"The History of Government Regulation and Big Business":
http://rabbit-hole-journey.blogspot.com/2007/09/history-of-government-regulation-and.html
Anonymous said...
Good post. Lets say you live in a mythical place where people are encouraged to trade, produce and make their own things which they take to market. Lets say competition is encouraged but not beyond some prices (because too much competition results in monopoly, oligopoly), and also individuals themselves follow a religion which tells them to be generous in trade, to even aid competitors if they are in trouble (because there is plenty for everyone and everyone is guaranteed a pre-determined livelihood by God who is the Most Generous). would this be a good society in your opinion?
I can see some people may be lazy because "God provides", but they are taught that God provides for those who help themselves and who work.
For instance I have heard cases of shop traders in Egypt refusing to serve a customer and asking them to go to a neighboring 'competitor' shop to buy the item 'because he has not had allot of business today'.
He may have missed my point, in that history shows that true free-market competition PREVENTS cartelization. There is no such thing as "too much competition". Cartels happen when government imposes regulation; history says that regulation was pushed by the giant corporations themselves (through lobbyists and bribes to government officials), to help shut out competition from startups.
His 2nd point, about people (such as ancient Egyptians) or a religion that encourages people to help their competitors when they are in serious trouble, reminds me of 2 things.
First is that this is the philosophy, if I recall correctly, of Plato, that "The Pie is Big Enough", or better yet, "We Can Make the Pie as Big as we Want it to be", as opposed to "The Pie isn't Big Enough for Everyone", or "Life is a Zero Sum Game".
In the former, the essence is that knowledge is wealth, and more knowledge begets more wealth. Technology has the power to make everyone wealthy. Witness how technology has enriched our lives.
In the Middle Ages only Kings could travel 500 miles in relative comfort, and they would die a slow death if they contracted Amoebic Dysentery. Today I'd wager that flying 500 miles in coach on JetBlue or Southwest is more comfortable than said Middle Age King's journey, and even the lower middle class in a 3rd world country can afford the pills to cure Amoebiasis.
In the latter, (Zero Sum Game) the belief is "I need to steal somebody else's piece of the pie in order for me to have a bigger slice". This mindset is at work when some riffraff breaks into your car (thinking "I'm poor, this guy is rich, he can afford a new stereo"); when people do day trading on the stock market; or the big leveraged buyout firms make money; or when the WTO/NAFTA/IMF/WB force rules and monetary and tax law changes on 3rd world countries, which effectively force them to remain poor, for the benefit of transnational corporations. It is also true when nations go to war over oil. All of it is wealth re-distribution (and wealth destruction, in the case of wars and breaking in cars).
Socialism is the same. Socialists think "Look at these poor people, let's take money from the productive middle class, and give it to the poor". (Wealth re-distribution, zero sum game) .
A better way is to think "How can we stimulate the economy, or make the economy more sound and more fair, so that jobs can be created, so these poor people can make a decent living?" Make the pie bigger. The saying of teaching a man to fish, instead of giving him a fish, comes to mind. And no, I'm not talking about government mandated minimum wages. The minimum wage does NOT create more jobs...
The 2nd thing the comment reminds me of, is morality. An Egyptian shopkeeper sending customers to a competitor in trouble, is altruism. It's a separate topic than free-market competition. The two are not mutually exclusive. This is why during the 80s, the "Decade of Greed", that charitable contributions reached an all-time high. (From the book "The Politically Incorrect Guide to American History")
In the book "The Science of Good and Evil", the author Michael Shermer argues that altruism is hardwired into the brains of our species (as well as in primates). Altruism helps propagate the species. The book goes on to explain why people do evil things, despite that.
I will argue that everything that drives man, is for selfish purposes (as Ayn Rand says), including altruistic deeds. When someone does something altruistic, he or she feels good, which is what drives the deed in the first place.
My writing this blog is also a selfish deed. The direction that the nation and the world is going, makes me sad and angry. Writing this blog is my therapy. A second selfish reason for writing this blog, is the hope that it will make the world a better for most everyone, including myself.
It's just really neat that the mechanism of true free-market economics harnesses the power of selfishness to create wealth for everyone.
7 comments:
yeah, i agree with the point given here. a great example is the belief in socialism in general. this is supposed to be a belief that is on some level lead by a desire to help the poor and working class, yet undoubtedly any political group who implements it historically has required bloody and authoritarian controls over its citizens.
socialism only works in a form of permanent revolution, thats the only way it yields productivity, and the systems are initially very complex as you have to have a way to stop people from moving out of step with the big picture. complex systems quickly move to diminishing returns productivity-wise, which makes the system non resiliant over time.
I have read somewhere too that too much competition can lead to monopoly. Price undercutting and even selling some items at a loss, just to attract the customer to buy the higher valued products as well at the same time. This is because competitors will be driven to the wall, until one or a few firms dominate the market. I know you are saying that this is unlikely in a pure free market where there is no state, to intervene or create an elite. But the process described above is possible in such a situation is it not?
On the other hand the view that too much competition is never bad sounds plausible...as if prices fall too much...no one makes a profit and everyone would have to adjust their prices upwards again...this would attract other competitors to start a business in the same trade...until another equilibrium is reched.
I read this at the Ayn Rand piece which you linked...Rand...quote "believing that the sole function of a proper government is protection of individual rights (including property rights)."
The problem here is that she talks of 'rights' being given by governments.Where do these rights come from? Who says they are 'rights'? And if a similar group in a different context says no such rights exist does that make them true and authoritative?
Also who says that all individuals ought to pursue happiness as a life goal? Some German philosophers for instance have argued that suffering and pain are necessary for people like Wagner and Goethe to emerge and unleash their greatness. Do all people want happiness?
Hi
The Egyptian market I mentioned in an earlier comment was not in Ancient Eqypt as you assumed it was here:
http://www.islamicgarden.com/marketplace.html
Thanks for the clarification and the link.
To Anonymous who posted on Sep 20, 3:33PM.
"The problem here is that (Ayn Rand) talks of 'rights' being given by governments. Where do these rights come from? Who says they are 'rights'? And if a similar group in a different context says no such rights exist does that make them true and authoritative?"
See earlier comment above, rights aren't "given" by governments. In the case of the US Constitution, government is supposed to _protect_ these rights which are "God given", or inherent in humans. If an individual doesn't agree with this, they're welcome to move to a country that is more aligned with their beliefs.
"Also who says that all individuals ought to pursue happiness as a life goal? Some German philosophers for instance have argued that suffering and pain are necessary for people like Wagner and Goethe to emerge and unleash their greatness. Do all people want happiness?"
If one were to argue that "suffering makes some people 'happy'", and to expand "pursuit of happiness" to also mean "to do what you want", then people who want to 'suffer', as a means to achieve enlightenment or whatever, are free to do what they want in the USA. For example, if one wants to sleep on a stiff board, or to practice masochism, in the privacy of their home, as long as they don't trample on others' rights, they are free to do so.
Anonymous said
"I have read somewhere too that too much competition can lead to monopoly. Price undercutting and even selling some items at a loss, just to attract the customer to buy the higher valued products as well at the same time. This is because competitors will be driven to the wall, until one or a few firms dominate the market. I know you are saying that this is unlikely in a pure free market where there is no state, to intervene or create an elite. But the process described above is possible in such a situation is it not?"
If a corporation drops prices, let's say until it sells an item at a loss, in order to block a newcomer from making a profit, the consumer benefits from the reduced prices. If said corporation does this in order to maintain a monopoly, then I think the corporation "deserves" that monopoly, because it is able to drop prices lower than all other competitors. Consumer wins. If this corporation starts becoming fat and happy, then competitors will be able to undercut the first corporation, by having lower costs.
As for the case of "selling some items at a loss" in order to "sell other higher valued items", and the consumer ends up paying more, then it's the consumer's fault for not going elsewhere for the higher valued item. If the consumer likes to have a one stop shop, then it's still a win-win.
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