People consider increased production and technology to be good things? I’ve met more than a few people who aren’t happy at all with increasing production and new technologies; some think they’re the bane of our existence. Remember: capitalists, communists, and cancers believe that growth is always good. Here in Nashville, many of the locals believe that the city and suburbs are growing too fast, and they’d be happier with less production of new houses–maybe with none at all. In many cases there’s a point where increasing production stops making people happier and becomes wasteful or even destructive.
Likewise with technology, sometimes it’s good and sometimes it’s bad. Let’s look at medical technology, a case where we’re often told that we need market pressure to create technical progress. Medical advances like antibiotics certainly improved human life in generations past. These days, many new technologies only draw patient suffering in the last few days before death. Then it’s far less clear that they’re a good thing.
But certainly the markets don’t take such factors into account. For producers there’s motivation to keep producing. For construction firms in Nashville, there’s plenty of money to be made from slapping together new McMansions even if they do lead to urban sprawl. For medical firms, those new keep-the-patient-on-life-support-for-a-week-longer technologies can still earn a profit. Hence, the market is creating irrationality. (In some cases. Not in all cases, of course.)
And that doesn’t happen in the Canadian medical-care system? In a non-market system where the dying can be made into a clear, easy, and direct political selling point, end-of-life care would not be so heavy into continued attempts to keep the people alive? In that system, the young & poor would get great treatment, while the political elite — who are also the economic elite in pre-industrial cities, at least — wouldn’t claw for every second of life that might possibly be available?
In other words, if the Black Death came to a medieval city, the aristocrats living off inherited land rents wouldn’t flee for their lives, leaving the poor to deal with the disease by themselves, right? A pope living off tithes wouldn’t go to extremes to avoid the disease, while the poor sat helpless?
You are committing the fallacy of non causa pro causa by assuming there’s a market cause to some pathologies without establishing them in any credible way. The Tickle Me Elmo example may really illustrate the failure of our copyright laws to work properly. The market was prevented from coming out with servicable Elmo knockoffs at a critical moment. Of course there were fights! But, there is not a clear case establishing the market as the cause.
And further, as Cheesesteak alluded to, you’re also begging the question by assuming your examples are indeed examples of irrationality. You blame the market for violence over Tickle Me Elmo; however, was that, at the time, an non-sensical response to a shortage? You know, The Economist once had an article about the political change brought about by riots in Britian, in essence, praising them as a political tool that has worked well in keeping the country more-or-less democratic. You might call that irrational, but it’s not obviously so. We are humans living in a culture that has violence — by that, I mean fisticuffs — over trivial things. People fight. I’m not one of those types, but many people are. Is a fight over a toy shortage irrational by your definition? We like to fight, we like our kids, and we like to fight for our kids’ toys. Is that so irrational? In a society where people often use their fists, I’m not so sure what you’re describing is actually so pathological as you are making it out to be.
Here’s your argument put simply:
P1: A toy is made for profit
P2: Market forces make people willing to break windows and riot
P3: Such behavior didn’t exist in the past
C: Market forces make people willing to break windows and riot
That’s it. That is your argument for the markets causing silly behavior over a toy. P1 is an ad hominem. P2 is your conclusion. P3 is assumed without proof, and an example of the fallacy post hoc, ergo proctor hoc. That’s four fallacies in three premises. That’s not a compelling argument, because there is only one relevant premise, and that premise is the same as your conclusion.
You’re also committing a little equivocation, since “market” does not imply brand names, modern advertising, and nationwide distribution systems. If it’s brand names, modern advertising, and nationwide distribution systems causing the problem, then markets are not the problem; and if markets are the problem, then why bring up that other stuff?
Clearly, silly behavior has existed in the past, as the tulip bubble amply demonstrates. As far as I know, this bidding for resources did not include consuming all their capital to prevent further production. On Easter Island, however, not only was there apparent competition for resources, those resources were used beyond a point of sustainability. Does this show that markets may be irrational, but far less so than non-markets? Probably not.
Probably the best, and most accurate, statement is that humans act in ways that make us scratch our heads, and because it appears to be broadly true, a specific form of economic organization cannot be singled out as a fundamental cause. Instead, we have to seek an alternative explanation.
P1: Market forces make people willing to break windows and riot
P2: A rational person would not want it to happen that people be willing to break windows and riot
C: Market forces bring about situations which rational people would not want to happen.
Your post provides material for arguing against both premises.
Of course, just as I submit, I think of a good example.
In modern America, companies and workers waste resources with lock-outs and strikes. They could just work it out and even the inevitable loser will save money, relative to striking.
In ancient Rome, a number of times the plebs just packed up and marched out of the city, because of the treatment they were getting. That sort of thing helped bring them more rights, to the extent they ever ended up having any. It was probably costly to the plebs in terms of effort, lost production, accidents, and whatnot. And I’m sure it cost the Roman citizens a lot, too. Why not just work it out and avoid the plebian strike?
Two very similar situations in two vastly different cultural and economic landscapes. Can markets be blamed for the former? If so, what about the latter?
The simple, economic explanation has to do with asymmetric information. Not the market.
If you dislike the brain surgeon example, you could use farmers, factory workers, teachers, truck drivers, or any other profession whose daily work affects nearly everybody. I view the imbalance of pay between multimillionaire athletes and the typical worker as irrational because I don’t believe that human reason automatically agrees with everything that the market produces. It is reasonable to classify as necessary work that provides our needs: food, water, safety, health, clothing, shelter. Extraneous work relating to entertainment, fashion, or other luxuries gets classified as unnecessary. It may happen, but it’s less than important. Reason demands that we rank the importance of work on such a heirarchy.
In realistic systems people acknowledge a certain amount deviation from the heirarchy of useful work, some ‘random noise’ in the distribution of reward and punishment. Say we’re in a small town in the year 1850. We see a baker shop and a butcher shop next door to each other. Both the baker and butcher prepare and sell food–a necessity. They work roughly equal amounts. We’d expect them to earn about the same. In practice, deviations might push them apart. The butcher might earn more, possibly even twice as much as the baker or more. But if the butcher earned ten thousand times as much as the baker, we’d have to say that something was seriously wrong.
Yet our current economic system produces wrongness of precisely those dimensions. We have a class, big time athletes, whose only claim is that they can play a sport slightly better than athletes farther down the chain. For being able to hit a baseball fifty feet farther, or run a tiny bit faster, or jump slightly higher, they’re suddenly elevated to a class as far above the average American as a medieval king was above his subjects. A similar situation prevails with the highest paid actors, singers, etc…
While I started this thread to discuss the rationality of the situation in purely philosophical terms, people keep bringing practical aspects into the debate, so I’ll add a final thought. Does the situation with overpaid athletes have bad consequences? You bet. A friend of mine used to teach at an inner-ctiy Nashville high school. Explaining the problem of student motivation, he said: “Half the kids in school think they’re gonna play in the NBA someday. And that includes ones who didn’t even make the high school team. And they don’t bother with homework because it’s not relevant to their NBA careers.” There’s the problem. When the culture, the media, and the economy teach from early on that throwing a ball through a hoop is better than having brains, you gets kids whose priorities are out of whack.
This, in fact, leads up to a much broader point. Anybody who is selling something has the potential to benefit from sending out false information. If we assume that consumers are evaluating the quality of the product, the seller in the marketplace has a financial motivation to exagerate how great it is. If left to their own devices, in fact, sellers have no reason to avoid making bogus claims about products with no real value at all. Hence the stereotypical “snake oil salesman” of the 19th century, who was only reigned in by government regulation in the early 20th century. Of course, dishonest claims about products and services persist to this day; regulation can only go so far. And new mechanisms for exposing frauds, such as consumer groups and online reviews, also have their limitations.
The only way of combatting this inherent pressure towards dishonesty is a direct feedback loop from buyer to seller. Taking the small town from the 1850’s again, if the butcher were to pass off rotten meat as fresh, or the baker snuck some stale loaves among the new ones, people would find out quickly, and the customer base would dwindle. But once markets expand that check goes away. The salesman is long gone from the down before the folks figure out that his medicines don’t deliver the miraculous cures promised.
I’m not going to try rebuilding the idea of reason from the ground up to prove that certain things are rational and others not. It’s unlikely that I’d get farther in one thread than 150 generations of philosophers have gotten in their lifetime. But if we believe in the concept of reason, then we have to apply it in some cases or else it’s an empty shell. Consequently, we can’t just assert that any action, no matter how apparently irrational, might become rational if you view it in a bigger context or consider really long-term effects or whatnot.
Riots in Britain have worked towards good causes? I guess that’s plausible. If people riot in response to police brutality, that raises the political costs of police brutality, thus giving politicians a motivation to crack down on police brutality. That’s logical. Are you going to seriously assert that some similar chain of logic applies to the violent fighting over Cabbage Patch Kids? If attaching so much importance to a doll isn’t irrational then nothing is.
Recall that you have rejected the economically precise definition of rational because it didn’t match the above definition.
I’ve explained the consistency within the parameters I’ve been given. Instead of addressing my reasoning, you have dismissed it as an assertion. What you need to do is prove that I’m mistaken. You have to show that the toy-battles were by people without the ability to exercise reason AND they were insane (consult the DSMR-III) AND that the fists weren’t based on reason. I never said they were based on good reason. I explained how they could be based on reason, good or bad.
If you want to re-define reason, then you are going to change the parameters of the discussion.
So you’re as brilliant as the best philosopher in the last 150 years and as well written? C’mon. You give a compelling argument and I’ll be compelled. Get it?
What does believe have to do with it? I don’t believe in reason. In all honesty, I believe in as few things as possible. It makes life SOOOOOO much simpler, and I’m a lazy shit.
You definitely owe me an apology for that. That is dishonest and underhanded and inexcusable. The proper definition of rational is far more restrictive than any definition you have proposed.
You give some sloppy definition from some permissive dictionary and suddenly your vision of “rational” is reality. Right? That works for me, since the more permissive your definiton, the more acceptable the economic definition is. And what’s your beef, anyway? I’ve shown that the problem is human nature and not economic organization, and you’re still talking about markets.
Long haul truck drivers around here make about $65000 a year. The delta between that and the salaries paid pro athletes is purely a product of the availably supply of truck drivers and pro athletes; in the province of Ontario there are 200,000 Class A drivers, and about, oh, 100 elite pro athletes. The market does in fact pay far, far more money for the services of truck drivers than it does to pro athletes.
Well, that’s your opinion. Do you have anything to support your argument other than your own disdain for pro sports?
As I mentioned above, the market does in fact pay far, far, far more money to the common pool of truck driving labour than it does to pro athletes. Teachers? The United States spends more money on teacher salaries in one school year than have been paid to all the professional athletes in all the major professional team sports leagues in North America in their entire histories. Relatively speaking, pro sports is really not that huge an industry - I mean, it’s big, but it’s dwarfed by a lot of other things. The average NFL team has annual revenues of $175 million or so; there’s thousands of companies bigger than that you’ve never heard of, and it’s a burp in a state budget. The USA spends almost as much on teacher salaries every school day as any pro sports league spends on salaries in a year.
What you’re seeing in the case of pro sports is a matter of how many slices each pie contains. Pro athlete salaries are a product of the fact that the teams value players very highly, as well as they should; they’re the major marginal inputs. Begrudging the Rangers for paying Jaromir Jagr $8 million a year is just as silly as begrudging Smith Widgets Inc. for spending $8 million on plant upgrades. Really, the general population doesn’t put that much economic value in pro sports. The average American attends a major league baseball game exactly once every four years.
Given that, in fact the professions you named are all, as a group, valued far more highly than the profession of professional athleticism, the evidence does in fact strongly suggest that even by your own definition of “Rational,” the market is rational. You still need to come up with better examples.
Forgive me, but I do not believe “kids are no good today” arguments, ever. I put zero stock in such claims.
ITR, it seems to me that your problem is that markets don’t produce the kind of outcomes you personally value. That’s all. If we as a society value athletes more than brain surgeons, then athletes will make more. That’s not the fault of capitalism. Communist countries were full of athletes and actors who enjoyed huge benefits for achieving high levels of skill. They may have small salaries, but they live like millionaires.
You may not like that Tim Allen makes more money than a brain surgeon. The beauty of the market is that your needs are still served as well. Imagine how you’d feel if the state decided what kind of TV you had to watch?
Anyway, paying big money to the things people value most is what ensures that society expends lots of effort on those things. I fail to see how that’s irrational. Our focus on sports and our subsequent willing to spend huge dollars on it ensures that we get sportsmen of extremely high quality, with their events broadcast in high definition. I’m watching the PGA championship this weekend. In high definition. It’s gorgeous. I’m really enjoying it. And every one of those guys on the final day are already millionaries. It’s rich guys getting much richer for knocking a little white ball around. But I enjoy watching it, and the market has created an intricate structure such that I can watch it pumped electronically into my house through a cable and displayed in all its glory in my house. And for that, I paid less than a dollar. It all sounds pretty rational to me.
ITR’s point involves an assumption that none of us as individuals actually does value athletes more than brain surgeons. This seems plausible to me. If I were asked to choose between having brain surgeons around or having athletes around, I’d probably choose (albeit with some sadness) the brain surgeons. I think alot of people would, though perhaps not everyone.
If this is right, then it is doubtful that we “as a society” value athletes more than brain surgeons as well. And if that is right, then it is doubtful that the values attached to things by market forces accurately reflect the values that we attach to things as individuals, as societities, or for that matter, as cultures.
To participate in a system which does not reflect your values (whether you think of your values as your own as an individual, or as those of your society, or as those of your culture) is near to being paradigmatically irrational.
And this is close, I think, to the kind of point ITR is trying to make.
This is like arguing that because JK Rowling is a billionaire, all authors are overpaid. What you are ignoring is the millions of sports people who are NOT paid absurd amounts of money and are, indeed not paid anything because they wern’t good enough to go pro. Sports, compared to brain surgery is different not so much in the average amounts paid so much as the disparity in salaries.
You are working from an antiquated model of value. During the industrial revolution, the average job was in a factory and work was optimised for consistancy. The difference between the best and worst worker might be 1.5 or 2x at best and so the value of a worker lay in the hours worked. There was very little room for differentiation. Up until the 1950’s or so, this did not change appreciably and much of our work ethic and philosophy is still stuck in that era. We somehow equate harder working to deserving more money.
But the big shift starting from about the 1920’s or so was the rise of the knowledge worker. Workers were no longer indistinguishable cogs in a machine, instead, they were treated as semi-autonomous units within a collective and the difference between a good employee and a bad one gradually increased as workers were given more autonomy. The rise of the phrase “work smarter, not harder” started taking hold.
And even today, in most fields, the difference between the best and worst is relatively small. But for some fields, this difference is enormous. Nobody wants to visit the 8th most popular video sharing site or the 6th most popular search engine. Nobody wants to watch the 30th best golfer or listen to songs not on the top 100. In such fields, your either at the very top or you’re a nobody and the competition is brutal.
Comparing brain surgeons or farmers to sports stars like this is invalid because it ignores fundamental differences in the income distribution.
The problem is you can’t judge such things on what people SAY…you have to judge them on what they DO. For example, if polled, I’m pretty confident that people would say that no, they don’t do drugs. If asked further, they would say, yes…drugs are bad. Tobacco is bad. Alchohol is bad. Unprotected sex is bad. Blah blah blah. But…what people SAY isn’t necessarily in line with what they DO. And the market is a reflection of what we, as a society DO…what we value in real terms, as opposed to what we SAY we value.
I have no doubt, if asked, the majority of people would agree with you…Brain Surgeons (or Rocket Scientists) are more valuable than athletes. However, they are still going to go spend their money on sunday watching the big game either live or on their pay per view Football Frenzy 500 games! list (or whatever its called…I’m not a sports fan myself either ).
I’ve already agreed that state control also produces instances of irrationality. What I’m arguing against is the attitude that we classify as “rational” any distribution that results from market forces. Market defenders generally assert that a free market is a system that distills the often wild behavior of humans into reasonably and efficiently managed results. I’m saying that sometimes the exact opposite happens.
In other words, let’s look at the watching sports on TV example. For a customer to pay one dollar for the privelege of watching is entirely reasonable. Yet when the market structure exists, those dollars add up to such huge amounts that the result is irrational. One man, O. J. Simpson, collected so much money from those small individual payments that he was literally able to get away with murder. Other athletes go on drug binges, commit sexual assault, etc… The “spoiled, rich athlete” has become a cliche. To judge by the media, most people don’t like the fact that these athletes can get away with this stuff. Yet when it comes down to the question of making or not making that small individual payment, they’re not thinking about whether it will motivate a spoiled athlete to do some horrible crime. Nor should they, since that one little payment won’t make an appreciable difference in the end anyway. So the market structure has created a disconnect between what people buy and what they want.
I can tell you all about the exact opposite happening. They’re called market failures, and the subject is far richer than one person can study in an entire lifetime, both in breadth and depth. The water-diamond price paradox is not one of them. You’re not talking about real pathologies of the market, you’re talking about pathologies of human behavior.
Cause crimes? Questionable. Allow spoiled athletes to get away with crimes? Certainly. Does anyone honestly think that a poor man who commited the same crime as O. J. and left the same evidence behind would have escaped punishment?
So if any irrational behavior that falls out of the market is human irrationality rather than market irrationality, then what results do markets produce at all? You’ve defined market behavior out of existence, and declared that anything related to buying and selling is just human behavior.
Markets are systems of social institutions, laws, and physical infrastructure that channel and shape human behavior. It’s therefore valid to think about “market behavior”, which is the net human behavior that results when the market system is in place. If that market behavior is irrational, then it’s not just “pathologies of human behavior”. It’s pathologies specifically related to markets, pathologies that only exist thanks to markets. It’s valid to debate whether markets lead to more or less rationality.
I never suggested any such thing, indeed, what I’ve written has been far, far from that. What I said was that what you seem to think is irrational, based on examples and reason, is not a product of the market. I’ve argued it in several posts. Don’t forget that my first post was that yes, the market can produce irrationalities, and that fact is trivially true at this point in history.
Again, the sort of problems you are pointing to do not appear to be products of market behavior, but of human behavior. I’ve discussed why; I’ve given examples — including one very nice illustration of parallel pathologies in wildly different economic and political systems — showing that markets cannot be the common cause; and I’ve given at least one example of actual research showing expectations of, and demand for fairness are actually enhanced by having market mechanisms in a society. I have even pointed out that your example of athletes doesn’t support your hypothesis because the nonsensical system of rewards, worship, and importance placed on athletics does not obtain solely in capitalist economies:
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In this case, humanism is given as the culprit for the odd behavior.
There is ample material to show that the ideological free-marketeers are full of it, but what you’re offering ain’t compelling. This worries me, because I perceive this discussion giving free-marketeers more straw-man fodder with which to bolster their beliefs, hence making it more difficult to get through to them.
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