Theory of Capitalism collapses

[_asbestosman]

I always understood Rational in economics only to apply to how people make their subjective choices--that it should be self-consistent based on their subjective value. That such subjective value could change over time does not have any implication to whether or not the agents are rational.

That said, I think there is a case to be made that we aren't completely rational (in an internally-consistent way) when it comes to economic decisions. People will gladly drive 30 miles to save $50 on a $150 microwave, but they often will not do so to save $50 on a $1000 TV. The question is how this irrationality effects economic models.

[_Kevin Graham]

"Capitalism is from God, perfect in every way... everything else is of the devil"

That about sums up the usual Glenn Beck fantasy.

Anyone with a brain can see Capitalism does exactly what I said it does. It isn't even disputable. It has always followed this trend of funneling wealth to the few while expanding the poorer classes. Obiwan and Droopy would have us believe the United States is the oldest country in the world that hasn't collapsed. LOL! It is only a few centuries old, so give it another fifty years! And they think that the only other option from capitalism is to have a dictatorship. This just goes to show, again, how ignorant they are on these matters. Obiwan can't turn off Hannity and Beck long enough too get educated, and Droopy's education is confined to readings of an ignorant bigot who died long before economic reality disproved his theories.

My point is that this trend is not sustainable. Eventually the poor will out number the wealthy to such a great extent, than a revolution will take place. The rich will be afraid to go outside their protected compounds because their children will be taken for ransom. And we see the Rich have already begun to create their own little protected utopia that is separate from society at large. Folks like Trump, Boortz, Limbaugh, Gates, etc.. they don't live in our world anymore. You won't see these guys at the airport, shopping at the mall, or ordering at a McDonalds drive-thru. They take their private jets and hop from one golf resort ($20k membership) to another. These folks have no business pretending to understand our world anymore. All they do is sit around and devise ways to increase their salaries by indoctrinating the general public, getting them to think all these things that make them richer, are actually necessary for the world to be a better place. And the sad thing is, people buy into it. Americans are addicted to television. From American idol, to religious fanaticism, to political persuasion. The guys with the most money will capture the most minds, and so goes the story of Capitalism. Those with money rig the system so they keep making the money. Monopolies everywhere.

The wealthy give the poorer classes scraps just to keep them at bay for now, but their greed and evil desire for more more more more, will eventually force the poor to rebel. These maneuvers to bribe politicians in order to take away minimum wage, take away bargaining rights of the workers, to reduce social programs while letting the Rich get away with paying lower taxes, etc. This is all about redistributing more wealth to those who already have it and it is not sustainable. Does anyone really believe that in the year 2450, when the moon and Mars have been colonized because of overpopulation and our natural resources have been depleted, that capitalism is going to be the system to benefit the whole? These Right Wing idiots still envision themselves striving to survive in the backwoods of colonial America. That world no longer exists and when these Beck/Hannity idiots need to learn to educate themselves without a TV remote control for once.

And again, Jesus never would have supported a Capitalistic system.

[_CaliforniaKid]

I always understood Rational in economics only to apply to how people make their subjective choices--that it should be self-consistent based on their subjective value. That such subjective value could change over time does not have any implication to whether or not the agents are rational.

Exactly. Rationality doesn't change over time; only subjective preferences do. In order to generate effective predictions, rational choice models first require some input about the subjective preferences of the actors in the "game". (Contrary to what market economists used to think, profit maximization is not the top preference for most people.)

The future of economics is to find ways for policymakers to take into account the things psychologists are learning about the public's preferences. The dominant economic wisdom is that the best way to promote business innovation is to manipulate taxes and interest rates. This assumes that profit-maximization is people's primary preference, which may well be true for a small, upper-class elite. In the rest of society, though, people turn out to be more interested in qualitative things like group membership, symbolic identity, and certainty about the future. The key question for future policymakers is, can the system be structured so that there are qualitative rewards for innovation, in addition to the quantitative profit motive?

Of course, people have to have opportunities to innovate, too, which means education, ease-of-doing-business, and reduction of economic inequalities remain important.

That said, I think there is a case to be made that we aren't completely rational (in an internally-consistent way) when it comes to economic decisions. People will gladly drive 30 miles to save $50 on a $150 microwave, but they often will not do so to save $50 on a $1000 TV. The question is how this irrationality effects economic models.

The best models take into account people's faulty perceptions, though in the aggregate these can often be ignored.

[_Kevin Graham]

http://www.youtube.com/watch?v=qfHL3mxn ... ideo_title

[_Brackite]

Hi All Here,

There have been a lot of Political discussions going on in the Celestial Forum lately here. The latest Political Discussion Thread that I Participated in around here is in the Off- Topic Forum that I started there.
Here is the Hyper-Link to my Discussion Thread down there:
News From California:

I have changed a little bit in my Political views in over the last couple of years. The biggest Political change that I have come from within the last couple of years is the issue of Same-sex marriage. I used to be basically against same-sex marriage; however, I am now fully in support same-sex marriage. I remember when Kevin Graham used to be a Conservative Republican and going for Senator John McCain over two years ago. However, Kevin Graham has done a complete 180 turn, and he has totally "flipped" sides. I am wondering why Kevin Graham has totally "flipped" sides, within the last couple of years. I hope that he doesn't mind sharing with us here.

[_Droopy]

Anyone with a brain can see Capitalism does exactly what I said it does.

This is the last word on the subject from someone who has spent many years and long nights, well into the wee hours wrapped around texts in political economy, history, and economic philosophy studying, pondering, weighing...

It isn't even disputable.

I could name quite a few distinguished intellectuals and scholars who would be willing to dispute such claims, reaching from the late 18th century to the present moment.

It has always followed this trend of funneling wealth to the few while expanding the poorer classes.

That's the traditional Marxian fantasy, yes. Its long empirical discrediting, historical falsification, and theoretical flimsiness notwithstanding.

And they think that the only other option from capitalism is to have a dictatorship.

There are a number of alternatives to a rule of law based free market order, the best of them being able to barely approximate American living standards and guarantees of individual liberties, and all of the socialist forms (democratic socialism or "social democracy") leading, if allowed sufficient time and if their theoretical goals are followed to their logical and practical conclusion, to some form of deep and pervasive social and economic control, or dictatorship - most likely the "soft" variety now well advanced in western Europe and gaining strength in the United States.

...and Droopy's education is confined to readings of an ignorant bigot who died long before economic reality disproved his theories.

Hayek? Interesting.

My point is that this trend is not sustainable. Eventually the poor will out number the wealthy to such a great extent, than a revolution will take place.

Even Lenin understood that this idea had been seriously undermined by the mid 1920s. The conspicuous and aggressive military adventurism and support of political and guerrilla subversion of foreign countries that defined the Soviet Union from Lenin through Stalin, Khrushchev, Brezhnev, Andropov and Chernenko, all the way into the Gorbachev era; as well as the behavior of North Korea, North Vietnam, the PRC, and Cuba, was ongoing testimony that revolutionary socialism, if it was going to be transmitted at all to countries outside the communist world, had to be transmitted by tanks, bombs, and decapitated heads on poles (one of the Viet Cong's most effective means of promoting conformity at the village level) if it was going to make any headway beyond the iron and bamboo curtains, places many people continued to risk their lives to leave if at all possible.

The idea that any such proletarian revolution was in any realistic sense likely in the western capitalist countries was all but dead as a realistic expectation, due to ever rising wages and living standards in the West, when Lenin left the scene.

The idea that the poor are growing in America and other free market countries and will eventually outnumber the "rich,", and that free market economic relations are the cause of such a state of affairs, is so fantastically preposterous (and laughably easy to refute) that one can only wonder if Kevin really believes the stuff he says, or if he's just having sport with us.

The rich will be afraid to go outside their protected compounds because their children will be taken for ransom.

Kevin, get out of Shining Path now, before its too late. Isn't there a support group for that where you can get deprogrammed and achieve some intellectual "sobriety"?

Folks like Trump, Boortz, Limbaugh, Gates, etc.. they don't live in our world anymore.

What's this "our" world? Speak only for your world, and not ours. I still haven't figured out how to make the Millenium Falcon jump into hyperspace yet (I think giving the control panel in the cockpit it a good swift kick works now and then...)

You won't see these guys at the airport, shopping at the mall, or ordering at a McDonalds drive-through. They take their private jets and hop from one golf resort ($20k membership) to another. These folks have no business pretending to understand our world anymore.

Sounds like Danny Glover at an International ANSWER rally in San Francisco.

All they do is sit around and devise ways to increase their salaries by indoctrinating the general public,

The Manchurian Madison Avenue ad men, everywhere and all powerful...

getting them to think all these things that make them richer, are actually necessary for the world to be a better place.

The running dog Wall Street puppets...

And the sad thing is, people buy into it. Americans are addicted to television. From American idol, to religious fanaticism, to political persuasion. The guys with the most money will capture the most minds, and so goes the story of Capitalism. Those with money rig the system so they keep making the money. Monopolies everywhere.

He's Chomsky, Zinn, Moore, Clark, Fonda, Dellinger, Rudd, Gitlin, and the Raging Grannies all rolled into one. It would be far better to be one of the Three Stooges than one of the useful idiots among whom Kevin has thrown in his lot.

The wealthy give the poorer classes scraps just to keep them at bay for now, but their greed and evil desire for more more more more, will eventually force the poor to rebel. These maneuvers to bribe politicians in order to take away minimum wage, take away bargaining rights of the workers, to reduce social programs while letting the Rich get away with paying lower taxes, etc. This is all about redistributing more wealth to those who already have it and it is not sustainable. Does anyone really believe that in the year 2450, when the moon and Mars have been colonized because of overpopulation and our natural resources have been depleted, that capitalism is going to be the system to benefit the whole? These Right Wing idiots still envision themselves striving to survive in the backwoods of colonial America. That world no longer exists and when these Beck/Hannity idiots need to learn to educate themselves without a TV remote control for once.

A fever this high, if left untended, can cause brain damage. Might I suggest long soak in a tub of liquid nitrogen?

And again, Jesus never would have supported a Capitalistic system.

But he already has.

[_Droopy]

I remember when Kevin Graham used to be a Conservative Republican and going for Senator John McCain over two years ago. However, Kevin Graham has done a complete 180 turn, and he has totally "flipped" sides.

I would think the term "flipped out" would be more apropos.

I am wondering why Kevin Graham has totally "flipped" sides, within the last couple of years. I hope that he doesn't mind sharing with us here.

Because he left the gospel, turned openly and knowingly against light and truth, and has now been left to "kick against the pricks" and fight against God and all truth, not just those directly related to theological matters.

[_Droopy]

Exactly. Rationality doesn't change over time; only subjective preferences do. In order to generate effective predictions, rational choice models first require some input about the subjective preferences of the actors in the "game". (Contrary to what market economists used to think, profit maximization is not the top preference for most people.)

But many of these preferences are not clearly rational at all, and are in a constant state of flux and change among many millions of individual economic actors.

The future of economics is to find ways for policymakers to take into account the things psychologists are learning about the public's preferences.

Why do policymakers need to take into account the economic preferences of "the public" (whatever this is)? For what policy purposes would this kind of knowledge, whatever it would entail, be relevant and useful?

The difficulty here is that the "public" does not make economic decisions, buy goods and services, allocate resources, or run businesses. Only individuals do that, and the individual economic choices and economic calculations of hundreds of millions of individual economic actors, each with their own subjective preferences, cannot possibly be captured by any economic model and transferred to policymakers as relevant knowledge about the state of the market.

This is perhaps the great fiction of "social science," and not only in economics, which is precisely that abstract academic models can capture, render and schematize for political decision makers the incomprehensibly complex and constantly changing individual preferences, desires, and value perceptions that are what we call "the market"; an astronomically vast pool of constantly changing, shifting, mutating, varying and progressing information, knowledge, and preference that no conceivable body of bureaucrats and policymakers could possibly use as material from which to concoct "policy" of some kind relating to that market.

The very idea of capturing anything but a very rough, grainy outline of economic activity at extremely low degrees of resolution with such economic modeling is out of the question at first glance, not to mention that, moments, hours, days, and so on later, the information and actual economic conditions in the real economic world will have changed. Both the sheer size and the sheer complexity of the market make such modeling, and any idea of the construction of policy from it, an exercise in deep hubris.

No government, and no possible combination of experts, no matter how "smart," can possibly have the barest fraction of the information, or anything approaching the competence, to "manage" an economy as traditionally understood and attempted by social and economic etatists.

The best thing to do, as many of the best economic minds hailing from the classical liberal tradition have long pointed out, is to leave the market alone and provide a legal and political framework (the rule of law, equality under the law, protection of contract and property rights, and a civil and criminal justice system) to protect members of the market from fraud, deception, and unlawful force.

The dominant economic wisdom is that the best way to promote business innovation is to manipulate taxes and interest rates.

Who's? The way to promote business innovation and proliferation is to keep taxes low and to allow the price of money to fluctuate according to free market dynamics (preferably against something of real value).

Indeed, it is precisely the manipulation of money and credit that produced the present economic mess (and other previous boom/bust cycles).

This assumes that profit-maximization is people's primary preference, which may well be true for a small, upper-class elite. In the rest of society, though, people turn out to be more interested in qualitative things like group membership, symbolic identity, and certainty about the future.

Quite true.

The key question for future policymakers is, can the system be structured so that there are qualitative rewards for innovation, in addition to the quantitative profit motive?

The key question is: is this any of the business of the state or the political class? As such qualitative rewards are purely subjective, what could government possibly do to alter such subjective perceptions, along any particular dimension?

Whatever one does, one may perceive such qualitative rewards or one may not perceive them. One may dislike his job or feel it to be his "calling." Either way, whether one's satisfactions are more qualitative, more money oriented, or a combination of both, the core aspect that unites all of them is that one is "doing" something; he is working, producing, and engaging in some economic activity.

I'm not sure I see where the intersection of this and public policy is going to be.

[_asbestosman]

Exactly. Rationality doesn't change over time; only subjective preferences do. In order to generate effective predictions, rational choice models first require some input about the subjective preferences of the actors in the "game". (Contrary to what market economists used to think, profit maximization is not the top preference for most people.)

But many of these preferences are not clearly rational at all,

That is relevant to what CK wrote, but

and are in a constant state of flux and change among many millions of individual economic actors.

is not because he agrees that they are in a state of flux. He just says that's not what is meant by rationality.

The future of economics is to find ways for policymakers to take into account the things psychologists are learning about the public's preferences.

Why do policymakers need to take into account the economic preferences of "the public" (whatever this is)? For what policy purposes would this kind of knowledge, whatever it would entail, be relevant and useful?

To encourage innovation. It's why we have things like copyrights and patents. CK is not saying that the government should decide how many Twinkies, hotdogs, and automobiles we should produce. He's saying that we should consider what sort of rewards best encourage entrepreneurs, innovators, etc. You even agree with his point:

This assumes that profit-maximization is people's primary preference, which may well be true for a small, upper-class elite. In the rest of society, though, people turn out to be more interested in qualitative things like group membership, symbolic identity, and certainty about the future.

Quite true.

As to how policymakers could help out, I don't know.

[_Wisdom Seeker]

Because he left the gospel, turned openly and knowingly against light and truth, and has now been left to "kick against the pricks" and fight against God and all truth, not just those directly related to theological matters.

Droopy, funny thing is I too was very much a conservative Republican type and do not consider myself to be in that camp anymore. While I have not fully left the gospel, I have decided to not accept anything I may have learned or believed in the past to be totally true. I have accepted that I could be wrong in more than just politics. Most people are born, raised and learn to believe the things in which they just might believe all their lives. There are lifelong Democrats and lifelong Catholics who like their lifelong Republicans and lifelong (Choose a religion here) will always believe what they were born, raised and learned to believe is the right way. Show me a person firm in their belief and I just may show you a person unwilling to ever believe that they could be wrong.