Who Makes The Better Decision
Who Makes The Better Decision[moved from OpenCapitalism]
I am really wondering how many people in the USA are sharing Mark's views. In Europe, most people would reject them. (But maybe there is more to it, that I didn't understand yet.)
I reckon most modern economic theorists would reject his views too. Specifically, this part of them: ' It assumes that people are intelligent, mature individuals capable of making decisions for themselves better than other people making decisions for them ', implying this: ' the transactions in which a party of individuals chooses to engage presumably will benefit all those involved '. Economic models don't bear this out. Even a simple iterated prisoners dilemma model should be enough to convince you that this need not be the case? Everybody helping everyone else is an unstable solution.
How does the PrisonersDilemma bear this out? Either the prisoner can make the best decision for his situation or another person can. Given that everyone has the same, available information, how could someone other than the individuals involved make a better decision?
I need to be tighter in my use of use of language. I shouldn't use the word best because it implies an absolute level. I should use the word better because it implies a relative level. So, my question is, Who, other than the prisoner can make a better decision for his situation?
Have you considered the (demonstrable) fact that people often don't make the best decision, even with all information. Unethical people can (and do) take advantage of this fact for personal gain.
Who else can make a better decision for a person than that person themselves? As for unethical people, how do unethical people take advantage of the fact that people are incapable of making a better decision than anyone else?
Now we are playing with semantics. You might as well say that whatever decision anyone makes was the best decision, since otherwise why would they make it. The facts remain: propaganda works, people are easily influenced, often to there own detriment. There are massive industries in the western world whose entire existence is dedicated to convincing people to make poor choices (for the people, not for the industry). Pretending this is somehow 'best' for them is disingenuous.
No-one is pretending that there aren't forces trying to influence people's decisions. That's obviously true. What is not so obvious is that the final decision made by the individual could somehow be better made by someone else. I claim the individual's decision is the best among all alternatives because
You often hear assertions that open, free market capitalism is the `best' system for making everyone happy. Nobody has ever demonstrated this to be true. To be fair, it is probably not a solvable problem. Free markets do have certain theoretical efficiency advantages, it is true. As long as you can keep monopolies out of them. In a truly free market, this seems unlikely. The other bad assumption is that informed people will make the correct decisions. There is no reason to assume that the necessary information will be easily available (it certainly isn't now), and people demonstrably don't make optimal decisions. Even worse, people make suboptimal decisions in (somewhat) predictable ways - a fact that the propaganda and advertising industries count on.
Whether or not freedom is "objectively" better in a macroeconomic sense is unimportant. A free system is better because it is free. Freedom is desirable in and of itself. Why? Because we are humans, not ants or bees. If you want to live in a slave society, so be it. Don't take the rest of us with you. -- MikeSmith
You are making wild and unsupported accusations with the 'slave society' comment. All the more interesting because I didn't propose an alternative; I merely commented on an unsupported line of reasoning oft repeated these days. Why are you behaving defensively? Very strange. You don't even know if I support free market capitalism or not!
To play devils advocate: you should not that free market is in no way synonymous with free. It certainly hasn't been demonstrated that a real implementation (attempt?) at a free market will result in more personal freedom than any other real implementation of some other system.
Propose an alternative system and a definition of freedom and we can continue the discussion of the free market's relative strengths and weaknesses.
Random thoughts: To me, freedom is not a lot things, for example, it is not anarchy since everything is permissible in anarchy, and thus my freedom can be abridged at anytime by anyone. Therefore, freedom is the ability to do things that promote the good of one's self, one's family, and one's neighbors. This requires some rules against which you can measure good. Enter law. This leads to Freedom only being present in the presence of Laws; but not just any set of laws, a balanced set: Freedom of Speech v. Libel - I may speak my mind as long as it does not unjustly injure the party about which I am speaking. Freedom is too big a concept in this set of random thoughts to be confined to a short definition. WCM
I think that most people (at least here) can agree on parts of the free market ideology. For example, I doubt many would argue that `transactions' between parties of equal power should not be curtailed unnecessarily. Which implies the question is it ever necessary? It is an interesting question.
To my view, most problems with free markets occur when there is a large imbalance of power.
[moved to MonopoliesInTheWild]
Any useful definition of freedom in society must, to me, contain mobility. If it is not possible *for every member of the society* to significantly better one's position, then that society is not free. In fact, I might go further and state that if mobility is not complete, in the sense that any position in society is theoretically reachable from any other (in one generation), it is not free. I am not sure about the last.
It seems plausible to me that in the absence of any external forces, a truly free market could easily, and relatively quickly, destroy the mobility of the poor, thus destroying the freedom of the society. Clearly, where there is a large imbalance of power (such as that which exists today in all societies that I know of), it is possible for the empowered party to limit the options of the other. A few iterations of this process can restrict the options of the least powerful to almost nothing.
I read a Cato study a while ago indicating that the average speed that a family moves from the lowest wealth levels in American society to the top quartile is, on average, three generations. I wish I could provide the reference, but I can't seem to find it on their site.
Now do we think this would increase or decrease under a free market?
Excellent question. I was just about to edit my comment by adding "I don't know how that compares to other societies." My own biases tell me that a freer market would increase the mobility rate. Anecdotal evidence also supports that conclusion, I think. Former communist countries don't seem to allow for a great deal of movement between wealth classes. Assuming some kind of positive correlation between free market and mobility, I simply extrapolate that more freedom, more mobility. Of course, this is a dangerous extrapolation because we really don't have much evidence on the fringes. The closest we have to a real free market system in the world is Hong Kong, and I don't know of any studies of their society.
I don't think I can buy that reasoning, both the assumption and the extrapolation. The relationship between social mobility in the pseudo-communist countries and that in our pseudo-democratic, pseudo-free market is hardly clear. Some simple linear mapping seems horribly naive to me. Perhaps one could argue the other direction: that due to decreased options for the poor under a truly free market (hardly controversial), mobility must decrease. I am not sure about that line of reasoning either.
This isn't about assuming omniscient people to make decisions for us. Like the existence of law, this is a social contract that exchanges some liberties of the individual for the safety of the society as a whole. I have never heard a rational, let alone compelling argument that throwing out these social contracts will lead us to a better life.
I am interested in why the poster above states "a truly free market could easily, and relatively quickly, destroy the mobility of the poor." Any who agree with the idea that a free market would somehow keep poor people poor, defend that idea.
The only thing I see keeping poor people poor is income tax (as evidenced by there being a lack of a "wealth tax" in any country of which I've ever been aware, IOW once you've got it, you can keep it, but we'll make it hard as hell to get!).
Agreed. Income tax makes no sense at all. It should be entirely replaced by capital taxes. Tax the rich!
OTOH, I certainly don't agree that the only thing keeping poor people poor is income tax. And if you don't know how free markets can starve people or drive them into penury, then you really don't understand the first thing about markets. And nobody has any responsibility to educate you about such simple things, no matter how loudly you demand an explanation.
You're kidding right? I understand what I understand, a claim was made that started with "It seems plausible to me..." and I asked someone to defend it. Hand waving will not make it go away (in fact hand waving is a LogicalFallacy).
Make that It is certain that a free market could crush poor people's liberty and mobility. And anyone who understands how markets work in practice, or has the two thoughts required to imagine an auction where people sell themselves into slavery to avoid starving, would know exactly how that could happen.
Oh and don't "tax the rich" that's just stupid, or rather communism masquerading as stupid capitalism. I'm advocating very few taxes, with possibly the only fair tax being on what you spend (meaning people at all levels of society could avoid taxes by avoiding or putting off spending while assets grow to cover the cost of the "sales tax"). You're right in one point, though, there is a second thing keeping poor people poor, social conditioning. Ironically it generally originates from the same place as IncomeTax?.
Yeah, that's because you're an idiot who doesn't understand such basic concepts of economics as public goods. Or that sales taxes are inherently regressive and thus far worse than even income tax in the USA (note to Europeans: income tax in the USA is pretty much regressive, not progressive). That is, sales taxes are aimed strictly at the poor.
Maybe you'd like to point out a real world free market that has driven a segment of its population into "penury?"
Romans and Greeks had debt slavery. People sold themselves into slavery in order to pay back their debts. As for a modern example? EVERY market that is completely free and unrestrained results directly and inevitably into massive bankruptcies among producers (shops, businesses, manufacturers) thus loss of livelihood for the people involved. This is the reason why there isn't a single totally free market in existence. Something you would know if you knew fig about economics. Only idiots ever ask for examples of free markets that have done such and such things because free markets self-destruct before they're even brought into existence. And on their way down, they take with them everyone who relied on the "non-free" market that did exist. Such people end up in penury, poverty and starvation.
ConversationalChaff deleted. Read the CC page asshole.
I read it and I believe you are still being disingenious. I have asked you to defend an unstubstantiated comment or at the very least to provide one single example where it was true. What is so wrong with that. I believe, in truth, that you are projecting your feelings about your own arguments onto me.
What's so wrong is that you're an idiot who doesn't understand the least little thing about economics but wants it all explained to him and then is unwilling to make allowances for the slightest misspeech, despite the fact that the intent was clear, despite the fact that nobody has any responsibility to educate you. Go grab a bloody textbook, jerk, and leave everyone else in peace. I hate trolls.
I am not a troll, my goal is not to just say something to get a reaction and make people mad. I wanted to have an honest debate about a comment with which I disagreed. You seem more interested in making Ad Hominem attacks and taking a superior tone. Well I'm very sorry, but continually restating your thesis does not an argument make. And whether I am a jerk or any of the other unkind things you have called me actually has no bearing on my argument being correct or incorrect. I am not asking you to "educate" me, I asked anyone who agreed with the original statement to defend it. You complied, after a fashion. I then stated that "Because it's true!" was not an adequate defense. You stated "Well anyone can imagine people becoming slaves to avoid starvation!" and I asked how would a free market cause the circumstance of starvation in the first place. I further asked for an example of a free market that had done this, you provided two examples of un-free markets that had. Apparently though, I have mistook your "clear intent" for name calling and belittling (and yes I admit to my own bit of belittling, I did).
You are a troll. Either that or someone too stupid to live. It's pretty clear that there's a continuum of "free" vs regulated markets. It's also clear that at one end there's people selling themselves into slavery (free market) whereas at the other end, it's patently illegal to own or sell slaves. If you'd bothered to rub two thoughts together in your wee brain, you'd have figured all of that out. Instead, you preferred chortling madly over a misspeech and crowing in victory. <rolleyes>
And you're STILL a troll. If you weren't, you'd have carefully read what I'd written until you understood it, instead of treating my words as impressionistic art. As proof, the fact that you attribute to me "anyone can imagine people becoming slaves to avoid starvation" which occurs nowhere in what I've written, nowhere on this page even. If you're to stop being a troll, you'll have to invest yourself in the discussion and take responsibility for your own words. In particular, stop hiding behind anonymity, start thinking about what it is you're reading (even if you have to reread it multiple times) and start thinking about what YOU are writing. Because when you keep giving me ammo like this, proving my claims for me, then that shows you just aren't thinking.
Well perhaps in that last paragraph I should have mentioned that I was paraphasing about the whole starvation thing as well as your other points (anyone can read your actual points as I have not deleted or modified any of your statements), if you want a quote "People sold themselves into slavery..." and later, speaking of the same people, "Such people end up in penury, poverty and starvation." I felt that by that time it was obvious I was paraphrasing. I also think the paraphrase fits.
I did carefully read what you said until I "understood" it, I think what you want is for me to read it until I "agree" with it. Well those are two different things.
As far as anonymity is concerned, you haven't signed any of your contributions either, lol. I am simply following the WikiSocialNorms request that I use my real name (see RealNamesPlease) or remain anonymous. I choose not to use my real name, Wiki prefers I don't use a pseudonym, so I remain anonymous (which many Wikizens prefer anyway).
Back to the actual point: Okay, so there is a continuum of free vs. regulated markets. What markets do you consider most free, the Roman Empire's market? Umm, that had more beureuacracy than the US market today (with each Roman controlled "province" being subject to Roman law AND any pre-existing local laws that weren't in direct opposition). What's to say the people selling themselves into slavery weren't forced to do so because of the beureuacratic forces, rather than the pressures of the free market? As well, I could be wrong, but I don't think slaves in the Roman empire, "sold" themselves into slavery, or got any remuneration for becoming a slave at all. Generally it was against their will. So on the other end of your continuum it's illegal to own slaves? So up until 1865 the US was not a free market (despite there being very little in federal law regarding the market, except in the case of imports) and post 1865, the US suddenly becomes free, and yet there are many, MANY more regulations? Hmm...
There're two main dimensions when judging taxes: efficacy and equity (there's also enforcement too, as Russia has found out, but that's not a main problem in the West). Efficacy deals with how much a given tax will hurt the economy: it's concerned about drawing the maximum benefit for the greater good. Equity deals with how much a given tax will hurt those who can least afford to be hurt: it's concerned with not screwing over anyone too hard.
The income tax is pretty poor on equity grounds, though better than other options like sales taxes and lotteries (which actually tax the poor more than the rich). It's used mainly on efficacy grounds: a reasonable income tax imposes minimal friction on the economy. This is because income has fairly low elasticity: people still need to work, so in general they won't work less when you tax them more.
There is a hypothesis that tax revenues decline when income tax rates get too high, because people do choose not to work more. This is the LafferCurve??, which served as the foundation for Reagonomics. Actual data suggests that the LafferCurve?? exists, but the numbers are far higher than Reagan and his economists suspected. Reagan's tax cuts increased revenue only from the top bracket of taxpayers, those paying close to 70% of their incomes in taxes. This is similar to the experience of Sweden and other mostly-socialist countries, where people continue to work even with very high marginal tax rates.
The capital gains tax is a great idea on equity grounds (since wealth is much more unevenly distributed than income), but a horrible idea on efficacy grounds. The long-term health of an economy depends on its ability to invest and, more importantly, get investment funds to those businesses that show the most promise. Capital gains taxes prevent people from selling their stocks, which imposes serious friction on the capital markets. Without capital, promising startups never get off the ground and losers don't get ditched for winners.
I'd much rather see employee ownership of corporations become more common. This fundamentally addresses the underlying inequalities rather than slapping a tax bandage over it. -- JonathanTang
Wow, you can't be the other person I've been conversing with! Okay, so you claim that income tax, while not optimal, is ultimately the most fair and impacts people's willingness to work the least (since they have to work). What happens when you have a graduated income tax, like in the US, where many families earning 45,000 USD or less pay insignificant or NO income tax. That, to me seems suboptimal for three reasons: 1) There just aren't enough "rich" people to pay for everything, especially when that 45k mark keeps rising. 2) There IS a strong disincentive to break that 45k limit, thus stifling productivity (I don't believe in a ZeroSumGame, or else our GDP would remain the same as it was for the last 200+ years). 3) In the US and other "democracies" the people making the taxing decisions start to be less and less the people actually paying the taxes (at least directly, and remember the number for no tax keeps rising), meaning that the biggest producers get crushed abnormally fast.
I do agree that lotteries are horrible and should be banned. However, I think a spending tax is useful as a tax and social engineering to keep people from spending as much as they normally would. That doesn't seem like it hurts the "poor", considering the amount of debt most "poor" tend to carry in the US (i.e. they spend way more than they make).
I leave the employee owned corporations and such for later discussion.
Income tax is most fair, eh? Give up Jonathan, the idiot's a troll. [Well that answers my question of whether this was the same guy, no it wasn't. When I said "most fair" I meant closest to being fair, responding to John's statement that it was "better than other options".]
I actually claimed that the income tax is a decent solution when balancing equity and efficacy, not that it is either the most fair or most efficient. At the turn of the century, a land tax was proposed that would've been just about ideal for the conditions of the time. Land is completely inelastic: there's a fixed amount available, so a tax is a simple redistribution of payments with no frictional effect. And back then, the people with the most land tended to be the richest, making it as fair a tax as any. Unfortunately, it would be difficult to enforce then and virtually impossible now, as much of the value of land comes from improvements and not raw acreage.
Even today, I think there're better possible tax schemes. A continuously graduated income tax would be one, so you never end up making less by nominally making more. Taxes on externalities (pollution, natural research use, etc.) actually restore normal functioning of the free market, instead of adding friction - the difficulty, of course, being in measuring the value of the externality. Taxes on addictive goods like cigarettes also work well, because elasticity is close to zero and you can always argue that "It's your own damn fault." Though it does tend to double-screw those addicted, because they need to fork over money to the company that got them hooked and then more to the government.
To answer your points, though:
1) You would be surprised. In 1994, 50% of the U.S. aggregate income was made by the top 20% of families (source: http://www.census.gov/hhes/income/incineq/p60tb2.html). It's likely to have grown by now. The people who make pay no income tax (which is close to 50% of households) make only about 20-25% of the total income.
2) Less than you might think. There sometimes is, in the short run - I know that I'm carefully controlling my earning power this year so I fall under the minimum needed to file a tax return. But in the long run, most people eat the taxes and make more anyway. The problem is that earning power in the long run depends on raises in the short run. If you refuse to take the pay increase to $45k because you'll have to start paying taxes, then you'll never get the raise to $60k that might dramatically increase your living standards.
3) That applies to most political policies. The people who declare war on Iraq are not the ones sending their kids over. The people who outlaw abortion are not the ones having babies. The people pushing for capital punishment are not on death row. The people outlawing marijuana are not the ones using it. The people enacting the DMCA don't know the first thing about copyrights, intellectual property, or anything creative. You're really arguing against government, not against taxes. -- JonathanTang
On equity grounds, there's good reason to support:
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