News Too big to fail - the definition

Ivan Seeking

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How does one quantify the claim that a company is so large that its failure would take the national economy down with it?

And here is a bit of a paradox. There is no such a thing as "too big to fail" in a free market. But from a practical point of view, we can't have the entire economy subject to the whims of any one corporate entity, so it must be that too big to fail means too big to exist. But any action to limit the size of companies also suggests that we no longer have a free market. Therefore, there can be no free market.

It seems to me that puritan free-market policies are not in the public interest - it is a dead concept. While I still favor maintaining as free a market as possible, I now wonder why I was ever such a fan of the idea. Puritan free-market principles now seem about as logical to me as the notion of passing on penicillin in order to allow a bacterial infection to run its course, out of principle. That is to say that I see no evidence that a free market ultimately acts in the public interest any more than does a weather system, a bacterial infection, or any complex and self-serving, or chaotic system.
 
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yes, it hasn't been an honest-to-dog free market economy here for mucho time. as soon as a technology crosses that threshold from luxury to something we depend on, we call it a utility and regulate it. so things like energy supply, water supply, and telecommunications are too big to fail. and since we do so little with cash anymore, banks are too big to fail. the problem is, if something is too big to fail, then you can't let it be totally free anymore, you've got to have tighter regulations and actually enforce them. ironically, it seems that both regulation and deregulation may have led to the collapse here.
 
D

drankin

What do you have if you don't have a free market? I'm just curious because I hear so many say that a "free" market doesn't work. A true free market is no good as it tends to allow monopolization of industries. There must be a middle road that allows a basic free market but discourages a corporation to be too large that the shear size threatens the entire economy. Maybe a corporate size limit? At a particular size it is required to split in order to create competition? What would have happened to microsoft if there were such a rule? Would we have a better OS? ...
 

Astronuc

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It seems to me that puritan free-market policies are not in the public interest - it is a dead concept. While I still favor maintaining as free a market as possible, I now wonder why I was ever such a fan of the idea. Puritan free-market principles now seem about as logical to me as the notion of passing on penicillin in order to allow a bacterial infection to run its course, out of principle. That is to say that I see no evidence that a free market ultimately acts in the public interest any more than does a weather system, a bacterial infection, or any complex and self-serving, or chaotic system.
I think one is referring to the 'Chicago School' of economic theory: lower taxes, free markets (regulations by the participants - buyers and sellers), and minimal (or no) intervention or regulation by the government.

For free markets to truly work (in the interest of the community or society), the participants must be ethical, i.e. honest in their dealing, free of misrepresentation, . . . .

It would appear that some institutions or sectors become too big that they must fail, especially when engaging in unethical practices or false premises.

Chicago school of economics
http://en.wikipedia.org/wiki/Chicago_school_(economics [Broken])

RIP Chicago School of Economics: 1976-2008
http://www.ritholtz.com/blog/2008/12/chicago-repudiation/

Friedman Would Be Roiled as Chicago Disciples Rue Repudiation
http://www.bloomberg.com/apps/news?pid=20601109&sid=a3GVhIHGyWRM& [Broken]
 
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What do you have if you don't have a free market? I'm just curious because I hear so many say that a "free" market doesn't work. A true free market is no good as it tends to allow monopolization of industries. There must be a middle road that allows a basic free market but discourages a corporation to be too large that the shear size threatens the entire economy. Maybe a corporate size limit? At a particular size it is required to split in order to create competition? What would have happened to microsoft if there were such a rule? Would we have a better OS? ...
it used to be pretty common to break up companies when they got too big. trust-busting.
 

Ivan Seeking

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it used to be pretty common to break up companies when they got too big. trust-busting.
But now, instead of monopolies, we are talking about the death of the economy.
 
A

Al68

~ If Rush [Limbaugh] wants Obama to fail, then he wants America to fail. So Rush and Bin Laden are on the same page. - Bill Maher
Dude, I would seriously change that quote. Big time faulty logic.

Of course a lack of understanding of free market economics doesn't help either.
 
Dude, I would seriously change that quote. Big time faulty logic.

Of course a lack of understanding of free market economics doesn't help either.
so what's this i hear about Bill Maher bangin' Ann Coulter? i think Aaron McGruder's got the right idea about these people. it's all theatre.
 

OmCheeto

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Originally Posted by Ivan Seeking View Post

~ If Rush [Limbaugh] wants Obama to fail, then he wants America to fail. So Rush and Bin Laden are on the same page. - Bill Maher
Dude, I would seriously change that quote. Big time faulty logic.

Of course a lack of understanding of free market economics doesn't help either.
The quote seems very logical to me. I was going to steal it, but my signature section is full at the moment.

And who is it you are implying doesn't understand free market economics? Rush, Obama, America, Maher, Ivan, or yourself?
Or are you practicing a form of self-deprecating humor?
Your 3rd sentence do not follow logically from the first two, and I thought you might be making a joke about logic by being illogical.

:rofl:
 
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Al68

The quote seems very logical to me. I was going to steal it, but my signature section is full at the moment.

And who is it you are implying doesn't understand free market economics? Rush, Obama, America, Maher, Ivan, or yourself?
Or are you practicing a form of self-deprecating humor?
Your 3rd sentence do not follow logically from the first two, and I thought you might be making a joke about logic by being illogical.

:rofl:
Well, if you assume that Rush equates a failure of Obama's agenda with a failure of America, then the logic is fine. Of course then it's a bad assumption. Even if Maher equates the two, his conclusion is based on Rush equating them.

And I didn't intend my third sentence to follow from my first two. It was a separate paragraph.
 

Janus

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Well, if you assume that Rush equates a failure of Obama's agenda with a failure of America, then the logic is fine. Of course then it's a bad assumption. Even if Maher equates the two, his conclusion is based on Rush equating them.

And I didn't intend my third sentence to follow from my first two. It was a separate paragraph.

From reading the statement from which Rush's quote was taken, I'd say that Maher's take on it is quite accurate. At one point Rush lists a number of items that he says Obama wants to implement , and then say that he hopes that they don't succeed, because he (Rush) doesn't want these things to happen. It is important to note that he does not say that he doesn't want Obama to succeed in implement these items, nor that he doesn't think that they will suceed, but that that he doesn't want them to succeed.

Now the aim of many of these items are to strengthen the economy. For them to fail, means a continued failing economy. So it is very clear that Rush is implying that he'd rather have a failed economy than an economy strengthened by something that goes against his ideology. IOW, if the country can't succeed on his terms, he doesn't want it to succeed at all.
 

mheslep

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...Now the aim of many of these items are to strengthen the economy. For them to fail, means a continued failing economy.
That's a fallacy, a rather obvious one. 1. The statement of of aim or intent may be subterfuge. There may be other agenda's, and in the case of many congressional representatives I believe there are. 2. The aim may be well intended, but mistaken or flawed.
 
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mheslep

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I believe that America's free market has been the engine of America's great progress. It's created a prosperity that is the envy of the world. It's led to a standard of living unmatched in history. And it has provided great rewards to the innovators and risk-takers who have made America a beacon for science, and technology, and discovery.
Barack Obama
http://www.barackobama.com/2007/09/17/remarks_of_senator_barack_obam_24.php [Broken]
 
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A

Al68

From reading the statement from which Rush's quote was taken, I'd say that Maher's take on it is quite accurate. At one point Rush lists a number of items that he says Obama wants to implement , and then say that he hopes that they don't succeed, because he (Rush) doesn't want these things to happen. It is important to note that he does not say that he doesn't want Obama to succeed in implement these items, nor that he doesn't think that they will suceed, but that that he doesn't want them to succeed.

Now the aim of many of these items are to strengthen the economy. For them to fail, means a continued failing economy. So it is very clear that Rush is implying that he'd rather have a failed economy than an economy strengthened by something that goes against his ideology. IOW, if the country can't succeed on his terms, he doesn't want it to succeed at all.
I have to assume you can't really believe that. In any case it's way too absurd to discuss.
 
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Ivan Seeking

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In other words, you admit that you have no response and Rush is essentially un-American. He cares more about his ideology than he does the country.
 

Ivan Seeking

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In a nutshell, I think we see the reason for the mess we're in right now - ideologs have taken us to the brink of disaster. We can't live by the motto, "Free markets and damn the rest!".
 

mheslep

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...

It would appear that some institutions or sectors become too big that they must fail,
Thus the US government must fail?
 
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Al68

In a nutshell, I think we see the reason for the mess we're in right now - ideologs have taken us to the brink of disaster. We can't live by the motto, "Free markets and damn the rest!".
Uh, is that a joke? :rofl:
 
democrats want republicans to fail. republicans want democrats to fail. if you think otherwise, you're a pretty dim bulb.
 

Astronuc

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Thus the US government must fail?
Well looking at the number of investors harmed over the last two or three or four decades (including the current fiasco), and the pension funds and corporate treasuries that were cleaned out, I'd say the US government has failed in its role to regulate the economy, protect employees and investors. I'll have to provide some examples.

Looking at 9/11/01, the US government failed to protect the nation against attack, part of which was due to sloppy airport security, and part due lack of follow up on al Qaida.

There was a recent failure to prevent contaminated food entering the domestic food supply.
 

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