News Can the market alone fix the economy?

[misgfool]

Give perfect solutions? The Enlightenment was not a religion. It didn't "give solutions". I don't know what to make of this.

The Enlightenment was a time period. You can learn more about it in

http://en.wikipedia.org/wiki/Age_of_Enlightenment

But please, do tell me what it provided?

Individual liberty and general welfare are not at odds with each other. Quite the contrary. Economic freedom results in prosperity.

Why? How?

Economic oppression causes poverty.

Why? How?

 

[misgfool]

I suppose you have evidence of socialist policies causing prosperity?

Perhaps the purpose of a socialist policy is not to directly cause prosperity, but enable the less fortunate sons/daughters to try to obtain it as well.

 

[mheslep]

The Enlightenment was a time period. You can learn more about it in

http://en.wikipedia.org/wiki/Age_of_Enlightenment

But please, do tell me what it provided?...

Science.

 

[mheslep]

Thanks, I hadn't heard of this one. But I think you posted this to the wrong person, since I'm not the free market extremist.

Forget about the politics for a second and just look at the structure of your argument here:
https://www.physicsforums.com/showthread.php?p=2104176#post2104176

 

[Al68]

Individual liberty and general welfare are not at odds with each other. Quite the contrary. Economic freedom results in prosperity.

Why? How?

Economic oppression causes poverty.

Why? How?

Well, if you don't understand that, I'll just have to refer you to some famous economists, many crucial figures of the Enlightenment: John Lock, Thomas Hobbes, etc. Of course there are many more modern authors, and any economics textbook written prior to schools jumping on the Marxist bandwagon explains the principles as well.

Even if you don't agree with the authors, understanding the economic principles involved is beneficial.

 

[Al68]

Perhaps the purpose of a socialist policy is not to directly cause prosperity, but enable the less fortunate sons/daughters to try to obtain it as well.

Well, that I'll agree with. I have no doubt that is the purpose. However I'm more concerned with the actual result than the purpose.

And of course you're right about it not creating prosperity, but what is missed is that confiscating wealth that is created by capitalism causes a reduction of future wealth being created. Maybe that point is not missed, but its effect is greatly underestimated.

Socialist thinkers often refer to the marginal utility of material wealth being greater for the poor than for the rich, and that's true. But when they conclude that that causes the benefits of wealth redistribution to outweigh the negative effect on overall wealth production, they greatly underestimate the effect, especially at higher levels.

Forcing people to share a large percentage of their wealth will reduce the total wealth created exponentially more than forcing people to share a small percentage of their wealth. Of course, I'm ignoring all moral concerns here, just using basic principles of economics.

 

[misgfool]

Forget about the politics for a second and just look at the structure of your argument here:
https://www.physicsforums.com/showthread.php?p=2104176#post2104176

You wouldn't mind to dissect the post and point out flaws in it?

 

[misgfool]

Well, if you don't understand that, I'll just have to refer you to some famous economists, many crucial figures of the Enlightenment: John Lock, Thomas Hobbes, etc. Of course there are many more modern authors, and any economics textbook written prior to schools jumping on the Marxist bandwagon explains the principles as well.

Even if you don't agree with the authors, understanding the economic principles involved is beneficial.

I have never read Locke or Hobbes, but I have read more modern macroeconomics. But perhaps I shall find some time to go through such classics. I believe I understand basic economic principles sufficiently well. Since I understand them, I must demand you to explain your unaccounted claims. My interpretation leads to a very different outcome.

"Leviathan was written during the English Civil War; much of the book is occupied with demonstrating the necessity of a strong central authority to avoid the evil of discord and civil war."

"Any abuses of power by this authority are to be accepted as the price of peace. In particular, the doctrine of separation of powers is rejected: the sovereign must control civil, military, judicial and ecclesiastical powers."

Doesn't Hobbes (in Leviathan) want you to give your freedom to the government in exchange of safety? Isn't this terrible?

 

[Al68]

I have never read Locke or Hobbes, but I have read more modern macroeconomics. But perhaps I shall find some time to go through such classics. I believe I understand basic economic principles sufficiently well. Since I understand them, I must demand you to explain your unaccounted claims. My interpretation leads to a very different outcome.

Well, the claims you challenged were just basic economic principles. The only real historical disagreement has been the extent of the effects, not the existence of the effects.

Doesn't Hobbes (in Leviathan) want you to give your freedom to the government in exchange of safety? Isn't this terrible?

Yes and Yes. My reference to Hobbes was not intended to imply that I agree with everything he ever said. Just some economics points:

Hobbes believed that equal justice includes the equal imposition of taxes. The equality of taxes doesn’t depend on equality of wealth, but on the equality of the debt that every man owes to the commonwealth for his defence and the maintenance of the rule of law.

It's clear that he believed that the justification for taxes is based on services rendered to the person being taxed, not because the government (or anyone else) "needs" the money and the ends justify the means.

 

[Al68]

I have never read Locke or Hobbes, but I have read more modern macroeconomics. But perhaps I shall find some time to go through such classics.

Locke or Adam Smith would be a better choice, since they wrote more extensively about economics. But I must warn you, if you put their writings in the context of the economy being under the control of government, it won't make any sense at all. Their premises were that people were naturally free, and the right to own property and enter contracts are natural rights, and that every individual owns his own labor (has the right to sell or trade it as he sees fit), which precludes socialist policies by default.

 

[misgfool]

Well, the claims you challenged were just basic economic principles. The only real historical disagreement has been the extent of the effects, not the existence of the effects.

They were not economic principles. They were wishful thinking.

Yes and Yes. My reference to Hobbes was not intended to imply that I agree with everything he ever said. Just some economics points:

It's clear that he believed that the justification for taxes is based on services rendered to the person being taxed, not because the government (or anyone else) "needs" the money and the ends justify the means.

I think you have to look this in it's context. He might have not said that taxes thing, if there wasn't the underlying strong government premise.

 

[misgfool]

Locke or Adam Smith would be a better choice, since they wrote more extensively about economics. But I must warn you, if you put their writings in the context of the economy being under the control of government, it won't make any sense at all. Their premises were that people were naturally free, and the right to own property and enter contracts are natural rights, and that every individual owns his own labor (has the right to sell or trade it as he sees fit), which precludes socialist policies by default.

Lol. I should have read this before I wrote my last message. Ok, so their own writing were contradictory. That should already raise a red flag. Or their writing weren't contradictory and you are just interpreting them in way that you find comforting, but which is not what was originally intended.

 

[Al68]

I think you have to look this in it's context. He might have not said that taxes thing, if there wasn't the underlying strong government premise.

Well, Hobbes was a bad reference on my part, but strong government doesn't imply that the power should be used to oppress. I believe in a strong government. I just think it's legitimate function is to protect liberty, not take it away. Nothing weak about that.

 

[Al68]

Lol. I should have read this before I wrote my last message. Ok, so their own writing were contradictory. That should already raise a red flag. Or their writing weren't contradictory and you are just interpreting them in way that you find comforting, but which is not what was originally intended.

What contradiction are you referring to?

Edit: If you're just referring to the fact that Hobbes is not a libertarian on all issues, then I agree with you. It is interesting how a lot of people are so adamant about liberty on some issues, but ambivalent about it with other issues. A lot of Democrats, although not at all libertarian on economic issues are very libertarian on some social issues. And the reverse is true of some Republicans. Clearly they only agree with the tenets of libertarianism when it serves their agenda.

 

[misgfool]

What contradiction are you referring to?

You wrote that their writings make no sense. What expression would you use?

Edit: If you're just referring to the fact that Hobbes is not a libertarian on all issues, then I agree with you. It is interesting how a lot of people are so adamant about liberty on some issues, but ambivalent about it with other issues. A lot of Democrats, although not at all libertarian on economic issues are very libertarian on some social issues. And the reverse is true of some Republicans. Clearly they only agree with the tenets of libertarianism when it serves their agenda.

Life isn't mathematics and consistency is not a virtue. For instance existence of the death penalty doesn't mean that it should be applied to all offenders. Different people have conflicting interests and when they have to solve common problems, they have to make compromises.

 

[ThomasT]

I've been following the discussion, and think I'm essentially a Libertarian in my beliefs regarding individual freedom (minimal governmental restriction or intrusion on personal freedom, eg., mobility, speech, wealth/ownership, private behavior, etc.). I don't think that any individual should be taxed at a higher rate than any other individual. I do think that the profits of collective enterprises should be taxed at a higher rate than individuals , and that they should be held to higher standards of social responsibility than individuals.

Wrt the current economic situation, there's the argument that increased governmental spending is a necessary part of the solution. Based mostly on what I've read and heard regarding economists opinions that the printing and spending of more money by the federal government would have shortened the time of the Great Depression, I tentatively agree with this approach. This doesn't mean bailing out failing companies.

Individual liberty and general welfare are not at odds with each other.

I agree -- to a certain extent of course. We collectively agree to live by the rule of laws made by publicly elected representatives rather than by the arbitrary whims of powerful individuals. And laws do proscribe and prescribe certain behaviors collectively deemed to be contrary to the general welfare. They limit our freedom. But our collection of laws should be consistent. When a law is found to produce results contrary to those intended, then it should be promply repealed. I think we have far too many laws. For example, the tax code is absolutely ridiculous.

Economic freedom results in prosperity.

I agree -- again, to a certain extent. Sometimes the actions of economically powerful individuals or collectives diminish or suppress the prosperity of individuals -- eg., precursors to the current economic situation.

Economic oppression causes poverty.

This can happen when the practices of companies, corporations, and conglomerate enterprises are inadequately regulated. The abuse of power by collective economic enterprises leads to the economic oppression of individuals. For example, the trend of steady increases in prices without commensurate increases in salaries and wages leads to a steady decrease in the buying power of a large number of individuals in our society.

I believe in a strong government. I just think it's legitimate function is to protect liberty, not take it away.

I agree -- to protect the liberty of individuals. Sometimes it's necessary to constrain the practices of business enterprises in order to do that. Companies and corporations shouldn't be treated as individuals under the law.

I also think that certain industries might constructively be considered necessary public services, and to the extent that socializing these industries would result in increasing the liberty of tens of millions of otherwise somewhat oppressed individuals, then they should be socialized.

 

[Al68]

You wrote that their writings make no sense.

I said they would make no sense if they were put in the context of a government controlled economy. That's not the intended context.

 

[Al68]

I don't think that any individual should be taxed at a higher rate than any other individual. I do think that the profits of collective enterprises should be taxed at a higher rate than individuals , and that they should be held to higher standards of social responsibility than individuals.

These statements contradict each other.

For example, the trend of steady increases in prices without commensurate increases in salaries and wages leads to a steady decrease in the buying power of a large number of individuals in our society.

No. The analysis is not that simple. In a competitive free market, prices can't steadily rise for no reason. And buying power is a function of productivity.

Sometimes it's necessary to constrain the practices of business enterprises in order to do that. Companies and corporations shouldn't be treated as individuals under the law.

They are individuals. Deciding not to treat people like people doesn't actually keep them from being people.

I also think that certain industries might constructively be considered necessary public services, and to the extent that socializing these industries would result in increasing the liberty of tens of millions of otherwise somewhat oppressed individuals, then they should be socialized.

If they are considered public services, then the state or local government should provide them, not prohibit or restrict others from providing them. There is no reason for example for the government to try to control FedEx or UPS, for example. Private competition is a good thing, even for services provided by government.

 

[WhoWee]

Should a PhD earn more than a BS?

WHY?

Could it be BECAUSE THEY EARNED IT?

Should PhD's be required to go back and tutor underachieving/underprivileged students...because they are struggling?

In America, people are paid based upon economics...supply and demand...talent, education and abilities are rewarded. Unfortunately, tax strategies are out of sync with this norm.

A small businessperson often (first went to college) risks their home, life savings and future security of their family to EARN A PROFIT. Someone that RISKS EVERYTHING to earn a higher income should not be taxed at a higher percentage than someone who punches a time clock...and risks nothing but time.

In America...High Risk = High Reward (or Loss). It should not mean high penalties for achievement.

 

[misgfool]

I said they would make no sense if they were put in the context of a government controlled economy. That's not the intended context.

I don't get it. They want a strong government. They also want free markets, but not a strong government. Isn't that a contradiction?

 

[Al68]

I don't get it. They want a strong government. They also want free markets, but not a strong government. Isn't that a contradiction?

No.

The words "strong" and "oppressive" are not synonyms. Strength can and should be used in defense of liberty.

The fact that a hypothetical government doesn't oppress people doesn't make it weak just like the fact that I don't try to boss people around all the time doesn't make me weak.

 

[misgfool]

No.

The words "strong" and "oppressive" are not synonyms. Strength can and should be used in defense of liberty.

The fact that a hypothetical government doesn't oppress people doesn't make it weak just like the fact that I don't try to boss people around all the time doesn't make me weak.

You are splitting hairs here. A strong non-oppressive government only exists in an idealistic world, which is definitely not this one.

 

[Al68]

You are splitting hairs here. A strong non-oppressive government only exists in an idealistic world, which is definitely not this one.

Now that's a good point.

There is a big danger in delegating too much power to government. That's why the U.S. government has only limited powers delegated by the constitution. It wasn't intended to be weak, just to have limited power. Of course we've seen that politicians will ignore those limits whenever they can get by with it, which is a lot in the last few decades.

But strong or weak, the legitimate function of a government which acts only as an agent of the people is limited to those powers delegated to it by the people. And those powers are limited to the legitimate powers possessed by people. People only have the right to use force against other people when it is defensive force.

Where would government get the legitimate power to use force for any other purpose?

 

[misgfool]

Now that's a good point.

There is a big danger in delegating too much power to government. That's why the U.S. government has only limited powers delegated by the constitution. It wasn't intended to be weak, just to have limited power. Of course we've seen that politicians will ignore those limits whenever they can get by with it, which is a lot in the last few decades.

But strong or weak, the legitimate function of a government which acts only as an agent of the people is limited to those powers delegated to it by the people. And those powers are limited to the legitimate powers possessed by people. People only have the right to use force against other people when it is defensive force.

Where would government get the legitimate power to use force for any other purpose?

Lol. A country with a preemptive strike doctrine can justify any use of power.

If you give to an individual the option of power, (s)he will eventually use it abusively. If there is a possibility to use power, the government will use it. Legitimacy is overhyped. In the real world legality is the only thing that counts. Well sometimes even that isn't necessary.

 

[Al68]

Lol. A country with a preemptive strike doctrine can justify any use of power.

If you give to an individual the option of power, (s)he will eventually use it abusively. If there is a possibility to use power, the government will use it. Legitimacy is overhyped. In the real world legality is the only thing that counts. Well sometimes even that isn't necessary.

True, but that doesn't mean I have to agree with their actions.

 

[misgfool]

True, but that doesn't mean I have to agree with their actions.

The point is, that it's unrealistic to believe that the conditions required for your liberalism are achievable. Therefore we need to look at alternatives.

 

[turbo]

I don't think that any individual should be taxed at a higher rate than any other individual. I do think that the profits of collective enterprises should be taxed at a higher rate than individuals , and that they should be held to higher standards of social responsibility than individuals.

Thank you, TT! Businesses in our current economy/government have far more rights than are accorded to individuals, with tax benefits that are sometimes obscene.

Businesses thrive on the stable atmosphere that our system of governance provides, and they should pay more taxes than individuals because their existence and profitability depend on the health of our government. The naive notion that "business is good" for us is far out-dated. Too many businesses are stripping wealth from our country, shipping it off-shore, and sucking up benefits from the tax-payers who are expected to pay for their excesses.

 

[Al68]

The point is, that it's unrealistic to believe that the conditions required for your liberalism are achievable. Therefore we need to look at alternatives.

The fact that we can't achieve perfection applies to any alternative as well. More economic freedom is better than less economic freedom despite the fact that we may never have perfect economic freedom.

 

[ThomasT]

I don't think that any individual should be taxed at a higher rate than any other individual. I do think that the profits of collective enterprises should be taxed at a higher rate than individuals , and that they should be held to higher standards of social responsibility than individuals.

These statements contradict each other.

Only if the consequences of the collective actions of two or more people are taken to be necessarily equivalent to those of a single person -- and since they aren't, necessarily, then it might be argued that the principle of individual liberty doesn't necessarily apply to collectives.

However, the aim is to maximize the liberty of all individuals. And, toward that goal, I think that drastically simplifying the tax code vis a single universal income tax rate takes precedence over the fact that, wrt some minimum standard of living, a sufficiently high flat tax (applicable to all, including those whose incomes are lower than the current standard deductions) diminishes the liberty of lower income earners proportionately more than it diminishes the liberty of higher income earners. (The federal government can deal with that disparity vis increased grants, loans, coupons, services, etc. to lower income earners.)

I was advocating a higher tax rate for the profits of collectives primarily because I wanted to do away with certain other taxes that are now levied, and (other than a progressive tax on individual incomes which is what we're trying to get away from) I couldn't think of any other way to generate what I thought was the minimum necessary revenue. But after doing some calculations I now think that a flat tax rate for ALL income (along with other changes) is a viable alternative to the current mess of a tax code.

However, until I learn something that changes my mind, and notwithstanding the apparent inconsistency of the position, I think that collectives should generally be held to higher standards of social responsibility (generally closer scrutiny by regulatory agencies and whatever it takes to keep them from screwing up environments, coercing government officials, monopolizing markets, undermining collective bargaining efforts, etc.) than individuals, because the power of a collective to suppress or diminish the liberty of its individual constituents, or other individuals who its actions might affect, is greater than the power of any of its individual constituents to do that.

Simply put, with greater power comes greater responsibility. Didn't you see Spiderman?

... buying power is a function of productivity.

Yes, but more to the point of what I was saying, buying power refers to the relationship between prices and disposable income.

If they are considered public services, then the state or local government should provide them, not prohibit or restrict others from providing them. There is no reason for example for the government to try to control FedEx or UPS, for example. Private competition is a good thing, even for services provided by government.

What do you think of the idea of the federal government extending Medicare and Medicaid type programs to provide health care to people who don't now qualify for those or other programs and can't afford health insurance?

 

[misgfool]

The fact that we can't achieve perfection applies to any alternative as well. More economic freedom is better than less economic freedom despite the fact that we may never have perfect economic freedom.

Good. You acknowledge that talk of free markets is just rhetorics? Now it all depends on where we draw the line. That is a purely subjective matter and determining the degree of rightness is also purely subjective. That is because in one model we can give some freedoms that don't exist in the other one. Comparing two freedoms and assigning them a quantized freedom value hasn't been done. So essentially any choice we make is in some sense the right and the free one.