patrick.net

Unregulated capitalism is all the freedom you can afford, and not one drop more.

Related to my studying of The Irvine Company, I was doing some reading on LA history and found a funny story about one of the great capitalists of the day, Phineas Banning, who dredged the Port of LA and established a local transportation nexus from it. Then SPRR came through and took it all, making Banning an agent of the company.

Glibertarians forget that there is always a bigger fish in the sea that will take what is theirs eventually, that is the law of one-dollar one-vote. I prefer one-man one-vote, since the masses are more easily placated than the robber barons.

I prefer one-man one-vote, since the masses are more easily placated than the robber barons.

Unregulated democracy is the tyranny of the majority. In any human society, the majority of the people are losers. Why would you want to rest your future on losers?

Why won't you prefer a system in which there is a chance for you to become a winner?

The average IQ of a person is 100, but the IQ of the mass is 0.

I don't know about you, but I rather have a chance to be successful, or die trying, than a guarantee to be mediocre.

But my highly educated German peers would tell you point blank that the system of massive taxes (50% for single young workers) actually limits social mobility.

It's my general understanding that massive taxes mainly serve to limit real estate prices (and rents).

Germany didn't experience a big bubble this go through, right?

Why won’t you prefer a system in which there is a chance for you to become a winner?

Rawl's "Veil of Ignorance" moral argument, basically.

http://en.wikipedia.org/wiki/Veil_of_ignorance

AdHominem says

Uh, free markets don’t have morals. That is why the founding fathers gave us a free market with a few protections on life, liberty and property.
We need private property laws that protect owners from damage by polluters. Pollution is like vandalism.
Private property laws are what is needed. Not a vast bureaucracy.

I can't privately own the drinking supply, because I can't privately own all the ground water, rivers, lakes, etc.

So, what's going to stop them?

Oh, that's right -- NOTHING. Nothing did stop them, and that's why we had to create institutions like the EPA in the first place.

Unless I have the right to defend myself against the person who is poisoning my drinking water (that is to say, the right to stop them, by force if necessary), I do not have "freedom".

But, please, spend some time in a country that allows such unfettered capitalism. Let me know how that works out for you!

I can’t privately own the drinking supply, because I can’t privately own all the ground water, rivers, lakes, etc.

I'd take this a step further. The 19th century robber barons succeeded in conflating capital with natural resources, creating the intellectual cover for wealth to own and profit from mere "ownership" of the natural universe and not the active employment of entrepreneurial or capital management skills.

Commerce may not be a zero sum game, but ownership of natural resources, including land, sure is.

I consider myself a left-libertarian and would like to think a "geolibertarian" social order (where wealth cannot profitably concentrate in ownership of land and natural resources) might have a chance of working in the real world. Straight-up status-quo libertarianism . . . it is to laugh.

20 years ago when I first started thinking about this stuff I mused "those greedy capitalists would buy all the oxygen in the atmosphere if they could!" but lacked the intellectual framework to separate ownership of capital (saved wealth and the produced means of production) vs. ownership in Land.

It was only discovering Henry George when things fell into place.

http://homepage.ntlworld.com/janusg/coe/!index.htm

Kev,

Your argument is that government failed to protect private property therefore we need bigger government. Nice.

Or that "criminals who disregard gun laws have guns so we should have more gun control".

AdHominem says

Kev,
Your argument is that government failed to protect private property therefore we need bigger government. Nice.

I think Kevin is attempting to make the point that in a truly free market we would see rampant corruption, therefore the need for regulation is a necessary one.

Corruption is the ill of an ineffective big government. In a truly free market, it is logically impossible to have corruption.

Obviously, we need a government to defend Free Market against its many enemies: such as thieves, murderers, and, social engineers.

Let me repeat, Free Market is incorruptible because it has no will. It is always fair and effective, though cruel and merciless, just like Nature.

I just find it amusing that frequently those who put absolute faith on Evolution are also those who absolutely reject Darwinism.

Troy says: It’s my general understanding that massive taxes mainly serve to limit real estate prices (and rents). Germany didn’t experience a big bubble this go through, right?

House prices in Germany were very high outside of Stuttgart. Not Bay Area prices, but maybe 2x the American median (and I would consider it a median area in Germany). They seem to spend a lot on rent, but food and public transportation are cheap. People get a subsidy to have kids, and taxes are lower for families.

For lovers of unions though, their Workers Councils are pretty surprising. They ratify promotions, lateral job moves, and can even dispute who gets the axe in bad times. If people think employers can be unfair or petty, wait until your career path is controlled by your peers. It's a huge culture shock for Americans who take assignments there.

hey Peter, great point.

Thanks Bap!

I can already see the downfall of humanity. Perverting the survival of the fittest is the most intellectual way to bring about our extinction.

but first, we need legalized dope and french kissing married dudes on primetime.

Peter P says

Let me repeat, Free Market is incorruptible because it has no will. It is always fair and effective, though cruel and merciless, just like Nature

The problem is that there are several conditions that must be met in order to have a true free market. And the US doesn't meet them, so that's why we need government to help fight corruption.

Are you saying that it’s impossible to dupe shareholders in a free market system?

I am saying that shareholders should take full responsibilities in a free market system. If investors are conditioned to behave less like sheep perhaps they can learn to protect themselves.

If someone voluntarily buys a stock, he better not moan about being duped no matter what happens. The stock market had existed and operated long before any regulatory body. There have always been winners and losers. No one can change that.

One can quote data and statistics all he wants but there exist no objective truth. It always comes down to the world with that person being an observer. Nothing beats common sense and our Evolution-honed intuition. :-)

tatupu70 says

Peter P says

Let me repeat, Free Market is incorruptible because it has no will. It is always fair and effective, though cruel and merciless, just like Nature

The problem is that there are several conditions that must be met in order to have a true free market. And the US doesn’t meet them, so that’s why we need government to help fight corruption.

Not a bad post tatupu, not a bad post at all.

Peter P says

Corruption is the ill of an ineffective big government. In a truly free market, it is logically impossible to have corruption.

So in a free market if I were a business owner and wanted to reduce my operating expenses through child labor, would that not count as corruption?

tatupu70 says

Peter P says

Let me repeat, Free Market is incorruptible because it has no will. It is always fair and effective, though cruel and merciless, just like Nature

The problem is that there are several conditions that must be met in order to have a true free market. And the US doesn’t meet them, so that’s why we need government to help fight corruption.

What are these conditions?

Peter P says

To keep productivity here, we need to lower corporate tax rate (which is one of the highest in the world),

Tax rate is irrelevant. Actual taxes paid is the number you want. With all the deductions in the tax code corporate tax's in America are very reasonable compared to most other countries.

Peter P says

Corruption is the ill of an ineffective big government. In a truly free market, it is logically impossible to have corruption.

I don't follow the logic at all. If a market were truly free then it would be the wild east of Russia and gangsters would rule. If there are rules of any kind the then market isn't truly free. This is a contradiction. Who decides what rules are the rules for a truly free market but don't really count as rules since they are the truly free market rules not regulations the stifle the truly free market? Help I'm confused.

If a market were truly free then it would be the wild east of Russia and gangsters would rule

bingo.

Help I’m confused.

You're not confused, Peter P is. Wealth concentrates over time while democratic power by definition does not. The Free Market is simply one-dollar one-vote. This is somewhat workable until feedback effects result in 51% of the wealth being controlled by 3% of the populace (like it is in the US right now).

Democratic governance, on the other hand, has built-in feedback such that 51% of the population will correct abuses, theoretically, though of course in the US we see Christianists (25~30% of the population ) aligned with the 10% nutball sociopaths (aka libertarians) and the 10% that actually own the 66% of the country, forming the current Republican power bloc that while fragile is oh-so entertaining.

Here is a pretty good article on wealth distribution, although it is out of date. Things are actually much worse now. Curious how wealth inequality started to really change about 1980 or so. Wealth seems to have really trickled up. Also worth noting is that one of the defining characteristics of the third world is huge disparity in wealth with a very, very small part of the population controlling almost all the wealth.

Don't get me wrong, I think capitalism is great, I also think that giving capitalists a totally free hand is like giving teen age boys whiskey and car keys (thank you PJ O'Rouke for that wonderful quote) as our current economic state shows.

http://multinationalmonitor.org/mm2003/03may/may03interviewswolff.html

From the article.

MM: How does the U.S. wealth profile compare to other countries?
Wolff: We are much more unequal than any other advanced industrial country.

Perhaps our closest rival in terms of inequality is Great Britain. But where the top percent in this country own 38 percent of all wealth, in Great Britain it is more like 22 or 23 percent.

What is remarkable is that this was not always the case. Up until the early 1970s, the U.S. actually had lower wealth inequality than Great Britain, and even than a country like Sweden. But things have really turned around over the last 25 or 30 years. In fact, a lot of countries have experienced lessening wealth inequality over time. The U.S. is atypical in that inequality has risen so sharply over the last 25 or 30 years.

So in a free market if I were a business owner and wanted to reduce my operating expenses through child labor, would that not count as corruption?

I do not see that as corruption. So long as the employment is at-will, there is no moral issue.

This will be corruption: In hypothetical country A, child labor is illegal, but the enforcement can be paid off to overlook the infraction.

I do not understand the sentiment against "wealth inequality." If there is no wealth inequality I am going to sit on my hands and wait to be fed.

You think people work because they want a better world? I don't. There is no good or bad world. There is only a world better off or worse off for any given person.

Like everything in life wealth inequality needs to be a balance. I think the advantages of wealth have accrued to the point of danger in America. The plutocracy has reached a point where the accumulated wealth is being used, especially through manipulation of government, to accumulate ever more wealth at an ever increasing rate. Like all increasing rates of change, at some point this will blow up.

The wealthy do owe a debt to the society that provides the vehicle to their wealth. People like Warren Buffet and Bill Gates, hardly communists, have openly said that they believe this is true.

The current tax structure is unfairly biased by the sheer volume of tax rules that makes avoidance of taxes possible for everyone but wage earners. These rules were of course promulgated by the very capitalists you defend. This was in order to firstly reduce the personal taxes on the wealthy in the guise of increased economic activity as in capital tax gains. Secondly to accrue competetive advantage without having to invest the resources to actually compete. This allows corporations to avoid taxation without an actual corporate tax cut which would be very politcally unpopular. It also allows politicians to maintain the fiction that corporations are paying high taxes while rewarding those very same corporations for bribes (sorry campaign contributions) to the politicians. Very convenient.

So how does one achieve this perfect world of economic freedom without the inevitable spiral of wealth upwards? This has been the pattern throughout history, almost always resulting in the destruction of the society involved. Which is why I find it so disturbing. Can you provide some real world examples of this kind of perfect capitalism for us to examine?

Peter P says

I do not understand the sentiment against “wealth inequality.” If there is no wealth inequality I am going to sit on my hands and wait to be fed.

From a practical point of view, a high level of wealth inequality hurts the economy. Someone in the middle or lower class will spend a much high % of a marginal $100 than will a member of the elite. Further, everyone here rails against welfare--the larger the inequality, the more people will be on public assistance. Ideally, you want a large middle class so there are lots of taxpayers and few people on public aid.

I do not understand the sentiment against “wealth inequality.”

There are three main kinds of wealth. There is savings and consumer goods. These are the physical manifestations we are most familiar -- cash in the bank, food in the pantry, TVs, etc. Secondarily, there is capital wealth. This is the wealth that is used to create more wealth -- ownership of land, business equipment, shares in CAT. Third, there is societal capital -- the knowledge, experience, connections, and access that one uses to create more wealth or otherwise achieve an income through labor.

Disparity in the first category is of no great concern to me. People are free to bust their ass for this wealth to their heart's desire and there's generally no lack of opportunity on the individual level.

Disparity in the second -- capital -- is just the stacked deck nature that the poorer face in competition with the more wealth. The wealthy can afford to risk more since they can afford more failures, and furthermore with capital comes rentierism -- the rack rents and profits that the wealthy wring from those less well off. Everywhere the middle class and below turns they are gouged by wealth -- their monthly rent, the profit margins they pay for retail goods, the medicines they need, etc.

Disparity in the third -- societal capital -- is the most critical feedback nature -- and evil -- of capitalism. I don't know about you, but 3 of the 5 professional jobs I've had in my life have come from personal connections. Thanks to the non-free market UC system, I was able to affordably acquire job skills that enabled me to leverage these connections into useful employent, benefiting both society and myself. Left to its own devices, IMO, the free market serves to increase the disparity of societal capital over time. The history of the 20th century's middle-class was increasing access and acquisition of societal capital at the expense of the upper class, and this was a very good thing if you think meritocracy and maximal development of societal talent is important.

Peter P says

So in a free market if I were a business owner and wanted to reduce my operating expenses through child labor, would that not count as corruption?
I do not see that as corruption. So long as the employment is at-will, there is no moral issue.
This will be corruption: In hypothetical country A, child labor is illegal, but the enforcement can be paid off to overlook the infraction.

Either way would you support a free market without regulation? Are you really ok with child slavery?

Peter P says

I do not understand the sentiment against “wealth inequality.” If there is no wealth inequality I am going to sit on my hands and wait to be fed.
You think people work because they want a better world? I don’t. There is no good or bad world. There is only a world better off or worse off for any given person.

Sir James Goldsmith said it best "the economy is here to serve the people, but we are setting up a situation where the people serve the economy (transnational companies)."

Either way would you support a free market without regulation? Are you really ok with child slavery?

I am okay with child labor but NOT child slavery.

Slavery deprives a person of his properties and hence it is evil.

Unfortunately there’s a twisted and sick belief in this country that there should be no upper limit. If a single person ends up with enough money to decimate an entire city or even an entire state? Too bad, so sad, Darwinism don’t ya know!

I still don't get what is wrong.

Money is simply a belief system. When it becomes completely out of whack, people lose faith in that system and there will be a new equilibrium point. It will all happen naturally.

Any attempt to hinder the natural flow of wealth will only create more hardship. For instance, any form of welfare beyond a basic safety net will only sustain poverty.

Sir James Goldsmith said it best “the economy is here to serve the people, but we are setting up a situation where the people serve the economy (transnational companies).”

Both are undesirable.

IMO economy is here so that everybody serves himself. In the end, both the people and the economy will benefit. Humans are by nature self-serving. I think it is wise to have a system that reconcile this trait.

Thanks to the non-free market UC system, I was able to affordably acquire job skills that enabled me to leverage these connections into useful employent, benefiting both society and myself.

Or... thanks to the semi-free market university education system, some other people were not able to afford a degree so you had an edge. :-)

A few questions:

Won't your degree lose value in the context of a competitive job market if more people have it?

How come many self-made billionaires do not have a degree?

Does a university education provide job skills or does it merely validate the acquisition of such?

Won’t your degree lose value in the context of a competitive job market if more people have it?

On the personal level, yes. On the societal level, may the best man win. SInce I am 40 now, if I were a purely rational operator maximizing self-benefit I'd want to bring the ladder with me. Being a left-libertarian and not a right-libertarian, I don't roll that way. I recognize glibertarians are incapable of thinking on scales larger than their own self-interest, that's cool, if a tad sociopathic.

How come many self-made billionaires do not have a degree?

The skills to be a worker bee are much different than the skills to be a billionaire. The fetishizing of billionaires by glibertarians is quite humorous to me, as if we all can be a nation of billionaires.

Le secret des grandes fortunes sans cause apparente est un crime oublié, parce qu'il a été proprement fait.

Does a university education provide job skills or does it merely validate the acquisition of such?

Depends on the person and the field. For CS, self-study is the way to go. Same thing for starting your own business, day-trading, real estate, etc etc. Other fields with greater capital minimums and higher skillsets benefit from time in academia.

as if we all can be a nation of billionaires.

In Zimbabwe, everyone is a multi-trillionaire. LOL!

I think most work requires more art than science. In that case, self-study is important. To be fair, college education ensures that one look beyond his field and broadens his world view.

I tell college grads how to fix the crap they design on paper, when it does not work in the field. I graduated from the school of work-faster and smarter-stay employed-get food. It was great fun. No bongs, no beer games, no co-eds, just lots of ass busting.

Mexifornia needs trade schools .... not welfare qualification junior colleges .. but, real trade schools.

Peter P says

Either way would you support a free market without regulation? Are you really ok with child slavery?
I am okay with child labor but NOT child slavery.
Slavery deprives a person of his properties and hence it is evil.

Really? Shouldnt children be taken care of and not taken advantage of for cheap labor?

Peter P says

Sir James Goldsmith said it best “the economy is here to serve the people, but we are setting up a situation where the people serve the economy (transnational companies).”
Both are undesirable.
IMO economy is here so that everybody serves himself. In the end, both the people and the economy will benefit. Humans are by nature self-serving. I think it is wise to have a system that reconcile this trait.

So, we should not show compassion or concern for those that are left out of the profits?....your statements are starting to sound really creepy like a business person with no moral concern for the effect of their actions. I agree, everyone is self serving however, we need to prevent that nature from dominating the compassion we should have as moral individuals, the need for compassion should outweigh the need for profits. Your thoughts?