Anti-Capitalist Sentiment (with some morality)

[Savy]

I'm fairly sure the watchdog insisted that cheapest rail fares must be calculated and shown by the websites. I got that fare from National Rail Enquiries.

OUR trains are a shit and outdated form of transport. You wouldn't say the same if you lived in Japan.

Trains are essential if we want to reduce the number of cars on the road.

What something like watchdog says and what actually happens aren't exactly directly linked a lot of the time & I also think that was a suggestion that hasn't been implemented yet if it ever is.

[a500lbgorilla]

I'm referring to the mechanism by which humans can change things.

I forgot about fuedalism

[OngBonga]

Without he profit motive...

There's still a motive for government to get it right in the form of a boosted economy and votes.

Profit is all very well and good where there is healthy competition. Without competition, it's just a more expensive version of the failing system that you accuse government of running.

There is no competition when it comes to the rails. It is not possible to say "£300 is too much, I'll use a different train company". There's only one network. All I can do is either say "it's too much, I won't go", or find a cheaper alternative, such as driving, or air.

Privatising railways does not make it more efficient. Profit isn't an incentive for them because they rely on the fact that the majority of those who use the train will continue to do so regardless of the shitty service they receive. They get the profit anyway, because what they own is essential infrastructure, and people need to get to work.

Votes and economic benefits should be of more incentive to a government than profit is to a private company that pretty much has a guaranteed profit regardless. The threat of no profit is the real incentive for business to maintain their standards, and that doesn't exist when a private company owns a monopoly of essential infrastructure.

[OngBonga]

And if we want to say profit is what drives people, well that's fine... the government should employ people to manage the railways, and they will receive performance related bonuses, based on things like value, overcrowding, reliability, safety and punctuality. The incentive for government to maintain an efficient service should be obvious, and the incentive for the managers to do their job is better pay.

I'm unconvinced a private company has the same incentive. It's easy to sack an underperforming manager (and pay him compensation if a tribunal rules in his favour). It's not easy to rip up a contract between government and an underperforming private company, it is bound to be a drawn-out legal process with a great deal of money at stake.

[wufwugy]

There's still a motive for government to get it right in the form of a boosted economy and votes.

Less of an incentive. Are you devil's advocating here? Because this line is different than what Ong says he believes about why government does what it does.

Profit is all very well and good where there is healthy competition. Without competition, it's just a more expensive version of the failing system that you accuse government of running.

The profit incentive is essential to the creation of competitive markets. Without it there would be no competition.

There is no competition when it comes to the rails. It is not possible to say "£300 is too much, I'll use a different train company". There's only one network.

Thank the government.

find a cheaper alternative, such as driving, or air.

Thank markets and entrepreneurs.

Privatising railways does not make it more efficient. Profit isn't an incentive for them because they rely on the fact that the majority of those who use the train will continue to do so regardless of the shitty service they receive.

This is contrary to your previous point.

They get the profit anyway, because what they own is essential infrastructure, and people need to get to work.

Here we're getting at the root of why people are afraid of no regulation by government. People fear that a private company can monopolize something the public views as "essential" then abuse it. I'm happy to tell you that not only is this not something that happens in free markets, but it is something that happens when government intervenes.

Votes and economic benefits should be of more incentive to a government than profit is to a private company that pretty much has a guaranteed profit regardless.

Should be but isn't.

[wufwugy]

And if we want to say profit is what drives people, well that's fine... the government should employ people to manage the railways, and they will receive performance related bonuses, based on things like value, overcrowding, reliability, safety and punctuality. The incentive for government to maintain an efficient service should be obvious, and the incentive for the managers to do their job is better pay.

This is what we have today. It doesn't work that well and naturally inclines towards corruption and deterioration of the product/service.

[OngBonga]

The problem I have here though is that I don't consider road and air to be "competition" to the rails. They shouldn't be competing with each other. The idea that it's cheaper to fly to Cornwall is outrageous, it's obviously more expensive to build aircarft, train pilots, and then burn kerosene to get it airbourne, than it is to build a train, train the driver, and then burn diesel or hook it up to the electrcity grid.

The whole point of trains is to get cars off the road, get people moving without using as much fuel. If it's cheaper to drive than it is to go by rail, then it is utterly failing.

[OngBonga]

Thank the government.

Thanks government for not building sixteen different railway networks.

[wufwugy]

The problem I have here though is that I don't consider road and air to be "competition" to the rails. They shouldn't be competing with each other. The idea that it's cheaper to fly to Cornwall is outrageous, it's obviously more expensive to build aircarft, train pilots, and then burn kerosene to get it airbourne, than it is to build a train, train the driver, and then burn diesel or hook it up to the electrcity grid.

You are right that it isn't competition within the rail market, but it can be considered so within the transportation market. Economists tend to discuss the various things you mentioned as substitutes (trains, cars, planes, bikes, etc.).

On a big scale, it's worthwhile to think of theses in terms of competition. Here's an example for why: the less that rail can do, the more consumers move to substitutes (like cars and trucks), which lowers the price of rail and increases the price of the substitutes. Some suppliers then exit (on the margins) the rail market, and some enter the car market. This increases the supply of car goods/services, which decreases the price of car goods/services. Then consumers (on the margins again) move back to rail for some things. This raises rail demand, which increases rail price, which incentivizes entry of suppliers into rail, which increases supply, which drops rail prices and increases rail output.

The process I described is the market correcting mechanism discussed in econ 101. This mechanism has been at play in every industry one can think of, and it is essential for providing us the goods/services we have now (and the better ones we'll have in the future). It is when government intervenes with something like a price control or a subsidy that this mechanism is stymied and the markets begin to look more like monopolies instead of competitive.

[OngBonga]

It's a problem to accept that the motive for rail companies to up their game is to compete with road and air.

Short-haul flights should be expensive, and for the purpose of super-fast travel, it shouldn't be a cheaper alternative to rail because rail is much cheaper to run, and much more eco-friendly. Roads are already full in this country, and again car travel is less green than rail.

...which lowers the price of rail and increases the price of the substitutes

But this isn't happening. Rail is more expensive than road, and this is in a nation where fuel tax is astronomical compared to yours. Those who prefer to get the train to work, especially those who work in the cities, do not want to have to go by road, because it is much less convenient... they need to park, and share the road with other road users. They also can't sit and read the paper with a coffee while travelling. Road and rail offer different benefits and downfalls, they are not in direct competition with each other, and nor should they be. They should be there to compliment one another, for the purpose of keeping people and goods moving, which is essential for the economy.

[wufwugy]

It's a problem to accept that the motive for rail companies to up their game is to compete with road and air.

It is what it is. Economics is like physics: it doesn't matter what you want it to be, it is what it is.

What I mentioned is only one element of a much bigger picture too.

But this isn't happening.

Thank the government.

Also, what I mentioned has happened and is happening because law of demand, but the perception of there being no significant effect (which is what you're getting at) is why I say thank the government.

[OngBonga]

The Chinese rail network is state owned. I'm finding it tough to find figures to see how efficient it is.

The Japanese network is private, and is extremely efficient. They must be doing something right, maybe you can tell us what.

[OngBonga]

I don't doubt the government is responsible for the inefficient service we get, but that's besides the point. It is not government per se that is the problem, it is the actual government of the time.

We have a shit government, and have had for a very long time. It'll be interesting to see if Corbyn can somehow get into power, because he wants to privatise the railways.

[OngBonga]

I would say the work ethic and value they place on dignity and integrity will play a huge role in the efficiency of business ventures in Japan. It would be unacceptable to fail to provide the service they are contractually obliged to provide. Here in the UK, we accept second best because we're so fucking used to it.

[wufwugy]

I don't know much about rail specifically, just some of the economics that apply.

The quality of some of China's infrastructure can mostly be attributed to the quality that when government has an agenda, it is generally good at achieving that agenda. The China government has the agenda of beating every other country. Combined with its totalitarian control, this allows the government to succeed at the narrow goal of trains running on time.

I can't say anything specific about Japan's rail. One thing I can say is that when thinking in terms of economics, we don't want to look at specific examples so much as the economy as a whole. An example for why is that Japan's rail system could be better than others due to reasons that reduce economic dynamism. On the whole this would be bad even though it would make Japan look like it's doing good. Or maybe Japan's transportation system is a standout in the arena of free markets. I don't know.

The most common example that people tend to use for why they think government can do good is healthcare in the non-US world. They point at the benefits they get but miss the lack of dynamism this creates. As messed up as the US healthcare system is, it's still (excluding maybe Singapore) the freest and it has the most dynamism and countries that don't have those are being indirectly subsidized by the US healthcare system. Without the US healthcare system, the ones Europeans like would be at a crossroads between being more Soviet or less regulated by the government.

[wufwugy]

I don't doubt the government is responsible for the inefficient service we get, but that's besides the point. It is not government per se that is the problem, it is the actual government of the time.

We have a shit government, and have had for a very long time. It'll be interesting to see if Corbyn can somehow get into power, because he wants to privatise the railways.

Government is like this by innate nature. A monopoly cannot behave like a non-monopoly.

[wufwugy]

I would say the work ethic and value they place on dignity and integrity will play a huge role in the efficiency of business ventures in Japan. It would be unacceptable to fail to provide the service they are contractually obliged to provide. Here in the UK, we accept second best because we're so fucking used to it.

I suspect you are very right.

This has been challenging for Japan too, as the cultural psyche does not lend itself towards change.

[Poopadoop]

Anyone trying to suggest that gov't should be in charge of things like railroads and not capitalists is just letting Wuf shoot fish in a barrel. I think it's pretty clear capitalism wins that battle.

You can also argue that gov't regulation of industry leads to monopolies, abuses, etc.. And these things are probably true.

But, there's often a human price to pay for overall economic efficiency inasmuch as it leads to social Darwinism, resulting in inequalities in access to resources. Capitalism ran free in the oldy days and led directly to the class system. There's no disputing it. Part of the reason governments took an interest in economics in the first place was because the poor were always pissed off at being exploited by the rich, and the gov'ts didn't like the idea of a large proportion of the people being angry all the time. So they usually tried to balance things out. And when they didn't they had revolutions to deal with.

You can say gov'ts don't do a cost-efficient job of redressing the imbalances brought about by the free market and theorize that capitalism would. But when capitalism was the root cause of the problem in the first place it's hard to buy into the idea that it's also the cure.

[OngBonga]

A monopoly cannot behave like a non-monopoly.

Of course it can, if it has the incentive. Government has incentive beyond profit. Arguably, the ultimate incentive is still profit. If the economy is sweet, dividends are bigger. If I employed 15,000 people in Lodon, I'd want them at work on time and not stressed out from their journey. It would result in greater productivity. That means greater profit for the company, greater tax for the taxman.

Government is not monopoly, because government changes.

[wufwugy]

But, there's often a human price to pay for overall economic efficiency inasmuch as it leads to social Darwinism, resulting in inequalities in access to resources.

Such is life. Capitalism makes less of this. Also inequality is not inequity.

I find it odd that "social Darwinism" has become a pejorative. The world is Darwin, humans are Darwin. If we try to make society not Darwin we'd find that we're really fucking up society and making things worse.

Capitalism ran free in the oldy days and led directly to the class system. There's no disputing it.

It did? When was this?

[OngBonga]

Anyone trying to suggest that gov't should be in charge of things like railroads and not capitalists is just letting Wuf shoot fish in a barrel. I think it's pretty clear capitalism wins that battle.

Capitalism thrives where there is competition. I think I have wuf on my side in this regard.

Capitalism wins the battle where the incentive exists. Currently it doesn't, because if I want to go to Cornwall, it's gonna cost me a shit ton. Where's their incentive to provide an efficient service?

[wufwugy]

Of course it can, if it has the incentive. Government has incentive beyond profit. Arguably, the ultimate incentive is still profit. If the economy is sweet, dividends are bigger. If I employed 15,000 people in Lodon, I'd want them at work on time and not stressed out from their journey. It would result in greater productivity. That means greater profit for the company, greater tax for the taxman.

Government is not monopoly, because government changes.

These don't determine whether or not something is a monopoly. Government is a monopoly.

[OngBonga]

monopoly - the exclusive possession or control of the supply of or trade in a commodity or service.

We can argue about "exclusive control" where we're talking about a government that changes over time.

[wufwugy]

Capitalism thrives where there is competition. I think I have wuf on my side in this regard.

Capitalism thrives everywhere (except perhaps where there is chaos). Capitalism is the creator of competition, not emergent from competition.

The popular mindset has it backwards. That mindset thinks that capitalism needs competition and that competition needs government to keep capitalism from deterring competition. The truth is more like competition needs capitalism for its creation and it needs government to prohibit itself from intervention.

Capitalism wins the battle where the incentive exists. Currently it doesn't, because if I want to go to Cornwall, it's gonna cost me a shit ton. Where's their incentive to provide an efficient service?

Review my posts.

[wufwugy]

We can argue about "exclusive control" where we're talking about a government that changes over time.

Law is a service. Government is a law monopoly.

Change over time is not relevant. Government is the most remarkable example of monopoly there is.

[Poopadoop]

Such is life. Capitalism makes less of this. Also inequality is not inequity.

So you accept that capitalism leads to inequalities but say it fixes the problem too. Thank you for making my point.

I find it odd that "social Darwinism" has become a pejorative. The world is Darwin, humans are Darwin. If we try to make society not Darwin we'd find that we're really fucking up society and making things worse.

Thankfully you're not in the majority in that view. If you take it to its logical conclusion you will start letting sick people die so you don't interfere with nature. Probably best to let the sick baby born to a poor family who can't afford treatment to die as well since that's just survival of the fittest.

It did? When was this?

Are you suggesting that governments instigated the class system through their efforts to redistribute wealth? Or can you accept that there were rich people and poor people long before there was such a thing as government.

[wufwugy]

So you accept that capitalism leads to inequalities but say it fixes the problem too. Thank you for making my point.

I've said no such thing. Inequality is a non-removable facet of life. Government makes it worse and capitalism makes it better.

Thankfully you're not in the majority in that view. If you take it to its logical conclusion you will start letting sick people die so you don't interfere with nature. Probably best to let the sick baby born to a poor family who can't afford treatment to die as well since that's just survival of the fittest.

I have not suggested cruelty or psychopathy. The world is Darwin. It is best that we understand this and use the knowledge to construct the best society we can. Not doing so would be attempts at breaking the natural world in ways that doesn't get broken.

An example is how, because of the Darwin nature of people, when the government subsidizes unproductive behavior, it promotes the survival of unproductive behavior. This can be thought of as the environment selecting for behavior that harms. Applying Darwinian ideas to society has nothing to do with the barbaric notion that many think, but with promoting good and discouraging bad.

Are you suggesting that governments instigated the class system through their efforts to redistribute wealth? Or can you accept that there were rich people and poor people long before there was such a thing as government.

You said this was capitalism. It's not. Capitalism is very new in history. Where free market capitalism has thrived, we've seen vast thriving of the poor. Where we have seen the class divides you're discussing is where we haven't found capitalism and instead of found powerful governments.

[Poopadoop]

Inequality is a non-removable facet of life. Government makes it worse and capitalism makes it better.

You keep saying this but you haven't explained how capitalism reduces inequality (or if you did I missed it, sorry).

I have not suggested cruelty or psychopathy. The world is Darwin. It is best that we understand this and use the knowledge to construct the best society we can. Not doing so would be attempts at breaking the natural world in ways that doesn't get broken.

An example is how, because of the Darwin nature of people, when the government subsidizes unproductive behavior, it promotes the survival of unproductive behavior. This can be thought of as the environment selecting for behavior that harms. Applying Darwinian ideas to society has nothing to do with the barbaric notion that many think, but with promoting good and discouraging bad.

I'm not talking about interfering with the private sector in ways that are harmful. Of course that happens and of course that's stupid.

I'm talking about how you get that poor sick baby some medicine in a purely capitalist system. There's no recourse for that child's family, they're just screwed.

You said this was capitalism. It's not. Capitalism is very new in history. Where free market capitalism has thrived, we've seen vast thriving of the poor.

According to the dictionary, capitalism is "an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state." So I don't understand how there wasn't a free market economy before governments existed. What was it then?

Where we have seen the class divides you're discussing is where we haven't found capitalism and instead of found powerful governments.

Can you give some examples of places and times where this has been shown to be the case?

[JKDS]

I take issue with the use of Darwin in describing behaviour.

[wufwugy]

I take issue with the use of Darwin in describing behaviour.

How come? Natural selection applies to behavior.

[Poopadoop]

I take issue with the use of Darwin in describing behaviour.

If you're referring to Social Darwinism, it has some serious shortcomings which is why it fell out of favor early in the 20th century. The main issue is the idea that evolution only rewards competition and doesn't value cooperation.

[OngBonga]

The main issue is the idea that evolution only rewards competition and doesn't value cooperation.

This isn't true, and a simple example can prove it... jackdaws vs seagulls in Cornwall... the jackdaws are much smaller than the seagulls, but the seagulls won't challenge them for food because the jackdaws always go around in pairs; one keeps a look out while the other is feeding. Cooperation.

There are other examples. The honeybird has been known to alert humans to the presence of a beehive, the humans will extract the honey from it, and leave some for the bird. Cooperation.

Dogs and humans. Bees and flowers. Cooperation in nature is everywhere.

[Poopadoop]

Cooperation in nature is everywhere.

Exactly. That's why Social Darwinism is a bad theory, at least in the way it was put forth in the 1800s.

[OngBonga]

Oh right I misunderstood the context of your comment, excuse me for smoking a big spliff and grunching.

[Poopadoop]

excuse me for smoking a big spliff and grunching.

I assumed there was a good reason for the misunderstanding, no problem.

[wufwugy]

You keep saying this but you haven't explained how capitalism reduces inequality (or if you did I missed it, sorry).

It may not seem like I've said much on this since what we're dealing with mostly is derivation from economic principles.

To answer simply how capitalism reduces inequality: it allows for people to best apply the value of their capital (skills and equipment) and their labor. Markets are where people with varying attributes go to find buyers, and to find sellers of other attributes, all for the purpose of creating more beneficial resources for the involved parties. The free market allows for this to happen to its fullest extent. It provides for those with the lowest quality and quantity of attributes to find the optimal price to sell their goods/services for.

When a government intervenes into this engine, it inflates costs because it does not intervene efficiently. This cost inflation harms those with the lowest quality and quantity of attributes first, which diverges equality. As more intervention comes, costs inflate further. Today's market is intervened so heavily in by government that there are many huge industries where the poor and middle class have valuable skills that others want to purchase but they can't because the costs are too high and those with the skill and desire to produce don't even engage the market. What this leaves behind is a situation where only the wealthy can engage in the market because they're the only ones that can afford the high costs. This creates another vicious cycle of government and the rich rubbing each others' backs, further pushing out competition. We've seen this happen all over the place, from medical associations that want only their special group of doctors to be allowed to perform functions that nurses can do just as safely for much cheaper, to unions that lobby to raise the minimum wage so that there is less competition for contracts from cheaper alternatives than the union.

I'm talking about how you get that poor sick baby some medicine in a purely capitalist system. There's no recourse for that child's family, they're just screwed.

If we think of our healthcare systems, the true cost of care is very very very very low compared to what the prices are. The best way to make medicine available for sick babies is to let the system that thrives on abundance and pleasing the customer (capitalism) do what it does. The best way to keep babies from getting the medicine they need looks similar to what governments are doing with healthcare: all sorts of interventions that greatly deter supply.

This raises the question: "what can governments do proactively to raise supply?" Well, I have a hard time finding things since most of what they can do, and what is popular among voters, is that which decreases supply. For example, people don't like when a brand new drug is very expensive so they want government to set a price control. On the surface it sounds like there is nothing wrong with this, but it reduces the supply in the drug market and hurts everybody.

According to the dictionary, capitalism is "an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state." So I don't understand how there wasn't a free market economy before governments existed. What was it then?

The sensibility of production for sale on a market wasn't really even a thing until it was invented somewhere around the Dutch area and sometime in the 17th century or something. Most of history before then was about people farming for sustenance and paying the remaining in tax to the state or warlords, while a handful of others did specific tasks for the aristocracy (like blacksmithing or stable tending). These societies had huge class divides and very little in the way of markets.

Northern Europe created the idea of private enterprise, Britain embraced it more, a Scottish philosopher (Adam Smith) explained the theory behind it, and America took the idea and ran with it. The American government was the very first time that a government had constitutionally limited power, and the American land was the first time that the sensibility of private enterprise was allowed to flourish without great obstacles. This is the difference that created the world we live in today. Many say "it was technology" or "it was oil". Neither provides the story. Without economics to apply markets to the supply, demand, and distribution of goods and services, oil would still be in the ground and the light bulb would be something people who have access to books know about.

Can you give some examples of places and times where this has been shown to be the case?

I mentioned some above. It's more than giving examples but explaining why they're examples. Like Friedman said, every prosperous country is an example of this. There are no known examples of countries that have risen from third world poverty to have a middle class that didn't do so by embracing free market reforms and limiting government intervention.

This stuff involves a deconstruction of so much that we take for granted. For example, the term "middle class" is itself a symbol of the example you're looking for right beneath our noses. There was no middle class in the entirety of history except for when it grew out of capitalism in America and Europe. China and several other countries are undergoing the same creation of a middle class that we did in real time, and economists are watching it in real time. The emergent China middle class is coming as China's government is deregulating its markets and allowing entrepreneurs and consumers and workers do as they like.

[wufwugy]

If you're referring to Social Darwinism, it has some serious shortcomings which is why it fell out of favor early in the 20th century. The main issue is the idea that evolution only rewards competition and doesn't value cooperation.

That's very strange. Evolution rewards cooperation big time.

[wufwugy]

Oh I see you already addressed that.

The issue is probably the way it was initially presented.

[Poopadoop]

That's very strange. Evolution rewards cooperation big time.

The Social Darwinists' motivation for applying Darwin to human behavior was mainly an excuse for imperialism, racism, etc., as being the 'natural' state of things and thus, morally justified.

For what it's worth, Collective Darwinism emphasized cooperation in nature as a justification for communism (roughly speaking).

[wufwugy]

Super important edit from above. I organized it originally wrongly. Here's the fix:

Today's market is intervened so heavily in by government that there are many huge industries where the poor and middle class have valuable skills that others want to purchase but they can't because the costs are too high and those with the skill and desire to produce don't even engage the market. What this leaves behind is a situation where only the wealthy can engage in the market because they're the only ones that can afford the high costs.

[Poopadoop]

It may not seem like I've said much on this since what we're dealing with mostly is derivation from economic principles.

To answer simply how capitalism reduces inequality: it allows for people to best apply the value of their capital (skills and equipment) and their labor. Markets are where people with varying attributes go to find buyers, and to find sellers of other attributes, all for the purpose of creating more beneficial resources for the involved parties. The free market allows for this to happen to its fullest extent. It provides for those with the lowest quality and quantity of attributes to find the optimal price to sell their goods/services for.

When a government intervenes into this engine, it inflates costs because it does not intervene efficiently. This cost inflation harms those with the lowest quality and quantity of attributes first, which diverges equality. As more intervention comes, costs inflate further. Today's market is intervened so heavily in by government that there are many huge industries where the poor and middle class have valuable skills that others want to purchase but they can't because the costs are too high. What this leaves behind is a situation where only the wealthy can engage in the market because they're the only ones that can afford the high costs and those with the skill and desire to produce don't even engage the market. This creates another vicious cycle of government and the rich rubbing each others' backs, further pushing out competition. We've seen this happen all over the place, from medical associations that want only their special group of doctors to be allowed to perform functions that nurses can do just as safely for much cheaper, to unions that lobby to raise the minimum wage so that there is less competition for contracts from cheaper alternatives than the union.



If we think of our healthcare systems, the true cost of care is very very very very low compared to what the prices are. The best way to make medicine available for sick babies is to let the system that thrives on abundance and pleasing the customer (capitalism) do what it does. The best way to keep babies from getting the medicine they need looks similar to what governments are doing with healthcare: all sorts of interventions that greatly deter supply.

This raises the question: "what can governments do proactively to raise supply?" Well, I have a hard time finding things since most of what they can do, and what is popular among voters, is that which decreases supply. For example, people don't like when a brand new drug is very expensive so they want government to set a price control. On the surface it sounds like there is nothing wrong with this, but it reduces the supply in the drug market and hurts everybody.



The sensibility of production for sale on a market wasn't really even a thing until it was invented somewhere around the Dutch area and sometime in the 17th century or something. Most of history before then was about people farming for sustenance and paying the remaining in tax to the state or warlords, while a handful of others did specific tasks for the aristocracy (like blacksmithing or stable tending). These societies had huge class divides and very little in the way of markets.

Northern Europe created the idea of private enterprise, Britain embraced it more, a Scottish philosopher (Adam Smith) explained the theory behind it, and America took the idea and ran with it. The American government was the very first time that a government had constitutionally limited power, and the American land was the first time that the sensibility of private enterprise was allowed to flourish without great obstacles. This is the difference that created the world we live in today. Many say "it was technology" or "it was oil". Neither provides the story. Without economics to apply markets to the supply, demand, and distribution of goods and services, oil would still be in the ground and the light bulb would be something people who have access to books know about.



I mentioned some above. It's more than giving examples but explaining why they're examples. Like Friedman said, every prosperous country is an example of this. There are no known examples of countries that have risen from third world poverty to have a middle class that didn't do so by embracing free market reforms and limiting government intervention.

This stuff involves a deconstruction of so much that we take for granted. For example, the term "middle class" is itself a symbol of the example you're looking for right beneath our noses. There was no middle class in the entirety of history except for when it grew out of capitalism in America and Europe. China and several other countries are undergoing the same creation of a middle class that we did in real time, and economists are watching it in real time. The emergent China middle class is coming as China's government is deregulating its markets and allowing entrepreneurs and consumers and workers do as they like.

I have to admit I don't really have the tools to critique your essay as I'm not a trained economist. My point of view is probably better articulated by others, such as here:

https://ethicalrealism.wordpress.com...st-capitalism/


That aside, I think that in general you are taking a point of view that is extreme and overly simplistic. Academics (including Friedman) tend to take extreme positions, that's what makes them and their theories interesting and being interesting gets rewarded in academia. That doesn't mean such theories are true or even that the person postulating them even believes they're true. They're only theories after all. Friedman himself even argues in favor of certain government interventions which are decidedly not capitalist.


From here:
https://unlearningeconomics.wordpres...s-distortions/

"In Capitalism and Freedom, he advocated building infrastructure, a negative income tax, school vouchers, praised antitrust laws and more."

[wufwugy]

https://ethicalrealism.wordpress.com...st-capitalism/

There's no sense in going point by point, but I'll just mention that the author gets a good deal of stuff wrong.

Friedman himself even argues in favor of certain government interventions which are decidedly not capitalist.

Not everybody's perfect.


There is a great divide between what some economists say and what the economics itself says. I do my best to speak from the economics itself and ignore the politically biased statements made by some economists.

[Poopadoop]

Not everybody's perfect.

There is a great divide between what some economists say and what the economics itself says.

This sounds like you're saying most economists are way way off.

I do my best to speak from the economics itself and ignore the politically biased statements made by some economists.

Oh. I thought you were basing your ideas on Friedman's, I didn't realise you'd progressed beyond him into your own realm of understanding. Well done!

[wufwugy]

This sounds like you're saying most economists are way way off.

Economists themselves argue about this stuff. The spectrum of economists ranges from those who are free market advocates in virtually every way (like Bob Murphy), to free market advocates in almost all (but not all) ways (like Scott Sumner), to free market advocates in most ways but not when it comes to their political emotions (like Paul Krugman).

Oh. I thought you were basing your ideas on Friedman's, I didn't realise you'd progressed beyond him into your own realm of understanding. Well done!

I am deeply influenced by him. My influences are mainly Friedman, Sumner, Caplan, and the stuff I read in economics textbooks. A lot of economists think there is a problem among many economists in forgetting what the textbooks teach. I think it is not only that but that most economists too readily set aside what I think is the most important skill economists have: deducing from economic principle. Perhaps an example of this is how much we've heard economists discuss the minimum wage like it's anything other than creationism or flat earth-ism. The econometric approach to minimum wage makes it look like there is something worth looking at, but this is because the econometric approach provides very little evidence from which conclusions can be made. This instills poor habits in economists and misleads the public. What economists should instead do on the minimum wage (most of them do this fwiw, just not all) is point out that the law of demand and not-exactly-a-law of supply are theory as rock solid as theories get, and it is in a very simple deduction from them that an increase in the minimum wage is expected to decrease the demand for labor and/or increase the price of goods/services. Econometricians have a hard time showing this happen but that's because econometrics doesn't have the tools to show it happen in the first place.

[rong]

Every time this thread picks up, I read a few posts, feel rage, start to type, feel exhaustion and frustration, give up.

[MadMojoMonkey]

What economists should instead do on the minimum wage (most of them do this fwiw, just not all) is point out that the law of demand and not-exactly-a-law of supply are theory as rock solid as theories get, and it is in a very simple deduction from them that an increase in the minimum wage is expected to decrease the demand for labor and/or increase the price of goods/services. Econometricians have a hard time showing this happen but that's because econometrics doesn't have the tools to show it happen in the first place.

It's exactly stuff like this which makes me skeptical about economics.

You say that supply and demand is as rock solid as economic theory gets, but then you say that it can't be shown to even happen in the first place on the example of minimum wage. Minimum wage is not a new issue, has changed many times in the past, and the idea that economists can't show that this plan is antithetical to positive economic growth tells me that they don't have anything from reality to affirm their position.

It sounds like a frat house echo chamber of people who have said things which "seem right" to each other enough that everyone now thinks it's a sign of mental deficiency to not say the thing is right. However, any truly rigorous analysis shows that this level of certainty is unjustified in the light of human complexity.

So the dissonance I find is that on the one hand, you put forth your economic ideas as though they are undisputed laws, when the reality is that that they are guesses at guidelines.

Which is fine, I guess, but I can't take you seriously when you tell people who disagree with you that they are wrong. If you can't demonstrate to another economist who wants to agree with you that the thing you mention is real, then how can you hope to convince people who think your ideas "seem" wrong?

[CoccoBill]

Re: government incentives: What about agency/unit/personal level goals and targets, performance metrics, reward systems, penalties, reputation and bad press etc? Those are things in most governments today. Not even going into personal motivations like altruism, which should exist on a very similar scale in both public and private sectors, one could argue more so in the public.

Profit is far from being the only incentive.

[wufwugy]

It's exactly stuff like this which makes me skeptical about economics.

You say that supply and demand is as rock solid as economic theory gets, but then you say that it can't be shown to even happen in the first place on the example of minimum wage. Minimum wage is not a new issue, has changed many times in the past, and the idea that economists can't show that this plan is antithetical to positive economic growth tells me that they don't have anything from reality to affirm their position.

When economists can keep all other factors the same (ceteris paribus), they can demonstrate the supply and demand theories, and those theories have been demonstrated repeatedly. If they could do that with minimum wage, they would (they try, but ceteris paribus is so evasive on that level).

[wufwugy]

Re: government incentives: What about agency/unit/personal level goals and targets, performance metrics, reward systems, penalties, reputation and bad press etc? Those are things in most governments today. Not even going into personal motivations like altruism, which should exist on a very similar scale in both public and private sectors, one could argue more so in the public.

Profit is far from being the only incentive.

Profits measure the incentives* that can be measured (at this point) by the common unit of account of money. There are more incentives than that though, so you are correct about that.

This is an interesting thought experiment you've brought up. I may spend some time on it at a later date when I have more energy.

*More or less. There may be some exceptions. This isn't something I've covered enough to say for sure.

[CoccoBill]

To continue, profit motivates only those who receive them. In a big company that's typically the shareholders and some execs, not the employees. There might be some reward system in place that benefits all employees, but most of the time there's no linear correlation between company performance and employee bonuses. More typical from my experience is that if the company performs well, you get whatever bonus percentage of your annual salary you're entitled to (provided you've also met your personal targets), and if the company performs poorly, no one gets anything. Yet it's the employees who have the most effect on the company's performance [citation missing], the shareholders who get most of the profits have none. I'm starting to think profits aren't that effective an incentive in many cases. For a mom and pops sure, where the employees are the "shareholders", but where are those nowadays, and how big part of the economy are they?

[OngBonga]

Furthermore, it can surely be argued that if the workers own the means of production (a core aspect of socialism) then they will be more incentivised than an employee who merely earns a wage.

Socialism can be argued to pass the incentive from the top to the bottom. Coco makes a solid point... employees lack the profit incentive, their main incentive is fear of losing their job, which is a negative incentive. How do you give them more incentive? By either giving them performance related bonuses, or by giving them a financial stake in the business.

[wufwugy]

To continue, profit motivates only those who receive them. In a big company that's typically the shareholders and some execs, not the employees. There might be some reward system in place that benefits all employees, but most of the time there's no linear correlation between company performance and employee bonuses. More typical from my experience is that if the company performs well, you get whatever bonus percentage of your annual salary you're entitled to (provided you've also met your personal targets), and if the company performs poorly, no one gets anything. Yet it's the employees who have the most effect on the company's performance [citation missing], the shareholders who get most of the profits have none. I'm starting to think profits aren't that effective an incentive in many cases. For a mom and pops sure, where the employees are the "shareholders", but where are those nowadays, and how big part of the economy are they?

The employees are driven by profits too (their own wages). I don't mean this in that they are driven by the profits of the company (they're not), but in that they are themselves akin to mini-companies. Just like a company sells a good or service to a consumer for profit, a laborer sells his service to the consumer of labor (employers/owners).

Compensation matches well with skills and risk. Shareholders get more of the rewards of good times because they take on the risk of bad times. Higher up work gets paid more because it requires rarer skill sets.

If I was questioning the idea of profits, I wouldn't want to go this route. The current system rewards pretty closely to the real risks and real skills that different parties have.

[wufwugy]

Furthermore, it can surely be argued that if the workers own the means of production (a core aspect of socialism) then they will be more incentivised than an employee who merely earns a wage.

Workers have the freedom to own the means of production in capitalism. Do you think that perhaps this would be more common if it worked better?

Socialism can be argued to pass the incentive from the top to the bottom. Coco makes a solid point... employees lack the profit incentive, their main incentive is fear of losing their job, which is a negative incentive. How do you give them more incentive? By either giving them performance related bonuses, or by giving them a financial stake in the business.

Watch the frame.

The main incentive of a laborer is making a wage to buy things he wants. Framing it as not wanting to lose his job is painting with a brush of dysphemism.

[wufwugy]

Perhaps a route I would want to take is that money can't act as unit of account for everything. That is, well, probably true. I'm not sure money will ever be able to measure somebody's desire to not lose face. However, money does measure that to a degree (losing money shows losing face in some cases), and economists do try to think in terms of money for things that people don't intuitively (like "this 1 hour of leisure on the golf course is worth more to me than the $40 I would make working at the clinic instead").

That said, I think the best course of action would be to let money measure more things than we currently do.

[OngBonga]

The main incentive of a laborer is making a wage to buy things he wants. Framing it as not wanting to lose his job is painting with a brush of dysphemism.

The main incentive of getting a job is to buy things that one wants. But that isn't the incentive to do the best one can do. If I'm paid £10 an hour to work in a factory, do you think I'm going to be as productive as someone doing the same job who has shares in the company, or gets x% of the profits as a yearly bonus? Nope.

I think you underestimate the sheer volume of people who basically grind through their working day doing as little as they can get away with. The incentive to meet the minimum criteria in this regard is fear of losing the job... that's all that's stopping them doing a worse job.

Buying things isn't an incentive to work harder if you're not going to get paid more for working harder.

[wufwugy]

The main incentive of getting a job is to buy things that one wants. But that isn't the incentive to do the best one can do. If I'm paid £10 an hour to work in a factory, do you think I'm going to be as productive as someone doing the same job who has shares in the company, or gets x% of the profits as a yearly bonus? Nope.

I think you underestimate the sheer volume of people who basically grind through their working day doing as little as they can get away with. The incentive to meet the minimum criteria in this regard is fear of losing the job... that's all that's stopping them doing a worse job.

Buying things isn't an incentive to work harder if you're not going to get paid more for working harder.

I get your point. There isn't a 1 to 1 correlation between getting paid more and working harder.

Yet, it's still about making the wage. Why does somebody not want to lose their job? Because it means loss of wage.

[CoccoBill]

To my knowledge people in government earn wages too, which would suggest government employees have the same profit incentives as the private sector.

[OngBonga]

I get your point. There isn't a 1 to 1 correlation between getting paid more and working harder.

So this comes back to my point about the workers owning the means of production. In such a system, surely the workers are more incentivised than someone merely earning an hourly wage. The profit incentive is now held by the workers, not the shareholders.

I'm not suggesting this proves that socialism wins. But I do believe that aspects of socialism can make capitalism better. I'm surprised you don't see it as obvious, considering that you believe that profit is the best incentive. Why incetivise the shareholders rather than the workers? The workers are the ones who can make the most practical adjustment to increase revenue... working harder. Why would they want to do that if they aren't the ones seeing the benefit? The only incentive the worker really has beyond fear of losing the job is the prospect of promotion (and hence future pay rise), but I really don't think that is anywhere near as strong an incentive as a direct pay rise, shares, or performance & profit related bonuses. The problem with promotion is that not everyone will get promoted, so you're directly competing with your collegues for that incentive.

I accept that profit is the greatest incentive. I just feel that capitalism has a tendancy to incentivise the wrong people.

[MadMojoMonkey]

I think you underestimate the motivating power of self-respect.

I heard a story of a failing auto factory and one of the things they did to fix it is they started a "bring your family to work" day. The workers were encouraged to clean up their work space and to add personal effects to make it their own, so that when their families came to see it, they had a sense of pride about their job.

They also encouraged inter-departmental competitions and monetary incentives, so I'm not trying to suggest that isn't an important factor in motivating people. I'm suggesting that there is more to motivating people than money.

Most of the people I've worked with in life do not want shares in the company or a variable income in any way. They want a secure paycheck which has - above all else - predictability. People raising families don't want to worry that they may not earn enough to feed their families if their coworkers decide to slack off for a while.

[OngBonga]

I think you underestimate the motivating power of self-respect.

Not at all. It's why Japan's private railway network functions on a level that we British can only dream of. The British don't have a great deal of self respect.

I certainly agree with you that there's more to incentive than money. But the point wuf makes a lot, and one I agree with when applied generally, is that profit is the greatest incentive. Money is worth more than pride to the vast maority of people.

[Savy]

You'll find there are certain areas, especially those requiring creative solutions, that money incentives have shown to have a detrimental effect on.

[OngBonga]

Most of the people I've worked with in life do not want shares in the company or a variable income in any way. They want a secure paycheck which has - above all else - predictability

Wait a minute... I didn't suggest that performance and profit related pay should replace hourly wages. I'm simply saying that the profit, or at least some of it, should shift from private owners to the workers... in this way, productivity is maximised.

An hourly rate can still be guaranteed, allowing security.

[OngBonga]

You'll find there are certain areas, especially those requiring creative solutions, that money incentives have shown to have a detrimental effect on.

Probably. There's also plenty of people who aren't motivated by money. I think we have to look at this in general terms.

[Savy]

Probably. There's also plenty of people who aren't motivated by money. I think we have to look at this in general terms.

The thing with capitalism, and if anyone disagrees please do say, is that the idea is to put a value on things which currently we are so far away from actually being able to do that the idea gets ignored and we talk about money. Incentives are a great thing but they have to be relevant, for example job security has an incredible value that people don't really value correct and a lot of people are very falsely under the impression that their job is much safer than it really is. Anyway a better point is that personal development in your role is an absolutely huge incentive & for a lot of things vastly superior to money incentives whilst also leading to some of the other qualities mentioned such as self-respect. Those should all be accounted for in a real economic system but obviously doing so is hard whereas saying £5 > £4 therefore incentive is too simplistic and as a result when applied across the board it's wrong.

[OngBonga]

Those are fine points, but personal development and self respect are still incentives when the workers are also taking a slice of the profit.

I'm thinking of this is the basic sense of a factory that creates goods. The harder the employees work, the more profit the company makes. A very simple model, but also relevant to a large % of our work force. All the incentives that capitalism offers are there... personal development, promotion, self respect etc... but where employees also have a financial stake in the success of the business, well that creates a further, and extremely powerful, incentive.

Of course when we start to think of services, rather than industry, it becomes much more complicated, because it's harder to put a value on the quality of a service, as opposed the value of increased productivity. But that just takes it out of my depth.

[Savy]

I'm not saying it should be one or the other.

[OngBonga]

Nor am I, I'm merely arguing that incentivising workers with profit will likely result in increased productivity.

[Savy]

Nor am I, I'm merely arguing that incentivising workers with profit will likely result in increased productivity.

Except in all the circumstances where it doesn't and has been shown not to + all the ones we don't yet know about. Ye.

[OngBonga]

Shown not to? Not to me. Show me.

[Savy]

Shown not to? Not to me. Show me.

[MadMojoMonkey]

Interesting information.

[CoccoBill]

I agree wholeheartedly. The key issue there is that that's how it works after the employees earn enough for the money to no longer be an issue. The majority of people work because they have to, they need to support their family and pay the bills. If they have to constantly struggle doing that, that's pretty much the only thing in their minds. If on the other hand they earn enough as their base salary to comfortably manage that, any added income sees drastically diminishing returns. Some extra luxury, sure, but the comparison to the value of each dollar when you're barely making ends meet is huge. After you're earning enough, other things probably become more important for most people.

For example, I'd personally much rather work less hours for my current pay, than get a raise working the normal hours. Life > work, free time > money.

[OngBonga]

Ok, my first thought was that these people are being given tasks which require skill or intelligence. But he gets to that, so cool.

The gist I'm getting is that performance related pay would work in the factory where the job in hand is to operate machinery, or other mundane tasks like picking & packing, basically a great deal of industrial production. According to this research, it starts to fall apart where the job in question is cognitive... where it requires innovation and creativity. I guess smart people perform worse when under financial pressure, and where there's a huge carrot, it distracts them from peak performance. It's an interesting conclusion.

I think the points I am making relating to industry are supported by this research. Mechanical tasks improve in quality with pay.

[CoccoBill]

^I'd assume some of that is explained by the difference in wages, more people falling under the barely surviving category. Factory workers doing monotonous tasks probably earn a great deal less on average than people doing innovative and creative work. The other alternative which I'm a bit hesitant to pursue is saying factory workers are simpler folks who don't care about their work having a purpose, or at least have slightly less ambitious goals regarding that.

[OngBonga]

I think the lack of purpose thing is important in factory workers. This is why they lack incentive.

The pay... I'm not sure that really matters. I mean wealth is relative. Someone earning £1000 a week, being offered a £5k performance bonus, might be more motivated to earn that reward than someone who is earning £10k a week and offered a £20k bonus. It's five weeks wages to the former, and two to the latter. People's idea of "a lot of money" differs drastically depending largely on income.