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Source link: http://archive.mises.org/8093/does-money-taint-everything/

Does Money Taint Everything?

May 8, 2008 by

Let’s pull this sentence out of the civic pieties of our time and see what’s wrong with it: “We should all volunteer our time in charitable causes and give back to the community in a labor of love.”

We can’t argue with the instruction here, or the sentiment behind it. There is nothing wrong with giving and sacrifice. My argument is with the choice of language. It contains a word and three phrases the common usage of which can be highly misleading. FULL ARTICLE

{ 205 comments }

Inquisitor May 11, 2008 at 8:03 pm

“It has been stated ad nauseum that there is no independent justification for the state – it rests on its own power. How old are you? How long did it take for you to realise this? Have you been living in dreamy-dream land?”

So why should anyone accept its dicta? When are you going to stop saying might makes right as if this proves a single thing? Have you never even heard of the Humean ought-is gap? How do you propose to close it? By naively denying it?

“Inquisitor, the state does not need to justify anything. How long did it take you to learn that? They use guns.”

So do criminals.

Owen May 11, 2008 at 10:18 pm

Inquisitor:

Now you are finally getting somewhere. I think this is good for your personal growth.

So you finally understand that justification and right and wrong are irrelevant – that which rules are enforced depend on the dominant power and their wishes.

I think this is very healthy for you, your eyes are opening.

“So do criminals.” Tut tut tut, you are trying to look for reason and justification where there is none. Think force – you will have your answer!

Michael A. Clem May 12, 2008 at 2:49 am

Minimal redistribution guarantees that no-one starves because enough is taken from everyone to feed those who have nothing – explain how it doesn’t feed them -
Oh, so the burden of proof is on me to prove that minimal redistribution doesn’t guarantee that no one starves, and not on you to prove your assertion that it DOES guarantee it? That’s an utterly unpersuasive argument, Owen. No one will agree with you unless they already believe what you’re saying.
The fundamental flaw of coercive redistribution is that it assumes that it won’t impact production, that you’re merely skimming off the top and this won’t affect producers. This is, of course, false. If any producer knows he is getting 100% of his own product, free to consume and sell as he likes, he will produce as much as he desires, and no more.
However, if he knows that some percentage of his product will be forcefully taken from him, what does he do? If he knows 10% will be taken from him, does he work harder than he has to to produce 110% so that he’ll have all that he desires and still have enough to allow to be taken away? Not likely, instead he must settle for some amount less than he truly desires, and since the greater his effort, the greater amount is taken away from him, the less reason there is for him to work so hard or be so productive. The result is less overall production, and thus, less to redistribute.
Furthermore, top producers are willing to go to greater effort to protect their product and try to reduce the amount taken from them, and since they are top producers, they tend to have the means necessary to do so, either illegally, or by changing the laws so they can do it legally. Again, the result is less to redistribute, but in this case, it puts the greater burden on the middle class of producers, thus providing even more discouragement for middle class producers to produce as much as they desire.
Since there is no way to guarantee how much is produced in the first place, there is no way to guarantee that there will be enough to redistribute to the needy. This is just the logical and theoretical flaw in redistribution program, though.
Since government agents are fallible people just like the rest of us, then any 100% guarantee that every last poor person will be fed is impossible. Furthermore, as government employees whose jobs are not very dependent on how good a job they do, as would be the case in the private sector, they have less incentive to even care that every last poor person is fed–their main concern is simply making sure every dollar or good their service provides is given away, period, whether it is given to actual, needy, poor people, or to less needy people who are just taking advantage of the system. Government bureacracies are also less likely to adapt to changing circumstances than private organizations, since there is less pressure to do so, and changing governmental policy tends to be a cumbersome, heavy-handed process.
Add the ability to abuse and corrupt the process (Ted Turner, family farmer?), and I fail to see how redistribution, even minimal redistribution, can guarantee anything except for waste, inefficiency, fraud, and corruption. Your turn: prove your assertion.

Michael A. Clem May 12, 2008 at 2:55 am

Michael, you don’t understand anything, not what REDISTRUBUTION is or any of the other truths that have been revealed to the Prophet Owen.

O wise and knowledgeable Master, this undeserving, humble and ignorant one sits at your feet and seeks True Wisdom from the blessed words of the mighty Prophet Owen, forsaking all others who are false prophets of base idols.
;-)

Michael A. Clem May 12, 2008 at 3:02 am

So you finally understand that justification and right and wrong are irrelevant – that which rules are enforced depend on the dominant power and their wishes.
Then why are we wasting time talking? Whoever has the biggest guns win. But then why would whoever has the most power give a fig’s leaf in making sure that the poor are fed? They’re the losers who should be groveling to the rich and powerful for scraps. If there’s no need for justification, then there’s no reason to feed the poor. The point of gaining power is so that the wealth is redistributed to the powerful, not to the powerless.

Owen May 12, 2008 at 3:58 am

Michael:

Now you are getting it. How old are you now that you have had this epiphony?

What you cannot comprehend i am sure is that the people in power are not like you and don’t think like you (well in some countries they might do like Myanmar).

In most western countries the powerful (such as myself because I am part of the democratic majority who vote) actually do care and have set up the welfare state to care for those that cannot care for themselves for whatever reason.

(PS/ Don’t worry about Inquisitor she is just getting restless because she hasn’t won an argument for about two weeks)

TokyoTom May 12, 2008 at 5:31 am

Jeff, you’re right that money does not taint everything, and that monetarily compensated work as well as “volunteer” work is itself a font of benefit for others, as well as self-benefit. I agree that we should never lose sight of that.

However, Christ called us not merely to work and make our own daily bread in an increasingly impersonal world, but strive to be members in a community of loving and caring people. Some of us may get this at the office, but very many don’t – and may not be fully a member of any mutually caring community at all.

Money is an instrument of exchange that has played a vital role in an amazing expansion of wealth that began before Christ and greatly improved material human welfare. But it cannot be denied that this has also been accomanied by a scaling up of human enterprises that have also served to loosen the bonds of individuals with each other, and left us with a thirst for community that is rarely slaked.

Somewhat ironically, it is this need for community in “civilized” man that in fact served as the impetus for the growth of organized religion, which religion served to provide not only the community needed by individuals but also to served to strengthen the bonds of otherwise unconnected people in expanding societies.

The social glue provided by organized religion has of course had various legacies, not least of which have been deliberate manipulation by elites for selfish purposes and clashes with societies for which a different religion provides the social glue (both phenonmena apparent in the recent war against ragheads).

The glue of organized religion is also rather weak, and a very imperfect substitute for the closer and more caring communities of the type the Jesus called for. Hence we see not only the continuing creation of sects and reformist movements, but also our own attraction to the continuing calls from religious groups and other community leaders for us to form tighter communities to which we directly and personally contribute.

So, is money the root of all evil? No. Does it by itself taint everything? No. But is it an instrument of alienation? Inevitably, yes – and one that religion provides one avenue for us to partly heal.

Regards,

Tom

Inquisitor May 12, 2008 at 8:13 am

“So you finally understand that justification and right and wrong are irrelevant – that which rules are enforced depend on the dominant power and their wishes.

I think this is very healthy for you, your eyes are opening.”

No, in fact I rejected your answer. The fact that you are incapable of justifying your position means there’s no point in even discussing this with you – you’re unable to. You’ve not closed the ought-is gap, you’ve not proven that might makes right (as a moral proposition), you’ve shown nothing. The argument on your side has not been forthcoming. The discussion is thus over.

Inquisitor May 12, 2008 at 8:18 am

“(PS/ Don’t worry about Inquisitor she is just getting restless because she hasn’t won an argument for about two weeks)”

No, I’ve just shredded about every single argument you’ve thrown at me to pieces. That is all.

Alex Peak May 12, 2008 at 6:13 pm

This recording reminded me of Bastiat’s writings.

Michael A. Clem May 13, 2008 at 12:01 am

In most western countries the powerful (such as myself because I am part of the democratic majority who vote) actually do care and have set up the welfare state to care for those that cannot care for themselves for whatever reason.
You think you are one of the powerful because you vote? I vote, too. What does that prove? Go against the majority and see how much change your vote causes to happen. Or try and vote for someone or something that’s not on the ballot. Can I, for example, safely assume that you support the continued Iraqi occupation, since it doesn’t look like we’re getting out of there any time soon?
And as I always have to remind people, good intentions aren’t enough. Does the existing welfare system actually do more good than harm, or do people like you merely think it does because that’s what it’s intended to do? Look at the real-world results and don’t merely assume what you want to believe. Look at welfare-recipients, then look at corporate welfare, and then try to tell me the current welfare system is doing a good job, much less guaranteeing that nobody starves.
And tell me why you are still arguing your point if might makes right? Why do you have this guilt-driven need to justify your actions if you are “one of the powerful”? But don’t complain if some person or group more powerful comes along and changes everything. “King of the Hill” is a hard game for any particular group to win at for very long.
And by the way, my “epiphany” occurred many years ago, about 1990, when I realized that might does not make right–it merely makes a very big and difficult-to-deal-with wrong.

newson May 13, 2008 at 4:17 am

conradt says:
“GDP does include intermediary production by definition– Economics 101

well that depends on what textbook, but this ground has been thoroughly ploughed on another post -http://blog.mises.org/archives/008092.asp#comments

reisman, skousen, corrigan have gone to some lengths to show how gdp is a keynesian construct, and does in fact omit intermediate processes. that the bureau of economic analysis now calculates “gross output”, which dwarfs gdp, is a tacit approval of this approach.

richard johnsson also has written on the reisman breakthrough.

TLWP Sam May 13, 2008 at 6:11 am

Perhaps the real ability of a strict organised religion is the ability not to get morally confused via relativism. Not to mention the ability to define crimes and have strict law enforcement and punishment.

Nick Kaplan May 13, 2008 at 8:02 pm

Owen; By saying that one has a ‘right’ to basic necessities you have essentially said you have a right to another’s charity, since by definition those in need of such necessities are unable to provide them for themselves. However, this cannot possibly be what a right is, surely one can only have natural rights to things with which one is naturally endowed such as life or liberty or to things which one produces themselves such as property in the form of wealth. Assigning rights to another’s charity is arbitrary as a right to another’s charity by definition is not something one can achieve on one’s own. The problem here then is by assigning rights to charity one must use force as one can only gain a right to another’s charity (and here we are concerned with charity that is not already being provided) through coercive force (otherwise it would be given voluntarily). This use of force makes the claimant of the right to charity completely dependent on the person providing that charity, but what if the provider decides to stop producing? If this occurs the claimant loses his charity, and no longer gets that thing he has a right to… but if he has a right to it how can he no longer get it? The only possible answer is that this right was not a natural one, it was arbitrary. Thus the only way you can maintain that a right to necessities trumps a right to property is if you assume arbitrary rights can trump natural rights. However, if you are willing to put arbitrary rights above natural rights you will start on the slippery slope into communistic fascism in which any right defined by the state or ‘collective’ can be used to justify any action. Natural Rights arise out of the objective fact that we are all separate people with our own lives to lead, each of us owns ourselves, thus one cannot use another as a means to one’s ends. The forced provision of a right to a basic necessity violates the principle that one cannot use another for one’s own ends and hence is immoral. I would also contended that letting someone die when you can easily help is immoral (although not unjust), and I would help a starving person if I could, however this does not give me the right to force others to do the same. The market does not preclude charity (something that really annoys you lefties), if you want to redistribute your own wealth go ahead. But Owen, you have failed to realise one important thing; the loudness with which you demand higher taxes on others is no measure of your benevolence.

OPERE May 16, 2008 at 12:04 am

ASG

Owen May 16, 2008 at 12:07 am

test

Owen May 16, 2008 at 12:45 am

Inquisitor:

The meaning of ‘Might makes right’ is not literal, and that is why I suppose you strugged to comprehend it’s depths. The meaning is that value-based rights mean nothing and force alone is enough to impose any set of rights ionto a situation. Wake up.

Newson:

Where two goods are combined to make a third good with a higher value than the two of them combined? How much as society gained? Has it gained by three goods or one? When a car is produced for consumption has socieety also gained tha value of the thousand or more parts used in it’s manufacture? If so then who “benefitted” from them?

The FACT is that the value of all intermediate goods is captured in the value ofthe final good they are made into.

If you wanna add intermediate consumption into GDP stats then all that would do is increase the complexity of measurement to come out with statistics which are either perfectly correlated to final GDP or skewed based on the number of transactions required to bring an item to market. Reflecting nothing of the actual usa value to society of the good produced…Stupid really.

Nick:

You don’t understand that there are enough natural resources in most states (except maybe SIngapore) to provide basic necessities to everyone. Under minimal redistribution these resources are pledged to everyones basic needs before rights to property are recognised. So there is no theft from anyone but merely the asserting of a pre-existing right.

Michael:

No I actively support government that is why I am a part of it. Once it stops being a government I support I will become an underground guerilla like you.

newson May 16, 2008 at 2:16 am

owen says:
“The FACT is that the value of all intermediate goods is captured in the value ofthe final good they are made into.”

the point made by reisman et al is that inventory, and partly-assembled goods do not figure into the gdp number, and yet cannot be excluded from the economic calculation.

the fact that gdp is skewed towards consumption would also explain why there can be severe contractions in the production sectors (like the post-nasdaq-bust) that don’t impact much on gdp.

Owen May 16, 2008 at 2:30 am

newson:

inventory eventually get’s included in GDP when the products are sold. Anyway, The country has received no use-value yet from them so there is good rationale to not include them.

Only things which have actually provided use-value are included in GDP.

Consumption comes from production so such a contraction in production would very soon be realised (within months). Any high consumption that is made up from imports would get subtracted from GDP so there is no worries there.

All you have presented newson are timing issues which are minor at best.

newson May 16, 2008 at 2:52 am

owen says:
“inventory eventually get’s included in GDP when the products are sold. Anyway, The country has received no use-value yet from them so there is good rationale to not include them.

and yet precious time and resources have been devoted to this not-yet-final component of the economy. it exists, it is vast, and should be counted if we are going to make meaningful comments about the economy.

otherwise why would the bea have decided to start the gross output series? japan has a similar series that corrigan has used in his piece on gdp and its biases.

Owen May 16, 2008 at 3:02 am

newson:

This ‘vast’ part of the economy is counted when those goods are consumed. It is simply a timing issue which all economists are easily able to take into account when using GDP stats.

Gross output measures which you talk about are not widely used and never will be. They are not a reflection of any significant ‘problems’ with GDP as a measure.

There are as I said previously, a thousand ways to dissect the economy. Many other more specific measures are used to isolate different aspects of the economy. GDP is by far the best overall measure hands down.

newson May 16, 2008 at 3:26 am

owen says:
“They are not a reflection of any significant ‘problems’ with GDP as a measure.

gdp was originally created with the keynesian framework in mind. that is, it was assumed that consumption was the driver of the economy, not production. hence the mantra “consumption is 70% of gdp”, and the inference that government must intervene to ensure that consumption doesn’t flag.

it’s hardly surprising that governments favour data series that pay homage to intervention, and give short-shrift to series that paint a different picture.

re: the timing issue. given that inventory and unfinished goods are always present, the timing aspect is irrelevant. as one unfinished good becomes a finished good, it is in turn replaced by another. unfinished goods as a whole don’t disappear and should be counted if we’re making policy recommendations.

Owen May 16, 2008 at 4:24 am

Consumption is the determinant of what is produced. Or do you not believe in consumer sovereignty?

There is one form of economic system in which production is paramount…ever heard of communism?

So that is what you are advocating?

GDP measures the level of economic activity and is a benign measure. Your fallicious logic that it pays ‘homage’ to intervention is incorrect.

No, unfinished goods get included in the next quarters GDP. There is no compelling reason to shift them forward. Mainstream economists are easily capable of collating GDP and inventory stats to produce valid forecasts for future GDP. They have been doing it for decades.

newson May 16, 2008 at 9:12 pm

owen says:
“Consumption is the determinant of what is produced. Or do you not believe in consumer sovereignty?”

do you not believe in say’s law?

Michael A. Clem May 16, 2008 at 10:27 pm

Owen, it’s become very clear that you simply have no idea about the consequences of the actions you support. Forced redistribution, even minimal redistribution, causes changes in production, resulting in unintended consequences, and thus cannot guarantee that everyone will be provided for, even minimally so. Means and ends cannot be separated. Cause and effect cannot be sundered.

Owen May 17, 2008 at 8:22 am

newson:

Sounds like newson believes in Say’s Law. I guess that makes you a communist/socialist. shrug? Are you gonna make everyone one red t-shirts and matching shoes for next year in your production-planned economy? I especially like the part where Say’s law predicts that “recessions are not the result of a lack of money” when it was perfectly obvious to everyone that lack of money (although not the entire reason) was the final trigger in the 1929 depression. If the money kept flowing there would have been extreme inflation adjustments but no recession.

Michael Clem:

You stated:

1) Forced redistribution, even minimal redistribution, causes changes in production,

2) resulting in unintended consequences, and

3) thus cannot guarantee that everyone will be provided for, even minimally so.

Actually I hate to burst you bubble but redistribution has been the norm in Western economies for well over 50 years and last I heard the average annual GDP growth rate for those 50 years was above 3%. Or are you gonna (sigh) claim that people in the West are in fact worse off that they were 50 years ago before they started redistributing wealth?

Kinda knocks your proposition (3) above on the head fairly soundly.

Propositions (1) and (2) are noted and agreed with but they are the cost of redistribution. It is a market interference, but one to remove a market failure (for those people with a heart) – people dying.

newson May 17, 2008 at 11:58 am

to owen:
i suggest you look further afield than wikipedia, when searching for economic explanations. here’s a brief synopis:

“…Say outlined his famous “Law of Markets”. Roughly stated, Say’s Law claims that total demand in an economy cannot exceed or fall below total supply in that economy or as James Mill was to restate it, “supply creates its own demand.” In Say’s language, “products are paid for with products” (1803: p.153) or “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another”, (1803: p.178-9.).

can’t see anything vaguely pinko about that. just sounds like commonsense.

read murray rothbard’s “the great depression”. the benign cpi and ppi numbers of the twenties masked a large growth in money and credit. the bust could have been as brief as the one at the beginning of the twenties, when president harding decided not to intervene. hoover and roosevelt were determined to vigorously oppose the market reaching a new equilibrium, and the price was a long and disastrous crisis. what austrians would diagnose as the ailment, you recommend as the cure. mind you, you’re hardly alone, and roosevelt is widely respected for his “rescue” of capitalism. and not just by the lay public, many economists as well.

printing money didn’t save japan from a 15 year bust (even now the nikkei is scarcely more than a third of its top almost two decades ago).

likewise, argentina printed money and went down the gurgler at the beginning of this decade.

Yancey Ward May 17, 2008 at 12:57 pm

From Michael Clem:

And tell me why you are still arguing your point if might makes right? Why do you have this guilt-driven need to justify your actions if you are “one of the powerful”?

Indeed! Michael cuts to the heart of the motivation for relativism, and the futile, self-contradictory attempts for it’s own justification- a justification that can rest on no natural right, as Nick has clearly demonstrated.

Own,

The only argument you can logically make is that forced redistribution can be done because those doing so have the power to do so. Attempts to dress it up as the fulfillment of a natural right to necessities are logically invalid. This is where you are consistently going wrong, and one must assume you err because you feel the need to justify forced redistribution.

Tom May 17, 2008 at 6:21 pm

As an uniformed economist let me ask a couple silly questions:

This piece and others on this site promote the free-market as a sort of moral utopian model of the just society. Yet there is never a mention of monopolies or oligopolies. Unrestrained capitalism is a dynamic competition that will inevitably have a winner, a monopoly. Then the competition ends, the free market is no more. So the government must step in to regulate it. Now we have government regulating the market and the opportunity for legislated monopolies parallels the number of corrupt government officials we have or even for the government itself becoming the monopoly, I.E. socialism, communism.

I understand that to hold to zero-sum economics is looked down upon, yet I always have this tendency to apply physics, that neither energy nor matter can be created nor destroyed. So if I accept that wealth can be created I must also accept that it can be destroyed. I am told that the great crash that happened in the 20′s can’t happen again because we are infinitely more economically savvy now than then. Yet on 9/12 GWB tells us that this can’t stop us from shopping. That’s not merely a Bushism but reflects the fears of the market … exposing its tenuous and ephemeral nature. As we have given away our factories to China and our technical skill jobs to India, and have racked up the greatest debt the world has ever seen … I must wonder at just how tenuous and ephemeral it is.

It seems to me that the free-market must be regulated, and the regulators also regulated, the created wealth must be at some level tangible as paper and promises are both bio-degradable, and the debt must be managed … essentially it is a balancing act. Yet this piece and others seems to present a black and white view: Free-market good, everything else bad.

Michael A. Clem May 17, 2008 at 7:41 pm

Actually I hate to burst you bubble but redistribution has been the norm in Western economies for well over 50 years and last I heard the average annual GDP growth rate for those 50 years was above 3%. Or are you gonna (sigh) claim that people in the West are in fact worse off that they were 50 years ago before they started redistributing wealth?
You haven’t shown that GDP growth rate is the result of redistribution. I would, in fact, argue that we would have been better off now without that forced redistribution, for the reasons mentioned above.

Michael A. Clem May 17, 2008 at 7:55 pm

As an uniformed economist let me ask a couple silly questions:
Sorry, but Miseans tend to avoid uniforms. ;-)
From an ordinary, common-sense point of view, it seems perfectly reasonable to turn towards a middle-of-the-road position, to try to gain the “best of all possible worlds”: free markets, but with just enough oversight and regulation to keep things from getting out of hand. But this overlooks a couple of points. Free markets tend to be self-regulating, while the coercive powers of government tend to not be self-regulating. And of course, it’s more than just the fact that we end up with too much or too little regulation, but that government agents, with no economic feedback to be informed by (the “calculation” problem), have no way of knowing just what the “right” amount of regulation is. Businesses in the market, based upon the profit margin, and thus, on doing the best job possible or else losing profit, constantly get economic feedback on how well they are doing. Furthermore, business opportunities abound for satisfying consumer needs to such a degree that businesses regulating other businesses can be very profitable, where the actual need arises.
Governments, if they have any legitimate function, should be there to protect against rights violations, cases of force and fraud, and very little else. Naturally, governments want to do more than that, and end up trying to regulate just about everything. The result of such interventionism is to prevent the market from working as well as it could, including the self-regulation.

Owen May 17, 2008 at 10:31 pm

Yancy:

I have made that argument the whole way along. I have no idea why you keep thinking that what happens in the world is based at all on what is morally ‘right’. It is what those in power want.

Michael Clem:

You obviously forgot what you said so I will quote you again: “Forced redistribution, even minimal redistribution, causes changes in production, resulting in unintended consequences, and thus cannot guarantee that everyone will be provided for, even minimally so.”

It is an undisputed fact even by Austrians that western economies have grown considerablt in the past 50 years whilst having redistribution.

So your statement that redistribution causes economies to not even be able to minimally provide for citizens is refuted even by Austrain economics itself!!

You don’t realise that redistribution itself is not an economic system but only one part of a wider modified free-market which would operate minimally below the efficiency-level of a pure free-market.

Your arguments mean nothing because they are all wrong. Furthermore you show naivety with statements such as this:

“government agents, with no economic feedback to be informed by (the “calculation” problem), have no way of knowing just what the “right” amount of regulation is”.

Calculation problems relate to economics and efficient market outcomes Michael. They do not relate to measuring the non-economic outcomes of economic transations which many many regulations are used to do.

Sigh…just nother person who sees everything with a dollarsign on it’s head. Such dangerous simplicity of thought is why your ideas are and always wil be “fringe”.

newson May 18, 2008 at 12:24 am

for those who may be interested, stefan karlsson gives owen’s view of gdp the thumbs-up. so take a bow, owen! here’s the link: https://www.blogger.com/comment.g?blogID=14390234&postID=541886920192650136

whilst i don’t know of any austrian who maintains that gdp growth must necessarily be wealth-producing, there does exist a variety of opinions within the austrian camp about the usefulness of the gdp construct. for me, it means more homework in this area.

Owen May 18, 2008 at 12:51 am

I just wanna repeat clearly newson that GDP has so many flaws that on it’s own it is not a great measure. But like Democracy, as they say it is the best we have at the moment for measuring the ‘health’ of the economy.

In NZ they quote GDP alongside employment numbers, average house prices, home ownership rates, poverty figures, health figures, crime rates, education stats and wage rates. Most people need these numbers PLUS their knowledge of their countries’ security environment, recent laws impinging or affirming their rights they agree/disagre with and their anecdotal experience of their own community…

…to be able to get an idea of whether living standards are increasing or decreasing.

Tom May 18, 2008 at 1:45 am

Thanks for responding Michael A. Clem. Actually I’m not uniformed, but I am uninformed.

I’m not advocating a middle of the road, just a little not too much, regulation. I specifically think that anti-trust regulation is required and assumed that others would agree. Perhaps that assumption is wrong but it seems that the abuses of Victorian age unrestrained capitalism lay that foundation. I don’t see government regulation needed beyond that. But as a realist I know that given a little taste, that government officials would naturally want more. Plentiful are the personal financial opportunities for a public servant in a regulation-laden environment.

“Governments, if they have any legitimate function, should be there to protect against rights violations, cases of force and fraud, and very little else.”

What constitutes rights, force and fraud could be argued endlessly.

What do you think about my observation of the ephemeral and tenuous nature of created wealth?

newson May 18, 2008 at 4:06 am

tom says:
“I specifically think that anti-trust regulation is required and assumed that others would agree.

not on this site. dominick armentano’s book explodes the anti-trust myth. do a search on mises for some of his articles.

Owen May 18, 2008 at 4:50 am

Tom

What you are missing is that very few if any monopolies are stable and they are constantly under threat of competition and new technology.

There are some monopolies that can however sustain their position due to extremely high entry barriers – usually because of high natural resource requirements – that leads to a negative societal outcome when more than one producer tries to enter the market. Such industries are the distribution networks of energy, water, gas, telecommunications aswell as roads and rail. These networks all take up physical space on the ground or in the air and and have very low marginal costs and very high fixed costs.

Of course the first thing you will say is that there are numerous examples of privately run businesses in ALL of these industries. That is the case, however a single operator is able to extract extremely high monopoly rents and ‘milk’ their infrastructure whilst aggresively protecting their monopoly against competition. The overall economy is worse off if thes such distribution markets are allowed to be completely unregulated.

So, apart from distribution networks, all other monopolies should be allowed to operate as normal and the threat of competition and new technology is enough to discipline their pricing.

Yancey Ward May 18, 2008 at 10:07 am

From Own:

I have made that argument the whole way along. I have no idea why you keep thinking that what happens in the world is based at all on what is morally ‘right’. It is what those in power want.

Uh, no. You have made that argument while, in the same breath, appending the right to basic necessities as a justification for what you believe to be the correct policy- forced redistribution. Indeed, you have mocked others for holding to basic natural rights in the face of powerful political cohorts who do not believe the same. If someone with a gun robs you, then the principle of “might makes right” holds- you had no right not to be robbed, but I am confident that you would not feel that way, thus your self-contradictory arguments.

You need to choose a position that is logically consistent. There are arguments that you could make that would be internally coherent, but you have failed to this point in time. I have read your comments with much amusement. You seem to think that the other commenters here don’t understand the distinction between what is and what ought to be, but you are the only one who doesn’t really grasp the full meaning.

Yancey Ward May 18, 2008 at 10:18 am

Tom,

Monopolies can only be enforced with coercion. The idea of having private enterprise regulated by government regulators, and those regulators regulated by other government regulators is a fool’s errand. Where does it end? If the regulators need to be regulated, then why not the regulators of the regulators? Why not the regulators of the regulators of the regulators ad infinitum. What omnicient, selfless being is at the end of the chain?

Tom May 18, 2008 at 11:24 am

Owen,

OK, so monopolies are unstable and have a limited life. Sooner or later they will go away on their own.

BTW to my way of thinking monopolies are not only on grand scales but also on local scales, such as the small town with the single grocery store and single factory/mill/mine/etc (often in the old days owned by the same entity) who say: “If you don’t like the price or the pay then drive the three hours into the city, or just leave. This is my town.”

Perhaps it is just relative, that in the scale of business growth/size monopolies are simply at the top. They have full market share. So in the broader picture is the question simply; how big?

Let me ask another question; where is the efficacy of big companies? Economy of scale only goes so far and is offset by the incredible big company bureaucracy, stucture and waste. It must be leverage, leverage in making deals, deals with vendors and customers but also with the government, the media, academia, the military, competing companies, or even executives of competing companies.

Tom May 18, 2008 at 11:35 am

newson,

Perhaps I have no understanding of the specifics and am confusing anti-trust with something other … I said that I based my assumption on “the abuses of Victorian age unrestrained capitalism.” Has that myth been exploded? Is it anachronistic and never to happen again like the great stock market crash?

Tom May 18, 2008 at 11:50 am

Yancy Ward,

“Monopolies can only be enforced with coercion.”

So is this coercion a good thing or a bad thing. Does it matter if the coercion is on the part of a corporation or the government?

Regulating regulators is the US tradition of checks and balances. There is no “omnicient, selfless being” controlling anything, not a CEO nor even the SCOTUS. We all have self-interest, bias and bent. That is why we all regulate each other in the continual discourse we call the rule of law.

Yancey Ward May 18, 2008 at 1:14 pm

Tom,

Coercion is a bad thing, but there is a difference between private coercion and government coercion- government will kill you or throw you in prison if you resist; in other words, you have no legal recourse to resistance. Now, there isn’t a huge divide between the two, and one’s organized resistance (organized among those of a like mind) to private coercion can be viewed as the proto- or minimal state. This is where I always part company with the so-called anarchists: I believe we do need a state that enforces the procriptions against private coercion, to enforce the contracts we freely enter, and to protect the property rights of all. The challenge is keeping that state’s nose to that particular grindstone, and to not let it wander off into other pursuits, pursuits that ultimately become exercises in rent-seeking and favor granting, and all at the point of a gun.

Tom May 18, 2008 at 5:03 pm

Yancy,

I couldn’t possibly disagree with what you wrote. I might even add that much of private coercion functions by threatening to unleash government coercion. Justice is often to those with the better lawyers. In this way big corporations can tacitly coerce. Teddy’s “speak softly and carry a big stick,” whose big stick was the great white fleet might be analogous to a corporation’s legal department and the big name lawyers on their retention roster.

“The challenge is keeping that state’s nose to that particular grindstone … ” Absolutely! Well-stated and that is our challenge. All branches of government must be made to remain with-in the boundaries established in the constitution. But who’s going to do that? Especially when government and business are frequently butt-buddies acting in the mutual self-interest of its leaders .

Implied in what you wrote is also the thought that free-markets are not entirely self-regulating, self-policing. Does this make you a Misean heretic?

newson May 18, 2008 at 8:58 pm

tom says:
“…the single grocery store and single factory/mill/mine/etc (often in the old days owned by the same entity) who say: “If you don’t like the price or the pay then drive the three hours into the city, or just leave. This is my town.”

this is indeed a plausible situation – but begs the question, why does nobody set up a competing business? in most cases because there are zoning or regulatory barriers which thwart new entrants coming in to compete away the monopoly rents.

in the unlikely event that a whole town is owned by a mining company, and all the providores are also owned by same, then the higher cost of living would see the town competing with the rest of the country. that is, workers would emigrate, or the mining company would have difficulty recruiting workers outside the zone.

newson May 18, 2008 at 9:04 pm

tom, check out the tom di lorenzo lectures on the “media” part of the site. he’s got some good introductory stuff on anti-trust and the robber-barons.

Tom May 19, 2008 at 7:17 pm

newson

” …why does nobody set up a competing business? in most cases because there are zoning or regulatory barriers which thwart new entrants …”

I think this is probably true. Government and the court system are complicit with businessmen in creating monopolies. In the small retirement town I live in it is about a 1 hour drive into the next commercial shopping area where prices are competitive. There is one major chain grocery store (Albertsons) in our town that regionally prices. But despite the fact the store has lower real estate and labor costs it charges more than their stores in the larger area … because the inconveniences of driving the hour, especially for seniors, allows that extra gouge … Ouch! That chain has connections in the town and arranged an exclusivity contract with the town for a certain number of years. In this case the monopoly is temporary (unless the corporation and government realize a new deal) and enabled by government intervention.

What I have read on this site so far tastes of a black and white dichotomy of business Vs government, the free market Vs regulation. Yet it seems to me that there is a considerable blurring between the businessman, lawyer and politician. Success in any endeavor requires mastering all three. In the small town sometime all three are embodied in the same individual. In a larger venue very few politicians were not first lawyers or businessmen and once again become lawyers or businessmen when they leave office. That they change their stripes while in office is a leap of faith.

“…that is, workers would emigrate … ”

You seem to observe this with a coolly analytical mind. Personally I find it poor manners that a company would manipulate the whole economy of a town to their benefit (low wages, high expenses). And that eventually people would be driven from their home-town to find better lives. It is of no comfort that the monopolistic company eventually goes belly-up while we watch the execs float away in their golden parachutes.

newson May 20, 2008 at 12:30 am

tom says:
“You seem to observe this with a coolly analytical mind. Personally I find it poor manners that a company would manipulate the whole economy of a town to their benefit (low wages, high expenses). And that eventually people would be driven from their home-town to find better lives.”

and the alternative is what? the scenario i painted was extreme and probably unwordly, merely to convey the point. the competition markets generate limit the power ot the natural monopolist. i know someone who owns the only sandstone quarry near my former town. to bring in sandstone from any other area is uneconomic, so he’s got a very nice natural monopoly. can he charge whatever he wants? no, because sandstone competes with marble, with slate, and with all other dressing stones. magic, no regulator needed! (he does very well, but no one forces people to buy sandstone).

isyaku bosso May 20, 2008 at 12:02 pm

explain to me what it means by money is anything that money does.

Tom May 20, 2008 at 12:30 pm

newson,

The economics of sandstone is weight, transportation costs, correct? But sandstone vs other stone is like really like Toyota vs Chevy.

I always marveled that The American steel industry had the two very heavy essential components; iron ore and coal, and the world’s biggest customer; the American auto industry, all right in their backyard. Steel is very heavy, it’s $/pound should make it very transportation cost sensitive. Yet they lost it to the Japanese who had to import/export everything.

Monopolies get fat, dumb and happy and sooner or later go belly-up, even if they have some special leverage. Yet that is not justice because it leaves many victims when it happens, none of which were those responsible, those who profited greatly for many years.

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