connecting a couple minimum wage points.

[JohnRoberts]

By definition if they live in the middle of nowhere (like where I live) there is no public transportation infrastructure.  Where I live there is the interstate and a rail-road track but the train doesn't stop here or carry passengers, just freight. Out here in the real middle of nowhere there aren't even taxi cabs.  I might call one from 25 miles away but can't imagine what that would cost.

There are lots of places in the US far more sparse than where I live, but we are not remotely like Europe for population density.

Well, I was referring to the consequences this would have in a country like Germany, where taxi cabs are highly regulated, monitored, are required by law to transport every applicant and provide local public transport infrastructure. It's reliable and accessible to everyone, even to people who don't live in city centers, don't own cell phones, at whatever time etc.  And it provides jobs that don't subject workers to self-exploitation because there are standards.

I don't give a flying f__ about Uber, and German regulators can certainly protect their local cab industry if they choose to. I am not familiar with the concept of taxis as public transportation. While I guess if it gets regulated tightly enough they can make it resemble that.  FWIW Uber needs for it's drivers to be vetted and bonded to insure passenger safety. If they meet the standards they should be allowed to compete.

I had to research the taxi business in Germany to understand your public transportation characterization. One obvious difference between taxi service over there and here, here cabs go where the customers are and compete for business. In Germany the cabs don't roam but wait at cab stands for customers to go there or call. Then the customer pays for that distance traveled too. (kind of like me calling for a cab 25 miles away. I'd have to pay for that trip coming and going).  The regulation that cabs wait at stands, it pretty much a sweet deal for the cab drivers that reduces competition and results in more expensive service to most customers who don't live at the cab stand. It is also very German because it is more efficient (for the cab operators not the customers).  ;D

And there is no 20% extraction of earnings to wall street. Which makes Uber extremely profitable, all they have to do is run the app and collect the money. Compared to the taxi craft it is again a net bottom-to-top redistribution. 

And it does this also at the expense of people's quality of life. Good luck to the 75 year old coming from the supermarket to find someone to drive her home safely with all the shopping bags she cannot carry all the way home.

If Uber took all the profitable routes, the remaining jobs would be highly unprofitable, the taxi system couldn't work. It's progress for some, leaving others out in the desert.

The same goes for AirBnB and other similar offerings. Their raison d'etre is extraction, not advancement.

Air BNB is similar. Are they challenging the hotel infrastructure..? You bet they are and this is good too. The customer generally wins. There is always a need for regulation, but the job of regulation is not to protect the establish old guard, but to insure consumer safety and prevent, not assist monopolistic behavior.

I do not give government regulators credit for being all knowing with the wisdom to manage future outcomes. 

Of course opinions vary and some hold government in higher regard than I do..

JR

 

[JohnRoberts]

Getting back to the minimum wage topic - ideally there would be a healthy balance of power between business leadership and workers, analogous to a healthy balance between consumers and business sales. If this balance of power is out of whack, worker's can be paid less and less (many things contribute to this, primarily unemployment, i.e. why pay someone $10/hr if a bunch of people are  jobless and willing to work for $8/hr).

Indeed the supply and demand of a free market will control the cost of labor. All wages are higher in tight labor areas around new/developing oil fields.  The real issue as I stated before is weak economic expansion and poor business environment that discourages them from investing (here).  So the problem is not enough high paying jobs.

Making menial labor more expensive will just speed up automation, and reduce opportunities for kids to get on the employment ladder's bottom step.

It seems, looking at history, that capitalist systems without government regulation (aimed to maintain a healthy balance), morph into systems with business leadership overpowering worker's interests  - wages drop - poor working conditions - etc.
Let's face it, the best and the brightest are on the business leadership side, and they  figure out how to maximize their profits at the expense of worker's.

There is always a place for regulation. The worst labor abuses happen in regions suffering from deep poverty and high unemployment. I am inclined to think of garment workers in SE asia, not burger flippers here.  In SE asia worker safety is almost more of a concern than  wages, while wages matter.

It seems economists KNOW the answer - but for some reason greed obscures common sense. Without a healthy balance of power between worker's and business leadership, the path leads to political instability.

Ah the coming revolution.  :'( If economists know the answer the problem is which answer?  As the old joke goes ask two economists a question and you'll get 3 answers.  That's why I am following the Sea-Tac minimum wage hike as a relatively clean economic experiment we can observe and learn from.

I disagree with the central bank mandate to both manage inflation "and" employment. Inflation is relatively straight forward to control with money supply, but employment is far more complex and involves factors the central banker have little control over. An increase in the wealth disparity can be attributed to central bank policy inflating hard assets that are held more by wealthy than poor.  Pumping in too much liquidity increases the potential for future bubbles.

If you think economists know "the" solution, please share. I am not an economist but stayed at a holiday inn (once).

JR

 

[living sounds]

Let's face it, the best and the brightest are on the business leadership side, and they  figure out how to maximize their profits at the expense of worker's.

They are often not the best and the brightest, but simply wealthy heirs. And shamelessly greedy and ignorant. Like the Koch brothers...

You don't need to be clever to make more money out of a lot of money, you can buy all the expertise you need. And influence the political system to further your goals.

 

[dmp]

That wording may have been poor.
I was observing that there can easily be an imbalance of power with business leadership able to drive down wages, with all the available resources wealth brings.

 

[mattiasNYC]

John,

I just think we have very different views on economic and political systems. I don't think your "shorthand" is true and you therefore make blanket statements which you then contradict. So it's hard to know what to reply to.

But the bottom line is two-fold: You've made up your mind that Capitalism can't be replaced and I disagree, and secondly that we're off topic.

 

[JohnRoberts]

Let's face it, the best and the brightest are on the business leadership side, and they  figure out how to maximize their profits at the expense of worker's.

They are often not the best and the brightest, but simply wealthy heirs. And shamelessly greedy and ignorant. Like the Koch brothers...

Being kindler and gentler perhaps you could use a little less pejorative language when describing the Koch family. I understand the anger they engender from the left because they are conservative politically and put their money where their mouth is, kind of like George Soros and other deep pockets on left do in support of their world view. 

According to wiki, so take it FWIW,  Koch industries employs 50,000 workers in the US and another 20,000 outside the US (second largest private US corporation). The nature of the industries they operate are not likely to employ many minimum wage workers. They have some black marks for environmental issues associated with oil industry operations. Apparently their wealth comes from inventing a better process for cracking (refining) petroleum to make gasoline. I don't think they fit your cookie cutter image of ugly capitalist. .

I am not a fan of big money having undue influence in politics, I'd rather see a celebrity death match between the Koch bothers on one side and George Soros on the other. Maybe a tag team match with Jeffrey Katzenberg on Soros's team.

You don't need to be clever to make more money out of a lot of money, you can buy all the expertise you need. And influence the political system to further your goals.

it seems this would take more money than I have but the number of lobbyists and concentration of wealth in Washington DC is prima facia evidence of the high level of influence being traded there (for money). 

Crony capitalism is not a flaw of capitalism, is is a flaw of governance for tolerating or even encouraging cronyism. We all pay the price for this cronyism (I didn't have to look that word up). .

JR

PS: I think the acceptance or tolerance for offensive name calling like with the Koch brothers comes from group think, when we surround ourselves with like-thinking people such language does not seem ofennsive. I do not know for a fact but suspect the Koch brothers are not ignorant. Sometimes we ASSume that anyone who does not share our opinion about things must be ignorant. Our voters break roughly 50-50 and don't the ignorant break on party lines while I do expect half to be below average intelligence (or is that below median?). 

 

[JohnRoberts]

John,

I just think we have very different views on economic and political systems. I don't think your "shorthand" is true and you therefore make blanket statements which you then contradict. So it's hard to know what to reply to.

Shorthand is by definition incomplete and these are complex topics.

But the bottom line is two-fold: You've made up your mind that Capitalism can't be replaced and I disagree, and secondly that we're off topic.

My opinion is that capitalism is not perfect, just better than everything elese.

I do not form these opinions lightly, and consider "The road to Serfdom" by Hayek a compelling argument against central planning and government management of the private sector. "The wealth of nations " by Adam Smith is a dry read (boring) but if you can make it through it, it delivers a powerful message about free trade and markets. If course there is plenty disagreement between economists, so not all will stand up and salute these giants, but i will..

JR

 

[mattiasNYC]

Shorthand is by definition incomplete and these are complex topics.

But it doesn't have to be inaccurate though, does it? What purpose does it serve to write shorthand if it's inaccurate and later contradicted? It only looks like hyperbole (assuming the person issuing the statement isn't ignorant, and you don't seem to be).

My opinion is that capitalism is not perfect, just better than everything elese.

I do not form these opinions lightly, and consider "The road to Serfdom" by Hayek a compelling argument against central planning and government management of the private sector. "The wealth of nations " by Adam Smith is a dry read (boring) but if you can make it through it, it delivers a powerful message about free trade and markets. If course there is plenty disagreement between economists, so not all will stand up and salute these giants, but i will..

JR

I've read neither but Capitalism isn't "better than anything else".

This is all a mostly inconsequential discussion and topic. Regardless of what happens to the minimum wage business entities will strive to lower costs and in the end we'll have huge problems. This is all about how resources are allocated. One can argue until one is blue in the face about the virtues of a very small minority of the worlds population being absolutely disgustingly wealthy, but in the end that'll be a problem, minimum wage or not. People finally get fed up when they see no reasonable likely way to improve their lives and then they revolt. Only thing in the US is the masses are grossly uneducated on various political systems (including capitalism) and live believing in an American dream that doesn't exist for them statistically speaking. Once they stop dreaming there'll be trouble.

Fortunately, for now, people can argue about inconsequential stuff like how potus salutes or whether Bush is stupid, and pit pro-Capitalist Democrats against pro-Capitalist Republicans and pretend there's a difference of any significance.

Sometimes we ASSume that anyone who does not share our opinion about things must be ignorant. Our voters break roughly 50-50 and don't the ignorant break on party lines while I do expect half to be below average intelligence (or is that below median?).

The Democratic party is a right-of-center party in favor of capitalism and the Republican party is slightly right of the Democratic party, so I don't really see how the above is relevant.

 

[JohnRoberts]

My opinion is that capitalism is not perfect, just better than everything elese.

I do not form these opinions lightly, and consider "The road to Serfdom" by Hayek a compelling argument against central planning and government management of the private sector. "The wealth of nations " by Adam Smith is a dry read (boring) but if you can make it through it, it delivers a powerful message about free trade and markets. If course there is plenty disagreement between economists, so not all will stand up and salute these giants, but i will..

JR

I've read neither but Capitalism isn't "better than anything else".

This is all a mostly inconsequential discussion and topic. Regardless of what happens to the minimum wage business entities will strive to lower costs and in the end we'll have huge problems. This is all about how resources are allocated.

Ding ding ding... Yes, free markets are the most effective way to allocate resources.  Both Adam Smith and Hayek talk about letting markets allocate resources instead of government planners. 

One can argue until one is blue in the face about the virtues of a very small minority of the worlds population being absolutely disgustingly wealthy, but in the end that'll be a problem, minimum wage or not. People finally get fed up when they see no reasonable likely way to improve their lives and then they revolt. Only thing in the US is the masses are grossly uneducated on various political systems (including capitalism) and live believing in an American dream that doesn't exist for them statistically speaking. Once they stop dreaming there'll be trouble.

Fortunately, for now, people can argue about inconsequential stuff like how potus salutes or whether Bush is stupid, and pit pro-Capitalist Democrats against pro-Capitalist Republicans and pretend there's a difference of any significance.

Sometimes we ASSume that anyone who does not share our opinion about things must be ignorant. Our voters break roughly 50-50 and don't the ignorant break on party lines while I do expect half to be below average intelligence (or is that below median?).

The Democratic party is a right-of-center party in favor of capitalism and the Republican party is slightly right of the Democratic party, so I don't really see how the above is relevant.

These exact same conflicts between wealthy and not, and numerous experiments in trying different forms of government have gone on for thousands of years.  Another book for your reading list is the "federalist papers", actually a collection of essays written by our founders a few hundred years ago as they were debating our form of government. There is a pretty good discussion of historical forms of governance that preceded, while lacking recent history since then. ,

I am not so arrogant as to suggest a new better form of government can't be invented, but the typical protesters are mainly concerned with getting some power for themselves. We do need to get our government out of the ditch and back up onto the road,  and operating like our founders spelled it out in the constitution.

The HK protests look sincere from this distance.

JR

PS: I thought about doing my homework on Sweden but got busy... I do notice they are in the news recently for dropping their interest rate to 0% So apparently connected enough to the world economic system to suffer the same malaise (actually dropping the interest rate is central bankers trying to avoid deflation like Japan suffered in the '90s and still hasn't recovered from. ). All of this central bank easing is fungible so the US liquidity was helping keep the rest of the world propped up. Now that we stopped quantitative easing (this week) central banks in the rest of world are stepping up to make up for the liquidity we withdrew.  This historic monetary engineering is another huge economic experiment that may not end well... We won't know until we are well clear of it. 

Sweden is a constitutional monarchy organized as parliamentary democracy.  According to wiki Sweden is the 9th largest arms exporter, and recognizes the palestinian state. That sounds interesting in juxtaposition but doesn't mean anything special, exports are good, and being liberal is not a crime.  I need to do more homework.

 

[living sounds]

it seems this would take more money than I have but the number of lobbyists and concentration of wealth in Washington DC is prima facia evidence of the high level of influence being traded there (for money). 

Crony capitalism is not a flaw of capitalism, is is a flaw of governance for tolerating or even encouraging cronyism. We all pay the price for this cronyism (I didn't have to look that word up). .

Crony capitalism is what happens without sufficient rules. Deregulation has given rise to the corrupt system we have now.  And then it fuels itself, by changing society for the worse.

PS: I think the acceptance or tolerance for offensive name calling like with the Koch brothers comes from group think, when we surround ourselves with like-thinking people such language does not seem ofennsive. I do not know for a fact but suspect the Koch brothers are not ignorant. Sometimes we ASSume that anyone who does not share our opinion about things must be ignorant. Our voters break roughly 50-50 and don't the ignorant break on party lines while I do expect half to be below average intelligence (or is that below median?).

Intelligence doesn't naturally align with lack of ignorance. George Bush has an above-average IQ (around 120), but he's famously ignorant, lacking intellectual curiosity.

But there's more: In total there are four factors relevant for rational thought, these  are intelligence, knowledge, need for cognition, and open-mindedness. This explains it very well:

http://www.skeptic.com/insight/more-on-why-smart-people-are-not-always-rational/

 

[living sounds]

I do not form these opinions lightly, and consider "The road to Serfdom" by Hayek a compelling argument against central planning and government management of the private sector.

That's a straw man. We're not arguing for central planning or government management of the private sector.  At least I am not. What I am arguing for are strict rules that make sure the system as a whole remains in equilibrium. Negative feedback, if you will.  8)

 

[JohnRoberts]

it seems this would take more money than I have but the number of lobbyists and concentration of wealth in Washington DC is prima facia evidence of the high level of influence being traded there (for money). 

Crony capitalism is not a flaw of capitalism, is is a flaw of governance for tolerating or even encouraging cronyism. We all pay the price for this cronyism (I didn't have to look that word up). .

Crony capitalism is what happens without sufficient rules. Deregulation has given rise to the corrupt system we have now.  And then it fuels itself, by changing society for the worse.

There are two schools of thought. One believes that government is the answer for everything, and another that "too much" government is the problem.

In my judgement it is the size of government and fraction of the private sector that they control directly or indirectly with regulation, that attracts the lobbyists buying influence. The crony capitalism is not just between business and legislators who want money to pay for expensive election campaigns but between lobbyists and regulators that often jump into cushy jobs after leaving government service. There are rules restricting even that but IIRC it's just a time window.

There is a valid need for some regulation to prevent the excesses of capitalism but government is not all knowing and all wise.

PS: I think the acceptance or tolerance for offensive name calling like with the Koch brothers comes from group think, when we surround ourselves with like-thinking people such language does not seem ofennsive. I do not know for a fact but suspect the Koch brothers are not ignorant. Sometimes we ASSume that anyone who does not share our opinion about things must be ignorant. Our voters break roughly 50-50 and don't the ignorant break on party lines while I do expect half to be below average intelligence (or is that below median?).

Intelligence doesn't naturally align with lack of ignorance. George Bush has an above-average IQ (around 120), but he's famously ignorant, lacking intellectual curiosity.

Some more group think from Bush haters. I blame Bush in part for turning the other cheek and not pushing back against all the cheap shots, but I am thankful he is not as thin skinned as our current leader who routinely verbally attacks individual reporters.

Bush in known to have read more than one book a week, mostly history and non-fiction. He is probably better informed than all his detractors. He has a speech affectation that makes people think he is dumb, because of his speech patterns but IMO he is far from it. I appreciate his class in not butting into politics after his term ended, unlike other ex-presidents who still clamor for the spot light.

But there's more: In total there are four factors relevant for rational thought, these  are intelligence, knowledge, need for cognition, and open-mindedness. This explains it very well:

http://www.skeptic.com/insight/more-on-why-smart-people-are-not-always-rational/

I do not know GB personally but suspect he is adequately all of the above.  Again I am not sure what "need for cognition" is. From the latin a need to think?  I found it pretty ironic when Paul McCartney was in the White house library and made a snarky comment that "at least the current President can read". I suspect Bush has read more books than Sir Paul and Obama combined.

Again evidence of group think the like-mined people do not even notice the comment as offensive, while clearly not based on fact.

JR

 

[living sounds]

There are two schools of thought. One believes that government is the answer for everything, and another that "too much" government is the problem.

Look John, you're doing it again. Straw man.  Arbitrarily assigning extreme positions nobody actually holds and them arguing against them won't get us anywhere.

Some more group think from Bush haters. I blame Bush in part for turning the other cheek and not pushing back against all the cheap shots, but I am thankful he is not as thin skinned as our current leader who routinely verbally attacks individual reporters.

Forget the Bush thing, look at the science behind the argument (in the link).


I've also found this great debate (ignore the title):

http://www.thebaffler.com/odds-and-ends/soak-the-rich

 

[JohnRoberts]

I do not form these opinions lightly, and consider "The road to Serfdom" by Hayek a compelling argument against central planning and government management of the private sector.

That's a straw man. We're not arguing for central planning or government management of the private sector.  At least I am not. What I am arguing for are strict rules that make sure the system as a whole remains in equilibrium. Negative feedback, if you will.  8)

You can call it a straw man, that doesn't make it so. Government telling private business what they must pay workers, what and how much free health care they should provide, is just the start. Government has larger designs over how business operates, if allowed to continue on this trajectory.

Keeping the system in equilibrium is not a desirable goal. I suspect you are talking about a collective employees vs employers balance of power. This can not be mandated, wage growth will only come from more unfilled jobs than workers. I am repeating myself that raising the minimum wage will just lead to less minimum wage jobs (as evidenced by the increasing use of automation in Sea-Tac)

The private sector IMO should be dynamic and growing to provide more employment opportunities. Many private businesses do not even know how to do that and fail. The government certainly doesn't know how to grow private business and their behavior the last few years is a dark cloud still hanging over business decision making.  This uncertainty and bad tax policy depresses domestic investment and job growth. 

JR (straw man)

 

[living sounds]

Keeping the system in equilibrium is not a desirable goal. I suspect you are talking about a collective employees vs employers balance of power. This can not be mandated, wage growth will only come from more unfilled jobs than workers. I am repeating myself that raising the minimum wage will just lead to less minimum wage jobs (as evidenced by the increasing use of automation in Sea-Tac)

The private sector IMO should be dynamic and growing to provide more employment opportunities. Many private businesses do not even know how to do that and fail. The government certainly doesn't know how to grow private business and their behavior the last few years is a dark cloud still hanging over business decision making.  This uncertainty and bad tax policy depresses domestic investment and job growth. 

JR (straw man)

Keeping the system in equilibrium means making sure the wealth gets redistributed to a degree that makes it impossible for a minority to live unproductively on inherited wealth at the expense of the rest at increasingly lopsided angles.

It has nothing to do with telling businesses what to do, just making sure the amount of extraction/concentration is limited by negative feedback (ideally global taxes). It's explained well in the debate I linked above, and in order for capitalism to survive long term the insight is growing that this will be a necessity. We need many small companies that compete, are flexible and innovative, and since this won't happen by itself it needs to be adressed by policy.

Furthermore, we won't have high growth rates again, without a catastrophic event it is just not going to happen. We need to adapt our policies to this reality.

 

[mattiasNYC]

Ding ding ding... Yes, free markets are the most effective way to allocate resources.  Both Adam Smith and Hayek talk about letting markets allocate resources instead of government planners. 

In my opinion you're committing a common "mistake" above.  You appear to believe that "efficiency" is an inherently positive value. But it is not. "Efficiency" is a "value neutral" description of a process. To use an admittedly crude and often disliked example we could say that the Nazi's were very efficient at killing people. That doesn't make "efficiency" a good thing obviously. In that context it was a bad thing.

In the context we're discussing you're now implying that improved efficiency is what free markets give us, efficiency at allocating resources, and that this efficiency is good. Well, good for whom? It's certainly good for businesses, on that we certainly agree. But businesses, and in fact the whole capitalist system, are intellectual constructs that are meant to serve mankind, not the other way around. So the real question is how do we evaluate whether or not people in general are benefitting optimally by using this system?

Suppose we have a community of 1,000 people, and the capitalist system generates a wealth measured at $1,000,000. So now we look at the distribution of that wealth: the top 10% of people, 100 people, get 75% of the wealth (let's just say they divide that equally), then they all get 7,500 each. The remaining 900 people get about 275 each. Now let's say we compare that society with one that's exactly the same but has a system where all wealth is divided equally, and as a result it's only half as "efficient" and thus generates a wealth of only 500,000: everyone now gets 500, almost twice the wealth for half the efficiency for most people. For the 90% of the people not at the top this system was more efficient at giving them what they want. And it just gets worse if we add another 10-20% to that top.

See my points here? 1: If you want to argue that "efficiency" is good and the most of it can be had in capitalism then you need to put it in a context that is relevant to human beings. 2: Do we choose a system based on what's best for the few or what's best for the majority?

> And just to be 100% clear; I'm not advocating everyone getting exactly the same amount of money regardless of anything.

PS: I thought about doing my homework on Sweden but got busy... I do notice they are in the news recently for dropping their interest rate to 0% So apparently connected enough to the world economic system to suffer the same malaise

Sweden is a constitutional monarchy organized as parliamentary democracy.  According to wiki Sweden is the 9th largest arms exporter, and recognizes the palestinian state. That sounds interesting in juxtaposition but doesn't mean anything special, exports are good, and being liberal is not a crime.  I need to do more homework.

I am a Swedish citizen living in the US actually.

Sweden post-WWII did very well and decided to follow what was called a third-way-policy, effectively splitting the economy into one part which was called the "private sector", a capitalist sector where individuals and businesses could do business, and a "public sector", in which the state ran things. The public sector owned and operated education, health care, emergency services, infrastructure (roads, railways, airways etc), IT (television, telecom, internet), mining, energy (nuclear and water mostly), the military, liquor sales, driving licensing etc. A huge sector in other words.

This worked extremely well and was what led Sweden to become an example for a large part of the world since citizens got free health care, free eduaction, good housing, decent pay, unemployment benefits etc. Pretty much all of the population. With the trend of the 80's-90's however Sweden got right of center governments which decided that integration with Europe/the rest of the world and liberalization of trade and financial markets was the sh!t. Ergo the start of selling off public property.

Now, we've seen in recent years scandals where kids show up to school to see a note on the door saying it's out of business, all while the owner is making millions. Politicians act surprised and make statements about the responsibility of business owners and perhaps reviewing regulations etc, but it was all foreseeable. Sweden slipped in the latest global study on education. We see poorly operated infrastructure. What began as modest fees for health care have steadily crept up with no increase in the quality of service. Corporations such as IKEA moved abroad as soon as possible.

As far as I can see Sweden is an excellent example of what happens when you allow market forces to decide what happens with the allocation of resources. Of course Sweden has done well on a national level, but it gets back to my earlier point that it's all relative to what one feel is important. The wealth-gap increased in Sweden while quality of a lot of services stagnated or decreased.

Capitalism is not the only system that produces wealth, and capitalism isn't the best system at distributing resources in a way that benefit people the most. The minimum wage will either slow down or speed up the progress towards an inevitably problematic situation in which we'll have to either do something else or suffer great turmoil first and then still do something else.

 

[JohnRoberts]

Ding ding ding... Yes, free markets are the most effective way to allocate resources.  Both Adam Smith and Hayek talk about letting markets allocate resources instead of government planners. 

In my opinion you're committing a common "mistake" above.  You appear to believe that "efficiency" is an inherently positive value. But it is not. "Efficiency" is a "value neutral" description of a process. To use an admittedly crude and often disliked example we could say that the Nazi's were very efficient at killing people. That doesn't make "efficiency" a good thing obviously. In that context it was a bad thing.

Just to be clear I said "effective" not "efficient"... Letting government control enterprise can be efficient (like having cabs sit at the stands waiting for customers), but it is not desirable or best use of those resources for most customers. 

In the context we're discussing you're now implying that improved efficiency is what free markets give us, efficiency at allocating resources, and that this efficiency is good. Well, good for whom?

Again not efficiency but effectiveness. Only a free market market with price discovery and even playing field generates the highest return for resources (for the owner of those resources). Best use of resources will get mired in subjective considerations, like a government taking mineral rights and exploiting them for the "general good".  The shale oil boom in America has been powered by individuals being able to sell the rights to the oil and gas beneath their property to other private companies to exploit.  So despite a constrictive government energy policy opposed to exploiting fossil fuels, many citizens have been able to get fair value for their property. (Of course there are anecdotes of abuse, and many opponents favor not exploiting our wealth of fossil fuels at all. )

It's certainly good for businesses, on that we certainly agree. But businesses, and in fact the whole capitalist system, are intellectual constructs that are meant to serve mankind, not the other way around. So the real question is how do we evaluate whether or not people in general are benefitting optimally by using this system?

Business is based on rule of law and property rights. This is mainly to serve business. The public benefit is the side effect of growing business where jobs and new wealth are created. As I have said in almost every post, unfettered capitalism can lead to abuse so it requires some regulation to prevent monopolistic anti-competitive behavior. 

Suppose we have a community of 1,000 people, and the capitalist system generates a wealth measured at $1,000,000. So now we look at the distribution of that wealth: the top 10% of people, 100 people, get 75% of the wealth (let's just say they divide that equally), then they all get 7,500 each. The remaining 900 people get about 275 each. Now let's say we compare that society with one that's exactly the same but has a system where all wealth is divided equally, and as a result it's only half as "efficient" and thus generates a wealth of only 500,000: everyone now gets 500, almost twice the wealth for half the efficiency for most people. For the 90% of the people not at the top this system was more efficient at giving them what they want. And it just gets worse if we add another 10-20% to that top.

I am not a fan of wealth redistribution by government force.. The money I have earned from a lifetime working, inventing, and making smart investments does not need to be redistributed to some slacker just because he does have as much as me (I don't have that much).  Government's job if any is to provide the level playing field so he can make money, just like I did. Not to take it from me and give it to him. Sorry if this sounds stingy or uncharitable, but i see the increase in number of people on the dole with negative incentives to work. Economics teaches that unwed mothers who lose entitlements for getting a job, will not get a job that means working more and getting less. This can be fixed, but government need to adjust assistance programs to actually benefit the needy, not just buy their votes, and keep them on the government teat forever. 

See my points here? 1: If you want to argue that "efficiency" is good and the most of it can be had in capitalism then you need to put it in a context that is relevant to human beings. 2: Do we choose a system based on what's best for the few or what's best for the majority?

> And just to be 100% clear; I'm not advocating everyone getting exactly the same amount of money regardless of anything.

PS: I thought about doing my homework on Sweden but got busy... I do notice they are in the news recently for dropping their interest rate to 0% So apparently connected enough to the world economic system to suffer the same malaise

Sweden is a constitutional monarchy organized as parliamentary democracy.  According to wiki Sweden is the 9th largest arms exporter, and recognizes the palestinian state. That sounds interesting in juxtaposition but doesn't mean anything special, exports are good, and being liberal is not a crime.  I need to do more homework.

I am a Swedish citizen living in the US actually.

välkommen

Sweden post-WWII did very well

Apparently neutral in WWI and tried to be neutral in WWII while supplying some industrial support for Germany (they may not have had much choice.) 

and decided to follow what was called a third-way-policy, effectively splitting the economy into one part which was called the "private sector", a capitalist sector where individuals and businesses could do business, and a "public sector", in which the state ran things. The public sector owned and operated education, health care, emergency services, infrastructure (roads, railways, airways etc), IT (television, telecom, internet), mining, energy (nuclear and water mostly), the military, liquor sales, driving licensing etc. A huge sector in other words.

I have noticed several European countries that use a mix of public/private enterprise. German healthcare for example is a mix.

This worked extremely well and was what led Sweden to become an example for a large part of the world since citizens got free health care, free eduaction, good housing, decent pay, unemployment benefits etc. Pretty much all of the population. With the trend of the 80's-90's however Sweden got right of center governments which decided that integration with Europe/the rest of the world and liberalization of trade and financial markets was the sh!t. Ergo the start of selling off public property.

Not the only country to privatize formerly government run industries , often because of substandard performance. Like I mentioned Mexico if opening up it's oil business to competition. Again Sweden needs the currency to be competitive to enjoy strong exports and the recent interest rates moves suggests they are affected by the same economic tide as their neighbors ,(deflation).

Now, we've seen in recent years scandals where kids show up to school to see a note on the door saying it's out of business, all while the owner is making millions. Politicians act surprised and make statements about the responsibility of business owners and perhaps reviewing regulations etc, but it was all foreseeable. Sweden slipped in the latest global study on education. We see poorly operated infrastructure. What began as modest fees for health care have steadily crept up with no increase in the quality of service. Corporations such as IKEA moved abroad as soon as possible.

Waht about those meatballs?

As far as I can see Sweden is an excellent example of what happens when you allow market forces to decide what happens with the allocation of resources. Of course Sweden has done well on a national level, but it gets back to my earlier point that it's all relative to what one feel is important. The wealth-gap increased in Sweden while quality of a lot of services stagnated or decreased.

Capitalism is not the only system that produces wealth, and capitalism isn't the best system at distributing resources in a way that benefit people the most. The minimum wage will either slow down or speed up the progress towards an inevitably problematic situation in which we'll have to either do something else or suffer great turmoil first and then still do something else.

Evaluating "that benefit people the most" is very subjective. I prefer the freedom to make decisions for my personal self interest, even if the government thinks it would benefit people the most if I turned down my home thermostat to 60' and walked to work instead of driving a gas burning car (now those are straw men but offered as hyperbolic examples). .

JR

 

[JohnRoberts]

Keeping the system in equilibrium is not a desirable goal. I suspect you are talking about a collective employees vs employers balance of power. This can not be mandated, wage growth will only come from more unfilled jobs than workers. I am repeating myself that raising the minimum wage will just lead to less minimum wage jobs (as evidenced by the increasing use of automation in Sea-Tac)

The private sector IMO should be dynamic and growing to provide more employment opportunities. Many private businesses do not even know how to do that and fail. The government certainly doesn't know how to grow private business and their behavior the last few years is a dark cloud still hanging over business decision making.  This uncertainty and bad tax policy depresses domestic investment and job growth. 

JR (straw man)

Keeping the system in equilibrium means making sure the wealth gets redistributed to a degree that makes it impossible for a minority to live unproductively on inherited wealth at the expense of the rest at increasingly lopsided angles.

So preventing productive people from becoming wealthy, and taking wealth from already wealthy people will somehow improve the productivity of a nation. I don't see that. Simple economics suggests this will discourage high earners from creating more wealth, and discourage low earners from working at all.

We may have some narrow agreement that some commercial behavior is not productive and bad for the whole. I consider high speed traders that profit from gaming the system, and inside trading that cheats the rest of the the investment community unacceptable. I saw a recent report where some high speed trader were getting access to SEC  files seconds before they were published and trading on that brief information advantage.  One of my few compliments for the current administration is they have clamped down on a lot of inside trading, but their work isn't done, and congress could use a close look at how they profit from inside information. 

It has nothing to do with telling businesses what to do, just making sure the amount of extraction/concentration is limited by negative feedback (ideally global taxes). It's explained well in the debate I linked above, and in order for capitalism to survive long term the insight is growing that this will be a necessity. We need many small companies that compete, are flexible and innovative, and since this won't happen by itself it needs to be adressed by policy.

Global taxes would be another drain on economic growth and not help the intended.. It would fund another massive bureaucracy.

Furthermore, we won't have high growth rates again, without a catastrophic event it is just not going to happen. We need to adapt our policies to this reality.

Artificially fueled growth will never end well. like the mortgage/housing bubble that we are still paying for. China is currently trying to engineer a soft landing for previous too easy credit. I have discussed this in the context of marginal reserve banking. By multiplying the effective lending capability the system can grow faster but is less stable...The recent round of European bank stability reviews may be more rigorous than the last time, but capital reserves and the quality of sovereign debt in those reserves is still questionable.  We are still learning what we don't know about managing currencies and many wish for a return to the gold standard. I think the Swiss are considering a return to that. 

JR

 

[mattiasNYC]

I am not a fan of wealth redistribution by government force..

The US government forces everyone to participate in the US capitalist system. Try not to participate and see how that goes. The government and its agents will be there to protect the interests of capitalism. Read on:

The money I have earned from a lifetime working, inventing, and making smart investments does not need to be redistributed to some slacker just because he does have as much as me (I don't have that much). 

Here's the thing though:

If you own Calvin Klein the company, and you get wealthy because of the profit the company makes, then your profit actually comes not from the portion of labour the buyer performed to pay for the suit/t-shirt whatever, but the portion of their labour that went to pay for the dividends of the owners. In other words; when I go buy a suit I don't just pay for the workers making the product + the raw material, I'm also paying the profit to the owners who don't need to do anything at all to get that product to me. So my labour creates wealth, and that wealth (remuneration) gets redistributed to the owners. We don't call that "redistribution" because that's not the popular view (just like we don't call your sense of rights to do things your way "entitlement", we reserve that to people on benefits), but it is surely distribution of wealth. Clearly it assumes that the net result is positive, but I argue that it is not.

Government's job if any is to provide the level playing field so he can make money, just like I did.

Really? So what do you suppose should be done with regards to inheritance then? We all know that a billionaire with a 1% profit on his 100 million investment makes a wee bit more than a middle class guy making a 10% profit on his 10,000 investment. Ten times the return on investment as a ratio, a fraction of the profit. The system is anything but level.

Not to take it from me and give it to him. Sorry if this sounds stingy or uncharitable, but i see the increase in number of people on the dole with negative incentives to work.

But you would never in a million years want a system where your only actual tangible wealth came from your own labour though, would you? If we created a system where you could have as much wealth as you could physically create, and that applied to all people, then the limit of your total wealth would be set by your physical abilities and time. Same for all people. And since we're all different it'd all vary. But it'd be nowhere near the discrepancies we see now. In order for them to show up we need a system that allows you to benefit from the labor of others. You need a system where a bunch of people work their asses off for low wages to create products sold at a price significantly higher than cost to a large amount of people. The incentive NOT to work is the same as making money work for you. As I said earlier. The point I'm making is that you can work and get paid as a worker, and that work can be administrative or managerial, but it's still pay for labour, and that's a vastly different proposition from profiting from pure ownership. Switching to such a system doesn't equal taking stuff away from people, it means the lack of them to profit from other people's labour while actually not doing anything.

Apparently neutral in WWI and tried to be neutral in WWII while supplying some industrial support for Germany (they may not have had much choice.) 

It worked both sides, just like during the cold war....

Not the only country to privatize formerly government run industries , often because of substandard performance. Like I mentioned Mexico if opening up it's oil business to competition. Again Sweden needs the currency to be competitive to enjoy strong exports and the recent interest rates moves suggests they are affected by the same economic tide as their neighbors ,(deflation).

But it had been in a different situation had it stayed the course. It lost independence and it created a much harder society for all people. It's a brilliant example of what can be done with a huge governement run sector that works and what happens when market forces are allowed to do their thing instead. It did NOT lead to a better society.

Evaluating "that benefit people the most" is very subjective. I prefer the freedom to make decisions for my personal self interest

But again; the capitalist system is based on government force as well. You don't see it that way because you perceive yourself as being free to choose. And of course you are, you have the money to. But for people who lack the means the "freedom" they have to choose to buy a yacht or Citation-X is just a meaningless theoretical concept since they actually don't have and never will have the means to exercise that freedom. It's like me saying you have the right to express yourself any way you want to the entire world and then I take away any means for you to do so.

The irony is that the masses could decide to have their government make decisions that benefit them at your expense. From their perspective it'd be exactly what you're talking about: "the freedom to make decisions for my personal self interest". Your argument of self-interest works both ways, it's just that people are deluded into thinking the American dream is likely to happen to them.

The bottom line to me is that if we're going to force each other to comply to something that force needs to be justified with something more than "it's better for me". Force always needs to be justified. Freedom should be the starting point and any restriction needs to be argued for and proven to be both moral and the better option.

 

[JohnRoberts]

I am not a fan of wealth redistribution by government force..

The US government forces everyone to participate in the US capitalist system. Try not to participate and see how that goes. The government and its agents will be there to protect the interests of capitalism. Read on:

I guess I'll read on...

The money I have earned from a lifetime working, inventing, and making smart investments does not need to be redistributed to some slacker just because he does have as much as me (I don't have that much). 

Here's the thing though:

If you own Calvin Klein the company, and you get wealthy because of the profit the company makes, then your profit actually comes not from the portion of labour the buyer performed to pay for the suit/t-shirt whatever, but the portion of their labour that went to pay for the dividends of the owners. In other words; when I go buy a suit I don't just pay for the workers making the product + the raw material, I'm also paying the profit to the owners who don't need to do anything at all to get that product to me. So my labour creates wealth, and that wealth (remuneration) gets redistributed to the owners. We don't call that "redistribution" because that's not the popular view (just like we don't call your sense of rights to do things your way "entitlement", we reserve that to people on benefits), but it is surely distribution of wealth. Clearly it assumes that the net result is positive, but I argue that it is not.

I believe a successful brand/company involves a lot more than just assembling some raw material into a serviceable garment. There is good will and intellectual property (called property because it is) associated with the SKUs that affect desirability to customers. Then there is marketing/merchandising and a slew of other overhead costs that must be funded for the business to afford to continue. Finally the investors who funded starting up the business, and providing working capital, deserve some return on their investment or why would anybody ever invest?  Such investments are not guaranteed sure things but 100% at risk, so the investor could also lose their entire investment, as many do., in whole or in part. 

Government's job if any is to provide the level playing field so he can make money, just like I did.

Really? So what do you suppose should be done with regards to inheritance then? We all know that a billionaire with a 1% profit on his 100 million investment makes a wee bit more than a middle class guy making a 10% profit on his 10,000 investment. Ten times the return on investment as a ratio, a fraction of the profit. The system is anything but level.

Where can I make 10% on 10,000? I really would like to know. As I mentioned most bonds, CDs, and safe interest paying accounts are paying low single digit interest. Higher yields come with much higher risk, which is why they are called Junk bonds. The roadside is littered with formerly rich investors who lost their fortune. One hedge fund made a bad bet on european sovereign debt a few years ago that collapsed costing them millions. Many high profile (rich) investors have made wrong currency bets, while we read more about the successful ones.  There is no easy guaranteed return. Some large investment portfolios tried using hedge funds, thinking they never lost but guess what... there is no sure thing in investing. Chasing return involves higher risk.

Nobody admires rich slackers any more than poor slackers but IMO they are not the problem preventing higher economic growth.  They are just lucky winning the genetic lottery. I wouldn't trade my parents RIP but they also worked for a living. 

Not to take it from me and give it to him. Sorry if this sounds stingy or uncharitable, but i see the increase in number of people on the dole with negative incentives to work.

But you would never in a million years want a system where your only actual tangible wealth came from your own labour though, would you? If we created a system where you could have as much wealth as you could physically create, and that applied to all people, then the limit of your total wealth would be set by your physical abilities and time.

You are confusing the product of labor, and products of intellectual work... I have 9 patents, a few of which have made a bunch of money for the company I assigned them to as work for hire. I do not begrudge them that profit, since they invested in me by paying me a decent salary and providing me with support. My job was to solve problems and I did OK.

IP like a patent can create more wealth even after the labor involved has been finished.

Another thing you (should) learn early on, if you take a shovel and dig a ditch by yourself you can only dig a small hole. If you hire a team of men with shovels you can make a bigger hole faster, and finally if you buy or rent a power back hoe you can make a big hole quickly.  Any smart business type learns to multiply his or her productive output by using employees and/or technology. Mass production is all about multiplying individual productive output beyond the capability of simple 1x labor.

Same for all people. And since we're all different it'd all vary. But it'd be nowhere near the discrepancies we see now. In order for them to show up we need a system that allows you to benefit from the labor of others.

Laborers should benefit from their personal labor while many under appreciate the contribution from capital and other intangibles without which there would be no merchantable product to sell at a profit.  Small factory owners in China have copied products they made for Western companies and failed trying to sell them in the West without the brand and distribution channels.

You need a system where a bunch of people work their asses off for low wages to create products sold at a price significantly higher than cost to a large amount of people. The incentive NOT to work is the same as making money work for you. As I said earlier. The point I'm making is that you can work and get paid as a worker, and that work can be administrative or managerial, but it's still pay for labour, and that's a vastly different proposition from profiting from pure ownership. Switching to such a system doesn't equal taking stuff away from people, it means the lack of them to profit from other people's labour while actually not doing anything.

There is a third category where other than direct labor  is not just administrative or managerial, but creative. And that creative output is worth more than simple management, while that has value too. I have worked managing other engineers, and i created value for my employer by keeping them focused on what the company needed, but I also created some new IP that nobody else had thought of before and that helped my employer create more wealth selling more desirable products. 

Apparently neutral in WWI and tried to be neutral in WWII while supplying some industrial support for Germany (they may not have had much choice.) 

It worked both sides, just like during the cold war....

Not the only country to privatize formerly government run industries , often because of substandard performance. Like I mentioned Mexico if opening up it's oil business to competition. Again Sweden needs the currency to be competitive to enjoy strong exports and the recent interest rates moves suggests they are affected by the same economic tide as their neighbors ,(deflation).

But it had been in a different situation had it stayed the course. It lost independence and it created a much harder society for all people. It's a brilliant example of what can be done with a huge governement run sector that works and what happens when market forces are allowed to do their thing instead. It did NOT lead to a better society.

Evaluating "that benefit people the most" is very subjective. I prefer the freedom to make decisions for my personal self interest

But again; the capitalist system is based on government force as well.

Capitalism requires rule of law and government force to protect property rights. If an investor or business owner can not be assured his property will not be taken away, there is no incentive to own or build a company. If ownership is subject to the whims of some warlord, or a government that thinks it should decide what to do with your money  why build a business? 

You don't see it that way because you perceive yourself as being free to choose. And of course you are, you have the money to. But for people who lack the means the "freedom" they have to choose to buy a yacht or Citation-X is just a meaningless theoretical concept since they actually don't have and never will have the means to exercise that freedom. It's like me saying you have the right to express yourself any way you want to the entire world and then I take away any means for you to do so.

I was not born with wealth, while I am not complaining. After my father died, my mother took a full time job to support us. She later remarried. I was lucky enough to be born in a country where I could be paid well for my effort. While I haven't done simple labor (for pay)  since I was a teen shoveling snow and mowing lawns. Even as teen my summer job was in a machine shop doing some rote labor but by my second summer I was working on the lathes and milling machines doing skilled labor Albeit still what I call 1x work where my output was limited to my labor alone. Creating wealth requires doing more than  1x work.   

The irony is that the masses could decide to have their government make decisions that benefit them at your expense. From their perspective it'd be exactly what you're talking about: "the freedom to make decisions for my personal self interest". Your argument of self-interest works both ways, it's just that people are deluded into thinking the American dream is likely to happen to them.

Yes a simple democracy is no better than a lynch mob where popular opinion will generally oppress the minority individual. Our Representative Republic with constitution is strongly based on protecting individual rights from the tyranny of the masses. 

The bottom line to me is that if we're going to force each other to comply to something that force needs to be justified with something more than "it's better for me". Force always needs to be justified. Freedom should be the starting point and any restriction needs to be argued for and proven to be both moral and the better option.

Yes... again I recommend the "federalist papers" for a better understanding of how our government was crafted and is supposed to work.

Thanks for the thoughtful discussion.

JR