The real reason that capitalism is so crash-prone. • Hacker News Board

Re: The real reason that capitalism is so crash-prone.

#51

Post by jerf » Fri, Oct 02, 2009, 11:31 PM UTC

abefortas wrote: post #24

jerf wrote: post #21

I think this is a better way of thinking about it than "greed". The next natural conclusion that follows is that nobody actually knows how to fix this . It may even be an intrinsic attribute of a growing economy; it may literally be impossible to avoid, short of not having a growing economy. Centralized management makes the lockstep-motion problem radically worse, solving the positive feedback problem by nearly elimi…

Some people are against having a growing economy. Obviously the economy cannot grow indefinitely.

Growth does not imply the use of more resources. Economic wealth comes from knowledge and command of atoms. Software is wealth, books are wealth, and so on. Such wealth clearly requires a baseline of control over resources and energy, but we get more efficient with it over time so it's not the linear relationship that so many seem to think.

There's a lot of growth left to do, and all precluding our growth now will do is make damn sure we never actually build a sustainable society, because it's not possible with our current technology.

We'll worry about how to manage a non-growing economy when we get there. That situation is so unlike the current situation that even speculation has rather limited value.

(See also: http://www.jerf.org/iri/post/2417 , which is too long to put here and not entirely on topic, but is fleshed out a bit more.)

Re: The real reason that capitalism is so crash-prone.

#52

Post by jibiki » Fri, Oct 02, 2009, 11:37 PM UTC

jamesbritt wrote: post #48

GavinB wrote: post #46

Earlier quoted context omitted.

The tragedy of the commons works like this: If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. If you somehow (how to do it is a coordination problem) arrange for only a small number of people to fish, they can bring in reasonable number of fish every day for many years. The upshot: In some markets, like consu…

" If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. " Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish.

> Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish.

This can have downsides, namely the sort of "credentialism" that's often derided on this site (licensing for interior decorators, etc.) All the players in some industry decide that it's in their best interest to appeal for regulation which will prevent others from entering this industry.

Re: The real reason that capitalism is so crash-prone.

#53

Post by timwiseman » Fri, Oct 02, 2009, 11:55 PM UTC

abefortas wrote: post #24

jerf wrote: post #21

I think this is a better way of thinking about it than "greed". The next natural conclusion that follows is that nobody actually knows how to fix this . It may even be an intrinsic attribute of a growing economy; it may literally be impossible to avoid, short of not having a growing economy. Centralized management makes the lockstep-motion problem radically worse, solving the positive feedback problem by nearly elimi…

Some people are against having a growing economy. Obviously the economy cannot grow indefinitely.

At least in principle, I do not see why it cannot. Growth implies that the GDP is going up, considering that IP/software/etc can all contribute to the GDP then as long as people continue to work creatively then it can in principle grow indefinitely.

Re: The real reason that capitalism is so crash-prone.

#54

Post by chimariko » Sat, Oct 03, 2009, 12:01 AM UTC

pyre wrote: post #41

chimariko wrote: post #22

Earlier quoted context omitted.

Capitalism creates an environment where both positive and negative traits can be materialized. Everyone agrees that altruism is better than selfishness in moral sense. However one must be quite civilized and have high quality of life and standard of living to exercise altruism. Those whose individual demands are not met simply cannot afford altruism. A financial system aimed at rewarding those who think of others ( s…

> However one must be quite civilized and have high quality of life and standard of living to exercise altruism. Not necessarily. There are plenty of people that have nothing that still devote time/money into helping others before themselves. I hate to reference the Bible, but there was a parable in there about a woman donating 2 cents to the poor verses wealthy men donating piles of money (I think this was 'bags of…

I wouldn't rely on poor people's altruism as on a valuable contribution to others. Even if giving those 2 cents was an important decision for the woman considering her poorness, the piles given out by a richer man were much more valuable. It is absolute value of a contribution that matters for a receiver of good here.

Re: The real reason that capitalism is so crash-prone.

#55

Post by anamax » Sat, Oct 03, 2009, 12:34 AM UTC

hy3lxs wrote: post #4

Great read. My two favorite quotes: The Prisoner’s Dilemma is the obverse of Adam Smith’s theory of the invisible hand, in which the free market coördinates the behavior of self-seeking individuals to the benefit of all. Each businessman “intends only his own gain,” Smith wrote in “The Wealth of Nations,” “and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his i…

One difference between designing airplanes and govt regulation is that designing airplanes isn't prone to folks making design decisions to benefit to friends and family.

Political corruption is pretty much a fact of life whenever govt gets involved in money.

I don't see why folks who complain about corruption involving govt contracting believe that financial regulation will be any better.

Re: The real reason that capitalism is so crash-prone.

#56

Post by kiba » Sat, Oct 03, 2009, 12:43 AM UTC

Confusion wrote: post #39

kiba wrote: post #16

Failure is a feature of capitalism. It is to be expected. However, what shouldn't really happen is a cluster of failures. That's caused by misinformation in the pricing system. Real saving rate doesn't matched up with interest rate, so people are being fooled by non-existent capitals. At least that's how I understand it.

As Marx correctly understood, capitalism is best likened to a force of nature: it doesn't have any moral basis and can have both morally positive and negative consequences. This is why we need governments to keep capitalism in check: unchecked capitalism also leads to activities we find morally unacceptable. Like evolution favors only those traits that add reproductive value, capitalism favors only those activities t…

If the government is trying to head off failures, then it become a quasi-political game. Politics also happens to be a far more violent affair than the play-wars of businesses.

To be threatened with a gun for the purpose of forceful extraction of your wealth is FAR DIFFERENT than peaceful voluntary exchanges championed by capitalists.

Also you misunderstood failures(as in loss). Failures is a feature of capitalism. Failure play an improtant part of resource allocation by telling companies what not to allocate to.

Likewise, success(as in profit) tell companies that this is what consumers want. It could be that consumers want lot of trashy poor quality mass produced goods or high quality expensive goods. The market help companies decide what to produce.

Re: The real reason that capitalism is so crash-prone.

#57

Post by pyre » Sat, Oct 03, 2009, 1:34 AM UTC

chimariko wrote: post #54

pyre wrote: post #41

Earlier quoted context omitted.

> However one must be quite civilized and have high quality of life and standard of living to exercise altruism. Not necessarily. There are plenty of people that have nothing that still devote time/money into helping others before themselves. I hate to reference the Bible, but there was a parable in there about a woman donating 2 cents to the poor verses wealthy men donating piles of money (I think this was 'bags of…

I wouldn't rely on poor people's altruism as on a valuable contribution to others. Even if giving those 2 cents was an important decision for the woman considering her poorness, the piles given out by a richer man were much more valuable. It is absolute value of a contribution that matters for a receiver of good here.

That may be, but the original statement said that one needed to be 'rich' to exercise altruism, and despite the downmodding of my previous comment that point still stands.

Re: The real reason that capitalism is so crash-prone.

#58

Post by [deleted] » Sat, Oct 03, 2009, 4:17 AM UTC

[deleted]

Re: The real reason that capitalism is so crash-prone.

#59

Post by jamesbritt » Sat, Oct 03, 2009, 7:21 AM UTC

jibiki wrote: post #52

jamesbritt wrote: post #48

Earlier quoted context omitted.

" If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. " Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish.

> Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish. This can have downsides, namely the sort of "credentialism" that's often derided on this site (licensing for interior decorators, etc.) All the players in some industry decide that it's in their best interest to appeal for regulation which will prevent others from enter…

Oh, absolutely. I just don't buy the idea that the default expected behavior from people is to shot themselves in the foot so blindly (e.g., a race to see who can empty the lake first).

That people may slowly stab themselves in the foot repeatedly is more likely.

Re: The real reason that capitalism is so crash-prone.

#60

Post by GavinB » Sat, Oct 03, 2009, 6:35 PM UTC

jamesbritt wrote: post #48

GavinB wrote: post #46

Earlier quoted context omitted.

The tragedy of the commons works like this: If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. If you somehow (how to do it is a coordination problem) arrange for only a small number of people to fish, they can bring in reasonable number of fish every day for many years. The upshot: In some markets, like consu…

" If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. " Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish.

There are many different ways to deal with coordination problems, both public regulation and private arrangements.

The overfishing problem isn't a hypothetical example, it's a real problem that has caused problems all over the world. http://en.wikipedia.org/wiki/Overfishing#Instances_of_overfi...

The problem is that even if 90% of the fishers in an area are responsible, the remaining 10% can ruin it for everyone. And no one has any incentive, other than their conscience, to cooperate. And that's why it's a tricky problem.