Markets and Community

It seemed like he was complaining about how the market focus simply focuses on goods and services at the expense of deeper community relations. But did Marglin forget the other important good that the market produces? The one that these communities consume at an alarming rate? Did he mention the ability of the market to create time? Its only because we arent spending 16 hours a day in a mine simply working for our survival that we are able to partake in a more robust community life.

Its only because we aren't spending 16 hours a day in a mine simply working for our survival that we are able to partake in a more robust community life.

Posted by: Ian Lippert

This would be my biggest issue with the current economy. The trends in family hours worked and now net worth are in the wrong direction. When we see such a huge discrepancy between productivity and medium income and hours worked then the economy IS not working for everyone.

The current economy de-links wealth and value. Many wealthy people are taking from the productivity pie with out really contributing. Paper shuffling complex financial products does nothing and the idea that this doesn't happen and wealth is magically apportioned by value added has little basis in factual evidence and a lot to do with presumption and faith.

A hundred billion dollars worth of Wall Streeters could die tomorrow and be missed far less then a similar dollars worth of teachers, construction workers, nurses and janitors.

The failure to recognize this is exactely the reason for the failure we are seeing in our economy. It's the same reason a Monopoly game ends. at some point they have no more money to give to the guys on top. Inequality of such degrees does matter and we're seeing the reasons play out before our eyes as we have seen over and over through history. The Demand-siders have quite a bit of logic and evidence to back their position as far as I can see.

Who are the demand siders and what policies do they think will help the upcoming recession?

Ian,

Doesn't it make a little sense that if the vast majority of people have less and less to spend and have maxed out their credit and second mortgages that the economy might freeze up a bit.

Meanwhile if the wealthiest have so much they can't even think of what to buy next or stash it away to an over seas account or investment then they really aren't going to stimulate our economy.

Recently I was at a lecture by noted Princeton medical economist Uwe Reinhardt. His point was that health Care could be a major growth industry. If some of that frozen money pocketed by the super wealthy were refloated into the economy to provide for the coming buldge of medical care need many good and needed jobs could be created and the economy would be flooded with more money. Of course multi millionaires would be a little colder unable to burn as much cash in their fireplaces but they'd be just as well off.

Good grief. muirgeo has already blabbered endlessly for well over a solid hour on this subject and no one else except for Ian can get a word in. Dick Cheney really did the entire web a serious disservice when he cut those funds for the home.

Hijack! Hijack! Hiajck!

Usual suspect, muirduck.

Hiajck!

That misspelling was just for you muirduck, in case Economic dyslexia isn't your only problem.

Good grief. "The market" is but a subset (albeit the largest one) of the social enterprise, which is simply the free and voluntary exchange of goods, services, and ideas that generates the "spontaneous order" without which humankind would still be living in caves.

Thus, to lament the loss of community is simply to acknowledge the extent to which regimented order -- i.e., the state -- thwarts this very natural process.

As for economics, it has been a captive of the state for so long that it constitutes a profession the same way prostitution does.

Straw man slaying gets a little old, but he is among the best.

No one around here denies that the U.S. economy is greatly distorted, with just disagree with muirgeo as to the why and how.

Muirgeo's cure is the kind of political intervention in the economy that got us to this state. Just doesn't comprehend either the nature of political power or the incentives such intervention creates.

Let's just get the oligarchy to enact the right laws to prevent the oligarchy from exercising power over us. That's the ticket.

Let's give the oligarchy more power to keep the oligarchy from using that power to our detriment. Yeah! Yeah!

sorry, "we just disagree"

I disagree that Sam disagrees. That would imply that BOTH parties had formed an opinion that was based on both fact and thought.

Let's just get the oligarchy to enact the right laws to prevent the oligarchy from exercising power over us. That's the ticket.

Sam,

It's the same crap written in the same ebonics in every single post. I don't think Muirdiot is a doctor. I think he's a patient.

Muirgeo,

You're an idiot.

It's hard to ignore the troll.

On the subject at hand, I think, even though I have never read "The Road to Serfdom" is that muirgeo and all liberals get Hayek exactly backwards in their everyday life. The invisible hand of the "market" is how we deal with the millions of unknown souls everyday to maximize our well being. Family, friends and people who we choose to "like" we deal with differently, kindly, compassionately, generously. Liberals do the EXACT opposite. They expect people they don't know to take care of their friends and family, (while they, themselves, for the most part, don't lift a finger to do anything but criticize) Then they wax all indignant when other's don't do for "free" for people those others don't know and will never ever meet.

even though I have never read "The Road to Serfdom" is that muirgeo and all liberals get Hayek exactly backwards in their everyday life

The irony is that this is one of the things that Hayek says in "The Road to Serfdom". He draws attention to the fact that socialists take the language of liberty and render it meaningless by using the words to describe the antonyms of the words. The Soviets were experts at that.

Freedom is slavery!

Muirgeo's cure is the kind of political intervention in the economy that got us to this state. Just doesn't comprehend either the nature of political power or the incentives such intervention creates.

Posted by: Sam Grove

Sam,

How many times.... How many times do I have to cram this down your throat. Was the economy better 25 years after Wilson, FDR or Reagan.... the facts don't support your claim. They support mine. On a shorter time lien was the economy doing better 8 years after Clinton or Bush?

YOU LOSE!!! Cry straw-man but the facts don't change. And after this fiasco of an economy sinks and we get another round of progressive policies I'll have one more stack of data showing the economy overall does better and the middle class in specific does better. Straw-man my ass.... it's your only fricken stupid reply because you got no evidence on your side.

You guys can't do anything but name call. Please some one tell me how bad the 50's were compared to the 30's. Please tell me how bad Clintons economy was compared to the end of Bush.

Sam you have the gall to blame this on over -regulation when the tone has been deregulatory ever since Reagan.. You can't even be honest.

If I'm the idiot show me the facts. Show me some GDP numbers , show me some median income numbers, show me family working hour trends, show me US GDP per capita compared to the rest of the world and during which era were we supreme... you can't because ALL that data would show how wrong you are so you're left being chickenshit name callers. You have nothing but your invisible hand and blind faith. The market principles you worship aren't even applicable to the crazy crap that money goes through on Wall Street and the Global markets. $1 dollar of hard work gets traded and leveraged and securitized and turned into all sorts of bullcrap sucking money away from those who labored and earned it.

Your days are done... The Tale of Two Cities has been read over and over it's not in our future.

"It was the best of times, it was the worst of times..." – and closing – "It is a far, far better thing that I do, than I have ever done; it is a far, far better rest that I go to than I have ever known."

muirduck, the economy was better 25 years after FDR because he was dead by then, and unable to do any further harm.

muirduck, yes, the rhetoric has been 'deregulate', and yet government spending as a percentage of GNP goes up and up.

muirduck - I take it you have no net assets?

Tone, shmone.

Are you seriously purporting that finance and banking are unregulated?

There are probably hundreds of regulations regarding the generation, distribution, and pricing of electrical power in CA, yet when the politicians CHANGED several rules, the press was ablaze about electric utility DEREGULATION.

NO SUCH THING AS DEREGULATION OCCURRED.

The this sector of the economy had been deregulated, the public utilities commission would have been decommissioned, and they would have repealed those regulations.

That TONE you are talking about is all part of the delusion, the misleading of the public as to what actually goes on.

You persist in missing the point, it's not about 'regulation', it's about power and incentives. You give the government the power to manage the economy, and you create incentives for business to influence the government.

You think the people are managing the government? You think any regulation or law gets passed that isn't acceptable to the oligarchy?

As for whether things were better when, you need to avoid jumping to the typical progressive assumption as to which caused what. Many things were happening that affected economic growth, not the least of which was increasing productivity due to advances in technology, the ending of WWII which allowed all those factories to turn back to domestic production. And they must've done something about the Smoot-Hawley tariff.

You also assume that because you are anti-wealth concentration that we must therefore favor it, but that is not the case, all we've been ding is try to educate you as to why that is the case and why your dream of severing the connection between a big powerful government and the big money people is illusory.

My god man, do you have any idea how many millionaires are in federal office? do you know that there are more Democrat millionaires than Republican millionaires (at least that used to be the case).

Do you recall how the Kennedys got rich?


Look at all the presidential candidates this past election. Where did they go to school?

You think the good cop is on your side? The Democrat party is the good cop, but they ain't on your side. They're on the same side as the GOP, because their interest in getting and staying in power is identical. Both parties get money from the same sources.

Until the citizens of America wake up to the fact of that, they'll continue to be suckers for their respective smooth talking political 'saviors'.

The only way a citizenry can free themselves from this oligarchical enslavement is to stop expecting 'the government' to save them from their fears.

Egads! Is this about freedom or wealth such that they don't have to go necessarily hand-in-hand? One analogy could be a quaint village of quaint villagers who voluntarily interact in a way that might be consistent with Anarcho-Capitalism and who all of a sudden get taken over by a high-tech group of people who then put the villagers to work operating levers that control mass-production machinery. The poor villagers are technically more productive in output than when they were quaint villagers but sure as heck aren't free.

That's an 'interesting' scenario.

It is usually that case that people prefer to have more with less effort. It tends to be the case that countries where most of the denizens are poor are also countries where the government controls much of the wealth.

Ethiopia.

The government once declared that there would be no hoarding of food. Seed stock was seized from farmers. Starvation.

Examples abound.

who all of a sudden get taken over by a high-tech group of people

Taken over how?

'Taken over' as in 'invasion'. I thought I implied the villagers were living a low-tech lifestyle.

Tone, shmone.

Are you seriously purporting that finance and banking are unregulated?

Posted by: Sam Grove

Talk about Straw-men. No I didn't say they were unregulated but yes they have been deregulated. Banks didn't use to be able to offer all sorts of products other then loans to private individuals. There used to be usury laws to prevent predatory finance.

The only way a citizenry can free themselves from this oligarchical enslavement is to stop expecting 'the government' to save them from their fears.

Posted by: Sam Grove

Sam,

How is that going to happen. We could vote for more and more deregulation and still the men with money and power will run what ever is left of our government to their benifit.

That is what happens every time we head towards deregulation.

Look at the Republicans. They are supposed to be all about containing government regulation and cost. They deregulate and cost skyrocket because they open the flood gates to the looters.

It doesn't work. The people have to have great over sight and need to be well informed to keep their government honest.

We have to insist dishonest politicians pay or go to jail. We have to insist every politician is scrutinized in everything they do. They should all have to wear helmet cams that are always on live feed to a public access web cam site.

My way needs lots of work but your way has no way of working that II can see without returning us to a feudal system. And again the evidence shows that over and over. As we deregulate power and wealth are concentrated to the detriment of therest of society.

...the facts don't support your claim. ~ muirgeo

You've got unresolved claims here at the Cafe that you have ducked for far too long a time, muirgeo. You're a troll that spews lies and half truths with regularity. And when you get called out, you pull a Houdini on a thread.

I have to suspect that you like the attention that gets paid to your troll like behavior -- the attention (mostly negative here) must be satisfying some deep needs for you in connecting with your fellow human beings because this cyber relationship seems masochistic from your end. You wouldn't happen to be a cutter, would you?

No need to answer that last crack but until I get my two direct questions from the previous thread satisfactorily answered, I'm not going to give you any more of that attention (and pain?) that you've been craving, Troll.

muirduck,

Stop pacing the ditch, reach up and place your hands on the lip of the ditch. Now do a pull-up so that your eyes clear the lip, and look out. There is a great wonderful world outside the ditch.

Now that you have found your eyesight can go a long ways once it is allowed to see out of the ditch, you might enjoy letting your brain follow.

The reason, muirduck, you don't understand the invisible hand is because you don't understand that you are the invisible hand. Yes you personally.

I am the invisible hand, yes me personally.

Together, you and I, we do not make an invisible hand and a market, we can not truly merge our invisible hands and we can not merge our markets. We can only exercise our invisible hand, and create a marketplace that will last until our business has been completed.

You are a market.

I am a market.

There are over six billion invisibles hands in the world.

There are over six billion markets in the world.

As invisible hand I direct my market sometimes on rational planned missions, and sometimes on random impulse. In other words I walk into Walmart with the intention of buying a half gallon of milk. After selecting my milk, I walk past the new spring line of shirts and spontaneously selcted one to add to my purchase of milk. My invisible hand tells Walmart through their inventory system that they need to bring more milk and probably more shirts to that store location. Now, remember Walmart does not know that my purchases were half planned and half spontaneous, they only know that product moved because that is most of what they need to know.

No central planner can take that into account, they can only dictate a path and attempt forcibly to eliminate my invisible hand and force my market to adhere to their path.

That creates resentment and rebellion, six billion times over.

Now there you have it, muirduck, in terms even a sandbox level intellect can understand.

Now, I have great empathy for you in your frequent(?) battles to save lives, small or large makes no difference there. Even with my past experiences in my head I can not imagine holding a baby in my hands working to keep life there and have it slip away, and then going home and not letting it eat at me. I sincerely mean this, muirduck.

However, this is what you have to understand. Unless it was your negligence then almost certainly you did not cause the conditions the baby is struggling with, you are trying to help. No one can be perfect and never fail, not even nature. the hunchback of Notre Dame was born defective in body, he didn't gain the body from being beat up by a gang of crips or bloods.

But, even more important to this is the fact that I did not cause those conditions either, and certainly no one else on this blog did. It is tragic, it is heartbreaking, and none of our fault. The child you speak of is not a relation of anyone here, not one that anyone here ever expressed responsibility for, and to expect anyone here to pay for it is ludicrous. you may ask for donations, but to demand your jackbooted thugs come and take our wealth to pay for your desires is still theft and still morally wrong, even more morally wrong than refusing to take responsibility for life we didn't even know existed.

I pity you, muriduck, I truly do. You have no comprehension of your ignorance and its true magnitude.

I think that Muirgeo is about to see for real the type of society he proposes. In fact, I think the current economic slowdown is a reflection of people pricing in exactly that probability.

You guys can't do anything but name call. - Muirdiot

That's all that's left when all civil methods have been exhausted. If you don't like it, you can find another blog to pollute. I know idiots rarely realize this, but you are here of your own free will.

How many times do I have to cram this down your throat.

Why am I not surprised that your only method of persuasion is cramming bullshit down people's throats.

Muirdiot, you continue to claim that you're here to learn. Here's a lesson for you that's more your speed: The right shoe goes on the right foot and the left shoe goes on the left foot. You can have your mother mark them "L" for left and "R" for right if you can't tell the difference yourself.

Muirgeo,

On the last post I asked you 2 very important questions that you ignored and are bringing up here again. Please review my questions to you and respond here. Here they are...

Muirgeo says:

"The results of the 40's 50's and 60's are far superior ro the 30's and the current results."

There are 2 things we need to consider here. First we must agree that the 40's through 60's did in fact have better regulated free markets than the 30's and current.

Secondly, we have to show that the 40's through 60's were better off economically than the 30's and current.

Do you agree that such a discussion based around those 2 points would be fruitful, or do you want to show your hand now and disagree with everything that I am going to say, so you can save me the time?

Posted by: Python | Mar 10, 2008 7:16:29 PM

Muirgeo also said: "If history is any guide the democratic party will come to power and the economy will improve from its current suckieness."

Can we have a debate on this statement as well? Can we agree that we need to define the term "democratic party will come to power"? Do you mean as President, both houses, at least one house and President, or all 3? Let's define that first. Then we can go on the sensible task of looking at those times and seeing the impact of said improvement. Are we agreed?

Posted by: Python | Mar 10, 2008 7:20:10 PM

muirgeo:

Doesn't it make a little sense that if the vast majority of people have less and less to spend and have maxed out their credit and second mortgages that the economy might freeze up a bit.

It could happen. I'm not sure it is happening, but it could happen. Opponents of this proposition don't deny it as much as they propose alternative explanations of the same statistics without supporting the alternatives. If the rising debt only masks rising equity, I want to see statistics distinguishing people with rising debt from people with rising equity. The median net worth figure doesn't make this distinction, because people with net worth can have either high or low debt. We need a correlation measure here. If "core inflation" is low and warrants ignoring "volatile" food and energy prices, I want to see the "volatile" prices falling. If the current account deficit is all about foreigners eager to invest in the U.S., I want to see investment numbers excluding the purchase of Treasury notes, established brands, patents and similar securities. Accounting identities aren't very informative.

Meanwhile if the wealthiest have so much they can't even think of what to buy next or stash it away to an over seas account or investment then they really aren't going to stimulate our economy.

If the Lafferians are correct, we have a net investment flow into the U.S.

http://www.bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm

But "investment" is an incredibly broad term even encompassing the purchase of authority to collect taxes.

Recently I was at a lecture by noted Princeton medical economist Uwe Reinhardt. His point was that health Care could be a major growth industry. If some of that frozen money pocketed by the super wealthy were refloated into the economy to provide for the coming buldge of medical care need many good and needed jobs could be created and the economy would be flooded with more money.

The money is not "frozen" as much as it's malinvested. Money "invested" in Treasure notes doesn't employ anyone to produce goods you and I will likely consume. Much of it purchases "goods" deliberately designed to be blown up and then rebuilt over and over again, but you and I must yield a "return" on these "investments" regardless. The military-industrial complex is only the most obvious example of this statecraft at work.

The coming flood of medical care demands and similar demands is problematic for the same reason that a flood of castle building is problematic. It's more problematic. A large chunk of the population soon will demand a rapidly growing chunk of productive resources without producing similarly themselves. Saying "no" to a few castle builders is probably easier than saying "no" to the aging baby boom.

Of course multi millionaires would be a little colder unable to burn as much cash in their fireplaces but they'd be just as well off.

What do you think of a progressive consumption tax? That's essentially a rise in marginal income tax rates accompanied by a rise in entitlement to reinvest income with tax deferral (as in an IRA). Ideally, a progressive consumption tax has marginal income tax rates approaching 100% again (as in the fifties) with unlimited tax deferral for investment.

Smaller fireplaces in smaller castles could be a step in the right direction, but retiring baby boomers don't have large fireplaces. They have lots of small fireplaces. Redirecting the efforts of castle builders toward supplying all of these fireplaces might not be enough.

We must consider three factors, the proportion of people producing, the productivity of the producers and also precisely what is produced. The first of these factors is the looming problem in the next couple of decades. By most accounts, we've become more productive in the last couple of decades, but are we really more productive suppliers of medical care for the elderly? Probably not. Is the recently acquired productivity easily transferred to supplying medical care for the elderly? Probably not.

I'm curious to hear a justifiable answer, from anyone who is nitpicking on the wealthy, to the following questions:

If the wealthy are less productive and wealth is separated from value - what do all the wealthy do with all of that wealth they accumulate? Where does this wealth go? How is the wealth used? Where is the mattress where all of this wealth and value lie? And where in the world is Carmen Sandiego?

That is what happens every time we head towards deregulation.

Excuse me, there has been some changes to regulation in some specific market segments (trucking and air travel), but overall the federal registry is larger than ever and the regulatory burden is greater than ever.

Please, when you talk abut deregulation that has occurred, you must be specific about which deregulation you are referring to, and tie that to the results which you decry.

There is too much loose talk about 'deregulation' giving people the impression that 'deregulation' is behind all sorts of evils. Usually, when some 'deregulation' has occurred, is typically is only in some specific regard and not in any general sense.

I remind you that the deregulation I referred to above was strongly resisted by the industries that were 'deregulated'.

Generally, regulation is anti-competitive, that is, the introduction of regulations are affected by entrenched businesses to the detriment of smaller and potential competitors.

Specific question for muirgeo:

Which interests do you think originally

called for anti-trust legislation?

The main power consumers have against any business is the opportunity to choose from among competitors. The introduction of regulatory burdens are anti-competitive in the manner I mentioned above.

Additionally, the cost of complying with regulation MUST be passed on to consumers; That's where businesses get their money!

In the end the costs of regulation...all the costs...are borne by consumers.

I humbly apologize for my grammatical errors.

Use preview, use preview.

If the wealthy are less productive and wealth is separated from value - what do all the wealthy do with all of that wealth they accumulate?

The wealthy are entitled to the yield of capital they govern. Their income is the yield of this capital. Essentially, that's my definition of "wealthy". If you're entitled only to the product of your own labor, then your aren't "wealthy". That nonhuman capital (with a productivity not attributable to anyone's labor) exists is a fundamental assumption of modern, market economics since the marginalist revolutionist. The theoretical alternative to this assumption is the discredited labor theory of value.

Where does this wealth go? How is the wealth used?

The yield of capital is either consumed or reinvested.

That nonhuman capital (with a productivity not attributable to anyone's labor) exists is a fundamental assumption of modern, market economics since the marginalist revolution.

Yes Martin, we knew you would know. But does muirgeo get it?

Sam,

You have the patience of Jobe. After all this time you can't possibly believe that he even understands any of your well-written, extremely clear explanations. It's one thing to disagree with you and completely another to lack the capacity to understand what you say in the first place.

I found this episode as good as any. I applaud the presentation of views different from the libertarian's. Whatever your persuasion may be, Russ does a masterful job of identifying similarities and some key differences between classical and some contemporary liberals. Indeed, the difference can be smaller than you think. There is a lot to be said about philosophical affinities between austrians and post-keynesians, and in general about the reciprocal respect between Keynes and Hayek. At the same time, there are differences regarding the way "experiential knowledge" is weighted and processed.

I have one more suggestion for those interested: there is a "diavlog" on bloggingheads.tv between Will Wilkinson (Cato Institute, and a GMU's Mercatus alumnus) and Prof. Marglin. Although Marglin repeats many points mentioned in the EconTalk episode (Milbank's article, the Amish example, Hayek), the tone is slightly more polemical. I found both good, although Russ is the better interviewer, probably because he truly seeks to understand his interlocutor's view.

After all this time you can't possibly believe that he even understands any of your well-written, extremely clear explanations.

I think the progressive oil all over his capacity for perception makes explanations roll off like water off a duck.

The problem is the typical dichotomous nature of debate today.

Progressives, for instance, like to hold themselves as well intentioned. If you take issue with their means, they tend to jump to the assumption that you are not well intentioned.

To end polite discussion with any socialist it is only necessary to ask, after he/she expresses her beliefs, "how does that work, how can you make it work?"

They will immediately shift to emotion based arguments because there is no rational way to make any socialist idea work.

The yield of capital is either consumed or reinvested.

Posted by: Martin Brock | Mar 12, 2008 2:18:30 PM

Or they hide it under their pillows. Or burn it in their fireplace. Really is that less believable then the FICTION of reinvestment? I mean we're supposed to HATE the rich for their conspicuous consumption(cars, houses, boats, jewelry, jets).

I just listened to the episode today, and I noticed something interesting. I couldn't see how Marglin thinks markets undermine community.

Markets are by their nature a voluntary order, they can only destroy a community if they offer something that is more desirable to a signifcant fraction of the community. Maglin implied that he was opposed to holding communities together by force, but how else could these communities be preserved?

I can understand how the State can destroy voluntary associations (see: every totalitarian state ever), but how does the market destory voluntary community?

FreedomLover:

Or they hide it under their pillows. Or burn it in their fireplace. Really is that less believable then the FICTION of reinvestment? I mean we're supposed to HATE the rich for their conspicuous consumption(cars, houses, boats, jewelry, jets).

Most real capital doesn't fit under a pillow or in a fireplace. Money is not capital. Money is an accounting device.

Reinvestment is not a fiction. We aren't supposed to hate the rich, but investment is a capitalist's job. Expecting him to do the job is not unreasonable. Since statesmen threaten to harm people for violating their established patent monopolies and other forcible proprieties, limiting the authority of the title holders is completely reasonable. I expect flying castles in Saudi Arabia. Effectively forbidding them for American citizens doesn't bother me at all. It's a thoroughly liberal check on statutory power, and it's "liberal" in the classical sense.

I have no problem with forbidding Air Force One either. So what if Bush risks assassination on a commercial airliner? He should be more careful about the enemies he makes. If really needs the security, let him hitch a ride on a troop transport. He says he wants to live more like the soldiers he orders to Afghanistan. I say the Congress should draft him and send over forthwith. The guy nauseates me.

"I have no problem with forbidding Air Force One either. He should be more careful about the enemies he makes."

Martin,

Is that for all presidents, or just the one who nauseates you?

All of them.