Free markets are the greatest conceivable system for generating wealth and alleviating poverty. The system works so well because price signals, accurately reflecting real supply and demand conditions, lead entrepreneurs acting purely out of self-interest to act in a way that benefits everyone. Given free markets, I am wondering what kinds of values held by individuals can make this resource-allocation system more or less effective / efficient at generating wealth and alleviating proverty. One thing that I believe makes free markets less effective is when the general populace has a poor understanding of economics. Two examples:
1. If the general populace is unaware of the beneficial economic effects of (what they call) “price gouging” and “profiteering”, entrepreneurs may be disinclined to raise prices following a catastrophe. They may decide that the quick, high profits available are not worth seeking because of the long-term reputation damage from being seen as “price-gouging” or “profiteering”. This will cause shortages and prevent resources from getting to where they are most needed.
2. If the general populace is convinced that Fairtrade-certified products are an effective means of helping the poor, entrepreneurs may be disinclined to invest capital in the poorest areas. The cost-saving from investing in a very poor country is nullified, since the wage-costs and employment-standards must be the same wherever the investment is made (at whatever Fairtrade considers a “fair” wage and standards). This causes investment to be directed away from the very poorest areas relative to what it would have been if consumers had not valued the Fairtrade-certification mark. Does anyone else have any thoughts (or links?) about this general idea of how the [non-political] values held by individuals make free markets more or less effective as a wealth-generator?
Government Explained 2: The Special Piece of Paper
Law without Government
Does anyone else have any thoughts (or links?) about this general idea of how the [non-political] values held by individuals make free markets more or less effective as a wealth-generator?
I don't have any evidence that this is a contributing factor, but in my experience too many people will remain customers of firms that they don't like and constantly provide comments and criticisms as to how to improve, instead of moving their business to a different firm that actually meets their needs. CEO's aren't reading comment cards, but they are looking at how many customers they lose to rival companies.
they said we would have an unfair fun advantage
I take a broader view of human behavior on this point. I think it is safe to say that all forms of privilege to create "negative externalities" - if all persons with the name Bernard have the right to take anyone's wristwatch any time they like, we're all going to suffer from having to hide our wristwatches or buy wristwatches that look dull and uninviting so as not to attract the interest of a Bernard. And so on. Those with privileges have an incentive to preserve their privileges since it permits them to furnish their table and rear their family on the backs of others without privileges. The entire conflict between the State and humanity can be seen as nothing more than a battle between the privileged class and the unprivileged class.
The puzzle comes about when you realize that privileges only come to exist by being recognized (passively or actively) by the majority... yet the privileged (parasitic) class is only a minority. How is it that the majority of unprivileged people in the productive class recognize - actively or passively - the privileges of the parasitic class when the individuals in the productive class are net losers from the arrangement?
Rothbard suggests that it is the successful propaganda of the parasitic class that dupes the productive class but I tend to think this fails to be consistent with rationality. Hoppe suggests that it's an alliance between the Prince and the dissipative contract-breakers and rent avoiders but this also fails for the same reason (those in opposition to the Prince should have more wealth at their command since they are more productive). I think it has to be something in our biology, a vestige of ancient social order where there were "hardwired" roles in human society, like what you see in a wolf pack or a group of primates (e.g. alpha-, beta-, zeta-males and so on). I believe the privileged class (the State) can exist and live parasitically off the productive class by manipulating these hardwired roles even though the conditions in which our hardwired social roles were useful have long since passed. Contrary to Rothbard, I tend to believe that economic fallacies and other superstitions are symptoms of the underlying reality more than causes. There are an infinite number of possible economic fallacies yet there are only certain specific ones that really "play to the masses." Why those fallacies and not other fallacies? I think that is the right question to ask and I think that answering that question can lead us to better, deeper insights into the human condition.
Clayton -
mikachusetts:I don't have any evidence that this is a contributing factor, but in my experience too many people will remain customers of firms that they don't like and constantly provide comments and criticisms as to how to improve, instead of moving their business to a different firm that actually meets their needs. CEO's aren't reading comment cards, but they are looking at how many customers they lose to rival companies.
That's just the kind of thing I was looking for, thank you. I suppose we could call this "sticky consumers".
Clayton, you're a little off topic because I wanted to limit this debate to non-political viewpoints. But I think you are right that we should look to our evolutionary past to explain the ultimate reasons why humans tend to support the State.
Clayton:Contrary to Rothbard, I tend to believe that economic fallacies and other superstitions are symptoms of the underlying reality more than causes. There are an infinite number of possible economic fallacies yet there are only certain specific ones that really "play to the masses." Why those fallacies and not other fallacies? I think that is the right question to ask and I think that answering that question can lead us to better, deeper insights into the human condition.
I don't know what you mean here. What did Rothbard believe and how do you differ?
trulib: Clayton, you're a little off topic because I wanted to limit this debate to non-political viewpoints. But I think you are right that we should look to our evolutionary past to explain the ultimate reasons why humans tend to support the State. Clayton:Contrary to Rothbard, I tend to believe that economic fallacies and other superstitions are symptoms of the underlying reality more than causes. There are an infinite number of possible economic fallacies yet there are only certain specific ones that really "play to the masses." Why those fallacies and not other fallacies? I think that is the right question to ask and I think that answering that question can lead us to better, deeper insights into the human condition. I don't know what you mean here. What did Rothbard believe and how do you differ?
http://www.lewrockwell.com/rothbard/rothbard62.html
Read the section, "How the State Preserves Itself" to see Rothbard's view. Where I differ is that I don't think that an opinion-molding class is sufficient to explain the longevity of the State's parasitism. Petty thieves are repelled by the prospect of resistance from their victims so that their predation is, as Rothbard notes in the linked article, "ephemeral... the coercive, parasitic lifeline may be cut off at any time." How is this less true for victims of a propagandizing government? Surely, one or two people will be smart enough to see through the charade and I think that, actually, a pretty significant percentage do see through it (I think people wise to the State tend to be among the older demographic). Yet, even though quite a few people see through the charade, they still go along with it. Why would they participate in their own victimization?
My theory is that the human brain is not a completely libertarian brain, in terms of morality. That is, the brain insists most of the time that whatever social rules apply to itself must also apply to everybody else (universalizable rules), which makes our brain mostly libertarian. But then I think it has "hardwired" special exceptions for certain kinds of rules having to do with primitive aspects of sex, family, property and so on. These problems were complex and Nature solved them long before there could have been law (because we were not yet verbal) which explains why they are hardwired. Once we developed the ability to speak and later developed law, these traits actually became maladaptive because they now make us liable to manipulation by those with the shrewdness to figure out how to do it.
Here's a blog post I wrote last year on the subject.
To sum it up, the irrationality of the populace makes markets less effective.
Why anarchy fails
I am looking for a general principle like that, thank you. I take it by irrationality you mean people choosing bad means for acheiving their ends?
Less effective than what?