Economics

The Caped Crusader of Capitalism

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caped crusader

A little love for Joseph "Creative Destruction" Schumpeter from The Smart Set in these days of Keynes:

A lot of talk centers on Keynes these days and for good reason. It was Keynes who convinced a generation that the market mechanism had no inherent tendency toward full employment. In short, capitalism is just as happy being in a bust as being in a boom. Keynes saw himself as the beast master, marshaling the forces of government in order to get the monster to behave. The entrepreneur, whom Schumpeter was always trying to encourage in his reckless behavior, was in Keynes' eyes a rather uncouth fellow who ought to be taught how to take his afternoon tea. Keynes was the guy trying to turn the party down just as Schumpeter was coming in from the kitchen with another bottle of tequila.

Note: The flamboyant Schumpeter actually did wear a cape fairly often including, one assumes, while championing capitalism.

More love for the Schump here and here.

NEXT: The Right Not to be Offended?

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  1. the market mechanism had no inherent tendency toward full employment.

    Anyone care to refute this? If not, anyone care to explain why this is just fine and dandy?

    Love the two articles linked. Such adulation of the wonderful and resilient American economy!

  2. Never understood why the cape never caught on.

  3. Love the two articles linked. Such adulation of the wonderful and resilient American economy!

    It was resilient until the government decided to make home ownership a right. And now President Hopey is doing his best to reinflate the bubble. No need to ask Japan what a lost decade of economic growth feels like, we’re about to find out!

  4. Mark my words. Just wait, not Hitler, not Stalin, not even Marx, John Maynard Keynes will go down as history’s greatest monster.

  5. John Maynard Keynes will go down as history’s greatest monster.

    Even worse than Jimmy Carter?

  6. the market mechanism had no inherent tendency toward full employment.

    To which I would respond: government programs have no inherent tendency toward productive employment.

    Less flippantly, that statement is chock full of undefined terms, including “market mechanism”, “inherent tendency”, and “full employment.”

  7. Never understood why the cape never caught on.

    Jeff P,
    Does this answer your question?

  8. Why is Keynesian economics making a comeback? It was thoroughly discredited in the 70’s. A prediction was made, and it failed. We had both high unemployment and high inflation simultaneously, contrary to the theory. Thus the theory needs to be thrown out.

    What’s next, are the the politicians going to resurrect the theory of phlogiston?

  9. anyone care to explain why this is just fine and dandy?

    Sure. Full employment does not prosperity make. 100% employment + 1 generation = mass poverty. See: USSR, Cuba, North Korea, etc. etc. etc.

  10. R C Dean,

    In other words, who gives a damn how many people are employed? Keeping the market “free” is the most important thing, right?

    government programs have no inherent tendency toward productive employment.

    Pity about those facts that contradict you, isn’t it? I know, I know, public school teachers are obviously inferior to and less efficient than private school teachers. Police forces would be so much more efficient if they were market based. We’d have been to the moon decades earlier if not for that pesky government monopoly on space travel!

    Less flippantly, that statement is chock full of undefined terms, including “market mechanism”, “inherent tendency”, and “full employment.”

    I don’t see what’s so hard to understand about these terms.

  11. Sure. Full employment does not prosperity make. 100% employment + 1 generation = mass poverty. See: USSR, Cuba, North Korea, etc. etc. etc.

    I don’t see how this follows at all. I’m gonna need more of a causal explanation. By the way, I think full employment usually refers to having low unemployment, not necessarily that every last person has a job.

  12. Why is Keynesian economics making a comeback?

    Because Keynesian economics provides a justification for the ruling class to maintain their hold on power, at the expense of the disadvantaged, while the economy recovers from the irresponsible, self-serving policies previously implemented by the ruling class.

  13. history’s greatest monster

    While FDR remains a hero? You suppose pretty grand revolutions in the narrative of history.

    Anyone care to refute this?

    Why does anything remain unsold on Ebay? Because the seller won’t accept the going rate.

    See Hazlitt, The Failure of the New Economics (1959) (pg. 257-259 in the text, pg. 269-271 in the PDF)

  14. Because the seller won’t accept the going rate.

    All hail Libertopia. I can just envision all the children working for 5 cents a day! Brings such joy to my heart.

  15. In other words, in a free market, prices can change. During the Great Depression, prices weren’t permitted to change. Someone thought letting stuff become cheaper (including labor) would lead to the end of the world.

    Like today, where someone thinks houses and stocks shouldn’t get cheaper. Prices realized in transactions only partly reflect the wishful thinking of the seller.

  16. Here you go, Tony. A shiny new penny for your thoughts.

  17. all the children working for 5 cents a day!

    Hell, at that price we may as well just eat them.
    Mmmm…tasty Mexican babies…

  18. Has anyone here read Schumpeter’s book capitalism, socialism and democracy? I had to read it in grad school and for the life of me I can’t see how anyone who read that book can see him as some defender of capitalism…

  19. MNG,

    See, that’s what I’d heard. I figured he liked capitalism only insofar as anyone likes what they perceive to be a vicious but effective means of resource allocation.

    What kind of supporter of capitalism coins a PR bomb like “Creative Destruction” anyway?

  20. Warren
    I can’t speak for Tony but from reading his posts it sounds like he has some familiarity with these thinkers. It really is possible to read all that stuff and not agree with it you know?

    I used to have a Muslim classmate who assured me that noone who read and understood the Koran could resist conversion, that it’s truths were so obvious and glorious that to read it was to love it. Some libertarians sometimes seem to think that way about Mises, Hayek etc.

  21. Tony=Lefiti

  22. I mean, you’re aware that J.S. Mill, who obviously had read J.S. Mill, came to some pretty Tony-like conclusions in his writings, right?

  23. All hail Libertopia. I can just envision all the children working for 5 cents a day! Brings such joy to my heart.

    Your are aware that the vast majority of workers in this country make more than minimum wage, right?

  24. Naga
    Tony is way brighter than Leftiti man.

  25. It really is possible to read all that stuff and not agree with it you know?

    MNG,
    Well sure. But I don’t see how you can be familiar with Austrian and Chicago economics and still maintain a fetish for “full employment”.

  26. They may think the Austrians and the Chicago School’s ideas on the subject were wrong or unpersuasive. Just saying.

  27. “Because Keynesian economics provides a justification for the ruling class to maintain their hold on power, at the expense of the disadvantaged, while the economy recovers from the irresponsible, self-serving policies previously implemented by the ruling class”

    That’s pretty much a Marxist Critique of Keynesianism right there!
    He was one bougouse m@??%%?”$r

  28. In other words, who gives a damn how many people are employed? Keeping the market “free” is the most important thing, right?

    This isn’t difficult. People like to make money. Many people start companies in order to make money. Companies need employees to make money. Until people stop acting in their own self-interest (i.e. never), there will be jobs for people.

    Of course, a good way to reduce the number of people willing to provide jobs is to construct barriers to entry into the market, of which burdensome regulations are a wonderful example. Why do you think big businesses frequently lobby for government regulations? It keeps the smaller, more agile competitors out of the game.

    And finally, what is the magic employment number that you consider to be moral? If employment ever fell below that number, would it be moral for the government to force you to employ others?

  29. Jordan
    You’re argument seems to say:

    “An untrammeled market would provide jobs for everyone.”

    Is that right?

    Because it strikes me Warren and some others here would disagree with that, as they’ve said that according to the Austrians and the Chicago school full employment is a bad thing.

  30. I forgot to add that, yes, unemployment sucks. But the best way to alleviate that pain is to provide temporary unemployment benefits while capital is reallocated to more productive uses and employers start adding jobs again.

    Crowding out private investment and nationalizing and subsidizing failed companies is exactly the wrong thing to do and will prolong and exacerbate this recession. Unemployment is going to be much higher for much longer than it otherwise would have been. So, while it might be fun to rail against us evil, handlebar-mustached libertarians, it’s your guys who are fucking over everyone else, especially the poor.

  31. “But the best way to alleviate that pain is to provide temporary unemployment benefits”

    Jordan-you mean government theft and redistribution, right?

  32. Jordan
    You’re argument seems to say:

    “An untrammeled market would provide jobs for everyone.”

    Is that right?

    Nope. An untrammeled market would provide jobs. Period. They might not be Tony’s magic, moral number of jobs, but they would be jobs. Propping up unproductive companies just for the sake of making work will only destroy wealth. Which is why I’m not opposed to unemployment benefits. My prescription: Slash government meddling so that it’s easy to start businesses and hire workers, provide temporary unemployment benefits for those between jobs, and get the hell out of the way.

  33. “Why do you think big businesses frequently lobby for government regulations? It keeps the smaller, more agile competitors out of the game”

    Neo-Keynesianism =

    Government takes money off efficient industry

    Gives it to inefficient industry

    I do actually have a copy of “the general theory” on the way from amazon

    I’m actually quite interested to read it
    certainly the word Keynesianism is used by alot of people in Europe as a justification for Lennist socialism,
    Keynes aboslutely despised socialism so that’s ironic,
    from what I can gather its closer to the Hitler/Mussolini type corporatism that was big at the time
    I’m still interested to read it anyway

  34. Jordan-you mean government theft and redistribution, right?

    Yep. It’s the lesser of two evils. I’m willing to live with it, though, because the greater evil (what we have now) is far worse, and I acknowledge that anything closer to libertopia is politically untenable at this point.

  35. “government theft and redistribution”

    negative income taxation is cool for me

    If you actually tried to end wealth redistribution you’d probably get shot pretty fast

    Its better to just make the redistributon more effective so you can reduce the overall amount

    scrapping social security and replacing it with negative income taxation is a good start

  36. Henry Morganthau, Secratary of the Treasury, FDR

    We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . . I say after eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot.

    In spite of reports to the contrary, not once in our nation’s history have liberals been able to defy gravity. Sorry, you will just have to find something else to believe in. Your neighbor’s dog maybe?

  37. Arguing with Tony about economics:arguing with Mother Theresa about “best sex position”.

  38. Shorter TAO: Tony doesn’t instantly agree with me, therefore he needs EKON 101!

    And we know you’re the standard of such knowledge, Cuz that law degree you’re working on is in EKONOMICS, right?

  39. Tony is definitely not Lefiti. Lefiti seemed compulsive in his insistence on posting semi-coherent nonsense. Tony is at least “in the room with us,” so to speak.

  40. MNG,

    Do you have a substantive argument to make? I didn’t realize you would be so offended that I mocked Tony oh-so-slightly. Is that your boyfriend?

  41. And we know you’re the standard of such knowledge, Cuz that law degree you’re working on is in EKONOMICS, right?

    I’ll give you three guesses as to what degree my B.A. is in.

    Go on, little sister, guess.

  42. I think the answer to Tony’s questions is that market-oriented economies, (pre-surrender Hong Kong, Ireland, the US, etc) in addition to being wealthier than their neighbors, tend to have lower rates of unemployment than non-market-oriented economies.

    Full employment isn’t defined, Tony, because nobody knows what the natural rate of joblessness is. After all, some people get fired, quit, change careers, finish college and have to find their first job, etc. We assume that natural rate is around 3-4%, but I believe Hong Kong’s unemployment was down to around 2% prior to the Chinese retaking.

  43. So did whichever REASON editor (Nick?) who posted as joepboyle finally get out of the job and now some loser intern-Riggs or Walker maybe?- have to “replace” him as Tony?

  44. Boy you asking another poster for a substantive argument is rich like Richie Rich…

    I mean, wtf was YOUR substantive argument supposed to be? “I no like Tony he no know about ekonomics?”

  45. Ohmigod, is it, EKONOMICS?

    Your bachelors degree? Man, you really do know about that stuff then! I mean, only a third of the U.S. population has a frigging bachelors degree…

    There’s an old saying about a little bit of knowledge being worse than none…

  46. Try to keep up, tiny stuff. I mocked Tony, and yes, it was because he was demonstrating a total lack of economic knowledge while trying to make economic arguments.

    I would have thought that you, priding yourself on how terribly intellectual you are, would be more inclined to listen and defend the people who know what they’re talking about instead of someone who baldly states something stupid about “Reagonomics”, whatever that means.

    I mean, wtf was YOUR substantive argument supposed to be? “I no like Tony he no know about ekonomics?”

    Not substantive, but yes, that’s what it was. Now defend him on the merits, since you have so much emotional energy tied up in the man.

  47. Man, you really do know about that stuff then! I mean, only a third of the U.S. population has a frigging bachelors degree…

    That doesn’t follow, Captain Logic.

    Again, have you something to say?

  48. Six Letters Enter; Three Letters Leave

  49. Where above did Tony mention “Reagonomics?” Or are you still smarting from some past spanking he gave you?

  50. “I would have thought that you, priding yourself on how terribly intellectual you are, would be more inclined to listen and defend the people who know what they’re talking about”

    Yes, that is my tendency, I just don’t think a person having a bachelors degree in something has much to do with whether that person knows what they are talking about (assuming the subject is what their degree is in). Sorry, from my experience an undergraduate education alone is worth about beans.

  51. Where above did Tony mention “Reagonomics?”

    This economic ignorance is spanning two threads. Sorry.

    Or are you still smarting from some past spanking he gave you?

    Are you really so beholden to “RAH RAH GO TEAM BLUE” that you really believe that Tony could “spank” anybody?

    I mean, I’ve heard of fanboism, but you (as usual) take it from “cute” to “creepy”.

  52. Sorry, from my experience an undergraduate education alone is worth about beans.

    how convenient. Is it OK if I just declare an arbitrary ‘from my experience, Ph.Ds in PoliSci are worth a hill of beans”?

    I somehow sense that would be less OK with you.

    Yes, that is my tendency

    Apparently it isn’t. Tony shows up spouting some patently ignorant bullshit and you defend him by stating that MY degree in the subject isn’t worth anything.

    That’s some good rigor on your part.

  53. But my “point” was made above. Warren seemed to have assumed, based on Tony’s comments which saw a problem with market mechanisms not having an inherent tendency towards full employment, that Tony was economically challenged. My point was that perhaps he simply disagreed with the libertarian (or Austrian/Chicago) ideas about the value of full employment and that linking an assumption of ignorance of the subject with taking that position was unwarranted.

  54. Tony has absolutely handled you every time I have seen you two go at it. Once you even seemed to break down and said “Oh Tony, is all you can is to tear down? What do you believe in?” It was like your Sally Fields moment or something…

    But yeah, I have more than my experience in concluding that a bachelors degree does not an expert make, and part of that is the commonality of such degrees that I pointed to above. Am I to assume that 1/3 of the U.S. populations are what we would call experts? That’s pretty silly…

    Two years of education does not make someone “know what they are talking about” (two years usually devoted to the major, as opposed to gen eds).

  55. My point was that perhaps he simply disagreed with the libertarian (or Austrian/Chicago) ideas about the value of full employment and that linking an assumption of ignorance of the subject with taking that position was unwarranted.

    Here’s the problem: it isn’t just the “libertarian schools” of economics and economists who think that government programs that are trying to cram “full employment” down the collective throats of nations is a “fool’s errand”. To suggest it’s only us “loony outliers” who think that isn’t academic honesty.

  56. Oh Tony, is all you can is to tear down? What do you believe in?” It was like your Sally Fields moment or something

    Dumbass. It was said in anger at Tony’s nihilism (don’t worry, you’re one too), not teary-eyed.

  57. Am I to assume that 1/3 of the U.S. populations are what we would call experts?
    Two years of education does not make someone “know what they are talking about”

    So only experts know what they are talking about now? How about well-educated laymen, or do you have to have a certain number of magical letters for you to actually listen to someone?

    Have a good one, champ.

  58. Tony

    “Pity about those facts that contradict you, isn’t it? I know, I know, public school teachers are obviously inferior to and less efficient than private school teachers. Police forces would be so much more efficient if they were market based. We’d have been to the moon decades earlier if not for that pesky government monopoly on space travel!”

    So lets see, public school teachers, cops, and the moon landing are your arguments FOR the greatness of government?

    “All hail Libertopia. I can just envision all the children working for 5 cents a day! Brings such joy to my heart.”

    You really aren’t that stupid are you?

    I miss joe, too.

  59. If a laymen demonstrates his education then I’m all for considering that person as an expert, and if a PhD demonstrates their stupidity then I will take more seriously the former than the latter. But as a heuristic shorthand yes I tend to only take people with terminal degrees seriously about such things. It ensures that at the least they have about 7-9 years of formal training in matters intellectual. So you pulling the “I have a bachelors degree so I know what I am talking about” is pretty funny, because it’s a kind of elitism but one that’s pretty sad (it’s like saying “hey, I know about football because I played two years in high school!”).

    It’s also funny to hear you call someone a nihilist, as one many occasions when I’ve asked you to lay out your general philosophy (what makes an action right or wrong for example) you consistently refuse to give an answer.

    “it isn’t just the “libertarian schools” of economics and economists who think that government programs that are trying to cram “full employment” down the collective throats of nations is a “fool’s errand””

    I doubt you know what the mainstream of economics is on that position, but even if that is granted there is no reason to suppose Tony must have been talking about “cramming full employment down the collective throats” of the populace. There are all kinds of actions a government might take to encourage or foster full employment that fall short of that kind of thing. Tony’s comments were obviously simply oriented around pointing out that market mechanisms alone might not foster that and that this is a lamentable thing.

  60. Once you even seemed to break down and said “Oh Tony, is all you can is to tear down? What do you believe in?” It was like your Sally Fields moment or something…

    Since you’ve mentioned it a dozen times now you definitely seem to have been a fan of the performance ….

    Come on, TAO, practiced ennui is the only respectable pose for the modern thinker!

  61. I don’t have a degree in anything. Here’s my opinion. The current administration will continue to shovel money into the hole at an unimaginable rate. The republicans will continue to be a fly in Obama’s nation rebuilding ointment. In 2 years, when the economy is deeper in the shitter, the democrats will blame the repubs for holding up the money train enough for the economy to get worse. The average american voter, (dumbass,) will send most of the remaining repubs home. We will then enjoy a 90-95% democratic congress. The perfect storm is building. Any thoughts on how to stop it?

  62. the market mechanism had no inherent tendency toward full employment.

    Anyone care to refute this? If not, anyone care to explain why this is just fine and dandy?

    Where is it written that everyone has the right to a job?

    Generally, the unemployment rate is simply economic lubricant – people moving between jobs. Labor being reallocated from one place to another, to more efficient uses.

    If we had 100% employment, labor would not ba allocated to it’s most efficient uses. That would mean lower overall productivity and hence a less prosperous economy.

    With less than full employment, you have a few people who temporarily are worse off, but they are living in a more productive society as a whole, which compensates them (on average) for the risk of unemployment.

  63. re: Hazel

    Where is it written that everyone has the right to a job?

    Nowhere; however, people do have the right to pursue their happiness. What people like Tony and MNG refuse to accept is that some people are perfectly happy merely living from one bottle of Thunderbird to another.

  64. “Since you’ve mentioned it a dozen times now you definitely seem to have been a fan of the performance ….”

    Well, the tears were awful yummy!

    Shorter Hazel: unemployment is good because it allows the awesome employer to leverage his lazy employee into a more productive stance.

    That reserve army comes in handy!

    “What people like Tony and MNG refuse to accept is that some people are perfectly happy merely living from one bottle of Thunderbird to another.”

    Ex-pat
    What makes you think I think that? I wasn’t arguing for full employment (whatever that might mean to whomever [mandating a job for all? having conditions in which virtually all folks who do want to work can find such sork?]). I was arguing that assuming Tony is ignorant of economics because he argues that is unwarranted.

    I fully realize that a great deal of people are fully satisfied with living from one bottle of Thunderbird (or Wild Irish Rose) to another…

  65. I will say ex-Pat that I tend to like a lower unemployment rate than a higher one, as a worker I like it when we have more leverage than when we have less.

    See, I think self-interest is a good guiding light, but I don’t just think its a good one meant for employers only…

  66. “I know, I know, public school teachers are obviously inferior to and less efficient than private school teachers.”

    Inferior? Not necessarily, though I suppose that depends on what metric you are using. Less efficient? That is a demonstrable fact.
    Private schools get better results with less money spent per pupil than the government schools.

    “We’d have been to the moon decades earlier if not for that pesky government monopoly on space travel!”

    And forty years later, we are not even capable of going to the moon again without reinventing the Apollo program from scratch because of that government monopoly decided the propaganda value of the acheivement was spent and there was little else good reason to maintain it.

  67. MJ, imo, the average private school student is is better at the “social graces” and is more interested in learning than the average public school urchin. This is the biggest reason for the difference in results vs dollars spent per child.

  68. Anyone care to refute this?

    Absolutely not. The whole point of economic progress is to have more and more wealth with less and less work. If we had a truly healthy economy, more people could get by really well working only part time, retiring early, or even sponging off their friends and relatives.

  69. In other words, who gives a damn how many people are employed?

    What you’re truly concerned about is that nobody live in poverty or that everybody gets a fair share of the wealth or however you would like to put it, correct? Can you see that that doesn’t necessarily equate to everyone having to have a job.

    For example, in a more prosperous society than ours one could imagine that a larger percentage of married women would choose to stay at home rather than work. Or, as another example, in a more prosperous society one might be able to actually live in a decent apartment and afford health insurance on money earned by working as a waiter only six months per year. Or a person who has worked at a full-time job all of his or her life might be able to retire comfortably at age fifty.

    As a libertarian, I believe we’d have that kind of prosperity if the government weren’t sucking up so much of everyone’s wealth.

  70. MNG, I note that you can’t actually counter argue Hazel’s position. Apparently, your qualifications on matters economic have been thus established.

    Too bad, I was looking forward to hearing what the precise rate of unemployment would be under your definition of “full employment”. Hint – no economist (not even the NYT’s pet Nobelist) would suggest it is zero.

  71. Shorter Hazel: unemployment is good because it allows the awesome employer to leverage his lazy employee into a more productive stance.

    That’s true, but not exactly what I was referring to.

    At any given time, there are some people who have been fired or quit because they either weren’t productive or weren’t enjoying their job. Those people are available to fill openings in places where they will be either more productive, or paid less. In a free market, the economy optimizes placement of those individuals to maximize productivity. Unemployment is the result of that constant reallocation of labor to suit the demands of the moment.

    During the current recession, people will lose their jobs. That is because consumers are not buying what they are producing. It is necessary and reasonable for that labor to be freed up in order to be available to be reallocated to something else. Something that consumers actually do want, as opposed to something the consumers clearly find “expendable” at the moment.

    If consumers don’t want to buy a new car every 5 years anymore, it’s not their moral obligation to keep buying cars so that auto workers can keep having jobs.

  72. Papa ‘bama is gonna make my ouchies go away. Bad Libertarians for sayin’ it aint so!

  73. brotherben,

    Excuses, excuses. Government school inefficiency has more to with the high overhead than the quality of the students.

  74. “In a free market, the economy optimizes placement of those individuals to maximize productivity.”

    Did you mean to say “profits” rather than “productivity”? The two are’nt necessarily the same thing. One reason why employers threaten people with the stick of unemployment is to get them to accept a lower wage so that employers can then take home more of the money created from the enterprise than otherwise. The lower unemployment the bigger the slice of the profit the employee can demand, but the higher unemployment is the lower he can demand.

    Now profits for the employer are’nt some inherently bad thing, and they help provide all kinds of good incentives. But a larger share of the profits for the employees ain’t necessarily a bad thing either, and the club of productivity shouldn’t automatically be invoked to obscure this process…

  75. “I wasn’t arguing for full employment (whatever that might mean to whomever”

    juris
    That’s from a post of mine above. Yes, I know economists have varying definitions (points) of “full employment” and that they do not take the concept in a literal sense. Someone can know that and STILL not agree with the libertarian position btw.

  76. Come on, TAO, practiced ennui is the only respectable pose for the modern thinker!

    Silly me and my passion for freedom. Next time I will just take a drag on my clove and say “I am le bored“.

  77. But a larger share of the profits for the employees ain’t necessarily a bad thing either, and the club of productivity shouldn’t automatically be invoked to obscure this process

    What “process” would that be?

  78. Ex-pat
    What makes you think I think that? I wasn’t arguing for full employment (whatever that might mean to whomever [mandating a job for all? having conditions in which virtually all folks who do want to work can find such sork?]). … I fully realize that a great deal of people are fully satisfied with living from one bottle of Thunderbird (or Wild Irish Rose) to another…

    Thank you for clarifying that. Your comment that “[t]here are all kinds of actions a government might take to encourage or foster full employment,” made me think that perhaps you thought differently.

  79. And forty years later, we are not even capable of going to the moon again without reinventing the Apollo program from scratch because of that government monopoly decided the propaganda value of the acheivement was spent and there was little else good reason to maintain it.

    I agree with you. I think space operations will eventually become a matter of private enterprise. And that’s a good thing. The Internet is a model of something generated not by the market but by government investment, and it has now been turned over to private enterprise to the benefit of everyone.

    I was just arguing against the very tired and very false assumption that the government just can’t do anything right. It can do lots of things, including innovate even beyond the wildest dreams of the private sector.

    The problem with assuming a priori that the government can’t do anything efficiently or well is that people get in power who believe this and do everything they can to prove themselves right.

    I simply believe that government has a role to play in direct action where the market does not provide necessary things.

  80. The Internet is a model of something generated not by the market but by government investment, and it has now been turned over to private enterprise to the benefit of everyone.

    The government may have generated the Internet, but it would be an inexcusable oversimplification of the history of the Internet to say that it would be as ubiquitous as it is today without private enterprise.

  81. The government may have generated the Internet, but it would be an inexcusable oversimplification of the history of the Internet to say that it would be as ubiquitous as it is today without private enterprise.

    That’s exactly what I said.

  82. “What “process” would that be?”

    The process of employers using unemployment as a leverage in bargaining with employees. They can do this to “increase productivity” and/or in order to increase their slice of the profits pie relative to labor. Considering there are many more employees than employers out there, and so their welfare (whether it be welfare in the classical sense or something like their “dignity” or “voluntariness”) is more important, it strikes me as ok to have government foster a condition that has the optimum amount of employee leverage and productivity (which I readily admit could and should be a brake to employee empowerment, lest there be no job at all in which to empower bargaining position!).

    Ex-pat
    Well, as I said, full employment might not be taken in the literal sense, and by “fostering full employment” I meant actions which simply move the tendency in the direction of “full employment” (i.e. less unemployment). There could be a variety of reasons for this, ones that might call on economic productivity to justify them and ones that may not (as a society, and even as individuals, few of us want to simply maximize economic productivity at all costs, there are other valued things to be promoted and perhaps government has a hand).

    But yeah, trying to literally force the lumpenproletariat to work or force them on employers would be stupid for a variety of reasons.

  83. Did you mean to say “profits” rather than “productivity”? The two are’nt necessarily the same thing. One reason why employers threaten people with the stick of unemployment is to get them to accept a lower wage so that employers can then take home more of the money created from the enterprise than otherwise. The lower unemployment the bigger the slice of the profit the employee can demand, but the higher unemployment is the lower he can demand.

    No. I meant to say productivity. The threat of unemployment also makes people work harder.

    I can tell you from personal observation that tenure makes university professors less productive. But doesn’t do anything to improve their wages.

    But this whole thing about unemployment being used to push down wages is a classic Marxist arguement. I.e. unemployment keeps wages down so that the employer can extract “surplus value”.
    (You may not have been aware of where that arguement comes from, of course. There are lots of bits of Marxism floating around out there.)

    I could get into a discussion of everything that’s wrong with Marx’s “surplus value” theory. To start with … the labor theory of value.
    In reality, the market price (value) is dependent on consumer demand, which is not fixed, and has no relationship to the labor performed by the worker. The employer hence isn’t extracting “surplus” value – he’s making a calculated bet that there will be more demand for his product than supply. In most cases, he’s also tailoring the product to pretty specific demands that your average factor work isn’t going to be able to predict.

  84. The Internet is a model of something generated not by the market but by government investment, and it has now been turned over to private enterprise to the benefit of everyone.

    Yes, even a stopped clock is right twice a day. Are you suggesting that the fact that government invented it is proof that the private sector couldn’t or wouldn’t have? Timothy Sandefur has an excellent series of essays addressing nonsensical thinking like this here, here, and here.

  85. as a society, and even as individuals, few of us want to simply maximize economic productivity at all costs

    Why not? Productivity improvements align with efficiency improvements, and with more goods being produced. More goods to go around for everyone (including travel and entertainment). Productivity can also be defined to improve improvements in quality.
    Any “good” can be included. Greater productivity means you don’t have to work as much to produce the same amount, so it also means more leisure time. It also means more efficient and resource energy use and hence less pollution.

    Seriously, I really can’t see the downside here that would make us want to focus on something else.

  86. Are you suggesting that the fact that government invented it is proof that the private sector couldn’t or wouldn’t have?

    I dunno. All I’m saying is the government did it, and wasn’t the giant bumbling straw man libertarians make it out to be.

    The government manages a huge bureaucracy that provides a massive range of services, and has innovated not just the Internet, but lots of new weapons technologies and armed combat tactics, space operations, a highway system, etc. It didn’t just stumble upon these things as a broken clock does the hour twice a day. Many government innovations and actions have, as in the case of the Internet, transformed the market in ways that seem to benefit most or all people.

    I do not in any way disparage the abilities of the market. I just believe in human agency to direct its abilities in beneficial ways.

  87. That’s not to say the government isn’t ever inefficient. I’m not saying that any more than I’m saying the market can’t do anything useful. It is as efficient as its custodians make it. And the ones who usually do the worst job seem to be the ones who don’t believe in its ability to be efficient.

  88. “In reality, the market price (value) is dependent on consumer demand, which is not fixed, and has no relationship to the labor performed by the worker.”

    Now that doesn’t sound right, the price of labor and materials will certainly be reflected in price, hence the oft heard claim that more regulation will result in producers having to increase the prices of their goods.

    If you can get an employee to work for less and still sell the product for the same price then you get to keep the difference. And you can get him to do that easier if there is an army of folks hungry for his job at the factory gates…No?

  89. That’s exactly what I said.

    Not really. The difference lies in a conclusion that you implied but didn’t explicitly state.

    You said the market did not generate the Internet and then later said that the “government has a role to play in direct action where the market does not provide necessary things”. This implies that you don’t think the market would have generated the Internet on its own.

  90. Hazel
    There were times during the awful Soviet experiment in which the USSR did increase its productivity through what amounted to slave labor. I submit that this is a case in which some other values trump the mere increasing of productivity (if a person threatened by unemployment works harder, imagine slave labor, a whip can be an awful prodding thing).

    There are lots of other conceptual examples that might come to mind…

  91. All I’m saying is the government did it, and wasn’t the giant bumbling straw man libertarians make it out to be.

    Fair enough. Government gets it right once in a while. Some libertarians go overboard in saying that government always screws up.

    The government manages a huge bureaucracy…

    Not the best example. Managing its own bureaucracy is one of the things that the government does not excel at.

  92. I do not in any way disparage the abilities of the market. I just believe in human agency to direct its abilities in beneficial ways.

    What exactly do you think the market is, if not the result of human agency?

    It is as efficient as its custodians make it.

    Wrong. Government bureaucrats can never possess the necessary domain knowledge to manage millions upon millions of transactions that the individual participants themselves possess.

    And the ones who usually do the worst job seem to be the ones who don’t believe in its ability to be efficient.

    Confirmation bias is quite powerful.

    The government manages a huge bureaucracy that provides a massive range of services, and has innovated not just the Internet, but lots of new weapons technologies and armed combat tactics, space operations, a highway system, etc. It didn’t just stumble upon these things as a broken clock does the hour twice a day. Many government innovations and actions have, as in the case of the Internet, transformed the market in ways that seem to benefit most or all people.

    Well, national defense is a legitimate province of government. An interstate highway system arguably is too.

  93. This implies that you don’t think the market would have generated the Internet on its own.

    I don’t know whether the market would have or not. I also don’t know whether the market would eventually require all meat sold to be safe to eat. I just know the government did it faster.

    Not the best example. Managing its own bureaucracy is one of the things that the government does not excel at.

    I think many people, especially libertarians, tend to have a certain bias that focuses on government inefficiencies while ignoring all of the things it does right on a daily basis.

  94. Now that doesn’t sound right, the price of labor and materials will certainly be reflected in price, hence the oft heard claim that more regulation will result in producers having to increase the prices of their goods

    I should clarify. Consumer demand has no relationship to the labor performed by the worker. Labor costs will cause a marginal increase in the market price, among other things (costs of materials, transport to market, etc.).

    If you can get an employee to work for less and still sell the product for the same price then you get to keep the difference. And you can get him to do that easier if there is an army of folks hungry for his job at the factory gates…No?

    If you can get the employee to produce more, then you can sell it for less and gain market share from your competitors. There will also be a lot more goods in the market for consumers to buy – more stuff to go around for everyone.

    Our current unemployment rates aren’t anywhere near levels where people are banging on factory doors. That’s because we have a sufficiently free market that anyone can open a new business and start employing people – soaking up the pool of unused labor. Including small mom-and-pop store that have a few employees each – not just huge factories with rich handlebar mustacioed capitalists running them.

    You treating the product’s price as if it’s a fixed knowable quantity. The employer may want to get the employee to work for less, but he’s also uncertain whether demand for his product will even exist by the time it gets to market. For all he knows, someone else will introduce something that makes it obsolete. Or fifty people will be out there making knock-offs. It’s less a question of “How much profit can I make?”, then “Am I going to make a profit at all?”. That is never certain.

  95. if a person threatened by unemployment works harder, imagine slave labor, a whip can be an awful prodding thing

    Oh, so now you are comparing being threatened with unemployment to slavery?

    I take it then, that you won’t object next time someone here compares taxes to slavery.

    Didn’t someone say there need to be some new categories of Godwinism?

    I nominate comparisons to slavery.

  96. What exactly do you think the market is, if not the result of human agency?

    But it’s not directed human agency; it’s more of an emergent force of nature. There is no evidence that I’m aware of that it produces everything we need in the most efficient manner. A lot of irrationality goes into the market.

    Wrong. Government bureaucrats can never possess the necessary domain knowledge to manage millions upon millions of transactions that the individual participants themselves possess.

    I don’t think it should attempt this. I’m no communist. I simply think that certain things can be more efficiently provided by government action, with the assumption that there exist certain things that the people collectively need or want.

    What I absolutely don’t buy is the notion that government bureaucrats are inevitably less knowledgeable than entrepreneurs or CEOs. If someone isn’t capable, get someone who is.

    Confirmation bias is quite powerful.

    Indeed it is, such as when people only cite examples of government waste in order to support their a priori stance that government is always wasteful, while ignoring its successful programs.

    I don’t think it’s confirmation bias to assert that the party of “limited government” has been the least fiscally responsible party in recent history.

    Well, national defense is a legitimate province of government. An interstate highway system arguably is too.

    We disagree about what is and isn’t legitimate provinces of government. The arguments I’m making are about why I believe economic intervention to be a legitimate government role.

  97. There is no evidence that I’m aware of that it produces everything we need in the most efficient manner. A lot of irrationality goes into the market.

    Actually, if you know what ‘pareto optimal’ is, it can be shown mathemetically that if all actors are perfectly rational, self-interested, and have access to all the information, then a free market will acheive the pareto optima.

    Naturally, information is limited to market actors, this is one of the reasons why it’s illegal to trade on inside information, and there are laws requiring accuracy in accounting and disclosure of earning statements. But information is more availablei n the market than the government. Information is distributed throughout society, so the results tend to be closer to optimal if decisions are made locally (by individuals) rather than centrally (by government planners).

    Also, while market actors aren’t perfectly rational, neither are governments. Moreover, they respond to different incentives. Government agents respond to political incentives, market actors to economic ones. I’ve yet to see any evidence that political incentives are more likely to result in superior decisions.

  98. But it’s not directed human agency; it’s more of an emergent force of nature.

    Of course it’s directed, just not by some benevolent master. Self-interest is what drives the market.

    A lot of irrationality goes into the market.

    As opposed to government bureaucrats who are always rational?

    Indeed it is, such as when people only cite examples of government waste in order to support their a priori stance that government is always wasteful, while ignoring its successful programs.

    You’ve been hammering away at this strawman for quite a while. Those essays I linked do a good job of addressing the trade-offs in having the government involved in creating goods such as the Internet.

    I don’t think it’s confirmation bias to assert that the party of “limited government” has been the least fiscally responsible party in recent history.

    It’s also completely irrelevant. Neither party can manage the economy without introducing myriad unintended consequences and altering incentives in ways that could never have been anticipated. Fannie Mae?

    What I absolutely don’t buy is the notion that government bureaucrats are inevitably less knowledgeable than entrepreneurs or CEOs. If someone isn’t capable, get someone who is.

    Ah, if only we had the right man in charge. You know the nice thing about incompetent CEOs is that nobody is forced to associate with them. Incompetent bureaucrats, not so much.

  99. Also, what Hazel said.

  100. Amendment … there are certain cases where rationally self-interested actors will not acheive the pareto optima. The one-shot prisoner’s dilemma being one. (This could be a long discussion). The pareto optimal is mutual cooperation, while the rationally self-interested choice is mutual defection.

    But (a) in the iterated PD the results tend to evolve towards mutual cooperation without a central authority anyway, because of the strategies people play. And (b), in reality, even in one shot games, people tend to choose mutual cooperation because we’ve evolved certain “irrational” traits that seem explicitly designed to help overcome these situations.

    In that case, you could say there are certain situations where market “irrationality” would produce better outcomes than an ideal rational market would, an still, without government intervention.

  101. I don’t think it’s confirmation bias to assert that the party of “limited government” has been the least fiscally responsible party in recent history.

    It’s disingenuous to use the fact that Republicans describe themselves as the party of “limited government” without acknowledging that it is empty sloganeering with no reality behind it.

  102. But it’s not directed human agency; it’s more of an emergent force of nature. There is no evidence that I’m aware of that it produces everything we need in the most efficient manner.

    Ah, you prefer authoritarian human direction to free choice. OK, let’s start with you. From now on you will do whatever I tell you because I have determined that I know what is best for you. No arguments now, that’s just denial on your part.

  103. “I simply believe that government has a role to play in direct action where the market does not provide necessary things.”-Tony

    Your examples were wholly inappropriate for proving that. The government has made a hash of education compared to private schools and while the moon landings were very cool, they were hardly necessary and certainly not efficient.

    Government tends to be sclerotic, inefficient, and incompetent because the poliical success of a government function has little to do with if the program has actually succeeded in its ostensible goals. If anything, incompetence tends to be rewarded with more funding, as the answer to a failed program is to throw more money at the problem. Government is not results oriented at all.

  104. “But it’s not directed human agency; it’s more of an emergent force of nature.”

    The “market” is the aggregate interactions of all human beings involved in commerce. The market is human agency. You are just uncomfortable with the ides of there not being a small, easily identified group of people “in charge”. The problem with that model is that there is no person or group of people well-informed enough to be “in charge” of the market, and anyone who tries will bumble about causing distortions and inefficiencies in the market’s functions. Contrary to what you claim, history shows again and again that the model you crave does not work very well, if at all.

  105. Without Google/Yahoo search engines, I doubt the internet would be what it is today. Did Al Gore invent those as well? No, he didn’t.

  106. Workers can opt not to work at prevailing wages. You may have never witnessed this. Henry Ford did and learned that he needed to pay above the prevailing wage to avoid assembly-line shutdown due to absenteeism.

    One still sees this phenomenon in LDC economies where wages are low. Absenteeism is high, but also in these economies, on-time delivery is expectedly ‘not-on-time’. LDC economies suffer from ologopolist control, which in turn suffers through shortage because it knows it controls the show. A quick trip to Miami or a European Capital will set the oligarchs lack of consumer selection at ease.

    You really can’t even measure unemployment in these countries, but rather underemployment. At the prevailing rate of wages, any given person might prefer to skip a day and drink with his buddies. If the same guy has a job paying better wages, he wants extra hours.

    Why is this so difficult to understand?

    I have a shitty undergrad degree which I don’t use for employment purposes. I travel both professionally and leisurely (in a backpacker way). I see what’s going on. I make labor contracts in the LDCs. I know the challenges. Fuck you elitists with degrees that think the rest of us can’t think. Fuck you. You cannot reckon why your wages don’t match the money you spent on your degrees. And fuck you again, because they were mostly funded by money not your own. Good God you’re pathetic. You Fuck!

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