From: (Anonymous)

2009-03-18 02:11 pm (UTC)

huh? Libertarians don't argue that the economy is zero sum. In fact, most libertarians argue that economic growth is the key to success of everyone overall. That's why libertarians argue that taking money from the productive (i.e. wealthier) people and giving it to the less productive ends up hurting the poor more - because the economic pie isn't growing as fast.



And if you think the current system is laissez-faire, you're quite mistaken. The housing bubble and the financial bubble happened, to some degree, because of actions taken by the Federal Reserve. There were a lot of factors, and certainly greed was one of them, but the system was not "unregulated", it was regulated poorly. Systems were already in place to (in theory) prevent the Madoff scandal, but the regulators were uninterested in pursuing.



For what it's worth, I do agree that "Too Big To Fail" is probably "Too Big To Exist". But I believe this because companies that are TBTF take advantage of the corruptibility of the politicians, and use that government power to ensure their own survival. TBTF isn't a problem with the market, it's a problem with the fact that Congress is not staffed by angels.



From: atari_eric

2009-03-18 07:42 pm (UTC)

Re: huh? taking money from the productive (i.e. wealthier) people



Oh really? You just assume wealthy people are productive? What about those who inherit their wealth? Even heirs who still work aren't necessarily more productive, or even productive at all - their lack of production can easily be hidden by their vast cash reserve.



See, it's this type of assumption made in economics that gets us into trouble. All the various "laws" of economics are just taken for granted without anyone ever re-examining them to see if they still hold true, if they ever held true, or they're appropriate to the subject they're compared against. I mean, have you even seen a real-life "rational actor" (economics-wise)?? I haven't - all I see are human beings</> - people who do not make their decisions purely on logical economic concept, though many may try. A large part of economic "law" - if not its entirety - depends on the true existence of this fictitious entity and I have seen NO ONE who touts these laws ever adjust for the fact that their theories depend on key premises that are at best wildly inaccurate.



And we run our country on this house of cards. No wonder it fell down. From: ka9q

2009-03-18 11:11 pm (UTC)

You're right - economic "laws" have assumptions You are exactly right when you say that the various "laws" of economics are just assumed to be true.



I think most of them are still valid if certain basic assumptions are met. For example, free market competition does push prices down towards costs if there are many suppliers and many consumers in a market and participants are free to come and go, and accurate information about the market is available to everyone.



The problem is that this assumption is met only rarely in practice. There are many, many commodities where there are only a few (or even only one) supplier, there are large barriers to entry, and important information is held by only one party. One of the best examples today is local broadband communications, where Congress has pretended that "the market" will just magically work despite none of those qualifying assumptions being true.



And you're quite right that the market players are not always rational actors with plenty of time to research their decisions. Health care is a good example; are you really going to calmly shop the market for trauma surgeons when you're in a hospital ER with a bullet wound?



The government's job is to try to make a market actually work where possible; to regulate when market forces are insufficient; and to step in and provide a service if it's considered important enough and the market simply can't provide it. In that order.







From: (Anonymous)

2009-03-18 08:31 pm (UTC)

Re: huh? There are a few problems with ka9q's line of thinking:



1) First of all, to assume that those WHO HAVE are those who MAKE is not accurate. Paris Hilton is quite wealthy, but I don't think anyone would argue that she's more productive and a wiser investor of money.



2) Trickle down economics is not a magic bullet. We've had eight years of low taxes under Bush. The wealthiest part of our population saw their assets grow dramatically, but the middle class did not. One of the presuppositions of Trickle Down is that the money we're not taxing is going to be invested back into our economy creating work, but in a global economy, the wealthy are just as likely to invest that money half-way across the globe in some third-world, but rapidly growing economy. Good for them, good for that world's economy, not so good for us - at least not for a long, long time. Furthermore, the idea that the wealthy are going to go around creating all of these brilliant investments... where exactly are they going to find the time and incentive to make all of these decisions? Most of them have full time jobs as it is. The extent of most of their financial decision-making is whom to give the money to and hope they invest it well. (And many of these "geniuses" picked Bernie Madoff.) But lets look at some of the giant companies around us - Google, Kinko's, Apple, Microsoft, etc. These were created by people who had NOTHING. The core cause of their success wasn't some guy with money who said, hey, let's make Google. It was a kid who was young, and hungry, and focused, who made it happen.



3) A recent nobel winning economist did research in India. He watched the effect micro loans, or very small loans to families who wanted to make investments in things like vegetable gardens, etc. He came back years later, and found that those small loans had had a much greater effect than originally anticipated. These micro-loans had helped them to get them ABOVE subsistence level, and because they now had (for the first time in their lives) discretionary funds, they were able to take this additional capital, and continue to invest it. Over the long term, there were huge changes in their financial situation. Some might argue (with validity) that this is precisely trickle down economics at work. The problem becomes that (as we've said) how many wealthy people (or even banks) have time to make this type of small investment? It becomes a question of how best to deliver this type of aid? For the wealthy, maybe a couple of "drops" may trickle down in the form of investment loans, but for every one deserving person who's found, there are probably hundreds who are not. At the same time, redistributing this aid in the form of taxes and tax relief to the poor (at the expense of the rich) means that for every deserving person who is now able to break the "subsistence barrier" and is able to start the journey into economic mobility, there are probably a hundred who who aren't deserving, and who will not make that investment.



The question becomes, then, what balance of tax distribution will best serve to create the right mixture of "fertilizer," or broad based investment over a large area, and also having targeted investments on promising individuals?



I'm running out of time here, so I'll just sum up by saying that the core principles I'm talking about here are made clearer when you look at our current and last president. Which world do you want to live in:



1) The one where the son of an ex-president who basically flunked his way through life becomes president predominantly because of his father's political connections?



2) The one where the kid who had virtually nothing, and who had to have a scholarship and loan to go to college became president through hard work and resolve?



Just some thoughts. Looking forward to other people's thoughts and criticisms.

From: ka9q

2009-03-18 10:56 pm (UTC)

Re: huh? There are a few problems with ka9q's line of thinking:





I don't think you meant me; I wrote the base story, and I basically agree with you. I think you're referring to the anonymous guy who responded to me, and to whom you're responding.

From: (Anonymous)

2009-03-22 08:22 pm (UTC)

Re: huh? Excellent points:

1) Paris Hilton is the exception - not the rule. Aside, do you really know how her wealth trickles down, or do you just love to hate a pop-culture celebrity like her. The VAST MAJORITY of wealthy people do create a trickle down effect.

2) I love your comment about the founders of Google being hungry and focused. They weren't entitled, they were young and hungry, and they worked very hard to make Google happen. If they were fat dumb and happy, we would be paying for their food stamps. Tell me that the trickle down effect doesn't work with Google - how many jobs have they created, thousands or tens or thousands?

3) Micro investments - another excellent example. BTW, who makes micro investments? NOT the government - wealthy private individuals.

From: ka9q

2009-03-18 10:13 pm (UTC)

Re: huh? I was responding to (another anonymous) commenter on my last entry who said directly that economics was a zero-sum game. Perhaps he wasn't a true-blue libertarian but I certainly took him as one.



It is rather astounding how conservatives have worked themselves into a lather convincing themselves that our new president is a "Socialist" who wants to take money from the productive and give it to the unproductive -- simply because he said he wanted to roll the tax rates back to what they were a few years ago. (He *did* use some poorly chosen words, I'll admit.) And now it doesn't even look like he'll do that for a few years. For what it's worth, *I* would probably pay more under Obama's original plan, but to tell you the truth I considered it a fair deal given the rest of his platform. I'd like to keep my money as much as anyone, but there are times when money simply isn't the most important issue -- and this is one of them.



I think you're simply wrong about the causes of the current market crash. I think we can at least agree that the market was regulated poorly even if from my point of view it was not regulated enough and from yours it was regulated too much. All sorts of regulations that had kept the market stable were systematically dismantled, starting under Reagan and continuing under Clinton and both Bushes, and eventually that had an effect that should have been fully expected. The same thing happened here in California when electricity was deregulated in 2000; the market went completely unstable and we had electrical emergencies nearly every day.



What actions by the Federal Reserve do you mean? If by that you mean the repeal of various financial reserve requirements, the merger of banking and investment operations, and the unregulated growth of repackaged securities, you're right. But someething tells me you mean something else.



It's promising that we agree on TBTF being TBTE even if it's for opposite reasons. The evidence that unregulated markets are unstable markets is now overwhelming, so I can understand why libertarians are a little defensive right now.

From: (Anonymous)

2009-03-22 11:33 am (UTC)

Re: huh? We don't think he's a socialist any more, now we think he's a fascist. From: ka9q

2009-03-23 05:03 am (UTC)

Re: huh? Fascist? Where were you eight years ago when Bush and Cheney took office?



I almost snorted soda out my nose when I heard Rush Limbaugh blather on about "individualism", "liberty" and "rule of law" last week. Please don't tell me you agree with him.



If you're not going to take off the ski mask, could you at least put a distinguishing mark on it?



From: (Anonymous)

2009-03-22 05:18 pm (UTC)

Re: huh? The fact that this president is a "socialist" is undeniable. An effective stimulus package is one that jump starts economic engines that are self sustaining. You claimed they stimulus budget can't be criticized as a whole, it needs to be scrutinized line by line, yet you found it easy to criticize Bush as a whole and not consider his actions one by one. That is typical Liberal double speak. If you really look at HR1 line by line, you will see the vast majority is pork to non sustainable sectors. Furthermore, it significantly increases entitlements and it is a fact that "safety nets" perpetuates poverty and social decline.

Its funny that you claim that the market crash is a conservative disaster - once again, the hallmark of democratic indoctrination. The Bush administration can be criticized for many things (I personally think it was awful), but one thing I will never blame it is causing this crash. We have ESTABLISHED EVIDENCE that conservative attempts during the Bush administration to reign in FM^2 were blocked by the radical left. Free markets are self regulating, and what the democrats did is remove moral hazard from self regulation and therefore tamper with the basis of the market.









From: ka9q

2009-03-23 05:17 am (UTC)

Re: huh? I criticize Bush as a whole because the man didn't make a single positive contribution as president. Not one, except perhaps not declaring martial law on January 19th of this year and canceling Obama's inauguration. I don't know enough about James Buchanan to know if he still qualifies as the worst US president in history, but George W Bush most certainly qualifies as the most disastrous US president in the last 100 years.



FM^2?



I think you need to take off the libertarian ideological blinders and look at things again from first principles. Pay very close attention to the fact that the properties of free markets depend on some critical assumptions that are often untrue without government regulation.



"democrats did is remove moral hazard from self regulation"



Do you know what "moral hazard" actually means? I don't think you do. Read up on it. The Wikipedia article isn't a bad start.



I used to consider myself fairly libertarian, and on social issues and individual rights I am still very much so. But it was hearing nonsense like what you just said that made me change my position on economics.



From: (Anonymous)

2009-03-18 03:46 pm (UTC)

Surely a troll? Surely this is a troll? It starts with libertarians think economics is a zero sum game and ends with financial libertarians had their chance?



I prefer to think a troll than some poor unthinking slob surrounded by only like minded morons in a college somewhere. At least a troll is good at something. From: (Anonymous)

2009-03-18 03:51 pm (UTC)

Re: Surely a troll? I tend to agree. This can't possibly be a serious article. For instance...



"I used to be fairly libertarian. I've changed my mind. We now have direct experimental evidence for what happens when our government takes a completely laissez-faire role in the economy."



Nobody could write that with a straight face unless they literally knew absolutely nothing about the world they lived in. Must be a joke. From: ka9q

2009-03-18 09:57 pm (UTC)

Re: Surely a troll? Well, I hate to disappoint you but I did write it with a straight face. Strip off your ski mask, make a serious counter-argument and I'll listen to you. Otherwise, you're the troll.

From: (Anonymous)

2009-03-18 05:51 pm (UTC)

[Quote] The bottom line is simple: the financial libertarians have had their chance, and they blew it. It's time to try something else. [/Quote]



Bwahahahaha! Financial Libertarians had their chance? I'm sorry, but there hasn't been anyone with libertarian leanings in charge of the government since the 19th century. Bush didn't preach libertarian values, his policies would best be described as cronyism.



You claim that we're in our current issues because of a laissez-faire system. The very lynchpin of the subprime crisis: Fannie and Freddy - two government established and government mandated companies. The enablers? The SEC, the OTS, the Fed, etc. In financial markets, it's WORSE to have bad regulation than it is to have no regulation at all.



Bush was a neo-con puppet. Paulson and Cheny were the Wall Street and Oil puppetmasters who found new and creative ways of robbing the poor to feed the rich. The problem with government regulation is that it's run by the government, and in America, the government is controlled by the highest bidder. From: (Anonymous)

2009-03-18 06:01 pm (UTC)

for serious? "We now have direct experimental evidence for what happens when our government takes a completely laissez-faire role in the economy"



Really? When? Banking is the most heavily regulated industry in the economy; hardly "laissez-faire", no matter how many people repeat that falsehood.



And as for, "Libertarians often argue that the economy is a zero-sum game," I think you're off your rocker. I am not at all familiar with a libertarian "zero-sum economy" argument. If you know of some, please point them out.



On the other hand, libertarians often do argue that government spending is a zero-sum game, which is to say that every dollar the government spends into the economy, was either first taxed or borrowed out of the economy.



From: ka9q

2009-03-18 10:43 pm (UTC)

Re: for serious? Okay, I'll concede that I used "laissez faire" in a relative sense, and the regulatory climate has never, ever been "laissez faire" enough to please the true libertarians.



Yet the financial industry *has* become much less regulated in recent years. That's an undeniable fact; all sorts of regulations were repealed starting with Reagan and reaching a fever pitch under Bush Jr.



The libertarians' "zero sum game" argument I was talking about *was* the claim that government spending is a zero sum game. If I worded that too broadly, I apologize. I'd be happy to go back and reword it to say that "Libertarians often argue that government spending is a zero sum game". That doesn't modify my argument at all because I was arguing precisely the opposite: government spending is NOT a zero sum game. It depends entirely on what they spend it ON. A certain government expenditure can increase or decrease economic productivity, or it might have no effect other than to drain a certain amount of money out of the economy. Each case has to be looked at under its own merits.



I argue that one of the largest government expenditures -- defense spending -- works to decrease productivity in addition to being largely a waste of money in its own right, yet conservatives largely have a blind spot about this one. It's as if the money we spend on the military comes out of the aether, not from tax revenues.



Now I'll grant you that neocons and libertarians aren't the same thing. Some libertarians do agree that our defense spending is out of control and that we're involved in far too many wars that have nothing to do with true national defense. But I'm talking about libertarians with a small 'l', i.e., everyone who says they have a libertarian point of view, not the view of the Libertarian Party, and right now that seems to includes a lot of what could also be described as neo-cons. My apologies if I painted with too broad a brush. Maybe I should have said "conservative" instead of "libertarian" in the first place. They overlap, but they're not the same.



But if you do identify as libertarian, then you seem to share with the conservatives the strange notion that the current economic mess is entirely the fault of the federal mortgage companies. No, it's not, and we have abundant empirical evidence that it's not. You could blame it on the corporations who exploited lax regulations, but that would be like blaming bacteria for doing what comes naturally. The blame falls squarely on the government for dismantling the regulations that kept the market stable.

From: (Anonymous)

2009-03-22 11:37 am (UTC)

Re: for serious? So now, at this point, you've had to basically back off every factual point in your article. Now that you've come that far, it's time to assume that most of your opinions are based on factual points of similar veracity. You've been sold a bill of goods, or maybe you're just surrounded by people who all think alike... either way, if you can learn, you will, if you can't, you won't, so there's not much anyone else can say to you.



But, those of you who can't learn, stop trying to take the money from those of us who can. From: ka9q

2009-03-23 05:44 am (UTC)

Re: for serious? I am able to change my views in accord with experience and new evidence. You seem to consider this a weakness or at least a disadvantage. I guess you're entitled to your opinion.



I watched Milton Friedman's TV series "Free to Choose" circa 1980. Do you remember it? I fully bought into his arguments.



To be sure, 30 more years of the drug war have only strengthened Friedman's positions on issues of personal freedom. I'm afraid we'll never get that one right any time soon.



But his positions on financial regulation have not fared as well.



Markets can do wonders IF -- big IF -- their basic assumptions are met. Problem is, they're always met only in a libertarian dreamworld. In the real world, they often aren't. That's the fatal flaw in libertarian economic ideology (and it IS an ideology). SOME amount of government regulation is always needed to keep most markets healthy; they simply won't do it on their own.



Time and again, the ideologues have dismantled regulations claiming that markets can run themselves. Time and again, the results have often been disastrous.



I can understand why you're a little touchy. This economic disaster is the largest in many decades, and it wasn't long in coming after the dismantling of regulations such as the Glass-Steagall Act that had stood for decades.





From: (Anonymous)

2009-03-21 06:11 pm (UTC)

Phil, your arguments are as flawed as a sieve. You do however have one good point - "productivity". Socialist countries have no productivity because people have zero incentive to be productive. Please name ONE productive socialist nation. Previously, you failed to name one successful socialist nation, I suspect you will ignore this challenge as well with additional long winded rhetoric. Your attempt to refute (or divert) the fact the economy is a zero sum game is mute. Aside for introducing massive inflation, when the government wants to give $1 to the "needy" it needs to take about $2 from the "wealthy" (or as Libtards like to say: the "lucky" ones.)



You talk about "Bush's disastrous war" playing the typical Libtard blame card. Here are some facts you would like to ignore. Congress has been Democratically controlled for over two years now. The economic collapse happened on Democratic watch. The Democrats have blocked every single attempt to reigh FM^2 in. The Democracts have not introduced a SINGLE piece of legislation to correct the flaws in the housing marked - is it a just a coincidence? Since the messiah has been in office, the DJI dropped from ~8,500 to ~6,500. The Messiah is now sending additional troops to Afghanistan for what you call a "criminal war". Why aren't you blaming him of war crimes? Based the libtard school of blame - this economic disaster points all the way back to the left of center.



Your conclusion that disaster happens when the government takes a passive role is a wrong one. The democrats have created a snowball that started rolling in the Clinton administration and we are just seeing the results. The Democrats slowly built a house of cards with the "fair housing acts" and Clinton's removal of the firewalls between the mortgage sector and the finance sectors. The Democrats have continuously held a steady front to prevent serious investigation into their actions. This is all well documented on C-Span, so you don't have to take my word for it.



This disaster isn't due to the lack of government intervention, this disaster is due to government intervention backed by a radical left wing agenda. It is time that folks such as yourself wake up and look at the facts.



Last, remember that paying more taxes is patriotic. I urge you to pay more taxes.



;-) From: ka9q

2009-03-23 06:25 am (UTC)

You still don't get it. I argue that EVERY country, including ours, is and always has been inherently "socialist". They differ only in degree (the government's fraction of GNP) and nature (which socialist services the government funds). This is true even for governments that do little more than maintain an army. National defense is provided to a country's citizens as a socialist service.



I'd need much more specific definitions to answer your question. What's "productivity"? Per-capita purchasing power? Depending on who does the calculation, the US is 4th, 6th or 8th highest in the world, with countries like Luxembourg, Norway and Singapore above us. How about average life expectancy? That's a good indicator of the productivity of its health care system. The United States is 45th in the world, with most of western Europe well above us, including countries I suspect you'd classify as "socialist".



Again, what the hell is FM^2??



It's pretty funny to blame the collapse of the economy on the Democrats just because they (barely) controlled Congress for the last two years. Starting in 1980 we had 20 years of Republican presidents, including the most radical one in many generations in terms of wars started and deficits increased.



I don't think you skipped Iraq as an honest oversight, did you? We were attacked, so we had a legimate reason to invade Afghanistan, though that legitimacy extended only to attacking al Q'aeda and those parts of the government that supported them. We had no legitimate reason whatsoever to invade Iraq. And in neither country do we have the right to violate the Geneva Conventions and the Convention Against Torture. They are treaties to which the US is a party, so violations are crimes under US law as well as international law. Bush and Cheney have openly admitted to ordering those violations, so it is not hyperbole to refer to them as war criminals. They ARE war criminals.



For what it's worth, I think Obama is making a mistake by sending more troops to Afghanistan. Our job there should be strictly limited to ensuring that it isn't used as a base for further attacks on us. As intensely as I dislike the Taliban, getting rid of it just isn't our job, and we will probably fail to do it anyway.





From: (Anonymous)

2009-03-24 03:18 pm (UTC)

FM^2 = Fannie Mae & Freddie Mac. Per your suggestion, I looked up the Moral Hazard definition on wikipedia: "Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk." This is consistent with my point. In a free market, if companies are exposed to risk they behave more responsibly. This massive intervention by govt removes most risk and therefor creates a situation which promotes bad behavior. In a free market - the companies should have been left to fail. The dooms day scenario our elected officials tried to convince us would happen would not have happened. Companies would be have bought and following the "impulse response" they would have self corrected to "steady state."

The war in Iraq was wrong - or at least that is my position based on the information I have. But that still does not justify your point that the "conservatives" are wrong. The last administration was a failure, and most political analysts would agree that it was a clear departure from conservative values.

Back to productivity, what would your productivity be if we take your free Q sponsored health care away, force you to pay for govt health care, and then significantly reduce your salary to the market average since because we will put in place the "fair pay doctrine".

Your point that we are already "socialist" doesn't go far, as politics isn't binary. Yes, we have "common interest" things in every nation, but there are many colors of gray. There are many of us that want to avoid this country from going to the radical left. We all pay taxes for common benefits, we don't want to pay MORE taxes and perpetuate MORE poverty. We have seen nations go this way before and we already saw where they ended up. BTW, you still have yet to name one successful socialist nation. Lets reflect on: USSR and Eastern block nations, China, Cuba, and Europe. Europe is probably half way there. How is productivity there compared to the US? Name ONE significant product/achievement that has come out of Europe in the last 40 years.

From: ka9q

2009-04-08 03:01 pm (UTC)

Moral Hazard Yes, that's the definition I thought it had. And, believe it or not, we are actually in violent agreement that it would have been best to let these companies fail. Since I became a *former* EV1 driver, I confess that I've kinda been looking forward to GM's eventual failure. Unfortunately, a lot of people will suffer a lot more from it than will the people who were responsible for it.



And that's precisely the problem. These companies became "too big to fail".



And why was that? Because government fell down on its job. In fact, in recent decades government, driven by economic libertarians, has been hell bent on removing every obstacle possible to anticompetitive behavior. Mergers and acquisitions have taken place at a fever pitch and antitrust law has been completely dormant, all in the supposed name of "getting government out of the way" and "letting the wisdom of the market rule".



You see, the moral hazard that got us into trouble was the moral hazard of corporate bankruptcy. It became possible to set up a corporation, establish a highly leveraged investment, and get rich if the investment paid off. But if the investment failed, then the corporation would simply declare bankruptcy and those who ran it would walk away. So much of this went on that in the end it all came down in a cascading failure.



All in the name of "unleashing the wisdom of the market", extremely complex new forms of investments were left unregulated, everyone got in on the game of gambling with other peoples' money, and the inevitable happened.



The fact is that there is a proper role for government regulation, and markets can actually be freer and more productive WITH it than without it.



Now maybe you agree that this experiment in deregulation was a failure and that a move back to greater regulation is now necessary to -- paradoxically -- make the markets more free, or at least function more like ideal free markets. So maybe we're in violent agreement.



But I'm not sure. If you oppose ANY move in that direction, you have a real problem. We've done the experiment and the results were pretty clear. So I guess your only alternative is to mischaracterize your opponents' arguments, shout "socialism" at them and hope that others find the word as yucky as you do.



I think that's where we came in. I was merely pointing out that every government since the concept was devised have ALWAYS provided socialist-like services, sometimes on a truly massive scale (as with the United States Department of Defense). So just yelling the world "socialism" over and over isn't very constructive. It would be far more constructive to discuss *WHICH* services should be provided in that manner and to what degree, and which are better provided by the market. It would also be much more constructive to discuss the degree to which governments should be involved in regulating markets, not whether such regulation is morally right or wrong or whether it again constitutes the bogeyman of "socialism".







