I did but I’m guessing most of free marketeers didn’t.
I’m not a communist or a socialist. I’ll gladly acknowledge that the free market works and is a strong element in any functioning economy. But it doesn’t work by itself - it needs to be supported by a regulatory frame to keep it working the way it should.
Free marketeers claim that if we eliminate these regulations, the free market would be able to run free. The rest of us think that without these regulations, the free market would trip over its own feet and fall over.
Yeah. I don’t know about some of that. Actually, depending on what they mean, I would question probably at least half.
I mean the first thing about the gold standard is complete bs. No one who is actually involved in the mechanics thinks like that.
The whole ‘high-powered’ thing sounds like woo. I mean if they were talking about leverage, that would be different. Then they would be talking about unregulated shadow banking and that sort of thing, but I have no idea what this crap is.
The money multiplier has no real meaning eh? Yeah. I’m stopping there.
I both agree and disagree. I agree that markets most decidedly need certain public goods - law and order, courts etc. which can only be provided by government. I’m less certain that markets need specific, market oriented regulations to keep them functioning.
For instance, I used to believe that monopolies are a case of market failure, and regulations are needed to prevent monopolies from abusing their power. I know a bit more economics now, and as long as monopolies can’t literally force people to buy their products at any price, abuse of monopoly power is exceedingly difficult to sustain due to even the possibility of competition. Now many, if not most governments, spend a lot of time, money and effort to purportedly prevent monopolies from abusing their power. Ironically, the one way companies can abuse their market power on a sustained basis is through government regulation providing entry barriers. So governments can and often do harm more than help on this issue(with most industries). There are many other similar things.
Again, I don’t advocate laissez faire, but regulation is tricky to get right, and governments rarely do. I don’t believe the answer is removing regulations, but people ought to be a lot more skeptical than I think they are.
I think this is really the key point to why we don’t due true free markets. There are some goals that either are very unlikely or maybe even impossible with current market pressures, but they’re ones that society has, for better or worse, decided that it wants.
I think a good analogy is natural and artifical selection. But as humans, we didn’t just sit around and wait, we got involved in the breeding to get the desired traits we want. They might eventually come on their own, but all it would take is a bit of bad luck to ruin it. But we’ve caused plenty of bad stuff too, introducing negative traits, genetic diseases, and creating havoc in certain ecosystems. Given our goals, it makes sense to do these things, but we can’t just wanton try to breed a unicorn and then be shocked when trying to mate a horse and a goat is a massive failure.
I think the economy is much the same way. An example that comes up is meat inspection. Sure, maybe there’s enough of a market for it that it would come without regulation, but the market pressures involved are WAY too complex to just sit back and hope for it. Maybe a small meat-packer would do good regulations, but a larger one can cut corners and do it a lot cheaper and an ill-informed consumer puts the smaller one out of business. Then we just have to wait for it to happen again, but the next time the business is mismanaged, and the next time there’s poor timing on supply that puts them out of business.
The counter-argument is that there are plenty of industries that self-regulate, and I think most or all industries ultimately can, but I think it’s flawed logic to assume it will always naturally arise within an industry, especially in particularly volatile ones. But I see that as more of an argument of potentially relaxing or removing regulations at some point when self-regulation is possible rather than just letting go.
So, while I do favor free-market as much as possible, and I think it will be surprisingly resilient on it’s own, it does logically appear that some regulation makes sense. That said, I think any regulations should be minimal, carefully considered, and then reviewed regularly so they can be adjusted to make sure we’re meeting whatever goals we’re trying to achieve. And if we’ve met them, regulations should be turned down or removed, and if things mess up from that desired state, they should be reintroduced.
But I think that’s where the biggest problem is, we have a tendency to WAY over-regulate, but the response to that isn’t just to naively remove all regulation.
ETA: Also, note how the trend of contract manufacturing, particularly in electronics, is largely removing the possibility of any manufacturing company being a natural monopoly now.
Sorry. I figured you were seeing the whole picture, but I wanted to point out that monopolies aren’t just laisse-faire capitalism run amok. I think that is the image that is most common.
Also, it’s rare that things happen in a binary way, i.e., perfect competition or monopoly - as I’m sure you understand. Everything happens on a continuum so the regulation has to be implemented in a similar fashion.
It doesn’t. The author seems to think that the federal govt is the abyss from which money is conjured ab nihilo and into which the demon is banished once it’s served it’s purpose. In fact, the fed is the sorcerer.
I’m guessing that it must mean the government would fund its activities by simply printing money. I have no idea what the actual effect of doing that would be; obviously it would be inflationary, but would the other benefits (presuming there are any) in some way counteract this?
They can, but it depends on too many factors to just list.
The important point in regard to that particular quote is that the federal reserve bank operates independently of the 3 branches of the US federal government. It often works closely with the US Treasury, but it is the fed that creates and destroys currency and controls the supply of money, influences interest rates, etc.
Of course one has to mention that the mint is in charge of coinage, but that is an insignificant part of the money supply - at least until they decide to mint that $1T coin.
I would disagree even with this. Markets can occur even when government does not provide law and order and courts, and even when government is actively working against the markets - witness the trade in illegal drugs in the US.
As to whether other economic theories are obsolete - part of that depends on what level you are talking about. Socialism of a sort exists in families and small communities. Free market capitalism is the most efficient way that strangers can interact with each other commercially. Which is why your mother gives you birthday presents but you have to pay for your marijuana.
A big problem with the whole field of economics is that people aren’t automatons. They actually are able to change their behavior, habits and attitudes in ways that completely bone the models and frequently do just that. I think it’s only recently, maybe the last decade at most (???) that this variability has really started be considered and I don’t thing the modelers are anywhere near getting a handle on it.
Who thinks this is always the case? The Constitution was written specifically to guard against cases of those in power not being sterling leaders.
I don’t think many economists are against the Fed. How much involvement is a matter of debate, but I think it is pretty clear that neither total freedom or total regulation are practical models.
In the past 30 years there has been significant consolidation in electronics manufacturing. Back when I started major companies did everything in house, and smaller companies used CMs. Today almost no one does anything in house except perhaps final assembly. An indicator of this is the equipment market, which now sells to only a few very large customers instead of to many, many customers.
IC manufacturing has gone further down this path due to higher costs of new process nodes. It is now Intel and TSMC and some smaller companies at older nodes. It is going to get worse when Intel starts to sell fab capacity which sounds likely since they have overbuild and their product volume is decreasing.
Not a monopoly, but definitely fewer players.
On the contrary, without regulation any social system soon becomes very unfree. Without regulation, you’ll just end up with an utterly corrupt market; a sham controlled by people collaborating behind the scenes. They’ll indulge in price fixing, blacklisting, bribery, insider trading, etc; eliminating regulations just means that people will cheat and try to rig the market in their favor, not that they’ll all robotically act like ideologically perfect free marketeers who would never even consider gaming the system.
Free market fundamentalism like Communism is based on the assumption that humans won’t act like humans.
The problem with this is that the market is not an actually entity. The market is we the people. The market deciding something is just millions of people making a decision of what they want. The market decided the Ipod is better than Zune means that millions of people made a choice to buy one and not the other. So it is incoherent to say that the markets do not give us what we want, the market is by definition what we want.
The objections are two fold. First that the market gives us what we want and not what we should want. Thus the government should outlaw drugs because although we want drugs we should not want them. The response to this is easy to see.
Second objection is that the market overproduces some goods and underproduces other due to externalities. Thus the government should outlaw drugs because high people impose costs on the sober that are not taken into account by the price of drugs. The response to this is that it is very difficult for the government to know how much the sober people are being hurt and how much the druggies are helped. Thus it is very difficult to design regulations that improve upon the market. So just because it is possible for government regulation to improve upon market outcomes, in reality it is very rare for them to do so because of the incentives involved.
That’s not true at all, there’s all sorts of ways to manipulate a market. For example, a big company dumping an inferior product under cost to drive a better product by a smaller company out of business, then raising the price drastically when their competition is gone. Or companies meeting together and deciding what will be sold where by who at what price. Or a company lying about what its product is like. Or a company ordering its employees to buy certain products or be fired. Or a company that uses slaves to make its products. And all sorts of other things prohibited (or that should be) by those so-evil regulations.
The market in the real world is not some magic system that produces the best product for the best price, it’s system of self interested, often ruthless people trying to game it every way they can, and who if they can will happily cheat and collaborate with each other to cheat.