Free Capitalist Network - Community Archive
Mises Community Archive
An online community for fans of Austrian economics and libertarianism, featuring forums, user blogs, and more.

Flaws of Free-Market Capitalism

rated by 0 users
Answered (Verified) This post has 1 verified answer | 53 Replies | 5 Followers

Not Ranked
Male
57 Posts
Points 1,650
Austen posted on Mon, May 14 2012 7:44 PM

What, if any, flaws do you think free-market capitalism has?

Answered (Verified) Verified Answer

Top 10 Contributor
Male
6,885 Posts
Points 121,845
Verified by Austen

Um, that's not a very specific question. It's kind of like asking "What, if any, flaws do you think the heliocentric model has?" The correct answer: none that we know of.

Praxeological science is not normative - it doesn't say "people ought to be capitalists" it says "here are the rules that determine the social outcomes when people behave this way or that way, respectively." If you centrally-plan an economy with an iron fist, you will have under- and over-production, starvation and eventually population collapse. This has nothing to do with whether we ought to have capitalism or not. It's like saying if you shoot a rocket at the right speed and angle, it will orbit the earth. That doesn't tell you whether you ought to launch such a rocket, only what will happen if you do.

Clayton -

http://voluntaryistreader.wordpress.com
  • | Post Points: 25

All Replies

Top 200 Contributor
Male
429 Posts
Points 7,400

 

No, what I mean here is that company X opens up a bridge and then charges a monopoly price. Well building a bridge is super expensive. Maintaining a bridge is super cheap over a long period of time. So company X charges this huge monopoly price and attracts competition. Let's say three new bridges open up and a relatively competitive price is finally reached. Well now we have 4 bridges and all the resources wasted producing them when the first bridge would have done. Valuable resources are spent producing copies of something where one is needed. This is inefficient.

Just for clarification, what do you mean by "monopoly price"?

First and foremost, you're analyzing monopoly wrongly. Absence of competitors is not absence of competition. You go on as if he can charge this exorbitant price (I'll get to this later) until competition arrives, but in reality, the price he sets will be influenced by potential competition far before any actual competitors surface. After all, why in the hell would he ever want competitors to surface? You'd think he'd want to be the only game in town. This is what pressures him to price competitively.

Secondly, it's not like the highest price is the price which will gross the most profits. There is a limit to the price he can set, and it's subjugated to supply and demand.

You're also making unsupported assumptions (implying you know the optimal number of bridges), but I think the other arguments are more important.

  • | Post Points: 20
Top 50 Contributor
Male
2,439 Posts
Points 44,650

"Eh, I'm just pointing out that in the case of roads, statists have a pretty poor argument."

Kind of. It's not anywhere the killer argument they think it is but the fact is that it's much more direct, certain, and at wider dispersed costs than the favored alternative being discussed.

"Of course, it's probably the law that makes it the case, but I see no reason why people wouldn't continue this practice or something similar without a state mandate.  If you can't be bothered to be vaccinated, then you probably would not get access to a lot of different things.  Especially in this day and age of advanced computing, I don't see how this could be too difficult for an anti-state solution."

Nontheless. It's much more certain to take place if you have the mythical omniscient government that most statists believe in out providing these services and ensuring that it happens, and furthermore that was a single example. 

 "What is seen is that the beekeeper is more wealthy, and maybe there are even more crops, but what is unseen are the other businesses that could not flourish or exist because beekeepers are making more money and expanding their businesses. "

This is still most likely inefficient because the beekeeper is indeed not being paid the full value of his labor, the equilibrium that most markets gravitate to as it's the best way to satisfy consumers.

"But you don't really know if they are natural monopolies."

And? This does not mean that there is anything wrong with the natural monopoly theory. You are not addressing the exact point here. What we are mainly discussing are areas of market inefficiency, suboptimal results, the main concern is not whether or not government can fix it. However, in once again the statist dream world, this would never happen because the community knows what is and what is not a natural monopoly and will deal with the mater accordingly because democracy.

"Well you don't really know if only one bridge is needed."

I thought it was implied in my example that one bridge could carry over everyone in town without a great deal of traffic congestion. If the competitive price, or a price corresponding with the marginal cost of a car driving across the bridge was reached then one bridge would be able to carry everyone in town without a problem, or at least without enough problems to warrant the building of two bridges

"Maybe the citizens of that particular town prefer these benefits over whatever the costs might be to having those extra bridges."

If so then a new bridge would open up even if a bridge was operating competitively. This really isn't the example, you're just giving reasons why this state of affairs would be acceptable. Also, I propose the possibility that the prime candidate for the person who would produce the new bridge would indeed be the monopoly 

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
  • | Post Points: 20
Top 50 Contributor
2,360 Posts
Points 43,785
z1235 replied on Sat, May 19 2012 2:01 PM

Neodoxy:
This is still most likely inefficient because the beekeeper is indeed not being paid the full value of his labor, the equilibrium that most markets gravitate to as it's the best way to satisfy consumers.

Define "inefficient" (vs. what alternative?) and a market "failure" (vs. what alternative?). So a pretty girl walking down the street is "inefficient" and a "market failure" because she is not being paid the full value of the positive externalities she's providing all the guys enjoying the view? Shall someone (anyone?) do something (anything?) about this "problem"? 

What we are mainly discussing are areas of market inefficiency, suboptimal results, the main concern is not whether or not government can fix it.

Inefficient and suboptimal compared to what, exactly?

However, in once again the statist dream world, this would never happen because the community knows what is and what is not a natural monopoly and will deal with the mater accordingly because democracy.

Because democracy?

I thought it was implied in my example that one bridge could carry over everyone in town without a great deal of traffic congestion. If the competitive price, or a price corresponding with the marginal cost of a car driving across the bridge was reached then one bridge would be able to carry everyone in town without a problem, or at least without enough problems to warrant the building of two bridges

Trabant cars are able to carry everyone without a problem thus Ferrari's and locomotives are "inefficient" use of resources and "market failures"? Bread and salt are able to feed everyone without a problem thus ice cream, beef, truffles, and Coca Cola are "inefficient" use of resources and "market failures"? 

Are you going all out Venus/Zeitgeist on us here? smiley

 

 

  • | Post Points: 35
Top 200 Contributor
Male
429 Posts
Points 7,400

Are you going all out Venus/Zeitgeist on us here?

I know, right. Maybe he's got a case of libertarian-contrarianitis.

  • | Post Points: 5
Top 75 Contributor
1,389 Posts
Points 21,840
Moderator

These

Yes we have major flaws if we want to subcribe to left wing aesthetics, social signaling, and moral maximalisms.  Fortunately all that stuff is a retarded, unfortunatley it is a subsidized priestly languand and popular - which (at least according to good Austrian logic) is being "correct" at least in some way (though probably not in a way a leftist would like to be). 

Either way, this is no surprise and to be expected.  If one wants to figure out leftism - hang around the cool leftists and learn the fashionable language of the week so you can be "cutting edge" - take those "cutting edge" aesthetics, and work out some obfuscating and confusing system to suport it.

"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

  • | Post Points: 5
Top 50 Contributor
Male
2,439 Posts
Points 44,650
Neodoxy replied on Sun, May 20 2012 12:56 AM

"Define "inefficient" (vs. what alternative?)"

Waisting scarce resources that could have instead been spent upon things which people wanted more. Better allocating the limited resources that humans have at their disposal. The alternative is perfectly clear, a situation in which the market failure did not exist, a situation in which all people banded together to supply the collective goods they demand and where monopolies didn't charge monopoly prices. 

"So a pretty girl walking down the street is "inefficient" and a "market failure" because she is not being paid the full value of the positive externalities she's providing all the guys enjoying the view? Shall someone (anyone?) do something (anything?) about this "problem"?"

I addressed it. And that makes about as much sense and is about as relevant as when statists start talking about what happens if parents start selling their children into slavery on the free market.

"suboptimal compared to what, exactly?"

A situation in which more people were made better off.

"Because democracy?"

I'm making fun of statists who act like there's some magic link between the existence of democracy and optimal results for the actions of a state. 

"Trabant cars are able to carry everyone without a problem thus Ferrari's and locomotives are "inefficient" use of resources and "market failures"? Bread and salt are able to feed everyone without a problem thus ice cream, beef, truffles, and Coca Cola are "inefficient" use of resources and "market failures"? "

That has absolutely nothing to do with anything that I just said. Different brands of cars are not market failures specifically because people demand the different brands. The different cars is the source of utility and are what people are willing to pay for. People don't want to pay for 4 different bridges when the only difference is a vague location change.... Please provide me with an actual argument, instead of trying to equate two utterly different things.

Are you going all out Venus/Zeitgeist on us here? smiley

Because believing that the free market is not perfect in every single respect = Venus project... 

I see you're taking more than just one page out of the book of usual statist arguments! :D 

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
  • | Post Points: 20
Top 50 Contributor
2,360 Posts
Points 43,785
z1235 replied on Sun, May 20 2012 10:10 AM

Neodoxy:
Waisting scarce resources that could have instead been spent upon things which people wanted more. Better allocating the limited resources that humans have at their disposal.  

How do you know which outcomes people (other than yourself) want(ed) more than what the free market has produced? How is it even logically possible that the realm of voluntary actions (exchanges) would not reflect the valuations and preferences of all parties involved? Assuming everyone's latent desire to fly by flapping their arms, could gravity itself be considered a "market failure"?

The alternative is perfectly clear, a situation in which the market failure did not exist, a situation in which all people banded together to supply the collective goods they demand and where monopolies didn't charge monopoly prices.

How is this different from the "Resource Based Economy" proposed by the Venus/Zeitgeist people? You should really check them out.

I addressed it. And that makes about as much sense and is about as relevant as when statists start talking about what happens if parents start selling their children into slavery on the free market.

In what way is the pretty girl "market failure" different from your beekeeper "market failure". Both the girl and the beekeeper seem to be providing benefits to others for which they are not being compensated. According to you, this makes them both "inefficiencies" and "market failures". No?

"suboptimal compared to what, exactly?"

A situation in which more people were made better off.

Is this a cosmic criterium for optimality or strictly yours? According to this, you keeping $100 in your pocket is "suboptimal" to (i.e. less "efficient" than, or a "market failure" compared to) an outcome in which, say, you get smacked in the head with a baseball bat, your cash is taken and used to buy sandwiches for 20 hungry people, no?

The different cars is the source of utility and are what people are willing to pay for. People don't want to pay for 4 different bridges when the only difference is a vague location change.... Please provide me with an actual argument, instead of trying to equate two utterly different things.

My agrument all along has been that you (or anyone else) can not know how many and what types of things other people want. Market agents' valuations and preferences are only revealed through their (voluntary) actions and exchanges. Hence, it is meaningless to even talk about "failures" and "inefficiencies" of outcomes resulting from the realm of voluntary action/exchanges. An apple falling from a tree and hitting you in the head is not cosmically "inefficient" or "suboptimal". It just is

  • | Post Points: 20
Top 50 Contributor
Male
2,439 Posts
Points 44,650

"How do you know which outcomes people (other than yourself) want(ed) more than what the free market has produced? How is it even logically possible that the realm of voluntary actions (exchanges) would not reflect the valuations and preferences of all parties involved? Assuming everyone's latent desire to fly by flapping their arms, could gravity itself be considered a "market failure"?"

What? We can tell pretty much all of this because people gravitate towards lower prices and they themselves seek to maaximie their own utility. The life of every consumer would be made better off if the monopolist didn't charge a monopoly price. We can tell that many people still prefer the monopoly price over no price, but many people would be made better off at a more competative price.

At any rate, the middle part of your question seems to be much more of a rhetorical question than an actual valuable question. Each one of the problems explains why voluntary human interaction leads to these failures.

The final part of your question is, of course, utterly irrelevant because gravity has nothing to do with the market and is detracting from our conversation.

"How is this different from the "Resource Based Economy" proposed by the Venus/Zeitgeist people? You should really check them out."

Because it is done through monetary means alongside a highly capitalistic economy and has nothing to do with robots, wage slavery, the belief that money is debt, or a ruling elite. What you are arguing is obviously disingenuous. How is it that people, coming together on a free market to provide goods and services not a case of a free market interaction? It just isn't done through traditional financial markets. I guess charity is socialism and volunteers are pro a resource based economy as well. 

"In what way is the pretty girl "market failure" different from your beekeeper "market failure". Both the girl and the beekeeper seem to be providing benefits to others for which they are not being compensated. According to you, this makes them both "inefficiencies" and "market failures". No?"

How is owning a person different from a piece of property? Isn't this a case of fair free-market ownership? Provide me with real arguments instead of going to reductio ad absurdum. 

"Is this a cosmic criterium for optimality or strictly yours? According to this, you keeping $100 in your pocket is "suboptimal" to (i.e. less "efficient" than, or a "market failure" compared to) an outcome in which, say, you get smacked in the head with a baseball bat, your cash is taken and used to buy sandwiches for 20 hungry people, no?"

No. Make real arguments. At any rate that causes such intense displeasure to the individual that it could probably under no situation be worth it. Second of all that utility is exceedingly hard to measure, while those dealing with the market are usually more measurable, are still only vaguely possible to have any possible understanding of.

"My agrument all along has been that you (or anyone else) can not know how many and what types of things other people want. Market agents' valuations and preferences are only revealed through their (voluntary) actions and exchanges. Hence, it is meaningless to even talk about "failures" and "inefficiencies" of outcomes resulting from the realm of voluntary action/exchanges. An apple falling from a tree and hitting you in the head is not cosmically "inefficient" or "suboptimal". It just is. "

And? If I could then I'd stop an an apple from falling from someone's head. Someone killing someone is not inefficient, it just happens. At any rate, we can always tell certain things about what consumers would prefer. 

 

 

 

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
  • | Post Points: 20
Top 50 Contributor
Male
2,439 Posts
Points 44,650

"Just for clarification, what do you mean by "monopoly price"?"

A price at which output is restricted for a consitent period of time in order to maximize profit 

 

"First and foremost, you're analyzing monopoly wrongly. Absence of competitors is not absence of competition. You go on as if he can charge this exorbitant price (I'll get to this later) until competition arrives, but in reality, the price he sets will be influenced by potential competition far before any actual competitors surface. After all, why in the hell would he ever want competitors to surface? You'd think he'd want to be the only game in town. This is what pressures him to price competitively.

Secondly, it's not like the highest price is the price which will gross the most profits. There is a limit to the price he can set, and it's subjugated to supply and demand."

No, I understand both of these things. I could go on on a long defense of monopoly based upon the shape of the demand curve, security, facts of the industry, technological incentives, and the threat of competition. This is why in some cases a monopoly can be better than a competative situation. But in some cases it isn't.

"You're also making unsupported assumptions (implying you know the optimal number of bridges), but I think the other arguments are more important."

What part of this don't you guys get!? My examples, my rules! :P

I don't think you can argue that a lot of bridges are necessary in most situations. But at any rate, the fact still stands that a monopoly not charging a monopoly price, or one which cut down drastically upon its prices would probably be much more efficent than competing bridges.

I really wish that someone would argue the example rather than trying to push holes in the example itself. You should argue why this situation couldn't exist or is rare, not why "in some cases" X. 

 

 

 

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
  • | Post Points: 20
Top 200 Contributor
Male
429 Posts
Points 7,400

A price at which output is restricted for a consitent period of time in order to maximize profit

Shitty definition. Restricted compared to what? Your personal idealization of a preferable output? What's a "consistent period of time"? Why would you imply that maximizing profit is a bad thing? Can you show me a scientific method by which you can identify a monopoly price? I betcha can't ;)

 This is why in some cases a monopoly can be better than a competative situation. But in some cases it isn't.

And by what metric do you differentiate between these two types of monopolies? 

You should argue why this situation couldn't exist or is rare, not why "in some cases" X.

Umm.. You haven't even proven why the situation isn't preferable beyond referencing your subjective opinion.

Btw, Z smoked you in the last response. This conversation should be over.

  • | Post Points: 20
Top 50 Contributor
2,679 Posts
Points 45,110

Neodoxy:

How is owning a person different from a piece of property? Isn't this a case of fair free-market ownership? Provide me with real arguments instead of going to reductio ad absurdum

This in particular stood out to me.  Reductio ad absurdum is, in fact, a valid method of argument.  He is pointing out that if you were to be consistent, the pretty girl should be paid money just for walking around.  If you really want, let's make her a model, so that she actually makes her living from having people look at her.  Her walking around is her providing her normal service without charging anyone.  If we were to follow your logic, this would be a market inefficiency.  Perhaps you are okay with that, in which case your opinions would be internally consistent.  But most people would probably think that it is a ridiculous notion to say that the model not being paid while walking around is inefficient.

Neodoxy:

No. Make real arguments. At any rate that causes such intense displeasure to the individual that it could probably under no situation be worth it. Second of all that utility is exceedingly hard to measure, while those dealing with the market are usually more measurable, are still only vaguely possible to have any possible understanding of.

The point is that all utility is impossible to measure between individuals.  You cannot know if the pain caused to the one guy outweighs the pleasure gained by the 20 hungry people being fed.  It's the same with bridges.  It's not just the number of bridges, but how long they are, where they are located, what they are constructed with, how wide they are, etc.  Perhaps the first bridge is really well built and sturdy.  Maybe the second one has only enough room for one lane, but it's enough to supplement the first bridge so as to reduce traffic congestion.  We really just don't know.  Maybe having more bridges is good for when tourists come to town, and during the off season they are superfluous.  Again, we just don't know.

Neodoxy:

What part of this don't you guys get!? My examples, my rules! :P

Not around here!  On a more serious note, the point of us making modifications to your examples is to demonstrate that they are incomplete examples.  You could make up an example where you know absolutely all the variables and whatnot, so that you could know what should be done.  But this is impossible in the real world, and that is what the calculation problem is.  You can't really say that one bridge is the optimal amount of bridges in your example.  You don't even know how wide or long it is or what materials it is made out of.  And I'm sure there are far more variables than those three.

Okay, now I'm going to respond to your earlier response to me:

Neodoxy:

Kind of. It's not anywhere the killer argument they think it is but the fact is that it's much more direct, certain, and at wider dispersed costs than the favored alternative being discussed.

Well, NASA is funded at wider dispersed costs.  The United States Postal Service is funded at wider dispersed costs.  But we can see that the USPS is so inefficient that there are numerous competitors out there, and if it were legal to compete with regular mail, I'm sure that there would be more companies competing in that regard too!  The problem of these widely dispersed costs is that the people who directly use the roads (for our example instead of the USPS) don't get to spend the money where they want!  There are potholes in my town, and it's a nice town.  It's actually known in the area for its ridiculously bad potholes.  If people were responsible for their roads instead (for example), I bet there would not be as many potholes.  Anyway, the point is that widely dispersed costs does not mean that the government will do it better than a private solution.

Nontheless. It's much more certain to take place if you have the mythical omniscient government that most statists believe in out providing these services and ensuring that it happens, and furthermore that was a single example. 

Well, my solution was actually not that different from what the government does now.  If you want to go to public school, you need to have certain vaccinations.  People in this current system are not all getting vaccines.  I wouldn't be surprised if this were rarer with a free market solution.  Perhaps instead of not being able to go to schools, maybe malls (the horror!) would also require vaccines.  Who knows?

This is still most likely inefficient because the beekeeper is indeed not being paid the full value of his labor, the equilibrium that most markets gravitate to as it's the best way to satisfy consumers.

The beekeeper is being paid full value for his labor.  Nobody values the extra stuff enough to pay him for it.  It's like when people give out free samples.  Sure, no one is paying for the samples, but the business is doing this so that more people will buy the product.  Are free samples also market inefficiencies?  If so, I don't see how the phrase "market inefficiency" is a meaningful phrase.  But, in regards to the beekeeper, just because he isn't being paid does not mean he should be.

And? This does not mean that there is anything wrong with the natural monopoly theory. You are not addressing the exact point here. What we are mainly discussing are areas of market inefficiency, suboptimal results, the main concern is not whether or not government can fix it. However, in once again the statist dream world, this would never happen because the community knows what is and what is not a natural monopoly and will deal with the mater accordingly because democracy.

You are missing the point.  You can't argue for something to be called a natural monopoly if you don't know if it is one.  Maybe natural monopoly theory is logically consistent, and maybe it isn't.  But it makes no sense to call something a natural monopoly and then treat it like one if you cannot know if it is one.  Furthermore, maybe there is a natural monopoly in an area for 5 years, and then on the 6th year, a competitor comes to town.  What then?  What if it were 5 months, and then the competitor came on the 6th month?  When you start using government to control these "natural monopolies", you no longer are able to know if it would remain a natural monopoly.

I thought it was implied in my example that one bridge could carry over everyone in town without a great deal of traffic congestion. If the competitive price, or a price corresponding with the marginal cost of a car driving across the bridge was reached then one bridge would be able to carry everyone in town without a problem, or at least without enough problems to warrant the building of two bridges

Answered this earlier in this post.

If so then a new bridge would open up even if a bridge was operating competitively. This really isn't the example, you're just giving reasons why this state of affairs would be acceptable. Also, I propose the possibility that the prime candidate for the person who would produce the new bridge would indeed be the monopoly 

Ditto to the above.

  • | Post Points: 20
Top 50 Contributor
Male
2,439 Posts
Points 44,650
Neodoxy replied on Sun, May 20 2012 11:29 PM

"Shitty definition."

I'm not used to hearing definitions used by Ludwig Von Mises as being described as "Shitty" around here.

"Restricted compared to what? Your personal idealization of a preferable output? What's a "consistent period of time"? "

A price where little or no profit is recieved as that maximizes the utility of consumers. A consistent period of time is any long period of time in which firms do not come and compete with the firm. 

"Why would you imply that maximizing profit is a bad thing?"

Because if profit seeking does nothing other than decrease the quality of consumers lives then it is negative. Profit seeking is positive only because in most instances, and if properly performed, is beneficial for everyone.

"Can you show me a scientific method by which you can identify a monopoly price? I betcha can't ;)"

That doesn't mean that it doesn't exist. 

"And by what metric do you differentiate between these two types of monopolies? "

One provides superior services than it would under more competative conditions, one provides inferior services.

"Umm.. You haven't even proven why the situation isn't preferable beyond referencing your subjective opinion."

Then you can never prove any situation prefferable to any other. One's opinion is the only way that one can reference 

"Btw, Z smoked you in the last response. This conversation should be over."

He didn't, and it's not. I have yet to see a reply that in any real way addressed the matters and did more than provide gross conflation and vague attacks at definitions so as to say "ah ha! Well because you can't do XYZ you can't prove that this happens in all cases", other than Gotlucky. He had a genuinely good reply that actually addressed the problems. It's really interesting how I get attacked the moment that I even propose the idea that the free market could have flaws...

 

 

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
  • | Post Points: 20
Top 200 Contributor
Male
429 Posts
Points 7,400

Well, my reply wasn't too good. But both Z and gotlucky made great arguments.

  • | Post Points: 5
Top 25 Contributor
Male
4,922 Posts
Points 79,590

Sorry for taking so long to respond to you, Neodoxy.

Neodoxy:
We can tell by human action what individuals prefer, and if individuals did not prefer less scarcity and lower prices then I believe that this would come through in their actions and markets would arrange themselves into situations where consumers voluntarily paid higher prices. If this were the case then most modern market successes would be failures. At any rate, I'm not saying we can measure welfare in a quantitative sense, but we can in a qualitative sense, that is to say we know that firms which provide lower prices benefit a larger number of people than firms which charge higher prices. How much this has increased human welfare, however, is beyond human measuring.

On the one hand, individuals don't always prefer less scarcity and lower prices. On the other hand, the notion of "qualitative measurement" makes no sense to me, as I take measurement to be inherently quantitative. So I still don't see how the phrase "maximizing human welfare" can be taken in a non-quantitative sense. For something to be maximized, it must be measurable, which means it must be treated quantitatively.

Neodoxy:
That certainly is a possibility, as is (this is what I believe would be the optimal form of organization) a group of people coming together and supporting a non-profit community run road building organization. All I am saying here is that it is not as intuitive and natural for this to be built as it is for bob to open up a shop down the street to make make pretzels, and there are other cases, such as say, statues, where everyone might want X good but it is not paid for because there's no real way to pay for it. Although I have to say that once you get outside of roads and defense the collective goods become increasingly more "Boo Hoo" cases.

Private roads aren't seen as intuitive or natural in this day and age because roads are typically handled by governments. I strongly suspect that, in a world where private roads were ubiquitous, they would be seen as intuitive and natural.

Neodoxy:
You're right, that depends upon the size of the specific market for defense. Here we have sort of an odd case because in many ways it depends upon whether or not we're conceiving of defense within a void, because militaries are very expensive things to start up but after the fact they're actually surprisingly cheap to maintain. If we assume that modern weaponry is taken from the current statist society when the new stateless one is born, then in most cases defense could be noticeably influenced by the richest members of society. However, if the start up costs for the military were involved then these would likely be enormous. No one short of the top 10 richest people alive could influence a military budget the size of the United States, but there are tens of thousands who could influence Russia's (for the hell of it we'll assume that defense budget is what it would take to protect a large country with the greater efficiency but smaller economies of scale which would be inherent in multiple military organizations).

For one thing, there are some surprisingly low-tech weapons (e.g. IEDs) that have proven to be highly effective against military forces using much more advanced technology (e.g. US and allied forces in Iraq). For another, if any one (or more) of the top 10 richest people alive could influence amilitary budget the size of the United States', then the assertion that "no one person can affect the amount of defense provided" is certainly disproven even in today's highly statist world.

Neodoxy:
Buuuuuuut at any rate, there are not many people who could influence a multi billion dollar industry by giving even the totality of their income, and if war were to actually break out then the fact is that it's an extremely expensive affair. As soon as we reach the 100 billion dollar mark, even mega millionaires can only make some .X percent difference, and billionaires can only effect it by percentage points unless they sell off large amounts of their assets to pay for a single year of defense, and all this, of course, is assuming that these people believe that there is danger which needs to be defended against, or that if there is danger, that it can be stopped by the organization.

Again, "not many" is not the same as "none". The assertion that "no one person can affect the amount of defense provided" implies the latter, not the former.

Neodoxy:
Depends upon the individual and the industry. And there's no real way for any one individual, short of being a campaign manager, and there can only be so many of those, to make a noticeable influence upon a campaign... Hell if there was then Ron Paul would have easily snagged the nomination because of how dedicated his supporters are!

I would say that his detractors are just as dedicated, if not more so. They also happen to have more power on their side.

Neodoxy:
At any rate, the point is that I could not, even if I spent my entire yearly income, make a noticeable difference in the production of a large roadway because those are very expensive to produce. The big problem, of course, is that there's a lot of roads which would need to be produced in the stateless society. A fortunate break for the anti-statists, however, is that many roads in developed countries are already produced. Indeed I'd argue there's an obvious surplus of roads. And this means that these things need not be produced, only maintained, which is infinitely cheaper.

"Production of roads" doesn't just mean "production of large roadways", does it? If you spent your entire yearly income, I think you could certainly make a noticeable difference in the production of local roadways. On the other hand, I personally think that "large" roadways (i.e. highways, I presume) would be run as for-profit businesses.

Neodoxy:
Kind of... You could argue that a mother who has a baby who becomes a doctor is a case of an externality, and that therefore we should fund more mothers to have babies or some derp argument like that, but there are more down-to-earth examples of an externality, like the fact that if I improve my house local home prices go up and so everyone's assets increase in market value, and yet they have not had to do anything. You can argue against externalities based upon their subjectivity, or from a reducto ad absurdum standpoint, but the fact is that there are cases where people do things, or don't do things that are harmful or beneficial respectively, which others value and would pay to/not to happen if there were a market on this, but where there is none in reality.

Strictly speaking, "harmful" and "beneficial" are themselves subjective. But if a person is willing to pay others to (not) do certain things, that's up to him. Of course, that doesn't mean the others will accept what he offers them.

However, I see the externality argument as implying that people necessarily owe others due to externalities. In the case of positive externalities, the beneficiaries owe the person who produced the externality. In the case of negative externalities, the person who produced the externality owes the victims. But what qualifies as an externality and what doesn't? One could define "externality" in such a way as to include all action within it. Just because people don't doesn't erase that possibility.

Neodoxy:
By most mainstream economists it's usually done by the market value of what is lost or by what people would have paid for for it to not happen.

Right, which speaks to my point - there is no objective way to measure cost. That is, there is no such thing as a "true cost" for anything. Hence "Marginal Social Cost" can't be measured - it can only be imputed.

Neodoxy:
Local area monopolies and name brand companies are the only monopolies which could really be maintained on a free market. Utilities and roads, should they be provided by independent private companies, are both examples of this. Mises does a good job of identifying them in the monopoly section of HA. The fact is that in a small town it's inefficient to have more than one water company   functioning as it can probably only uphold a single economy of scale that provides anywhere near an efficient output. On a street block realistically only one road can be provided to these houses. It's also inefficient as hell to even conceive of things like competing bridges...

We can also tell a priori that the welfare of consumers would be maximized if these firms did not charge a monopoly price.

By that definition, I have a natural monopoly over my own body. What do you mean by "(in)efficient"?

Neodoxy:
Yes it does because value is subjective. But if we look at increasing people's purchasing power and their ability to buy things they desire then it's sure as hell not doing that.

To determine whether purchasing power has increased or decreased, we'd have to measure purchasing power. How exactly is that to be done? About one hundred years ago, the notion of a "price level" was created in an attempt to do this very thing. Apparently that was too difficult, and "mainstream" economists moved to the notion of "gross national/domestic product" instead.

The keyboard is mightier than the gun.

Non parit potestas ipsius auctoritatem.

Voluntaryism Forum

  • | Post Points: 20
Top 50 Contributor
Male
2,439 Posts
Points 44,650

Bleh, okay everybody, I got kind of overwhelmed by the number of responses here, so sorry for the lag in response, I'll try to make this as succinct as possible.

@Autolykos

"On the one hand, individuals don't always prefer less scarcity and lower prices."

Everyone wants the same good for a lower price. So long as money has any value to the acting individual in question then this is a praxeological statement

"I take measurement to be inherently quantitative."

Drop the word "measurement" next to qualitative then, and simply say we can make qualitative statements about the amount of utility in the economy, E.G, "greater than" or "less than"

"Private roads aren't seen as intuitive or natural in this day and age because roads are typically handled by governments. I strongly suspect that, in a world where private roads were ubiquitous, they would be seen as intuitive and natural."

Due to the spread out nature of the way that they are paid and the necessarily diffused benefits/costs, I'm going to have to disagree. Funding roads with traditional market means is never going to be as easy as it will with most markets which exist.

"For one thing, there are some surprisingly low-tech weapons (e.g. IEDs) that have proven to be highly effective against military forces using much more advanced technology (e.g. US and allied forces in Iraq). "

Nonetheless, a fully functioning military, and moreover a military which could fully repel a statist onslaught without much loss is going to cost a good deal of money, and it's going to be difficult, once again through traditional market means, to fund this.

"Again, "not many" is not the same as "none". The assertion that "no one person can affect the amount of defense provided" "

I concede the point, but nonetheless very few people can make a noticeable difference, which decreases the amount of funds which people will allocate to the matter.

"I would say that his detractors are just as dedicated, if not more so. They also happen to have more power on their side."

Meh, irrelevant to the overall discussion, but I'm just going to say that I've seen a lot more amateur "champions" of Ron Paul than I have people who have actively attacked him. Social and economic status will change this, of course.

""Production of roads" doesn't just mean "production of large roadways", does it? If you spent your entire yearly income, I think you could certainly make a noticeable difference in the production of local roadways."

This is true, and I admit I was committing hyperbole from this perspective. But the point still stands that few people have a real incentive to donate to these roadways. 

"On the other hand, I personally think that "large" roadways (i.e. highways, I presume) would be run as for-profit businesses."

If they themselves are run for profit then you run into a monopoly price problem pretty quickly and we have to hope there are going to be mitigating circumstances that prevent too high a price.

"Right, which speaks to my point - there is no objective way to measure cost. That is, there is no such thing as a "true cost" for anything. Hence "Marginal Social Cost" can't be measured - it can only be imputed."

Externalities are vaguely objective in that they are what people would have paid if there would have been markets. I agree that in most cases there's no real way to calculate externalities, the only exceptions being in cases of externalities dealing with production where you can calculate the gain or loss contribution to production, or in cases of negative externalities where property is damaged.

"To determine whether purchasing power has increased or decreased, we'd have to measure purchasing power."

Just because something cannot be measured does not mean it does not exist. Once again, just because market failure exists doesn't mean that the government can solve it, or do so optimally.

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
  • | Post Points: 5
Page 3 of 4 (54 items) < Previous 1 2 3 4 Next > | RSS