patrick.net

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?

Kevin says

Wealth is absolutely not a zero sum game. Today the world posesses billions upon billions of times more wealth as it did a thousand years ago.

At any given time capital stock and savings is a zero sum game, but over time it is true that capital can accrete more than consumption, increasing the wealth in the system.

Also, technology can advance, increasing output per unit of labor/capital, or increasing the utility of the goods that are produced (eg. electronics now vs. 20 years ago).

But within this system I see landlords and other rentiers sucking the wealth out of the productive sector. 20% or so our GDP ends up the pockets of landlords, much of that income not due to their capital improvements but the naked ground rents they've captured.

So in this light, I do see wealth as something of a zero-sum game between the producers and the consumers. Capitalists play both sides, positively on the producing side and negatively on the consumption (where they are rightfully called rentiers and not capitalists per se).

Bill Gates's billions were largely a result of successful rentierism, enabled by successfully securing monopoly profits on software for much of the 80s and 90s. While it's inarguable that Microsoft created useful capital goods (their software) that greatly assisted others in the production of wealth, their products were not that superior to the non-monopoly alternatives and their pricing was far, far above the true cost of production. To that extent there was (and is) wealth-transfer from productive enterprise to MS.

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

Yep. If we care about job skills and global competitiveness, we really need to replace junior colleges with trade schools.

4x...

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

Children should never be forced to work against their will, but in many parts of the world, taking care of children means providing them with employment opportunities.

So, we should not show compassion or concern for those that are left out of the profits?

I think Free Market Utilitarianism is a viable moral system. It may not display much compassion, but I believe the end result will have exactly the same qualities and values that compassion strives for.

Whether wealth is a zero-sum game depends on your perspective and your value system.

Today the world posesses billions upon billions of times more wealth as it did a thousand years ago.

Then Zimbabwe must be the fastest growing economy in the world.

Peter P says

Whether wealth is a zero-sum game depends on your perspective and your value system.

No, it's not actually. The world is undeniably wealthier now than it was 20, 50 or 100 years ago. You can't even argue it. Factories are more efficient, farmers are more efficient, technology has improved many, many fold...

The world is undeniably wealthier now than it was 20, 50 or 100 years ago.

100 ago, it was men exploiting men. Now, it is just the opposite, but it is the same thing.

Wealth is really about control. No amount of efficiency or productivity can change the dynamics of human societies.

I much rather be a medieval king than a Star Trek peon.

Peter P says

Wealth is really about control. No amount of efficiency or productivity can change the dynamics of human societies.

To the extent that wealth controls natural resources, I agree 100%. This is why I'd like to see very high unimproved commercial land value taxation and severance taxes on natural resources, to level the playing field for the less well off. This idea comes from Henry George, who over 100 years ago detested the (real) Socialists of his day.

I'd like to think the libertopian minarchy would actually work under this tax regime, since wealth would have to be put to actual work, not just engaged in naked rentierism as it is now.

Peter P says

I much rather be a medieval king than a Star Trek peon.

That *really* fails Raws' "Veil of Ignorance" test LOL

Peter P says

Wealth is really about control. No amount of efficiency or productivity can change the dynamics of human societies.

Are you kidding me? You don't think human societies, as a whole, aren't better off than they were hundreds of years ago?

Yeah, most of Africa still sucks, but in most of the world we've eliminated slavery (real slavery, not the bullshit people are complaining about on this forum), democracy exists in more places than it does not, and on and on.

It's no coincidence that the poorest societies are the ones where you most commonly find despots. Whether freer societies create more wealth or more wealth creates freer societies is irrelevant, what's important is that the two go hand in hand.

Troy, I agree that land tax is much more fair and much less damaging than income tax.

You don’t think human societies, as a whole, aren’t better off than they were hundreds of years ago?

We have made a few superficial improvements but we are still human.

It’s no coincidence that the poorest societies are the ones where you most commonly find despots.

I think the poorest societies are also the least capitalistic. China is far from democratic but since its experiment with capitalism the people have become much wealthier.

I agree that economic freedom is very important, because a market must be given breathing room. Political "freedom" can become despotic without adequate regulation of democracy. This is why the Constitution was draft to protect the people from the people.

Real slavery? I guess people used to be literally eaten alive by cannibals. Now, they are merely figuratively eaten alive by banksters. Progress huh?

Here's an article all the freedom lovers (tm) may find interesting:

"In Search of Morale, Are Americans Too Broken for the Truth to Set Us Free?"

http://www.informationclearinghouse.info/article24126.htm

-

"It’s no coincidence that the poorest societies are the ones where you most commonly find despots. Whether freer societies create more wealth or more wealth creates freer societies is irrelevant, what’s important is that the two go hand in hand."

Kevin, its no coincidence that the poorest societies, the ones where you most commonly find despots, are almost universally the ones who are suffering under having to recover from being systematically destroyed by the 'freer' societies in search of wealth, and you'll usually find that many of the despots have been set up and supported by outside societies in order to continue the pillaging. You should read a bit about what the Dutch did for gems in africa, or what the Spanish did to South America, and there are many examples closer to home if you care to look. The thing that tweaks me about your line of thinking is how conveniently bereft of context and history it is. There is no cause and effect, there's only what we have currently. Its basically the FYIGM argument.

kentm says

Kevin, its no coincidence that the poorest societies, the ones where you most commonly find despots, are almost universally the ones who are suffering under having to recover from being systematically destroyed by the ‘freer’ societies in search of wealth, and you’ll usually find that many of the despots have been set up and supported by outside societies in order to continue the pillaging. You should read a bit about what the Dutch did for gems in africa, or what the Spanish did to South America, and there are many examples closer to home if you care to look. The thing that tweaks me about your line of thinking is how conveniently bereft of context and history it is. There is no cause and effect, there’s only what we have currently. Its basically the FYIGM argument.

Not every despotic regime is the result of first-world plundering, nor is every country that is the product of first-world plundering a despotic regime.

...but that's not even the point I was making. I know it's fun to throw our hands in the air and pretend like we can ignore real solutions to poverty by complaining about how europe screwed up so much of the world, but it has very little to do with the simple correlation of which I spoke.

Peter P says

We have made a few superficial improvements but we are still human.

Superficial improvements? Are you fucking kidding me? It used to be the *NORM* for powerful people in a society to be allowed to murder, rape, and otherwise injure the lower classes with impunity. We used to allow human beings to be bought and sold as property. Most people lived in a constant state of warfare (think Afghanistan or sub-saharan africa today -- only everywhere).

Yes, we've come a long way. As good as it makes people feel to bitch about whatever petty problems that they face today ("oh no taxes" "oh no unemployment" "oh no my 401kaaaaaay"), it's immeasurably better today.

Could we still use improving? Absolutely, and we always will. If you honestly think things are bad as long as we're human, you may as well just kill yourself now.

Peter P says

I think the poorest societies are also the least capitalistic.

One has little to do with the other. India and China are comparably wealthy (with china perhaps slightly ahead), but they have very different levels of capitalism. There aren't a whole lot of "capitalistic" third word cesspools because those places tend to not have any economy at all. You can't have capitalism without a strong, stable government to protect it.

Peter P says

Real slavery? I guess people used to be literally eaten alive by cannibals. Now, they are merely figuratively eaten alive by banksters. Progress huh?

Anyone who refers to taxation as slavery is being just as stupid as people who compare health care to genocide.

No, comparing anything that we have to deal with today to the hardships endured by slaves is so far from being a rational argument that it's not even really worth debating.