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What's so good about Market Forces, anyway?

  
  

Page: 12345(6)7

 
 
jbsay
22:09 / 09.12.04
MJ

you're a garrulous chap. care to elaborate on your example?

pretty sure that the biotech indsutry kills the case that the free market can't do long-tailed R&D investments.
 
 
No star here laces
00:53 / 10.12.04
Originally posted by jah:
...mixed societies are impossible...

...there are many different varieties and extremes of socialism. They end in differing degrees of devestation (sic)and collapse....

I'd argue that yes, you probably want some VERY limited form of government whose ONLY job is to protect private property. The point is, communities can decide for themselves. THis is the beauty of a minimal, decentralized government.

Don't you see the teensiest bit of contradiction inherent in these statements?

If the slightest bit of governmental control or bureaucracy equals the dread hand of socialism at work, leading to imminent starvation and societal collapse, then surely even a minimal decentralized government is also socialist and therefore doomed?

You can't have it both ways. Your argument would be far more credible were it not so purist.

I'm on a majorly different time-scale being in Singapore (a nation, by the way, that has lifted itself above the economic misery of its neighbours despite having no natural resources by dint of having one of the most rigidly control-freak regimes ever to exist) so I will weigh in with another example despite it being off-topic to this discussion of R&D.

I work in the advertising industry. Advertising as a service operates in a pretty free market, with ideas travelling across borders and agencies charging rates commensurate with the demand for their services from other companies.

The advertising industry as a whole has thrived over the course of the 20th century, presumably because we provide a service that is useful to our clients.

In other words, the purchase of advertising must make a company more competitive, which means it must influence more consumers to buy that product.

Further to that, it is not a simple linear relationship, but in general, purchasing more advertising leads to more sales. Investment in marketing tends to yield a good return.

From which one can only conclude that being in possession of sufficient funds to invest in marketing makes a seller more likely to succeed. Whether or not hir product is of value to the consumer, or is better than the product provided by the competition.

In what exact manner is this not a distortion of the market? And if it is, how can it be attributed to "socialism"?
 
 
illmatic
10:31 / 10.12.04
Sorry to post and run, but I'm glad to see someone's putting "socialism" in scare quotes, as Jah seems to have a pretty unique definition. One that is not shared by a) most of the governments he's calling socialist b) the political parties that make up these governments c) the citizens of these countries and d) most of yer actual real life self-professed "socialists" out there!
 
 
jbsay
11:29 / 10.12.04
Inmybeer--

Don't have time for a full reply--will talk about advertising at a later point (remind me if i forget to)

But here's the deal with economics, and maybe this will help Kit Kat understand long versus short run. No one is saying that authoritative governments cannot "work"....in the short run. No one is saying that ANY governmental policy will not "work" in the short run.

Let's say you want to "grow an economy". There are two ways you can do it. 1) You can use gold/silver (or whatever the market selects as the best currency), save and invest and build up a capital base, and work long hours. Or. 2) You can have the government print money out of thin air, mess with interest rates, take on a lot of debt, and set up "social security" and other welfare schemes. Both will have similar effects in the short run . The government plan might even be more "successful" than capitalism in the short run

Let's say you want to impress the ladies by "getting into shape". There are two ways you can do this. 1) You can change your diet, do cardio, and lift weights. 2) You can use steroids.

Now, let's mix metaphors. You have the government do all the stuff they normally do--the equivalent of steroids. This creates an incredible boom like the roaring 20's (WHEEE!!! [dancing on table in glee and staring at self in mirror] Look at me! My muscles are so big! I'm so sexy! I'm gonna get me some tonight!). So far so good. The problem comes 20 years down the line when the malinvestment created by the false boom gets washed out (Whoa dude. Why is my face and back breaking out in acne, I have weird hair growing on my shoulder blades, my testicles look like shriveled little raisins, and the cat scan shows a tumor in my brain).

Or, for you environmentalists out there. There are two ways to farm. 1) "sustainable development" 2) slash and burn. Both provide food in the short run. You wonder how people can be so desperate and/or ignorant that they would resort to slash and burn agriculture. This is how capitalists (me) look at socialism. Socialism is the economic equivalent to slash and burn farming. You're basically slashing and burning your capital base. At first, this works. But what happens when you have slashed and burned all the land? What happens when you have taxed or otherwise redistributed the capital so that now everyone is equally wealthy (or should I say, equally poor).
 
 
Kit-Cat Club
11:44 / 10.12.04
Tssk, of course I understand the difference between short-term and long-term - I'm not an idiot. I was curious as to what you meant by long-term, as you hadn't been clear on this up to that point.
 
 
Lurid Archive
13:33 / 10.12.04
No. They have incentives to not violate other people's property because they are liable for the damage (this is a cost they factor in). This limits "negative externalities" like you are talking about.

In order for this to be at all practicable, you need at the very least a functioning justice system. Now, you might get Microsoft to cough up for a few judges, but then what if Microsoft is accused of "property rights" violations (which, bizzarely, trump human rights for libertarians)? What about if the violator refuses to pay a penalty, or change their behaviour? Remember, we are talking about a system where the substitute government would have substantially less power than it does now. It is simply absurd for an advocate of small government to claim that property rights can contain pollution.

pretty sure that the biotech indsutry kills the case that the free market can't do long-tailed R&D investments.

First, though it is fairly clear at this point, I should point out the stunning dishonesty implicit in this. Somehow, the financial institutions of the 1920s count as "socialist", yet the biotech industry supported by government funding and a whole host of market distorting incentives counts as "free". It should be obvious what the criterion being used here really is.

But, ok, lets look at the biotech industry. One of the major advances was the human genome project, which was largely carried out in academia where the results were freely available. Private companies then issued patents on discoveries "they" made, using techniques that were widely known. This is a well established pattern whereby basic research is carried out by governments so that private companies can profit. I'm not even saying this is always a bad idea, but giving all the credit to the free market requires some serious ideological blinkers.

Actually, biotech generally has been loathe to embrace free markets. The patents supported by the US essentially forbid comptetion in manufacturing in many cases. People suffer, of course, but that is never a concern. Now a good amoral libertarian might insist that this is a right and proper of some abstracted "property rights", but note that the inobtrusive government has to act to enforce global standards of law, using international institutions and lawyers and so on. Pretty hefty, if you ask me.

And it is well known that biotech firms have actively opposed consumer choice in the area of GM foods, essentially because their profits are geared toward monopoly positions. A free market? I don't think so.

Coherent, yes. Public, no. And for everybody? No. I would have much preferred to start working full-time at the age of 10.

So what you are saying is that the market can provide education just as good as now, as long as we ditch certain human rights and get children working at 10? (And get churches and charities to deal with the difficult cases). I'm not sure you've given me anything to rebut here.

Not necessarily a coincidence. THe more effective the free market has been, the bigger the governmental parasite can get without killing the patient (for a while).

How long is this "while"? How long is "long term"? How many centuries are you actually talking about, before the widespread harm that you claim is inevitable will even be visible? Or is that too short term of me?

Socialism is the economic equivalent to slash and burn farming. You're basically slashing and burning your capital base. At first, this works. But what happens when you have slashed and burned all the land?

By "socialism", it bears repeating, jah means everyone except nutbar libertarians. Keynes won this argument, and it is pure conspiracy theory to think that this is because world leaders then and ever since have all been "socialists". It has rather more to do with the rising standard of living, levels of growth and the avoidance of global recessions.
 
 
MJ-12
13:52 / 10.12.04
care to elaborate on your example?

Since you seem to judge any example of the shortcomings of capitalism as transient, and any example of non-disaster in market interference as similarly transient, not particularly, no.
 
 
jbsay
14:39 / 10.12.04
In order for this to be at all practicable, you need at the very least a functioning justice system.
Sure

Now, you might get Microsoft to cough up for a few judges, but then what if Microsoft is accused of "property rights" violations (which, bizzarely, trump human rights for libertarians)?
This is assuming that “evil monopolies” are contributing to the justice system. There are many ways to set this up, including a nominal head tax to each citizen, that have nothing to do with Microsoft.

Not “bizarre” at all. What is a human right? This is a slippery slope. Do you have the “right” to “free” healthcare? To “free” food? To a plasma TV? Everyone has a different definition of what their own particular view of “human rights” are and can’t see any other way of doing things. Gays want gay rights, Christians want Christian rights, pro-choice advocates want “abortion rights”, minorities want “minority rights” and so forth.

What about if the violator refuses to pay a penalty, or change their behaviour?
Remember, we are talking about a system where the substitute government would have substantially less power than it does now. It is simply absurd for an advocate of small government to claim that property rights can contain pollution.
No difference than now. Judicial system, police force, and jails. It is similarly absurd to claim that big government can contain pollution, particularly since it has a much worse track record (stalin and the aral sea, Ethiopia, etc.)


First, though it is fairly clear at this point, I should point out the stunning dishonesty implicit in this.
Fair. But first, I should point out, that you are a twit.

Somehow, the financial institutions of the 1920s count as "socialist"
I cited a particular example (Federal Reserve/1913) WHOSE VERY CHARTER IS TAKEN DIRECTLY FROM PLANK 5 OF THE FRIGGIN COMMUNIST MANIFESTO. YOU CAN CALL IT WHATEVER YOU LIKE, BUT IT IS WHAT IT IS.


yet the biotech industry supported by government funding and a whole host of market distorting incentives counts as "free". It should be obvious what the criterion being used here really is.
Of course it’s not “free”. You are either a moron, or stubbornly obtuse, or both. The example shows how, IN THE ABSENCE OF THE GOVERNMENT, a free market COULD solve the problem of long-tailed R&D. Venture Capitalists have larger risk-tolerance and longer investment time horizons than other investors. Christ you’re dull.


One of the major advances was the human genome project, which was largely carried out in academia where the results were freely available.

No, actually, it was NOT, and YOU are either woefully ignorant or purposefully dishonest. I have probably spent more time in a lab than you have, have analyzed this industry, met with management teams, and visited the companies we are talking about.


Remember Celera? Craig Venter? Applied Biosystems? Formerly PE Biosytems, now Applera? Who came up with the method of shotgun sequencing? Who built the tools to do this? If the same quality information was available as quickly for free from the public domain, who did Celera, Incyte, and others sell their database subscriptions to?

The government delayed the first stage of complete gene mapping by siphoning away intellectual and economic resources from private enterprise,.

As Lew Rockwell wrote:



…by sucking away intellectual and economic resources from private enterprise, the government delayed this first stage of complete gene mapping. Only when it appeared that the government operation would never complete its job–and why should it, since its budget was guaranteed and its scientists were comfy cozy in their positions?–did commercial enterprises step in to do the job.

The New York Times noted that "the public consortium has also fallen somewhat behind in its goal of attaining a working draft" of the genetic sequence and that "academic scientists have felt some chagrin" that the government "should be upstaged by a commercial rival financed by the company that made the consortium's DNA sequencing machines."

Yet these telling hints fail to capture the extent of the meltdown that the government’s gene bureau experienced. Founded in 1990, and freely spending $3 billion in tax dollars, it had consumed half its funding and only mapped 4 percent of the code. Fearing that private enterprise would horn in on its laziness, it did more, but even then only completed half the job as of 1998.

Fed up with the snail's pace and shocked at the waste, commercial rivals got into the act, and, using a new shorthand technique for decoding, spent a fraction of the money and forced the bureaucrats to scramble to prevent private enterprise from taking full credit. It was old-fashioned competition, not government largesse, that got the job done.

Celera is a division of PE Corporation, which has stockholders to whom it must answer for its every expense. It makes management decisions based on economic and not political criteria. It was driven to complete the job in a hurry and at low cost because of the prospect of profits from innovations in biotechnology.

…
But what about the claim that Celera benefitted from the publicly available information from the government’s gene bureau? To "benefit from" something is not the same thing as being dependent on it. Celera could have proceeded without the government’s research, but because it is private, it economizes on resources and uses what's available.

It is actually to the discredit of the government's bureau that it had all this information and still couldn't manage to complete the job. The same sort of claim is also made about the internet: because the government laid the first lines, we are supposed to thank big government for the web. In truth, it was commercial firms that made both genetic sequencing and web commerce come to life.

Also obscured in the news reports was that this sequencing would have never been completed but for a technique invented by private enterprise called "whole genome shotgun." As one researcher described it, the technique is comparable to shredding an entire book and putting it together again, while the government was taking an extra and unnecessary step of first dividing the book into chapters and then reassembling it. The second approach provides no research advantages but it does slow the process down, all the better to drag out the guarantees of government funding all the longer.

Celera pushed ahead with its new technique against all detractors because its incentive structure is wholly different from the government's. As is typical of government-employed scientists, their first concern is to retain and maximize their research grants. They follow the progress of legislation and Congressional appropriations even more closely than their research goals. The driving force is not success but stalling for as long as possible. The incentives for private enterprise are just the opposite: to economize on research spending so the product can be brought to market and the profits can begin to flow.

It is precisely this difference in the constellation of incentives that explains why government research is always either slow or misdirected as compared with private enterprise. Eliminate competition in research altogether and you produce strange places like the Soviet Union, which had a vast population of highly educated scientists, but technology that fell further and further behind the longer that socialist regime survived.

The difference between a society that advances scientifically and one that does not isn’t to be found in its number of scientists, but in the ability of its institutions to inspire creative research and bring it to fruition in the market. It is not science as such that produces advances, but capitalist economics that creates the right incentives and provides the means to bring science to market. In a socialist society, a million of the best scientists still can't create anything like a socially useful and available technology.




You sir, are an asshat. Do you ever get tired of being shown wrong? Pipe down, you might learn something.

Private companies then issued patents on discoveries "they" made, using techniques that were widely known.
I agree that patents are unfair monopolies. This is irrelevant.

This is a well established pattern whereby basic research is carried out by governments so that private companies can profit.
Again, the government got their money from where?

I'm not even saying this is always a bad idea, but giving all the credit to the free market requires some serious ideological blinkers.

No it doesn’t.

Actually, biotech generally has been loathe to embrace free markets.

Everyone is loathe to embrace free markets as long as there is a sugar daddy government that take money from other people to benefit their particular situation. Welfare mothers are also loathe to embrace free markets. This doesn’t change the case that the free market has a method for solving long-tailed R&D projects.


And it is well known that biotech firms have actively opposed consumer choice in the area of GM foods, essentially because their profits are geared toward monopoly positions. A free market? I don't think so.
Again, if you have a tool at your disposal that can make consumer choice irrelevant (government), wouldn’t you use it? That’s what governments do. They substitute the will of one group (in this case, agbio companies) for the will of consumers. YOU are trying to do the same thing every time YOU propse a “policy” or “regulation”.


So what you are saying is that the market can provide education just as good as now,

Better than now.

long as we ditch certain human rights and get children working at 10? (And get churches and charities to deal with the difficult cases). I'm not sure you've given me anything to rebut here.

No. I never said MAKE the children work at age 10. I said give them the OPTION to buy schooling on the free market like they do any other good/service, or the OPTION to go get valuable work experience, instead of FORCING them into schools that are obviously not working.


How long is this "while"? How long is "long term"? How many centuries are you actually talking about, before the widespread harm that you claim is inevitable will even be visible? Or is that too short term of me?

See my above post about testosterone, and slash and burn agriculture.


By "socialism", it bears repeating, jah means everyone except nutbar libertarians.
No dude, I mean people who advocate public control over the means of production. Been over this before


Keynes won this argument
No he didn’t. More people use his method. This does not mean he won the argument any more than a vast majority of people believing in astrology means that astrology won an argument. There are a lot of dumb people out there. (no offense to astrologers, I like the I-Ching myself, astrology makes much more sense than Keynes ever did, so sorry to lump you into a group with him).


and it is pure conspiracy theory to think that this is because world leaders then and ever since have all been "socialists".

No more so than it is for you to think that Microsoft would control the judicial system in a capitalist economy. You can CALL it “socialism” or “dog poop”—your choice of words is irrelevant. Economically, it’s the same thing.


It has rather more to do with the rising standard of living, levels of growth and the avoidance of global recessions.

Oh yeah? The great depression happened AFTER Keynesian policies were put into effect (and I have argued that these policies CAUSED the depression). Japan fell into a “liquidity trap” (this isn’t actually what happened) that the Keynesians didn’t exactly foresee. Does your standard of living “rise” if you take out $10k in debt and buy a plasma TV? That’s what the governments are doing (e.g., the US govt has a 70+ TRILLION dollar debt level, if you include off balance sheet items). Your knowledge of economics terminology clearly outpaces your understanding of the meaning behind said terminology.
 
 
MJ-12
15:22 / 10.12.04
This thread makes the Baby Mises cry.
 
 
Lurid Archive
16:22 / 10.12.04
There are many ways to set this up, including a nominal head tax to each citizen,

Sounds suspiciously SOCIALIST to me.

No difference than now. Judicial system, police force, and jails.

If your position is that you want to reduce the role of government, that is at least arguable. It seemed to me that you were claiming the markets could do all this and that a mixed system was "impossible". It sounds like your small government is going to have an awful lot of employees, though.

Of course it’s not “free”. You are either a moron, or stubbornly obtuse, or both. The example shows how, IN THE ABSENCE OF THE GOVERNMENT, a free market COULD solve the problem of long-tailed R&D.

No, I'm sorry that doresn't work. You can't claim that any problem with the current system is down to socialism, and then use as an example of the workability of the free market something even you don't recognise as being part of the free market.

No, actually, it was NOT, and YOU are either woefully ignorant or purposefully dishonest.

...

Remember Celera? Craig Venter? Applied Biosystems? Formerly PE Biosytems, now Applera? Who came up with the method of shotgun sequencing?


But I'm not trying to claim that private companies can't do any research. That would be silly. But Celera were criticised for witholding the parts of the genome they sequences while taking advantage of the publicly available information. Huge private success on the back of a multi-billion dollar government project doesn't spell market supremacy to me. My point is that the market isn't doing this alone (you are the one obsessed with saying that mixed solutions are "impossible").

I agree that patents are unfair monopolies. This is irrelevant.

Right. So you are saying that market are clearly able to do research, by using examples where there is huge government subsidy and the support of monopolistic practices. How does this tell you anything about how private companies can do all this in a free market? You are flagrantly begging the question.

Again, the government got their money from where?

So if the government spends something to do something worthwhile, then we must assume that private companies would have done the same but for the "socialists"? Uh huh.

No more so than it is for you to think that Microsoft would control the judicial system in a capitalist economy

You say above that people can take advantage of their position, even if this is unfair. Somehow that doesn't apply in free markets? Monopolies, ineqaulities of wealth and power aren't problems? Again, I think checks and balances are needed because people can abuse their power. You think that because people can abuse their power, we should remove checks and balances.

Oh yeah? The great depression happened AFTER Keynesian policies were put into effect (and I have argued that these policies CAUSED the depression).

And the non conspiracy theorist point of view is that Keynsian policies were only really implemented after the great depression, and those countries that did so earlier recovered earlier.

See my above post about testosterone, and slash and burn agriculture.

On the whole, if my doctor told me that taking some food was going to kill me and refused to give me any tests that showed harm being done and refused to comment on a time frame in which I might see that harm...then I would go to another doctor.
 
 
jbsay
17:27 / 10.12.04
Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If government spending is financed by borrowing from the commercial banks, it means credit expansion and inflation. If in the course of such an inflation the rise in commodity prices exceeds the rise in nominal wage rates, unemployment will drop. But what makes unemployment shrink is precisely the fact that real wage rates are falling.
--Ludwig von Mises, Socialism, the second greatest economic thinker of all time

But what about the Keynesian multiplier?
-Lurid, the greatest economic thinker of all time


[Ed: Please note the subtle finesse of Lurid’s inquisitive method, deftly disproving all of standard 20th Century American Economic Dogma in one concise rhetorical question]
[Implicitly suggesting reductio ad absurdum that all one need do to achieve Utopia on Earth is lower taxes to -100%, employ 100% of the population in the public sector, build an infinite number Pyramids--thus running an infinite deficit--and oh yeah printing $1bil in Federal Reserve notes for every man, woman, child, and lemur on the planet and dropping them from helicopters to the grateful and now-billionaire proletariats (and lemurs) the world over]
[Furthermore, sarcastically suggesting that we print another $1billion and send it via a spaceship to the Sun, with an additional promise to the Sun of Universal Healthcare Coverage (with no copay!) to induce the Sun to shine all day such that we never have to worry about night or cold winters ever again, and beautiful tan women with exotic accents pour us pina coladas by the pool all day and fan us and feed us grapes, and the productivity level of worldwide agriculture will increase parabolically as a function of the increased sunlight, which Greenspan can then add to his productivity numbers and deduct from CPI, thus bringing inflation to 0]
[Rhetorically wondering why not a single person in the history of the world has ever successfully implemented this brilliant scheme and we still have to drag ourselves out of bed and into work every day]
[Ignoring the obvious fact that in such a scheme of things there is not much room for a typical efficiency-minded, profit-seeking capitalist. Clearly this parasite would have to be shipped off to Siberia or at the very least employed in the public sector. Which is why Keynes proceeded to call for "the euthanasia of the rentier" directly after suggesting the "multiplier effect" and consequently arguing for "the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital." ]
[Brilliantly ignoring the fact that Lurid considers himself just such a capitalist (mainstream economist) who should thus logically be "euthanized" when he is not enthusiastically quoting tenets of the Communist Manifesto as espoused by one Lord Maynard Keynes so that the rest of us mortals can benefit and learn capitalist economics by counter-example.]
P.S. Lurid provides the following rigorous disproof:
As Keynes would describe it, "Social Income" can be divided into consumption and investment, ie,
Social Income = Consumption + Investment
If nine-tenths (0.9) of Income is consumed and one-tenth (0.1) of Income is invested, then it follows that Income is 10 times as great as Investment -- ie, has a "Multiplier" of 10, ie,
10 X Investment = Social Income
In the fantasyland of Keynesian non-sequitors, Lurid tells us, this means that income can be increased 10-fold by an increase in investment (ie, a simple proportion has been transformed into a functional relationship). Keynes conveniently treats government spending as a form of investment -- leading to his conclusion that government spending of $1 billion results in an increase in Social Income of $10 billion.
Lurid then remains faithful to Keynes' "logic" in constructing the following argument (insisting it is not a parody. Social Income can be divided between Your Income and the income of everyone else (Other's Income):
Social Income = Your Income + Others' Income
If Your Income is one-millionth (0.000001) of total income (Social Income) and everyone else's income (Others' Income) is 999,999 millionths (0.999999) of total income, this represents a "Multiplier" of one million, ie,
1,000,000 X Your Income = Social Income
Thus, the government only would need to print $25,000, give it to you and by the magic of the "Multiplier" Social Income would increase $25 billion. (Reductio ad absurdum)
Lurid leads us to the inevitable conclusion, The Iron Law of Economics, that
THERE IS NO SUCH THING AS A FREE F*CKING LUNCH

P.P.S The Santa Claus Fund
Lurid here calls to attention, as an interesting aside, the fact that his economic inferior Mises anticipated and rebutted the 1936 Keynesian "General Theory" a quarter- century ahead of Keynes: In his 1912 work, The Theory of Money and Credit, Mises contended that forced-draft credit expansion, not so-called "mature capitalism," carried the seeds of boom and bust. Here Mises praxeologically tied individual subjective values to price determination and to the quantity theory of money. In other words, he integrated the supply of and demand for money to marginal utility theory. And he saw that government, Keynes to the contrary, has no magical money save what it taxes or borrows from the people. As Mises said in Human Action and Lurid repeats here for the benefit of Us Mortal Proletariats:
At the bottom of the interventionist argument there is always the idea that the government or the State is an entity outside and above the social process of production, that it owns something which is not derived from taxing its subjects, and that it can spend this mythical something for definite purposes. This is the Santa Claus fable raised by Lord Keynes to the dignity of an economic doctrine and enthusiastically endorsed by all those who expect personal advantage from government spending. -von Mises, Socialism
[Lurid then one-ups Mises to clinch his airtight argument against a "contracyclical budget" so as to maintain "effective demand" and hence "full employment." Lurid regards the "G" in the Post- Keynesian "full employment" formula of Y = C + I + G as the most unstable, inflationary, politics-ridden, and unscientific balancing wheel that the economic managers can employ. For one thing, the formula ignores the political propensity to spend and spend, good times or bad. Moreover, it assumes the "pretense of knowledge," the statistical or mathematical measurability of the unmeasurable, for how much consumers and businessmen will spend in year X is not given to the mind of man. Most grievously, it ignores myriad market-sensitive cost-price relationships, notably the proclivity of trade unions and minimum wage laws to price labor out of markets-i.e., INTO UNEMPLOYMENT.
[Lurid thus concludes that Keynesian theory in practice leads, through fits of fiscal and monetary expansion, to inflation, controls, and ultimately stagnation and depression. Further, "G" so used, generally means the secular swelling of the public sector and shrinking of the private sector-a trend that spells trouble for human liberty, and as an interesting aside THE TOTAL F*CKING COLAPSE OF THE ECONOMIC SYSTEM since IF THE PUBLIC SECTOR DOMINATES THE ECONOMY, THERE IS NO ECONOMY SINCE THE GOVERNMENT SELLS NEITHER GOODS NOR SERVICES BUT INSTEAD DERIVES EVERYTHING FROM TAXES ON THE PRIVATE SECTOR AND/OR ISSUANCE OF DEBT TO THE PRIVATE SECTOR AND/OR THE INFLATIONARY ISSUANCE OF FIAT MONEY WHICH IS--AGAIN--A HIDDEN CONFIFISCATORY TAX ON THE PRIVATE SECTOR]
 
 
No star here laces
17:40 / 10.12.04
I will deal with advertising later

Please deal with it now.

Please also deal with the issue of the judiciary and its funding.

Please also deal with the principle that possesion of capital equals possesion of power and the fact that this is not part of standard economic theory.

Please also deal with Daniel Kahneman, whose actual hard scientific theories with, like, proofs and evidence and all those things you don't think are necessary to substantiate your arguments, have shown that given a free market, humans will not necessarily act in their own best interest.

Please answer the questions that have been posted on this thread without reference to an imaginary "socialist" enemy, who so far as I can see has not posted on this thread to date.

I do not believe in a planned economy, and I do not believe that Lurid, Pin, Kit Kat, Haus or any of the others on this thread do either. Please echo the courtesy that we extend to you and engage with our arguments as they are presented instead of projecting them on to the "socialist fundamentalist" straw man of your fevered imaginings.

You're clearly not stupid. Please apply that intelligence to the medium of debate as well as the process of economics.
 
 
jbsay
14:26 / 12.12.04
Advertising
1) there is no magical "ad spend" multiplier. see keynes above.
2) don't confuse relationships with causality (a big mistake in statistics). you cannot "prove" that ad spend caused higher sales. You can show a relationship. This relationship will NOT however show any opportunity costs (e.g.cut ad spend, use the money saved to lower prices). And it is not guaranteed to hold (increasing ad spend leads to a corresponding increase in sales as per our statistical model)
3) advertising, while important, is not the key to business. if you have a product that people genuinely need, you can get by on a small budget. If you have a product that you need to convince them they need, it will take more work.

4) you are (putting words in your mouth) implicitly assuming that more capital means its easier to do business and that you become a monopoly. it makes some things easier, other things more difficult. for instance, in the investing world, if you are a huge fund you have certain advantages (marketing, support, best access to companies and research, etc.). But there are tradeoffs too--its much more difficult to put up good numbers the larger you get. You become bureaucratic, you have to invest in larger companies for liquidity reasons (which makes it tougher to get good returns, and limits your investableuniverse). You can't move trade as nimbly. You lose your best employees to start up funds where the risk and potential rewards are higher. Etc.

Bottom line: bigger ad budgets, all else equal, are an advantage. but all else is never equal. Look at Blair Witch project or any other guerilla marketing examples.


Please also deal with the issue of the judiciary and its funding.
If you wanted to be really original you could ask about how you can have capitalism on the gold standard if people can mine it and thus increase the supply, just like fiat money.

Listen. I'm not a Founding Father. I'm not a bureaucrat, and i'm not a lawyer, and i'm not a politician. This doesn't particularly interest me. If we ever get to the point where we need a new articles of confederation, then you can ask me to work on the problem and I'll spend a couple of months on it and show you the compromises that need to be made and what economic effects they will have. Until then, I'm more interested in studying economics and business.

I can tell you what the general formula is (minimize government, maximize private property protection). I can also tell you what absolutely NOT to do (anything that Marx or Keynes recommended, for starters). If you want to write a constitution, go for it, i'll proofread it for you.


Please also deal with the principle that possesion of capital equals possesion of power and the fact that this is not part of standard economic theory.

It's not part of economic theory because its not true, it's a rehashing of Marxian misunderstandings of capitalism, part of the class-war thing, oppressive power of capitalists, tendency for monopolies under capitalism, etc. They've all been dealt with.

THe possesion of capital equals the possession of capital, not the possession of power. What you are saying is a little like when people say that "guns kill people". No, they don't. People kill people. The question is, do you want to concentrate guns in the hands of a few people (the government) or decentralize it such that everyone can own a gun and the balance of power is more equitable. History shows that concentrating guns in the hands of governments has disastrous results. Likewise, economic theory and history shows that concentrating the "posession of capital" in the hands of the government is disastrous both economically, environmentally, and socially.

Please also deal with Daniel Kahneman, whose actual hard scientific theories with, like, proofs and evidence and all those things you don't think are necessary to substantiate your arguments, have shown that given a free market, humans will not necessarily act in their own best interest.

There's nothing to deal with. Repeat after me. You cannot use statistics to prove anything about conscious human action. I dont care if he has a nobel prize or not


I do not believe in a planned economy, and I do not believe that Lurid, Pin, Kit Kat, Haus or any of the others on this thread do either. Please echo the courtesy that we extend to you and engage with our arguments as they are presented instead of projecting them on to the "socialist fundamentalist" straw man of your fevered imaginings.

Don't lie, you are all socialists with beady little eyes and grubby hands and I can see you walking around out there. Just because I live in a reinforced subterranean bunker doesnt mean I dont have a periscope. And dont try any of your Jedi mind tricks on me, I'm wearing a tinfoil hat.

In all seriousness, to paraphrase Nixon when he defaulted on the gold window ("We're all Keynesians now"), you are all socialists now, even if you dont realize it. If you have a central bank, you have a centralized and planned economy. End of story.

And all of your first insticts are that you need to "harness" the "market forces" for the "public good" because the "market" isnt doing a good enough job. That is the very definition of a planned economy. Go read the Tao, learn to cultivate stillness, and stop trying to tinker in other people's business.

I'm happy to share my knowledge, and if you ask questions nicely for the most part I'll respond in kind, but I also don't suffer fools gladly. You'll note that just because I've read the Idiot's Guide to Tarot doesnt mean I go spouting off my mouth on Barbelith telling people the "right way" to do Tarot, or that Thoth is better than Waite-Rider and so forth. I am thrilled for the opportunity to lurk and learn from you people who are clearly more knowledgeable in these areas than I am.

However, I have very little patience for people who are dilettantes in an area that I consider myself an expert on, but mistakenly believe they know what they're talking about and then make ridiculous assertions and points showing their profound ignorance of the issues at hand. I would bet that most of the people advocating Keynesianism on this board, or who say that it "won the argument", have never even READ his primary works, let alone the criticism of it by others.

It is better to remain silent and let people think you a fool than to open your mouth, shout a lot and wave your hands, and prove to them conclusively that you are a fool.

You're clearly not stupid.
Thank you for your kind words. My mom also says that once you get past my abrasive personality and my tendency to drool in public, I'm very loveable once you get to know me.

If I can return the compliment, you're clearly not entirely illiterate. And you're probably a much better dancer than I am (don't tellme , it'll just make me jealous).
 
 
jbsay
14:10 / 13.12.04
Now that I have perhaps shattered some of your economic worldviews, perchance some of you can approach the subject a bit more open mindedly.

This is a good overview from SafeHaven this morning comparing the modern financial (socialist) system to the Matrix. Maybe this will move the debate to a different tack and we can all behave in a civilized manner.

http://www.safehaven.com/article-2340.htm

The "machines" of the movie are political systems, governments, banks, and central banks which humans instituted to serve them, but they developed a mind of their own and surreptitiously enslaved human productive capacity to serve their own ends.
 
 
Regrettable Juvenilia
16:25 / 13.12.04
Brilliant! You're a gift that keeps on giving.
 
 
illmatic
08:47 / 14.12.04
I've don't think you've shattered anyone's worldview sunshine, more like everyone has become bored of arguing with you, because you are an ideologue, with a habit of changing definitons and skipping the difficult bits in people's counter-arguement ie. your response to 'Laces question about power above.
 
 
jbsay
11:56 / 14.12.04
No sparky, i walked you through the disproof for why keynes and what passes for economics in the mainstream is wrong. If you can't understand WHY that shatters your economic worldview, you should work on your reading comprehension. I also showed you why socialists and interventionists destroy the price system and economic calculation. Neither of these points has anything to do with my personal idealogy. If you can walk me through why the disproofs are incorrect, I'll be happy to admit I'm wrong and that you shattered my economic worldview.

The fact that some people are power hungry doesn't disprove capitalism any more than it disproves socialism (look at the damage done by power-hungry socialist dictators). You have a huge police apparatus and judiciary and government right now, and crime rates, murder rates, rape, theft, etc are all high. Upwards of 6% of the population is incarcerated. Likewise, at least 50million people have been killed in the past 100 years by their own socialist governments. This alone however is not enough to show that big government and/or socialism can't work any more than the existence of a black market (capitlist exchange) under socialism disproves socialist theory.

I personally neither need nor want a judiciary, so I dont spend a lot of time thinking about how to set one up--it's not evading the issue at all. If you are interested in it, I would refer you to Rothbard, Hans Herman Hoppe, and others who have spent much more time on this than I have.
 
 
jbsay
12:06 / 14.12.04
You win, I give up. Good luck to you, let's hope your economic worldview is better than mine or we'll all toast.
 
 
HCE
17:01 / 14.12.04
In a strange, sad way, it seems almost as though one side is arguing that people are basically evil and rapacious and will cannibalize each other unless restrained by some form of government, while the other side argues that people are basically wise and are capable of taking the long (not sure how long) view.
 
 
illmatic
12:14 / 15.12.04
you should work on your reading comprehension.

Entirely possible. I do intend to re-read a lot of this thread over Xmas (hey, how will you spend yours?) as I found a lot of your critque of "big government" pertinent, but I'm just not sold on the idea of unfettered capitalism as a remedy. I've a distrust of both government beauracy and the "free market" as a cure all.
 
 
illmatic
12:21 / 15.12.04
I'm going to quote Alas here, from the American Culture Wars thread in Switchboard, saying it a million times better than I could:

I have a healthy distrust for both "free" markets and government interventions in people's lives AT THE SAME TIME that I have a sense that there is beauty in true, lively market places and in basic, simple government guarantees that each body of every citizen here, regardless of that person's ethnicity or religion or social class or education level or political persuasion or employment status is worthwhile and will not be allowed to die of malnutrition or lack of health care.
 
 
Atyeo
17:01 / 15.12.04
In a vague attempt to cahnge the nature of the debate...

It has always bamboozled why economies go through cycles.

I know it seems a bit of a stupid question but I can't, for the life of me, work out why.

Surely, the quality of an economy is based on how much it can produce. The story everyone learns on day one of economics is the fishing - picking berries tale of trade. I can't see how expanding that over millions of people should result in recessions and booms.

Does it solely arise from loans and credit?

Is this what Jah means when he basically says Keynes was a twat.

Am I being thick?

(I think I can probably answer that one myself.)
 
 
Tryphena Absent
09:31 / 16.12.04
people are basically evil and rapacious and will cannibalize each other unless restrained by some form of government

People are already cannabilizing each other and that's with some form of government existing. You know- sweatshops, slave labour, Guantanamo Bay, third world farmers.
 
 
HCE
15:37 / 17.12.04
Would that be an argument on jah's side, then? Things are bad enough with governments in place, unbridled free markets could hardly do worse?
 
 
MJ-12
19:45 / 17.12.04
No, I don't think you need to accept that all people are evil/rapacious, or even that a very large percentage of the population are. It's simply that a small number of bad people can have effects disproportionate to their numbers, and the rapacious, by their nature, tend to gravitate towards positions/circumstances where they can exert undue power. Properly functioning, while govt in one sense is a concentration of power, in another it is actually diffusing power to even out inequities. For my definition of "properly functioning," anyway.
 
 
Tryphena Absent
21:07 / 17.12.04
No it's an argument against jah, he clearly needs to read Oliver Twist or even just watch the musical, a nice simple example of what happens when there is no government applying labour laws.
 
 
jbsay
21:23 / 17.12.04
Anna, while I appreciate your reading list suggestions, I've read Oliver Twist AND studied the history and economics of labor laws in a fair amount of detail. So I would retort that you clearly need to a) learn economics and b) examine real history, not just via the lens of historical fiction.

http://www.mises.org/freemarket_detail.asp?control=337&sortorder=articledate


History frowns upon the belief that government protects children's rights, and yet that is precisely the claim that undergirds child labor laws, now enforced in most parts of the world. Hardly anyone dares question their existence, much less the conventional history of child labor, no matter how many children and families continue to be victimized by government regulation of labor.


Consider child labor in nineteenth-century Britain--the wellspring from which modern child labor laws evolved. Immediately, hideous snapshots flash in the mind: five-year-olds being lowered into coal mines, wan children at textile mills, a Dickenesque Oliver asking for "more." These images are used to condemn the free market and the Industrial Revolution against whose evils a humanitarian government is said to have passed child labor laws. This analysis is badly mistaken.

For one thing, it misses a key distinction. Early-nineteenth-century Britain had two forms of child labor: free, and, parish or "pauper" children. Historians J.L. and Barbara Hammond, whose work on the British Industrial Revolution and child labor is considered definitive, recognized this distinction. The free_market economist Lawrence W. Reed, in his essay "Child Labor and the British Industrial Revolution," goes one step farther in recognizing the importance of the distinction.



Free-labor children lived with their parents or guardians and worked during the day at wages agreeable to those adults. But parents often refused to send their children into unusually harsh or dangerous work situations. As Reed notes, "Private factory owners could not forcibly subjugate "free labour" children; they could not compel them to work in conditions their parents found unacceptable."

For example, the unacceptable position of "scavenger" in textile factories. Typically, scavengers were young children--about six years old-- who had to salvage loose cotton from under the machinery. Because the machinery was running, the job was dangerous and injury was common.

Fortunately for businessmen willing to use the State to their advantage, government had no qualms about sending parish children to work under running machines. Parish children were under the direct authority of government officials. Parish workhouses had existed for centuries, but sympathy for the downtrodden was also lessened by the fact that taxes for poor relief in 1832 were over five times higher than they had been in 1760. Gertrude Himmelfarb s book The Idea of Poverty chronicles this shift in attitude toward the poor from compassion to condemnation.

In 1832, partly at the behest of labor-hungry manufacturers, the Royal Poor Law Commission began an inquiry into the "the practical operation of the laws for the relief of the poor." Its report divided the poor into two basic categories: lazy paupers who received governmental aid; and, the industrious working poor who were self-supporting. The result was the Poor Law of 1834, which statesman Benjamin Disraeli called an announcement that "poverty is a crime."

The Poor Law replaced outdoor relief (subsidies and handouts) with "poor houses" in which pauper children were virtually imprisoned. There, the conditions were made purposely harsh to discourage people from applying. Virtually every parish in Britain had abandoned workhouse children who, being bought and sold to factories, experienced the deepest horrors of child labor. In this, the workhouses were merely continuing a practice common before the Poor Laws.

It is no coincidence that the first industrial novel published in Britain was Michael Armstrong: Factory Boy by Frances Trollope. Michael was apprenticed to an agency for pauper children. Nor is it coincidence that "Oliver Twist" was not abused by his parents, but by brutal workhouse officials in comparison to whom Fagin was a humanitarian. And, remember, at the age of twelve with his family in debtor s prison, Dickens himself was a pauper child who slaved at the Blacking Factory. Reed observes, the "first Act in Britain that applied to factory children was passed to protect these very parish apprentices, not "free labor" children." The Act was explicit in doing so.

Thus, in advocating the regulation of child labor, social reformers asked government to remedy abuses for which it was largely responsible. Once more, government was "a disease masquerading as its own cure." To their credit, some reformers realized that regulations to help the poor did precisely the opposite
 
 
jbsay
21:29 / 17.12.04
MJ wrote
It's simply that a small number of bad people can have effects disproportionate to their numbers, and the rapacious, by their nature, tend to gravitate towards positions/circumstances where they can exert undue power. Properly functioning, while govt in one sense is a concentration of power, in another it is actually diffusing power to even out inequities. For my definition of "properly functioning," anyway.

There is an excellent cartoon summary of FA Hayek's excellent book "the road to serfdom" here--namely, how the worst rise to the top in government. (does this sound at all familiar to anyone in the US right now?)

http://www.mises.org/TRTS.htm

The point of the capitalism is that government power is diffused and strictly limited to the preservation of private property, thus minimizing the ability of people to wield concentrated power. Does this mean that even under this scenario govt wont overstep it's bounds? Of course not. The constitution in the US was thrown out the window at least 100 years ago. The point is its the better way to do this, and again socialism is economically impossible in the long run
 
 
jbsay
21:33 / 17.12.04
For the record, I never said Keynes was a twat. He WAS a filthy Marxist charlatan paedophile who pretended to be an economist (under false pretenses), but I never said he was a twat.

And yes, the expansion of money/credit is what causes the boom/bust cycle. The most in-depth explanation of the business cycle may be found in Mises' Theory of Money and Credit.
 
 
jbsay
21:45 / 17.12.04
Here is an excellent summary of Keynes theory, far better (and better written) than I could do:

http://www.mises.org/fullstory.aspx?control=1578


First—and I apologize in advance—a little basic economic reasoning, but, don’t worry, it’s something every business man, or housewife, or school kid saving up his pocket money will readily understand.

This concept is the simple one which says that if you reduce the price of something, more of it will tend to get sold.

Are you a retailer, stuck with too many beach hats in a poor summer? Slash the prices, draw attention to them and maybe you’ll get to shift them all at last.
...

Now this straightforward bit of logic also applies to the cost of almost all other economic ‘goods’ and though we don’t always think of it in these terms, labor is a good, too.

It’s something that can’t be had for free or in infinite supply. It’s something which commands a value and which must be paid for on a competitive market.

It’s a good.

So, if, for whatever reason—say, because an unsustainable, technology-centred Boom came to a crashing halt—there are temporarily too many workers for employers to hire, cut the price of the goods (lower wages) and more of them will tend to be bought (put back on the payroll).

Now, of course, people aren’t beach hats.

Beach hats don’t have feelings. Beach hats don’t have a large mortgage to support, or a car lease to maintain. Beach hats don’t insist that they’re not getting out of bed for less than $20 an hour, not with a college education behind them. Beach hats don’t scream at the injustices of the capitalist system when the store owner unloads them at a 20% discount.

Thus, it is often difficult to persuade an unemployed man that he should maybe aim a little lower on the wage scale and try to discount himself back into a job, on the reckoning that 90%, say, of his former salary is worth a whole lot more than none.

That same man may be doubly reluctant to compromise if he can rely on a welfare scheme which will pay him a goodly portion of his former wages, even if he does nothing but sit around drinking coffee all day, getting under the feet of his long-suffering spouse.

Even if he would rather work than be idle, it may still prove impossible if there is a minimum wage under which he’s not allowed to offer his services at all.

Nor will the wannabe-working man benefit much from a union policy which insists all jobs at a given company comply with their rules, not the boss’s (unions, you see, maintain their grip not by fighting against the abstraction of "Capital", but by insisting "Capital" enforces a high degree of discrimination against both non-union members and the unemployed).

Finally, our job-seeker might find that though he’s able to offer to work for a low enough pay packet to tempt his boss, that latter can’t afford all the payroll taxes, insurance costs and regulatory burdens imposed upon him by the state, so it’s still no dice.

This is where the evil genius of John Maynard Keynes came in, seventy years or so ago when he saw that, if Mohammed would not go to the mountain for a lower pay check, the mountain must come to Mohammed.

What Keynes realized was that if modern institutional arrangements and political short-termism were going to rule out that wages could fall far enough in the Bust, in terms of the dollars and cents people were paid in (if wages were ‘sticky downwards’ as economists have it), he could achieve the same result by making the dollars and cents themselves worth less!

So, why not just INflate all the troubles away, he pondered from his Ivory Tower at King’s, Cambridge?

That way, though the working man would still be able to pull in the same $550 a week, say, in folding stuff, as he ever did, that $550 would end up buying less at the shops, since the price of goods would have risen.

In other words, suppose it used to be that a prospective new boss would only be able to sell the goods the worker was able to produce for, perhaps, $900—out of which would come the new hire’s required $550—but that, sadly, at this level, he would not reckon on being able to cover all his other costs, like those to repair and replace his equipment, to pay his tax bill, his banker and stockholders, and then to have a little left over for his own trouble. So, it would have been a case of, Sorry, Buddy and I can’t spare a dime, either!

However, thanks to Lord Keynes’s debauching of money itself, that same businessman might see he could now sell the same goods for $1000, instead of $900. All of a sudden, the arithmetic works and, hey, you can start Monday, pal.

With this shallow piece of knavery did Keynes consolidate his overblown reputation and, at the same time, prise open wider the Pandora’s Box of Boom and Bust, of the rise of the Money Trust, of the unceasing encroachment of Big Government into our lives, and of the eventual extinguishing our freedoms, amid the decay of our morals and the erosion of our prosperity.

But the insidious thing about this black magic is that, in the short run, it seems to work, much like, in the short run, the hair of the dog seems to lessen the effects of a hangover. Then again, it was Keynes himself who superciliously remarked that, "in the long run, we are all dead."
 
 
jbsay
21:47 / 17.12.04
whoops, almost forgot the best part (how good a word is "turgid")



Thus, though his own prose can be turgid and his chains of false reasoning tortuous, the message was eventually made clear enough to all: monetary inflation can price people back into work so long as they are under the illusion that they are not suffering a real cut in their wages.

Sooner, rather than later, of course, that illusion was dispelled. Soon, the workers and their representatives, not to mention the pensioners and welfare recipients, began to watch the published price indices very closely and, at the first hint of an uptick, they would all demand to be compensated for the loss to their purchasing power which that increase comprised.

Indeed, before very long, they were making the process pretty much automatic, by building indexation clauses into working agreements and state benefit payments.

So, as more and more money was pumped into the world economy in the 1960s—led by a US trying then, as now, to have both Guns and Butter—and as this INflation pushed prices up ever more rapidly, workers became ever quicker to adapt to the change, making any lessening of their real cost to employers ever more transient and unreliable.

INflation, then, was not reducing unemployment in anything like the manner the Keynesians had predicted, and this was solely because the plumbers had outsmarted the professors and the sausage makers had gotten a jump on the central bankers.

In due course, this helped hasten the monetary breakdown of the early 70s. Nixon put America into another partial default (FDR having been the first to do so) by closing the gold window. The breakdown of the Bretton Woods system, which Keynes himself had helped to construct before his death, soon followed.
 
 
jbsay
22:13 / 17.12.04
more on child labor, some propaganda to counteract anna's anti-capitalist (and uninformed) propaganda
http://www.libertyhaven.com/countriesandregions/britain/childlaborbritish.html

Capitalistic competition is also why "child labor" has all but disappeared, despite unionist claims to the contrary. Young people originally left the farms to work in harsh factory conditions because it was a matter of survival for them and their families. But as workers became better paid—thanks to capital investment and subsequent productivity improvements—more and more people could afford to keep their children at home and in school. Union-backed legislation prohibiting child labor came after the decline in child labor had already begun. Moreover, child labor laws have always been protectionist and aimed at depriving young people of the opportunity to work. Since child labor sometimes competes with unionized labor, unions have long sought to use the power of the state to deprive young people of the right to work. In the Third World today, the alternative to "child labor" is all too often begging, prostitution, crime, or starvation. Unions absurdly proclaim to be taking the moral high road by advocating protectionist policies that inevitably lead to these consequences.

...


Professor Ludwig von Mises, the great Austrian economist, put it well when he noted that the generally deplorable conditions extant for centuries before the Industrial Revolution, and the low levels of productivity which created them, caused families to embrace the new opportunities the factories represented: "It is a distortion of facts to say that the factories carried off the housewives from the nurseries and the kitchens and the children from their play. These women had nothing to cook with and to feed their children. These children were destitute and starving. Their only refuge was the factory. It saved them, in the strict sense of the term, from death by starvation."3

...

It has not been uncommon for historians, including many who lived and wrote in the 19th century, to report the travails of the apprentice children without ever realizing they were effectively indicting government, not the economic arrangement of free exchange we call capitalism.
...
The emergence of capitalism was sparked by a desire of Englishmen to rid themselves of coercive economic arrangements. The free laborer increasingly supplanted the serf as capitalism blossomed. It is a gross and most unfortunate distortion of history for anyone to contend that capitalism or its industrialization was to blame for the agony of the apprentice children.

Though it is inaccurate to judge capitalism guilty of the sins of parish apprenticeship, it would also be inaccurate to assume that free-labor children worked under ideal conditions in the early days of the Industrial Revolution. By today's standards, their situation was clearly bad. Such capitalist achievements as air conditioning and high levels of productivity would, in time, substantially ameliorate it, however. The evidence in favor of capitalism is thus compellingly suggestive: From 1750 to 1850, when the population of Great Britain nearly tripled, the exclusive choice of those flocking to the country for jobs was to work for private capitalists.
...
So it is that child labor was relieved of its worst attributes not by legislative fiat, but by the progressive march of an ever more productive, capitalist system. Child labor was virtually eliminated when, for the first time in history, the productivity of parents in free labor markets rose to the point that it was no longer economically necessary for children to work in order to survive. The emancipators and benefactors of children were not legislators or factory inspectors, but factory owners and financiers. Their efforts and investments in machinery led to a rise in real wages, to a growing abundance of goods at lower prices, and to an incomparable improvement in the general standard of living.

Of all the interpretations of industrial history, it would be difficult to find one more perverse than that which ascribes the suffering of children to capitalism and its Industrial Revolution. The popular critique of child labor in industrial Britain is unwarranted, misdirected propaganda. The Hammonds and others should have focused on the activities of government, not capitalists, as the source of the children's plight. It is a confusion which has unnecessarily taken a heavy toll on the case for freedom and free markets. On this issue, it is long overdue for the friends of capitalism to take the ideological and historiographical offen-sive.


  
 
jbsay
22:33 / 17.12.04
here's one of the articles i was previously looking for regarding public goods (lighthouses etc)

http://www.mises.org/journals/qjae/pdf/qjae7_2_1.pdf
 
 
jbsay
22:43 / 17.12.04
I didn't adequately address how interventionism leads to socialism


From Mises


Middle-of-the-Road Policy
Leads to Socialism

3. How Interventionism Works
It is not the task of today's discussion to raise any questions about the merits either of capitalism or of socialism. I am dealing today with interventionism alone. And I do not intend to enter into an arbitrary evaluation of interventionism from any preconceived point of view. My only concern is to show how interventionism works and whether or not it can be considered as a pattern of a permanent system for society's economic organization.

The interventionists emphasize that they plan to retain private ownership of the means of production, entrepreneurship and market exchange. But, they go on to say, it is peremptory to prevent these capitalist institutions from spreading havoc and unfairly exploiting the majority of people. It is the duty of government to restrain, by orders and prohibitions, the greed of the propertied classes lest their acquisitiveness harm the poorer classes. Unhampered or laissez-faire capitalism is an evil. But in order to eliminate its evils, there is no need to abolish capitalism entirely. It is possible to improve the capitalist system by government interference with the actions of the capitalists and entrepreneurs. Such government regulation and regimentation of business is the only method to keep off totalitarian socialism and to salvage those features of capitalism which are worth preserving. On the ground of this philosophy, the interventionists advocate a galaxy of various measures. Let us pick out one of them, the very popular scheme of price control



...




4. How Price Control Leads to Socialism
The government believes that the price of a definite commodity, e.g., milk, is too high. It wants to make it possible for the poor to give their children more milk. Thus it resorts to a price ceiling and fixes the price of milk at a lower rate than that prevailing on the free market. The result is that the marginal producers of milk, those producing at the highest cost, now incur losses. As no individual farmer or businessman can go on producing at a loss, these marginal producers stop producing and selling milk on the market. They will use their cows and their skill for other more profitable purposes. They will, for example, produce butter, cheese or meat. There will be less milk available for the consumers, not more. This, or course, is contrary to the intentions of the government. It wanted to make it easier for some people to buy more milk. But, as an outcome of its interference, the supply available drops. The measure proves abortive from the very point of view of the government and the groups it was eager to favor. It brings about a state of affairs, which—again from the point of view of the government—is even less desirable than the previous state of affairs which it was designed to improve.

Now, the government is faced with an alternative. It can abrogate its decree and refrain from any further endeavors to control the price of milk. But if it insists upon its intention to keep the price of milk below the rate the unhampered market would have determined and wants nonetheless to avoid a drop in the supply of milk, it must try to eliminate the causes that render the marginal producers' business unremunerative. It must add to the first decree concerning only the price of milk a second decree fixing the prices of the factors of production necessary for the production of milk at such a low rate that the marginal producers of milk will no longer suffer losses and will therefore abstain from restricting output. But then the same story repeats itself on a remoter plane. The supply of the factors of production required for the production of milk drops, and again the government is back where it started. If it does not want to admit defeat and to abstain from any meddling with prices, it must push further and fix the prices of those factors of production which are needed for the production of the factors necessary for the production of milk. Thus the government is forced to go further and further, fixing step by step the prices of all consumers' goods and of all factors of production—both human, i.e., labor, and material—and to order every entrepreneur and every worker to continue work at these prices and wages. No branch of industry can be omitted from this all-round fixing of prices and wages and from this obligation to produce those quantities which the government wants to see produced. If some branches were to be left free out of regard for the fact that they produce only goods qualified as non-vital or even as luxuries, capital and labor would tend to flow into them and the result would be a drop in the supply of those goods, the prices of which government has fixed precisely because it considers them as indispensable for the satisfaction of the needs of the masses.

But when this state of all-round control of business is attained, there can no longer be any question of a market economy. No longer do the citizens by their buying and abstention from buying determine what should be produced and how. The power to decide these matters has devolved upon the government. This is no longer capitalism; it is all-round planning by the government, it is socialism.
 
 
jbsay
22:47 / 17.12.04
And the kicker




5. The Zwangswirtschaft Type of Socialism
It is, of course, true that this type of socialism preserves some of the labels and the outward appearance of capitalism. It maintains, seemingly and nominally, private ownership of the means of production, prices, wages, interest rates and profits. In fact, however, nothing counts but the government's unrestricted autocracy. The government tells the entrepreneurs and capitalists what to produce and in what quantity and quality, at what prices to buy and from whom, at what prices to sell and to whom. It decrees at what wages and where the workers must work. Market exchange is but a sham. All the prices, wages, and interest rates are determined by the authority. They are prices, wages, and interest rates in appearance only; in fact they are merely quantity relations in the government's orders. The government, not the consumers, directs production. The government determines, directs production. The government determines each citizen's income, it assigns to everybody the position in which he has to work. This is socialism in the outward guise of capitalism. It is the Zwangswirtschaft of Hitler's German Reich and the planned economy of Great Britain.


6. German and British Experience
For the scheme of social transformation which I have depicted is not merely a theoretical construction. It is a realistic portrayal of the succession of events that brought about socialism in Germany, in Great Britain and in some other countries.

The Germans, in the first World War, began with price ceilings for a small group of consumers' goods considered as vital necessities. It was the inevitable failure of these measures that impelled them to go further and further until, in the second period of the war, they designed the Hindenburg plan. In the context of the Hindenburg plan no room whatever was left for a free choice on the part of the consumers and for initiative action on the part of business. All economic activities were unconditionally subordinated to the exclusive jurisdiction of the authorities. The total defeat of the Kaiser swept the whole imperial apparatus of administration away and with it went also the grandiose plan. But when in 1931 Chancellor Brüning embarked anew on a policy of price control and his successors, first of all Hitler, obstinately clung to it, the same story repeated itself.
 
  

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