Timsup2nothin
Deity
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Whose capital? How do you cause this 'flood'? Not disputing, just trying to see where you are coming from here.
How should an economy be structured?
- Thread starter hobbsyoyo
- Start date
Whose capital? How do you cause this 'flood'? Not disputing, just trying to see where you are coming from here.
I would abolish inheritance. At death, all assets are sold and distributed among all others. So you could still accumulate wealth over your lifetime, but you couldn't do so across several lifetimes and wealth couldn't become as concentrated as it is now.
You need to start with the constraints on what is possible.
True Free Market Capitalism: This is not a thing which has ever existed. This is not a thing which will ever exist in the future. This is not a thing which can exist. It is not even within the realm of theoretical possibility for this to exist in the real world.
True full on communism: This is not a thing which has ever existed. This is not a thing which will ever exist in the future. This is not a thing which can exist. It is not even within the realm of theoretical possibility for this to exist in the real world.
So, take the extremes out of the picture, and what have you got left? Every economy in the real world is what is called a mixed economy. Parts of it are market based and privately owned, parts of it are government based and publicly owned. Parts of it are private decisions, parts of it are government regulation. This will always be true.
The realm you want to consider is within this framework of mixed economy. Within this there is a vast amount of room for one extreme or the other. But the best results come some place in the middle.
Economies function imperfectly. But market based economies function pretty damned well at doing a very broad range of things. When Adam Smith came up with the concept of the 'invisible hand', he was net referring to some supernatural force that guides the economy. Although many people today seem to have the impression that that was what he had in mind. There is no supernatural force guiding the economy. What there is is people making decisions which best benefit themselves, given the choices before them. The theory behind this is that each person is best able to determine what is best for themselves. And so by taking as many decisions as possible to the lowest level possible, the best decisions will be made. But when taking as many decisions as possible to a higher level of planning, decision quality invariably declines. This is what is called the socialist calculation problem. In effect, a central planner simply is not capable of having as much information as they need to have in order to make the right decisions.
So, best decisions are made at the lowest level. That being true, why have government? And the answer is that markets have many imperfections. And if no one is regulating these imperfections, then the system gets ground down until it stalls. Unregulated capitalism is like putting sand in your engine oil. You are eventually going to break down, catastrophically. The biggest one of the imperfections of the economy is what is known generally as 'externalities'. What that means is that any transaction between 2 people is likely to have an effect on someone who was not a party to that transaction. And because of that, the people who are agreeing to the transaction get a free benefit at someone else's expense.
Because economies don't function without government, you never find a situation where there is no government and a capitalist economy is doing well. But because market transactions are so efficient, you never find an economy which is centrally planned and owned which is doing well. The reality is always in the middle. Now where in the middle, that's the subject of endless debate. But it needs to be understood that much of that debate is not honest academic debate, based on the evidence. But is rather paid partisan advocacy. The term which is used to describe this is 'rent seeking'. So all of those 'free market' think tanks, Heritage, AEI, too many others to name, they are not researching what actually exists and making recommendations, they are paid advertising groups which are rent seeking for their clients. They are trying to get government policies which benefit their clients at the expense of the general public. Nearly all of the debate against government policies in the US today are this; rent seeking. Rich people trying to use government to screw the rest of us.
So if you really want an economy to work well, you need to get liberals back in charge of it. Hiring conservatives to run a capitalist economy is like hiring a convicted serial child rapist to run a boarding school. If you've thought about it at all, you know it will end in horror.
True Free Market Capitalism: This is not a thing which has ever existed. This is not a thing which will ever exist in the future. This is not a thing which can exist. It is not even within the realm of theoretical possibility for this to exist in the real world.
True full on communism: This is not a thing which has ever existed. This is not a thing which will ever exist in the future. This is not a thing which can exist. It is not even within the realm of theoretical possibility for this to exist in the real world.
So, take the extremes out of the picture, and what have you got left? Every economy in the real world is what is called a mixed economy. Parts of it are market based and privately owned, parts of it are government based and publicly owned. Parts of it are private decisions, parts of it are government regulation. This will always be true.
The realm you want to consider is within this framework of mixed economy. Within this there is a vast amount of room for one extreme or the other. But the best results come some place in the middle.
Economies function imperfectly. But market based economies function pretty damned well at doing a very broad range of things. When Adam Smith came up with the concept of the 'invisible hand', he was net referring to some supernatural force that guides the economy. Although many people today seem to have the impression that that was what he had in mind. There is no supernatural force guiding the economy. What there is is people making decisions which best benefit themselves, given the choices before them. The theory behind this is that each person is best able to determine what is best for themselves. And so by taking as many decisions as possible to the lowest level possible, the best decisions will be made. But when taking as many decisions as possible to a higher level of planning, decision quality invariably declines. This is what is called the socialist calculation problem. In effect, a central planner simply is not capable of having as much information as they need to have in order to make the right decisions.
So, best decisions are made at the lowest level. That being true, why have government? And the answer is that markets have many imperfections. And if no one is regulating these imperfections, then the system gets ground down until it stalls. Unregulated capitalism is like putting sand in your engine oil. You are eventually going to break down, catastrophically. The biggest one of the imperfections of the economy is what is known generally as 'externalities'. What that means is that any transaction between 2 people is likely to have an effect on someone who was not a party to that transaction. And because of that, the people who are agreeing to the transaction get a free benefit at someone else's expense.
Because economies don't function without government, you never find a situation where there is no government and a capitalist economy is doing well. But because market transactions are so efficient, you never find an economy which is centrally planned and owned which is doing well. The reality is always in the middle. Now where in the middle, that's the subject of endless debate. But it needs to be understood that much of that debate is not honest academic debate, based on the evidence. But is rather paid partisan advocacy. The term which is used to describe this is 'rent seeking'. So all of those 'free market' think tanks, Heritage, AEI, too many others to name, they are not researching what actually exists and making recommendations, they are paid advertising groups which are rent seeking for their clients. They are trying to get government policies which benefit their clients at the expense of the general public. Nearly all of the debate against government policies in the US today are this; rent seeking. Rich people trying to use government to screw the rest of us.
So if you really want an economy to work well, you need to get liberals back in charge of it. Hiring conservatives to run a capitalist economy is like hiring a convicted serial child rapist to run a boarding school. If you've thought about it at all, you know it will end in horror.
We are at the point now where the biggest obstacle to the rollout of renewable energy is the rate at which new installations and builds can be paid for, and old soon-to-be-stranded power generation assets can be retired. It's a cashflow problem, so the more capital is flowing in, the faster the decarbonisation happens. So - more government injection of funds is needed in basically every country.
This sort of program would probably have a New Deal type impact on employment too so that's good as well.
Timsup2nothin
Deity
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Fair enough. I lean more towards "eat the rich and crap their wealth into energy development," myself, but this is good too.
hobbsyoyo
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Great in theory, hard to pull off. To circumvent this I'd just start giving my kids a massive yearly allowance while I was alive, or hire them for do-nothing jobs with astronomically high salaries.
But I agree completely with the sentiment. I actually don't mind the fact that billionaires exist. I want people to continue striving for those kinds of outcomes. What is wrong is for people to be handed those outcome at birth and then spending their entire lives trying to deprive other people of those outcomes. This deprivation comes in all sizes.
Paying lobbyists to ensure taxes go down ensure less resources are there for everyone else. Using wage suppression is direct theft, if usually invisible to the guy who's being stolen from. And of course there is the continual entrenchment of wealth through inheritance.
Lexicus
Deity
I don't think you can have billionaires without them paying lobbyists to ensure taxes go down (or any other political objective favorable to billionaires).
If capping wealth is a goal, the rules doing so must be in place at the most fundamentals levels of the government and cultural apparatus. To do so in the US would take a ground up reform of our tax policy and procedure. I'd love to see it happen.
innonimatu
the resident Cassandra
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Easy answer. Communist free market. The free market is good. Capitalism is a disease of the free market.
Free market is the regulated free trade of goods and services. Every market has rules and the rules must be so that the market is as free as possible: no monopolies allowed, too big operators get broken apart in size. Or in some cases are taken to operate outside the marked if they are recognized as some necessary public good to be supplied unconditionally.
Communist because there are those cases, as we acknowledge even now. Many more than is commonly acknowledged. Every natural monopoly. And all the legal monopolies agreed to be necessary to provide a safe and comfortable standard of living to the population (and here there is much ground for political differences...). These exist outside the market because of their very nature (advantages of scale, social requirements). They must be managed communally, by the state or some other public-interest group with democratically accountable and (ideally) non-permanent management. Both the costs and the benefits of these monopolies must be distributed equally for the benefit of the whole population, no role for private profit is admissible. This means no privatization, no faux "private competition" set up by states, for such monopolies.
The sad thing is that post-ww2 social democracy aimed for this (though it never achieved it), and some of the communist block governments also (though marked communism was more limited than it could have been). Much of what was achieved has been corrupted or destroyed since the 1980s. And now we see live expectancies of new generations actually falling: first in the immediate aftermath of the disaster befell the former "communist block" in the early 90s with the theft of everything not nailed down, now even inside the "victor" of that cold war.
It would probably be a good idea to ditch all the old names, so twisted their meanings have become (social democrats, socialists, republicans, whatever) and put forth a new practical party with a simple declared aim of doing whatever it takes to improve the living standard of the population disregarding statistical outliers (the 1% will lose out...). Call it "Free Market Communists" and see some heads explode within the estabelished parties and media. Smash the lie that those are incompatible things.
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innonimatu
the resident Cassandra
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"Liberals" were long sold out to the wealthy and engaged in increasing inequality, with benefits accruing to themselves and their families of course. Bill Clinton was an america liberal, was he not? Tony Blair was a british liberal, was he not? Holland was a french liberal, was he not? Schroeder was a german liberal, was he not?
Cutlass, fewer and fewer people are voting for liberals because those liberals earned a well-deserved fame of liars and phonies. If they must have liars and phonies they'll vote for the "honest" ones. Your liberals are a lost cause.
Lexicus
Deity
I too am of the opinion that socialism is necessary to have free markets.
warpus
Sommerswerd asked me to change this
First you start with a solid free market base. That's what the economy should be based on; good competitive principles that lead to innovation.
The second step is to put in well balanced regulations so that the economy not only benefits those who own the companies, but also protects the interests of the employees, the people as a whole, and the environment.
As part of my particular ideas about regulation I would also for the most part only allow co-operative types of corporations. This will ensure that the goals of the economy as a whole mirror the goals of the overall community and that democratic principles are at the core of my style of economy.
Other than that I would perform case studies and modify the details as the situation warranted going forward, sticking to an evidence-based approach first and foremost, relying on the advice of experts and analysis of what has worked in the past and what didn't.
What are the goals that your co-op based economy will support?
warpus
Sommerswerd asked me to change this
The goals of each company will be up to the owners and as such up to the customers.
For instance let's say we are analyzing a company that sells shoes. People who buy shoes at this company will be able to vote in the elections that determine who sits on the board of directors. This in turns drives the process that determines the overall goals of the company.
The point of this is to ensure that the company has the same goals as the customers - in this case let's say the creation of affordable yet stylish shoes. Or whatever the people running for the board manage to convince people to vote for them for.
To give you an example of how this would work in practice - MEC. A successful co-operative corporation that exists in Canada. Here is what they say about how they are structured as a company:
Borachio
Way past lunacy
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I'm not so sure that inherited wealth is such a big problem. (Apart from monarchies.)
The number of multi-generational fortunes that exist isn't very large. (I think).
After two or three generations, those inheriting vast wealth will tend to have frittered it all away. Maybe?
(I seem, as usual, to have misplaced all the relevant statistics, at the moment. I think I may have a large whole in my coat pocket.)
I don't think inheriting a lot of wealth is conducive to either a sound work ethic or healthy ambitions. I mean, how could it be?
For those who believe in a free market....
Do you mean the consumerism aspect of it: the free choice what and where to buy ?
Or the generation of goods and services ?
And is there a free market for the generation of goods and services when the barrier to entry for a new company is too high to be of practical importance.
These two aspects are quite different animals !!!
That consumerism aspect is close to most of our live, all the many choices "we" have,
and I am afraid that this overwhelms a good discussion and opinion on the free market.
To dig in the aspect of generation of goods and services,
as a way to get sharp what matters there
Say you would set up your own business...
and not a new pub, some new food take away service, a commodity with your own style and flavor added, purchasing commodities, selling directly to the consumer......
but something within the manufacturing chain:
You have to deal with:
Hereby noted that a start up company is seen as a risk by money suppliers and have to pay a much higher interest than existing commercial business.
The maturity of the sector, which is meanwhile high in most sectors, meaning that the frequency of game changing new techs is low, meaning that most of the time your barrier to entry is high, with now and then a short time window where you have to react fast at the lower barrier to entry during that window.
Hereby noted that the general speed at which new techs are absorbed in the business, the shortening of time between the innovation and maturity, is still increasing. The time delay from invention on the R&D department to selling it to the market is a prime KPI for big companies.
In general
IF a sector is mature, the amount of free martket starts to diminish (no new companies in Capital/IP intensive business), and the positive effect of competition has already caused the bulk of the possible effeciency.
If a sector is fully stable, has fully become a commodity, where almost all knowledge is integrated in the machines, the procedures, the company software, that sector has only Capital and marketing left as critical succes factors.
Whereby noted that the database of the companies is getting better and better filled with our consumerism behaviour (retail leading the way with their customer cards), meaning that marketing will as well be absorbed in the expert company software (which means that you can buy that info for Capital).
Furthermore the IP laws encourage big companies to "control" these nasty new techs that upset the status quo of their position. They will buy IP directly or through buying small innovative companies that own IP, to be able to dose the amount of new techs at for them convenient moments.
All in all
It is increasingly Capital that controls the "free market"
My conclusion is that regulating, a defense line against certain abuses, will not be enough.
It will for example be able to deal will durability.
But against the background of global trade, a tough and slow moving improvement, just like child labor, inhuman labor conditions, environmental, food health, climate issues.
If a business is a pure matured commodity with high Capital intensity, there is nothing to gain to leave that sector in the free market, because the high capital intensity (the low interest) will favor the government as owner, and the high matured commodity does nor bring much further price effeciency anymore for the consumer.
If a government does not own these sectors, some oligarchical groups will make sure they own them. A free ride for money.
Energy renewables an example of this sector, assuming that maturity commodity will be there in a few decades.
Meaning also that some cooperation with big companies at the current innovative stage, by subsidy injections, is not totally wrong AS LONG AS their market share stays below 30% or so.
The IP abuse of big Pharma shows already how the free market is a complete failure for that sector if, as a government, you are not able to handle on a sovereign base, the peoples base, IP and knowledge.
As sir Francis Bacon already said: "knowledge is power".
A lesson not taken over by free marketeers that see universities primarily as an education machine to supply the free market with well educated employeess.... NOT as an owned source of government power to set borders, to direct change where the free market gets issues.
Do you mean the consumerism aspect of it: the free choice what and where to buy ?
Or the generation of goods and services ?
And is there a free market for the generation of goods and services when the barrier to entry for a new company is too high to be of practical importance.
These two aspects are quite different animals !!!
That consumerism aspect is close to most of our live, all the many choices "we" have,
and I am afraid that this overwhelms a good discussion and opinion on the free market.
To dig in the aspect of generation of goods and services,
as a way to get sharp what matters there
Say you would set up your own business...
and not a new pub, some new food take away service, a commodity with your own style and flavor added, purchasing commodities, selling directly to the consumer......
but something within the manufacturing chain:
You have to deal with:
- Capital
- Knowledge
- Employees
- Network and market info suppliers/customers
- Admin compliances
Hereby noted that a start up company is seen as a risk by money suppliers and have to pay a much higher interest than existing commercial business.
The maturity of the sector, which is meanwhile high in most sectors, meaning that the frequency of game changing new techs is low, meaning that most of the time your barrier to entry is high, with now and then a short time window where you have to react fast at the lower barrier to entry during that window.
Hereby noted that the general speed at which new techs are absorbed in the business, the shortening of time between the innovation and maturity, is still increasing. The time delay from invention on the R&D department to selling it to the market is a prime KPI for big companies.
In general
IF a sector is mature, the amount of free martket starts to diminish (no new companies in Capital/IP intensive business), and the positive effect of competition has already caused the bulk of the possible effeciency.
If a sector is fully stable, has fully become a commodity, where almost all knowledge is integrated in the machines, the procedures, the company software, that sector has only Capital and marketing left as critical succes factors.
Whereby noted that the database of the companies is getting better and better filled with our consumerism behaviour (retail leading the way with their customer cards), meaning that marketing will as well be absorbed in the expert company software (which means that you can buy that info for Capital).
Furthermore the IP laws encourage big companies to "control" these nasty new techs that upset the status quo of their position. They will buy IP directly or through buying small innovative companies that own IP, to be able to dose the amount of new techs at for them convenient moments.
All in all
It is increasingly Capital that controls the "free market"
My conclusion is that regulating, a defense line against certain abuses, will not be enough.
It will for example be able to deal will durability.
But against the background of global trade, a tough and slow moving improvement, just like child labor, inhuman labor conditions, environmental, food health, climate issues.
If a business is a pure matured commodity with high Capital intensity, there is nothing to gain to leave that sector in the free market, because the high capital intensity (the low interest) will favor the government as owner, and the high matured commodity does nor bring much further price effeciency anymore for the consumer.
If a government does not own these sectors, some oligarchical groups will make sure they own them. A free ride for money.
Energy renewables an example of this sector, assuming that maturity commodity will be there in a few decades.
Meaning also that some cooperation with big companies at the current innovative stage, by subsidy injections, is not totally wrong AS LONG AS their market share stays below 30% or so.
The IP abuse of big Pharma shows already how the free market is a complete failure for that sector if, as a government, you are not able to handle on a sovereign base, the peoples base, IP and knowledge.
As sir Francis Bacon already said: "knowledge is power".
A lesson not taken over by free marketeers that see universities primarily as an education machine to supply the free market with well educated employeess.... NOT as an owned source of government power to set borders, to direct change where the free market gets issues.
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Broken_Erika
Play with me.
The economy should be structured out of Elmers glue, dental floss and dried macaroni.
Mise
isle of lucy
Goal is to enable human flourishing. So whatever economic set-up best enables human flourishing. This is best done in a liberal way, i.e. using veil of ignorance, triadic relation of liberty, etc. This is a settled matter in my mind; the specifics of how we do this are of course not at all settled.
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