There is a reasonably finite economic pie. When textiles and small manufacturing jobs were exported a couple decades ago ,it didn’t cause much notice. In the last few years , major manufacturing and tech jobs are leaving the country. The middle class ,a talented , educated and trained middle class is being hosed. They did what the American dream said and their reward is unemployment, no health care and economic downsizing.
At the same time . the wealthy have increased their share of the wealth exponentially. Two percent of the people are in control of 50 percent of the worlds wealth. It should be a terrifying trend because economic power equals political power.
Should people expect shelter, food and health care in America. Or do we just not care. The end of all this inequity is social and political unrest.
[aside]
To remove all doubt, there is no sarcasm whatsoever in my applause. I spent several years in the co-op/whole foods movement, and manys the time I have lamented the lack of a progressive MBA. When Big Food (Piggly Wiggly, Cub, Rainbow, you know…) began to offer organic and bulk foods at a price we could not compete with, many of us mourned, I got out my dancing shoes. (The triumph of optimism over experience, I dance like a white boy…but sometimes the call to boogie! cannot be deferred.)
Good on you, lad, give 'em hell, and I’ll try not to get in the way.
[/aside]
No worries, I never suspected sarcasm. One of these guys, 
was supposed to be in there. It was the, ah, richness of the phrase that caught me off guard. I should use it for a sig. That would get some goats.
And I hear ya about Big Food selling organic. I try to buy it when I can so they will add even more products. Paying an extra buck for a dozen eggs is worth it. Never said you couldn’t vote with your dollars, just that it aint more democratic.
And before anyone jumps me on it, I dont know how to spell ‘ceteris paribus.’ Jump on me for the rest of it.
AP
… I do know how to spell ‘ceteris paribus.’ …
Damn you Gaudere!!!
I’m pretty sure economists have to take accounting and finance.
Anyhow, you might also want to dabble in macroeconomics as well as financial accounting. Accounting and microeconomics are at the level of the individual company. Macro deals with the workings of the entire economy.
But accountants and financial managers don’t have to take economics. The reason? Accounting is a branch of mathematics and therefore in the same category as the sciences. Economics is a fusion of philosophy, art and fortune telling, and therefore in the same category as voodoo, witchcraft and necromancy.
As one who has done post-graduate work in Necromancy at Miskatonic University , I take a degree of umbrage at your comment comparing such metaphysical science with economics. Nonetheless, you’re quite correct about voodoo. And voodoo economics, well, that’s* right out!*
And you completely ignored my point that government power generally works the same way. Go count the number of people in the U.S. Senate who are NOT millionaires. Go through the entire U.S. government hierarchy of elected officials, and find the ones who were minimum wage earners before entering government. Or even any who made less than, say, 50 thousand a year.
Large market for luxury goods? Compared to Wal-Mart? McDonalds? Sears? Best Buy? Amazon? Radio Shack?
The vast bulk of the market is made of products and services aimed at the middle class and lower class, because that’s where the bulk of the people are, and where the bulk of the money is. Lord knows I’ve heard lots of upper-middle class people whine and moan about how much they hate Wal-Mart, with its low cost products, crowded aisles, and stores packed full of poorer families with screaming kids. Looks like the market is serving them with great gusto, wouldn’t you say?
Why do you keep mixing up internal management structure of corporations with our discussion? It’s a total non-sequitur. It’s like saying that our goverment isn’t democratic because we don’t get to vote for the staffers the politicians hire. Methinks that as a (I’m guessing) first or second year undergrad, you’re simply mashing together all the knowledge you are picking up from various courses and trying to find some unifying theme in it. But let’s try to stay focused. How a board elects its officers inside a company has nothing to do with whether or not the market provides more choice than does government.
Oh, so even those big companies have to listen to their customers? Fancy that. If they control the market like you think they do, why don’t they just tell their customer to go to hell, and manipulate the market so their shareholders get rich?
You miss my point. In business, if a product is failing, and the manager of that product line wants more cash, he has to justify it. Explain to his superiors why more cash will fix the problem, come up with a concrete plan for turning a profit with that cash, etc.
In government, if a project is failing they just throw more money at it. No, tax revenue isn’t a bottomless well except in the figurative sense in which I was using it. But judging by the ballooning of the government budget to several trillion dollars and a deficit in the hundreds of billions, that well is pretty damned deep.
To quote Ray from Ghostbusters: “I’ve been in the private sector. They expect results!”
If they don’t fail, at the very least they don’t grow and ‘control’ the market. They limp along losing market share until they either shape up or go bankrupt.
I have absolutely no idea what point this makes, if any.
Government CAN manipulate the market. It just shouldn’t do it, because it always has unintended consequences. Sure, you can raise taxes on the rich to 90% - and then you can watch your capital fly out of the country. Sure, you can double the minimum wage - and watch your poorest people’s employment rate plummet and a black market in labor spring up. Sure, you can arbitrarily pass a law that says that no one can earn more than a million dollars - and watch the frantic creation of shelters and a massive brain drain of the best from your country. Sure, you can decide that no one should drink alcohol - and watch speakeasies form and the mob take over the alcohol business.
It’s NOT the same. One is the natural result of the free exchange of millions of people, the other is a guy with a gun dictating how we must behave. It doesn’t matter that the guy with the gun has a nice smile and good intentions.
Then I suggest you take your progressive blinders off and look around. If you want a good undergrad project, why don’t you rank the countries by degrees of economic freedom, then rank them by increase in GDP over the past 30 years. See how strong your correlation is.
And as I said, you participate in the market and influence it every time you spend money. You have FAR more influence over the market as a single individual than you will ever have wtih government. There’s a good chance you will go through your entire life without ever directly affecting the outcome of an election. But every time you buy something, you have an effect. And if you buy something large like a house or a car, you have a pretty big effect.
Of course. Which is why libertarians advocate fewer opportunities for the goverment to intercede on behalf of business. You ignored my entire paragraph on milk subsidies.
What you’re talking about is ‘regulatory capture’. It happens all the time. Some well meaning folks lobby the government for new regulations on business. The government complies. Then the activists stop paying attention and go away. In the meantime, the businesses have to deal with these regulations daily, so they hire lobbyists to influence government to change them for their benefit. Over time, the regulations become distorted until they are tools of big business. A company that has a natural advantage in one area will have laws passed that help them and hurt the competition. Unions have laws passed preventing employers from hiring outside the union. Trade organizations have laws passed that put up barriers to entry in the trade so they can maintain high prices. And so it goes.
Let me know when those private security forces start putting guns to people’s heads and demanding that they buy the company’s products. The issue of private security forces is another total non-sequitur.
Uh, because it isn’t? I mean, I get annoying phone calls from solicitors, but I have yet to have one come to my door and force me to buy a vacuum cleaner at gunpoint. I also haven’t been beaten up or threatened by the Wal-Mart shopping dragoons. Just those nice old lady greeters at the door. Maybe they’re packing heat.
You’re right. And that’s why it’s so nice that the market doesn’t use it. Or are we equating ‘force’ with ‘achieving goals’ now? It’s getting hard to tell where your train of thought is going.
The problem of asymmetric information is a real one, but the market also has solutions for it. BTW, I have no problem with the government operating in an informational capacity to eliminate some of those asymmetries. For example, if the FDA became a purely advisory agency that tested drugs and reported on what it found, I’d have no problem with it.
The fact that one side has more resources, however, is completely irrelevant.
You can go somewhere cheaper.
Seriously, why in hell is price shopping not negotiation? It means precisely that you do not HAVE to accept the price offered. In fact, there are lots of stores I don’t shop at because I don’t accept the prices offered. I don’t buy coffee at Starbucks, because I don’t accept the price offered. So Starbucks lost a customer. We all make choices like that every day.
So what? I would say that this just reflects reality. And also, you’re invalidating your own point. Earlier you were saying that businesses are powerful controllers of the market, dictating prices, and that the only thing holding them back from total domination is access to more capital. Now you’re claiming that they are powerless to control the price of their own supplies. Which is it?
Oh, why is that the comparison? Can we not use the examples of leaders who were elected democratically and then turned on their subjects? Or democratic governments that became autocratic?
Also, it kind of makes my point to show that the governments that have the smallest footprint on the economy are the only ones who have hurt their citizens less.
You don’t believe in market forces? I thought you just said that businesses can’t control the price they pay for their supplies?
And on what basis do you choose to not believe in the efficient market hypothesis and the general equilibrium theory? Please explain your rationale for those beliefs.
You’re in business school, and you think that the ‘short term’ is all that businesses care about? You’re not aware of any long-range planning that goes on in business? I suggest you check out the history of, say, the Boeing 747 to see how far in the future businesses plan. Or you could look at GM’s fuel cell research, or Microsoft Research, or Bell Labs, or…
Really, your messages are so full of these jaw-dropping zingers that I sometimes don’t know how I’m supposed to even respond.
Now THIS sentence is confusing. Let me see if I can parse it - the market is only a constraint on business if it desires to remain an ongoing concern and increase market share. Couldn’t have said it better myself. Sure, a business can ignore the forces of the market - if it doesn’t care if it loses its customers and goes bankrupt. Absolutely.
And why do you think that ‘available capital’ is a major constraint? Lots of cash-flush businesses screw up in the market. Companies with billions of dollars in the bank and access to huge capital through stock issues and bonds still fail in the marketplace. See: General Motors. In fact, they have so much available capital that they tried to buy customers by offering such large rebates on their vehicles that they were taking a loss on each one. Some might even have claimed that they were ‘dumping’ cars on the market. Didn’t seem to help them much, did it?
Do you know what analysts say it will take to turn GM around? Making cars people want to buy. That’s it. If they build it, people will come. No shenanigans with their billions of dollars in cash will change the fact that they will continue to lose market share until they provide products the market wants. Period.
There you go again, tossing in meaningless non-sequiturs. What in hell do landfills have to do with whether a price is found that allows the market to clear? Stuff isn’t supposed to wear out? The fact that we produce trash is an indictment of the market? Please elaborate on your thinking here.
They do? What happens to a business that sets a price floor on its products that is higher than customers are willing to pay? That would be a ‘glut’ wouldn’t it? And what happens if a business sets a price floor lower than what it costs to make the product? They’ll soon run out, won’t they?
(continued…)
They don’t seek control over it - they seek market share. Let me repeat - market share does not equal control. Do you know how companies maintain large market share in their sector? They do it by simply being better than the competition at providing what customers need. They have no more control over the market at 30% market share than they did at 2%. Make a crappy product, and that 30% can become 2% overnight.
By the way, the companies that lost out to the one gaining market share also sought the same thing. Apparently, it didn’t work for them.
If companies ‘controlled’ the market once they had a large market share, you would see a trend where once companies get to a certain size they never shrink again, and a gradual takeover of markets by increasingly large companies. Not only that, but if the market wasn’t functioning any more because of it, you would see those companies producing increasingly inferior products, inexpensively made, once they had ‘control’ over their sector.
By that statement, I assume you believe that there are never any losers in the marketplace. After all, they all succeed in controlling the market.
[quote]
Business is not beholden to market forces. The market is beholden to actions and demands of business.
[quote]
You keep saying that, and you keep ignoring all the points I bring up that show exactly the opposite. Go find a professor of economics in your school, and ask him if business controls the market, or if the market controls business.
Another assertion made without any evidence. Please provide some.
Oh, man. So capitalists and their evil marketing departments TELL us what we want, how much we have to pay for it, and then they sit back and cackle and smoke hundred dollar bills while the sheep meekly comply? Is that it? And the government is our Robin Hood, who we call on when the fatcats get too greedy, and the noble government goes out and rights all wrongs? Is that your worldview?
:rolleyes: Yes, it’s all just opinion. Even when you state as FACT that you have seen evidence to support a theory. All I asked was that you describe this evidence. Later, you made the claim that certain subjects are not taught in business school. Another easily verifiable claim.
In Great Debates, when you make an assertion of fact, you may be asked to provide cites. If you can’t, your arguments will be ignored. If you continue offering ‘facts’ and refusing to cite them, you yourself will eventually become ignored.
Oh, man, my physics education must be a total waste, because I have yet to come across a massless, frictionless spring.
I hope you understand that these assumptions are made IN SCHOOL to help illustrate principles and avoid complicating important concepts with endless caveats. Real world economists, including libertarian economists, are fully aware that these conditions are not always met. Just like real world physicists have to modify their equations to account for the fact that the spring actually does have mass and friction. That doesn’t make the concepts useless. It just means the real world is more complicated than your textbooks. The underlying principles, however, do not change.
Nuance is what grad school is for. If you don’t like what’s in the textbooks because they don’t give enough weight to your pet theories, you’ll have the opportunity to change conventional thinking later.
Personally, I was just thinking that your Macro book focused on Keynes while only giving a page to Friedman. I hope Hayek and Von Mises at least got mentions. You know, Nobel prizes and all that.
Gee, that’s strange, since the biggest blue-chip stock in my portfolio just increased its dividend to .28/share from .25. Why did they do that? You’d think the management would have just voted themselves a pay raise or something.
Maybe you were just suckered in by populist writing and a newspaper that has the same biases you do.
Sure. Which means some other company probably didn’t, unless the market itself is growing enough for us all to meet our growth targets.
Well hell, you’ve got to base it on something, don’t you? I think what you are trying to say is that “businesses make plans”. Not particularly insightful when stated that way. Of course, if I make an expansion plan based on my sales targets, I still might not hit them. That’s when those high-paid managers have some explaining to do.
Frankly, I think you’re a little confused. Business sets its prices based on desired profits, but only within the constraints of what they believe they can sell their product for. What you are missing is that by the time a product actually gets to the point of being developed, someone has already made the determination that the market is such that the product can be made and sold for a price that will allow the corporation to recoup its investment and make a profit. If you think businesses don’t look at the market when setting prices, please explain why Microsoft doesn’t sell Windows for $20,000. Think of the profit they could make!
Please explain how that would work. I don’t follow you at all. What generally-accepted principles can you apply to economics that ensures that it will become a better tool for understanding how the world works?
Yeah, I know what it means. You’re just misapplying it. Taking accounting terms and applying them to economics. Intrinsic value may have a specific meaning in terms of accounting practices, but when it comes to macro economics, there is no such thing. A $50,000 car is useless if there are no roads or fuel, and suddenly may be only worth its scrap value. In economics, ‘value’ only has meaning in terms of the negotiated price between two parties.
What, they’re not part of the market? The fact is, if a business with a flatter management structure has a competitive advantage over one that doesn’t, then the practice will survive and flourish. If companies that try it fail, it will go out of favor. The competitive advantage doesn’t even have to be on price. It could be that such companies find it easier to attract higher-quality employees, or find their management costs lower and therefore their profits higher. Good for them. But it’s all part of the market.
You believe that? People are really that equal? It sure doesn’t seem like it to me. Anyway, there are plenty of businesses that are set up as meritocracies, so if you’re truly management material, you can make your way there.
So we can look forward to more Ben & Jerry’s, I guess. More power to you. When you get out into the business world, you’ll be totally free to set up your business collective and show us all the errors of our ways.
That’s the beauty of the free market.
There are countless ways to “adjust” the market and countless ways to define “equity”. But since it was **Illuminatiprimus **who was recommending that such adjustments be made, it should be he who tells us what he has in mind. I have no recommendations because I don’t want to “adjust” the market.
Nope. I’m not the one calling for an “equitable distribution of wealth”, so why should I define it? You seem to have this strange idea that posters don’t have to define what they mean when they use vague terms like “equitable distribution of wealth”. But if someone advocates that we strive for that, it is incumbent on him to define what that is.
I didn’t ask what the things were, I asked what process we used to determine what people “really want”. Next I’d like to know what we do with that information once we get it. And, btw, the market provides health care, wholesome food and “nacho cheese flavored dog food”. But wait, there’s more: no one forces you to buy the last one if you don’t want it. What’s not to like about that?
Well, if you find one of those “conservatives” around here, you are welcome to deabte him or her. What that has to do with any of my posts I have no idea.
“Sanctity” is your term, and I’ve never said anything about the market not being flexible. In fact, “the market” is probably the most felxible human institution there is. Just because you folks on “the left” have not destroyed the economy, doesn’t mean you know what you’re doing or that you have the best ideas of how to aleviate poverty.
And at least with government I can find protection and remedy under the law, along with everyone else. It does not cater to just the highest bidder. Why do you live in a democracy? Sounds like you would rather live in Russia or some other kleptocracy where money is the only thing that matters. I think we came up with something a little better than that.
No, as compared to Ghana, Chad, Laos, Suriname, etc.
It was in answer to your comment on that shareholders can vote and that business is democratic, and also because the original OP. And ‘how a board… etc,’ is an assertion without evidence. Galbraith presented a pretty coherent argument in his book on how corporate governance determines how those corporations will act in the market. Have you read it? He provides plenty of evidence, though not the pretty mathematical models that the Nobel committee prefers. And where did I talk about whether or not the market provides more choice than government.
I stated that government has equal rights to participate and meddle in the market as any other player. So what if they got guns? Are they forcing anyone to buy T-bills? They forcing contractors to supply the feds with whatever they want? They use their ‘guns’ to make sure everyone is playing by the same rules, including themselves. And considering we have a democratic government, why are you so afraid of the majority? I currently detest the decision they made in the last two US presidential elections, but I am not advocating we abolish elections. So what if every government intervention doesnt work out? We should outlaw intervention? Most businesses fail. Maybe we should outlaw business.
When you have several players trying to dominate, yeah, conflict happens. And most private interactions are between the parties involved with negligible ramifications on the larger market.
I realize I have overstated my point though. I believe the law of supply and demand does matter in macroeconomics and over the long-term (the course of a decade or so, barring breakthroughs like this here Internet.) I am actually more conservative when it comes to macro. I like supply-side economics and Friedman’s monetary theories (which require government intervention on the supply of money and capital) over Keynesian models. I do not like the current ‘neo-classical’ microeconomic theories. I do not think the models have been empirically proven and I think their premises are false, or based on assumptions that will not hold in reality. But they keep teaching it.
Why dont I like the efficient market hypothesis? It presumes that information will be shared and received instantaneously. There is too much information and too many parties. Someone will always possess the information before someone else and most likely will be able to profit from it. Asymmetric information is the reality. That is what models have to incorporate.
Why dont I like the general equilibrium theory? I dont believe equilibrium is possible in a dynamic, innovative market. Every year, something new occurs that will affect the larger aggregate market, so long term forecasting is fairly ineffective. Your examples where from when? How much luck have Boeing and Airbus had with their current models in design?
I dont believe the market exists in microeconomics unless you are dealing with pure commodities (i.e. fungible). Companies and people dont interact in the market - they interact in private relationships over short-term horizons where all variable, ‘market-based’ costs can be accounted for by contracts or similiar measures. They take the market it out the equation. And in micro, large firms will dominate smaller firms. The largest firms and organizations can even affect the macro side.
Hmmm, because perhaps your points are not as strong as you think they are? That alternate theories of the firm exist? That disagreement with Galbraith does not equal refutation. You asked for evidence. I said it was ‘self-evident when looking at the size, scale and operations of modern corporations which exist to enrich their management and not their shareholders.’
But you want me to post the average increase in executive compensation and the average increase in the size (by revenue, assets, employees, what would you like?) compared to the average increase in ROA, ROE and other measures of performance and earnings?
Give me a couple days. Honestly. I might be completely full of shit, but three years of reading Fortune, Business Week, and the business sections in dailies have led me to believe that Galbraith had the stronger argument. Some research has been done on it. Satisficing over maximizing.
Until then, consider the S&L crisis, or Long Term Capital Management. Why didnt they market just let them fail since businesses have no power over the market. If GM defaults tomorrow, how fast will the central bankers rush to prop up the market. What would happen if Calpers decided to divest from the securities market and invest in real estate? What would happen if the Walton family decided they had enough and liquidated WalMart? How would the markets react? These are just small players. $60 billion dollars in a $9 trillion dollar economy. No effects, right?
In the short-term, business influence the market far more than the market influences business. So what is the company misses its target by a few points. Good planning should account for. Missing by wider margins is a greater sign of management mistakes than any market influence.
And in the long-term we’re all dead.
Economics tries very hard to present itself as a hard science on par with physics with established laws and theorems and principles. Adam Smith is held on par with Isaac Newton. But each generation has rewritten the text. It is a social ‘science’ at best. And my other similiar courses were very good at presenting both sides of an issue, of presenting the ‘mainstream’ and alternate theories. But my econ classes and textbooks were very poor in that regard. If I took them at their word I would never have heard of Galbraith, Friedman, Schumpeter, and a dozen more that are still alive and kicking and shaking up all those ‘established’ facts.
That they want to break everything down so we can learn the ‘basics’, fine. Then put it all back together again like my physics professor did. Show me how the ‘real’ system works once we know those basics. Show me the empirical evidence that led to the conclusions or why they were overturned the way quantum physics overturned (or added onto rather) newtonian physics. But it doesnt happen because it cant happen.
Maybe I just went to a shitty school, but it doesnt seem like it. Most of my peers seem to have the same basics I received. All of this is relevant but goes beyond the issues I raised in this thread. And to finish for tonight:
And the evidence for this assertion? A ten thousand, even a million dollar purchase is a ‘pretty big effect’ in a multi-trillion dollar economy? Thats jaw-dropping.
And in the marketplace, you can organize boycotts, publish consumer magazines, put expose’s on television, start advocacy web sites, and do all sorts of other things to magnify the power you have over corporations. And my experience says that corporations are far more malleable to this kind of tactic than is the government.
Ralph Nader had a pretty big effect on Corvair sales, wouldn’t you say? Unfortunately. The anti-globalization activists certainly managed to convince several large corporations to abandon their ‘sweatshops’.
Furthermore, if you don’t like someone’s business practices, you can set up a corporation to compete with them on more ‘ethical’ grounds. Ben and Jerry’s did that. So did “The Body Shop”. If you don’t like the lack of charity in business, you can influence that as well. "Newman’s Own’ salad dressings have a pretty big market share, and all their profit goes to charity.
The last time I was in the grocery store, I saw all kinds of examples of this. “Fair Trade” coffee, all kinds of organic foods, you name it.
I think individuals have a far greater ability to push the market in directions they prefer than you are giving them credit for.
Wow, what a strawman. Especially since I already said that I believe the government has a strong role to play in making sure the market functions properly.
Huh? By that definition, the apples I bought yesterday are luxury goods. All that proves is that our market is pretty good at providing what we want. By extending your definition of luxuries out so far to make your point, you trivialize it.
I haven’t read Galbraith’s book. I’ll put it on my reading list. But in any event, I’m not here to argue that companies always adopt the best internal management practices. Only that those whose management practices impact the quality or price of their products will be punished or rewarded by the market accordingly.
Is it possible that an evil businessman could take over a company, rape it of its assets, and run for the hills? Absolutely. Just as its possible for a crooked politician to pocket millions of dollars for slipping laws into the books that favor a special interest at the expense of the citizenry.
They also use their guns to force you to pay the taxes they want to raise to pay for their projects. They use their guns to force you to use their first-class mail system. They use their guns to prevent milk producers from selling milk across various boundaries without paying a tax. They use their guns to prevent people from buying the drugs they want, getting the medical procedures they want, buying cars without air bags, and any number of other regulations they place on us.
As for regulating themselves - who will watch the watchers? You think the government holds itself to the same rules it holds the rest of us to? If so, I’ve got some prime land in New Orleans to sell to you.
The government is NOT an equal player. The government is the referee. When you let the referee into the game, don’t expect to get fair calls. Would you let a judge preside over his own trial?
I find it interesting that you automatically assume that businesses are evil, that the market will trend towards only aiding the rich and powerful, yet you seem to have no qualms whatsoever about giving guns to a bunch of rich, powerful people and saying, “Care care of me, boys.” Your faith in government is not rational. All you have to do is look at the number of scandals and indictments that habitually ooze out of Washington to see that. The U.N. is corrupt throughout. The government is busy gerrymandering districts so that the current parties can hold a monopoly on power. Campaign finance reform laws stifle the speech of the middle class and the poor, while giving rich people full rein. They exempt themselves from numerous regulations they expect the rest of us to live under. They make millions of dollars from lobbyists trying to buy their way into power. And they are far, far less accountable in their decision making than are businessmen who operate in the free market.
And yet, you’ve got no problem with giving them even more power - power to tell people who they can trade with, how much they can charge for their work, and how much of their money they have to give to the rich guys in Washington.
And even if they had hearts of gold, they are still just a bunch of guys with no particular training in any given field, who are making daily decisions that affect the lives of the people who know far more than they do. They believe they are better at determining what’s best for you than you are.
I don’t have that kind of faith. I prefer to have my country controlled by the free exchange of goods and services of the citizenry, where people are free to ignore bad ideas, refuse poor service and shoddy products, and where innovation is allowed to thrive without the heavy hand of government stifling it under mounds of regulations.
Oh, I don’t know. You think the blacks were afraid of the decisions of the majority in the 1800’s? How about the guy doing 5 years in a penitentiary because he was caught using a drug the majority frowns upon? How’s that working out for him?
You can’t avoid the problem of government. You need some government to ensure that your society is protected from force from within and without. You need a government to provide some basic standards and to adjudicate disputes. You need the government even to provide for some public works where there are market failures, and to ensure that the market runs smoothly and is protected from fraud and corruption as possible. I have no problem with that.
The problem comes in when you start using the government to attempt to mold the market in some direction other than where it wants to be through the use of force. Forcing minimum wages because you think people should earn more. Imposing tariffs when you don’t want your fellow citizens buying products other than from your favorite business. Getting into the game of manipulating the economy for social ends through a system of subsidies, taxes, and regulations on business.
Not only is it immoral to interfere with people in that way, but it usually has consequences other than what the regulators intended. But once you give them that kind of power, good luck getting it back.
Nobody ever said anything of the sort. But if your government has a habit of making bad decisions, why do you want them to do more? The public school system is sure a model of efficiency, isn’t it? How about the Post Office? How’s Amtrak doing? How about medicare? Good thing the government is such a good regulator of itself, or they might, you know, underfund their Medicare and Social Security system or something. Or Lord knows, raid the money and use it for something else.
It’s no surprise that you need more than one company before you have competition. You seem to think that there are real monopolies out there. Can you name one? One that isn’t in the position its in because of government intervention on its behalf?
And of course individual market transactions are a negligible part of the overall market. That’s irrelevant though. The market is nothing more than the aggregate sum of such transactions. That’s why it’s so hard to predict, and so hard to control.
The S&L crisis was the fault of government, not the market. The proximate cause was the government providing loan guarantees without undertaking the proper fiduciary responsibility to ensure their loans were used properly. It was exactly what happens in a market when the government gets involved and distorts it to their own end. What they get is not what they thought they were going to get.
I don’t get your point. Big companies have gone under before. Entire industries have undergone huge upheavals. Have a look at the airline biz.
Any of these companies can go under, for any reason whatsoever. The market will do what it always does - adapt. If a real need was left unfilled by the demise of the company, other companies will spring into the vacuum. The workers will be rehired elsewhere. Life goes on.
You know, it doesn’t have to be a management mistake. You forget that the competitors are also working to gain the same share. Perhaps a better comparison is a 100 yard race. You can both be fast, but one might be just a little faster.
My company currently has a plan to take more market share in our segment by releasing a new product that we thing will eat the competition’s lunch. And it probably will. But on the other hand, we don’t know what the competition is up to. Maybe they’re already a step ahead of us. Maybe they’ll beat us to market by a month or two. Or maybe our development team will discover some problems along the way and the product will cost more and take longer to build.
If we fail, it doesn’t mean we made ‘mistakes’. It means our competitors were somewhat better than us in this case. Maybe next time we’ll get them.
It’s a pretty big effect on the market you happen to care about. If you’re a ‘Ford Family’, And buy Fords your entire lives, you have a measurable effect on Ford’s bottom line. Especially if you convince your children to buy Fords.
But it’s at the smallest level where you have the most effect. A single patron can be a substantial asset to a corner bar. When you decide which convenience store to stop at on your way home, which brand of milk you prefer, which operating system you will use, and which company you will work for, you have a significant effect on that area of the market - and those are the areas that matter to you most. Frankly, I could care less whether NASCAR survives and Open-Wheel racing dies, because I don’t watch either one. So I don’t care that I have no effect on that. The effect of my money and effort is aimed squarely at the things I care most about. Another reason why the market works better than government.
Your naivete is really showing here, among other places. Do you vote? Did you vote for the president? I know you don’t like Bush (and I hate bringing up politics in econ threads, but since the door has been opened…), but would you have voted the same way in Texas? What was the last referendum you voted on? Was it based on a school? On a zoning ordinance? Did you vote against the war in Iraq? Did you vote to balance the budget? How about healthcare? Before you get all mussed, please note that I do believe in voting, but I don’t believe in direct democracies, which is what a government would have to be in order to be applicable to the market economy. Unlike the dollar, the vote, when one does actually get to vote, is merely a representation of issues and ideas favorable to the voter. The dollar, on the other hand, really is more direct.
Sam’s point about purchases is that you make these decisions daily (unless someone else is doing it for you, and you care not one way or another). Your decision, along with the millions of other people out there, in the aggregate, decides whether a product line lives or dies; whether a service is to be utilized; whether a business is to stay afloat, or hires/fires workers. Every dollar counts.
One guy argues macro economics and gets a micro economics response. There was a reason that trust busting and monopoly rules came to be. The corporations have to be watched carefully. They will restrain trade if left alone. Competition which is good for the consumer is anathema to corporations. Price setting and pooling of patents is only good for them.
What is the financial reason for corporations not to pollute.? They do and will unless watched carefully. Destroying the environment and exploiting workers is a financial gain. They will do it any time they get a chance. They have no conscience. Government regulation needs to be thorough and punitive.
Fair trade coffee only demonstrates that companies have discovered there is a niche market for socially responisible products. If you consider destroying the rain forest a bad thing, and company X buys coffee from people who grow socially irresponsible coffee, 5% of the market refusing to by from company X is not going to make much of a difference, especially when they make coffee cheaper. Sweatshops? Kathie Lee says she didn’t see any, but I suspect there are one or two sweatshops still operating. Nader might have killed the Corvair, but the Pinto was still built. (I had one. Great car - no one tailgated. 
)
If something a company does is wrong, but hidden, the market providing alternatives is nice, but is not going to eliminate the wrong - especially if the wrong occurs far away. If the wrong is that buyers of the product directly suffer, you got more of a chance.
Agnostic Pagan: Why don’t we set aside this philosophical discussion of the relative merits of business vs government and get back to your actual thesis (which we’ve spent almost no time discussing in this thread)?
In your OP, you touted the relative superiority of co-ops and partnerships over corporations. Can you clarify what we need to do, if anything, to allow these 3 entities to compete on a level playing field? I’m not at all clear why one type of organization has any legal advnatage over the others, in which case it would seem that the market can sort out which provides better products and services for consumers. For example, what’s preventing a group of investors from forming a Auto Manufacturing Co-op or Partnership instead of a Corporation?
Gladly. This is becoming a very ugly trainwreck. (For which I admit I am partly to blame.)
Others projecting aside, I do not think corporations are inherently evil or sociopathic, but they have an extreme tendency to become so over other business models, especially when they go public.
(Nor do I think that government is the solution to all our problems. I don’t care for big government myself actually. If one wanted to privatize the executive branch, I would probably support it. Just dont turn it over to a corporation. Sadly it seems like the judiciary will be privatized first.)
Corporations were established to provide a shield from liability and diversity of ownership, both measures to minimize risk. That shield has been extended to other advantages under the law in regards to taxation, nature of business, property rights, etc. It also helped build the wall between capital and labor. They shielded the owners from direct contact with labor and vice versa. Labor representation on boards of director is not common.
Partnerships under the law were very restricted and usually limited to only professional firms. Joe’s Garage couldnt form one. The beauty shop couldnt form one. So Joe and his buddies had to set up shop under one owner or form a corporation. I would venture that many private corporations are this arrangement. A glorified partnership to take the advantages available under the law.
Co-ops have even more restrictions. Details vary by state, and some do not allow them (smacked of socialism or communism, I guess). Where they do exist, they are mostly limited to agriculture.
I have overstated my points about the market which helped derail the discussion. But I do believe enterprises have as much, if not more, control over their market as the market controls them.
One factor that affects the market is its structure and the nature of the players. Why do we have a labor market based on wages for hire and not equity for risk?
I believe because the corporate hierarchy was modeled after the military which itself dates back to the feudal hierarchy with one guy at the top, his lieutenants, and at the bottom, the lowly serfs and peons.
And that model continues purely out of historical and elitist reasons. While it has shown its worth on the battlefield, there is no inherent reason why it should exist in the marketplace. I dont believe it should exist in a democratic society. It divides society into two classes - the capitalists and labor which generally leads to conflict since there was very little movement between the two. Rags to riches were the exception, not the rule. It also creates a mentality that a person is either one or the other.
Liberty, equality, fraternity. I believe in that. I think they should come in that order, but I dont believe they are mutually exclusive. Once we have liberty, we should strive for equality. Once we have equality, we should strive for fraternity.
This might a bit more than you inquired about, but its the basis of why I believe co-ops and partnerships are superior. They treat their members not on an either/or basis, but as both labor and owner. That labor can, and I believe should be, compensated with equity and not just income.
But that requires acceptance that your co-workers are capable of being both labor and owner, of being a professional. It requires that the average person can be capable of both responsibilities. Total Quality Management has demonstrated that production workers can be entrusted with far more responsibilities than what Henry Ford and other early industrialists thought. But they were raised in an environment where the master/servant relantionship was still valid. It no longer is today.
I am a product of my upbringing. I grew up in the suburbs, went to work on the big city. A slight difference in the average mindset.
Working in the 'burbs, most of my co-workers were children of professionals like myself, and we approached our work not as labor, but as professionals. Which sometimes meant there were more chiefs than indians, but thats the point. None of us would have been content to be mere labor.
Working in the city, it was the opposite. All indians, and no chiefs. Because they grew up in an environment that it was pointless to aspire to be a professional. Far too many had the great ambition of finding a job in government because they could collect a pension and that was the only industry left with strong unions. They thought that to enter management would be ‘selling out’ or ‘working for the man,’ not that they would be empowering themselves. I blame unions even more than business for that mindset.
Co-ops and partnerships encourage professionalism without encouraging exploitation of their workers. Those outside the organization? I think it would diminish the tendency. Most firms get along quite well with other firms. Cooperation is more prevalent than competition.
So what needs to change? All forms of business should be the same under the law. Tax laws and property rights should be the same.
Methods need to be established to allow workers to change firms. I cannot recall the process, but how do law partners cash out when they retire? Or do it the same way as with equity in real estate.
Education needs to change so that everyone who wants to be a professional can be. I believe most people are capable of owning a home and raising a family. And that is not a small responsibility. Its often as much, if not more than their responsibilities at work. And while they have the opportunity to build equity in their home, they often lack that opportunity at work. They rarely feel the same ownership of their work equal to the ownership of their home. They rarely feel the same pride in their work as in their family. As when they work for wages, I cant really blame them.
So whats preventing investors from doing so now? Mostly social inertia, but also how much capital does a new investor have? When I graduate, I am considering trying to start a firm and then practice what I preach, but I have no equity. Some form of outside financing is necessary to get the ball rolling. This is where I prefer debt financing over equity. The bank only has claims on the interest, not the profits. If I succeed, I can pay off the loan, and go on my merry way (unless I want another to expand even more.) With outside shareholders, they never seem content. They want faster capital gains, or higher dividends, or this or that. Another reason I prefer co-ops and partnerships. The equity stays inhouse. The only pressure for ‘more, more, more’ is internal.
One government organization that I think does its job very well is the SBA. Not nearly enough people take advantage of it. Most of my co-workers in the city had never heard of it. I think their programs have been very effective. Non-profits and private equity firms similiar to it exist also.
Corporate America is beholden to the executive suite which is beholden to Wall Street which hides behind the ‘market’ to absolve itself of any responsibility while refusing to acknowledge the power they have over the market.
I think Co-op America would be better place to live. I think it would make the market stronger. Organizations would tend to be smaller, not greater, though SAIC, which I consider a very good model, is a decent size. The theory of the firm is based on that - small firms that do not have market power. Not on multinational corporations. I think it would enable individuals to have greater power in the market and encourage them to be better citizens as well.
Thats when I realized I was overstating my argument. Ready for a shocker? I love the market. I think the market has proven to be the most effective way to distribute material resources. I just dont believe the market exists the way the textbooks present it and the way Wall Street presents it. And I think the current structure of the ‘market’ is horrible at sharing equity. The market has been so distorted by business and government that discussing it is only an academic exercise. Another model needs to be created, especially as we move into an economy where material resources mean less and less. What are the two biggest selling assets in our economy? Human capital and mass media. Knowledge and information. Traditional economics breaks down on both of those shoals.
Liberty, equality, fraternity.
Peace out.
Good lord, do I write or do I write? I never realize how much I have done until I post. Sorry for all the lengthy posts. I really am trying to shorten them.
Peace.
AP
Having agreed with the “right” on some of this stuff, I have to call foul on this nonsense:
It’s all about checks & balances. The Corvair was indeed unsafe; sweatshops are an abomination. Claiming otherwise shows you have your eyes on the stars, thinking sweet thoughts that have nothing to do with the ground underneath you until, of course, you step in some shit. Then, suddenly, you’ll remember that regardless of how high-flown your thoughts may be, you’d better keep your eyes firmly focused on the ground in front of you.
Regardless of who you give the power to, businesses or governments, if you give them too much power, they will abuse it. Power corrupts and all that. Yes, businesses can’t throw you in prison or shoot you for dissenting, but if you give them enough power, they can blacklist you for being pro-union or even just pro some relatively harmless social legislation. Anyone who thinks otherwise hasn’t visited a Latin American country under a right-wing government.
It’s all about checks & balances.
And just to show up the allegedly “left” side of this debate, a bit of a caution on government power below, which illustrates why I’m always baffled when so-called “democratic” socialists suddenly get all defensive about the USSR, as happened somewhere upthread:
Dark Past, Bright Future: A Legacy of Pollution
Either you are in fact for democracy and checks and balances, or you aren’t. To the little people, it makes no difference if the side you favor is government or business, 'cause they’ll get screwed either way. And they’re not fooled when either side tries to use them as cannon fodder for their cause. Just in case you were wondering.
I now return you to your battle between irreconcialible ideologues.
I don’t believe you grasped Sam’s point there pantom.
-XT