Economics Questions

Re: Capitalism = Destruction?

Anenome — Mon, 05 Mar 2012 08:15:32 GMT

Braedalbane:

I take as my 1st example the Grand Canyon in the USA. When it was first discovered by non-Native Americans (i.e. "us" Caucasian European types) some guy decided that a part of it was his and he built some ramshackle hut and started charging people to see and visit "his" Grand Canyon.

Some folks didn't think this was such a good idea. They lobbied Congress and whichever president was in office for many years to make it into a National Park, thus preserving its beauty for everyone and not just this one guy (or guys).

A similar situation arose in the Yosemite area in California. Some private concern built a hotel or other type of boarding house in the Yosemite Valley. John Muir led the fight on this one. The idea being again that some land, some places are too singular in beauty, etc. to be owned by one or more persons, but should be accessible and preserved for all of the public. There are other examples of other national parks. On the face of it I like this approach as I am a biolgoist and natural historian. But I am also trying to learn and understand anarchy!

Now, how would the free market handle this? We can get into clear cutting the Redwoods later (I'm kidding).

The area as a whole or in parts would be sold to the highest bidder and used as they please, assuming they don't impinge on the rights of the other owners.

If someone thought the area in whole was beautiful and to be preserved as a park in exclusion to all other uses, he would have to be the highest bidder. He could then charge for entry fees or w/e, or hold it for his own private use. In the end, it would be used for its most productive use. National parks are unecessary. Private parks would be better managed.

Re: Capitalism = Destruction?

Braedalbane — Mon, 19 Dec 2011 05:52:30 GMT

I got here rather late. I had been reading this thread from November 30th! I see it is still alive however here on December 18th, so here's my question. I've thought about this whole "environment" question many times.

I take as my 1st example the Grand Canyon in the USA. When it was first discovered by non-Native Americans (i.e. "us" Caucasian European types) some guy decided that a part of it was his and he built some ramshackle hut and started charging people to see and visit "his" Grand Canyon.

Some folks didn't think this was such a good idea. They lobbied Congress and whichever president was in office for many years to make it into a National Park, thus preserving its beauty for everyone and not just this one guy (or guys).

A similar situation arose in the Yosemite area in California. Some private concern built a hotel or other type of boarding house in the Yosemite Valley. John Muir led the fight on this one. The idea being again that some land, some places are too singular in beauty, etc. to be owned by one or more persons, but should be accessible and preserved for all of the public. There are other examples of other national parks. On the face of it I like this approach as I am a biolgoist and natural historian. But I am also trying to learn and understand anarchy!

Now, how would the free market handle this? We can get into clear cutting the Redwoods later (I'm kidding).

Re: Capitalism = Destruction?

EmperorNero — Sun, 18 Dec 2011 23:56:49 GMT

AJ:
Great post, Nero.

Thanks a lot, AJ!

Wheylous:
I like your principles, but disagree with using empirical evidence to back them up, as one can just as soon say "well, yes, the US is preserving its environment - because of government!"

Every poor and dirty place in the world has some history of well-intentioned social engineers attempting to fix their problems with government intervention. In fact, most poor and dirty countries have a lot more activisty governments than those relatively laissez-faire countries that did manage to improve their environments. If socialism is the solution to environmental concerns, why does it only work in the most free market places in the world? Shouldn't it work even better in even more socialist countries? But the correlation is directly the opposite of that. The socialists are assuming causation that is directly the opposite of the observed correlation.

I know that socialisty types always say that socialism is totally different from what they want when it fails. That's why the evil socialist countries don't count. But by that standard I have a 100% success rate at guessing coin-flips; when I get it wrong it doesn't count.

Wheylous:
The same can be said about the lifespan v property rights graph. While we may like to claim that better property rights lead to better living and longer lifespans, a different analysis can easily conclude that the most democratic governments lead to longer lifespans. Really, anything can be used.

The "democracy fixes everything" argument is kind of a tautology, because countries that turn evil they don't stay democratic. The best example of that is Germany pre ww2, which was a democracy. Once it became evil it quit being democratic, hence the track record of democracy remains untarnished. But democracy is a consequence of a successful society, not a cause of it. Democracy and long lifespans are both a consequence of free markets.

But I get your point. In the end it's not possible to fully prove that our explanation of a particular correlation is accurate. But I think we can go a long way looking at the data with an open mind. Or even caring about empirical data at all. Most people apparently don't.

Re: Capitalism = Destruction?

Wheylous — Sun, 18 Dec 2011 19:08:43 GMT

I like your principles, but disagree with using empirical evidence to back them up, as one can just as soon say "well, yes, the US is preserving its environment - because of government!"

The same can be said about the lifespan v property rights graph. While we may like to claim that better property rights lead to better living and longer lifespans, a different analysis can easily conclude that the most democratic governments lead to longer lifespans. Really, anything can be used.

Re: Capitalism = Destruction?

AJ — Sun, 18 Dec 2011 16:42:31 GMT

Great post, Nero.

Re: Capitalism = Destruction?

EmperorNero — Sun, 18 Dec 2011 12:36:44 GMT

Environmentalism is the new reason to have (national) socialism, following the utter defeat of socialism in the intellectual battle over how to create material prosperity. A century ago pretty much everyone assumed that material prosperity can't come about "by itself" through markets, you need the state to engineer that! That's why countries like Russia, China and most of Africa attempted to state engineer their material prosperity. We know how that worked out. Much hardship and decades of lost progress later the empirical evidence is out: capitalism won.

But instead of admitting defeat, the (national) socialists simply changed their argument. "Ok, maybe capitalism is better to create material prosperity, but to protect the environment we still need socialism!". So now the entire propaganda machinery - state school, tv - has been geared towards selling the myth that free markets spoil the environment and we urgently need more (national) socialism to fix that. And now everyone believes that producing a clean environment is somehow economically different than producing any other good or service.

Everybody just assumes - without evidence - that socialism is better at conserving resources and cleaning up the environment than market liberalism. But that belief absolutely isn't supported by the empirical evidence. Just look at the world, where do they have growing forests, and progressively cleaner air and water? In the most capitalist countries; e.g. Britain, the US, Germany, France. And where do they have deteriorating environments? In all those failed (national) socialist countries; e.g. China, Haiti, Africa. The empirical evidence is crystal clear: Capitalism is good for the environment, socialism is not. In fact, most environmental socialism is counter-productive in the long term if you factor in the unintended consequences.

I too used to believe the myth that forests are chopped down by modern corporations because of profit. That's the pictures they show on tv. But that's actually not how forests disappear in the 21st century. They are chopped down by desperate people in socialist countries because they have no other way to cook their food. People in capitalist countries do not need to chop down their forests, they have electric stoves. The capitalist part of the world gets its lumber from tree-farms that are specifically grown for that purpose. That's why forests are growing in countries on top of the most-free list and shrinking in countries on the bottom of the most-free list.

Material wealth and a clean environment are not mutually exclusive goods. And anticapitalistic asceticism is not a necessary condition for a clean environment. It's the opposite way around: Real wealth is the only thing that ever managed to clean up the environment. People want a clean environment after they managed to feed and clothe themselves. The recent focus on environmentalism is not because it's a growing problem, but because we are becoming rich enough to afford the luxury. Capitalism makes us wealthy and therefore allows us to clean up the environment. Socialism, including environmental socialism, makes us poor, and therefore harms the environment.

Re: Capitalism = Destruction?

cporter — Fri, 02 Dec 2011 22:19:39 GMT

John James:
cporter:
Are you saying people can't profit without a respect for individual rights? I think we would both agree that actually achieving that profit is significantly more difficult without respect for individual rights

No, I would not agree to that. In fact that is the exact opposite of the truth. Profiting in the absense of respect for individual rights seems to be much easier than doing so with such a handicap.

I was thinking about this last night and decided the truth wasn't nearly as simplistic as my original statement let on.

When I said, paraphrased, "achieving profit is more difficult without respect for individual rights" I had in mind the overall reduction in wealth for people as a whole that occurs without the respect for rights. This is what I think we would both agree with.

However, we weren't really talking about people as a whole; we were talking about personal profit and the pursuit thereof. In that case, you're closer to the truth in your quote above than I was. For some people it is easier without a respect for individual rights. For there to be an overall reduction of wealth, however, that also means for some people it is harder. Enough so that it more than makes up for the benefits granted to the first group.

It is the political class (those using aggressive violence as their means) that has an easier time profiting and it is the rest (those using peaceful production and trade as their means, as though they were still operating in a free market) that are being leached from, to the overall detriment of everyone but for the immediate advancement of the political class.

The greater the ability of the political class to confiscate wealth, then, the better it should be to be part of that class and the worse it should be to be outside of that group. So, we should see these effects over time:

Wealth and wealth growth should slow, stagnate, or reverse at a rate commensurate with the relative power and pervasiveness of the political class.
People's desire for political action should steadily increase as it presents the optimal way to pursue self interest (at least immediately).
As the political method is more centralized (wealth flows through fewer channels than in a free market), we should see profits concentrate in the hands of relatively few as well.

This is basic stuff that we all more or less were aware of already, but I had not previously reached these conclusions from a similar starting point so I thought it would be worth posting my train of thought.

Re: Capitalism = Destruction?

John James — Fri, 02 Dec 2011 20:55:04 GMT

In the newbie thread I linked earlier there's a link to the Austrian economics links at Mises WIki, which compiles all the relevant links to "what is Austrian economics?" "What should I read first?", etc.

As for Economics in One Lesson, there is also the PDF of the 2007 print as well at the Mises Wiki page...but as I was saying here I would go for the 1978 edition. (Which you can find a link to at the bottom of that thread).

However, as an opening text, one might actually do better with How an Economy Grows and Why it Crashes or Lessons for the Young Economist. (Uncoincidentally, those are actually the three econ texts listed here):

Two books everyone must read

(one might also check out the list of reading lists)

However...Here was my

suggestions to another beginner

Re: Capitalism = Destruction?

Clayton — Fri, 02 Dec 2011 19:51:42 GMT

@hanky:

Read these to help you get started:

http://mises.org/etexts/austrian.asp

http://www.fee.org/pdf/books/Economics_in_one_lesson.pdf

Clayton -

Re: Capitalism = Destruction?

John James — Fri, 02 Dec 2011 17:57:13 GMT

Anenome:
I stopped reading here, because if you really understood what you were saying then you would retract this statement and anything that follows based on it.

You probably should have kept reading...namely to this post. Apparently one page of a Mises forum thread was all it took to convert him.

Re: Capitalism = Destruction?

Wheylous — Fri, 02 Dec 2011 17:07:53 GMT

Hanky, don't worry about JJ. He's usually a great guy with great insights. It's just that at times he gets pissed when he sees enough of people like aerview on this forum. You, however, appear to want to have a productive conversation, which is good!

Re: Capitalism = Destruction?

Anenome — Fri, 02 Dec 2011 10:55:01 GMT

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

I stopped reading here, because if you really understood what you were saying then you would retract this statement and anything that follows based on it.

Let me explain what profit is. Profit is not simply an incentive. Profit is production. Literally.

Let's say you try to make something. There can be only three outcomes:

A. You made something you can sell for less than the cost of its materials.

B. You made something and sold it for the same cost as its materials.

C. You make something and sold it for more than the cost of its materials.

Now, only in case C have you produced something sustainably, and only in case C have you made a profit. That's the first key to understanding what profit is. Because in all except case C you have wasted your effort, you have worked for nothing. Profit is not simply motivation, it is payment for adding value and makes production in general possible. Nothing can be produced sustainably without profit.

But, what's more, this principle extends to biology. You cannot even live without profit:

Suppose you eat something you obtained. There's three possible outcomes (assuming it's not poison):

A. You ate something that gives you fewer calories that it cost to obtain it.

B. You ate something that gives you the same calories that it cost you to obtain it.

C. You ate something that give you more calories than it cost you to obtain it.

Only in case C was it worth the effort. B keeps you on the point of starvation. In fact, there've been many indigenous societies that live in case B and it's a pretty miserable way to live (see Cabeza de Vaca's account of American Indian tribes).

I swear, I'm going to write a book called "The Philosophy of Profit" because it is such a misunderstood concept and needs to be rehabilitated in everyone's mind. Profit is necessary for life itself, much less for business.

Gah, guess I'll read down in any case.

generalhanky:
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 has proven to be very environmentally conscious compared to command economies. It has also given more access to wealth than centralized systems ever did.

generalhanky:
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.

Basic fallacy here. You seem to think that consumption ruins a thing forever. It doesn't. Today's consumed good is tomorrow's new resource.

generalhanky:
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.

No big deal. Alternate energy tech will soon replace oil for primary energy generation. And we still have a few hundred years worth of oil left.

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

This is not actually true. Capitalism created the modern middle class. Previously it was the rich and powerful royals and the serfs. America created millions of millionaires.

generalhanky:
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.

False. Most fortunes are new fortunes, not inherited ones. Most millionaires in the US are first gen millionaires.

generalhanky:
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.

Lol

generalhanky:
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.

We don't have a free market, that's what has caused the recent problems. Almost everything you list here as a problem can be solved not by abandoning capitalism but by abandoning statism!

Re: Capitalism = Destruction?

Jargon — Fri, 02 Dec 2011 08:24:17 GMT

Hanky don't take it personally. I've been here about a month and JJ is regularly coarse, but I think he just wants to discuss as apersonally and logically as possible.

(typing that just reminded me of this, lol): http://www.youtube.com/watch?v=sR62WFl5Cv0

Re: Capitalism = Destruction?

generalhanky — Fri, 02 Dec 2011 05:29:48 GMT

You are quite possibly the strangest newb I've encountered. Does this sudden change of heart (and brain) mean you're not going to respond to my post? And here you were so quick to snipe at me for allegedly avoiding addressing points that were brought up.

John, I didn't snipe at you...I simply asked if you were going to add to the conversation. I know my position may be difficult to understand. I've actually had two polar opposite positions. I wanted to believe in capitalism, I actually have been supporting Ron Paul. On the other hand, I've come to think people should have an open conversation about the foundations of our economic system(s). For the moment, all I can say is I'm completely stoked to find a forum where people actually discuss economics intelligently. I'm very glad you've added to this thread and will respond to you soon, just too tired to think right now!

Re: Capitalism = Destruction?

Wheylous — Fri, 02 Dec 2011 03:54:21 GMT

Basically, I've come to the conclusion that our current model of crony-capitalism practiced in America is so far away from pure capitalism, that it has clouded my judgment to the point that I thought capitalism has failed us. My new question is...where could we go from here? How could we possibly reverse decades upon decades of the fundamental dismantling of capitalism? Ron Paul anyone? It's a start, huh?

Hey, cool! I congratulate you on taking a step in the right direction!

The next step (if you're interested) is to learn. Study history, some economics can't hurt, and possibly a bit of philosophy.

Why? Well, the way I view things, to remedy the current situation we will need policy changes. To achieve policy changes, we need public support (this is the reality of the matter). We need a change in the intellectual culture in America that first of all realizes that we don't have free markets in the US and that we've never had free markets (yes, that includes the Gilded Age, filled with government intervention). If you are able to spread the idea that capitalism is not evil to one more person, you help the cause.

Perhaps what would help most is... hang around these forums! While it appears that you've had a sudden change of mind on the matter, I do believe (due to personal experience) that better understanding the matter more deeply takes at least a few more days ;)

So hang around, drop us questions, and ask yourself questions. Is X capitalism? Are you suuuuure? Do we need the government to fix it? Can we fix it in other ways? Can I morally accept initiating violence against people to change the world through government? (hopefully, the answer here is no).

First and foremost, dig deeper into the ideas of the free markets.

For example, what about Standard Oil? Wasn't it a big bad free market monopoly? Didn't meatpacking prove we need regulations? Wasn't AT&T a company which simply got too big? Did greed cause the Great Recession? Can government create wealth?

If you're interested in these questions about the markets, ask us!

Now, as to policy changes:

Demonopolization of the regulatory apparatus. We're not against regulation. We're against involuntary regulation. The government needs to stop distorting the market forces that resolve disputes efficiently. The law of unintended consequences and the calculation problem haunt all government actions.

Furthermore, remember you are talking to libertarians. Do you feel like you are ready to explore some ideas in libertarianism? It may challenge your ideas of society, government, regulation, free markets, and history. If you ask us what the best policies going forward would be, we will quite likely give you some libertarian answers, and we'd like it if you gave these some thought instead of being repulsed, so we'd like to know whether you're interested in opening up your mind to alternative viewpoints (though the fact you came right to the lion's den is nice to see :) ).

I make this seem dramatic, but really, we're not a cult. We're a bunch of people. All I am saying is that in the beginning you might have some cognitive dissonance and feel slightly uncomfortable. Yet I know that for me this experience has been highly educational and I believe that we can improve the world.

On Ron Paul: He is certainly pro- free market. Yes, he would be a nice step. Remember, though, that we'd also need Congress to change how thigns work around here.

The very first step? End the FED and have a system of money which cannot be manipulated by government (I hesitate to offer free banking immediately for the present, but some of the other members here might think differently). End Fannie Mae and Freddie Mac.

Next step? Cut down the military budget. It is extremely wasteful and the best first step to cutting spending.

Third? End all subsidies.

Fourth? Starting removing federal departments. The ones least ingrained into the system will go first. Simultaneously, loosen up the reins of government in other departments as well.

Certainly, the market will experience certain shocks in the beginning as it adjusts to new roles, yet I do not think that it would take that long to settle into a comfortable pace of things.

At the same time, begin legalizing drugs. Prisons overflow with people slammed in for victimless crimes.

Legalize offshore drilling and open up free land in the US to homesteading.

Meanwhile, suggest private market solutions to state services such as police and firefighters.

Cut down regulations for starting new businesses.

After you've done dramatic cutting of the budget, slash those taxes. Eliminate income taxes outright immediately.

The market will all the while be adjusting to these things. After some time, the government should remove its remaining regulations and departments and then - click the logout button.

I realize I am suggesting a form of gradualism, but realistically, that is what we are capable of achieving with our limited power. The order in which government is cut down is important to allow the market to adjust.

I know many will point at me and say "gradualism in theory is perpetuity in practice!", and you might be right. But the above is a beginning. If we can convince half the population of the above, we'd have made great strides. If we could do away with it in one fell swoop, all the better.