"THE FREE MARKET HAS FAILED"
30 Aug 2011, 1:26 pm
wcoltd wrote:
AceOfSpades wrote:
I want to know what a "real free market" is, because there are people who think even a single red tape taints it enough to make it unfree.
That is a good point, it is a spectrum, though a truly free market, it must be founded entirely on the basis of an absolute definition of property rights and operates through complete voluntary action. In a truly free market there can be no coercion.
I have a slightly more tolerant measure of what a free market is. Hong Kong and its capitalist economy (which grew under British rule and is being continued under Chinese rule) is a close as a complicated well knit economy gets to free market. The government in Hong Kong exists to keep order, keep the traffic moving, putting out fires and such like. Hong Kong is still a prosperous center of commerce because the mainland government has been smart enough to keep their hands off.
ruveyn
30 Aug 2011, 1:26 pm
wcoltd wrote:
zer0netgain wrote:
The "free market" has always depended on a variety of wisely-wielded controls to prevent it from being twisted into something horrible.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
How do monopolies come to be? It is either through help from the government, or because they provide goods or services more efficiently than their competitors.
Monopolies come to be when an owner with tremendous amounts of pre-existing cash buys up the supply chain (vertical monopoly) or buys out the competition (horizontal monopoly) in order to become so efficient that it can out-compete any future competitors, even to the degree of setting its prices so low that it temporarily takes a loss. Efficiency is primarily the result, not the origin. Sometimes the original company did have some advantage that allowed it to expand in the first place, but not usually an advantage large enough to justify (in terms of the well-being of the consumer) driving out any and all competition.
30 Aug 2011, 1:28 pm
wcoltd wrote:
AceOfSpades wrote:
I want to know what a "real free market" is, because there are people who think even a single red tape taints it enough to make it unfree.
That is a good point, it is a spectrum, though a truly free market, it must be founded entirely on the basis of an absolute definition of property rights and operates through complete voluntary action. In a truly free market there can be no coercion.
neither coercion nor help (bailouts, farm subsidies, etc).
30 Aug 2011, 5:19 pm
LKL wrote:
wcoltd wrote:
zer0netgain wrote:
The "free market" has always depended on a variety of wisely-wielded controls to prevent it from being twisted into something horrible.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
How do monopolies come to be? It is either through help from the government, or because they provide goods or services more efficiently than their competitors.
Monopolies come to be when an owner with tremendous amounts of pre-existing cash buys up the supply chain (vertical monopoly) or buys out the competition (horizontal monopoly) in order to become so efficient that it can out-compete any future competitors, even to the degree of setting its prices so low that it temporarily takes a loss. Efficiency is primarily the result, not the origin. Sometimes the original company did have some advantage that allowed it to expand in the first place, but not usually an advantage large enough to justify (in terms of the well-being of the consumer) driving out any and all competition.
I addressed that in the paper!
Quote:
According to the Book “Monopoly Power and Economic Performance” by Edwin Mansfield. The problem of monopolization exists when large businesses find that they can become more profitable by collusion rather than competition. This causes prices for the individual consumer to rise, raising the burden on society.
There is one powerful argument against the viability of this thesis. It is this, to the extent that large business profit from collusion is the extent to which they incentivize new competition and innovation. This is the argument taken by Joseph Schumpeter.
Schumpeter’s thesis is then partially taken down by the Predatory Pricing argument, which says that because of the largeness of the monopoly, the monopoly can temporarily lower prices below what it costs the monopoly to produce - for the sole intention of driving the small competitor out of business. Tom Woods retorts the Predatory Pricing Argument in his book “The Politically Incorrect Guide to American History” and shows how entrepreneurs can ingeniously circumvent severely underpriced goods monopolies sell during times of competition. The story goes as follows:
There was a man by the name of Herbert Dow, and Herbert Dow was a smart man, He was able to produce a chemical called bromine for a substantially reduced cost than his competitors. The German monopoly Brokomvention did not like the fact Herbert Dow could do this, so they offered him a warning – they said if he ever decides to sell his bromine in Europe they – Brokomvention - would lower their prices so significantly in the U.S. that he would be put out of business. Herbert Dow was not deterred, he began selling his chemical for .33/lb in Great Britain versus Brokom’s price of .49/lb. So Brokom made good on their promise, they reduced their price in the United States for Bromine to .21/lb – a price which Herbert Dow could not possibly compete. So what did Herbert do? He did something very smart, he contacted his buying agent and ordered him to buy up as much of Brokom’s Bromine as he possibly could. He then took this Bromine and sold it to Europe (where the price was still .49/lb). Brokom, unknowing of this tactic saw the dramatic increase in demand for their bromine and saw that Herbert Dow was still well in business. So the Germans lowered the price to .15/lb and Herbert Dow bought and sold more, then they lowered the price to 10.5/lb until they finally discovered what Herbert Dow had been up to – and promptly raised their prices. But not before making Herbert a very wealthy man!
Indeed, whenever a monopoly sells below cost of production, it creates excesses in demand, and drives speculation – which can then can become profitable when the price for the same good rises during periods in which there is no competition. Speculation deters any significant arbitrage of this sort.
There is one powerful argument against the viability of this thesis. It is this, to the extent that large business profit from collusion is the extent to which they incentivize new competition and innovation. This is the argument taken by Joseph Schumpeter.
Schumpeter’s thesis is then partially taken down by the Predatory Pricing argument, which says that because of the largeness of the monopoly, the monopoly can temporarily lower prices below what it costs the monopoly to produce - for the sole intention of driving the small competitor out of business. Tom Woods retorts the Predatory Pricing Argument in his book “The Politically Incorrect Guide to American History” and shows how entrepreneurs can ingeniously circumvent severely underpriced goods monopolies sell during times of competition. The story goes as follows:
There was a man by the name of Herbert Dow, and Herbert Dow was a smart man, He was able to produce a chemical called bromine for a substantially reduced cost than his competitors. The German monopoly Brokomvention did not like the fact Herbert Dow could do this, so they offered him a warning – they said if he ever decides to sell his bromine in Europe they – Brokomvention - would lower their prices so significantly in the U.S. that he would be put out of business. Herbert Dow was not deterred, he began selling his chemical for .33/lb in Great Britain versus Brokom’s price of .49/lb. So Brokom made good on their promise, they reduced their price in the United States for Bromine to .21/lb – a price which Herbert Dow could not possibly compete. So what did Herbert do? He did something very smart, he contacted his buying agent and ordered him to buy up as much of Brokom’s Bromine as he possibly could. He then took this Bromine and sold it to Europe (where the price was still .49/lb). Brokom, unknowing of this tactic saw the dramatic increase in demand for their bromine and saw that Herbert Dow was still well in business. So the Germans lowered the price to .15/lb and Herbert Dow bought and sold more, then they lowered the price to 10.5/lb until they finally discovered what Herbert Dow had been up to – and promptly raised their prices. But not before making Herbert a very wealthy man!
Indeed, whenever a monopoly sells below cost of production, it creates excesses in demand, and drives speculation – which can then can become profitable when the price for the same good rises during periods in which there is no competition. Speculation deters any significant arbitrage of this sort.
30 Aug 2011, 6:01 pm
wcoltd wrote:
LKL wrote:
wcoltd wrote:
zer0netgain wrote:
The "free market" has always depended on a variety of wisely-wielded controls to prevent it from being twisted into something horrible.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
How do monopolies come to be? It is either through help from the government, or because they provide goods or services more efficiently than their competitors.
Monopolies come to be when an owner with tremendous amounts of pre-existing cash buys up the supply chain (vertical monopoly) or buys out the competition (horizontal monopoly) in order to become so efficient that it can out-compete any future competitors, even to the degree of setting its prices so low that it temporarily takes a loss. Efficiency is primarily the result, not the origin. Sometimes the original company did have some advantage that allowed it to expand in the first place, but not usually an advantage large enough to justify (in terms of the well-being of the consumer) driving out any and all competition.
I addressed that in the paper!
Quote:
According to the Book “Monopoly Power and Economic Performance” by Edwin Mansfield. The problem of monopolization exists when large businesses find that they can become more profitable by collusion rather than competition. This causes prices for the individual consumer to rise, raising the burden on society.
There is one powerful argument against the viability of this thesis. It is this, to the extent that large business profit from collusion is the extent to which they incentivize new competition and innovation. This is the argument taken by Joseph Schumpeter.
Schumpeter’s thesis is then partially taken down by the Predatory Pricing argument, which says that because of the largeness of the monopoly, the monopoly can temporarily lower prices below what it costs the monopoly to produce - for the sole intention of driving the small competitor out of business. Tom Woods retorts the Predatory Pricing Argument in his book “The Politically Incorrect Guide to American History” and shows how entrepreneurs can ingeniously circumvent severely underpriced goods monopolies sell during times of competition. The story goes as follows:
There was a man by the name of Herbert Dow, and Herbert Dow was a smart man, He was able to produce a chemical called bromine for a substantially reduced cost than his competitors. The German monopoly Brokomvention did not like the fact Herbert Dow could do this, so they offered him a warning – they said if he ever decides to sell his bromine in Europe they – Brokomvention - would lower their prices so significantly in the U.S. that he would be put out of business. Herbert Dow was not deterred, he began selling his chemical for .33/lb in Great Britain versus Brokom’s price of .49/lb. So Brokom made good on their promise, they reduced their price in the United States for Bromine to .21/lb – a price which Herbert Dow could not possibly compete. So what did Herbert do? He did something very smart, he contacted his buying agent and ordered him to buy up as much of Brokom’s Bromine as he possibly could. He then took this Bromine and sold it to Europe (where the price was still .49/lb). Brokom, unknowing of this tactic saw the dramatic increase in demand for their bromine and saw that Herbert Dow was still well in business. So the Germans lowered the price to .15/lb and Herbert Dow bought and sold more, then they lowered the price to 10.5/lb until they finally discovered what Herbert Dow had been up to – and promptly raised their prices. But not before making Herbert a very wealthy man!
Indeed, whenever a monopoly sells below cost of production, it creates excesses in demand, and drives speculation – which can then can become profitable when the price for the same good rises during periods in which there is no competition. Speculation deters any significant arbitrage of this sort.
There is one powerful argument against the viability of this thesis. It is this, to the extent that large business profit from collusion is the extent to which they incentivize new competition and innovation. This is the argument taken by Joseph Schumpeter.
Schumpeter’s thesis is then partially taken down by the Predatory Pricing argument, which says that because of the largeness of the monopoly, the monopoly can temporarily lower prices below what it costs the monopoly to produce - for the sole intention of driving the small competitor out of business. Tom Woods retorts the Predatory Pricing Argument in his book “The Politically Incorrect Guide to American History” and shows how entrepreneurs can ingeniously circumvent severely underpriced goods monopolies sell during times of competition. The story goes as follows:
There was a man by the name of Herbert Dow, and Herbert Dow was a smart man, He was able to produce a chemical called bromine for a substantially reduced cost than his competitors. The German monopoly Brokomvention did not like the fact Herbert Dow could do this, so they offered him a warning – they said if he ever decides to sell his bromine in Europe they – Brokomvention - would lower their prices so significantly in the U.S. that he would be put out of business. Herbert Dow was not deterred, he began selling his chemical for .33/lb in Great Britain versus Brokom’s price of .49/lb. So Brokom made good on their promise, they reduced their price in the United States for Bromine to .21/lb – a price which Herbert Dow could not possibly compete. So what did Herbert do? He did something very smart, he contacted his buying agent and ordered him to buy up as much of Brokom’s Bromine as he possibly could. He then took this Bromine and sold it to Europe (where the price was still .49/lb). Brokom, unknowing of this tactic saw the dramatic increase in demand for their bromine and saw that Herbert Dow was still well in business. So the Germans lowered the price to .15/lb and Herbert Dow bought and sold more, then they lowered the price to 10.5/lb until they finally discovered what Herbert Dow had been up to – and promptly raised their prices. But not before making Herbert a very wealthy man!
Indeed, whenever a monopoly sells below cost of production, it creates excesses in demand, and drives speculation – which can then can become profitable when the price for the same good rises during periods in which there is no competition. Speculation deters any significant arbitrage of this sort.
So, unless I'm misunderstanding, speculation is the solution to arbitrage? I'm not sure if you've been paying attention lately, but speculation, bubbles, derivatives, etc. - these are the very reasons why our economy is so unstable. When you take large sums of money and invest it in financial trickery, it's nothing more than legal gambling. It doesn't truly create wealth, in the sense of wealth being some sort of measure for production.
It's similar to a card counter who has an edge at blackjack. It's not illegal to count cards, but you'll be kicked out real fast if you're caught because the casinos know that that practice could bankrupt them. With the financial crisis, we were the house. Investors were promised the house edge because the house is always supposed to have the edge. The system can't survive without a house edge, much like a casino can't survive without that same edge. Speculation, derivatives, and other modes of trickery eroded that edge and we, the house, went bankrupt.
It's one thing if an individual wants to take their savings account to Harrah's. It's quite another when an individual (or company) wants to gamble their investor's money. It may be legal, but it's still robbery.
30 Aug 2011, 7:25 pm
number5 wrote:
wcoltd wrote:
LKL wrote:
wcoltd wrote:
zer0netgain wrote:
The "free market" has always depended on a variety of wisely-wielded controls to prevent it from being twisted into something horrible.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
How do monopolies come to be? It is either through help from the government, or because they provide goods or services more efficiently than their competitors.
Monopolies come to be when an owner with tremendous amounts of pre-existing cash buys up the supply chain (vertical monopoly) or buys out the competition (horizontal monopoly) in order to become so efficient that it can out-compete any future competitors, even to the degree of setting its prices so low that it temporarily takes a loss. Efficiency is primarily the result, not the origin. Sometimes the original company did have some advantage that allowed it to expand in the first place, but not usually an advantage large enough to justify (in terms of the well-being of the consumer) driving out any and all competition.
I addressed that in the paper!
Quote:
According to the Book “Monopoly Power and Economic Performance” by Edwin Mansfield. The problem of monopolization exists when large businesses find that they can become more profitable by collusion rather than competition. This causes prices for the individual consumer to rise, raising the burden on society.
There is one powerful argument against the viability of this thesis. It is this, to the extent that large business profit from collusion is the extent to which they incentivize new competition and innovation. This is the argument taken by Joseph Schumpeter.
Schumpeter’s thesis is then partially taken down by the Predatory Pricing argument, which says that because of the largeness of the monopoly, the monopoly can temporarily lower prices below what it costs the monopoly to produce - for the sole intention of driving the small competitor out of business. Tom Woods retorts the Predatory Pricing Argument in his book “The Politically Incorrect Guide to American History” and shows how entrepreneurs can ingeniously circumvent severely underpriced goods monopolies sell during times of competition. The story goes as follows:
There was a man by the name of Herbert Dow, and Herbert Dow was a smart man, He was able to produce a chemical called bromine for a substantially reduced cost than his competitors. The German monopoly Brokomvention did not like the fact Herbert Dow could do this, so they offered him a warning – they said if he ever decides to sell his bromine in Europe they – Brokomvention - would lower their prices so significantly in the U.S. that he would be put out of business. Herbert Dow was not deterred, he began selling his chemical for .33/lb in Great Britain versus Brokom’s price of .49/lb. So Brokom made good on their promise, they reduced their price in the United States for Bromine to .21/lb – a price which Herbert Dow could not possibly compete. So what did Herbert do? He did something very smart, he contacted his buying agent and ordered him to buy up as much of Brokom’s Bromine as he possibly could. He then took this Bromine and sold it to Europe (where the price was still .49/lb). Brokom, unknowing of this tactic saw the dramatic increase in demand for their bromine and saw that Herbert Dow was still well in business. So the Germans lowered the price to .15/lb and Herbert Dow bought and sold more, then they lowered the price to 10.5/lb until they finally discovered what Herbert Dow had been up to – and promptly raised their prices. But not before making Herbert a very wealthy man!
Indeed, whenever a monopoly sells below cost of production, it creates excesses in demand, and drives speculation – which can then can become profitable when the price for the same good rises during periods in which there is no competition. Speculation deters any significant arbitrage of this sort.
There is one powerful argument against the viability of this thesis. It is this, to the extent that large business profit from collusion is the extent to which they incentivize new competition and innovation. This is the argument taken by Joseph Schumpeter.
Schumpeter’s thesis is then partially taken down by the Predatory Pricing argument, which says that because of the largeness of the monopoly, the monopoly can temporarily lower prices below what it costs the monopoly to produce - for the sole intention of driving the small competitor out of business. Tom Woods retorts the Predatory Pricing Argument in his book “The Politically Incorrect Guide to American History” and shows how entrepreneurs can ingeniously circumvent severely underpriced goods monopolies sell during times of competition. The story goes as follows:
There was a man by the name of Herbert Dow, and Herbert Dow was a smart man, He was able to produce a chemical called bromine for a substantially reduced cost than his competitors. The German monopoly Brokomvention did not like the fact Herbert Dow could do this, so they offered him a warning – they said if he ever decides to sell his bromine in Europe they – Brokomvention - would lower their prices so significantly in the U.S. that he would be put out of business. Herbert Dow was not deterred, he began selling his chemical for .33/lb in Great Britain versus Brokom’s price of .49/lb. So Brokom made good on their promise, they reduced their price in the United States for Bromine to .21/lb – a price which Herbert Dow could not possibly compete. So what did Herbert do? He did something very smart, he contacted his buying agent and ordered him to buy up as much of Brokom’s Bromine as he possibly could. He then took this Bromine and sold it to Europe (where the price was still .49/lb). Brokom, unknowing of this tactic saw the dramatic increase in demand for their bromine and saw that Herbert Dow was still well in business. So the Germans lowered the price to .15/lb and Herbert Dow bought and sold more, then they lowered the price to 10.5/lb until they finally discovered what Herbert Dow had been up to – and promptly raised their prices. But not before making Herbert a very wealthy man!
Indeed, whenever a monopoly sells below cost of production, it creates excesses in demand, and drives speculation – which can then can become profitable when the price for the same good rises during periods in which there is no competition. Speculation deters any significant arbitrage of this sort.
So, unless I'm misunderstanding, speculation is the solution to arbitrage? I'm not sure if you've been paying attention lately, but speculation, bubbles, derivatives, etc. - these are the very reasons why our economy is so unstable. When you take large sums of money and invest it in financial trickery, it's nothing more than legal gambling. It doesn't truly create wealth, in the sense of wealth being some sort of measure for production.
It's similar to a card counter who has an edge at blackjack. It's not illegal to count cards, but you'll be kicked out real fast if you're caught because the casinos know that that practice could bankrupt them. With the financial crisis, we were the house. Investors were promised the house edge because the house is always supposed to have the edge. The system can't survive without a house edge, much like a casino can't survive without that same edge. Speculation, derivatives, and other modes of trickery eroded that edge and we, the house, went bankrupt.
It's one thing if an individual wants to take their savings account to Harrah's. It's quite another when an individual (or company) wants to gamble their investor's money. It may be legal, but it's still robbery.
If you look into it, you'll discovery that much of the trickery that went on was because of Government intervention. Also to get a better understanding it is important to understand how expansion of credit affects the business cycle.
Speculative bubbles can still exist without government intervention, however they tend to correct themselves more readily. Speculators work in the opposite direction as well, the reason why the stock market dropped was because of the work of rational speculators who discovered certain bonds were overvalued and shorted them.
Often times the work of speculators goes under appreciated, they are never recognized for averting shortages or mitigating periods of oversupply. Inflation can distort risk and reward and make it difficult for speculators to value things in term of one another. Variations in the money supply, not having a stable currency undermines their ability to see things rationally.
30 Aug 2011, 8:30 pm
wcoltd wrote:
If you look into it, you'll discovery that much of the trickery that went on was because of Government intervention.
How so? The banks were greedy and reckless. They used investor's money to gamble on garbage CDO's - knowing full well their worthlessness, and then insured their predicted losses. They continued to assure investors (after all, who ever heard of a retirement account losing substantial value) while enabling deceptive credit rating practices. Standard & Poor's knew they were providing inaccurate and deceptive ratings, but when it's the banks themselves who pay for these ratings, there's not exactly an incentive for accuracy.
I do not hold the government blameless, but it was their lack of intervention that was the problem here.
30 Aug 2011, 8:42 pm
wcoltd wrote:
AceOfSpades wrote:
I want to know what a "real free market" is, because there are people who think even a single red tape taints it enough to make it unfree.
That is a good point, it is a spectrum, though a truly free market, it must be founded entirely on the basis of an absolute definition of property rights and operates through complete voluntary action. In a truly free market there can be no coercion.
I think your analysis of property rights and coercion is inadequate.
First of all, can ALL property right violations likely be expressed in advance? I'm suspicious, and the reason why I am suspicious is because when crafting a law, it is a common failure to specify the exact nature of things in each and every possibility, but an effort at exhaustiveness has been made. So what ends up happening is we have a bizarre situation where the law simply doesn't make sense. In the case of property rights, what we will likely end up with is just a set of circumstances in which the property right claim is underdeveloped due to a technological shift unforeseen in the original statement of the property right. So, for instance, you are given property, 50 years later, mining becomes very common. Do you own the land underneath the deed and how far? Surely not the other side of the earth, but surely also not JUST the surface area either as you can dig and bury things in your yard. Do you have mineral rights though? Well, now, that's an open question, as your property was not formulated to say yes or no on the matter. http://organizationsandmarkets.com/2011 ... look-like/ In short, legal formalism(which you require) cannot work because of the necessary incompleteness of a legal framework.
As for "coercion" what about blackmail? That would appear like coercion to most people. How about a case where a person is extremely resource deprived and in extreme need, and the other person takes extreme advantage of it. (For instance, Bill Gates crashes in the desert, and I only am willing to give him water in exchange for making him my indentured servant and taking ownership of all of his property) Surely that instance is extreme. Surely Gates has the same amount of choice as if I pointed a gun to his head, as he can either die or accept my agreement. But.... this means that property rights are logically compatible with coercion.
Note: These objections don't militate us against a market order. In fact, a person can be a perfectly capable libertarian and accept both instances as possible. (I would actually bet anarcho-capitalist David Friedman stands a high chance of agreeing with both ideas) It's just that the framework of libertarianism you present doesn't seem compatible with both kinds of problems.
30 Aug 2011, 10:59 pm
Awesomelyglorious wrote:
wcoltd wrote:
AceOfSpades wrote:
I want to know what a "real free market" is, because there are people who think even a single red tape taints it enough to make it unfree.
That is a good point, it is a spectrum, though a truly free market, it must be founded entirely on the basis of an absolute definition of property rights and operates through complete voluntary action. In a truly free market there can be no coercion.
I think your analysis of property rights and coercion is inadequate.
First of all, can ALL property right violations likely be expressed in advance? I'm suspicious, and the reason why I am suspicious is because when crafting a law, it is a common failure to specify the exact nature of things in each and every possibility, but an effort at exhaustiveness has been made. So what ends up happening is we have a bizarre situation where the law simply doesn't make sense. In the case of property rights, what we will likely end up with is just a set of circumstances in which the property right claim is underdeveloped due to a technological shift unforeseen in the original statement of the property right. So, for instance, you are given property, 50 years later, mining becomes very common. Do you own the land underneath the deed and how far? Surely not the other side of the earth, but surely also not JUST the surface area either as you can dig and bury things in your yard. Do you have mineral rights though? Well, now, that's an open question, as your property was not formulated to say yes or no on the matter. http://organizationsandmarkets.com/2011 ... look-like/ In short, legal formalism(which you require) cannot work because of the necessary incompleteness of a legal framework.
As for "coercion" what about blackmail? That would appear like coercion to most people. How about a case where a person is extremely resource deprived and in extreme need, and the other person takes extreme advantage of it. (For instance, Bill Gates crashes in the desert, and I only am willing to give him water in exchange for making him my indentured servant and taking ownership of all of his property) Surely that instance is extreme. Surely Gates has the same amount of choice as if I pointed a gun to his head, as he can either die or accept my agreement. But.... this means that property rights are logically compatible with coercion.
Note: These objections don't militate us against a market order. In fact, a person can be a perfectly capable libertarian and accept both instances as possible. (I would actually bet anarcho-capitalist David Friedman stands a high chance of agreeing with both ideas) It's just that the framework of libertarianism you present doesn't seem compatible with both kinds of problems.
All valid points, there must be a consistent and comprehensive definition of personal property rights. This includes whether someone has the right to contract themselves to slavery.
There is one exception, I do not think the water blackmail analogy is the same as pointing a gun to someone's head. It is not coercion to deny a person water - even when their life is at stake. The person did not create the threat of death, the circumstance did. It was not the person who created the circumstance (of putting him in a life-threatening condition)
When someone signs a contract, is it always binding? Say if they have a mental illness and are not thinking straight, or if they are in a life threatening situation, will that contract hold under the law? I don't think it should.
Suppose that it doesn't, and this water carrier is aware of this. He would in this case dump it out or something denying Bill Gates of the water. I suppose the option - cruel as it is - is better than being denied the option of living, and forgoing everything he has.
I think the free-market utopia can only exist in a world where property rights are comprehensively defined, this poses serious problems, I agree. Without a complete and consistent definition of property rights, the free-market in the utopian sense cannot exist. I believe we can only approach such a utopia, not ever reach it fully.
30 Aug 2011, 11:47 pm
ruveyn wrote:
Governments are necessary to keep the peace, keep order and make it possible for folks to decide in a rather free fashion what to make, what to grow, what services to offer.
Keep the peace!? Who do you think starts all of these heinous wars? Condones torture? Criminalizes the silliest, most benign things? Constantly lies to the public about their misdeeds and/or justifies their actions?
Governments around the world consist of liars, control-freaks and psychopaths.
31 Aug 2011, 12:38 am
wcoltd wrote:
LKL wrote:
wcoltd wrote:
zer0netgain wrote:
The "free market" has always depended on a variety of wisely-wielded controls to prevent it from being twisted into something horrible.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
How do monopolies come to be? It is either through help from the government, or because they provide goods or services more efficiently than their competitors.
Monopolies come to be when an owner with tremendous amounts of pre-existing cash buys up the supply chain (vertical monopoly) or buys out the competition (horizontal monopoly) in order to become so efficient that it can out-compete any future competitors, even to the degree of setting its prices so low that it temporarily takes a loss. Efficiency is primarily the result, not the origin. Sometimes the original company did have some advantage that allowed it to expand in the first place, but not usually an advantage large enough to justify (in terms of the well-being of the consumer) driving out any and all competition.
I addressed that in the paper!
(snip exerpt for brevity)
So one inventor had a vastly superior process, and beat out his competitor because they undersold him enough that he was able to make a profit even after the shipping and handling costs of ferrying a product between different markets. That strategy will not work if the entrepreneur's product is only a little better than the monopoly's, or if the market is global (ie, the monopoly is undercutting prices everywhere), or if the undercut is shallow enough that people still buy the monopoly's product, but not so shallow that the entrepreneur can make a profit after paying for shipping costs.
In addition, the problem with monopolies isn't that they prevent new people from getting rich, but that they prevent competition of products. In the case you cited, the advantage provided by the entrepreneur was only price, and by buying and selling he managed to get rich; the customer was largely unaffected because bromine is bromine regardless of how it is produced. If the entrepreneur has a genuinely better product - more purified bromine, say, or a better mousetrap - but is reduced to trading the monopoly's material, then the consumer has lost out on access to the better product.
(edited to fix quote boxes)
Last edited by LKL on 31 Aug 2011, 2:48 pm, edited 1 time in total.
31 Aug 2011, 6:08 am
Awesomelyglorious wrote:
As for "coercion" what about blackmail? That would appear like coercion to most people. How about a case where a person is extremely resource deprived and in extreme need, and the other person takes extreme advantage of it. (For instance, Bill Gates crashes in the desert, and I only am willing to give him water in exchange for making him my indentured servant and taking ownership of all of his property) Surely that instance is extreme. Surely Gates has the same amount of choice as if I pointed a gun to his head, as he can either die or accept my agreement. But.... this means that property rights are logically compatible with coercion.
The man with the gun takes a positive action against the victim. The man who won't give poor Bill water is not taking a positive action. You have confounded omission and commission. Doing nothing is not the same as doing something. Failure to save a life is not the same as taking a life (provided that one did not create the hazard in the first place). In short you are making a category error.
ruveyn
31 Aug 2011, 7:12 am
LKL wrote:
wcoltd wrote:
LKL wrote:
wcoltd wrote:
zer0netgain wrote:
The "free market" has always depended on a variety of wisely-wielded controls to prevent it from being twisted into something horrible.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
Monopolies are illegal, but they largely exist because legislation undid prohibitions and while X, Y and Z corps don't have a "monopoly" in the legalistic term, they control over 90% of the market, set everything as if they were one entity, deny the public options, etc.
This distorts what a free market is supposed to be about...healthy competition.
How do monopolies come to be? It is either through help from the government, or because they provide goods or services more efficiently than their competitors.
Monopolies come to be when an owner with tremendous amounts of pre-existing cash buys up the supply chain (vertical monopoly) or buys out the competition (horizontal monopoly) in order to become so efficient that it can out-compete any future competitors, even to the degree of setting its prices so low that it temporarily takes a loss. Efficiency is primarily the result, not the origin. Sometimes the original company did have some advantage that allowed it to expand in the first place, but not usually an advantage large enough to justify (in terms of the well-being of the consumer) driving out any and all competition.
I addressed that in the paper!
(snip exerpt for brevity)
So one inventor had a vastly superior process, and beat out his competitor because they undersold him enough that he was able to make a profit even after the shipping and handling costs of ferrying a product between different markets. That strategy will not work if the entrepreneur's product is only a little better than the monopoly's, or if the market is global (ie, the monopoly is undercutting prices everywhere), or if the undercut is shallow enough that people still buy the monopoly's product, but not so shallow that the entrepreneur can make a profit after paying for shipping costs.
In addition, the problem with monopolies isn't that they prevent new people from getting rich, but that they prevent competition of products. In the case you cited, the advantage provided by the entrepreneur was only price, and by buying and selling he managed to get rich; the customer was largely unaffected because bromine is bromine regardless of how it is produced. If the entrepreneur has a genuinely better product - more purified bromine, say, or a better mousetrap - but is reduced to trading the monopoly's material, then the consumer has lost out on access to the better product.
The consumer will always buy the best product for the best price. If there is a situation where the price is so low that no one can possibly compete (due to high efficiency of the monopoly producer) that is not a bad thing. That is a very good thing, competition is good because it lowers prices for the consumer, competition can't do that because prices are already as low as they can go, then having the monopoly raise prices in order to open up competition only tries to solve the problem that was just created.
Herbert Dow wasn't reduced to selling his competitors product, he was still selling his bromide (at a higher price) if he had gone out of business, they would have sharply raised prices and he would have not been able to continue buying all the cheap bromide.
31 Aug 2011, 11:46 am
number5 wrote:
wcoltd wrote:
If you look into it, you'll discovery that much of the trickery that went on was because of Government intervention.
How so? The banks were greedy and reckless. They used investor's money to gamble on garbage CDO's - knowing full well their worthlessness, and then insured their predicted losses. They continued to assure investors (after all, who ever heard of a retirement account losing substantial value) while enabling deceptive credit rating practices. Standard & Poor's knew they were providing inaccurate and deceptive ratings, but when it's the banks themselves who pay for these ratings, there's not exactly an incentive for accuracy.
I do not hold the government blameless, but it was their lack of intervention that was the problem here.
Actually, banks were forced to make the loans under the Community Reinvestment Act, specifically the changes made by Bill Clinton in 1995.
Anyways, the government forced banks to use ridiculously low standards when it came to giving someone a loan.
http://www.businessinsider.com/the-cra- ... ide-2009-6
Thing the article leaves out is Bush backtracked and tried to actually reign in Fannae May and Freddie Mac, as did the Republicans but were stopped by the Democrats.
31 Aug 2011, 12:44 pm
ruveyn wrote:
wcoltd wrote:
Even in agriculture in the menonite communities - which are exempt from Federal taxes, the market is not entirely free because they are still restricted in terms of their farming practices, they cannot use certain types of fertalizers, they cannot in some areas till their land too close to water (due to potential nitrification of the water ways). These from imposed regulations designed to help the environment.
Also many of the seed distributers and farmers are taxed,
What a free market really means is a system of voluntary action, a sort of utopia where people pay no taxes or are not restricted by law to comply with any sort of regulation. We can guess what this utopia would be like by extrapolation of places which have more or less freedom. Through this mode of analysis we can guess what such a society would look like and we can suppose how it could operate.
In order for orderly markets to exist there must be laws to handle frauds and breach of contract. In order for there to be laws we must have a government to enforce them. Which means taxes. If you are saying the presence of government and taxes means markets are not free, then you imply free markets can only exist in the absence of government. But in the absence of government thugs, vandals and thieves would make commerce impossible.
ruveyn
Not impossible, just much more difficult. Every piece of cyberpunk media you can find postulates a boom in private security firms because of what you just outlined. Now are they replacements for our current police system? Absolutely not. But then again, it's also postulated that they were never really meant to be.
Bloviater wrote:
ruveyn wrote:
Governments are necessary to keep the peace, keep order and make it possible for folks to decide in a rather free fashion what to make, what to grow, what services to offer.
Keep the peace!? Who do you think starts all of these heinous wars? Condones torture? Criminalizes the silliest, most benign things? Constantly lies to the public about their misdeeds and/or justifies their actions?
Governments around the world consist of liars, control-freaks and psychopaths.
Yes, governments consist of people. What's your point?
31 Aug 2011, 1:01 pm
Vexcalibur wrote:
Quote:
Previous to Aguas Del Tunari, the government had a regressive pricing policy on their water, since they were taking up greater costs and risks for supplying water to the poorer communities, they had opted to charge them more for their water, so much so that as a result the poorer clients were paying more than 6 times more for the same amount of water. It was actually such a price differential that the rich who were partially comprised of cocaine farmers, were able to pull the water from the city supply and sell it in tanqueros to supply water to the poor communities. Bechtel suspects that it was this financial incentive that was behind the irrational protesting in Cochabamba Bolivia.
"Irrational protesting".I don't understand how anyone who can believe in evolution, does not believe in the free market.
The free market just applies the idea of natural selection to businesses.
How come this process cannot work in the free market when it works so well in biology?
