The Current Crisis

[BrightNoon]

Originally Posted by Didymos Thomas

No, that's not my argument. My argument is that because an ideal is impossible, we should not suggest pursuing said ideal damn the costs. We should take into consideration reality.

Okay... All actions have a goal, but a goal is not necessarily an ideal. My goal might be to go from smoking twenty cigarettes a day to ten a day, even though the ideal is not to smoke at all.

You example demonstrates how having an ideal can be beneficial. Your distinction between goal and ideal is arbitrary; a goal, as you have used it, is just an end which is not the final end. Pursuing is the operative word; ideals can not generally be reached. I wish to pursue the ideal of the free market; you, the ideal of utilitarianism. In other words, I want to act so as to make the market more free, while you want to act so as to give the most people the greatest prosperity. Both are ideals. Action without an ideal has no purpose, by definition.

Originally Posted by Didymos Thomas

Sort of; my ideal, I think, would result in such circumstances, ideally.

As I said, your ideal is utilitarianism, unless you are suggesting that your plan is to simply act, in no particular manner, and hope that general prosperity is the result. Otherwise, you have a goal, an ideal.

Originally Posted by Didymos Thomas

But I know better than to suggest steps towards said ideal despite real world concerns; like cutting taxes no matter the circumstances as some suggest.

Cutting taxes has nothing to do with the free market. Low taxes are generally preferable to high though. You mistake Reaganomics for laizee faire economics.

Originally Posted by Didymos Thomas

We can get into the history if you like; I'm a history major. However, understand that I'm going to dispute just about every word of your summary of American history.

Feel free.

Originally Posted by Didymos Thomas

In any case, I believe capitalism has failed because it has, according to it's own standards.

How, if you don’t mind?

Originally Posted by Didymos Thomas

The very principles upon which supply-side economics are founded have been shown to be faulty. Even Keynesian economics has fallen short and needs revision.

That is what you and most socialistic, would-be directors of the economy fail to understand; capitalism does not favor anyone; everyone has exactly the same rights and responsibilities under the law. Supply side is a misnomer: as if production is favored over consumption. Keynesian economics is absurd and could not be less functional or distant from laizze faire. How you are comparing their principles I don’t know. Freedom is the ideal, not the advantage of one group over another. It is natural that some will be more successful than others; we are not all equally talented or equally lucky.

Originally Posted by Didymos Thomas

They do not contradict. The ideal of laissez faire capitalism is impossible to reach. That's a fact. Also, supply side economics has been shown to be principally flawed (Says Law doesn't work, folks) by economists. Even the replacement for supply side, Keynesian economics, has some flaws.

When was supply side economics tested? During the Reagan demonstration I suppose? Was there not at that time an SEC, a Fannie Mae, a Freddie Mac, Welfare, Social Security, Medicaid, Medicare, etc.? That was not laizze faire, not even close. The principles were in no way tested and proven faulty because they never existed at all at that time. Anytime before the First World War, however, would be a fine example of those principles at work.

I’m not going to address the other points. Here are my remarks Candide, as you will henceforth be known.

A government elected by a majority of the population (imbeciles) will not be of the highest caliber; it will be filled not with the best minds, but the best speaking voices, the best actors, etc. Moreover, that government will change regularly, along with its policies. To suppose that such a stupid, slow and erratic entity can effectively understand, let alone regulate, an enormously complex, world-wide economy is extremely optimistic. Even if disaster, caused by poorly designed, implemented or contradictory regulation did not occur, the best that could be hoped for is stagnation. To deny the risks of the free market is to deny its possibilities.

If you find morality to be the first priority of government, as you indicated, let me point you to Robespierre and the Republic of Virtue.

[Mr. Fight the Power]

Originally Posted by Didymos Thomas

MFtP:
Says Law doesn't work. Demand can exist without supply, and the fact that a supply exists does not necessarily mean that a demand exists for said supply.

Actually, I don't think anyone really denies the logic that demand is dependent upon supply. That an individual can only demand utility to the amount he or she produces is a pretty basic accepted truth.

With that said, I understand that there are many, many critics of Say's Law, and I am prepared to defend Say's contributions (note that the abundance of economic theory built on Say's Law means that what some consider to be the work of JB Say is actually the work of someone else) at length. What I need to know is whether you are saying that Say is incorrect because you have found flaws in what he proposed, or are you saying that Say is incorrect because you have heard others say it.

I also think the modern corporate form violates free market ideas. I'm at a loss as to why you think corporations are natural if you take issue with corporate personhood. Prior to corporate personhood corporations were organizations extremely restricted by the state. Basically, they were state organizations operated by a few private investors.

I don't think corporate personhood would be respected without government intervention, but corporate form of ownership and liability would be an successful business model without government intervention.

Who cares if they offer the "best service", whatever that means, if as a side product of those services is atrocity after atrocity.
But let's think about this "best service" notion. Which service is better: the fine silk coat that cost five human lives, or the rough wool coat that required no human blood? I vote the later.

Ugh. This could go on forever until you understand where I am coming from.

When I say best service, I mean provide the best utility to the consumer at the lowest cost.

I also oppose aggression in all forms, except in securing compensation for past unjust aggression. To imply that I would support a system that allows for someone to kill people in order to produce a coat is another strawman and is insulting.

With that said, if by "side product" you refer to externalities, I will recognize that argument, but I need more to offer any sort of counter.

Because the economic formulas upon which free market capitalism is based have flaws.

So far you have made a vague statement about something resembling externalities, brought up corporate ownership, and stated that Say's Law is wrong, but you have have offered up nothing for me to counter. Is the free market perfect? No, but I am not a utopian.

If you want to keep making these unsupported statements, I will simply stop responding and start gainsaying.

I never claimed that capitalism generated greed, I said capitalism was fueled by greed.

I explained in some detail why, for your statement to be a relevant attack on capitalism, capitalism must generate greed. Greed is present in any system, and greed will fuel any economic system.

So if I were to take greed as a particular failure of capitalism, I must assume that capitalism generates greed.

[Didymos Thomas]

If you beleive that capitalism has failed, that is because you have evaluated its performance by your own ideal; indeed, it has not been equally beneifial to all and has ensured the existance of classes and of the poor. However, it is also responsible for the wealth of the U.S. that you would like to redistribute; Historically, America has grown strong under small government and laizze faire economics and has declined, since about the middle of the 20th century, after the imposition of elaborate social systems, higher taxation, larger government, etc.

Laissez faire policy is partly responsible for the accumulation of wealth in the US, but this wealth has gone almost exclusively to those who were already wealthy. America has managed to grown stronger under regimes that both grow and shrink the government. However, laissez faire policy has been unable to function for the benefit of anyone, including the wealthy, in times of financial crisis. Larger government and regulation was needed to bring the nation out of the Great Depression. America's decline is not due to social programs, higher taxation or higher government. Instead, we have declined because of massive defense spending just as Ike warned.

You example demonstrates how having an ideal can be beneficial. Your distinction between goal and ideal is arbitrary; a goal, as you have used it, is just an end which is not the final end. Pursuing is the operative word; ideals can not generally be reached. I wish to pursue the ideal of the free market; you, the ideal of utilitarianism. In other words, I want to act so as to make the market more free, while you want to act so as to give the most people the greatest prosperity. Both are ideals. Action without an ideal has no purpose, by definition.

Again, you make some strange claims regarding ideals. Action without an ideal can have a purpose; my previous example illustrates this fact. The distinction between goal and ideal is hardly arbitrary as a difference does exist, even if the goal is influenced by an ideal.

In any case, I have not derrided ideals at all. Instead, I have suggested that we not ignore reality for the sake of an ideal.

As I said, your ideal is utilitarianism, unless you are suggesting that your plan is to simply act, in no particular manner, and hope that general prosperity is the result. Otherwise, you have a goal, an ideal.

My ideal is not utilitarianism. Utilitarianism allows for all sorts of abuse of individual liberties.

Cutting taxes has nothing to do with the free market. Low taxes are generally preferable to high though. You mistake Reaganomics for laizee faire economics.

First, I criticize both Reaganomics and laissez faire. Second, laissez faire does call for low taxes, and for taxes to be lowered and eliminated whenever possible. Taxes are type of government regulation.

How, if you don’t mind?

The economics of pure capitalism do not hold up. I made this point with MFtP if you'd like to follow that line of thought.

That is what you and most socialistic, would-be directors of the economy fail to understand; capitalism does not favor anyone; everyone has exactly the same rights and responsibilities under the law. Supply side is a misnomer: as if production is favored over consumption. Keynesian economics is absurd and could not be less functional or distant from laizze faire. How you are comparing their principles I don’t know. Freedom is the ideal, not the advantage of one group over another. It is natural that some will be more successful than others; we are not all equally talented or equally lucky.

You're invocation of social Darwinism is, well, a bit scary to be honest with you. Not to mention the fact that social Darwinism has been ridiculed to death. Literally.

Actually, capitalism does favor some people. Capitalism favors those who have more capital, who have greater resources.

Keynesian economics is hardly absurd; Keynesian economics was the replacement for laissez faire, and managed to bring the US out of the Great Depression.

I'm comparing their principles the same way economists compare. By looking at the formulas and looking at the empirical data. Both Keynsian economics and laissez faire are flawed. Laissez faire was an economic progress, so was the development of Keynesian economics, but more developments will come and already Keynesian economics is on the way out. That's natural, this happens in all sciences, not just economics.

When was supply side economics tested? During the Reagan demonstration I suppose? Was there not at that time an SEC, a Fannie Mae, a Freddie Mac, Welfare, Social Security, Medicaid, Medicare, etc.? That was not laizze faire, not even close. The principles were in no way tested and proven faulty because they never existed at all at that time. Anytime before the First World War, however, would be a fine example of those principles at work.

Even prior to the Great War, the nation was not laissez faire. But I tell you what, I'll take you up on the offer. Prior to the Great War, big business used government troops and police to kill and brutalize striking workers. Fine example, indeed.

In any case, supply side has been tested. In a pure form? No, I've already stated that much. Doesn't mean that supply side has not been tested at all. Again, Say's Law has long been discredited.

Actually, I don't think anyone really denies the logic that demand is dependent upon supply. That an individual can only demand utility to the amount he or she produces is a pretty basic accepted truth.

With that said, I understand that there are many, many critics of Say's Law, and I am prepared to defend Say's contributions (note that the abundance of economic theory built on Say's Law means that what some consider to be the work of JB Say is actually the work of someone else) at length. What I need to know is whether you are saying that Say is incorrect because you have found flaws in what he proposed, or are you saying that Say is incorrect because you have heard others say it.

I'm saying Say's Law is flawed for the same reason I say evolution is true. Consensus among experts. If you want to defend Say's Law, don't waste your time here. Instead, publish a paper and shock the world of economics. Who knows, maybe they'll give you the Nobel Prize.

I don't think corporate personhood would be respected without government intervention, but corporate form of ownership and liability would be an successful business model without government intervention.

That's the thing, though: either we give corporations personhood or we have corporations strictly controlled by the government, created for a very particular purpose and limited to that role by the government.

Those are the two models of the corporation. I'm not aware of any other model, though there may very well be a way to reorganize corporations so that they are neither regulated by government and so that they also lack personhood.

Ugh. This could go on forever until you understand where I am coming from.

When I say best service, I mean provide the best utility to the consumer at the lowest cost.

I also oppose aggression in all forms, except in securing compensation for past unjust aggression. To imply that I would support a system that allows for someone to kill people in order to produce a coat is another strawman and is insulting.

With that said, if by "side product" you refer to externalities, I will recognize that argument, but I need more to offer any sort of counter.

I do understand, maybe that's the problem. My economic thoughts were almost identical to yours a few years ago, though probably not quite as well developed. As my thoughts developed I noticed the deep flaws that I am now explaning to you.

Right, best service, most utility, lowest cost. And right, you oppose aggresion. So, instead of best service, did you mean the best service with the stipulation that said service does not cause harm to another person? If you mean bottom line best service, this means best service even if people are harmed in the process.

Besides, I think this will go on all day; too many topics at once.

Oh, and I do not mean just externalities, though those would be included. I also mean harm done to those involved in the economic transaction - the worker and consumer included.

So far you have made a vague statement about something resembling externalities, brought up corporate ownership, and stated that Say's Law is wrong, but you have have offered up nothing for me to counter. Is the free market perfect? No, but I am not a utopian.

Hey, there we go, the free market has flaws! Wasn't so tough, was it?

I explained in some detail why, for your statement to be a relevant attack on capitalism, capitalism must generate greed. Greed is present in any system, and greed will fuel any economic system.

So if I were to take greed as a particular failure of capitalism, I must assume that capitalism generates greed.

Greed is present in any system, yes. But capitalism depends upon greed. Economies can be arranged such that they do not depend upon greed. That's a failure of capitalism and other systems, their reliance upon greed. We've made greed the fuel for our economy, rather than making need the fuel of our economy.

However, I would also argue that capitalism does at least promote greed. Because greed is the fuel required for economic success, greed becomes an increasingly valuable asset. Thus greed is promoted by the system.

[Aedes]

A bit closer to earth, I was interested in Alan Greenspan's comments. He said that he had been wrong in his career-long resistance to market regulation because he had made an assumption that proved wrong. That assumption was that businesses will always act in their own best interest.

As it turns out, businesses acted on gross denial, delusion, and fantasy. The premise was that holding mortgages is lucrative, and that it's ok if poor risk people default, because then the lender owns real estate and get, real estate never loses value, right? That's how companies accumulated $40 of bad debt for every $1 of assets. That's what unregulated fantasy does on a global scale.

[Mr. Fight the Power]

Originally Posted by Aedes

A bit closer to earth, I was interested in Alan Greenspan's comments. He said that he had been wrong in his career-long resistance to market regulation because he had made an assumption that proved wrong. That assumption was that businesses will always act in their own best interest.

As it turns out, businesses acted on gross denial, delusion, and fantasy. The premise was that holding mortgages is lucrative, and that it's ok if poor risk people default, because then the lender owns real estate and get, real estate never loses value, right? That's how companies accumulated $40 of bad debt for every $1 of assets. That's what unregulated fantasy does on a global scale.

Or it could have been his ultra-aggressive lowering of interest rates that completely eradicated any self-regulating properties that credit markets may have had. He was not negligent, he was proactive in creating this disaster (and many, many sources knew this, read any number of issues of The Economist over the last 8 years to see). He knows this, and he knows he abandoned the principles he had 40 years ago, now he is weaseling. Just like every other career civil servant.

He eliminated the natural rules of the system that he knew was there and then acted like the rules never existed.

Suppose 50 people were all in a room together. There is security, but there is no reason to assume that the people in the room would be uncivil to each other. Now assume all security leaves, but before they do, they decide to leave $100,000 dollars in cash in the middle of the room. Bedlam ensues, people are stampeded and beaten. Upon questioning the security guards say, "How were we to know that people just aren't civil to each other?"

That is what happened here.

Greenspan lowered federal interest rates to record lows, all major lenders are practically insured against failure, and money is flooded into the markets. All of a sudden lenders go crazy as all of these changes made for extremely easy money with almost no risk of loss. When interest rates are raised and normalcy begins to return, Greenspan has the chutzpah to place blame for the idiocy of the lenders on the system. Whats worse is that 20 years ago, he would have explained to you that the actions he engaged in as fed chairman would have blown up credit markets. He is a villain.

The amazing thing is that everyone is willing to believe the man who has already completely displayed his incompetence.

[zolasdisciple]

have no doubt bush knew what he was doing. he pretends to be dumb while he and cheyney ruin america and dont take responsibility. and there is no doubt capitalism is fueled on greed. which is very sad. this is the greatest country on earth yet we are proud of greedy.

[Mr. Fight the Power]

DT,

I don't want to go into anymore of this particularly, but I do want to point out one thing.

The principle idea behind Say's Law is that general overproduction is not possible, rather particular overproduction in certain markets IS possible if government or some other violent upheaval occurs to boost production there over other markets. The idea behind this is that commodities trade for commodities, so production is all that allows for consumption.

If we examine financial markets as Say would have, as nothing but a service for the easy exchange of goods and capital, we find them to be no different from other markets. When we further add the fact that financial markets have been horribly bolstered over the last decade, to the point that it is common knowledge that there is a housing and lending bubble of epic proportions, so that lending as outpaced production in other markets, we find that an analysis of the credit crisis from Say's perspective makes perfect sense.

[Aedes]

Low interest rates encourage people to borrow, it doesn't encourage people to make high risk loans as I understand it.

[Theaetetus]

Originally Posted by Aedes

A bit closer to earth, I was interested in Alan Greenspan's comments. He said that he had been wrong in his career-long resistance to market regulation because he had made an assumption that proved wrong. That assumption was that businesses will always act in their own best interest.

As it turns out, businesses acted on gross denial, delusion, and fantasy. The premise was that holding mortgages is lucrative, and that it's ok if poor risk people default, because then the lender owns real estate and get, real estate never loses value, right? That's how companies accumulated $40 of bad debt for every $1 of assets. That's what unregulated fantasy does on a global scale.

Is anybody that surprised that Alan Greenspan's economic policy crippled the nation? Come on this guy is a disciple of Ayn Rand. Any nation that follow the ideas formulated by Objectivism deserves what it has coming. Much of it grew out of fantasy anyway in terrible novels, so this should have been more than expected.

[Pangloss]

Originally Posted by Didymos Thomas

Keynesian economics is hardly absurd; Keynesian economics was the replacement for laissez faire, and managed to bring the US out of the Great Depression.

This idea of government expenditures necessarily being expansionary is due to the belief in a flawed Keynesian multiplier analysis. This belief is not based on any empirical evidence of the multiplier effect actually working out, or by any logical analysis. Naturally politicians will support an economic policy which allows them to spend more, regardless of the validity of this policy.

There is also absolutely no proof that "keynesian economics" or the new deal brought the US out of the depression. They teach this in history class, but the truth is that there has never been any economic analysis to support this idea. Correlation does not prove causation. The depression is the one event in history that all will point to as proof that free market economics have failed, yet Friedman correctly pointed out years ago that the depression was caused by a mismanagement of monetary policy which resulted in rapid deflation. Before the market crash, the federal reserve system began to cut the supply of money in order to reduce stock speculation. As banks began to close down, the federal reserve actually reduced the amount of credit it was willing to extend. Between 1929 and 1933, the money supply fell by more than 30%. This was a failure of policy, not of the market.