offspring—why pigs beget pigs and not sheep. At that moment modern biology was born."


Ain't nothing like this in any of the economic literature I've ever seen. And if there is, I desparately want to read it.

I hesitate to make this point because it becomes a very harried discussion from here on out that calls back to the philosophy of science that no one in their right mind would want to get in to, but this is the core of my difficulty with economics. I know why I can trust the theoretical explanations underlying the behavior of planes, but not why I should trust similar explanations for the behavior of unregulated free markets.

I think economics is more robust than you think, but you are correct that social sciences are the least of the experimental. Any step less experimental and it looks like humanities and art

However, there is a load of data and theory in economics. There's still a lot of algebra and consensus views. As far as I can tell, the technical stuff is almost never discussed by any who are not themselves hardcore economics academics. A big part of the reason why people think economics is lacking in any level of robustness is two things: (1) most trained in economics are in micro, not macro, and macro is very different than micro. (2) It's political. Even trained academics let their politics override way too often

Regardless, I think the public vastly overestimates the disagreement between PhDs. There's a lot of consensus, but few people listen

[wufwugy]

:wuf - Too much bias. Want to read your arguments but I get put off.

Then be better than I am. Don't let your perception of my bias become your own bias, and figure out what my argument is so you can show me why I'm wrong

Why do you think marijuana is illegal?

[CoccoBill]

This all assumes monopoly power. In a market, it doesn't matter that much if some people try to screw over clients when their asses are on the line because the competitive dynamic allows for others who can do better to do better. Like with natural selection, consumer selection weeds out identified problems.

Not at all? Any mid-manager with any decision power (e.g. product/service/security manager) is able to do this. The damage is done and the person moved on to greener pastures before the info comes out and the market is able to adjust, this is my point. And of course this is also possible and does happen in government, and pretty much every position where humans exist. The point was that it does also happen in the private sector, where you suggested it can't happen because markets.

When comparing people in enterprise to people in government, it's all just about incentive structure. Every one of us acts in our own self-interest first and foremost. Capitalism is the mechanism that harnesses that fact and uses it to create a society that improves itself

I'm sure it improves certain aspects, safety and equality not being some of them. I'm unconvinced that those and some other qualities would be ensured by free markets alone, since free markets are run by people who are in large part selfish greedy idiots. I'd rather put restrictions on the damage those can do.

What in those regulations are beneficial? The benefit in those regions is in every way that regulations that deter freedom have been overturned. The benefit for Colorado hasn't been in its new regulations of marijuana, but in its deregulation of punishing people for marijuana

Those were just used as an example how policies can improve, using your example case.

One of the focal points of the Caplan lecture I previously posted is how even though public sector policies have best interests at heart, they result in overall negative things, yet even though the private sector is selfish, it results in the best interests. It's counter-intuitive, but it is true that the economic mechanism of progress is selfish actors competing with each other. Intentions are not key, incentives are key. Government intends to do well, but its incentives don't promote doing well and it ends up not doing well. Entrepreneurs do not intend to do well (unless you think being selfish is "doing well"), but their incentive is to create a product or service that people freely choose to accept, and this dynamic coupled with competition from other entrepreneurs doing the same thing results in societal benefit

I didn't watch that yet, I'll be sure to do so. My gut instinct however is, that it deals with the current situation (in the US), not postulating a theory of how these are the unavoidable outcomes in all cases.

The belief is that government intervention helps the little guy, but it does the opposite. The overwhelming majority of intervention favors the big, entrenched guy. Helping the little guy comes by keeping government out of the market.

Again, is this an observation of the effect of current US policies, or based on a theoretical analysis of all possible regulatory models? Let's make it clear at this point, that from what I know of US policies, some first hand, I'm sure a free market would be a much better option than what you have in place now. I just think models that beat them both can exist.

It is a big mistake to think that businesses have the sort of capital or prestige to crush the little guy in a free market. If the pharmaceutical companies attempted to do what they've done to beat back competition without the use of government, they'd all be bankrupt. "Big pharma" should be changed to "Big government backing favored pharmaceutical companies and screwing everybody else"

I don't think it takes much capital and prestige to put out false info about competitors or your own products, the less easy those are to fact check the better. They might get caught or they might not. Sometimes when they do get it's already too late. Also there are several psychological mechanisms affecting this, such as negativity bias, which makes it much more likely for people to remember any false claims put out (such as in elections smearing a candidate) than the later corrections or counterarguments. Your pharma observation is due to bad government, not *any government*, IMO.

You're vastly underestimating the logistics it takes to start and operate successful businesses. Only somebody who wants to lose nothing but assloads of money could sell turd pizzas for a few months then close up shop and do it again. You're also underestimating consumers. Who the hell wants to eat a turd pizza? This hypothetical entrepreneur isn't going to just be able to up and sell whatever he wants to anybody he wants. A third underestimate is how much "turd" there is in your food already, despite the best efforts of regulators and businesses (mass production and oral consumption is messy). A fourth overestimation is how government could do any better.

It doesn't take all that much to start up a pizza joint and this is actually a real life example, minus the turds. But you may be right in the sense, that these are mainly made possible due to gov incentives for small businesses. However, I'm sure someone can come up with a better example, where the profits from unethical business make it worthwhile to operate even short periods and start anew. Internet crime and spamming come to mind, but just because I can't think of any right now doesn't mean they don't exist. Anyway, by a turd pizza I meant cutting corners in the production to produce something that looks and tastes legit, but isn't up to the expected standards.

Here's what works better than government regulation of food safety: a popular journalist reports that McDonalds knew that rat poison was in its food, people have died, the majority of McDonalds' customers are now going to Burger King, McDonalds and all its stakeholders are now in the process of bankruptcy

How regularly do popular journalists visit every goddamn burger joint in the US? And I don't mean for a happy meal, but to inspect their kitchens, sanitation processes, cold chains, storage, food samples and other safety standards? I wouldn't want to rely solely on foodspotting reviews or some crap like that. I'm afraid not a large enough portion of the clientele is ready to dish out cash for independent 3rd party inspection services, they just want their 99c menu and prefer not to know what's in it.

The incentive for businesses to run a clean ship is much, much higher than the incentive for the regulators to make sure they're running a clean ship. If a business gets caught screwing its customers, it's doomed. If the government gets caught screwing anybody, it slaps itself on the wrist and takes more tax dollars. Start listing examples of big businesses that have gotten away with screwing people over, and you'll find that they've been bailed out by government.

I disagree on the incentives, for businesses it's to make everyone think they're running a clean ship, whether it actually is is inconsequential. I feel this is an important distinction. The penalties governments impose on their employees for screwing up are probably not inherent to the theory of public governance, and neither are government bailouts.

It's just one example. Europe has a whole bunch of other problems. Even then, an example of government acting bad in one place but not another doesn't mean the problem isn't inherent. Besides, Europe has been the biggest culprit of government fucking people in the entire world. Lest we forget wars are not waged by private enterprise. There are few better examples of the destruction wrought by government than the colonialism and war of European ones. Today, we live in a golden age like never before precisely because of capitalism

None of that means progress should end, and that better models should not be investigated. A governance model, whether based on freedom, public authorities, a hybrid of the two or something completely different is a complete utopia, but that shouldn't mean it should not be aimed at. My personal view is that a benevolent, informed dictatorship is probably the best solution, but even that has obvious drawbacks.

Herein lies a good example of the problem of regulation. Because I completely disagree with this policy preference, and maybe I'm right. Or maybe you're right. Or maybe somebody else is right. But how could we find out who is right if we create a perpetuating incumbency on the issue?

I think the best salve to the issue is still allowing every citizen to have one vote, but letting them sell their votes if they so please. At first it sounds like it would be a disaster. It sounds like the Kochs would just buy up enough votes to get politicians to overturn the constitution and turn the US into a Kochtatorship, but the logistics don't back that up. What the ability for voters to sell votes would do is vastly increase the amount that people with an agenda would have to pay to get their agenda enacted, and it would likewise increase the amount of wealth (and potential ability to fight against an agenda) of those who sell their votes

I'd love to see a game theory analysis of this.

[CoccoBill]

A general response to CoccoBill:

1) Bad Governance vs Good Governance

It isn't that the governments are bad, it's that they are ill-equipped to act accordingly. You could fire the entire Congress and replace them with the top 535 IQ people in the country, hypothetical paragons of morality with no self interest to speak of, and they still would not be able to determine the correct amount of money to invest in ethanol production, or what the proper wage for a bussboy should be. That information can only exist because of the voluntary participation of millions of individuals in the market.

The government should not be making either of those decisions. If the public interest requires it or it makes financial sense for the government to invest in ethanol production, they should be allowed to do that based on any analysis and research they can come up with, possibly using private companies to conduct the research unless again, it makes sense for them to insource it, but none of this should have anything to do with how the markets deal with the issue. With the bussboy wage, I'm a bit on the fence when it comes to minimum wage but I lean on them being the lesser evil. Either way, that's for the minimum wage, not the actual wage.

2) "Those are people working both for the public and private sectors, there's nothing inherently different in their analytic capabilities. Their incentives and goals, however, differ."

You go on to describe the ways in which the private accountant could act in a corrupt manner and the public one in a virtuous manner. The facility for corruption is universal to all people, private sector or public. However, the big difference is that the public sector guy is insulated from the consequences of his corruption or in some cases completely divorced from them. This causes him to be even more corruptible.

On the other hand, actors in the private sector have their own money on the line, and stand to lose it a lot more readily if they fail. And the company they work for stands to lose even more. Yes, private companies have the capacity to defraud customers, but doing so is an enormous risk, one which resilient firms will not be willing to take.

While that may be the case regarding the owner and shareholders of the company, for the employees of the company it's exactly comparable to the situation of the government employee (well not completely, since the government employee is at least indirectly dealing with his own money since they are his tax payments, so there IS a level of self-interest), that is, the consequences of their actions are exactly what the policies of the organisation and the government say on the matter. There's nothing that dictates the public sector regulations and penalties to be more laxed. When we're not talking about one person companies or similar company setups where the owner can directly affect all decisions, companies are not coherent hive-mind entities which operate for a common goal, they're comprised of people with self-interests. "Resilient firms not willing to" is in most cases a fallacy in this regard. But yes, I acknowledge this is somewhat beside the point since I don't know how this individual screwup/fraud business could be dealt with in any case.

So when you're building the optimal government, it all has to begin with "Well people aren't going to value X like they *should*, so the government will seize Y amount of their assets to provide X to everyone." This is inherent waste on a colossal scale because the natural system for determining value has been undermined from the start. You have to reconcile this waste somehow with a collective benefit or gain in stability.

You're absolutely right, I think that's exactly why governments exist. Everyone has to decide whether they value public healthcare, security, infrastructure, education etc as a basic concept free for everybody, or whether everyone should deal with them by themselves. Every society, without an exception, has so far decided that these should be a group effort. The way how individuals value things varies greatly, it all gets smoothed out only when you look at collective statistics. These can be deceiving, all humans have on average about one testicle.

[Renton]

Don't you see the built-in contradiction there? 1) Value is determined by voluntary exchange. 2) Governments circumvent the voluntary exchange mechanism to provide public services to people.

I agree that every modern society is leaning toward socialism, but wouldn't you agree that nearly every country is in insurmountable debt because of this? Is every single government in the world terrible at spending money or is there a basic principle that makes it inevitable for them to bankrupt society?

It is pretty fruitless to argue this stuff on a macro scale, but we can easily perform basic economic experiments on single people or small groups of people. It is obvious, for example, that humans will use a resource differently when it is free than when they pay for it. People on food subsidy programs are extremely likely to spend their entire stipend in one sitting at the grocery store on things that they don't particularly need. They have very little incentive to be frugal, use coupons, choose non-name brand products, or conserve in any way. (anecdote alert) My aunt spends her food stamp card buying like four 24 packs of monster energy drink for her kids. Would she do this if she were spending her own money?

So we can pretty much take for granted the concept that people spend other people's money poorly on themselves. The incentives are very clear cut. If I spend 20 dollars on a gift for you, I am pretty likely to put some thought into that gift. If I give you 20 dollars to buy something for yourself, you're going to spend that money a lot differently (on average) than you spend the 20 dollars that was already in your pocket.

These negative incentives are amplified when you're spending someone else's money on someone else. If I give you 20 dollars to buy something for your friend's birthday, you're less likely to spend that money thoughtfully than if it were your own money. If I write you a blank check to get that gift, the negative incentives are even greater. You are in no way accountable for the results of this gift. You have no need to be frugal, to try to get a good deal. You have no need to even really care if the other person liked the gift, as he can just return it and pocket the money. These are all core problems with the collectivist model. Can you tell me in similarly simple terms how voluntary exchange can cause such harm to the exchangers?

While collectivism held sway, the global GDP was a stagnant horizontal line for the first 199,850 years since homo sapiens emerged, and then a sharp nearly vertical spike for the last 150 thanks to a sudden injection of individual rights and free enterprise. This unbelievable progress is met with nothing but skepticism and scorn by most scholars. Scholars with the brass-plated balls to state that we consume too much, that our standard of living is too high, that money shouldn't determine everything, and that free trade exploits poor people and children. Scholars who would do well to reacquaint themselves with the default state of humanity: abject poverty, hunger, and a miserable struggle to acquire the absolute basics of life support.

[CoccoBill]

^You're now talking about certain methods of income redistribution, not really about free markets vs regulated markets. I think these, while related, are completely separate issues. As a direct answer to your question, yes, there is a contradiction, because people cannot value things correctly when they don't have both all the necessary information about the value of things, and adequate skills and knowledge to evaluate that information. The more complex things become, requiring specialized knowledge and skills, the harder it becomes to assess things correctly.

Government is a company, just like any other, although it happens to be (in theory) owned by everyone, and it has the capability to rewrite the rules of the game. The rules that govern this company, its managers and employees, do not differ, in principle, from those that govern private limited companies, unless the rules are changed to either favor or handicap one or the other. Agree? So just like for the employees of the private company, there needs to be controls in place to make sure the worker does his job properly, regardless of his/her self-interests, and whether they're working for a public or private organization. Working for a company does not equate just dealing with your own cash and personal direct responsibility, the checks needs to be in place in both cases. Actually I'd even go as far to say, having worked both for the private and public sector, that in a public sector job I'm MORE inclined to do what's good for the general population, since it IS my tax money I'm dealing with, whereas in a private company I am less concerned about the future of the company, since if it does go under, another one will replace it and most people won't even notice. Operating a one man shop or acting as a major shareholder in a corporation are special cases.

[CoccoBill]

Forgot to address this.

While collectivism held sway, the global GDP was a stagnant horizontal line for the first 199,850 years since homo sapiens emerged, and then a sharp nearly vertical spike for the last 150 thanks to a sudden injection of individual rights and free enterprise. This unbelievable progress is met with nothing but skepticism and scorn by most scholars. Scholars with the brass-plated balls to state that we consume too much, that our standard of living is too high, that money shouldn't determine everything, and that free trade exploits poor people and children. Scholars who would do well to reacquaint themselves with the default state of humanity: abject poverty, hunger, and a miserable struggle to acquire the absolute basics of life support.

I think there has been far more government intervention and regulation in place for the past 150 years than for the previous 199,850. On the contrary, I feel most of that time people lived in something much more akin to a free market. We've never been as prosperous as we are today, and we have exponentially more and more complex regulations in place every year. Undoubtedly capitalism and freeish global trade have had a key role in the recent (relatively) prosperity boom, but I'd argue scientific advancement being at least, if not way more important. I would also argue that private sector investment into basic scientific research (rather than productization of discoveries) is a very recent phenomena, and had far less to do with the advancements in the past 150 years compared to publicly funded research.

[Renton]

As a direct answer to your question, yes, there is a contradiction, because people cannot value things correctly when they don't have both all the necessary information about the value of things, and adequate skills and knowledge to evaluate that information. The more complex things become, requiring specialized knowledge and skills, the harder it becomes to assess things correctly.

I think you may be missing my point. The value isn't an unknown constant that someone or some committee can ascertain with adequate knowledge. It is a variable in constant flux that can only be known for a given individual based on that individual's preferences, needs, and/or priorities. The same item is often worth more to one person than to another, or worth a lot at one point in time but nearly worthless an hour later. You say that individuals cannot value things correctly. I say that individuals are the ONLY ones who can value ANYTHING correctly. States exist primarily to separate people from the true costs of their lifestyles and to keep the deception up that you can get something out of nothing.

Government is a company, just like any other, although it happens to be (in theory) owned by everyone, and it has the capability to rewrite the rules of the game. The rules that govern this company, its managers and employees, do not differ, in principle, from those that govern private limited companies, unless the rules are changed to either favor or handicap one or the other. Agree? So just like for the employees of the private company, there needs to be controls in place to make sure the worker does his job properly, regardless of his/her self-interests, and whether they're working for a public or private organization. Working for a company does not equate just dealing with your own cash and personal direct responsibility, the checks needs to be in place in both cases. Actually I'd even go as far to say, having worked both for the private and public sector, that in a public sector job I'm MORE inclined to do what's good for the general population, since it IS my tax money I'm dealing with, whereas in a private company I am less concerned about the future of the company, since if it does go under, another one will replace it and most people won't even notice. Operating a one man shop or acting as a major shareholder in a corporation are special cases.

I think I can get somewhere with this. Comparing a government to a private company is key to a few insights about the incentives bearing down on each. I think you're wrong to look at it from the point of view of the worker and his self interest. I think the capacity for corruption is about the same for either.

As far as employee incentives against unethical behavior, the comparison is pretty mild. The private employee stands to lose his job and his reputation, as does the public employee. I might argue that public employees are a lot harder to fire, on average, which lessens their disincentives significantly. However, most states have imposed (unjustly so) significant barriers to fire in the private sector as well, so we'll just call that a wash.

The comparison becomes more stark when you move up the chain of command. While it is OK to compare a government to a corporation, its important to recognize a dis-economy of scale that is inherent in governments. Governments are very large, the major governments of the world dwarf the largest corporations in size, and to a degree this results in less accountability for mistakes and unethical behavior. Simply put, a government is able to withstand a lot more heat and public shame than a corporation is. And a government doesn't stand to lose as much from a damaged reputation. Governments are predicated on coercion; you can vote the president or prime minister out of office but the core of government is eternal. Governments require coups to topple. Corporations simply topple when they become un-competitive with other corporations, before the first salvo ever needed to be fired.

So back briefly to the worker, the public service worker stands to lose his job if he's corrupt, and perhaps punishment will spread to his immediate superiors, but all in all the government will emerge unscathed. Conversely, the private sector worker is in much greater ways a proxy for the owner of that corporation. Private enterprise walks a razor thin edge to remain in a competitive market so the incentives against incompetent, unethical, or corrupt behavior are abundantly in evidence. I have more to say about this if you want to hear it but I'm trying to keep my posts short.

[Renton]

Forgot to address this.



I think there has been far more government intervention and regulation in place for the past 150 years than for the previous 199,850. On the contrary, I feel most of that time people lived in something much more akin to a free market. We've never been as prosperous as we are today, and we have exponentially more and more complex regulations in place every year. Undoubtedly capitalism and freeish global trade have had a key role in the recent (relatively) prosperity boom, but I'd argue scientific advancement being at least, if not way more important. I would also argue that private sector investment into basic scientific research (rather than productization of discoveries) is a very recent phenomena, and had far less to do with the advancements in the past 150 years compared to publicly funded research.

As human beings languished in the millenia before the 1800s, it was mostly authoritarian. It's worth pointing out that some of the most advanced civilizations of ancient times were the earliest attempts at a mostly free society. The great ancient empires were at least pseudo-democratic. The end of birth-based nobility on a large scale to my knowledge did not occur until the 1800s, though. Now whether you can say that the great advances of the industrial revolution happened because of increased individual liberty or in spite of it is a reasonable question. Global GDP per capita was stable with a pseudo-capitalistic society in Great Britain for quite a while before the first industrial revolution. Either way, you're wrong about private vs public research.

The vast majority of gilded age era advancement was due to private money. The first industrial revolution was mainly due to the steam engine, a private invention. James Watt's research was funded by private means and he become a very rich man from it. Huge piles of wealth were created in the late 1800s - early 1900s by the great captains of industry who brought us modern steel, railroads, cars, communication, human flight, all by private means and with private money. Governments didn't do a lot to intervene one way or the other in technological advancement until the modern era. They did, however, actively and brazenly, try to prevent advancement in many cases (horses vs cars being one example among innumerable). I guess you can give them a little credit with the space programs, which were mostly spectacularly expensive failures of public enterprise if I'm honest.

[wufwugy]

Not at all? Any mid-manager with any decision power (e.g. product/service/security manager) is able to do this. The damage is done and the person moved on to greener pastures before the info comes out and the market is able to adjust, this is my point. And of course this is also possible and does happen in government, and pretty much every position where humans exist. The point was that it does also happen in the private sector, where you suggested it can't happen because markets.

I was referring to it being a systemic risk. A lot of people can do things like this, but they can't cause that big of problems by doing them. The corporate structure that has grown out of our market system demonstrates that the fail-safes are pretty great. Except, however, when incentives are created by and salvation is provided by government (like with the housing crisis)

I'm sure it improves certain aspects, safety and equality not being some of them. I'm unconvinced that those and some other qualities would be ensured by free markets alone, since free markets are run by people who are in large part selfish greedy idiots. I'd rather put restrictions on the damage those can do.

I understand the sentiment. I use to feel the same way. Moral hazard and unintended consequences are what changed my mind. "Regulatory restrictions on damage" is how we can explain why marijuana is illegal and millions of lives ruined. What I see is far greater damage than if the regulations didn't exist in the first place.

Again, is this an observation of the effect of current US policies, or based on a theoretical analysis of all possible regulatory models? Let's make it clear at this point, that from what I know of US policies, some first hand, I'm sure a free market would be a much better option than what you have in place now. I just think models that beat them both can exist.

The factors that parts of Europe have that make it better than the US are capitalist policies. Denmark and Sweden are two of the most business-friendly countries on the planet, and Germany turned from the sick man of Europe to a decade later being the strongest of the bunch through a handful of capitalist reforms (like in the labor market)

I don't think it takes much capital and prestige to put out false info about competitors or your own products, the less easy those are to fact check the better. They might get caught or they might not. Sometimes when they do get it's already too late. Also there are several psychological mechanisms affecting this, such as negativity bias, which makes it much more likely for people to remember any false claims put out (such as in elections smearing a candidate) than the later corrections or counterarguments. Your pharma observation is due to bad government, not *any government*, IMO.

How is it not "any government" when the job of government is to design laws for its constituents? The faults I lay on the hands of government are not about them being bad, but about how their innate structure and purpose is to create legislation that invariable causes more problems than it fixes. Renton is correct in that the smartest people on the planet could all be dropped in Congress and the place would still be a disaster. In many ways, a dictatorship would work better here, but it's "the law" and "a centralized body whose purpose is to devise laws" that's the problem. The reason this is the problem is because there is little accountability and little competition for reform. Capitalism is basically a system of de facto laws existing based on choices made by its participants.

It doesn't take all that much to start up a pizza joint and this is actually a real life example, minus the turds. But you may be right in the sense, that these are mainly made possible due to gov incentives for small businesses. However, I'm sure someone can come up with a better example, where the profits from unethical business make it worthwhile to operate even short periods and start anew. Internet crime and spamming come to mind, but just because I can't think of any right now doesn't mean they don't exist. Anyway, by a turd pizza I meant cutting corners in the production to produce something that looks and tastes legit, but isn't up to the expected standards.

What has the government done to stop internet crime? Virtually nothing. The market is working. The internet is one of the best social experiments we'll ever have. It's a hyper-free market and what it has been doing for humans is incredible. The only systemic problems with it seem to be coming from government intervention. Poker is a great example of that

Also I do not think the "short term profit" idea is a systemic risk in enterprise. It's a popular notion because people misunderstand what went on in Wall Street and think that all corporations care about is the short term. I don't think that's true and I think self-perpetuation is at the core of corporate operations. The evidence bears this out. There are millions examples of companies striving for self-perpetuation, and virtually zero of the opposite. Even the snake-oil salesmen (like fake-nutrition gurus) still don't operate on the "dine and dash" philosophy. Most examples that look like private foul-play are layered in government incentives, so we can't call it that.

How regularly do popular journalists visit every goddamn burger joint in the US? And I don't mean for a happy meal, but to inspect their kitchens, sanitation processes, cold chains, storage, food samples and other safety standards? I wouldn't want to rely solely on foodspotting reviews or some crap like that. I'm afraid not a large enough portion of the clientele is ready to dish out cash for independent 3rd party inspection services, they just want their 99c menu and prefer not to know what's in it.

If something is bad, it has bad consequences. When the consequences happen, the curtains are pulled back. Regulators aren't providing any value to this system. In fact, they sometimes stop innovation in this system by setting legal allowances on levels of "the bad".

Take delivery services for example. The government doesn't regulate them that much, but when people get broken deliveries, problems are on the cusp for the company because of how word gets out, especially today with so many cameras. Customers do not like this and start going for the competition, which is a huge crisis for the company and they have to start fixing it by finding the culprits. They can't sweep it under the rug because that wouldn't change the effects

It's like evolution. Fix it or die. This isn't just an example of why regulation typically doesn't help anything, but how it creates another less-often addressed problem in its monopoly power. It's good that we can change delivery services if we find a reason to, but we can't change governments. The former is a healthy and innovating market, the latter is a monopoly that gets away with anything and everything.

Is this a relevant question: Why does government get to murder millions of people and suffer very little consequences, while if Amazon and Google did that, they'd be destroyed in two days?

I disagree on the incentives, for businesses it's to make everyone think they're running a clean ship, whether it actually is is inconsequential. I feel this is an important distinction. The penalties governments impose on their employees for screwing up are probably not inherent to the theory of public governance, and neither are government bailouts.

Sure it's not inherent to the theory, but the practice is. How many businesses have gone bankrupt due to being out-competed by other businesses? Millions. How many government bureaucracies have gone bankrupt for just about any reasons? Zero

[wufwugy]

Government is a company, just like any other, although it happens to be (in theory) owned by everyone, and it has the capability to rewrite the rules of the game. The rules that govern this company, its managers and employees, do not differ, in principle, from those that govern private limited companies, unless the rules are changed to either favor or handicap one or the other. Agree? So just like for the employees of the private company, there needs to be controls in place to make sure the worker does his job properly, regardless of his/her self-interests, and whether they're working for a public or private organization. Working for a company does not equate just dealing with your own cash and personal direct responsibility, the checks needs to be in place in both cases. Actually I'd even go as far to say, having worked both for the private and public sector, that in a public sector job I'm MORE inclined to do what's good for the general population, since it IS my tax money I'm dealing with, whereas in a private company I am less concerned about the future of the company, since if it does go under, another one will replace it and most people won't even notice. Operating a one man shop or acting as a major shareholder in a corporation are special cases.

Maybe government is a company, but it doesn't behave in a system of companies. This is the problem. Even then, government isn't a company because of its mandatory revenue streams. Companies live and die based on getting people to freely choose their services. Bureaucracies don't ever die because taxes are mandatory

This is one of the main reasons I use the evolution analogy. Macroeconomics happens in populations, just like evolution. Extrapolating individual behavior to the whole leaves a lot to be desired. This is why looking at individuals in private companies vs in public companies doesn't tell us much about the difference between markets and government. What sets markets aside is competition. The same is true in evolution. Mutations and environment creates survival of the fittest in biology, and consumers and competition creates survival of the fittest in economies.

It can be said that it doesn't matter what's going on in a single company or bureaucracy. What matters is if there are any competitors. Government does not have competitors. This is a fundamental, inherent reason why government intervention into markets is bad, regardless of intentions or the intelligence of those involved. Why am I allowed to choose what companies to buy food from but I'm not allowed to choose my government? Is it because I need government? Okay, for what do I need government? I think there are several answers to this question, but I think answering the question shows how much we don't need government too

I think there has been far more government intervention and regulation in place for the past 150 years than for the previous 199,850. On the contrary, I feel most of that time people lived in something much more akin to a free market. We've never been as prosperous as we are today, and we have exponentially more and more complex regulations in place every year. Undoubtedly capitalism and freeish global trade have had a key role in the recent (relatively) prosperity boom, but I'd argue scientific advancement being at least, if not way more important. I would also argue that private sector investment into basic scientific research (rather than productization of discoveries) is a very recent phenomena, and had far less to do with the advancements in the past 150 years compared to publicly funded research.

Legal allowance and cultural appreciation of private ownership and innovation are very new. It started changing in very small ways in the Netherlands region in the 18th Century (IIRC). American intellectuals incorporated the improved-upon ideas by British intellectuals (but OMG Adam Smith was Scottish) in the late 18th Century. The 20th Century saw the most epic of epic showdown between capitalism and socialism, capitalism won. The contrast is so stark that West Germany is amazing while East Germany sucks. This isn't a difference of government, but economics. In China, it has only been at the hands of market reforms that it has done what its done


I think the evolution analogy is very important. Both evolution's and capitalism's driving mechanisms are variation and competition within populations

[CoccoBill]

I think you may be missing my point. The value isn't an unknown constant that someone or some committee can ascertain with adequate knowledge. It is a variable in constant flux that can only be known for a given individual based on that individual's preferences, needs, and/or priorities. The same item is often worth more to one person than to another, or worth a lot at one point in time but nearly worthless an hour later. You say that individuals cannot value things correctly. I say that individuals are the ONLY ones who can value ANYTHING correctly. States exist primarily to separate people from the true costs of their lifestyles and to keep the deception up that you can get something out of nothing.

I get your point, you mean value in exchange and I mean value in use. What I mean by value is the "objective" consensus value that the market would assign to something when all relevant information was known to everyone, not just the value for the highest bidding fool.

While it is OK to compare a government to a corporation, its important to recognize a dis-economy of scale that is inherent in governments. Governments are very large, the major governments of the world dwarf the largest corporations in size, and to a degree this results in less accountability for mistakes and unethical behavior. Simply put, a government is able to withstand a lot more heat and public shame than a corporation is. And a government doesn't stand to lose as much from a damaged reputation. Governments are predicated on coercion; you can vote the president or prime minister out of office but the core of government is eternal. Governments require coups to topple. Corporations simply topple when they become un-competitive with other corporations, before the first salvo ever needed to be fired.

Again, these may be valid arguments against the current US government and even many other implementations, but I don't believe any of this is something inherent to governments. Besides, at least in theory, democratic governments and toppled by voting.

So back briefly to the worker, the public service worker stands to lose his job if he's corrupt, and perhaps punishment will spread to his immediate superiors, but all in all the government will emerge unscathed. Conversely, the private sector worker is in much greater ways a proxy for the owner of that corporation. Private enterprise walks a razor thin edge to remain in a competitive market so the incentives against incompetent, unethical, or corrupt behavior are abundantly in evidence. I have more to say about this if you want to hear it but I'm trying to keep my posts short.

Please do.

[wufwugy]

David Henderson post today relevant to where this discussion is going, the good/bad government, competition, specific example stuff

http://econlog.econlib.org/archives/...alth_care.html

[Renton]

Please do.

I will try not to present everything in public vs private dichotomy but it will sometimes be necessary. For one thing, the primary difference between a public service and a private one is that the public one is almost always an enforced monopoly. In cases where isn't an outright monopoly, there are measures put in place to insure that no private service can truly compete with them, and it is impossible for citizens to determine the true costs of the public service.

Take fictional tire manufacturer Tirez Are Us for example, hereafter referred as Tirez. That Tirez must compete with other tire companies is the single most important force against corrupt or incompetent business practice. In order to make a profit in a competitive market, Tirez has to provide a product or service to the consumer at a price he is willing to pay next to the alternatives, and if the consumer isn't satisfied with that exchange, he will choose another provider. This pressure is ever-present in a free market, and its more than what's immediately apparent. Clearly, Tirez must provide either a higher quality or lower priced tire to compete with other tire companies, but even if the company has 100% market share in an area, it still has to compete with the specter of a competitor yet to arrive. If Tirez is ripping off and defrauding consumers in an area where it is the only provider for 100 miles in every direction, then Tirez's rapidly tarnishing reputation and high prices will create a large profit signal for competitors to enter the area and carve out a foothold for themselves.

Even if some tyrannical mega-corporation merged with Tirez and dominated every aspect of the tire economy, from rubber extraction, to manufacturing, to distribution, and the entire automobile economy to boot, they still would face market pressure not to rip people off. This is because of substitution. People have other means to travel. There are other materials that tires could be made from than rubber. Consumers have the capacity to substitute a nearly infinite amount of products for products less available, and this makes it literally impossible for such corruption and fraud to run rampant in the private sector. It is only through state-sanctioned means that companies have any power to run amok in this way.

So that covers competition, the primary market force that keeps everyone honest that only can be prohibited by states. The other common argument is that we need state-based watchdog institutions to make sure that our private providers give us safe and effective products. Well aside from competition, if people value the peace of mind that comes from such a service, it isn't as if watchdogs are incapable of emerging in a free market. The simplest examples of these are websites like yelp and tripadvisor, but those examples are kind of superficial and not likely to satisfy the more left-minded people. A somewhat better example is the Better Business Bureau.

Nearly 400,000 local businesses in North America support the BBB.^[4] The BBB invites successfully vetted businesses to become dues-paying Accredited Businesses that pledge and continue to adhere to the BBB Code of Business Practices.^[6] In return, the BBB allows Accredited Businesses in good standing to use its trademarked logo in marketing materials.

The effectiveness of the BBB in preventing unethical business practices notwithstanding, this is at the very least proof that business are willing to pay to be be policed, and by extension, their customers are willing to pay for the privilege of knowing whether a business meets a stated list of minimal standards.

This model could very easily extend to a forthcoming private corporation that fills the role of currently state-run departments of health inspection. Provided that customers who eat at restaurants or buy from grocery stores value knowing whether said businesses are on the up and up, those businesses will pay a company to do random health inspections and keep an up to date health score. As such inspection services would exist in a private context of ever-present competition, they would be similarly forced to provide an effective service. Eventually, businesses would highly value the seal of approval that comes from a prestigiously pre-eminent inspection company, and would be foolish not to seek one. Needless to say, this would all come at a decreased cost to the bureaucratic state-based alternative that has much fewer incentives to increase the quality or reduce the cost of its work to the consumer.

[wufwugy]

Fantastic post. I think private markets for safety run by insurance and ratings agencies would be far more robust, innovative, user-friendly, and cost-efficient than government ones

[CoccoBill]

Take fictional tire manufacturer Tirez Are Us for example

I understand all this, as I've said the advantages of free competition for efficiency are clear, it's not this I'm concerned about. Also I'm not convinced that public sector operations unavoidably lead to inefficiency and corruption. Unchecked they often do (as I think private sector does in a similar fashion) as is evident.

Even if some tyrannical mega-corporation merged with Tirez and dominated every aspect of the tire economy, from rubber extraction, to manufacturing, to distribution, and the entire automobile economy to boot, they still would face market pressure not to rip people off. This is because of substitution. People have other means to travel. There are other materials that tires could be made from than rubber. Consumers have the capacity to substitute a nearly infinite amount of products for products less available, and this makes it literally impossible for such corruption and fraud to run rampant in the private sector. It is only through state-sanctioned means that companies have any power to run amok in this way.

Let's assume this is the case. Still one clear issue would be time. For industries that require mass investments, research and infrastructure, what is preventing it from taking a lifetime (to slightly exaggerate) before competition can challenge them and the market can adjust? What I mean is that I'm not sure the market is quite as simple as that, and no external factors can hinder or downright block the market from working (yes yes, government regulations and incentives, but other than those). It is clear that individuals will use every trick in the book to try to circumvent that in order to maximize profits, which is the main goal for almost everyone. The scientific method may be a good comparison: the peer review mechanism will drag the consensus kicking and screaming to the right direction, but it may take years or decades for it to do so.

Well aside from competition, if people value the peace of mind that comes from such a service, it isn't as if watchdogs are incapable of emerging in a free market.

For sure, but herein again lies what I feel is a very significant contradiction, the main goal of these services isn't to ensure whatever they are meant to safeguard, but to make a profit. Yet again I'm not convinced, that while competition undoubtedly will have the unintended effect of pushing them to the direction of producing a more cost-efficient service, from a consumer's lifespan perspective they may get caught in a perpetual cycle of just services with improved marketing, branding and cutthroat tactics. A good marketing campaign is way cheaper than research. Of course this is a polarized view but so I think is a corrupt and inefficient government.

The simplest examples of these are websites like yelp and tripadvisor, but those examples are kind of superficial and not likely to satisfy the more left-minded people. A somewhat better example is the Better Business Bureau.

The effectiveness of the BBB in preventing unethical business practices notwithstanding, this is at the very least proof that business are willing to pay to be be policed, and by extension, their customers are willing to pay for the privilege of knowing whether a business meets a stated list of minimal standards.

For certain things, tripadvisor being a great example, I think a private sector solution is the only valid option, but when it comes to safety and health, I would personally leave it to the government.

And I can definitely see companies self-regulating, such as getting ISO-certified and what not, where ever they see a business case for it. But that's also my worry, there needs to be the business case, it's not an inherent want to provide the best possible service.

This model could very easily extend to a forthcoming private corporation that fills the role of currently state-run departments of health inspection. Provided that customers who eat at restaurants or buy from grocery stores value knowing whether said businesses are on the up and up, those businesses will pay a company to do random health inspections and keep an up to date health score. As such inspection services would exist in a private context of ever-present competition, they would be similarly forced to provide an effective service. Eventually, businesses would highly value the seal of approval that comes from a prestigiously pre-eminent inspection company, and would be foolish not to seek one. Needless to say, this would all come at a decreased cost to the bureaucratic state-based alternative that has much fewer incentives to increase the quality or reduce the cost of its work to the consumer.

Let's hope you're right, since this is the likely direction with continual government cutbacks.

Thanks for your responses (wuf also), while I'm not converted I got some fresh perspectives to consider.

[Renton]

the main goal of these services isn't to ensure whatever they are meant to safeguard, but to make a profit.

I can see that plainly you are attempting to gracefully bow out of the debate so I'll try not to open pandora's box again, but you need to objectively evaluate your anti-profit bias. It's an irrational way to argue against capitalism. I liken it to evolution vs creation debates when the creationist says "because Jesus Christ said...." There are plenty of rational arguments against capitalism, that it doesn't internalize costs, that it has trouble providing social services that are susceptible to free riders, that it doesn't allow large infrastructure projects to be built when necessary. There are strong pro-capitalist answers to argue against each of those, but they are still decent pro-state arguments. The fear that corporations will run amok in pursuit of short term profits at any cost to society is not a sound argument though.

[wufwugy]

I think it's easy to view government, albeit inadvertently, as cost-free. I think we'd find that every governmental regulatory policy only has as much capital and effectiveness as what constituents are willing to pay. If this is true, then it means that just letting markets run it would be at least as effective. Except they're far more effective for all the reasons that reduce costs and allocate capital more efficiently.

Saving the rhino through government may cost 100bn, but doing it through markets would be a fraction of that. Markets allow people to express their morals more effectively. People say "Congress should do this!" Congress says "we can do it for such n such cost". People respond "no!" If people were to respond "yes", doesn't that necessarily mean they would be willing to pay that cost in a market in the first place?

[a500lbgorilla]

I think you may be missing my point. The value isn't an unknown constant that someone or some committee can ascertain with adequate knowledge. It is a variable in constant flux that can only be known for a given individual based on that individual's preferences, needs, and/or priorities.

So any time a person purchases something, that's that something's value.

And if everyone were allowed to freely purchase everything, everything would be held at its value.

And so a purely free market would allocate all resources best, because all actors would be bidding on all resources based on their evaluations.

This smacks of circular thinking to me. Value isn't a thing at all, it's just the what you spackle into the cracks.

I know for a fact I overpaid today for shitty fig newton cookies. Because I remembered them being a thing and I remembered me liking them and dammit they weren't worth the 4.50.

Will that swear me off fig newtons in the future? Sure, for a spell, until I forget and in the mean time - the dream that was vanilla waffers.

Basically, if ever anyone 'misevaluated' anything, their evaluation would still be the proper one because they made it, because it's not possible to 'misevaluate' a product you choose to buy.

[wufwugy]

It's best because all other options are worse. Seriously

We use this logic for all sorts of things. When biological or adoptive parents aren't perfect, we don't say "ah, that means there's something better out there to raise kids". We know that for all the failings of parents, the state would do a far worse job. The same is true for virtually all other things. You may overpay for fig newtons, but the market factors that go into that decision are much better than any other hypothesized options.

[a500lbgorilla]

It's best because all other options are worse. Seriously

We use this logic for all sorts of things. When biological or adoptive parents aren't perfect, we don't say "ah, that means there's something better out there to raise kids". We know that for all the failings of parents, the state would do a far worse job. The same is true for virtually all other things. You may overpay for fig newtons, but the market factors that go into that decision are much better than any other hypothesized options.

We know that it's best to separate conjoined twins.

Til you ask any conjoined twins.

[a500lbgorilla]

And I mean to say, none of us would want to live like that. Forehead fused to our twin or some such. And we'd all want to risk death to one or both twins to see them separated and living a normal life. But if you ask any conjoined twins of a reasonable age, they self report being perfectly happy.

So are they wrong or are we? And does it matter, since we've all got the same brains basically? (maybe not in the case of the fused foreheads but, you know)

If you just want to claim your the best out there, fine, but recognize what you're doing.

edit which I suppose is facilitating human choice, but not making it better. I think that there is a role for a central, concentrated effort for making better choices.

[wufwugy]

Parents are responsible for their kids. It isn't market behavior to let children freely choose. That's foolishness. Markets are the best of what we have for how adults function. If everybody was a child, markets would likely not work. Hell, if everybody was a child, the species would have been eaten by leopards long ago

[a500lbgorilla]

Nah.

For 1, I'm talking about adult conjoined twins. For 2, if leopards were the problem we'd have quick kids or no kids, so just nah.

[CoccoBill]

It isn't market behavior to let children freely choose. That's foolishness. Markets are the best of what we have for how adults function. If everybody was a child, markets would likely not work.

At what age do children stop behaving irrationally? At what age do mentally handicapped or idiots? What about people who receive no formal education, or home schooling by idiots? All of these people, and a load of more I can't just now think of still operate on the markets every day, kids included. Let's assume, for argument's sake, that the rest will indeed behave rationally (which I seriously doubt). How is it possible for the markets to "work" with all these people, a significant percentage of the market players, choosing freely?

[wufwugy]

At what age do children stop behaving irrationally? At what age do mentally handicapped or idiots? What about people who receive no formal education, or home schooling by idiots? All of these people, and a load of more I can't just now think of still operate on the markets every day, kids included. Let's assume, for argument's sake, that the rest will indeed behave rationally (which I seriously doubt). How is it possible for the markets to "work" with all these people, a significant percentage of the market players, choosing freely?

There is no line. There are all sorts of problems with markets even among the most intelligent adults, but it was never a concept for children because of how bad it would be. I'll explain more in another post

[wufwugy]

Rilla, I have two points about your perspective:

(1) I don't know what you're arguing for. I know what you're arguing against, but it sounds like the god of the gaps fallacy, where because there are identifiable flaws in something, it automatically means something else is better (and that something is known). Markets are a thing, not because of how perfectly they perform, but because, despite their many flaws, they work better than state intervention. Except, however, for instances when state intervention is better, but those cases are exceedingly rare and possible they don't even exist.

(2) It looks like you're arguing against responsibility. Markets work better than state intervention precisely because they provide more consequences for the behavior of the actors within them. This is a very standard line of reasoning that we use for everything else, so why is it that when it comes to a host of entirely arbitrary issues, humans are thought best off when they do not bear as much accountability?

Compare two systems: One with food tastes regulated by the state and one with food tastes regulated by nothing. In the former, because of the broad brushes and inability to account for many factors, the kinds of foods you would eat are ones you don't necessarily like that much and they would never improve. But in the latter, you eat entirely whatever you like except for in the silly ways the highly flawed human body doesn't encourage it (like the ability for advertising to start getting you into fats at the expense of veggies, when you would probably like veggies more otherwise)

[wufwugy]

Let's assume, for argument's sake, that the rest will indeed behave rationally (which I seriously doubt).

I should add that "rational behavior" is about consequences. You get to choose what kind of bike you want to ride because you are you and nobody encompasses your preferences as well as you do. This is true whether or not you make a really "stupid" choice. The only other option is intervention from people not you. It's for me and everybody else to have some say in what you do with yourself. No matter how flawed markets are (because they attempt to organize the fundamentally flawed humankind), they're still better when used to decide personal issues than government

Markets are not Utopia because humans and the world are all sorts of messed up. "Optimal" human interaction creates all sorts of "less-than-optimal" results, some are downright terrible. In no way do markets act flawlessly. That would require humans being without flaw. You could point out a million problems with markets and it isn't an argument against markets, because we're dealing with fundamentally flawed topics like how humans interact.

When economists use terms like "rational behavior", it has nothing to do with flawlessness. It has to do with accountability. When the state intervenes in your choices, it is not acting as rationally as you are, even if your choices are self-destructive and the state's ones would have likely helped you

[CoccoBill]

I should add that "rational behavior" is about consequences. You get to choose what kind of bike you want to ride because you are you and nobody encompasses your preferences as well as you do. This is true whether or not you make a really "stupid" choice. The only other option is intervention from people not you. It's for me and everybody else to have some say in what you do with yourself. No matter how flawed markets are (because they attempt to organize the fundamentally flawed humankind), they're still better when used to decide personal issues than government

Markets are not Utopia because humans and the world are all sorts of messed up. "Optimal" human interaction creates all sorts of "less-than-optimal" results, some are downright terrible. In no way do markets act flawlessly. That would require humans being without flaw. You could point out a million problems with markets and it isn't an argument against markets, because we're dealing with fundamentally flawed topics like how humans interact.

When economists use terms like "rational behavior", it has nothing to do with flawlessness. It has to do with accountability. When the state intervenes in your choices, it is not acting as rationally as you are, even if your choices are self-destructive and the state's ones would have likely helped you

I, along with investopedia disagree:

"Definition of 'Rational Behavior'

A decision-making process that is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption that all individuals taking part in an action/activity are behaving rationally."

As you readily admitted, individuals and therefore markets often do not make the optimal choices. The whole basis for free markets is that statistically the markets do behave rationally, which may be the case in many situations, as S. Dubner and S. Levitt try to demonstrate. More on the subject here:

http://economicstudents.com/2013/05/...ty-assumption/

What you're saying is that the price is always right, aka Pareto optimal. If the market behaves irrationally this is not the case and it will lead to inefficiency. It has been proven that free markets under some circumstances can lead to Pareto optimal results, but only under very specific conditions (markets exist for all possible goods so there are no externalities, all markets are in full equilibrium, markets are perfectly competitive, transaction costs are negligible, and market participants have perfect information). Even then, Pareto efficiency is only about efficiency, not about desirable distribution of resources, as it makes no statement about equality or the overall well-being of a society.

At least in theory these and other issues (inequality, condensation of power, sustainability, market stability) with free markets could be tackled with policies to an extent.

[wufwugy]

I, along with investopedia disagree:

A decision-making process that is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption that all individuals taking part in an action/activity are behaving rationally."

This doesn't disagree with me. I'm trying to explain what that passage means. "Optimal" or "utility maximizing" are inherent facets of consequential choice. This is the basis behind what economists mean when they discuss "rational behavior". Take Becker's rational addiction for example. It isn't that drug addicts who choose addiction are doing what is optimal according to some objective moral standard (how could we even know that?), but that they're making the optimal decision according to their own inherent utility

The "optimal" of smoking another crack rock is different than how the word has been used ITT. I think this is important since understanding the difference between markets and regulation is in consequences. Regulation is an attempt of organizing the same exact stuff that markets do, except with less consequence. That alone is basically why markets work better. We see this in action in our own world all the time. Who's better at spending your money: you or your neighbor? The answer is you and it's exclusively because you bear a greater brunt of the ramifications of your spending choices. This effect doesn't necessarily exist when viewed individually, but it does exist in populations. Some individuals would benefit greatly by regulation, but entire societies (aggregation of individuals) benefit more by free markets. Even if "you" may be better at spending my money than "I" am, the "universal you" is not better at spending my money than the "universal I". What I'm trying to say is that some examples can be found of one person spending somebody else's money better, but the effect breaks down when it is expanded to everybody.

[wufwugy]

Whatever you think of inequality, the data is showing that it can't be positively changed by increasing taxes

http://marketmonetarist.com/2014/06/03/a-clean-break-with-hollande-a-lesson-for-piketty/

I love this paragraph

What strikes me is that neither Mitterrand nor Hollande had any idea about how economic incentives work. And frankly speaking when I read Piketty’s book then my main take away was exactly the same – Piketty doesn’t seem to understand incentives. It is social planing or engineering rather than economics.

[CoccoBill]

http://www.iflscience.com/health-and...-batters-dr-oz

[wufwugy]

The interesting thing about Oliver's Oz segment is that it makes a good case for the needlessness of regulations. The FDA isn't preventative about health, as it acts mostly after a problem arises. But this is pointless since markets respond just fine as well. Pro-government sensibilities on the issue of food safety mostly lies in its preventative aspects. Since the FDA doesn't actually do prevention, well... Another irony is that this segment is the market in action. It's not by government policies that Oliver brings Oz's hypocrisy to light

I don't think regulation solves this problem at all


Something I like



Markets (all of economics, really) boil down to incentives. While in a perfect world, government may not be necessary, in our world, government can work well as long as its policies make beneficial incentives. Singapore's healthcare system is an example of great government. Incentives are all aligned

[CoccoBill]

Maybe it's just me but I saw the piece completely differently. Dr Oz and other snake oil salesmen are able to operate, because the regulating bodies are stymied by market forces (lobbying). The market is already open to have self-regulation, it's not like the FDA has a monopoly on that. Anyone "could" start a competing business. Why hasn't the market dealt with snake oil salesmen?

[Renton]

Lobbying is not a market force. It's just another example of how the state distorts incentives within a market. In a society that doesn't give as much power to the government to meddle in markets, lobbying would not have the magnificent cost/benefit that it does and the effects of it would be much lessened. Crony capitalism is not capitalism.

[wufwugy]

Maybe it's just me but I saw the piece completely differently. Dr Oz and other snake oil salesmen are able to operate, because the regulating bodies are stymied by market forces (lobbying). The market is already open to have self-regulation, it's not like the FDA has a monopoly on that. Anyone "could" start a competing business. Why hasn't the market dealt with snake oil salesmen?

Renton is correct about lobbying not being a market force. Lobbying is an attribute that exists only because of legal monopoly held by government

I'll add that, in a way, FDA does have a monopoly that disincentives self-regulation. Here's an analogy: there is no market or no industry that could compete in domestic security because the government mostly monopolizes it, and so the private infrastructure isn't constructed. However, if government was no longer allowed to provide domestic security, we would see all sorts of new, competing enterprises in the arena. For the FDA, entrepreneurs don't enter its territory because the FDA has a structural advantage and distortion by law. If there was no FDA, I think a lot of the good that entrepreneurs could bring to the food safety arena is unpredictable (that's how innovation by competition works), but some of the simpler stuff would be like different agencies putting their reputations on the line by doing things like stamping approval of certain products. Some already do this (like Oz or Joe Rogan), but it's small scale and niche. At least up till now, Oz has gotten away with calling something a miracle drug, but larger companies couldn't. Imagine what the market would do if McDonalds said eating a Big Mac a day keeps the doctor away

Furthermore, selling snake oil isn't really a problem. Sure, I wish people couldn't do it, but I don't see how it can be regulated against. A lot of people read the Bible and it makes their lives ultimately worse off, but it's wrong to regulate against that. Likewise, people freely choose to buy wonderdrug sugarpills that do nothing, and we shouldn't regulate against it. The one thing that would solve this problem is market forces that include all sorts of things like the creation of actual drugs that actually work (and kick the fake drugs out of the space) or non-profit campaigns to change the culture and beliefs

Why hasn't the market dealt with snake oil salesmen?

Sometimes when I'm outside, I get rained on and I don't like it. Why hasn't the market fixed this? Sure, there are raincoats and umbrellas, but they're not perfect

I point this out because market proponents don't claim that it solves all problems. What we do claim is that if a problem is solvable, market forces are the best way to get there. Like Bryan Caplan said in one of the lectures I linked, economists only start worrying about problems when they can't figure out how an entrepreneur could get rich by solving it

[jackvance]

A lot of people read the Bible and it makes their lives ultimately worse off,

I wouldn't be too sure about that. It's of course not through godly power that religion helps people but rather religion creates social rituals which allow people to connect with others in ways they otherwise wouldn't. They misattribute it to something religious but the social connection is the real reason why religion appeals to people.

[eugmac]

And most Christians haven't read the bible in any depth. Understandable, seeing how the cognitive dissonance of reading the inconsistencies contained within while trying to justify their morality must get uncomfortable for the more intelligent of Christians.

[Savy]

They misattribute it to something religious but the social connection is the real reason why religion appeals to people.

Well done mate, you've really taken a complex issue there and summed it into one tiny little point that clearly (and now you've said it omg its obvious) is the only reason religion appeals to anyone at all.

[eugmac]

I'm glad you still represent your avatar proudly.

[wufwugy]

I didn't mean to claim that it makes everybody's lives worse. It makes some worse (I said "a lot", which I still stick to, but the phrasing was ambiguous). There are micro and macro examples of this. Regardless, my point was about how hard it is to legislate against choice. A lot of people freely choose to harm themselves. Most things we let it slide on, like sports and religion, but other things, like drugs, we try to legislate against.

[eugmac]

Sports is a form of self harm now?

[wufwugy]

Sports is a form of self harm now?

In the same ways that we're talking about. People get all sorts of brain damage, organ damage, other damage resulting in need for pain alleviation, even emotional damage from sports

When trying to legislate against snake oil, people focus only on the bad. But people get some good out of it even if it's just emotional. So I try to point out other things that are just like that which we don't consider like that. Sports is an example. We're not logically consistent if we say it's wrong that people can choose to buy something that may harm them yet in the next breath we're mums the word about other choices about other things that may harm them

[eugmac]

what frightens me most about you libertarian types is that you only seem to see things in black and white.

[wufwugy]

what frightens me most about you libertarian types is that you only seem to see things in black and white.

That we're black and white is the perception. I'm not sure what perpetuates it. The last way I would describe libertarianism is black and white, but one of the first ways I would describe what people think of libertarianism is that it's black and white.

Maybe the first step to understanding libertarianism (market capitalism) is that it's economics. It's not a branch of economics, but itself economics. Even the most "left-wing" economists, like Paul Krugman, are about a thousand times more "free market capitalist" than the public perceives them as. What makes a small handful of economists "left-wing" comes out of how popular it is with the public to be so, not things that academic economists believe. Additionally, most enthusiasts who claim to be economists, don't exactly have the credibility. I was blown away when I started reading the opinions of those with econ PhDs who still currently teach. What they say is night and day difference with what the public thinks.

[Renton]

what frightens me most about you libertarian types is that you only seem to see things in black and white.

As someone who has had a lot of experience both in libertarian and liberal circles, the main thing that struck me as different about libertarianism is that every one of its tenets is rooted in logic and scientific fact. Half of socialism is based on the false foundation that governments can do certain things better than individuals can do for themselves (examples? never mind that, socialists just accept this as fact without even questioning it) and the other half is based on the idea that you can get something for nothing, that there's somehow an infinite abundance of stuff in the world and therefore no one should want for anything.

As to that latter bit, I really wish every pro socialism person would learn about the broken window fallacy. If you know what it is, the next thing is to really think about the ramifications of it, all of the unseen (and massive) opportunity costs that are created by government policies that ignore this very simple concept.

If your problem is that we only see things in black and white, I guess our problem is that you muddle the ink of every clear cut economic issue with your tears for the unfortunate wretches of humanity. Meanwhile the statist policies you support are making the poor even poorer in spite of it.

[a500lbgorilla]

It certainly has a logic to it. NPR was running a bit about Lexus Lanes this morning and the dissenter said "it made me feel like only rich get to go home." or some such.

http://www.npr.org/2014/06/27/326062...muting-culture

Made me laugh driving into work today.

edit this back in: Though it definitely is not rooted in scientific fact.

[a500lbgorilla]

http://www.iflscience.com/health-and...-batters-dr-oz

The interesting bit about this that people irrationally love their supplements and I'm among them. The commercials and donated money didn't fundamentally change that.

[a500lbgorilla]

And this guy's comment vaguely touches a point that relates to me personally

http://np.reddit.com/r/spacex/commen...s480?context=3

That there's a regressive zeitgeist in the face of not just 1970s fallout of progress but even the fallout of progress today. That if, IF, the free market offers the best result possible, there's still plenty of shit that's gonna follow from it and no reason to embrace any path forward.

So I'll just sit here and poke holes in your 'best you've got to offer'

[wufwugy]

Living standards are skyrocketing exponentially. The only real correlation is capitalism. I'm fine with not calling it scientific fact, but we should call it socioeconomic consensus among experts. The only holes to be poked are in statism. Nobody has any clue about anything that can come remotely close to touching the progress created by capitalism. There are no competing theories, hardly competing conjectures.

Market proponents sound wacky to everybody else because the standard belief held by everybody else is basically insanity. We live in a world where capital markets are turning the impossible into the commonplace in merely years, yet the popular perception is that we're at a standstill or backtracking. Ten years ago we were buying CDs at stores we had to drive to. Today we download all music instantly for a fraction of the cost. But nobody talks about it. Nobody talks about how in capitalist societies, the poor today are richer than the richest person a hundred years ago. Nobody talks about how the poor fifty years from now will be a million times richer than we are today, plugged into their VR hookups, experiencing virtually anything on demand, even types of experiences the richest today can't even fathom

Humans are conditioned animals. It makes all the sense in the world why markets aren't the answer. But that sense is wrong. We've already beaten down these conditioned "common sense" barriers with experimental sciences, probably because they're easier to do so with. Perhaps social scientists are beginning to come around and explain how we live in the goldenest of golden age. But it doesn't matter if they aren't, because social reality is rapidly progressing even if social commentary is not. There is irony, however, in that it's possible a necessary facet of social progress is the belief that society is stagnant. I believe this may be an integral sensibility in pushing progress forward

[a500lbgorilla]

I've read a lot about economic history and it has a lot to do with growing technologies and a shriking globe as well as growing free trade. To put all this at the feet of capitalism is to say to me that you're ignoring so much other stuff.

I'm fine with free trade being a net good, just not with this run wild belief that it drives the best possible net good.

[a500lbgorilla]

I wish I could find this NPR bit I remember where they go through the amount of human labor hours required for 1 hour of light through history, up to the genesis of the modern age and they took great lengths to talk about how Edison's great invention wasn't the light bulb, it was the power grid that could turn that bulb on on a large scale. And how JP Morgan and his newfangled banking tech was so important to the light bulb that Edison was with JP in some bank at launch of his new system.

It really ties together nicely all this nonsense.

That it my eyes, it's multi-faceted human progress that's shining through and to lay it all at the feet of free trade capitalism is to really muddy up an incredible story.

[wufwugy]

The creation of capitalism as a theory (by Smith) was for the purpose of explaining the brand new phenomenon of wealth creation. Ever since, it has been the only working theory. Sidestepping the role of capitalism in forming the wealth of our society is like sidestepping the role of natural selection in evolution. Sure, you can technically say that if it wasn't for the thermodynamics laws, natural selection wouldn't work, but that's missing the point entirely. Our progress has been dependent on innumerable other factors (like some basic scientific discovery), but the mechanism by which they have been turned into utility for the masses is capitalism. Likewise, instead of just stopping at one new utility, it is the mechanism of innovation and further discovery

This

growing technologies and a shriking globe as well as growing free trade.

is the product of the market mechanism. Without the cult of entrepreneurship, electricity doesn't get turned into mass distributed light bulbs. Review Friedman's Lesson of the Pencil. Technologically being hypothetically capable of creating a pencil isn't what creates the pencil. Only through the market mechanisms is the whole put together to be greater than the sum of its parts.

We are where we are today because of the theory of supply and demand, private property, and the entrepreneurial spirit

[Renton]

Technology isn't some separate constant that is responsible for our escalating standard of living. It mostly comes from free trade. Governments are responsible for some of it as well to be sure, and I'll even admit that this is one of the least wasteful things governments do (albeit still very, very wasteful), but refer to the broken window fallacy again. Governments spend money on research and development of shit they believe is more important than the free market would recommend, like stealth drones or lunar rovers, creating untold opportunity costs of developments in other sectors. Capitalism taps the ingenuity of people to innovate in ways that individuals would value the most.

[a500lbgorilla]

That I mostly agree with. Free trade certainly dictates a better set of rules to innovate for - what will people want, but innovation itself is separate from capitalism, I think. You can look at inventions like the printing press or vaccines that have ancient Chinese origins, but which found enormous application in the western world. The inventions, the ingenuity to create, to solve a problem is not a mechanism of capitalism, but free trade certainly knows what to do with a good thing once you've put it together.

[Renton]

Most of the great innovations emerged from the private sector and made the innovators very very rich. Would James Watt have invented the steam engine if he was living just a couple of centuries before his time, or was there something specific about the environment of his day that facilitated him to do so? Maybe in a hypothetical society that provided no monetary benefits to people for innovating, Watt still would have created his steam engine. Certainly there are cases in history where people did great things for the world without a profit incentive (Jonas Salk creating the polio vaccine comes to mind), but you have to admit that the incentives help.

[a500lbgorilla]

Obviously they help. I'm not anticapitalism.

[Renton]

I'm not trying to say you are. I'm just trying to dispel the notion that innovation is somehow separate from capitalism.

Great minds are going to think of great shit in the absence of a monetary incentive, but it still takes capital to realize ideas, and I think that's where capitalism really becomes indispensable. And this is the area were we can really postulate the huge opportunity costs incurred by states. If all the money that went to wars over the last 50 years instead went to private sector innovation, we may have invented teleportation by now, who knows?

[CoccoBill]

If all the money that went to wars over the last 50 years instead went to private sector innovation, we may have invented teleportation by now, who knows?

Quite possibly, but you're not saying "wars" only happen when there are governments, or that having governments equals wars, right? Local skirmishes, from what I've been told, where much more frequent before governments and laws.

[Savy]

I'm not trying to say you are. I'm just trying to dispel the notion that innovation is somehow separate from capitalism.

Great minds are going to think of great shit in the absence of a monetary incentive, but it still takes capital to realize ideas, and I think that's where capitalism really becomes indispensable. And this is the area were we can really postulate the huge opportunity costs incurred by states. If all the money that went to wars over the last 50 years instead went to private sector innovation, we may have invented teleportation by now, who knows?

It's actually been shown that throwing money at innovation and invention doesn't work. In fact it tends to have the opposite effect. If you mean that the culture and facilities would be there to nurture innovation and invention more then maybe but I'm not really sure this would be the case..

source - yaawn in irc chat a couple of months ago

[wufwugy]

^most ambiguous post. just as imsavy should be


iphones? self-driving cars? a light-weight cheap travel-sized coffee mug that contains heat for five hours? Vitamin D in pill form? A burger that costs a few dollars? A shirt that I order by clicking buttons and it shows up two days later in my size and with my favorite band's logo?

The time we're living in right now demonstrates just how big a role capitalism has in invention and innovation. It isn't responsible for inventing everything in the world, but the more we gravitate towards capitalism, the more that gets invented at faster rates.

[wufwugy]

Quite possibly, but you're not saying "wars" only happen when there are governments, or that having governments equals wars, right? Local skirmishes, from what I've been told, where much more frequent before governments and laws.

I think the best we can get now is a government that enforces strong security from foreign powers. But we're also seeing how this is becoming less necessary. A great example is how Putin backed down due to economic reasons. Because of economic reasons, US and Britain will never again invade Germany, and at some time in the future we'll be able to say that about every country.

[Renton]

It's actually been shown that throwing money at innovation and invention doesn't work. In fact it tends to have the opposite effect. If you mean that the culture and facilities would be there to nurture innovation and invention more then maybe but I'm not really sure this would be the case..

source - yaawn in irc chat a couple of months ago

You're correct that it doesn't work when governments throw money at research, this can be seen clearly with the failed efforts around the world at promoting alternative energy. But when people with entrepreneurial savvy throw their money at an innovation, it works really really well.

[jackvance]

You're correct that it doesn't work when governments throw money at research, this can be seen clearly with the failed efforts around the world at promoting alternative energy. But when people with entrepreneurial savvy throw their money at an innovation, it works really really well.

But governments who fund research are quite essential too because they all add to the knowledge pool that everyone taps from, by the design of how science is conducted. It is true that it won't lead directly to commercial application but a lot of research can be done that would otherwise not be done. A lot of government funding flows directly to universities and doctorate students as well - here in Belgium at least, I assume it's the same everywhere and I know of several instances where it led to spin-offs and companies.

Another interesting matter I find is how we can first see technologically advanced applications in specific industrial areas which, when perfected, comes to mass consumption. One of the most famous examples is remote controls and microwave ovens. They came from NASA research and the space exploration and moonlanding attempts. And I believe the same thing is happening as we speak in another field: 3D printing. These have already grown beyond printing mere plastic, spaceflight and aviation already strongly use 3D printers to print metal components in any shape you want with no need for welding. Same in medical sciences, which use 3D printing for stuff like hearing aids (over 1 million sold in the US that have been printed in metal), prosthetic limbs and even organs! 3D printing is also being used for food - to have astronauts print stuff like pizza's. It's already happening so if we see this as history repeating itself, in the next 10-20 years we can expect every household to get their own 3D printer to print whatever you want. One friend of mine is already reschooling himself in 3D Studio Max.

But this future prediction aside, I wouldn't dismiss governmental funding offhand because it doesn't lead directly to commercialisation. It usually goes through universities and they are directly connected to the industry in most cases and in general whatever the results, everyone benefits from them.

[Renton]

Yeah, as I said, I think funding research is one of the least wasteful things states do. But whatever small gains they stimulate pales next to the all the other opportunity costs they incur. All taxation is by definition a slow on economic growth and entrepreneurship within an economy, because it takes money from the most-valued use (where people want to spend or invest it) and puts it into less-valued uses (where the government wants to spend it + interest on government debt). Even if you accept the notion that taxes are the price we pay for a civilized society (and this is an acceptable position), the "price" is a massive opportunity cost.

So I could take one of two positions. I could say that yes, you're right that government research grants do a lot of good, but all of the other ways that governments stifle innovation have negative 20 times the magnitude of effect as the government research money's positive effect. But I would even go so far as to say that the state money to research itself is worse than if it weren't taken out of individuals' and businesses' coffers to begin with.

It seems like you can divide government efforts at research development into two categories, big state agencies and projects like NASA or individual handouts like genius grants and the like. NASA did lead to some innovation, but I think its pretty safe to say it was a massive failure from a cost-benefit standpoint. The space shuttle program cost 200 billion dollars over just 30 years, and led to a couple of dozen deaths. Were microwave ovens and remote controls emerging a few years before their time worth these costs? Maybe and maybe not. Would an extra 200 billion dollars in the pockets of individuals have stimulated some innovation and entrepreneurship in its own right? Definitely.

As far as government grants to individuals for research, these are possibly less wasteful and more beneficial than big projects like NASA, but the big problem with these is rent-seeking. I'll just leave this short video to explain how costly it is to give away money to people.

[jackvance]

NASA did lead to some innovation, but I think its pretty safe to say it was a massive failure from a cost-benefit standpoint. The space shuttle program cost 200 billion dollars over just 30 years, and led to a couple of dozen deaths. Were microwave ovens and remote controls emerging a few years before their time worth these costs? Maybe and maybe not. Would an extra 200 billion dollars in the pockets of individuals have stimulated some innovation and entrepreneurship in its own right? Definitely.

I understand your position but you go on the premise that this money would have gone towards the exact same kind of research which is highly doubtable. The money could have just been "squandered" because there are no immediate applications - the word squandered is too strong but meaning it would have been applied to optimization rather than real innovation. This 200 billion went into a lot more ethereal research such as how to make death rays. A lot of it didn't pan out but this kind of the-sky-is-the-limit research will find very novel things which you can't get through the market. (perhaps this is the crux of where we differ of opinion)

There are also other issues and 3D printers can be used as a nice example. With some friends I have looked into the possibilities to invest in 3D printers but to get from what exists now to a convenient mass-marketable product means sailing through some 20+ patents and the companies that have them are just sitting on them and waiting for something to develop so they can try and get their piece. So we aren't limited by technological capability in this regard but rather by artificial constraints on innovation (patents). The technology for 3D printing already existed in the 70s but it has only started booming after some crucial patents fell through a couple of years ago.

However the medical industry and aviation and to be relevant to grants, NASA uses it for their own purposes. That means the technology gets developed and refined in some place and otherwise it simply wouldn't.

The issue to me is a lot more complex than calling the money wasted..

As far as government grants to individuals for research, these are possibly less wasteful and more beneficial than big projects like NASA, but the big problem with these is rent-seeking. I'll just leave this short video to explain how costly it is to give away money to people.

I'll watch this after work.

[wufwugy]

I think it is fundamentally true that if government does anything that people want it to do, the same could be done better and more cheaply by private interests because government policy is necessarily a product of the will of the consumer. Perhaps this appears to not be the case because government policy is inherently convoluted and creates unpredicted moral hazards and monopolies

[wufwugy]

To answer the question of whether government participation into research is good, I think one way to get at it is to answer this question: would Elon Musk and his endeavors be better off with or without government funding? I think Musk is a good case because he epitomizes private entrepreneurship yet also receives government aid

Musk was in debt, on the brink of losing everything. The first two SpaceX launches failed. If the third failed, they'd have to close up shop and Musk's other businesses and personal finances would be in ruin. The third launch succeeded and the government gave SpaceX enormous contracts as a result.

This suggests that Musk was saved by government funding. But I contend that isn't the case. Musk's success is determined by other factors. His turnaround was ultimately due to that third launch succeeding. Only then did the government give life-saving contracts. But what if the government hadn't jumped in, and likewise what if the government didn't jump into any other markets? Would SpaceX be doing as well today? Perhaps. Without government intervention of any sort, Musk wouldn't have been on the brink of bankruptcy in the first place since he would have had more capital due to lower taxes. Private investment from others would also have been higher since there would have been no crowding out from government investment. However, that doesn't make the case that SpaceX would be better off without government funding.

But we're not talking about SpaceX, we're talking about Musk and markets as a whole. When just about everybody discusses markets, we tend to gloss over that aggregates are essential, and we forget about unintended consequences. Now we have to talk about Tesla, also owned by Musk. Tesla far exceeds the competition in virtually every aspect, yet that competition doesn't feel the full brunt of this because the government has propped them up like crazy (think: auto bailouts). It is likely that if the government hadn't saved the auto companies, there would have been a much greater natural shift towards Tesla. This, I think, would have put Musk in an even more powerful position than he currently is, and this means that even without government funding for SpaceX, he would ultimately be able to raise more capital for SpaceX. It's like how Bill Gates can raise just about as much capital as he wants because he has proven himself through Microsoft. Musk would have done the same thing with Tesla, but didn't because government incentives pushed for a different direction.

TLDR: Government involvement made Musk expend more effort into SpaceX than he probably should have (chasing government funding), and made it harder for Tesla to kick the competition's ass (government propped up the Midwest companies)

[CoccoBill]

I think it is fundamentally true that if government does anything that people want it to do, the same could be done better and more cheaply by private interests because government policy is necessarily a product of the will of the consumer.

I agree whole-heartedly. If people were benevolent, selfless and smart, we wouldn't need governments, rules, laws, regulations, police, military, or anything like that. I see government as the necessary "evil".

Perhaps this appears to not be the case because government policy is inherently convoluted and creates unpredicted moral hazards and monopolies

What safeguards do free markets have against coercive monopolies?