Can I ask why you’re asking?
I suppose I could find a copy of After the Fact but it would take me some amount of effort. If I did so and told you that the period this happened in was 1618 to 1620 (a hypothetical) what would be the point? If you’re interested in learning more about this, you should read After the Fact.
Well, the claim has been made a famine in Virginia was the RESULT of a free market. I find that quite an interesting claim and would like to see if this is really the case. There must be more than one source than just the one textbook that costs a lot of money.
I’m sure there are. But that’s the one where I read it.
If you want me to launch a review of primary sources and historical journals, we can discuss my fee schedule. I feel my hourly rates are reasonable but I’ll want a deposit upfront before I start working.
And even in this, the barriers to entry are high enough that they have to go to the capitalists in the hopes of getting them to invest in it.
Food and clothing, sure, but I’m not convinced that’s the free market so much as it is technology and industry. It is so very easy to produce food and clothing that the government’s efforts, at least in the former case, is actually to prop up prices and pay farmers not to produce more than is needed.
Same with clothing, though a large part of that is from automation and offshored sweatshops, but the real thing about clothing is that it is durable enough and cheap enough that unless you are insisting on designer wear, it turns out to be a relatively insignificant part of your budget.
Though, we are approaching some issues with food. I doubt in the US we will see actual shortages, but prices are going up alarmingly, and I think that there may be some other countries that are less fortunate that do see shortages, as they don’t have the resources to compete with us over who is willing to pay more for food when there isn’t enough to go around.
The fact that the last few decades we have produced far more than needed to feed the world isn’t thanks to the free market, it’s thanks to combine harvesters and Haber and Bosch we have all this food.
Do you think that the free market will be able to cope when there isn’t enough food to feed everyone?
Shelter’s a different issue. I wouldn’t say that the free market is doing a very good job of it right now. Have you seen housing prices? Now, according to the free market, these increased prices should signal to build more homes, but they aren’t doing that either. They are just increasing prices and using the profits to buy up even more existing housing, which they then rent out for significantly more than one would pay for a mortgage on that property, which only makes the housing crisis worse.
Now, as has been discussed before on this board, and more recently and often about student loans, is that if the government is giving people money to buy something, then the price of that thing tends to go up. Is there a reason why food, clothing, and shelter are exempt from this trend?
Yep, and the US is pretty much the only developed country that doesn’t do healthcare, and the way we do education is pretty messed up as well.
But, why do your solutions not work there as well? If people need healthcare, give them money to buy healthcare, if they need education, you can just give them the money to buy that as well.
We aren’t arguing whether the govt should have a hand in the economy, we are just arguing where that hand should touch and how much.
Even worse than that. When they do build new homes, they build expensive new home, which just makes the situation for those who can’t afford housing worse. Government has to mandate “affordable” housing (quotes because it isn’t affordable for a lot of people.) I know that the response will be that government limits housing through zoning, but the NIMBY movement is grass roots driven. The state government is trying to force the local governments to do things like build higher.
I’ve never watched Shark Tank but are the people on that show who are selling food products in the business of primary or secondary food production?
To make the distinction clear, a farmer is in the business of primary food production; his business is adding to the total food supply. But most of the companies we think of as food businesses are in secondary food production; they are buying food that the primary producers made, altering it, and then reselling it to the consumers. Nestle, for example, is the biggest food company in the world - but they actually add very little food to the food supply. They buy products like wheat, vegetables, meat, sugar, chocolate, dairy products, etc from primary food producers and turn those primary products into things like Cheerios, Hot Pockets, and Kit Kats.
This is an important distinction to remembe when we’re talking about the issue of famine.
Because those are areas of huge market failure. Giving people money doesn’t change that. Food is not. That’s how the world works.
Health insurance, obviously, suffers from the problem of incomplete information and adverse selection (It is the go to example in a first year economics course of market failure - “Why do we have government health insurance but not government grocery stores?” is a classic midterm question.) Logically, if health insurance was a wide open free market, the first people in the door to buy it are the last people you’d ever want to sell it to, since they’re gonna be the sickest people. The people you’d want to sell it to are the last people who’d want to buy it. If, however, you have large groups of people buying health insurance - a big company works, but a whole damn country is better - then everyone is insured at more or less the same price, and the larger payouts to old, sick people are balanced by the premiums paid by young, healthy people. This cannot work if everyone is acting individually.
There’s no equivalent effect in buying frozen broccoli.
Take another example; the armed forces. The armed forces can’t be individually bought because in that case no individual derives any benefit at all from spending on it, but all individuals derive benefit from its existence, the classic free rider market failure. That is not a problem in the market for clothing. If I need a shirt I can buy a shirt, and I derive the benefit of having a shirt.
Or take, for instance, pollution. Pollution is another classic market failure, the negative externality. So you need government to do something about it. The market for furniture does not require that.
I read something once that has stuck with me.
It wasn’t that long ago that the developed world struggled to make sure everyone got enough calories to survive. Economic disparity, the inability to transport efficiently from a plentiful state tp a drought-stricken one, etc. meant people starved. Now Burger King can give you a day’s calories for $6 and very few people actually starve, even if the nutrition is not ideal.
I haven’t watched a whole lot of it, most of my exposure was a couple of binges out of boredom during COVID shutdown.
But, most people involved with food are at best secondary, making snack cakes and muffins, or some sort of energy bar. There were a couple that were involving crickets and algae, but I don’t remember if they were actually planning on growing those themselves or sourcing them elsewhere.
There were a few restaurants, either wanting to get their doors open or to expand an already existing establishment.
True, but in the context of where the conversation is currently, the point was that those are the sorts of industries that can reasonably be accessed by your middle class entrepreneurs.
I think they’ve had at least TWO cricket food entrepreneurs. My recollection is one raised crickets and the other didn’t.
Crickets are easy to breed.
Yuck.
But does the free market deserve all the credit? Part of the reason food is easy to obtain in the United States is because we have a good transportation network. And it was the government that either built that network directly or offered financial incentives to companies that built it.
But that’s not how the world has always worked, and it’s not guaranteed that’s how the world will keep working. Food security the way we have it is a very recent thing, and shouldn’t be taken for granted. I have the feeling that our global food supply is going to be stress tested here in the next couple years. Then we will see how well the free market allocates food to those who need it.
Agricultural subsidies have been with us since Leviticus, they aren’t some new thing. One of the most important functions of government was to feed your people, the fact that technology has made that much easier in the last century doesn’t change that.
I agree with everything in there. Unfortunately, many of my fellow US citizens do not. They believe that capitalism and the free market will make everything work out just fine.
There may be if there are more people that want to eat than there is food to be eaten.
Clothing is an interesting example, as it really was the first big industrialized industry, and serves as an excellent example as to why capitalism and the free market are not synonyms, and in fact, are largely at odds with eachother.
Let’s go back a little ways, and most of your homes had the tools to make and repair clothing. A loom wasn’t that hard to build, and people learned how to make clothing from their parents.
So, not everyone makes their own clothing, some people pay others to make it for them. A person with a loom could get in on this. Maybe they make a shirt in four hours that they can sell for 2 silver, costs them half a silver in materials, and then they pay someone 1 silver to collect the firewood they would have gathered in those 4 hours. They come out a little ahead, and get to spend time in front of the loom rather than foraging in the forest.
The demand picks up a bit, and now you can get 2.5 silver for a shirt. Now more people start using their home looms to make clothing to sell at the market, until the supply is glutted, and the price drifts back down towards 2. People enter and leave the market as the strike price drifts above and below their personal threshold.
That is a free market, or as close to one as you can really get.
Now, let’s introduce industrialization. I build a machine that lets an operator produce two shirts an hour, rather than one every four. Sounds great, doesn’t it? The problem is, is that it’s not your average homestead who has this machine, it’s owned by a wealthy businessman or trader.
You can now make 8 shirts an hour, but they aren’t yours to sell. Instead, you get paid 2 silver for your 8 hours of work. Why not go back to your own loom, where you can make twice as much, you ask? Well, since so many shirts are out there, they only sell for .5 silver each, so you can’t effectively compete with the factory.
This is no longer a free market. You have capitalists setting wages and prices, because the barriers to entry limit competition. They are not bound by the forces of the free market, they have the power to manipulate and distort the market for their own exploitation.
Now, on the one hand, this is better. You have eight times the supply of shirts, and they are at a quarter the cost, Yay capitalism! On the other hand, you have destroyed an industry and the free market that it existed in, there are fewer opportunities for an individual to participate in the market, and a greater need to go work for one of these capitalists, for less than you could have made working for yourself, in order to earn a living.
Capitalists hate the free market, a free market will limit their profit potential, and reduce the ROI of building factories. The last thing that a factory owner wants is someone to be able to compete with them without a massive investment in overcoming those barriers to entry.
So, as long as we are talking about negative externalities, I’d say that poverty itself is a negative externality of capitalism. (Not unique to capitalism, but with some unique factors that tend to exacerbate it.)
As long as healthcare requires insurance, the market alone will not be able to provide for very sick people. Healthy people need to pay into the system, and if there is a system with private insurers acting as a middleman they need to be mandated to give insurance to people they already know they will be taking a loss on.
That can only come from either good will from multiple actors in a private market or from the government mandating that transfer.
My response there was talking about the food aspect of the discussion. As I said, I agreed with him on the healthcare aspect.
Apparently someone does not know that the meat of sheep is not called veal.
I’m with you, since, as it happens, I’m not a populist. It doesn’t matter what people think; economics is economics. The facts are what they are.
No, it’s not, because it’s not an externality at all. That is not what that word means. One could, I suppose, argue that there are externalities that cause or worsen poverty, but “poverty itself is a negative externality of capitalism” is so vague it’s meaningless. Show me, say, a negative consumption externality that worsens poverty and we can discuss smart ways for the state to mitigate it.
See, this IS an example; you are just beginning to run into the concept of rent seeking and regulatory capture. (You’re missing a huge chunk of the truth in your shirtmaking example, of course - the single biggest part of it, actually. You forgot all the millions of people who, as a result of industrialization, can now save money on clothing.) In truth, no one likes the free market. Capitalists don’t like it, workers don’t like it… the free market means you’re competing. The only person who likes the free market is the person who just got into it and is succeeding. After awhile, they want to pull the ladder up behind them.
The government would ideally reject most of this crap. Big business will always, always, and always lobby government to reduce competition, reduce market freedom, and increase, in a thousand ways, barriers to market entry. They make more money that way. That’s the grand irony of it; free markets benefit us all collectively, but individually we’d all be better off not having to compete.
An externality is a cost of an action that is borne by a third party. If someone is made poor or poorer by the side effects of capitalism, that’s an externality, just the same as if someone gets sick drinking the polluted water that comes from a factory. I don’t know how it could be any more in line with the definition.
Okay, I’ve got lots of money, so I buy up the resources in an area for myself, driving up the cost of those resources for everyone else, increasing their cost of living and decreasing their quality of life.
The way to mitigate it is to not allow the wants of the wealthy to be fulfilled at a higher priority than the needs of the less affluent.
I don’t know that I am running into so much as explaining the concept and history of rent seeking, and regulatory capture isn’t a factor in this example, as that’s when you get the government to assist you in monopolizing a market, and while that’s a worthwhile topic, it’s not one that is relevant to the current context of the thread and the post that I made.
I don’t think I forgot it. I did in fact say, “Now, on the one hand, this is better. You have eight times the supply of shirts, and they are at a quarter the cost,”. I’ll admit that I didn’t go down the line of explaining that means that they can save money on it, and I didn’t specifically state that there would be more than one machine, but I thought that was clear with them costing less with more availability. How could I have been more clear to you on this point?
Except all the people that go on and on about how the free market is the best at running the economy. But my point isn’t about whether or not people like the free market, it’s as to whether or not the free market actually exists. My “thesis” here is that it does not, that capitalism has destroyed the free market in all but a small number of industries that can be accessed by the middle class.
I like the free market. I picked this industry specifically because it’s as close to the free market as you can really get. There are still some barriers to entry, and in many states the large companies have managed to perform regulatory capture, but here in Ohio, anyone with a pair of scissors and a table can call themselves a dog groomer.
We succeed because we provide the best service around, that’s what we compete on. I don’t mind others trying to compete, I welcome it, in fact.
But they don’t have to. Is the reason that you aren’t competing with Nvidia for making GPUs because of a government regulation, or the fact that you don’t have a couple billion dollars lying around to build a chip fab?
That’s the point, the barriers to entry come from the means of production. In some industries where the means of production are trivial, something close to a free market can exist, absent govt interference. In most industries, it’s not just the means of production, but economies of scale that prevent small players from breaking in.
And it goes the other way as well. A free market for labor would lower the cost of goods and services to employers who no longer need to pay minimum wage, and allow workers to compete on who will work for the least compensation. But individually, that means that many people can’t earn anything close to a wage they can live on.
Just a quick follow-up on this. Yes, economics is economics, and the facts are what they are, but it does matter what people think, because people vote.
Well that’s also true of physics, biology, and geology. People’s votes affect how we deal with problems related to those things. Doesn’t change the science, though.
For the amount of money they request from the Sharks on Shark Tank (typically in the tens or a few hundred thousand), I suspect there are easier, more traditional ways to come up with that kind of financing. People go on Shark Tank to gain exposure for whatever gadget, power drink, or food truck business they are starting.