Economics Questions

Re: Online debate with schoolmate in Govt. class

Anenome — Tue, 27 Sep 2011 10:20:29 GMT

Johan Norberg's "In Defense of Global Capitalism" goes a long way towards putting the history of capitalism in perspective, showing the world going from 90% poverty 100+ years ago to less than 20% poverty today.

Re: Online debate with schoolmate in Govt. class

EmperorNero — Tue, 27 Sep 2011 10:17:59 GMT

Wheylous:

Poverty went from being the norm to being the exception. Working conditions improved and the wealth of the super rich actually went down relatively to that of workers

I like this argument and would like a citation so that I may use it as well. What is your source (unless you pull this from memory)?

Thanks for your interest, I'll be happy to look that up. The part about poverty becoming the exception is from an old Freeman article about the 1800s: http://www.thefreemanonline.org/columns/ideas-and-consequences-presidents-and-poverty

The fact is, presidents of the 1800s did mount a war on poverty - the most comprehensive and effective ever mounted by any central government in world history. It just didn’t have a gimmicky name like “the Great Society.” Those early chief executives might well have said their antipoverty program was, in a word, liberty. [...]

And what a poverty program liberty proved to be! Even with a horrendous civil war and half a dozen economic downturns, America progressed from near universal poverty at the start of the [19th] century to within reach of the world’s highest per capita income by the end. Poverty didn’t disappear by 1900, but what was left of it stood out like a sore thumb because it was rapidly becoming the exception.

And if we established that real wealth increased for the common person, it follows that his working conditions improved as well. Since better working conditions are just compensating differentials, a way for employers to compete for workers.

As for the wealth of the super rich relatively to that of workers, I took that from an old Robert LeFevre lecture on youtube. He talks about the first industrial revolution half a century earlier, but it would be plausible that the second industrial revolution had the same effects. He says that around 1700 the richest 2% owned 80% of the wealth, the middle 8% owned 10% of the wealth, and the lowest 90% owned only 10% of the wealth. By 1850 the richest 2% owned just 30% of the wealth, the middle class was now 58% of the people who owned 50% of the wealth, and the lowest 40% owned 20% of the wealth. So even though everyone got richer, the wealth of the rich relatively to that of the poor went down.

We could compare those numbers to today, but modern numbers are all about money, not real wealth. Thanks to constant inflation, the richest few actually have a larger share of money today than they had in 1850, about half. I don't know what share of real wealth they have, but judging from this data, standards of living are more equal than in the past.

Re: Online debate with schoolmate in Govt. class

Wheylous — Tue, 27 Sep 2011 00:06:47 GMT

Poverty went from being the norm to being the exception. Working conditions improved and the wealth of the super rich actually went down relatively to that of workers

I like this argument and would like a citation so that I may use it as well. What is your source (unless you pull this from memory)?

Re: Online debate with schoolmate in Govt. class

EmperorNero — Mon, 26 Sep 2011 11:40:11 GMT

My response to her first post.

That whole debate about whether capitalism or communism fails to take human nature into account is a straw man. That's not why communism fails, but because you cannot rationally allocate resources without prices. For example, without prices, how do you know whether London or Birmingham needs more bread? In a price system you can tell that bread prices are higher in Birmingham, but in communism you don't know. You would have to guess or figure out some way to measure it, which will be inaccurate and inefficient. And you have to do this with millions of goods to millions of cities. It is impossible to get it right, you would have bread rotting in one city because there's too much while people have too little of it in another. That's why communism can't work, because of economics not because of human nature. The flaws of communism are already present in theory, it is not just the real world application that fails.

As for the gilded age, the reality is pretty much the complete opposite. The gilded age witnessed the greatest increase in standards of living for common people in human history. Poverty went from being the norm to being the exception. Working conditions improved and the wealth of the super rich actually went down relatively to that of workers. Of course conditions sucked compared to today, but we're so much richer today. You can't just compare conditions 150 years ago to today and declare that things were bad back then because they lacked laws. Things got better because we got richer, not because of laws or unions. If we did away with such regulation today we would still be rich and have good working conditions.

Yes capitalists are a lot richer than the workers. But so what? Keep in mind that wealth is not a fixed pie, their wealth does not take away from yours. They only use up a tiny percentage of societies wealth, and they are crucially important to making the economy work. Wealth does not just appear leaving us to figure out how to distribute it fairly. Wealth has to be created first, and that is impossible without capitalists. Capitalists are necessary for the economy to work, without them we would all be a lot poorer.

Yes, capitalists always attempt to keep costs low by using the cheapest resources possible. That's why capitalism is efficient! That's why we have so much stuff, because we're squeezing the most use out of the resources we have. If they used more valuable resources, we could afford less stuff and be a lot poorer. And yes, they will always try to pay their workers as little as possible. Paying workers more does not make them richer. Unless we produce lots of stuff, that money isn't going to have a lot of purchasing power. If, on the other hand, we produce a lot of goods and services, the wages of workers will buy a lot of goods and services. So you make people richer by having more efficient industry, not by paying them more money. And part of that is a pricing system where scarce labor is expensive and abundant labor is cheap.

Minimum wages do not force the capitalist to pay his workers more, it bans poor people from working. Because that's what it is, "you are not allowed to work unless you can earn this much". Minimum wages create unemployment and take away the chance for poor people to gain experience to get into better paying jobs. And it makes society poorer by keeing part of the workforce idle.

Re: Online debate with schoolmate in Govt. class

Wheylous — Mon, 26 Sep 2011 01:32:59 GMT

First, I suggest she should view this video (all of it) to get an idea of unexpected consequences of "well-meaning" government programs: http://www.youtube.com/watch?v=hsIpQ7YguGE&feature=related

What has been used to disprove Socialism? Google found nada.

She's gonna need to dig a bit deeper than that :)

completely unregulated Capitalism requires strong moral values in all parties involved. Without which, one or more parties will be screwed over.

You need to start calling her on this. She makes sweeping generalizations without providing specific examples. What are these moral values? In what situation are they needed? How do people get screwed over? Why do people not do something about it?

The economy rests on the stability of government, and vice versa

Correlation is not causation. The economy relies on services which happen to be provided by the government. If we suddenly nationalize all production of bolts and screws, of course the market will be reliant on the government! And people will say "who in the world would take up screw production if the government stops doing it?" Heck, "All of the economy relies on production of screws! Not only construction, but any product, as it is likely made in a factory which requires screws!"

Howard Zinn

Oh boy, the same guy who wrote the People's history of the US. Socialist supporter himself.

With our inability to separate capitalism and government, to tell our government to throw out all labour or business law would be like opening the flood gates, or throwing workers to the wolves of business men and their greed

How, dammit, how?

A free market cannot exist when a man wants to dip his hand into the pocket of both the government and of the market

Yes, because government=coercion, not free market.

But why should that mean they should be condemned to a life stuck in a penal, low paying job?

Only government may "condemn" people to anything.

Should we also throw out laws forbidding harassment in the work place?

Unless they violate the individual or his property, yes. See the video I linked above.

A good question to ask her:

What is the difference between the government and the Mafia? Both mandate I pay them protection money or people with guns will come and take both me and my property.

Well, maybe "government acts for the good of the people." But that still didn't satisfy me, because if a Mafia only stole from rich people and only gave to poor people the government would still prosecute it. So why can the Mafia be evil but not the government?

Re: Online debate with schoolmate in Govt. class

Aristippus — Mon, 26 Sep 2011 00:52:09 GMT

"What has been used to disprove Socialism? Google found nada."

Try 'Socialism' by Mises.

Re: Online debate with schoolmate in Govt. class

John James — Mon, 26 Sep 2011 00:40:12 GMT

If you want to quote a little cleaner, just use quote brackets [ quote]the text you want quoted [ /quote] (but without the space after the first bracket)

And to quote a post, (among other forum things) check here.

Re: Online debate with schoolmate in Govt. class

EmperorNero — Mon, 26 Sep 2011 00:19:48 GMT

completely unregulated Capitalism requires strong moral values in all parties involved. Without which, one or more parties will be screwed over. The government should serve to protect individuals from this.

Nope, capitalism does not require anyone to have strong morales; socialism does. People have to only take what they need and give according to their abilities, otherwise it won't work. In capitalism "greed" is controlled by market forces. Market forces are the unseen, systemic consequences that force everyone to act responsibly. For example, if you lie to your customers you will lose out to your competitors. Or, if you give home loans to people without income you will lose money. So in capitalism people do not have to act nicely because of shame or morals, but because market forces keep them from acting in socially detrimental ways no matter how greedy or immoral they are.

Laws that are supposed to protect individuals from "greed" usually just protect companies from competition, make them bigger, richer and less accountable to customers and employees.

Which brings me to my next point: The economy and the government aren’t two completely separate entities. And they can’t be. The economy rests on the stability of government, and vice versa. The business leaders, or rather anyone with a lot of money, have the strongest voice of the general population in the government. Money= voice & political influence.

Then why do you assume that regulation and intervention tends to reign in the evil capitalists? Since they have so much influence, isn't it more likely that they would write regulation they like?

Assuming moneybags aren’t just bribing officials’ outright, campaign donations can have some heft. Political influence will be gathered- whether directly or indirectly, through business men lobbying to promote their own agendas, or through local tax cuts intended to promote business development in the area. A free market cannot exist when a man wants to dip his hand into the pocket of both the government and of the market.

Correct, that's why we should separate economy and state.

This is another example of the greed I mentioned before. I did indeed give that video a gander, and I wanted to clarify that I am not discrediting capitalism completely- just unregulated capitalism.

You just told me that government regulation will always be on behalf of the rich and powerful, why then do you see lack of regulation as the problem?

With our inability to separate capitalism and government, to tell our government to throw out all labour or business law would be like opening the flood gates, or throwing workers to the wolves of business men and their greed. People have to work. But why should that mean they should be condemned to a life stuck in a penal, low paying job? Should we also throw out laws forbidding harassment in the work place?

Wages and working conditions improve because there is competition for labor, laws have nothing to do with it. We can easily throw out such laws, because they actually protect big business from competition and worsen conditions for workers. Doing away with them would throw capitalists to the wolves of competition where they have to compete for their money.

Re: Online debate with schoolmate in Govt. class

Esuric — Sun, 25 Sep 2011 23:53:20 GMT

Capitalism and Communism share a flaw: although they work amazingly well on paper, in practice they break. Neither economic theory took into account human nature.

lol

Re: Online debate with schoolmate in Govt. class

Norgath — Sun, 25 Sep 2011 23:33:35 GMT

Here's her response. This is going better than I thought I would, she is starting to question herself.

"We aren't even talking about subsidies anymore...

What has been used to disprove Socialism? Google found nada. Also, Socialism is definitely closer to Fascism than Communism. State controlled business? Sounds like Fascism to me. Back to subject- completely unregulated Capitalism requires strong moral values in all parties involved. Without which, one or more parties will be screwed over. The government should serve to protect individuals from this.

Which brings me to my next point: The economy and the government aren’t two completely separate entities. And they can’t be. The economy rests on the stability of government, and vice versa. The business leaders, or rather anyone with a lot of money, have the strongest voice of the general population in the government. Money= voice & political influence. This idea was described much better and in much greater detail than I could ever do in the book Declarations of Independence: Cross-Examining American Ideology by Howard Zinn. (Hey, you started the linking.)
Assuming moneybags aren’t just bribing officials’ outright, campaign donations can have some heft. Political influence will be gathered- whether directly or indirectly, through business men lobbying to promote their own agendas, or through local tax cuts intended to promote business development in the area. A free market cannot exist when a man wants to dip his hand into the pocket of both the government and of the market. This is another example of the greed I mentioned before. I did indeed give that video a gander, and I wanted to clarify that I am not discrediting capitalism completely- just unregulated capitalism. With our inability to separate capitalism and government, to tell our government to throw out all labour or business law would be like opening the flood gates, or throwing workers to the wolves of business men and their greed. People have to work. But why should that mean they should be condemned to a life stuck in a penal, low paying job? Should we also throw out laws forbidding harassment in the work place?

Can you rephrase the question “What is so unique about global trade that makes it a game that is not inhabited by individuals? Can you describe some other thing that acts that is not an individual? I doubt you can.” Cause I’m unsure exactly what you’re asking. I got confused when you said that global is a game not inhabited by individuals. I’ll answer it how I read it though. Global trade has so many players- from a single business (not an individual) to an entire government (not an individual), that it can’t be claimed to always (or ever) be interactions between two individual people."

What's funny is that it would seem the debate is going toward anarchy vs the state, I'm going to be careful, that could have some "bad" effects in class. I don't want everyone thinking I'm crazy.

Thank you gents.

Re: Online debate with schoolmate in Govt. class

Norgath — Sat, 24 Sep 2011 02:29:17 GMT

This is what I sent her but she hasn't replied yet.

"Capitalism and Communism share a flaw: although they work amazingly well on paper, in practice they break. Neither economic theory took into account human nature."

Not true at all, Communism and Socialism have been disproved by both theoretical and empirical evidence. Capitalism takes human nature into account 100%, you say greed is a problem, but it is man's own self-interest that drives the economy (and any economy for that matter.)

The only way for greedy people to make money is to sell people things they want at a price they can afford. It is called voluntary exchange, or mutually beneficial interaction, or Liberty.

Give this a gander:
http://www.youtube.com/watch?v=RWsx1X8PV_A

"Yeah, it kind of did. The Gilded Age, although amazing for those who made it to the top such as Carnegie, Rockefeller, and Morgan, really really sucked for workers. To promote unregulated capitalism is to promote the same basic practices as feudalism and serfdom, and to condemn many to the lives of misery. What can you attribute this decrease in price? Or more correctly, to whom might you address your thanks? During the Gilded Age, the fortunes of a few select men were built upon the frustrated toiling of millions of people unrepresented by strong unions. This trend is continued today, as it is in effect being relived as American business men inflict the same problems in other countries."

I hope you know a few things about the freedom of markets in the gilded age. The government actually helped to bust strong unions as they began to develop along side big companies, in a way that one would expect from a natural process.

The government siding with companies, is wrong and deplorable. There are instances of federal troops being told to fire on striking workers. The complete opposite of a free market.

"You say no one looses in this process- there’s only something to gain. And in theory, yes, you would be perfectly correct. However, the comparative wealth of the workers and the profiteers is glaringly disgusting. They make their money by keeping two things in mind. First, by keeping the expenses as low as they can finagle, which is to say by paying their workers as little as possible and by using the lowest quality materials they can, and second by selling the goods at the highest price they can."

And...?

Those workers accepted their wages, they are unskilled.

Plus, everyone who shops at Wal-Mart gets what they want for cheap. If they don't want to buy things there they don't have to.

"The current economic system is not simply comprised of individuals and their interactions, ours today is a global economic system. To claim that an individual affects the market is ridiculous. But a group of individuals will have an effect. It’s like the sampling in experiments- only with a large group are the results meaningful. Only with a large group of consumers can money be made, and trends be mapped. Me buying a ham sandwich does not necessarily entail a soon rise in the prices of ham sandwiches, but were I to get a billion ham sandwiches, maybe it would. Plus, as employers buy, sell, and employ in bulk, an employer constitutes a larger force than a single interaction between individuals would."

What is so unique about global trade that makes it a game that is not inhabited by individuals? Can you describe some other thing that acts that is not an individual? I doubt you can.

Re: Online debate with schoolmate in Govt. class

Wheylous — Sat, 24 Sep 2011 00:06:01 GMT

Norgath, could you please post her reply? We're spoiling for another quarrel :P

Re: Online debate with schoolmate in Govt. class

John James — Sat, 24 Sep 2011 00:03:48 GMT

Have some fun in here:

http://mises.org/Community/forums/t/23167.aspx

and see here, and here, and here

Re: Online debate with schoolmate in Govt. class

Wheylous — Fri, 23 Sep 2011 23:06:13 GMT

Oh alright, I was arguing a technicality, sorry. That is a nice video by the way. I'd like to get together a longer list of "systems" which have spontaneous order.

Re: Online debate with schoolmate in Govt. class

Clayton — Fri, 23 Sep 2011 20:26:27 GMT

Language is, by definition, something used by people. No one has ever invented a natural language because by definition no one can invent a natural language.

In a lecture by Steven Pinker he mentions lingual research that found that children raised without the benefit of speaking to adults who already know a language will invent their own rudimentary language de novo. So, we have to separate between the innate human capacity for language which is powerful enough that it is capable of simply inventing a language as-needed and natural languages per se which have emerged through use in day-to-day speech. The languages themselves are accretions of the innate lingual capacity of humans... the best innovations in language survive and spread while klunky turns of speech wither and die out if they ever even got off the ground to begin with. Nobody says "that's the bee's knees" anymore but the word "cool" is clearly an enduring idiom. As Outkast recently sang, "Alright now fellas, 'YEAH!' Now what's cooler than bein' cool? 'ICE COLD!' I can't hear ya' I say what's cooler than bein' cool? 'ICE COOOOOOOOLD!'"

To reiterate: Humans can invent languages (formal mathematics or computer programming are invented languages) but no one has invented a natural language because what it means to be a natural language is, by definition, not inventable.

Clayton -