I’ll only discuss fiscal conservatism and liberalism here, but I believe the OP may be quite close to the answer. Conservatives tend to strongly believe in personal responsibility, and think that people usually get what they deserve. Liberals believe that economic forces are not necessarily so easy to control, and that people may get different outcomes even with the same “work”, however we define this.
And maybe I’m going to misrepresent one or both of the sides here, but I tend to believe that conservatives are often more confident than liberals. They know that they got where they are through their own efforts and think that if others were encouraged to do the same, we would live in a better society. Liberals, on the other hand, tend to be less sure of the fact that they are the ones to thank (or blame) for their lot in life.
For example, I’m currently doing a doctoral degree in mathematics. I know I was able to reach this level through my own work, but on the other hand, I know that I certainly benefited from the fact that I am good in mathematics to start with, so I didn’t find it so hard when I started to study the domain (it did get harder eventually). I actually don’t work all that hard; many people live much more difficult lives than I, and I’m a perfectionist who’s never completely satisfied with his work. And we could even say that the fact that I was born in a wealthy Western democracy is the main reason for the good life I’m living. I didn’t “decide” to be a liberal* for this reason, but I guess it influenced me.
And, I had self-esteem issues for years, which are better now – through my own work, I guess – but which may have entrenched these doubts in me. I figure conservatives can also have self-esteem issues, but it’s probably less frequent.
*Most of my political opinions would fall among what Americans would call “liberal” ideas, but not all of them, which can be easily explained by the fact that I’m not American.
One of the assumptions needed for the efficacy of markets is that economic agents do not suffer from information asymmetry[sup]*[/sup]. If both are ignorant, great; if neither is ignorant, great; if one is ignorant, the situation can get pathological. Placing information labels on food is one such thing. If I have no idea what someone is putting in a loaf of bread, how can I make an informed choice? If I cannot make an informed choice, how could my purchase decisions possibly impact whether resource allocation at bakeries is going in the right direction? Maybe we are putting too much high-fructose corn syrup in bread, diverting corn from other uses. And all this time I thought it was sugar!
*[sub]I may be wrong. It may just assume perfect information, though specific work has been done to outline that mutual ignorance can allow markets to exist where asymmetry would tend to kill them.[/sub]
I don’t believe conservatives understand liberals any more than liberals understand conservatives. Both sides understand the other’s arguments to a certain point, but they also tend to misrepresent or caricature them.
I might add one more thing to your first paragraph. And that is, that some of us believe that if you try and ‘fix’ the different outcomes caused by the liberal philosophy, you actually make things worse.
If there was no label on the bread, and you therefore decided not to buy it because you didn’t know what was in it, what do you think would happen next?
Well, if you’re being serious, I’ll try and oblige. This is, though, somewhat complicated stuff.
Let’s say you have a painting that you value at $3 and I value it at $5. If I buy it from you for say, $4, then we both come out $1 ahead. The overall wealth of our little system here has increased by $2. This is one way to define economic efficiency (specifically, this is more or less what’s called Pareto efficiency). We can say that an economic transaction is efficient if both parties are better off after the transaction then they were before.
Instead of buying it from you, however, I conk you on the head, take the picture and run away. And it costs you $3 to go to the hospital. Now, I’m ahead $5, but you’re behind $6. So, the overall wealth of this system has actually decreased by $1. We can call this economically inefficient.
Now, instead of just you and me, let’s take a big system, with people making all sorts of transactions. If every transaction were inefficient, then the wealth of the system is going to decrease over time.
In the real world, though, not every transaction will be inefficient. Some will, some won’t. But if you want to push the overall wealth of a system towards increasing over time, you would try to eliminate some of the economic inefficiencies. In the real world, you won’t be able to eliminate all of them, but you can probably reduce a good number of them.
Now, I freely admit the decision to try to limit economic inefficiencies on my part is a value judgment. I prefer to live in an economy which has a tendency towards wealth creation. Some people may prefer an economy which tends towards wealth destruction and some people may place other priorities over wealth creation. That’s fine, we all have different priorities.
Did you even read the article? An information assymetry problem occurs when one (or more) parties to a transaction doesn’t have complete information about the transaction. Let’s go back to may painting example. Say the painting is a worthless forgery, but I don’t know that, so I give you $4 for it. Now, you’re ahead $3, but I’m actually out $4. Again, the wealth of the system has been decreased by $1, and we say this transaction is economically inefficient.
Now, in order to prevent this, maybe I hire an art expert to come in and appraise the painting. If he charges me 50 cents, well that might be the way to go. I would pay a total of $4.50 ($4 to you, 50 cents to the expert), but I’m still getting a painting I value at $5, so I come out 50 cents ahead and you still get your extra $1. But supposing it’s just impossible to do an appraisal for less then $2 (that’s the cheapest price you can get anywhere). Well, then, I can’t buy the painting anymore, and a transaction which could have occurred and increased the wealth of the system doesn’t happen.
Another approach is to require you to guarantee that the painting isn’t a forgery, and if it turns out it is, then I can get my money back. This, is, in fact, a regulatory approach to the issue. Now, we can conduct the transaction, and I can reasonably believe that either I have a real painting or I can get my money back if it turns out to be a fake.
This is all very simplified for illustrative purposes. If you want to get into the nitty gritty of specific regulations, we can. But when you’re doing this type of analysis, you have to look at the specific good or service that’s being regulated and the type of regulation.
Rattle? :dubious:
Laws to prevent say theft or fraud are a type of economic regulation, though. You are preventing a specific type of economic transaction from happening.
As an example of regulation designed to prevent economic inefficiency, let’s take the example of calorie count labeling for food, because this is similar to the fake painting scenario. Say I’m on a diet and I’m counting calories. And say we didn’t have any regulations regarding calorie labeling. And I want to buy a can of soup. Obviously, I can’t take the can of soup to the lab and have it analyzed for calories before I buy it. So my choice is either to not buy it, or buy it and take it to the lab and have it analyzed. If I buy it, and the analysis shows it has the right number of calories, then great. But if I buy it, and the analysis shows that it has the wrong number of calories, then the transaction has become economically inefficient, since I’m out the cost of the soup plus the analysis. The overall wealth of the system has been decreased. If everyone has to take their soup can to the labs, then we start to get a lot of transactions which are inefficient.
Or, we could require the soup company to put an accurate label of the amount of calories in the product. They make the thing, they only have to do the analysis a few times (instead of millions of people having to do the same analysis), and they are in the best position to determine the calorie count. By requiring a calorie count on the label, I’ve corrected the information assymetry problem, and individuals are better able to engage in the transactions they want to (in this case, soup purchase).
Say WHAT?!??! How is a law designed to prevent, say, fraudulent product advertising not a regulation?
Oh, I see. But just because other posters don’t adhere to your own unusual definition of the word “regulation” doesn’t mean that they’re using strawman arguments.
I think you’re about to embark on the standard libertarian exposition of how markets would fix the information asymmetry problem because another baker would come along who would be smart enough to realize that consumers like you want product information labels on their bread, so then you would buy that baker’s bread instead, so that baker would outsell the first baker, so the first baker would start using product information labels too, etc. etc. etc.
However, this standard exposition tends to overestimate the speed and efficiency with which markets correct information asymmetry problems. Face it, if another baker doesn’t happen to come along with product labeling at the desired time, you’ll probably still be buying bread from somewhere anyway because you gotta eat.
Sometimes, it really is faster and more efficient to get certain problems fixed by government fiat. FDA decrees “Put ingredient information on product labels”, manufacturers do that, voila, consumers have better information about the products they’re buying.
Lacking information isn’t destroying the food market. Lacking information does hurt the used car market. So, carfax pops up less than one hundred years after the car exists, but in the centuries of selling bread, it never seemed to happen.
Secondly, the margin on food is damn low to begin with, and distributing information in this case would be a pure cost. Without a very compelling reason, no one would do it. Thankfully we have just the means at our disposal to fix this problem.
Well, there is a considerable overlap. Straight-up Conservatives have more respect for rules and authority than Libertarians,* but they are hardly hostile warring camps.
A key difference is that Conservatives tend to be much more public-minded about enforcing social rules, whether laws or not. Conservatives would be willing to send in police, the militia, or even the army if necessary to stop violations of the public good or the law. Libertarians would be more inclined to shrug and let people be people.
A related difference might be in why they disagree with, say, Affirmative Action. Conservatives argue you ought to establish fair rules (like existing nondiscrimination statues) but not force people to specifically hire minorities to comply. Libertarians would likely shrug and simply would not shop at racist’s stores.
They tend to share methods, but use different reasoning. Conservatives tend to follow Edmund Burke, John Adams, and Andrew Jackson. Libertarians would prefer Milton Friedman, Basiat, or Thomas Paine. Conservatives tend to think more about a noble society, Libertarians about an efficient economy. Another way to put it is that Conservatives believe that, while not everyone must lead or follow all the time, there are leaders and followrs and heirarchies are natural. Libertarians tend to participate only when they feel like and only on their own terms.
*That’s one of my chief disagreements with Libertarians, and for that matter half the Left. They simply don’t respect public authority. They are willing to exploit it, maybe, when its useful. Much of the Left wants to control it. But they don’t respect it and ignore it when they can.
Aristotle (may have) said, “I have gained this by philosophy: that I do without being commanded what others do only from fear of the law.” My problem with most of the Left, and a fluctuating majority of the Right, is that they use but do not contribute to the public weal. This certainly applies in taxes, but so much more besides. Communities are being ripeed up and weakened with the result that people often simply have no good idea of how they ought to behave, and they have few willing to condemn them and say, “No!” in public anymore.
Who said anything about “destroying” the food market? The issue isn’t whether the food market will be destroyed by lack of product information labels, it’s whether product information labels reduce certain inefficiencies in the food market.
I notice you jumped straight to ‘regulations’ that prevent fraud. 40 lashes with a wet noodle for you.
Fraud law is something that attempts to ensure that if seller promises X, seller delivers X. Your argument is that somehow government must step in above and beyond these laws and certify that yes, indeed, the seller is delivering X. Otherwise no transactions would take place and commerce would suffer.
There are a few arguments against this:
There are laws to protect people from fraud. You could argue that yes, IdahoMauleMan, that’s true…but is that enough of an insurance policy for a potential buyer to feel comfortable and to generate commerce? Fine. Let’s move on to the next one.
Appraisals and insurance are a cost of doing business. If you choose not to buy them, you are balancing the risk of getting hosed and/or not having fraud laws protect you vs. the benefit of buying the painting at the offering price.
And if you don’t buy it, what might the seller do? Just sit there and say ‘Shucks, I can’t sell my painting at $4. I guess I’ll starve’. He can lower his price. He could pay a fee to an appraisal company - let’s call it the Bright & Shiny Appraisal Company - to inspect it and put their stamp of approval on it.
The fee could be small, since the B&SAC has developed a good reputation for appraisals and does a lot of business all over the world over which it can spread its costs. Fees are low because there are other appraisal companies in a vigorous, competitive market. B&SAC does good work, but they have to keep on their toes and keep costs down otherwise work will go to other appraisal companies.
Unfortunately, in many markets the government has enforced a monopoly on its own appraisal services or has crowded out other, potential private sources. The FDA and CPSC come to mind.
If there are many, many transactions via this seller, there would likely be on-line or other consumer appraisal systems to give feedback on his performance and honesty. EBay does billions of dollars worth of transactions each week without the government stepping in to ‘ensure’ every seller verifies what they’re doing. How does that happen? It should be massively inefficient, shouldn’t it? At least according to your theory. But in fact, its the opposite. It has exploded into one of the most liquid, efficient markets in the history of mankind. Hmmmmm…
Do you think each of the ‘millions’ of consumers who stood in line to buy the first iPhones hired a testing laboratory to test the battery life?
Did everybody who tried that little restaurant in Cancun send food samples back home first, to test for E Coli?
How about picking up the latest edition of the New Yorker in the airport? Do you quickly flip through it first, to make sure all the pages are filled with writing and they aren’t trying to jip you by stuffing blank pages in there?
Why do you make those buying decisions? Is it because the US government is stepping in to correct information asymmetry for you?
Do you know those unlicensed Arab taxi drivers who hawk rides at airports on the East Coast? I see the same guy every time I land at Newark. I’ve seen him for years. But he, theoretically, shouldn’t be there. It’s against the law. There are regulations against it. Why do you think he shows up? For his health? Am I to believe he has never had a paying fare in the 3+ years I’ve seen him, yet he keeps coming back day after day, giving it the old college try? Why else would he be there? It’s because people are weighing the risks and rewards of doing business with him, and acting accordingly. Come to think of it, the mere fact that he’s there all the time is probably a good source of feedback and consumer data…to the positive side. He wouldn’t be there if he wasn’t making money.
There is information asymmetry everywhere. You are mentally calculating the cost of risk vs the price of the good and it’s potential utility at all times, whether you realize it or not. Saying the government must step in as a monopoly provider of ‘resymmetrizing’ is ridiculous.
Most of the libertarians who post here (with the possible exception of Sam Stone on very specific issues) don’t seem to care one whit about an efficient economy. Unless you are using the term “efficiency” differently than is commonly used in economics.
No one said it. I was augmenting your post. Just because there is an information asymmetry doesn’t mean the market is going to be screwed forever. Hence my example of carfax. But in the case of food, on sale for, one assumes, thousands of years, it hasn’t popped up.
Sorry, but you can’t expect other people to abide by the idiosyncracies of the unique IdahoMauleMan dictionary, so you need to keep your wet noodle to yourself. Laws against fraud are part of legal regulation, and that designation is an entirely normal part of standard English usage, as seen in the following examples:
That doesn’t mean that inefficiencies in the food market didn’t exist during that time. To imagine it does is to fall into the naive-libertarian trap of assuming that the market always fixes any problems it may have, so if a particular corrective mechanism never emerged as part of a market structure, that means that the problem the mechanism is addressing doesn’t really exist.
And, of course, that naive assumption also completely overlooks the differences between traditional food production methods that dominated food markets for thousands of years and modern industrial food manufacturing. Information asymmetries could always exist in food markets as well as other kinds of markets, but they’ve been greatly increased in modern times, when the processes of commercial food manufacturing have become so opaque to the average consumer of commercial food products.
I would argue there are very natural, logical reasons for this. I also explained this in the true-cost-of-the-FDA threads.
Severe poisoning or death from defective drugs or food are what risk managers call High Severity Bad Events. HSBEs become very obvious, very quickly and prompt self-correcting mechanisms in large networks.
How quickly did that peanut company go bankrupt due to the salmonella scare a few weeks ago?
How quickly did that Chinese toothpaste thing spread?
Sam Stone’s example of sulfa drugs causing 107 deaths (the event that prompted the modern FDA) was another example. And that was from decades ago, when information traveled much more slowly. 107 deaths? I know that sounds terrible, but I bet that many people died from self-inflicted risk factors (smoking, drinking, eating bad food) around the world in the time it took me to write this post.
It is extremely unlikely that many, many people would buy bad bread and become very sick or die simultaneously. The news would spread too rapidly. In the interim, successful companies who don’t kill people can build their brands and reinforce their success via word of mouth and positive reviews.
Not only have the processes become more opaque, but the relationship between producer and consumer has effectively vanished as mom and pop shops disappear in our quest for cheaper goods and services. Not that I’m lamenting this, just saying… it is a contributing factor.
P1. He didn’t explain it clearly at all. Not to me, anyway. Please help me to understand better.
P2. Of course there is no guarantee. There is no guarantee of anything. What’s your point here? That it would be great if X happened, so let’s get the government involved to try and make X happen?
P3. Proof by assertion isn’t very persuasive. Could you help me try and understand?
Yes, yes… it is so massively complicated that I can’t even follow your example!
Where exactly did the $2.00 in “created wealth” come from?
I don’t see a net increase of $2.00 in total system wealth.
Does “wealth” get created from purely from transactions? Or are transactions just a measure of “economic activity” and is “economic activity” a true measure of total system wealth?
Or is “wealth” really defined by increasing productivity – in other words, human desires are fulfilled with less inputs (labor, energy, etc)?
Say WHAT?!??! How is a law designed to prevent, say, fraudulent product advertising not a regulation?