patrick.net

austrian_man says

thunderlips11 says

Can’t free markets lead to rigged markets, if those who concentrated wealth in the free market era use it to usher in a rigged market environment?

Excellent Question. I think the answer is: yes it can, if the political leaders are corrupt-free. In a corrupt-free society, I see free markets flourishing much better than centrally planned, socialistic markets.

Of course it can, but this is exactly the problem with an anarchist system as well.

There is no such thing as a corrupt-free society, and it is unlikely that there ever will be

Communism would also have worked very well if it took place in a corrupt-free environment. That is why it works so much better on a very small scale.

You have to plan for corruption, and a free market does not do that.

leoj707 says

There is no such thing as a corrupt-free society, and it is unlikely that there ever will be

I don't think that's true. There are countries such as New Zealand, Sweden that have very high ranking on corrupt-free governance.

austrian_man says

One crucial point: The enterprise in monopoly is guided by chance, not by intelligent forecasting of an entrepreneur with consumer’s needs in mind.

Real economies have to deal with luck and chance. Systems are too complex for any "intelligent" forecasting to be perfect. This randomness is represented by dice in the game.

While I agree that it is not a perfect comparison, the outcome of the game and a totally free market is the same.

austrian_man says

leoj707 says

There is no such thing as a corrupt-free society, and it is unlikely that there ever will be

I don’t think that’s true. There are countries such as New Zealand, Sweden that have very high ranking on corrupt-free governance.

Yes, but "very high" is not corrupt-free, and... they are "socialists" with systems in place to try and control corruption.

The problem is that with a totally free market corruption is encouraged. If both those countries went free market I would be willing to bet you would see the numbers change.

leoj707 says

Real economies have to deal with luck and chance. Systems are too complex for any “intelligent” forecasting to be perfect. This randomness is represented by dice in the game.

I don't think it is entirely random and that's the point. You are waging a bet, but with some intelligent thought behind getting it back with some profits. In a global economy that is as complex as it is today, I agree there's more to this "chance factor". But on a smaller scale, the factor reduces and it is a crucial difference.

leoj707 says

Yes, but “very high” is not corrupt-free, and… they are “socialists” with systems in place to try and control corruption.

You can never have a perfect, corrupt-free society purely because you cannot expect all the humans within the society to be morally on the highest plane of thinking at the same time. Yes I do agree that the examples quoted are socialistic economies and are centrally planned. But that is not to say it is the most practical and efficient way to run a stable system.

leoj707 says

The problem is that with a totally free market corruption is encouraged.

I do recognize this problem and this is where I think a sound monetary system will help. It will remove Government printing money at will, encourage savings/capital accumulation -- which would then be put to use in a careful way.

leoj707 says

If both those countries went free market I would be willing to bet you would see the numbers change.

Deregulation + fiat currency = economic night mare.. US is the living, breathing example for this.

austrian_man says

I don’t think it is entirely random and that’s the point. You are waging a bet, but with some intelligent thought behind getting it back with some profits.

Yeah, true. The game Monopoly has almost no strategy to it, 99% luck, but the end result is the same.

austrian_man says

Yes I do agree that the examples quoted are socialistic economies and are centrally planned. But that is not to say it is the most practical and efficient way to run a stable system.

Yeah, there may be better ways of running a system, but we can learn a lot from systems that currently are working. Personally I think that workable solutions are more hybrids of economic philosophies rather than "pure" systems.

austrian_man says

I do recognize this problem and this is where I think a sound monetary system will help. It will remove Government printing money at will, encourage savings/capital accumulation — which would then be put to use in a careful way.

In an unregulated "free" system where cheating has huge rewards cheating will be rampant, regardless of what monetary system is used. Corruption existed long before fiat currencies.

austrian_man says

Deregulation + fiat currency = economic night mare.. US is the living, breathing example for this.

Yeah, I don't think that we are a total nightmare yet...

But, we are well down that road a this point.

leoj707 says

Yeah, there may be better ways of running a system, but we can learn a lot from systems that currently are working. Personally I think that workable solutions are more hybrids of economic philosophies rather than “pure” systems.

Sure, I'm in complete agreement.

leoj707 says

n an unregulated “free” system where cheating has huge rewards cheating will be rampant, regardless of what monetary system is used. Corruption existed long before fiat currencies.

How can cheating have huge rewards in a sound monetary system? Every investor or consumer would not throw his money into the market (as it is practiced today). If there was someone cheating, they will be weeded out since reputation plays a big role in the free market. There is actually a financial incentive (more people will trust doing business with the said person) to show moral character.

No system is perfect, you can always have people who cheat in any system. So I'm not here claiming free market with sound money is panacea for all. At the end of the day, moral character of the people determines the level of corruption in any society.

leoj707 says

Corruption existed long before fiat currencies.

I am not saying gold standard solves the problem of corruption. It certainly does not let a market such as the derivatives market of today run amock to a half-a quadrillion dollar notional amount. Irrational exuberance, ridiculous risk taking will be curtailed in a gold standard.

If you look at the system from peasants' point of view, it is rigged. But that is the wrong point of view.

The system was created as the playing field of the elite by the elite. The results apparently look puzzling when the market goes up when the "economic fundamental" goes down. This is because the "economic fundamental" are looking at the peasants.

So if you want to win using moral hazard, be on the side of the elite.

austrian_man says

How can cheating have huge rewards in a sound monetary system? Every investor or consumer would not throw his money into the market (as it is practiced today).

I am not exactly sure what your point is here; if my response is off base I apologize.

Cheating = Corruption, even if we were to assume that the monetary system was perfect, and beyond manipulations, there are may ways to "cheat", independent of the currency system, in a totally free market system.

austrian_man says

If there was someone cheating, they will be weeded out since reputation plays a big role in the free market.

Yes, if they get caught. In any system reputation plays a big role.

The problem with a totally free market is that regulation is so weak that back room deals are easy to hide from prying eyes, and it can take years to catch and discredit someone. At that point they have already made their millions/billions.

austrian_man says

At the end of the day, moral character of the people determines the level of corruption in any society.

Are the people in New Zealand and Sweden of a higher moral character than most other countries?

I don't think so. I think that the system in which people are "playing" has a big effect on their behavior.

When a system is set up to facilitate/allow corruption many people, who otherwise would not, will become "corrupt" because that becomes the "norm" and if they don't they risk falling behind. There are many psychology/sociology studies that I believe display this kind of behavior.

I think that it is up to "moral" people in a society to demand a system that reduces corruption.

leoj707 says

even if we were to assume that the monetary system was perfect, and beyond manipulations, there are may ways to “cheat”, independent of the currency system, in a totally free market system.

You said cheating has huge rewards in a free market. I am saying that in a free market with sound money, cheating has relatively much lesser rewards as opposed to cheating in a manipulated market with unsound money (money that can be printed at will).

leoj707 says

In any system reputation plays a big role.

Reputation plays a useless role in an unsound monetary system, because the true meaning of money is lost when it can be printed at will. People start to believe that they can create something out of nothing. very dangerous, adds more risk to the system. Risk-taking is rewarded with handsome profits, which makes it a positive feedback loop of more risk taking...and in the end, the system breaks down...as it did in 2008.

leoj707 says

The problem with a totally free market is that regulation is so weak that back room deals are easy to hide from prying eyes, and it can take years to catch and discredit someone. At that point they have already made their millions/billions.

I agree regulation and vigilance is needed regardless of the type of monetary system, but the rules of the game are much simpler in a sound monetary system..i think.

leoj707 says

I think that the system in which people are “playing” has a big effect on their behavior.

System itself is set up by the humans :) So yes, the moral character of the society does play a big role in establishing the rules of the game.