A natural monopoly is one in which the structure of the market prevents competitors. It can be due to entry costs or economies of scale, or other things. Due to the lack of competition, plenty of natural monopolies have been infamous for their mistreatment of their customers. There’s a reason for regulation of monopolies, and it isn’t due to their ability to supply what people want.
Once again, you are missing the point. The goal is not to decide that certain industries require absolutely no regulation, it’s to decide that certain types of regulation are not required, for any industry.
Ignore this, I was responding to what I thought you said, not what you actually said.
It is clear today. Thirty years of a philosophy based on market freedom brought us a catastrophic financial collapse. It was clear in the 1929 crash. Perhaps you need to provide an example of this great free market system you pontificate. Show me a successful laissez-faire economy. Support your ecosystem comparison. I can immediately point to two recent economic disasters in American history. Where is your example?
I am not waving robber barons, In fact, I have never used the term. It’s not a term I would use to describe the situation today. I would call it perverse crony capitalism --corruption, not robber baron.
I didn’t realize it was necessary to define the terms but I will from now on to avoid confusion.
The economy today is a clear example of the culmination of thirty years of a neoliberal, free market, economic philosophy. The nineteenth century unregulated market gave rise to the industrialists and massive inequality and enormous wealth defined by the Gilded Age. This is another laissez-faire economy. There was an initial market scare in the late nineteenth century but speculation, leverage, and an unregulated financial market finally came to a crashing halt in 1929.
There is no free market today. It doesn’t exist. Why? The government subsidizes industry (Cabela’s, Wal-Mart, pharmaceuticals, Health Insurance, CSX). The market is dominated by oligopolies (media, telecom), monopolistic competition (cereal), abuse of eminent domain (Kelo v. City of New London), government influence (Jack Abramoff), cronyism (Halliburton), corporate corruption (Enron, World Com, financial industry,) etc. This is how the unregulated market and fiscal policy advocated by free market, small government capitalists ended. This is precisely the free market without laws and rules to govern behavior. A few people got astronomically rich and gained access to power, dictated policy, gambled and lost, and now spend the treasury. How can the unregulated free market possibly be defended?
I know You have indicated support for regulation that helps eliminate fraud, provides transparency and consumer information.
You think it is a silly argument, but I consider it a valid argument. Incidentally, there is a law that limits a person from leaving his home. It’s called house arrest. The government could easily enforce it arbitrarily.
Laws intended to control behavior to protect the public are not tyrannical. Laws intended to suppress the public to protect government are tyrannical.
I never said or implied the unpredictable market is anarchism. I am referring to the notion that a free market with minimal government leads to shared power among groups --to paraphrase.
I will agree that a highly competitive free market with multiple producers is a market force for behavior, but this isn’t the U.S. economy.
You can scoff at my comment, but when you compare Japanese and American corporate culture something besides the market determines behavioral differences. Japanese auto competes and pays a high wage. Taxes to fund healthcare don’t impede on their economic freedom as defined in the U.S.
Yes, I know that. I just cited Microsoft Windows as an example, which for years was touted as a natural monopoly under the theory that there was only one room for an operating system, because compatibility was important. So it was a winner-take-all race, and Microsoft won. For a long time, this was used to claim that Microsoft should be broken up, that it was using its monopoly power to pad its profits and that no one else could compete because the market was already closed.
But it’s not working out that way. Microsoft is under serious attack from not just Linux, but from dedicated devices, internet applications, and other means of computing.
That’s why I was saying that many natural monopolies really are only ‘natural’ because they provide something so well no one else can compete. But I also said it’s probably a poor use for the term, because there are cases where I can see that it would be coercive. And I would consider it a valid use of government power to regulate or force competition in cases where there could be only one winner, such as a railroad going through a town.
They said this:
Your cite’s words. I’m no economist, but this doesn’t seem ambiguous.
It is, if your point is that the difference is attributable to something other than economic inequality.
Of course it does. It says their stats don’t support your thesis, though they believe they can explain why.
Perhaps. Their plug of a “democracy effect” seemed one of the more egregious examples of attempting to explain stats that don’t support their contention, but it was mind-numbingly dull and reading it again might cause me to go insane.
Their words, in plain English, do not say what you want it to. Sorry.
No, the proper way is for the person making the contention–that would be you–to support something they are offering as a given. I am not obliged to cite anything since I’m not making any assertion. I’m just reading your delightful cites and reporting on what I read.
No, it means that you’re retreading the same paper in different forms.
What are you, an econ undergrad? Good for you. Let’s not get tied up in semantical confusion. Significance means that the statistic is reliable, weak means it’s not terribly important. How’s that?
I know I’m going to wait for the movie.
It must be ambiguous, or there wouldn’t be disagreement on what they meant.
Wrong. Read the quote (which you posted): “There is a positive association between equality and growth.” Now* that’s* unambiguous!
Wrong again. Unless we are talking about Somalia. Or is the U.S. a poor country now?
I have more than supported my contention, which is that there is a negative relationship between income inequality and economic growth. I have provided peer-reviewed cites which state explicitly that there is a statistically significant negative relationship between income inequality and economic growth. Despite your nitpicks, you have not countered this point.
You are now the one making a positive assertion, that my cites do not apply to the U.S. Seems like that’s the sort of thing economists could make a career demonstrating, so why don’t you go find some cites. No, wait, I bet you’ll find some excuse not to do this. I’m preparing my surprised face in anticipation.
No, it means that experts in the field have reached consensus on the issue. That consensus directly contradicts your opinion. If you feel like making a positive assertion to the contrary, well, see above re: cites.
Ah, an ad hominem. Does this mean you’ve conceded the point?
Significant is all I care about, so if you’ve conceded that then you’ve conceded the point. See for example my earlier post.
I was making the point that there was no third cite in my post, and was gently chiding you for your reading comprehension. Perhaps I was being too subtle.
P.s., how the hell do I get my reply to include nested quotes?
But I have, since my only contention is that the significance is not “incredibly powerful,” as you’re implying. It is WEAK, which your own cite documented. That’s not my opinion, that’s your cite. And it’s not a nitpick, it deflates your whole point.
Concede what? Here’s here a cite that may explain better my point:
So, your cite indicating a weak relationship is not, per se, “incredibly powerful.” In fact, if we are to infer anything on its face, it would be exactly the opposite. You want “statistically significant” to mean “significant.” It doesn’t.
Very subtle indeed. Third cite in this thread, not in that post.
Think about the tags as opening and closing parentheses, that helps me. If you establish a start tag, that “loop” stays open until there are an equal number of end tags.
To reply to myself, actually, this isn’t true. Income inequality is associated with a whole host of social ills. The traditional layman’s argument in favor of income inequality is that it is either the result of or the cause of faster economic growth. If it is the case that inequality drives growth, then an argument can be made that the social ills are worth tolerating because the economic benefit justifies them (the “you’ve got to break some eggs to make an omlet” argument).
The only way this argument has any force at all is if there is a strong positive relationship between inequality and growth. If there isn’t a strong relationship, then you’re bearing all the associated social evils of inequality for no benefit.
Given this, my opinion is that any analysis that doesn’t find a strong positive relationship between inequality and growth is an argument in favor of reducing inequality.
Now, if you can show a weak positive relationship between the two, then there’s some room for argument. We can have a reasoned discussion over how much human misery we should trade for an additional 0.1% of GDP growth. But all the available evidence says that there’s no positive relationship, and that by increasing inequality we’re actually slowing down economic growth.
So you’re left with nothing. Income inequality is a pure economic bad. It has no positive effects at all.
OK, now you’re just misrepresenting my words. Go back and re-read my post. Also read this post. At no point did I say that it was the statistical significance that was “incredibly powerful.”
As I thought I made clear, what’s incredibly powerful is the idea that inequality doesn’t drive economic growth. Notice the complete absence of the words statistical or significant in the preceding sentence.
There’s an idea that income inequality should be tolerated because it speeds economic growth. That idea has driven some incredibly destructive policies in a number of countries. By destroying the idea that inequality drives growth, you are destroying the justification for the policies. It’s the destruction of that idea that’s powerful.
Now, the economic studies that test whether income inequality is negatively related to growth–there statistical significance is important. But whether it’s weak or strong, so long as the relationship is negative, my point stands. To be honest, if the relationship is weak my opinion is that point stands whether the relationship is positive or negative; only a strong positive relationship could justify enduring the problems associated with high income inequality.
This is odd; you were the one who brought the idea of testing statistical significance into this discussion, and now that that’s working against you, you’re trying to bring it right back out.
Again, you were the one who wanted to test statistical significance, and now you’re saying that that’s not enough? Is that what they call moving the goalpost?
As I think I’ve made clear, significance isn’t important. The only counter to my argument that I can see is to show that the relationship is significant and positive. Any other outcome supports my point. (You could also show that there’s some other benefit to income inequality that I’ve overlooked, and then we can weigh that against the negatives, but you haven’t done that)
Also, I noticed that you didn’t bring any cites to the discussion. Weren’t you going to prove that income inequality drives growth in the U.S.? Try searching titles in Google Scholar; I hear that works.
When I press Reply to Post it only brings up the last person’s post, not the quotes that they were responding to. Any way to bring them both up?
Your position is clearer now since your prior post. You believe the disadvantages of economic inequality are so self-evident and so severe, that only a positive relationship (one significantly strong) with economic growth could support such a circumstance. I took your position to mean that the relationship between income equality and growth implied that equality would lead to greater growth. What I believe you’re saying is that the absence of growth means we should move toward equality, and this is simply axiomatic for you. Is that right?
A couple of things. First, this has nothing, really, to do with the OP’s proposal, which is that executive compensation, by itself, somehow is associated with the current economic meltdown, that a cap would produce some economic benefit. Your contention, I assume, would have been the same last April, before the meltdown, since the inequality existed then, offended your sensibilities I’m sure, and possessed the same statistical relationship with economic growth (nothing strong). My position is different. I don’t believe economic inequality is good or bad–it is merely the result of free markets and individual contributions. Since there is no strong relationship with economic growth and either the existence or absence of income equality, it remains irrelevant to the discussion for me. If income equality does not produce an economic benefit–it does not appear to, not in the form of growth–then it’s not relevant in a discussion regarding exec comp caps and the effect it will have on economic growth or collapses. It appears it will have none, whatever ancillary benefits you seem to think it will produce.
Second, why do you believe that only economic growth could be argument enough for the sort of economic inequality that exists in this country, particularly when you have made it an argument broader than economic effects? What if inequality does not lead to economic growth (similar to how equality does not) but it maximizes individual freedom?
Not that I’m aware of. I just do a lot of messy copying and pasting.
Hong Kong is not a free market. It is notorious for a market controlled by oligopolies and monopolies. In fact, Hong Kong is considered one of the worst rigged markets in the world ( Link Link).
Hong Kong has an autocratic government and never had a democracy. To Hong Kong, you, and the Heritage Foundation since it rated Hong Kong the most economically free, laissez-faire means there are no real labor laws, no minimum wage standard, and with the exception of civil servants, no limit on work hours. There is no state pension or unemployment insurance. Hong Kong has the worst inequality in Asia with a Gini Coefficient Index on par with Chili and Brazil. On the bright side, no one was tied to rail tracks and dropped from airplanes in Hong Kong.
Since 1986, the poverty rate has doubled in Hong Kong. The working poor have doubled in the last ten years. Fifty-five percent of children live in families receiving meager assistance. The elderly, women and children have the the largest poverty rates.
Schools are privatized with state subsidized vouchers that don’t always cover the entire tuition and never cover supplies. Not surprisingly, Hong Kong ranks 67th in the world for literacy.
It is easy to praise Hong Kong as a great success when you live in a democracy with universal public education, labor laws, and quality health care. You don’t have to live with thisreality. But, hey, maybe you feel it is perfectly acceptable for poor people to live in cages.
Libertarian paradise.
My premise is not that merely getting paid a lot hurts the economy as such but that the incentives were improperly pointed to cause executives to make very bad decisions that were not healthy for the long-term, sustainable growth of their companies. Instead they had staggering sums of money offered to them which saw them make very short term decisions which would spike profits, and thus their compensation, but were unsustainable in the long run and collapsed. My proposal is a means to hitch executive salaries to the actual health of the company which, I believe, is most directly reflected in the number of workers they hire and those worker’s wages.
Well, try this:
What leads you to conclude that executive comp led to the poor decisions that were made? The government has a legitimate interest in regulating self-evidently poor practices, meaning those decisions that directly lead to significant public concerns. Why does the government get any say in how a corporation (who is governed by its stockholders) wants to pay its execs? Point to the direct action that needs to be regulated. Speculating as to what might trigger that decision is, well, speculative and not the province of the government of a free people.
Someone is selling credit default swaps without sufficient reserves? Establish stricter reserve requirements.
You think they did it only to pump up their personal wealth? Establish stricter reserve requirements.
But the janitor in the home office only makes the minimum wage while the CEO makes millions, and you believe this is symptomatic of the philosophy that led to the CDS mess. Establish stricter reserve requirements.
It is NOT the government’s role to decide what the best management philosophy is, except to the extent that they have a legitimate interest in regulating activity that directly results in a public concern.
And as to your cite, I will readily concede that Dems, with their proclivity to tax the wealthy, have tended toward an artificial income equality. Why that is a good thing is where the real debate begins, however.
This leads me to that conclusion:
As noted in the OP Boards have not restricted this horror show. That despite it being a subject of debate even years ago. Shareholders have not reigned these whacked-out incentive plans.
Now, you could well say that it is their own problem and if they allow poor CEOs at the helm and that CEO sinks the ship the shareholders feel the pain. I’d agree with that if it wasn’t MY tax money going to bail these guys out.
IMO it becomes a matter of government interest when they start taking MY tax money to save these disasters. When incentives payout big time for short-term spikes then is it a surprise that the CEOs deliver short term spikes?
Read the cite more closely. The very wealthy actually did better under the democrats too. Perhaps they were taxed more but a healthier and more vibrant economy also saw them prosper more. On balance they are no worse off under Democratic leadership than Republican ones (economically) while the poor and middle class are decidedly better off under the Democrats.
I am reasonably certain “trickle down” economics has been shown to be the Voodoo Economics George Bush called it.
So, with that in mind look around and tell me, how is the economy going these days?
Could you define individual freedom for me in the context of income inequality? Is it the freedom of billionaires to pay a lower effective tax rate than the working poor? I’m not very smart; you’re going to have to explain to me how this is a good thing. Please use small words.
Your tax money gives you the right to regulate the behavior that created the mess, not to install some speculative social experiment that you think will create some new paradigm that will motivate different behavior. I do indeed react that the board and the shareholders get what they deserve, in that they have the means to control it; and, that said, the government has an interest in limiting the activity that directly causes such havoc. I do NOT attribute the current mess to exec compensation. But that’s my opinion, which is not the issue. The issues are those unregulated acts that directly caused such harm.
No, none of us can draw that conclusion. Because something occurred during an administration doesn’t make it attributable to that administration, a logical fallacy both parties have a great deal of affection for. And Clinton reduced the capital gains tax, which increased tax revenue as a result of the expanded investment–or so goes the theory. Economics is not the simple machine people would like it to be.
Is this supposed to be a gotcha? Am I singing the praises of the economy or saying that further regulation is not in order? :dubious:
Do you believe the effective tax rate has created income inequality? And do you really want to argue from the basis of who carried the lion’s share of the tax burden in this country? (And who does not?)
FYI, traveling on business, back Saturday. Won’t be able to post back to any responses until then.