Don’t be obtuse. When I wrote “They say that about the Black Death”, I was referring to “they” in a general sense. As in “There are those who say that the Black Death was also a necessary correction” - a claim I backed by cite. I’m sorry if you have a problem understanding colloquial English.
Who are those people? Where are they? I have not seen them in this thread.
Because in contraposition to such a caricature I can mention those at the opposite extreme: the communists who would deny any economic freedom, who would deny private property and everything would be the property of the state. And you know what? If I had to choose between those two extremes I’d go with the unregulated market without a moment’s hesitation.
As I have said regulation is not in contradiction with a free market so you are setting up false dilemmas.
Again, those are weasel words. Who are those people? And why are you arguing with them here if no one here has proposed such ideas? Why are you creating shadows to fight against? Why don’t we also fight the communists here?
I’d like to clarify my post a bit. When I say “natural” I don’t mean “good.” I just mean unencumbered. As others have indicated, a free market is not an unregulated market. A free market is a fair market. To some extent, regulation is necessary to achieve this fairness. It can take many forms; for example, facilitating the flow of information to correct perverse incentives, setting up the structure of property rights and how those are or aren’t subject to transfer, etc.
My point is that regulating a market over and above what is necessary for a fair free market is not intrinsically a bad idea; moral concerns might outweigh economic efficiency concerns. But if one wishes to take this road, one must perform a cost-benefit analysis. Just because someone decides that drugs are bad and people shouldn’t do drugs doesn’t mean we must therefore outlaw drugs. Ultimately it might be (and many people think it is) more expensive to enforce a prohibition than to deal with the consequences of (relatively) unfettered access to drugs. “Why should we regulate?” is not the only question, just the first question, and even once we come up with an answer, we might still find that we shouldn’t regulate for other reasons.
But if we never get beyond the first question, we’ve not really engaged in any critical thought on the matter.
As far as I know there has never been a country that has tried an ‘absolute free market system’ in the entire history of…history. Not even a No True Scotsman situation…no one ever even TRIED to have an absolute free market as far as I know. If someone has examples of even the attempt though I’d be interested in seeing them for future reference.
Nor do I know of anyone who wishes such a system, either on this board or in RL. Hell, I’ve never even read online or in text anyone advocating such a thing (though with all the wack jobs and nut cases out there it wouldn’t surprise me if SOMEONE thought it was a good idea somewhere).
Additionally, as others have said, Fannie Mae and Freddie Mac aren’t examples of market failure…quite the opposite. They are examples of why quasi-Federal agencies are a Bad Thing…especially when they become so huge and all pervasive.
-XT
I agree that it is very difficult to implement this, but then, how do you propose dealing with this? That is, if the rules allow the creation of companies “too big to fail” (which, of course is hard to define), then how should the government deal with these companies when they are close to failing?
How should the government have responded in the case of LTCM? Should they have left it to collapse, no matter what the implications to the global financial system?
If we have a system in place that requires the government to periodically come in and “save the day”, I don’t see how that bolsters the argument of people who deride the government and say things like “anything the government can do, the free market can do better”. Well, if the free market can save itself from the collapse of giant companies that are “too big to fail”, why doesn’t it do so? Why do these financiers go begging to the government when they are close to collapse?
The latest example is AIG, the world’s largest insurer, which wants the government to help it out. Here is a quote from the NYT today:
Well, I say, fuck them. No help from the government. If they don’t know how to run a company, the government should not help them stay around.
And if they are “too big to fail”, then the laws should be changed such that no company ever gets in such a position again.
I agree that it is very difficult to implement this, but then, how do you propose dealing with this? That is, if the rules allow the creation of companies “too big to fail”, then how should the government deal with these companies when they are close to failing?
How should the government have responded in the case of LTCM? Should they have left it to collapse, no matter what the implications to the global financial system?
If we have a system in place that requires the government to periodically come in and “save the day”, I don’t see how that bolsters the argument of people who deride the government and say things like “anything the government can do, the free market can do better”. Well, if the free market can save itself from the collapse of giant companies that are “too big to fail”, why doesn’t it do so? Why do these financiers go begging to the government when one of the big firms is close to collapse?
The latest example is AIG, the world’s largest insurer, which wants the government to help it out. Here is a quote from the NYT today:
Well, I say, fuck them. No help from the government. If they don’t know how to run a company, the government should not help them stay around.
And if they are “too big to fail”, then the laws should be changed such that no company ever gets in such a position again (i.e. in a position where its demise would damage the global economy)
All well and good, and to a certain degree I even agree…but I wonder, do you feel the same way about the individual? Should the government bail out people who, oh, say, lose their jobs? How about if people don’t have insurance…should the government save the day and provide? What about when people don’t know how to run their lives and get in over their heads with debt?
Thing is, we are a risk adverse society. When a big company like this fails a LOT of people are going to lose jobs and money. Part of the risk of doing business is that fuckups happen…and when they do, people get hurt. If you are cool with that then fine by me…when a company goes tits up it goes tits up and people will get hurt. If THESE companies go tits up (as seems possible) then a LOT of people are going to get hurt. Not only jobs but nest eggs are going to be lost here, and some people are going to be hurt really badly. Your’s truly is going to lose a lot of money (several hundred thousand dollars). All part of doing business of course…nothing is or should be a sure thing either in life or business.
Just be ready for the screams of the people who THINK that because they invested the money it should be a sure thing, and who are going to be pissed off because shit happened…
-XT
Whoops! There goes the entirety of patents, trademarks, and copyrights!
Unless, of course, I misunderstand “regulation” as you’re using the term.
No; I pointed out that absolutist free marketeers exist and then got pounced on by people pretending that I was claiming that everyone who disagreed with me was one.
They are in the OP. And as I mentioned they were heavily influential in the Iraq occupation, and helped screw it up as bad as it is.
But the OP wasn’t about such a hypothetical choice. And at any rate, you’d probably regret that decision, and you wouldn’t have economic freedom in either case. Without regulation, you’ll be buying everything from a monopoly that’s producing junk and poison at inflated prices, for wages just barely high enough to avoid starvation ( if you are lucky ), and probably be crippled or die young.
What people ignore in discussions like this is that there is no such thing as a free market. There never has been, and never will be. If the government isn’t manipulating it, then the corporations or the rich or someone will.
Interesting. What about the antitrust laws?
As I have said, you are conflating market freedom and market regulation which are completely different things.
Freedom of movement does not equal freedom to drive on the left side of the road or to run a traffic light. Traffic regulation actually enhances your freedom of movement, it does not diminish it.
Regulation is not in contradiction to freedom as you seem to imply when you talk about “absolutist free marketers”.
I do not believe that at all. Every day I and millions of others make free choices about what goods and services to buy or not to buy, to sell or not to sell. I do not want anybody telling me what I should buy or what I should sell or at what price. And I do not want anybody telling others what they should buy or what they should sell to me or at what price. Experience tells me the freedom to buy and sell is the best way to produce the most satisfaction to the most people. The minute you start regulating buying and selling you start creating supply problems and shortages. Nothing has been invented which can cope with supply and demand like the free market. Nothing.
What about them? Antitrust laws are aimed at preserving a healthy competition and preventing monopolies from arising by illegal maneuvering. As I said, a free market is not an unregulated market.
Most of the focus around a particular event is much too short-term to make broad generalizations about a totally free market economy versus a regulated one. Off hand I’d say you need a period closer to a hundred years than a single year to test a truly free market. If free markets generate the most wealth, you gotta wait a long time to see how much of that filters down to the bottom and ends up generating more wealth for that bottom group than a more regulated system that ends up not creating as much total wealth in the first place. This is of course, sort of a “greed is good” philosophy writ on a national scale. Fella named Gates hogs everything in sight and makes a bundle cornering an unregulated market, but when he’s geezed enough to start thinking Legacy all of a sudden he wants to give the ill-gotten gains back to society…reminiscent of the line where the Chinese say it’s just to early to tell if democracy is a good system.
The population within which the market exists also makes a large difference. The more homogeneous it is, the easier to pass regulations which are more socialist (or whatever term you want to use as the obverse of free market). It’s easier for a homogeneous nation whose population groups have common histories, work ethics and abilities, to swallow regulations than it is for very heterogeneous nations. (On the other hand, regulation may be needed more in nations with very disparate populations to prevent the disparities resulting from unregulated markets from becoming extreme.)
The anxiety against regulated markets is in part driven by the poor performance of the commie countries, of course, but it also reflects an anxiety that more regulation will kill the goose laying the golden egg. Historically the poorest of the world’s poor–even those from commie countries–fight to get into this country. They seem to be unmoved by statistics which suggest the US poor are peddling backward. (As a matter of fact, those immigrant poor contribute to the statistics of how badly the poor are doing; not all of those poor doing poorly in our statistics are longstanding citizens getting screwed over by unregulated capitalism. Coupla them just sneaked over the border yesterday.)
No market should be completely unregulated. Only a tiny percentage of a population needs to be unprincipled in order for the whole thing to dissolve into chaos. It’s really an argument of how much, and how, and perhaps how long a given regulation should last so that the goose doesn’t get obstipated by an entangled mess of regulations and stop plopping out golden eggs.
In your definition of a free market, does the government step in to bail out companies whose demise would damage the entire economy?
It is not my definition, it is Hayek’s. I would have to think about it but at first glance I can’t see that the answer has to be yes or no. What I think would be more important is that the rules be clear and spelled beforehand for everyone to know. I think that is more important than whether the answer is yes or no.
Having said that I believe a first approximation would be that the government should not bail out failing companies whenever that is possible.
If certain sectors like insurance or banking would create too much damage if certain large companies where to fail then I believe some form of obligatory insurance would be the answer (like FDIC). Again, this is not in contradiction with a free market.
In general terms the government should not be bailing out companies. That is what I think.
The US has never had an absolute free market, how do you know that it would fail?
You know, a lot of communists claim that “real” Communism was never implemented anywhere, and so the collapse of the Soviet Union does not prove that Communism is a failure.
But, of course, we don’t need to see absolute Communism in action to know that it will fail, based on the performance of actual cases of Communism that were tried, and based on what we know about human nature.
Similarly, we don’t need to see an absolute free market in action to know that it will fail, based on the history (and even very recent history: today) of the free markets in existence, and based on what we know about human nature.
Sure. Gas prices quadrupled because Congress didn’t maintain progressive MPG requirements and foreign supplies and domestic refinery capacity didn’t keep up. Now everyone is suffering with higher prices, and higher unemployment.
Meanwhile everytime an American buys gas they send a good chunk of money to Iran, and other dangerous countries. If Iran successfully builds nukes guess who gave them the money to.
Not all ventures succeed, and nothing gold can stay. Just because a business fails doesn’t mean the market has failed. A crappy business failing is a good thing, keeping around a failing business is a bad thing. How is this not clear to you? How do you suppose the market should act if it were to please you? (Honest question. What would you count as success of the market?)
To be sure…but can you show anyone even CLAIMING to be an absolute free market system in history? Any country that even attempted it, whether they fell short or not? Anyone who ever came as close as, say, those false Communist types in the Soviet Union or China?
It’s still a straw man unless you can show someone who thinks an absolute free market is a good idea, or who is arguing that we should have one. Since no one has, afaik, ever even attempted it in the past, it’s kind of a silly argument.
-XT