"Quid pro quo," in the words of Hannibal.
While I am quite willing and able to defend Capitalism theoretically, that does not mean the case for Socialism is proven. Far from it. You chaps need to state your case.
jog on
duc
Best Thread Keynes Vs. Hayek
"Quid pro quo," in the words of Hannibal.
While I am quite willing and able to defend Capitalism theoretically, that does not mean the case for Socialism is proven. Far from it. You chaps need to state your case.
jog on
duc
Martinghoul
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Right, let's please stick to the example case I have provided. Let's continue assuming that it was Bob's testicle that was pre-existing, rather than his one-testicle'd condition. Let's also assume that, regardless of the other details, the insurance company liable in this case (say, Bob's) simply refuses to pay the claim. Let's say that, as you suggest, Bob initiates legal proceedings against his insurance company in a private court of law. Given this setting, I have the following questions, please:
1) Given that there are several competing private courts, which court does Bob choose?
2) What is stopping the insurance company from performing a hostile takeover of the private court corporation (say, in the market)?
3) If the insurance company successfully obtains ownership of this court, what happens to Bob's lawsuit?
4) Suppose a private court A issues a verdict that Bob's claim is to be paid. What is to stop the insurance company from trying the same case in a different private court B, which (for whatever reason) reaches the opposite verdict? Which decision is going to be enforced?
Right, this makes sense... So you're saying that, in this case, based on the decision of the Court, I will be prevented from disposing of my private property as I see fit? In this case is it logical to conclude that my "right of property" is only valid as long as I abide by certain rules that are, effectively, formulated and enforced by the jury of my peers?
Assuming Bob is fairly honest, has a case, evidence, etc. Bob will likely choose the Court with the best reputation for the interpretation of the Common Law and finding justice.
Nothing at all. With free entry to the market, there will be competition. The Court taken over by the Insurance company, if it starts to simply rubber-stamp decisions based on prejudice, will soon lose all confidence and trust, and will be shunned.
He moves it to another, unaffiliated Court. Clearly he can cite conflict of interest.
Simply because once the Court is agreed on, and the trial takes place, the decision is final, unless there is a point of law which is challenged, in which case it goes to the appellate Court.
Not at all. The point of difference was a nuclear plant. If it can be shown that this nuclear plant violates other's property rights, then, it should not be allowed. If however, no violation of existing property rights can be demonstrated, then, you get your nuclear plant.
No the law of property is the line in the sand. Your peers, are there to render a decision after listening to legal argument from, I assume, your Barrister.
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duc
Martinghoul
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Grand, makes sense.
Right, but I am not really interested in what happens "soon". I am interested in what happens in this case to Bob's and his missing testicle. Are you suggesting that, in this particular circumstance a miscarriage of justice may occur solely and purely as a result of the design of the "private judiciary"? Moreover, are you suggesting (or I could have misinterpreted) that such a miscarriage of justice is "acceptable", because it's sporadic and will tend to vanish in the limit, so to speak?
Makes sense.
OKI, that makes sense. You're suggesting that it's not a problem if multiple private courts with overlapping jurisdictions exist, as long as there's an apellate court that will, effectively, issue the final verdict. So let's take the highest, most senior "private court" in this system (let's call it "supreme"). Because there's no apellate court that is able to overrule the supreme court's verdict, there can only be one "private" supreme court for every jurisdiction. Would you agree with this?
Indeed, so let me rephrase in a way that should be more in line with your statements above. My right of property is upheld as long as it doesn't violate the existing property rights of others in my community. The decision on whether my actions, actual or intended, constitute a violation of existing property rights of others is rendered by a jury of my peers, according to a particular pre-defined legal process. Does that sound like a reasonable summation?
Indeed. This Supreme Court will be made up of Judges drawn from the competing lower Courts. They will not be "lifetime" appointments, possibly just 1yr. They will be selected how? I rather favour by random drawing of ballots, but, who knows.
It must also not harm your property rights. Your "desire" to create a nuclear station is an action in the future. If your proposal to create a nuclear plant is rejected, your existing property and rights are not harmed, as the nuclear plant is still only a future possibility, and the future is uncertain.
Yes, apart from the "intended." I've expanded on this above. Future property, not actually in existence in the present, can exercise no property rights. That would be analogous to me claiming property rights of the entire moon, as, in the future, I will mine it for minerals, under first use principals.
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duc
Atilla
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Finally, mass production does not necessarily imply production of scarce goods & products for the masses at all. Far from it. Once again I beg to differ on the perfect theorem view of economics. It would be for maximising profits but even then it may be a long term view of maximising profits by eliminating competition further leading to imperfection of the standard perfect competitive market place.
Some examples
1. Mass production could be to gain economies of scale to increase profits or
2. To beat a competitor by flooding the market by cheaper products perhaps even sold under cost of production
3. Increase market share - leading to oligopolistic market place
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Atilla
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In which case you would be mistaken.
True. You have the answer right in front of your nose. Capital.
Incorrect.
It is the "Discounted Marginal Value Product" of labour that is important. With increased capital, increasing the DMVP of labour, it is entirely possible for "paid labour" to be more productive, or, profitable than slave labour.
Not sure what these were in reply to but I feel these have been taken out of context. If we are talking slave labour there was very little or no techonology involved in production.
There was land and labour. Cotton had to be picked. Can you explain how paid labour would be more productive than slave labour in bringing in more profits?
Have you even read the research?
Can you remind me or point me in the right direction please?
I wonder if you know the real reasons?
I wonder that too - would help if I know what's being discussed.
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duc
Atilla
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Government has debt. Debt needs to be balanced. One can either cut public expenditure or raise taxes. I favour doing both raising taxes and cutting spending to pay back debt.
1. Raise taxes
2. Cut spending (and reduce big Gov)
3. Maintain interest rates r < i below inflation to stimulate growth (this also helps with exch rate)
I didn't assume an inflation rate. Merely proposing negative rates of interest which is what we currently have.
What do you propose?
Hi Atilla,
Feel free to articulate your arguments. The devil may lie in the detail.
With public corporations, there is a problem. The CEO is generally not the original owner, nor entrepreneur. He is a contracted manager. Unfortunately his compensation is not contractually based on results.
The entrepreneur would earn the discounted market return, the natural rate of interest over time. If he was an innovator, in a nascent industry, he might well earn in excess of the market return. That would however attract competitors to his industry, lowering the return towards the natural rate, or equilibrium if you prefer.
Our current CEO's, particularly the Bank CEO's are not compensated on this principal. They in addition to any contracted salary, earn bonuses, allocated as a % of profits, which is different to the natural rate due to the leverage employed, thus the bonus is hideously distorted.
In part, the blame must lie with shareholders, who, are the owners. If they cannot/will not police the CEO, who, is their employee, then, they will be expropriated. The Board of Directors, supposedly, serve this function. Of course policing them, is not at all easy, the judicial system is a minefield to navigate.
My point is this: it is not capitalism that is to blame, rather, the institutions that have been created, and the legislation around them, designed it must be said, the "have's." Legislation is the purview of government. In government, lies the responsibility for this violation of "The Rule of Law."
The answer is not more government derived legislation, but the striking off of legislative law, and a return to, and continued refinement of the Common Law. Government, theoretically is constrained by Constitutional Law, but ignore it, change it, add to it at will.
The markets are not free and unhampered, they are tightly controlled, although not entirely, by government. Reducing the ability of government to exercise intervention in the markets is the first step forward.
Prices hardly stalled, defaults rose. The sub-prime defaults, linked as they were through the securitization process, then impacted other higher rated loans, which as we have been finding out, were incredibly low quality also, which, led ever higher up the risk tranches of the securities.
Leverage works both ways. When credit is expanded, the multiplier is positive [although even that has been falling] and when credit contracts, leverage exerts the same multiplier, only this operated at its maximum on the way down. The deflation that resulted, created the conditions that magnified the current crisis.
This fractional reserve lending of demand deposits, or contracts of depositum, is illegal. How then do Banks get away with breaking the law? Because they are exempted from prosecution by government. Government violated property rights to allow government to expropriate the property of their subjects.
Theft is always a negative outcome for the victim. Government, through committing theft against producers, will, and have, created a less prosperous environment for all, save those who now own the stolen property.
I'll come back to your other points, all of them require detailed answers. It's my breakfast time now!
jog on
duc
Feel free to articulate your arguments. The devil may lie in the detail.
With public corporations, there is a problem. The CEO is generally not the original owner, nor entrepreneur. He is a contracted manager. Unfortunately his compensation is not contractually based on results.
The entrepreneur would earn the discounted market return, the natural rate of interest over time. If he was an innovator, in a nascent industry, he might well earn in excess of the market return. That would however attract competitors to his industry, lowering the return towards the natural rate, or equilibrium if you prefer.
Our current CEO's, particularly the Bank CEO's are not compensated on this principal. They in addition to any contracted salary, earn bonuses, allocated as a % of profits, which is different to the natural rate due to the leverage employed, thus the bonus is hideously distorted.
In part, the blame must lie with shareholders, who, are the owners. If they cannot/will not police the CEO, who, is their employee, then, they will be expropriated. The Board of Directors, supposedly, serve this function. Of course policing them, is not at all easy, the judicial system is a minefield to navigate.
My point is this: it is not capitalism that is to blame, rather, the institutions that have been created, and the legislation around them, designed it must be said, the "have's." Legislation is the purview of government. In government, lies the responsibility for this violation of "The Rule of Law."
The answer is not more government derived legislation, but the striking off of legislative law, and a return to, and continued refinement of the Common Law. Government, theoretically is constrained by Constitutional Law, but ignore it, change it, add to it at will.
The markets are not free and unhampered, they are tightly controlled, although not entirely, by government. Reducing the ability of government to exercise intervention in the markets is the first step forward.
Prices hardly stalled, defaults rose. The sub-prime defaults, linked as they were through the securitization process, then impacted other higher rated loans, which as we have been finding out, were incredibly low quality also, which, led ever higher up the risk tranches of the securities.
Leverage works both ways. When credit is expanded, the multiplier is positive [although even that has been falling] and when credit contracts, leverage exerts the same multiplier, only this operated at its maximum on the way down. The deflation that resulted, created the conditions that magnified the current crisis.
This fractional reserve lending of demand deposits, or contracts of depositum, is illegal. How then do Banks get away with breaking the law? Because they are exempted from prosecution by government. Government violated property rights to allow government to expropriate the property of their subjects.
Theft is always a negative outcome for the victim. Government, through committing theft against producers, will, and have, created a less prosperous environment for all, save those who now own the stolen property.
I'll come back to your other points, all of them require detailed answers. It's my breakfast time now!
jog on
duc
Continuing...
This is not necessarily true. It is contingently true only.
Let me break this argument down into an analysis of logical structure.
M - P
S - M
S - P
This represents the correct logical structure of an argument. An invalid structure looks like this:
P - M
S - M
S - P
M = multiple of companies reporting less than expected profits (despite making profits)
P = to start the process of reducing production to maintain the higher profits
S = leading to redundancies and subsequent reduced aggregate demand.
So on that basis:
multiple of companies reporting less than expected profits (despite making profits) = to start the process of reducing production to maintain the higher profits
leading to redundancies and subsequent reduced aggregate demand = multiple of companies reporting less than expected profits (despite making profits)
The conclusion:
leading to redundancies and subsequent reduced aggregate demand = to start the process of reducing production to maintain the higher profits
As can be seen, the correct structure of the argument, leads to a nonsense conclusion.
Now of course, there was no real need to analyse the argument formally, but it is illustrative of how easy it is for errors to creep in. The result is that we can state that in the argument, there is a false premise.
The error is this: reduced aggregate demand need not reduce profits, nor do redundancies necessarily lead to reduced aggregate demand.
Keynesian economics, does not have a coherent theory of capital. That is the short answer. The long answer is to articulate the correct theory of capital, nor do they understand that aggregates, a mathematical construct, is illegitimate in the social sciences. Posting the correct theory of capital, and methodology, as you will appreciate, is beyond the scope of a single post.
jog on
duc
This is not necessarily true. It is contingently true only.
Let me break this argument down into an analysis of logical structure.
M - P
S - M
S - P
This represents the correct logical structure of an argument. An invalid structure looks like this:
P - M
S - M
S - P
M = multiple of companies reporting less than expected profits (despite making profits)
P = to start the process of reducing production to maintain the higher profits
S = leading to redundancies and subsequent reduced aggregate demand.
So on that basis:
multiple of companies reporting less than expected profits (despite making profits) = to start the process of reducing production to maintain the higher profits
leading to redundancies and subsequent reduced aggregate demand = multiple of companies reporting less than expected profits (despite making profits)
The conclusion:
leading to redundancies and subsequent reduced aggregate demand = to start the process of reducing production to maintain the higher profits
As can be seen, the correct structure of the argument, leads to a nonsense conclusion.
Now of course, there was no real need to analyse the argument formally, but it is illustrative of how easy it is for errors to creep in. The result is that we can state that in the argument, there is a false premise.
The error is this: reduced aggregate demand need not reduce profits, nor do redundancies necessarily lead to reduced aggregate demand.
Keynesian economics, does not have a coherent theory of capital. That is the short answer. The long answer is to articulate the correct theory of capital, nor do they understand that aggregates, a mathematical construct, is illegitimate in the social sciences. Posting the correct theory of capital, and methodology, as you will appreciate, is beyond the scope of a single post.
jog on
duc
Continuing...
I would disagree.
If by "mass production" we imply an increasing "supply" of goods/services, then we can state, all else being given, that an increased supply, reduces the price. If the price is lowered, then the goods/services become accessible to a greater number of individuals, viz. lower socio-economic groups containing numerically higher membership.
Profit maximisation, I agree, is the usual contingent reason for production, but again, it is not a necessary reason. Psychic profit accrued from philanthropic and altruistic production could just as easily be the reason.
Economies of scale would need to pre-exist mass production.
True in the first case, false in the second. In the first case, you see that the economies must pre-exist.
If they increase market share, why, really is that the case? Answering the question correctly will identify that this is a positive externality, not a negative.
jog on
duc
I would disagree.
If by "mass production" we imply an increasing "supply" of goods/services, then we can state, all else being given, that an increased supply, reduces the price. If the price is lowered, then the goods/services become accessible to a greater number of individuals, viz. lower socio-economic groups containing numerically higher membership.
Profit maximisation, I agree, is the usual contingent reason for production, but again, it is not a necessary reason. Psychic profit accrued from philanthropic and altruistic production could just as easily be the reason.
Economies of scale would need to pre-exist mass production.
True in the first case, false in the second. In the first case, you see that the economies must pre-exist.
If they increase market share, why, really is that the case? Answering the question correctly will identify that this is a positive externality, not a negative.
jog on
duc
Continuing...
I am quite willing to accept that at face value, especially considering we are talking about the 1700's through 1860's.
As the original poster indicated, "slave labour" is not "free labour."
You have the capital investment in the purchase price.
You have costs: housing, feeding, health management, clothing, etc.
If your costs are higher than the discounted marginal value product of hired labour, economically it makes no sense to continue with "slave labour." That is actually the case in the Southern states. Slave labour would have died out of its own accord, as it was increasingly unprofitable.
jog on
duc
I am quite willing to accept that at face value, especially considering we are talking about the 1700's through 1860's.
As the original poster indicated, "slave labour" is not "free labour."
You have the capital investment in the purchase price.
You have costs: housing, feeding, health management, clothing, etc.
If your costs are higher than the discounted marginal value product of hired labour, economically it makes no sense to continue with "slave labour." That is actually the case in the Southern states. Slave labour would have died out of its own accord, as it was increasingly unprofitable.
jog on
duc
Continuing...
Eliminate all taxes as illegal
[ii] Default on all government debt
[iii] Return to the free market to set interest rates based on time preferences.
[iv] Eliminate all government expenditures
[v] Eliminate all fiat money, return to a gold coin standard.
[v] Eliminate fractional reserve lending. 100% reserving.
[vi] Eliminate government legislative monopoly [if they still managed to exist of course.]
I have provided what I would do, if I could. Just consider, before you, or anyone else becomes hysterical, there is solid theory behind each recommendation, so if you wish to argue the point, be my guest, but you need to be on point.
jog on
duc
Eliminate all taxes as illegal
[ii] Default on all government debt
[iii] Return to the free market to set interest rates based on time preferences.
[iv] Eliminate all government expenditures
[v] Eliminate all fiat money, return to a gold coin standard.
[v] Eliminate fractional reserve lending. 100% reserving.
[vi] Eliminate government legislative monopoly [if they still managed to exist of course.]
I have provided what I would do, if I could. Just consider, before you, or anyone else becomes hysterical, there is solid theory behind each recommendation, so if you wish to argue the point, be my guest, but you need to be on point.
jog on
duc
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Atilla
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Re: Sub-Prime / Failure of Capitalism - what ever one wishes to call it issue is one and the same. What we had - in some extreme cases were Triple AAA rated secure asset backed securities. So called 'REAL' tangible assets. What could be safer than property? CDO's were conceived, manufactured and distributed by the creme de la creme of banks. These were later found to be worthless as property prices fell. Now if they were in the money and risks were properly managed, calculated and rated, then little man loses job, institution gets property and resells to get monies. Job done. Hey presto system works as intended. But if the repacking of this highly risky assets in numerous ways such as to be beyond imagination for any one person to calculate or assess risk and subsequently rated AAA to maintain corrupt capitalist system who's fault is that.
To blame Ninja's or minimum wage or Mr Government or Mr Politician for our problems is just simply passing the buck.
I object to blaming the little guy for losing his job or desiring to have what is good in life as we all do.
Problem is with the elites of capitalism - the likes of Jimmy Cayne's and Richard Fuld's rubber stamp all kinds of stuff on their desks as long as it makes money to top up their ridiculous unjustified short term super bonuses. Bob Diamond and Jamie Dimon's included. Are these masters of the universe really worth their salaries?
I do not blame Clinton for stating a policy objective as some have done. I'm sure he didn't say bend and brake the rules but get property ownership up. He merely stated policy objective being a politician as one does.
Finally, in the capitalist system - as per regular theory, these public companies would have gone to the wall. No? Shareholders would have either had to stamp up more money, equity or write off the loss in total. But we didn't have any of that. We had tax payers bail out the shareholders effectively. Not my understanding of capitalism. Surely the state (as in the UK) should own these mega financial institutions? Is this not nationalisation all but in name?
So when people start talking about laisez fair economy and the invisible hand - I'm tempted to add a pinch of skepticism to say the least.
Capitalism is totally rigged in the interest of the big private institution who has the money to buy influence. There is no perfect competition and that old assumption about supply and demand and maximisation of profit is not half as applicable as one may imagine.
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Incorrect.
The very existence of a Central Bank, a creature of government, creates not only moral hazard, but increased risk. The reason being that the CEO's are not owners, they are managers. They do not share the losses, only the profits. If, the threat of losses are removed, they don't even lose employment. This is categorically not Capitalism. This is Corporatism. An entirely different ideology.
And the "real property" is still there. The financial instruments, due to the "price paid" are no longer holding the original value, measured by the price paid. You have conflated money prices and marginal utilities with "real property."
So do I.
The little guy however did not allow the banks to break the law. That was a function of government.
Not even remotely.
Clinton was a President. Presidents have slightly different agenda's, which rather takes us off on a different tangent. Possibly we can come back to this subject.
Incorrect.
They necessarily would have been bankrupted. If not, then we are not talking about capitalism. Clearly they didn't, thus, we are not discussing capitalism at all, but rather the Social-Democratic/Conservative blend of Socialism.
Which is why I challenged the Socialists to define Socialism. That to date, they have failed to do so, rather indicts them, no?
The losses were such, and so fast, that it is unlikely that private investors would have assumed that risk. But, had they re-capitalized the business, sure, it could have survived.
Correct. It is not, was not, and never will be Capitalism. It is Socialism writ large.
True.
You have more or less yourself admitted that Capitalism was not the cause. It was a Corporatism/Socialism based model.
Herein lies the confusion, and the tragedy: few even understand the basic definitions of the ideologies, never mind the underlying theory.
jog on
duc
Atilla
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Capital is only one factor of production. There is also land and labour. One needs to focus on two sides of the equation not just on the money side.
I agree Keynes was too much into demand side but that was precisely what was required in his era. He was also spot on.
I would also add counter to too much emphasise on Capital side bias, even negative or zero rates of interest hasn't had much of a boost on level of economic activity.
Basically the all important elasticity of the Ms to monetary manipulation is pretty inelastic contrary to popullar monetarist dogma. One can't push a piece of string.
Continuing...
You must have added this...
I think we have established that it is not Capitalism at all. It is Corporatism/Socialism.
Capitalism would break the government/corporate symbiosis, which would result in a free, unhampered market. A meritocracy, rather than the cronyism that dominates today.
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duc
You must have added this...
I think we have established that it is not Capitalism at all. It is Corporatism/Socialism.
Capitalism would break the government/corporate symbiosis, which would result in a free, unhampered market. A meritocracy, rather than the cronyism that dominates today.
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duc
Atilla
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I can see how you approaching these matters I think I know where this is going but with due respect whilst I can see where you are coming from and I concur with your perspective to some extent on some points - forgive me if I may jump ahead state;
Anything that is a problem with the system - is not capitalism but is as a consequence of deviation from free true capitalism by government / socio / political interference and if we had totally free laizes fair capitalism then the problem either would not be there or it would very quickly correct it self?
Atilla
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A conjunctive argument.
To break it, you, or anyone else, will need to show a true free market failure. I'll save you some time and list the common ones:
I'll save you some more time, I have rebutted them in the past, and can do so again. If however you can come up with something original, then, by all means post it. I would be fascinated.
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duc
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