Argument: A pure "free-market" is not a stable situation, but is rather merely a transitory phase preceding corporatism & authoritarian government.
1. In a free market economy, some win (retain profits) while others lose (go bankrupt)
2. In general, "it takes money to make money" - those who retain profits will benefit from "economies of scale," compared to smaller competitors. "Winners" will find it easier to keep on winning, while "losers" will find it easier to keep on losing
3. Given this, wealth and capital will gradually concentrate, as the most successful buy up the assets of less successful competitors, who then face increased barriers to re-entry into the markets
4. Unchecked, this will eventually result in monopolies or oligopolies in many sectors (as we see today). At this point, the concentrated power of the oligopolies will make them difficult for others to challenge legally and possibly make them increasingly unpopular. The need (and ability) to employ organized armed force to defend (or increase) elite property will generally be proportional to the concentration of wealth.
Once oligopolies have sufficient (political/military) power, they will no longer need to compete using only market mechanisms, but instead can instead rely on fees, taxation, rent seeking, "bailouts," or even conquest.
Conclusion: A free-market is an inherently unstable situation, which is not self-sustaining on its own.
Summary - A "free-market economy" resembles a large game of poker. It only lasts until one player has all the chips, which is inevitable, given the rules. A free-market could be sustained indefinitely, as a poker game could, but neither will do so spontaneously, on their own. To do either requires organization, planning, intelligence and will.
ravochol:2. In general, "it takes money to make money" - those who retain profits will benefit from "economies of scale," compared to smaller competitors. "Winners" will find it easier to keep on winning, while "losers" will find it easier to keep on losing
Please provide your definition for "economies of scale".
Regardless of this definition, however, how is it necessarily the case that winners will always find it easier to keep on winning and losers will always find it easier to keep on losing?
As far as I can tell, your argument falls apart at this step. The logical fallacy is a simple non sequitur.
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Regardless of this definition, however, how is it necessarily the case that winners will always find it easier to keep on winning and losers willalways find it easier to keep on losing?
Well, it is true that it is nearly always easier to start a business venture or a career with more funding as opposed to less.
So those who start with more will always have an easier time of making more, than those who start with less.
Of course, this isn't a guarantee that every individual on a micro scale with an advantage will succeed - but that doesn't need to be true to prove that advantages, and disadvantages accumulate, which over time results in extreme concentrations of wealth.
If it takes money to make money, how did anyone ever become wealthy in the first place?
ravochol: So, in a market economy, those who start with more will always find it easier to end with more. This doesn't mean every individual on a micro scale who starts with more will end with more, of course - just as not every poker player who starts with more chips will win the game - but that doesn't need to be true to show that on a macro scale, successive winners accumulate further advantages, while the losers acquire further disadvantages -or even drop out of the game, which over time results in extreme concentration of winners.
So, in a market economy, those who start with more will always find it easier to end with more. This doesn't mean every individual on a micro scale who starts with more will end with more, of course - just as not every poker player who starts with more chips will win the game - but that doesn't need to be true to show that on a macro scale, successive winners accumulate further advantages, while the losers acquire further disadvantages -or even drop out of the game, which over time results in extreme concentration of winners.
Economy/business/exchanges in the free market should NEVER be compared to poker. In poker, everything is a zero sum game. The only way someone can benefit is by increasing their chips at the expense of other players losing exactly that amount in chips.
In free market exchanges/ business ventures, trades only occur when both parties value what they receive more than what they are giving up to receive it. It is NOT a zero sum game.
Yes, in a market economy it will be easier for someone who has a lot of money to start a new business and be successful than someone with less money (all other things equal). But do you actually have a suggestion as to how better allocate resources for engaging in business ventures than the free market?
You should be aware of the nirvana fallacy, which occurs when someone compares an idea to perfection (or usually their idea of perfection) and because that idea falls up short, they then believe that the idea is flawed and/or not the best idea available.
"do you actually have a suggestion as to how better allocate resources for engaging in business ventures than the free market? "
No - let's assume that the free-market is the Lamborghini of economies - the best, most efficient, etc.
My point is that, like a Lamborghini, it needs regular maintenance and intelligent steering.
A person guided by an assumption that 'Lamborghinis manage themselves,' they will soon be left with a worse-than-useless pile of junk.
ravochol: 1. In a free market economy, some win (retain profits) while others lose (go bankrupt)
Yes, some win and some lose. But the game is not zero sum. Beyond this, I do not understand the value of this statement.
ravochol:"Winners" will find it easier to keep on winning, while "losers" will find it easier to keep on losing
It is difficult to give examples of results in a free market, as there are none certainly today. However, examine the US automotive industry against this assertion and see if your statement holds any water. Or try web browsers. Or try to explain Google coming from nowhere against Microsoft.
ravochol: 3. Given this, wealth and capital will gradually concentrate, as the most successful buy up the assets of less successful competitors, who then face increased barriers to re-entry into the markets
As your number 2) above fails, this statement has no legs.
ravochol:4. Unchecked, this will eventually result in monopolies or oligopolies in many sectors (as we see today).
As your number 3) fails, this statement has no legs.
There is nothing about "BIG" that ensures success in a free market. For anyone that has worked at a "BIG" company, this is only too obvious. They are almost always the slowest, most cumbersome organizations, with no hope of competing against the next idea.
"BIG" only matters because of access to government pull, the exact opposite of a free market.
ravochol:Well, it is true that it is nearly always easier to start a business venture or a career with more funding as opposed to less.
Now you seem to be equivocating. In your OP, "starting a business venture or career" wasn't what you apparently meant by "winning", nor "failing to start a business venture or career" what you apparently meant by "losing". So I must ask at this point, what are your intended definitions for "winning" and "losing" for this thread?
ravochol:So those who start with more will always have an easier time of making more, than those who start with less.
As far as I can tell, this conclusion fails to hold for at least two reasons:
ravochol:Of course, this isn't a guarantee that every individual on a micro scale with an advantage will succeed - but that doesn't need to be true to prove that advantages, and disadvantages accumulate, which over time results in extreme concentrations of wealth.
A deterministic assertion means that there can be no other way. Even one outlier is enough to cast the entire assertion into doubt. While you claim that your assertions in the OP are deterministic, you have not yet demonstrated this logically. Empirical evidence doesn't matter here.
How did the Yankees get a larger payroll?
What I got from your statement is that wealth is not created, merely shifted. If that's the case, why isnt' everyone living in a cave and eating berries and small rodents? You seem to buy into the zero sum idea of wealth, which doesn't make sense theoretically and doesn't jive with history.
nice predictions, I agree to some extent, but the conclusion very poor. Basically, it is just your opinion. An assertion.
(english is not my native language, sorry for grammar.)
Mtn Dew: If it takes money to make money, how did anyone ever become wealthy in the first place?
spot on. One has only to be productive to make money. Or have entrepeneurship skills so to speak.
The logical fallacy is that the statement seems to assume that being "unstable" is a bad thing.
It's the central fallacy of Marxism and much of left-wing economic thought, the assumption that the owners of capital have a monopoly on it. This is just not factually accurate, these theorists forget that anyone can borrow money. Developed financial markets offer access to funding to anyone with productive capacity. And the owners of wealth therefore don't have any inherent competitive advantage, and wealth does not naturally concentrate.
JH2011:Yes, in a market economy it will be easier for someone who has a lot of money to start a new business and be successful than someone with less money (all other things equal).
Actually, I don't believe that to be the case. What matters in a free market is producing value at a lower cost than the next guy. How does having more money in any way make one more productive? If the rich run inefficient businesses and subsidize it with their fortune, they will run out of money eventually.