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Capitalism = Destruction?

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generalhanky Posted: Wed, Nov 30 2011 11:08 AM

I have a BBA in Finance and studied economics under some pretty amazing professors.  I was always an ardent supporter of capitalism, but over the years I have come to question its long-term sustainability, 

I believe that the flaw of capitalism is its foundation - profit.  While this powerful incentive has driven many incredible innovations and greatly increased the standard of living of everyone in the world (in capitalist nations, anyway), I foresee that it will eventually cause the pillaging of the Earth's resources and concentration of wealth in the hands of the elite few.

Capitalism seems to assume that the Earth's natural resources are infinite, and it relies upon eternal consumption and growth to function.  This is quite simply and logically unsustainable.  Many may argue that the market controls the use of resources and keeps over-use at bay...but this doesn't seem to be the case.  Humans have already burnt through 1 trillion barrels of oil, (concentrated energy that took 100's of millions of years to form) in a relatively short time-frame.  Profit drives this eternal consumption of the oil.

In capitalism, wealth is naturally concentrated in the hands of the few.  It takes money to make money right?  America has turned into an ownership society, where wealth is passed down generation to generation.  Sure, some of it is squandered, but anyone with half a brain can make plenty of money off $1 million.

All in all, I believe capitalism has served the world very well, fueling enormous growth and prosperity, some of which has "trickled down" to the little guys.  Unfortunately though, it seems it has run its course.  Our world faces huge economic problems that I do not believe can be solved by debt-based monetary systems combined with free-market capitalism.  I think we, as a world, should go back to the economic drawing board.  Please feel free to share your thoughts.

 

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John James replied on Wed, Nov 30 2011 11:23 AM

I honestly can't tell if this is a legitimate post or not.

 

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AJ replied on Wed, Nov 30 2011 11:27 AM

Oh I think it's legit. I could see how this would be a plausible way to think if you never looked deeper:

"Many may argue that the market controls the use of resources and keeps over-use at bay...but this doesn't seem to be the case.  Humans have already burnt through 1 trillion barrels of oil, (concentrated energy that took 100's of millions of years to form) in a relatively short time-frame.  Profit drives this eternal consumption of the oil."

 

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John James replied on Wed, Nov 30 2011 11:33 AM

what I mean is it sounds a bit too canned...like it was taken from somewhere and just posted here, not from someone with legitimate concerns or an interest in discussing it or learning anything, but instead as more of a trolling.

 

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AJ replied on Wed, Nov 30 2011 11:35 AM

Quite possibly, and then there's all the tags. But hey, we gotta assume good faith at first. Still, I don't even know where to start with this post. He pretty much lost me at "amazing professors."

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Clayton replied on Wed, Nov 30 2011 11:45 AM

I have a BBA in Finance and studied economics under some pretty amazing professors.  I was always an ardent supporter of capitalism, but over the years I have come to question its long-term sustainability,

You have fallen prey to a lot of popular fallacies.

I believe that the flaw of capitalism is its foundation - profit. 

You're forgetting the other half of the foundation: losses and bankruptcy. This is a common mistake. The punditry constantly cite America as "a capitalist nation" but how can we be capitalist when bankers can bet trillions of dollars, keep the profits if their bets pan out but shift the losses onto the public if it turns out they've bet wrong.

Think back to your ECON 101 class... what happens when the costs of a decision are borne by another person while the benefits of a decision accrue to the decision-maker?

While this powerful incentive has driven many incredible innovations and greatly increased the standard of living of everyone in the world (in capitalist nations, anyway), I foresee that it will eventually cause the pillaging of the Earth's resources and concentration of wealth in the hands of the elite few.

You're right if you're talking about the current system in America which is mislabeled "capitalism." It is not really capitalism, it's a mercantilism-fueled empire. Protections for the big boys, heavy taxes, tariffs and regulations for the rest of us and troops spread throughout the world to "protect our markets." Fencing your turf with guns and warships is not capitalism, it's colonialism.

Capitalism seems to assume that the Earth's natural resources are infinite,

You seem to be forgetting your ECON classes... capitalism assumes the precise opposite, that most goods are scarce and in short supply relative to the demand for them.

and it relies upon eternal consumption and growth to function.

Capitalism doesn't rely on eternal consumption, human beings do. We need to eat and be clothed, and so on, in order to be alive at all. Capitalism nowhere depends upon growth that's a purely modern bastardization of captialist theory.

  This is quite simply and logically unsustainable.  Many may argue that the market controls the use of resources and keeps over-use at bay...but this doesn't seem to be the case. 

The market establishes through prices at all times between all resources and all lines of production and consumption an equilibrium. The next unit of resource tends to go wherever it is most highly demanded. Preservation of natural parks and so on is also a demand and it will be balanced by the market with all other demands. The real demand for nature preservation is probably vastly exaggerated by its proponents.

Humans have already burnt through 1 trillion barrels of oil, (concentrated energy that took 100's of millions of years to form) in a relatively short time-frame.  Profit drives this eternal consumption of the oil.

Oil is an available resource. If it does "get used up" then we will simply use the next-best available energy source, say, natural gas or coal. If we "use up" all the hydrocarbons on Earth, then we can invest in other ways of capturing the energy of the Earth and Sun. Note that our current energy consumption (including oil) is just a tiny percentage - well below 1% - of the total solar energy which is incident to the Earth. The mania about over-consumption of oil is just a popular mania.

In capitalism, wealth is naturally concentrated in the hands of the few.

Actually, in mercantilism and mafia-economics, wealth is naturally concentrated in the hands of the few. In capitalism, wealth has no natural tendency to aggregate or dissipate. However, we can see that without the means to aggregate wealth that are employed in the current system (violence, threats of violence), the real wealth concentration in a free society would be much more dispersed and egalitarian.

  It takes money to make money right?  America has turned into an ownership society, where wealth is passed down generation to generation.  Sure, some of it is squandered, but anyone with half a brain can make plenty of money off $1 million.

Inheritance is not now and never has been the problem with society. Quite the opposite, inheritance is a foundational building block of society. Without it, capitalism would never have come about.

All in all, I believe capitalism has served the world very well, fueling enormous growth and prosperity, some of which has "trickled down" to the little guys.  Unfortunately though, it seems it has run its course.  Our world faces huge economic problems that I do not believe can be solved by debt-based monetary systems combined with free-market capitalism.  I think we, as a world, should go back to the economic drawing board.  Please feel free to share your thoughts.

Well, the very thought of "going back to the drawing board" is either futile or terrifying. If you mean we should try to persuade everyone on the planet not to act according to their self-interest, you are engaging in futility. If you mean we should try to force everyone on the planet not act according to their self-interest, it is terrifying.

You have correctly observed the symptoms of the problem in modern society. You have incorrectly diagnosed their causes which lie in the systematic aggression and fraud that has infused our social order. We tolerate an out-of-control Federal government that is waging war with every tinpot dictator on the planet while entitlement-spending and fat-cat bailouts at home are combining to bankrupt the government which, through its bond issues, is determined to take down the entire American public with it.

The mugger will have a much harder time stealing from you if he doesn't have a weapon and you do. It is true that Wall Street is plundering America but this is because they have a weapon in their hand... that weapon is the Federal Reserve, an agency created by the US government which permits the biggest US banks to expand and contract the money supply to suit their purposes.

Wall Street could only bankrupt itself unless aided and abetted by the Federal Reserve. We need to disarm these thugs by shuttering the Federal Reserve. They will naturally go bankrupt in short order because they are not businessmen, they are crooks. Forced to earn money through productive enterprise, they will have no choice but to move on to some new con.

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John James replied on Wed, Nov 30 2011 11:58 AM

The tags were just one more piece of it.  Notice how they aren't on topic but are just random economics-related things.  The last half of them aren't even separated...which is exactly how they would be if someone just copy-and-pasted a pre-packaged post.

 

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I can assure you it's a "legitimate post"...now did you have something to add, or do you just reply to people's posts with one sentence observations?

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Clayton replied on Wed, Nov 30 2011 12:57 PM

@hanky: Any responses to my post?

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There is the Schumpeter (and Marx too) concept of Creative/Destruction which you may find interesting:

http://en.wikipedia.org/wiki/Creative_destruction

Though it does nothing to affirm your thoughts.

Other than that, I think you may be missing what Subjective Value theory is - a key concept to understanding human activity.  You seem to be asserting values that can not really be thought about or discussed or thought of in any scientific or logical way.

"As in a kaleidoscope, the constellation of forces operating in the system as a whole is ever changing." - Ludwig Lachmann

"When A Man Dies A World Goes Out of Existence"  - GLS Shackle

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generalhanky:
I can assure you it's a "legitimate post"...now did you have something to add, or do you just reply to people's posts with one sentence observations?

Easy there, chief.  We get enough trolls/spam around here to make my doubt not at all unfounded.

And I can assure you my post was not an attempt to avoid addressing your OP, as (as I would hope one would guess) there is virtually nothing you bring up that hasn't been addressed ad nauseum, even in this very forum.  I would be inclined to locate and link various threads for you to look through which would cover all of your concerns, but based on your snipe here and the sheer number of enormous fallacies embedded in that first post, I'm not so sure it would be a productive use of my time.

However as you can see, Clayton has been kind enough to take the time to address literally every point you raised (which again, he himself, as well as various other members of this forum have already explained more times than they care to count).

I look forward to your responses to his explanations.

 

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Thank you Clayton, as you appear to be the only one so far who has responded intelligently.  Back to the profit discussion:

You're forgetting the other half of the foundation: losses and bankruptcy. This is a common mistake. The punditry constantly cite America as "a capitalist nation" but how can we be capitalist when bankers can bet trillions of dollars, keep the profits if their bets pan out but shift the losses onto the public if it turns out they've bet wrong.

Think back to your ECON 101 class... what happens when the costs of a decision are borne by another person while the benefits of a decision accrue to the decision-maker?

I agree, America is not a truly capitalist nation, in fact I don't know of any nation on Earth that is.  But that doesn't refute the fact that profit is so powerful an incentive that businesses will chase after it at any cost.  The only consequences for immoral/illegal actions are borne after the fact through litigation.  This is especially a problem in public companies, as the boards and executives are detached from the company and any resulting litigation.  The only thing keeping the profit-chasing in check in a capitalist economy is, like you said, losses and bankruptcy.  Sure, the threat of these would be a powerful limit on profit-chasing in a capitalist society that was populated by only small privately-owned businesses, but it doesn't work so well on huge multi-national corporations that make everything from toothbrushes to furniture to loans, etc.

"Capitalism seems to assume that the Earth's natural resources are infinite.."

You seem to be forgetting your ECON classes... capitalism assumes the precise opposite, that most goods are scarce and in short supply relative to the demand for them.

and it relies upon eternal consumption and growth to function.

Capitalism doesn't rely on eternal consumption, human beings do. We need to eat and be clothed, and so on, in order to be alive at all. Capitalism nowhere depends upon growth that's a purely modern bastardization of captialist theory"

So the check on limited supply for ANY good is simply pricing?  I agree that it does indeed work on renewable resources and manufactured goods.  However, oil is another story altogether.  No one knows for certain the exact volume the Earth holds, for one.  Also, it is literally in 90-95% of everything we use and consume.  My concern is that we rely on it so heavily for transportation when it's used in so many other applications and doesn't seem to have a readily available substitute.  It seems impossible that capitalism could accurately price a non-renewable resource like oil, when the volume is unknown and it is so highly depended upon.  I don't see how "market forces" could do anything but have a knee-jerk reaction once production slows to a snails pace.  I would say it's a dangerous fallacy to simply call over-consumption of oil a "mania."  It is a genuine concern...like I said, not just for energy, but for the world's food supply.

"In capitalism, wealth is naturally concentrated in the hands of the few."

"Actually, in mercantilism and mafia-economics, wealth is naturally concentrated in the hands of the few. In capitalism, wealth has no natural tendency to aggregate or dissipate. However, we can see that without the means to aggregate wealth that are employed in the current system (violence, threats of violence), the real wealth concentration in a free society would be much more dispersed and egalitarian."

I have to disagree with this.  Wealth builds upon wealth.  This is especially true in capitalism, where companies merge and acquire, overall making strides through technology, supply chain improvements and production efficiencies to overall make products more affordable.  This obviously has two sides:  cheaper products but the companies are typically owned by fewer people, concentrating the wealth.  This also applies to the next section I talked about, inheritance.  How is inheritance the "foundational building block of society?"  All it appears to do is, like I said, concentrate wealth.  A man gets wealthy, then passes it on to his offspring, providing them with a competitive advantage over everyone else who didn't have rich fathers.  The offspring have no real incentive to innovate when they can just run the gifted company, acquire some real estate, build a strip mall, etc and just kick back and relax.  Why work hard when your father's money is making money for you?

"All in all, I believe capitalism has served the world very well, fueling enormous growth and prosperity, some of which has "trickled down" to the little guys.  Unfortunately though, it seems it has run its course.  Our world faces huge economic problems that I do not believe can be solved by debt-based monetary systems combined with free-market capitalism.  I think we, as a world, should go back to the economic drawing board.  Please feel free to share your thoughts."

I agree it would be futile and/or terrifying to do either of the proposed things you said.  I wasn't suggesting either was even possible, just that it's good to at least discuss these issues.  My main point is that we should look back at the very foundations of our economic models.  For example, why does profit have to be the incentive?  Could we come up with an incentive that would be good for human-kind?   

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And by the way, sorry if my concerns have been discussed before, and I just tagged stuff so maybe more people would see it...I'm new to the site.  Yes, I did have some "amazing professors", but we didn't sit around and talk about economic theory all day in class...mostly discussed things that were relevant to the times.  Obviously, I didn't attend Harvard, lol

Capitalism and economic theory are complex ideas that rely upon many variables.  Sorry if my original post was rambling, but if I were to discuss all my thoughts and ideas about the subject, it would go on for pages and pages.  I merely sought to address some of my concerns in tidbits..if you don't know where to start with my post, start anywhere!  Clayton provided a good response to each of my points, but if you would like to debate any one point, go ahead!  I'm already enjoying the opportunity to talk to other people about this, as most people I know can't even hold a conversation about economics..

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cporter replied on Wed, Nov 30 2011 1:57 PM

generalhanky:
For example, why does profit have to be the incentive?  Could we come up with an incentive that would be good for human-kind?

A classic example of "the world would be better for people if it didn't include people".

Profit is not foundational to capitalism. Private ownership is foundational to capitalism. Profit is merely what happens when people are free to go about the business of making their lives suck a little less. People, not capitalism, engage in trade to better their own situation. People, not capitalism, produce things that better others' lives in the hope of trading for things that will better their own. Profit is not a capitalist incentive, it is a human incentive.

Your idea is to replace the natural desire of others to improve their own well-being with your desire to reshape the world in a way you prefer. You're not alone. The whole history of technocrats and invasive "do-gooders" are on your side. At least be honest and don't try to act like putting your desires first is best for all of human-kind.

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I suggest you define the term capitalism. I will assume you define it as a free market, because otherwise why are you posting this here? But beware that this definition is only used by 'right'-libertarians. Marxists and their ilk take a different definition.

generalhanky:

I have a BBA in Finance and studied economics under some pretty amazing professors.  I was always an ardent supporter of capitalism, but over the years I have come to question its long-term sustainability, 

I believe that the flaw of capitalism is its foundation - profit.  While this powerful incentive has driven many incredible innovations and greatly increased the standard of living of everyone in the world (in capitalist nations, anyway), I foresee that it will eventually cause the pillaging of the Earth's resources and concentration of wealth in the hands of the elite few.

Capitalism seems to assume that the Earth's natural resources are infinite,and it relies upon eternal consumption and growth to function. 

On the contrary the price mechanism serves to ration finite resources. If there was no scarcity, we could have communism. The economy doesn't need to expand, but it tends to because everyone wants more stuff.

This is quite simply and logically unsustainable.  Many may argue that the market controls the use of resources and keeps over-use at bay...but this doesn't seem to be the case.  Humans have already burnt through 1 trillion barrels of oil, (concentrated energy that took 100's of millions of years to form) in a relatively short time-frame.  Profit drives this eternal consumption of the oil.

The fact that we are using finite resources is not an argument against using finite resources. What exactly would you have us do with them?

In capitalism, wealth is naturally concentrated in the hands of the few. 

No. Just no.

It takes money to make money right? 

Again, no.

America has turned into an ownership society, where wealth is passed down generation to generation. 

And since America is the exemplar of free market principles...

Sure, some of it is squandered, but anyone with half a brain can make plenty of money off $1 million.

Neither here nor there.

All in all, I believe capitalism has served the world very well, fueling enormous growth and prosperity, some of which has "trickled down" to the little guys. 

Understatement of the millenia. 'Capitalism' is the only reason why the 'little guy' isn't still working the fields while his wife is dying in child birth to a baby who will most likely die by age 5.

Unfortunately though, it seems it has run its course.  Our world faces huge economic problems that I do not believe can be solved by debt-based monetary systems combined with free-market capitalism. 

How can you combine debt-based money with the free market? The two are the polar oppisite of each other.

I think we, as a world, should go back to the economic drawing board.  Please feel free to share your thoughts.

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"A classic example of "the world would be better for people if it didn't include people".

Profit is not foundational to capitalism. Private ownership is foundational to capitalism. Profit is merely what happens when people are free to go about the business of making their lives suck a little less. People, not capitalism, engage in trade to better their own situation. People, not capitalism, produce things that better others' lives in the hope of trading for things their better their own. Profit is not a capitalist incentive, it is a human incentive.

Your idea is to replace the natural desire of others to improve their own well-being with your desire to reshape the world in a way you prefer. You're not alone. The whole history of technocrats and invasive "do-gooders" are on your side. At least be honest and don't try to act like putting your desires first is best for all of human-kind."

Profit is just another word for "people...making their lives suck a little less"...and yes it is indeed a foundation of capitalism.  Look up the definition sometime.  It is the driving force of capitalism for christ's sake.  "...technocrats and invasive do-gooders?"  Is that your way of covertly calling me a libtard?  Lol

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generalhanky:

You're forgetting the other half of the foundation: losses and bankruptcy. This is a common mistake. The punditry constantly cite America as "a capitalist nation" but how can we be capitalist when bankers can bet trillions of dollars, keep the profits if their bets pan out but shift the losses onto the public if it turns out they've bet wrong.

Think back to your ECON 101 class... what happens when the costs of a decision are borne by another person while the benefits of a decision accrue to the decision-maker?

I agree, America is not a truly capitalist nation, in fact I don't know of any nation on Earth that is.  But that doesn't refute the fact that profit is so powerful an incentive that businesses will chase after it at any cost.  The only consequences for immoral/illegal actions are borne after the fact through litigation.  This is especially a problem in public companies, as the boards and executives are detached from the company and any resulting litigation.  The only thing keeping the profit-chasing in check in a capitalist economy is, like you said, losses and bankruptcy.  Sure, the threat of these would be a powerful limit on profit-chasing in a capitalist society that was populated by only small privately-owned businesses, but it doesn't work so well on huge multi-national corporations that make everything from toothbrushes to furniture to loans, etc.

Your forgetting about laws against force and fraud.

"Capitalism seems to assume that the Earth's natural resources are infinite.."

You seem to be forgetting your ECON classes... capitalism assumes the precise opposite, that most goods are scarce and in short supply relative to the demand for them.

and it relies upon eternal consumption and growth to function.

Capitalism doesn't rely on eternal consumption, human beings do. We need to eat and be clothed, and so on, in order to be alive at all. Capitalism nowhere depends upon growth that's a purely modern bastardization of captialist theory"

So the check on limited supply for ANY good is simply pricing?  I agree that it does indeed work on renewable resources and manufactured goods.  However, oil is another story altogether.  No one knows for certain the exact volume the Earth holds, for one.  Also, it is literally in 90-95% of everything we use and consume.  My concern is that we rely on it so heavily for transportation when it's used in so many other applications and doesn't seem to have a readily available substitute.  It seems impossible that capitalism could accurately price a non-renewable resource like oil, when the volume is unknown and it is so highly depended upon.  I don't see how "market forces" could do anything but have a knee-jerk reaction once production slows to a snails pace.  I would say it's a dangerous fallacy to simply call over-consumption of oil a "mania."  It is a genuine concern...like I said, not just for energy, but for the world's food supply.

Again, the fact that resources are finite is not an argument against using them. The price mechanism doesn account for possible shortages of oil. Speculators hoard oil which they will sell when there is a shortage, reducing price volatility, and entreaupenuers invest in other energy resources as they see the price rise.

Wealth builds upon wealth.  This is especially true in capitalism, where companies merge and acquire, overall making strides through technology, supply chain improvements and production efficiencies to overall make products more affordable.  This obviously has two sides:  cheaper products but the companies are typically owned by fewer people, concentrating the wealth.  This also applies to the next section I talked about, inheritance.  How is inheritance the "foundational building block of society?"  All it appears to do is, like I said, concentrate wealth.  A man gets wealthy, then passes it on to his offspring, providing them with a competitive advantage over everyone else who didn't have rich fathers.  The offspring have no real incentive to innovate when they can just run the gifted company, acquire some real estate, build a strip mall, etc and just kick back and relax.  Why work hard when your father's money is making money for you?

The size of firms is limited by economic calculation. There's such thing as diseconomies of scale as well. Today we have piles of regulation which reward large, bureaucratic corporations, no such things would exist in a free market. But even if this were true, fewer capitalists to every wage earner shouldn't affect the distriubtion of wealth that much. You seem to think it is really easy to run a company well, once it is off the ground. Not true. If that company doesn't keep innovating it will be overtaken by others in that field. And even if it does happen, so what? If person X deserves his fortune, and then gives it to person Y, doesn't Y deserve it just as much as X did? 

 My main point is that we should look back at the very foundations of our economic models.  For example, why does profit have to be the incentive?  Could we come up with an incentive that would be good for human-kind?   

Profit is the only incentive that works for the good of all human kind. Profit is the reward entreauprenuers get for serving the consumer. There is no other way of earning profit on a free market.

The only alternative to profit would be to establish a planning board of some kind to 'reward' people who the state deems acceptable, and punish those it deems unacceptable. Not only does this inevitably fail to calculate economic efficiency, but it will lead to tyranny. 

 

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Evilscepter:

You didn't really add much to the conversation with your "no's"...but I will try to address your questions/concerns.

"Capitalism seems to assume that the Earth's natural resources are infinite,and it relies upon eternal consumption and growth to function. 

On the contrary the price mechanism serves to ration finite resources. If there was no scarcity, we could have communism. The economy doesn't need to expand, but it tends to because everyone wants more stuff."

Sorry, I should have said capitalism (combined with debt-based monetary system) seems to assume...  Still, yes price does serve as the mechanism to ration finite resources.  But therein lies a problem with oil...no one knows just how finite it is.  Another major problem - "everyone wants more stuff."  Does that not concern anyone on here?  When is enough enough?  We already have 7 billion people on this planet of finite resources, with nearly half of the people suffering from a lack of fresh potable water and steady food supplies.  Yet some people are able to afford obscene luxury, like billion dollar, 27-story homes...make sense much?

The fact that we are using finite resources is not an argument against using finite resources. What exactly would you have us do with them?

Of course it's not an argument against using finite resources.  We must use them intelligently though.  We burn millions of barrels of oil every year, just in the USA, simply getting harvested food from the farms to your supermarket.  I thought economy was supposed to mean efficient...this is the opposite of efficient.  Oil has so many uses in our modern day, that we cannot continue to just burn it up getting from point A to point B every day; we will be in for a rude awakening one day if this does not change.

"It takes money to make money right?"

Again, no.

And how so?  Oh oh I know, since we can exchange our labor for money, right?  Take an average guy, no skills, no money, he can work at a minimum wage job and build up a large amount of wealth?  How?  Ok, I revise my statement, "In the vast 99.9999% of cases, it takes money to make money."

Understatement of the millenia. 'Capitalism' is the only reason why the 'little guy' isn't still working the fields while his wife is dying in child birth to a baby who will most likely die by age 5.

Really?  Capitalism is the only reason?  The Enlightenment had nothing to do with it?  Technological advances had nothing to do with it?  I guess all technology owes its roots to capitalism.  After all, Albert Einstein, Alexander Graham Bell, Thomas Edison, they were ALL in it for the money...

How can you combine debt-based money with the free market? The two are the polar oppisite of each other.

The "free market" operates in a debt-based monetary system, created by our wonderful Federal Reserve.  They aren't polar opposites, as they are not even in the same category.  One is an economic model, the other a monetary system..

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Jargon replied on Wed, Nov 30 2011 2:59 PM

 

I agree, America is not a truly capitalist nation, in fact I don't know of any nation on Earth that is.  But that doesn't refute the fact that profit is so powerful an incentive that businesses will chase after it at any cost.  The only consequences for immoral/illegal actions are borne after the fact through litigation.  This is especially a problem in public companies, as the boards and executives are detached from the company and any resulting litigation.  The only thing keeping the profit-chasing in check in a capitalist economy is, like you said, losses and bankruptcy.  Sure, the threat of these would be a powerful limit on profit-chasing in a capitalist society that was populated by only small privately-owned businesses, but it doesn't work so well on huge multi-national corporations that make everything from toothbrushes to furniture to loans, etc.


Firstly, the modern corporation as we know it is a product of the state. Subsidized, shielded, and free of competition, it is able to balloon in size while not having improving it's products. Free markets would likely see a much smaller business size on average, simply because maintaining such a large business is too difficult without privilege. Economy of scale applies, but is counterbalanced by executive distortion and delayed pricing responses. This is substantiated and documented at the beginning of the 20th century. These weaknesses of oversizedness are actually the entirety of the motives behind the progressive movement, the rise of the progressive-corporate structure. It's purpose was to protect large inefficient firms from the many small efficient ones with legal and regulatory shielding.

Secondly, how exactly does it not work as well on huge multi-nationals? What exactly would be the problem in suing a M-N?

So the check on limited supply for ANY good is simply pricing?  I agree that it does indeed work on renewable resources and manufactured goods.  However, oil is another story altogether.  No one knows for certain the exact volume the Earth holds, for one.  Also, it is literally in 90-95% of everything we use and consume.  My concern is that we rely on it so heavily for transportation when it's used in so many other applications and doesn't seem to have a readily available substitute.  It seems impossible that capitalism could accurately price a non-renewable resource like oil, when the volume is unknown and it is so highly depended upon.  I don't see how "market forces" could do anything but have a knee-jerk reaction once production slows to a snails pace.  I would say it's a dangerous fallacy to simply call over-consumption of oil a "mania."  It is a genuine concern...like I said, not just for energy, but for the world's food supply.

Thus here enters the beauty of the entrepeneurial system. Prices in good A rise. Consumers cannot continue to purchase A. Demand increases for alternatives to A, such as B, T, or V. The ratio cost of starting a project to the profit from the end of project lowers and lowers until entrepeneurs see that it is a good idea to sate the needs of the market. Investment and research proceed into whatever (solar, geothermal, hydro, gases, etc.) This is how, eventually, man will be weened off of oil.

I have to disagree with this.  Wealth builds upon wealth.  This is especially true in capitalism, where companies merge and acquire, overall making strides through technology, supply chain improvements and production efficiencies to overall make products more affordable.  This obviously has two sides:  cheaper products but the companies are typically owned by fewer people, concentrating the wealth.  This also applies to the next section I talked about, inheritance.  How is inheritance the "foundational building block of society?"  All it appears to do is, like I said, concentrate wealth.  A man gets wealthy, then passes it on to his offspring, providing them with a competitive advantage over everyone else who didn't have rich fathers.  The offspring have no real incentive to innovate when they can just run the gifted company, acquire some real estate, build a strip mall, etc and just kick back and relax.  Why work hard when your father's money is making money for you?

Wealth only builds upon wealth if it employs force or satisfies the market. We have never known any system but that which does not exclude the former option.

What clayton is talking about (I think, if not, then forgive me for speaking in your place) is that inheritance is the logical implication of private property. Private property, he states, is the building block of society.

 

I agree it would be futile and/or terrifying to do either of the proposed things you said.  I wasn't suggesting either was even possible, just that it's good to at least discuss these issues.  My main point is that we should look back at the very foundations of our economic models.  For example, why does profit have to be the incentive?  Could we come up with an incentive that would be good for human-kind?   

Profit doesn't have to be an incentive. You just have to brainwash the population of earth to serve something other than themselves. But good luck having that turn into a positive outcome. Free Market Capitalism is the best use of this selfishness because there is no monopoly. Every other system will give monopoly to selfish people. FMC pits these selfish people (as we all are), to the benefit of the customer! Hooray!

 
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cporter replied on Wed, Nov 30 2011 3:00 PM

generalhanky:
Profit is just another word for "people...making their lives suck a little less"...and yes it is indeed a foundation of capitalism.  Look up the definition sometime.  It is the driving force of capitalism for christ's sake.  "...technocrats and invasive do-gooders?"  Is that your way of covertly calling me a libtard?  Lol

I am not calling you a libtard, I just want you to understand that your issue isn't with capitalism. Your issue is with people pursuing their own interests because you don't like the results of it. Your ideas stated above, regardless of what political ideology you come from, are exactly those of everyone before you that also tried to reinvent the world in their preferred manner. Of course, they all claimed it was for the good of their fellow man, too. And I'm sure they all believed it. Don't you think it's a little strange to claim that removing the freedom to own (or at least to use belongings in a way you disagree with) is better for everyone?

Profit does not require capitalism. Capitalism does not require profit. How can it be foundational if this is true? Yes, people pursue personal profit; this is true with or without capitalism. Yes, people use the things they own (capital) to help produce further profits. But this isn't due to the nature of capitalism, this is due to the nature of people. At best you can argue that if we remove capitalism, people will not own anything to help improve their productivity, and therefore civilization would collapse and we'd use less resources. This is true enough, but it's hardly "best for all human-kind".

cap·i·tal·ism

[kap-i-tl-iz-uhm]

noun
an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.

 edit: Fixed the dictionary copy/paste problem.

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z1235 replied on Wed, Nov 30 2011 3:08 PM

I smell another Venus/Zeitgeist scout -- boldly venturing into enemy (capitalist) territory, Undercover Brother style. Yawn.

 

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limitgov replied on Wed, Nov 30 2011 3:08 PM

"I honestly can't tell if this is a legitimate post or not."

He is posting a serious question and he's being polite. 

Original poster, I'm glad you posted here.  We need more people who DO NOT know about free markets to post here and learn.  As I did and continue to do.  We have great posters here like Clayton, who can get into the nity grity and educate you.  All for free.  And much quicker than the time it takes for any school.

And once you get converted over...which you will, you'll spread the message for us with more passion than any of the others who are not new to this.

 

EDIT:

We don't this forum to turn into something like democraticunderground.com  That place literally feels like a communist country.  If they even suspect you of thinking the wrong way, you will get banned and they'll even go so far as to delete all of your post as if you never existed.  There is no real discussion that takes place there.  It is a police state nightmare.  This is one of the only forums where libs and free market people and anyone else can speak to each other freely.  Which is perfectly in tune with lew rockwell folk message...freedom.

 

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limitgov replied on Wed, Nov 30 2011 3:15 PM

"Why work hard when your father's money is making money for you?"

What does this have to do with the free market hurting you?  Or desruction as you said in your title?

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generalhanky:

Evilscepter:

You didn't really add much to the conversation with your "no's"...but I will try to address your questions/concerns.

To be fair you didn't give me much to work with. You need to provide an argument before I can attempt to refute it, no offense. You did expand on your points in your response to Clayton and I responded there.

"Capitalism seems to assume that the Earth's natural resources are infinite,and it relies upon eternal consumption and growth to function. 

On the contrary the price mechanism serves to ration finite resources. If there was no scarcity, we could have communism. The economy doesn't need to expand, but it tends to because everyone wants more stuff."

Sorry, I should have said capitalism (combined with debt-based monetary system) seems to assume...  Still, yes price does serve as the mechanism to ration finite resources.  But therein lies a problem with oil...no one knows just how finite it is.  Another major problem - "everyone wants more stuff."  Does that not concern anyone on here?  When is enough enough?  We already have 7 billion people on this planet of finite resources, with nearly half of the people suffering from a lack of fresh potable water and steady food supplies.  Yet some people are able to afford obscene luxury, like billion dollar, 27-story homes...make sense much?

The fact that we are using finite resources is not an argument against using finite resources. What exactly would you have us do with them?

Of course it's not an argument against using finite resources.  We must use them intelligently though.  We burn millions of barrels of oil every year, just in the USA, simply getting harvested food from the farms to your supermarket.  I thought economy was supposed to mean efficient...this is the opposite of efficient.  Oil has so many uses in our modern day, that we cannot continue to just burn it up getting from point A to point B every day; we will be in for a rude awakening one day if this does not change.

I responded to this point in my response to your response to Clayton (mouthful!), one of the problems of that arises when two people are posting responses to each other at the same time :)

"It takes money to make money right?"

Again, no.

And how so?  Oh oh I know, since we can exchange our labor for money, right?  Take an average guy, no skills, no money, he can work at a minimum wage job and build up a large amount of wealth?  How?  Ok, I revise my statement, "In the vast 99.9999% of cases, it takes money to make money."

Yes if you are totally usless at everything, you are not going to make alot of money. But you are going to make some, and you are going to build up the skills, capital and reputation earn more.

Understatement of the millenia. 'Capitalism' is the only reason why the 'little guy' isn't still working the fields while his wife is dying in child birth to a baby who will most likely die by age 5.

Really?  Capitalism is the only reason?  The Enlightenment had nothing to do with it?  Technological advances had nothing to do with it?  I guess all technology owes its roots to capitalism.  After all, Albert Einstein, Alexander Graham Bell, Thomas Edison, they were ALL in it for the money...

The division of labour and investment of capital is the primary cause of the elimination of dire poverty, yes. Technology is secondary. If you are on and Island I could tell you how to build an Ipad but it wouldn't help you - you are alone and without a stock of capital.

Edison was in it for the money and Graham Bell was a fraudster and a patent troll

The "free market" operates in a debt-based monetary system, created by our wonderful Federal Reserve.  They aren't polar opposites, as they are not even in the same category.  One is an economic model, the other a monetary system..

If the free market is operating under system founded on systematic theft and coercion, how is it free?

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Clayton replied on Wed, Nov 30 2011 3:31 PM

But that doesn't refute the fact that profit is so powerful an incentive that businesses will chase after it at any cost.

Am I supposed to believe that government employees are magically exempt from the profit motive?

On a more abstract level, it is important to remember that the pursuit of self-interest (what we really mean when we speak of "profit motive") is present in all human action. This is a definitional matter - even an ascetic who lives a spare and self-effacing life is pursuing what he perceives to be his highest interest - enlightenment or transcendence or whatever.

The profit motive isn't just an idea. It's a bit of a misnomer to call it "capitalism" like we have "nihilism" or "Arminianism" as if it's just some kind of ideology which has taken hold of the world. Capitalism is first and foremost a descriptive theory of the world-as-it-is. In particular, since the Industrial Revolution the largest historical puzzle facing the economist is two-fold. First, why did people suddenly start to become so wealthy and why did technological and economic advances become so rapid around 250 years ago? Second, what took humanity so long to reach this stage?

The answers lie in understanding the role that proeprty rights play in enabling the processes of specialization, division-of-labor and what Austrians call "lengthening of the time-structure of production" a cryptic phrase that simply means we break down the task of manufacturing into smaller and smaller pieces not within firms but within the market itself. Smaller and smaller improvements are made by producers before they pass on their output to the next producer.

The only consequences for immoral/illegal actions are borne after the fact through litigation.

Well, this goes back to a proper understanding of two concepts: uncertainty and calculation.

In the first place, uncertainty is a problem that afflicts all men alike - the regulator faces as much uncertainty as the regulated. Hence, what is the correct course of action can often only be seen after the fact, if at all. The economy is essentially a process of blind search where entrepreneurs are the individuals who take on the risk of trying new combinations in the search parameters (starting new businesses, expanding investment in existing businesses or shifting investment out of a business).

In the second place, all humans engage in calculation. The caricature of the unwashed masses as blind dolts who stumble about their daily lives goaded by one animal impulse after another is just that, a caricature. The fact is that the regulated are every bit as capable of calculation as the would-be regulator. If the job of the regulator is to "foresee bad consequences and halt activities which result in those bad consequences before they are tried", then the regulatee is just as capable of this kind of foresight. The key is strict, unlimited, individual liability for all persons at all times no matter their occupation. All individuals should be liable for any tort they commit and this liability must be unlimited because the damage that can be done is potentially unlimited. If this condition holds, then the question of foreseeing bad outcomes is reduced to the self-interest of the individual who will calculate the potential consequences of his actions. "It is cheap to dump my toxic chemicals into this creek. However, if I am discovered, then the people who live downstream and are harmed by my toxic efflluent will be able to sue not just my company but me personally and my entire wealth will be at risk. Perhaps I had better think twice about this."

Do you see why unlimited, individual liability is so crucial? But the government's system of business law works precisely to limit this. Many types of decisions made by CEOs and board members cannot come back on them, it is only the corporation which can be sued. This is the true reason for "corporate personhood." In Britain they are actually fairly honest about the whole thing... LLC stands for "Limited Liability Corporation" and its express purpose is to limit the liability of the owners/operators of the corporation. So, the government unwittingly plays a role in enabling the very kinds of things that leftists are frequently alarmed about - destruction of the environment, trodding over the rights of the poor, and so on.

Finally, a closing note on this idea of having something other than the profit motive. It is often said that the government doesn't have a profit motive like private businesses do. To the extent that this is true, the reason why is rarely, if ever, mentioned. The King (to put it in more basic language) has no profit motive precisely because he can take whatever he needs whenever he needs it. The government does not have to worry about profits because it can take whatever it needs in taxes at any time and it never hesitates to do so. Look at the second World War... there were rationing controls on almost every consumer good, taxes were stifling, government spending accounted for the majority of the entire gross domestic product of the US. So, the absence of profit-motive is due to an even greater evil, the evil of arbitrary seizure. Wal-Mart turns a profit and it benefits from a lot of bad legislation in the process that gives it unfair advantages vis-a-vis a small businessman. But Wal-Mart can't just kick my front door in and take whatever it wants. In the limit, the government always reserves exactly this right (they'll say "it's an emergency" of course but that's just a formality).

Clayton -

http://voluntaryistreader.wordpress.com
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aervew replied on Wed, Nov 30 2011 3:34 PM

Look OP, you are right, capitalism does have its problems. It does cause social injustice through wealth concentration. But we have regulations to battle with this. Progressive income taxation, high corporate taxes to ensure the big guy doesnt get more than his share, market oversight to ensure no exploitative behavior by enterprises. With these measures, we can get good results like Scandinavian countries with low Gini index aka high social justice and humane society with the best elements of both market and state regulation.

A lot of misesians dont want to admit this, hence the over the corner, sometimes bitter remarks in the "scandinavian myth" thread, but when it comes down to reality, the policies work and the result is what people expect from them, as is visible from voter preferences.

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limitgov:
We don't this forum to turn into something like democraticunderground.com  That place literally feels like a communist country.  If they even suspect you of thinking the wrong way, you will get banned and they'll even go so far as to delete all of your post as if you never existed.  There is no real discussion that takes place there.  It is a police state nightmare.  This is one of the only forums where libs and free market people and anyone else can speak to each other freely.  Which is perfectly in tune with lew rockwell folk message...freedom.

No one is stopping him from posting anything.  No one even attacked him.  All I did was say I couldn't tell if it was a legitimate post.  I didn't even attack anything that was said there.  All said was I couldn't tell if it was a legitimate post.  I'm sorry that he got overly defensive and came back and me like I was some kind of ignorant antagonizer.  I'm sorry that you think my simply pointing out that I couldn't tell if a post is legitimate constitutes treading toward democraticunderground territory, but I'll note that I was nothing but polite myself...including in response to his snipy retort.

Look through the forum history and you'll find quite a few newbs I've welcomed and helped quite considerably.  Sometimes even when no one else would.

I don't think any lectures are in order here.

 

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On another note, it looks like more people than just the OP could use this (in particular the how-to-quote section):

New member? READ THIS!

 

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Clayton replied on Wed, Nov 30 2011 3:40 PM

Look OP, you are right, capitalism does have its problems. It does cause social injustice through wealth concentration. But we have regulations to battle with this. Progressive income taxation, high corporate taxes to ensure the big guy doesnt get more than his share, market oversight to ensure no exploitative behavior by enterprises. With these measures, we can get good results like Scandinavian countries with low Gini index aka high social justice and humane society with the best elements of both market and state regulation.

A lot of misesians dont want to admit this, hence the over the corner, sometimes bitter remarks in the "scandinavian myth" thread, but when it comes down to reality, the policies work and the result is what people expect from them, as is visible from voter preferences.

The problem with this whole line of thinking is that it leaves the concept of government as a territorial monopolist of law and security completely exogenous. It's not even up for review or debate. What if the very nature of government is itself the problem? What if that is the source of most of our social ills? Since it's not even under discussion, it cannot be subjected to critique.

Clayton -

http://voluntaryistreader.wordpress.com
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aervew:
Look OP, you are right, capitalism does have its problems.

Somehow I don't think this is meant in the "yes, the world is not perfect, Earth will never be Nirvana" sense in which it resides.

 

Progressive income taxation, high corporate taxes to ensure the big guy doesnt get more than his share

"Corporate taxes ensure 'the big guy' [who?] doesn't get more than his share"?  What is "his share"?  Who decides that?

 

A lot of misesians dont want to admit this, hence the over the corner, sometimes bitter remarks in the "scandinavian myth" thread, but when it comes down to reality, the policies work and the result is what people expect from them, as is visible from voter preferences.

oy vey.  How many pages in that thread and we're still getting "in reality, statism works"?  For anyone interested in literature and media on this, see the Mises Wiki on Sweden.

 

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  • Of course it's not an argument against using finite resources.  We must use them intelligently though.  We burn millions of barrels of oil every year, just in the USA, simply getting harvested food from the farms to your supermarket.  I thought economy was supposed to mean efficient...this is the opposite of efficient.  Oil has so many uses in our modern day, that we cannot continue to just burn it up getting from point A to point B every day; we will be in for a rude awakening one day if this does not change.

You seem to be focused on oil a lot, and this paragraph really has ALL sorts of problems. Firsrly, Using them "intelligently" means absolutely nothing.  It may be "intelligent" to burn up everything next year.  It may be "intelligent" to not use it at all.  It all depends on the goals of various individuals acting in society, and what other means they have available. Secondly, yes, natural crude oil is a very easy to handle, energy dense, and useful.  One of these uses is as a compact, easy to handle, energy dense fuel.  Just because they're very useful in, say, manufacturing pharmeceuticals or plastic, doesn't mean that fossil-fuel derived plastics 100 years from now are worth more than a truckload of milk driven across the country today.  You can still make petroleuom products for a wide variety of uses, just not from fossil sources.  It's all about energy useage and transfer.

Fossil fuels represent a large, extremely rich source of easily accessible energy.  We've used that to develop societies with lots and lots of surplus resources that can sustain a wide variety of labor and capital.  This much larger stock of useful capital and labor is precisely what will enable us to develop additional, renewable or replacement sources of energy.  There will be transition periods, but oil production is not going to fall off of a cliff, and oil demand is not going to continue to climb in the face of rising prices.  Peak Oil graphs make the frankly naive assumption that demand is going to continue to rise at a steady rate versus decreasing supply, when there are alternative energy sources available.

The fact that we don't know precisely what the total stock of accessible fossil fuels on Earth are is just as irrelevent as not knowing what the total stock of copper is, or not knowing how much wheat will be harvested next year.  The point is that fluctuations year-over-year will be gradual, alternatives are available, and people attempt to account for uncertainty and risk.

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tunk replied on Wed, Nov 30 2011 4:04 PM

On the subject of inheritance, I take Ayn Rand's position: in a market economy, wealth tends to change hands to those who are most capable of wielding it, and so no matter how much you inherit, if you don't use it wisely in the long run you will lose it. It might be useful to consult some data on the United States.

Inheritance hasn't formed a very large percentage of the net wealth of the rich historically. According to the Fed, from 1989 to 2001, there "was a precipitous drop in the share of recipients [of wealth transfers] among the highest income group, from 48 to 36 percent, and for the top one percent of the wealth distribution, from 57 to 44 percent". Surprisingly, "wealth transfers as a share of household net worth tends to decline with both income and wealth." In 1998, the present value of wealth transfers amounted to 17 percent of the net worth for the highest income class.

[F]or all three groups of rich households, wealth transfers as a share of their net worth fell between 1989 and 2007. [...] It is therefore reasonable to conclude that inheritances and other wealth transfers have become less important for the rich as a source of wealth accumulation over these years.

We might note, as Thomas Sowell writes in Economic Facts and Fallacies, that many of those in the top quintile of income earners do, in fact, work more.

Economic Facts and Fallacies, p. 143:
There are nearly six times as many [heads of households who work full-time] in the top 20 percent of households as in the bottom 20 percent. Even the top five percent of households by income had more heads of household who worked full-time for 50 or more weeks a year than did the bottom twenty percent. [...] There was a time when it was meaningful to speak of the "idle rich" and the "toiling poor" but that time is long past.

The US Treasury has done a number of studies on historical income mobility. Many of them have reached the same conclusion: as long as you were not in the extreme top or extreme bottom, your chances of moving between income brackets remained fairly good (though obviously not ideal).

• There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period.
Roughly half of taxpayers who began in the bottom income quintile in 1996 moved up to a higher income group by 2005.
Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent – only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers declined over this period.
• The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
• Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups.

The gyrations of income mobility seem to apply to millionares as well. According to the Tax Foundation, only 15% of millionaires remain so for more than a year.

I'm not trying to defend the rich here or say every single one of them deserves to be where they're currently at; I'm just saying reality is always a little bit more complicated than the "RICH GET RICHER POOR GET POORER HURRR" caricature you get all the time from the media and from left-wing propagandists.

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To all posters on this thread:

Thank you for all your input.  I definitely learned more about the broad subject of capitalism and most importantly, how it's been skewed so much over the decades, that it's hard to distinguish true capitalism from the trash system we have today.  The discussion has already made me think of some more topics to thread in the coming weeks.  Oh, and thanks for the link to the noob guide John!  Special thanks to Clayton for his insightful and thorough replies.

Have a great evening!

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Wheylous replied on Wed, Nov 30 2011 6:29 PM

debt-based monetary systems combined with free-market capitalism

Uh....

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Jargon replied on Wed, Nov 30 2011 6:47 PM

John James:

On another note, it looks like more people than just the OP could use this (in particular the how-to-quote section):

New member? READ THIS!

 

I find it much easier to quote people point-by-point alternatively. For an entire post within one bracket the conventional method works. The question is, is it so terrible to quote unconventionally when addressing point-by-point?

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Jargon:
The question is, is it so terrible to quote unconventionally when addressing point-by-point?

Yes.  It's aesthetically unpleasing and many times confusing to a point that I find myself not even bothering to attempt to read posts that aren't quoted in one of the two normal formats (i.e. html blockquote or indenting).

I address point by point virtually all the time.  I use the blockquote and proper spacing to make the post as graphically pleasing as possible.  Have a look at how this is done in this post, and the rest of that thread.  Try to imagine how that discussion would have looked if the parties did not quote properly like that.  It would have been virtually unreadable.

 

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Wheylous replied on Wed, Nov 30 2011 7:29 PM

Before I post some more, I must say that this thread has been hands down the best thread I've ever read on any forum ever. So many economic fallacies are busted in clear, concise, and cutting words that this is sending my logic circuits buzzing at 110%. This thread should be stickied for future generations and be a required read in schools (hurr, hurr, I know free schools wouldn't be required to do anything).

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Wheylous replied on Wed, Nov 30 2011 8:10 PM

1) On the issue of inheritance - Assume that the money inherited was obtained in a legitimate, free market way (otherwise, it would be a failure of the justice system, not the rest of the market).

I will begin by quoting Smiling Dave on the topic of money and wealth:

 

How does one make money? By working. In other words, you only have money  if you have first produced something worthwhile, which is what working is . After you have done your share, being productive, then you get money. The money in your wallet allows you to go out there and reap the rewards of your productivity, by consuming what you want. 

The point of this obvious little exposition is that before you spent any money, you have contributed to the wealth of the nation by producing something. Otherwise you wouldn't have the money to spend.

In short, having a dollar in your wallet is at once a Certificate of Productivity [a proof that you actually contributed to the nation's wealth],  and a License to Consume [which is why we want money in the first place, to spend it]. Your consumption will not reduce the wealth of the nation, because you have already increased the wealth [by working for the money] before you ever took any wealth for yourself [by spending the money].

Taking this essential fact, we look at people who earn their money with their toil. These people are then capable of exchanging certificates of production for actual goods. Because they made their money through voluntary, mutually-beneficial trades, their money is, so to speak, "socially just" (to entertain the notion).

Now, what happens when money is inherited? Is production harmed and society made worse off? Note that inheritance of money is postponement of consumption. The original owner decided to not engage in voluntary trade with others to "cash in" his money for real goods. When money is passed down, it is this certificate of production that is passed down. When this is cashed in by the inheritor for real goods, he is accepting a gift from his father/mother who decided to not accept a good from society so that his son could. The cycle of the money is, so to speak, made "complete" in the sense that the certificate of exchange guaranteed to coordination of production and consumption - the father produced and saved to make his son better off and the son reaped the benefits of his father's help to society.

Has the son made society worse off? Not at all, for the father had produced for society already. Just because the son did not make his money directly does not mean that he makes society worse off. Money, after all, exists not to reward the virtuous but to coordinate production and consumption. The money he returned to the "system" is an overdue acceptance of the real goods for which the money is a placeholder.

When a son accepts a crazy amount of money, he does not make anyone else poorer off. The father-son system is closed, and the transfer of money neither created nor destroyed wealth for the rest of society.

Furthermore, examine what the son does when he "loses" his money. He spends it on jewelry, cars, houses, and casinos. The cars are likely created by a company which also creates non-luxury cars, and in this way the purchases of the wealthy (likely way above the cost of production of the car) help to decrease the cost of a car to a poor person, for a company can now defray the cost of producing other cars with the extra money gained from the luxury car. Don't forget that people actually work at the car factory and get paid as well. So the money of the rich man also goes there. When he gets a house built, he is also paying construction workers. When he squanders money at the casino this provides a way for the janitors at the casino to make a living, and for the people who make the chips. If the casino makes a lot of money, it stores this money in a bank, which then loans out the money to companies which create jobs. When the rich man buys jewelry, he indirectly provides a wage for people who work in the mines. Yes, the money of the rich man is dispersed, but where to? It does not merely disappear. It goes somewhere to aid in coordinating the production and consumption of other goods.

2) On the issue of oil - Assume our reserves have some hard limit which will be reached 100 years from now (I believe that Clayton works in this field and can attest to the fact that we have more oil reserves than we know). Of course, the end would not come abruptly and cause chaos in the world. We would have a considerable cushion period in which prices would obviously rise and result in the increase of production of alternative energy.

Furthermore, consider the alternative - the government decides that only 60% of our yearly energy may be acquired from oil. This will not result in the cessation of the use of oil as energy. It would merely delay the end. So if your contention is that oil would be used up - it would be used up anyway eventually. If you mean to say that government intervention would ease the transition from oil to other sources of energy, note that the distortion of market forces would redirect much of our resources from projects the markets deem efficient to the purpose of finding alternative under false (government constraints). This means that developing countries (if you think that some world government should implement this universally) would be greatly hurt as they try to find ways to not use the cheap energy. Furthermore, resources that the first world would have spent in improving the third world would now be redirected due to distortion of market forces.

Oil has allowed our standards of living to increase significantly and has freed up our resources for more important purposes because it appears to be an economically-favorable way of acquiring energy. Is your problem with climate change? That is an entirely different discussion.

3)

Another major problem - "everyone wants more stuff."  Does that not concern anyone on here?  When is enough enough?  We already have 7 billion people on this planet of finite resources, with nearly half of the people suffering from a lack of fresh potable water and steady food supplies.  Yet some people are able to afford obscene luxury, like billion dollar, 27-story homes...make sense much?

Yes, this makes a lot of sense (when the profits are made in a legitimate, free market way). Why? Here's why:

People want more stuff. Yes. Can they have more stuff? They might, through the market. Of course, due to the scarcity of goods, the market is able to ration the goods, and in this way works within the constraint of scarcity.

The people who can afford crazy homes do so because they contributed to society - remember the certificates discussed above. They have put their labor into society as a voluntary exchange. They now can build themselves homes. And once more, the money they use to build the home goes to the construction company, the company which acquires the raw materials, the people who plan houses, those who certify them, etc.

Free markets have done a remarkable job of voluntarily slowing the population growth of the world. This is an amazing emergent property of the market. Just when we thought that Malthus might have been right, we see that population in the West barely inches up with time. The fertility of the US is in fact below replacement fertility, meaning that if this keeps up for a long enough time, the population of the US (without any immigration) would being to decline (immigrant fertility upon arrival is higher, yet in the second generation it decreases very much).

 

Sadly, I am not as eloquent as some of the other posters on here, but I hope I contributed a tiny amount of truth to the discussion.

 

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Top 150 Contributor
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Vive,

There's so much Anarchism that keeps getting attributed to Marx. "The passion for destruction is a creative passion," says Bakunin in 1842, 6 years before Marx wrote the Communist Manifesto. Not attacking you. I've just started realizing how much Marxism is only accidentally Marxist.

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