Political Theory

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

Stolz2525 — Tue, 17 Jun 2008 21:03:15 GMT

dreamingoffreedominma:
- Keeping in mind that the free market caused the Great Depression, is it true that a boom and bust cycles happen in a free market? Is it inevitable in any type of economic model or does severity of the bubble just differ?

This has been covered already, but it's important. The free market didn't cause the Great Depression. We've never had a truely free market in the way most of the people in this forum think of it, but it hasn't even been close to free since the creation of the Federal Reserve.

dreamingoffreedominma:
who would create housing for the poor if people are driven by profit?

While I believe the poor would be much better off in a free market economy, it's irrelevant. No one has a right to coerce property from one person to give to another, regardless of their reasons.

dreamingoffreedominma:
My friend said that because profit plays such an important part that someone would figure out a way to a ridiculous amount of profit at the hands of the poor.

Sounds like government to me. I can't think of anyone who has made more profit at the hands of the poor than ours.

dreamingoffreedominma:
- Putting aside all the science to the contrary, how could one reconcile the issue of "global warming" from a libertarian perspective.

This makes no sense. http://www.cityviewmag.com/stories-the-greatest-hoax-ever-perpetrated_134.html

dreamingoffreedominma:
- Who is to prevent a couple of corporations (the rich in society) from teaming up to prey upon the smaller people in soceity?

What prevents it now? Corporations need someone to enable them to form monopolies, not someone to prevent them from doing it. Without government involvement, unnatural barriers to entry are eliminated and corporations are forced by competition to become more efficient, not less.

dreamingoffreedominma:
- Are there natural barriers of entry into a market and are they fair?

Yes, and if they are natural, how could they be anything but fair?

dreamingoffreedominma:
- Who would prevent the rich from teaming up and controlling the marketplace?

The US government has the biggest monopoly on coercion and force this world has ever seen, and try as they might they cannot control the marketplace completely. What makes you think we are in more danger from "the rich"?

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

meambobbo — Tue, 17 Jun 2008 17:04:47 GMT

- Booms and busts - Mises actually put his business cycle theory in the "free market" side of his theories. He believed it can arise from the free market. So do I. Anytime new money is injected into the banking or financial sector at a disproportionate rate to the rest of society, you will get a subsequent boom and bust. If a new gold mine is found, and all the prospectors rush all the new gold to the bank, and the bank loans it out with lower than prior interest rates, you can get a business cycle. With wildcat banking of the 1800's, where banks were permitted to practice fractional reserve banking, allowing massive credit issuance beyond the money backing up these claims, you had business cycles. The thing is, natural limits on gold and bank runs kept the booms and busts fairly small. And the busts had no government protection. The banks couldn't create more gold, or satisfy a bank run with more credit. Today, through government, they can create more money, subject to neither credit restraints or bank runs. Thus, today, our downturns are much longer and spread out...often avoided altogether (by further making malinvestments temporarily profitable - delaying a larger bust).

Further, Mises believed that bank runs more effectively policed fractional reserve banking than government could. He believed outlawing the practice would have simply turned into a legal protection of some arbitrary fractional backing, like we have now. Of course, he was also opposed to fiat currency, which we also have. ...There are also "Real Business Cycle Theory" people who claim the business cycle is completely natural phenomenon, although I haven't given it any notice...

- Housing the poor - To do A with some set of resources, means to not do B. Thus, to build public housing means to not build private housing. Thus, private housing costs increase, and you have more poor people who need public housing. The tax increase to build public houses onto those who are marginally homed pushes them out of a home. Essentially, there are two reasons not to advocate public housing. One is they must be paid for by taxes, which are unjust and adversely affect private production. The second is that government suffers from serious problems in being a producer. If they are to hire a firm to do the work, they will likely pay more than they should for the quality of work returned. This is simply because the government doesn't earn the money they use to pay, and thus cannot understand its value. Often, due to perverse practices of budgeting, agencies aim to pay the maximum amount rather than the minimum. Also, the agent distributing the money may wish to reward a crony, who possibly made campaign contributions (or bribes). This is the principle-agent problem. If the government attempts to build them itself, from raw materials to houses, it suffers from Mises's calculation problem. This basically says that profitability cannot be calculated through each stage of production, so there is no idea whether something is being done horribly inefficiently. Rest assured, nearly all nationalized industries are highly inefficient.

Basically, if we're inefficiently using taxes to produce houses for poor people who pay nothing for them (and often leave them in shambles, with the logic that it isn't theirs anyway) the result is less money to pay towards all industry that operates at a profit. Profit here doesn't mean the private coffers of rich men. It means that society is offered products at prices that promote mutual gain. The buyer values the product more than the price. The seller creates a product that is worth more than its raw material and labor costs.

Basically, free enterprise grows the economy and increases everyone who is productive's quality of life, relative to the amount of work they perform. Government enterprises often are paid for by those who contribute, while rewarding those who don't. The process is further compounded by perverse incentives in government management. The result is diseconomy - increasing the cost of living for everyone, except those who the government takes care of.

The solution is a mixture of economic growth and private charity. Contractors can still make profit through the charity of others. Ideally, it is not contractors, but all of society that wish to house and clothe the poor. Thus, the burden shouldn't be passed to specific groups. Charity always comes at a loss of quality of life of those providing it. Thus, charity is naturally limited, especially among those marginally homed. No one is going to donate their home if they can't afford another one. Thus, private charity tends to balance economic growth against itself. In this manner, most of the poor are housed while houses keep getting cheaper. The more profitable making houses is, the more production is devoted to that area (unless its through government decree - this makes some builders highly profitable while others not at all).

Section 8, or subsidized housing is simply the same thing - forced charity and diseconomy. Rent controls make landlords less profitable, meaning you get less landlords and aggravate the problem. Also, zoning and contruction regulation hampers the ability to build homes cheaper.

Of course, no solution here is perfect, but that's life. It also isn't perfect that some members of society can't produce anything and have no families or communities to rely on for support. And neither is it perfect that public housing has produced large-scale negative consequences for its tenants.

- Global Warming - if someone can prove that global warming is causing damage to someone or their property and can prove that someone else is causing it, they should have the right to sue for damages. considering the Earth has been hotter during human history, and conflicting scientific reports on greenhouse gases, etc. this is a very hard thing to prove. Ultimately, no government accords will really do anything. No carbon credit scheme can actually slow carbon emmissions to the point where the environment starts reducing carbon gases, and if it did it would come at a tremendous loss in quality of life. It is more likely future technology that will be able to make real strides in research of the issue and solving it if necessary, and the best (quickest/least cost) way to get to such is to get our energy sector unregulated.

- Cartels - read about actual cartels - they rarely are sustainable and soon revert back to competitive functions, pushing prices down again. One is much more inclined to find a de jure monopoly than a de facto one. Usually, the de facto monopolies occur because they have capital and efficient practices that are far ahead of competition. They usually offer higher wages and better working conditions, as well as lower consumer prices. Anti-trust law is used 95% of the time by one competitor against a bigger one (or even against smaller ones ironically), simply as a means to get competition out the way, rather than keep competition fair. The whole anti-trust thing started after corporations were put in a position where bigger equals better. This was simply because government is a monopoly and privilege was for sale. Remember the railroad subsidies and the ICC? Well, anti-trust didn't follow long after. There is little doubt as to why. In a free market, there is no government privilege (probably bc there is no gov), so companies can only grow (and only have incentive to do so) by seeing increasing profit. But profit not only makes one business grow, but draws other entrepreneurs into the industry. The larger the profit margin is, the more resources are shifted from less profitable industries. When production is able to meet demand, prices must fall, and so will profit margins. With privilege, profit margins can ensure less competitors. In a free market, they can only ensure more. Standard Oil comes to mind. Their peak market share was > 90%, but they only had like 65% when they were sued for anti-trust (mainly because of railroad contracts, which were forbidden due to regulation, which came about bc subsidies created railroad monopolies). Gov is arbitrary, and so are its privileges.

- barriers to entry - of course there are natural barriers to entry! it isn't regulation that prevents me from starting an automobile company; it's a whole lot of capital. if you expect to be competitive, you must out-compete your competitors in some facet. If you don't have as good capital, you must have better labor, profit models, or efficiency. Developing anything has a cost, and you must develop something before you can sell it! If the barriers are government imposed, like licensing, regulatory cost (esp when regressive), etc, they are not fair. If they are there because existing competitors have invested more of their own money in capital, labor, and land, then they are fair. If you don't think they are, try to produce your own capital, and get your laborers to work for free. In the area of land, if emminent domain or discounted gov rates are used to acquire land cheaper than others, this is an unfair barrier. land should be homesteaded (at the cost of the labor to do so), but as long as government rates are the same, it isn't an unfair advantage.

- cartel of the rich - well, we should ask ourselves if the rich are prevented by or use government to "team up". also, how can the rich team up? How do they force the people to buy their goods? How do they prevent competitors from arising? How do they accumulate all capital goods? The only way to do so is through threat of violence, which government monopolizes. Thus, if there was no government, such teaming up would be unlikely and perhaps impossible. At the end of the day, the rich don't simply want to be relatively more wealthy than the poor. They want to be actually rich. This means that we must have full scale productivity, giving us technological growth and affordable products. Usually cartels exist to restrict supply and expand profit margins. But even with greater production and less profit margin, they may make more money. And in terms of other goods, the same amount of money will go further. So why would two non-competing industries (like food and electricity) agree to lock out competition that could sell each other goods at less cost? In the end, all the rich "teaming up" schemes don't make sense to anyone's best interest. Rather, you have everyone naturally wishing to abuse the power of violence in the government. Labor unions want to use government to keep strikebreakers from working - basically claiming ownership to the capital they normally use. The poor want to use government to force those richer than them to give them charity. Really, there are no teams of classes, there are only pairs. Pairs who benefit from free exchange, or pairs of government and private groups forming privileges. With universal suffrage, we are simply likely to have everyone plunder everyone, rather than have one group plunder another. But in that resources are used in creating and fighting against these privileges, everyone suffers from diseconomy. For example, a steel tariff may be lobbied for by US Steel, but lobbied against by General Motors. Even if government chooses to guarantee a free market, its ability to prevent one requires resources to persuade it. Rather, in a true free market, General Motors does not have to lobby against US Steel, and if US Steel attempts to fight the free market and impose a steel tariff, it must do so at its own cost of enforcement.

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

dreamingoffreedominma — Wed, 11 Jun 2008 13:42:27 GMT

Haha, excellent response JAlanKatz:

"This question hinges on the most common misconception about the state - that it's magic. Listen carefully and you'll hear it all the time. I got it just the other day from a coworker who was arguing against anarchy. "But," he said "the market can't provide legal services. The law has to be above society and not made by humans." You tell me how this is supposed to work."

This post really started a lot for me because it led me to a site called 'The Online Freedom Academy (www.tolfa.us). It is the most logical and rational argument I have ever read for freedom. It is really clearing up a lot of emotional questions that one would get arguing for free markets and therefore the absence of government.

It is also clearing up many things about human nature, ethics, government and property rights that I did not completely understand. I had a TON of contradictions in my argument because I was trying to argue for limited government and no government at the same time. People would always catch those contradictions.

This site gives me a lot more information and more rational, coherent argument for free markets (the absence of government). From what I can gather on this board, there are many people who take difference stances on how much government there should be, but TOLFA's site is pretty convincing that government is the antithesis of human nature.

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

JAlanKatz — Wed, 11 Jun 2008 04:57:15 GMT

BlackSheep:
It should be pointed out that the Great Depression is twofold. There is the recession part, and then the policies that made it last as long as it did (high tariffs, price parity, etc). For the first part, whether you use the Austrian or the Chicago view, it all steams from the fact there wasn't a true gold standard, and the Federal Reserve messed up and didn't dealt well with it.

Perhaps you want to stay away from this. Remember that Friedman said that the Federal Reserve screwed up by not reinflating enough. That's an important distinction - he's arguing for incompetence, but not that the system itself is wrong, just that it should have better people running it. I wonder who he would have recommended...

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

JAlanKatz — Wed, 11 Jun 2008 04:55:26 GMT

dreamingoffreedominma:
I have heard this one before, so I will propose it to you: let's say that I start using force to enforce my monopolisitic control. What do you do then? Basically, how or what makes sure that those property rights are not violated by monopoly X's "army."

This is a fine argument, but what is it an argument for? Certainly not for starting out with a monopolist who uses force to enforce their monopolistic control, right?

dreamingoffreedominma:
The argument from the statist/socialist side says that there needs to be a final arbitrator and that should be the role of the state. I can argue that that would be an invasion of property rights but it ultimately comes down to who does the enforcing for this person. How can that be provided on the market as opposed to a governmental body?)

How can that be provided by a governmental body as opposed to the market? First, there is no final arbitrator - that is, we never really get out of anarchy anyway, we just play an expensive game of make-believe. That's because the state is human, not magic. It gets obediance by force, and is not really any different from the monopolist assumed in the argument. Second, an arbitrator is not supposed to judge his own case, so either there are disputes that cannot be arbitrated or, what comes to the same thing, the state does act as an arbitrator in its own case. We cannot meet the standards supposed in the question through the means the question is supposed to suggest.

This question hinges on the most common misconception about the state - that it's magic. Listen carefully and you'll hear it all the time. I got it just the other day from a coworker who was arguing against anarchy. "But," he said "the market can't provide legal services. The law has to be above society and not made by humans." You tell me how this is supposed to work.

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

Stranger — Mon, 09 Jun 2008 19:38:21 GMT

dreamingoffreedominma:

Stranger, would you be willing to explain to me what the law of association is and how it is applicable to the topic of discussion?

The law of association, also known as comparative advantage, says that bigness does not matter. Big fish have no greater interest in collaborating with other big fish than they do with small fish. In fact, given that big fish are much juicier targets than small fish, it is in the interest of big fish to enlist the aid of small fish in order to take down other big fish.

The bottom line is, it is the small fish who would most benefit from the free market, because they could cooperate with big fish in order to improve their conditions.

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

Jon Irenicus — Mon, 09 Jun 2008 13:20:53 GMT

Hah, empty promises.

-Jon

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

BlackSheep — Mon, 09 Jun 2008 02:30:46 GMT

dreamingoffreedominma:
(He also said that the free market caused the Great Depression, so I am going to have to have him read Rothbard's take on that)

It should be pointed out that the Great Depression is twofold. There is the recession part, and then the policies that made it last as long as it did (high tariffs, price parity, etc). For the first part, whether you use the Austrian or the Chicago view, it all steams from the fact there wasn't a true gold standard, and the Federal Reserve messed up and didn't dealt well with it.

I just think you should make it clear to him that it's not just the Austrians who have this position that the Great Depression wasn't caused by people having too much freedom. Milton Friedman made it mainstream that the Federal Reserve was behind it, and no economist advocates Hoovert/Roosevelt economic policies.

Tell him of this quote from Ben Bernanke (2002, Milton's 90 anniversary):

«Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.»

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

Jon Irenicus — Mon, 09 Jun 2008 00:32:42 GMT

This bigness nonsense needs to be buried for good. Check out the thread I posted the other day "My view on capitalism". Markets aid the poor like nothing else, either by giving them jobs or putting more money in the hands of their fellow citizens who can then help them efficiently.

As for "barriers" to entry, so long as no force is involved, they're "fair". All one needs is the opportunity to compete - not an "equal" opportunity, whatever that means.

Regarding the "rich" (more Marxian class nonsense) keeping the poor poor, this is statist mythology. Social mobility has always been high under free markets. What is needed is entrepreneurial innovation and motivation. If the "rich" are not good at exercising control over their firms, they will have their wealth removed from them, by way of the market's natural processes. Besides, the middle classes also invest in business. This phantom of the rich ruling business is largely the result of cartelized, regulated statist economies.

-Jon

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

dreamingoffreedominma — Sun, 08 Jun 2008 23:38:44 GMT

Excellent response, thanks for clarifying that. It makes a whole lot of sense.

It seems that when backed into a hole, statist/socialist type people argue subjectively that certain goods and services are rights. It seems to come down to an emotional response and a lack of free market economic thought - that in actuality, TANSTAAFL.

I have heard this one before, so I will propose it to you: let's say that I start using force to enforce my monopolisitic control. What do you do then? Basically, how or what makes sure that those property rights are not violated by monopoly X's "army."

(The argument from the statist/socialist side says that there needs to be a final arbitrator and that should be the role of the state. I can argue that that would be an invasion of property rights but it ultimately comes down to who does the enforcing for this person. How can that be provided on the market as opposed to a governmental body?)

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

JAlanKatz — Sun, 08 Jun 2008 22:26:46 GMT

dreamingoffreedominma:
Could you please explain the profit gap to me? And by preying, in the statist/socialist sense of the word, I mean exploit, take advantage of, etc. That is essence, in a free market the rich can control the marketplace because they have the most money and capital and the poor and lower classes are subject to their demands, creations, etc. Does that make sense (again, I am trying to play Devil's Advocate here and think like my statist/socialist friend)

The profit gap may well be a non-standard terminology, but what I meant was this: Suppose I am a monopolist, and therefore can raise prices without seeing a fall off in quantity demanded (which also means that I must be providing a relatively essential good with no good substitutes.) The more I raise my prices, without costs being impacted (somehow) the more profit I get. So, as I do more and more of this, my profit continues to grow. That increased profit provides more and more incentives for other companies to enter the market, or provide close substitutes, or for people to find ways around using my goods. The same thing holds if I cartelize the industry, since for the purposes of pricing, the cartel operates like one firm (or else falls apart.)

Ok, I knew what you meant by the word preying, but my point was that I don't see where the preying is supposed to occur. First, no one is subject to anyone's creations - you can choose not to buy something. So the only concern is that there's some kind of economic exploitation. But even in the worst case, say, charging very high prices for medical services, where is the exploitation? If I didn't do the work to build the hospital, and take the risks, you'd have no one to demand free or cheap services from, and you'd be no better off than you are if you can't afford my hospital. You'd be worse off because of charity, loans, and so on, but we're setting that aside. If you die for lack of medical services (which I would allow why? It's not profitable to me at all) what does that mean from a rights perspective? Did you have a right to my services? If so, did you have a right to them 200 years ago, before they were invented? How does that work?

In essence, if I charge a million dollars for my services, I'm not forcing you to pay a million dollars, you can walk away. That's only a bad thing if you have some kind of natural right to my services. Why should you?

dreamingoffreedominma:

On a side note, how they heck to you quote multiple people on this board? Is there a link anyone could provide to help me out here! Haha, thanks!

I don't know.

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

dreamingoffreedominma — Sun, 08 Jun 2008 22:12:31 GMT

Thank you for all of the responses. I don't believe in the logic of my friends argument, I am simply trying to figure out, from a libertaria perspective, rebuttals to such statements.

Stranger, would you be willing to explain to me what the law of association is and how it is applicable to the topic of discussion?

How does the free market prevent booms and busts?

JAlanKatz

"Regardless, the answer is the profit gap. If all businesses in the industry team up to cartelize the industry without help from government, there is a tremendous incentive for another firm to enter the market, since profits are up."

Could you please explain the profit gap to me? And by preying, in the statist/socialist sense of the word, I mean exploit, take advantage of, etc. That is essence, in a free market the rich can control the marketplace because they have the most money and capital and the poor and lower classes are subject to their demands, creations, etc. Does that make sense (again, I am trying to play Devil's Advocate here and think like my statist/socialist friend)

On a side note, how they heck to you quote multiple people on this board? Is there a link anyone could provide to help me out here! Haha, thanks!

And thanks for these great answers.

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

Fephisto — Sun, 08 Jun 2008 21:18:50 GMT

My attempt to sum up the above:

Taking something out of the free market entails putting the function in question to the hands of bureaucrats.

Re: The Big Fish Will Eat The Small Fish - I Have Questions, Who Has Answers?!

kingmonkey — Sun, 08 Jun 2008 20:16:34 GMT

dreamingoffreedominma:

- Keeping in mind that the free market caused the Great Depression, is it true that a boom and bust cycles happen in a free market? Is it inevitable in any type of economic model or does severity of the bubble just differ?

I think it's pretty clear that it was the Fed's messing about with the market inflating the money supply during the 1920's that brought about the crash of the market. And the "Great Depression" only became great because of the market intervintions of the Fed and the government.

dreamingoffreedominma:

- who would create housing for the poor if people are driven by profit? I argued that profit may not be the driving force behind someone starting a business and that they would create housing out of the kindness of their heart. My friend said that because profit plays such an important part that someone would figure out a way to a ridiculous amount of profit at the hands of the poor.

Habitat for Humanity has pretty much disproven any argument he could come up with. With less government controls, regulations and taxation you'd have more humanitarian organizations such as Habitat spring up. According to their website they have built more than 250,000 houses since 1976.

dreamingoffreedominma:

- Putting aside all the science to the contrary, how could one reconcile the issue of "global warming" from a libertarian perspective.

Property rights. If the courts had been enforcing property rights from the beginning you wouldn't have all of the dirty technologies we have. Instead, the courts have allowed industry to pollute "not too much". If property rights were respected no one, including major industrial companies, would have the right to pollute my body with their toxins, nor could they pollute my water with their waste. Cleaner technologies would have been sought out long ago as lawsuits against polluters would have either shut them down completely or made it difficult for them to operate. It is a failure to respect property rights that has brought about the "global warming" crisis. On a side note global warming is a load of BS and the data actually shows the earths temperature is cooling. Not to mention carbon is the main food source for all plants. The more food they have the better they grow which is why we are able to have record crop yields year after year. Plus the warmer the temperatures the more productive the plants will be.

dreamingoffreedominma:

- Who is to prevent a couple of corporations (the rich in society) from teaming up to prey upon the smaller people in soceity? How can a balance be created where a poor person would not be taken advantage off? The example he used was corporations and the rich could team up to create a monopoly on a service or good and leave people without any choice.

You can't have a monopoly in a free market. Monopolies exist because of some intervention by the state. Standard Oil was broken up because it was said to be a monopoly. The little known fact of the matter was that by the time Standard was finally broken up it's market share was falling as more and more competitors were taking more market share. There is always someone out there who is willing to do a job cheaper and will find a more efficient way of doing it.

dreamingoffreedominma:

- Are there natural barriers of entry into a market and are they fair?

Not really. The only barrier you could have would be lack of money. If it weren't for all of the governmental red tape and a lack of funds I'd start my own biodiesel manufacturing plant. But I don't have the $1 million to get my formula approved of by the EPA nor do I have the money to comply with the myriad of other regulations.

dreamingoffreedominma:

- Who would prevent the rich from teaming up and controlling the marketplace?

The rich don't control the market place. The average person does. If his solution is government regulation then who would prevent bureaucrats from teaming up to control the market? The market is self-regulating and human nature will ensure that there will always be competition.