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How America became uncompetitive and unequal

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Re: How America became uncompetitive and unequal

#61

Post by NoPiece »

sergiosgc wrote: post #35
NoPiece wrote: post #22

Earlier quoted context omitted.

Welcome to the age of thousand dollar a pill medicine. Every communication, location, every purchase, every mouse click or swipe duly tracked, recorded, and data mined. You are exactly describing the world today, as provided by our big government.

Small countries, like mine (.pt), kind of disprove this idyllic vision of small government. Small governments easily fall prey to large multinationals. USA's woes with oligopolies may have many causes. A government concentrated at the federal level isn't probably one of them.

My rebuttal would be that the oligopolies exist in heavily regulated areas (health, banking, telecom), and that isn't a coincidence. You don't need a big government to protect yourself from multinationals, you need a non corrupt government.

Re: How America became uncompetitive and unequal

#62

Post by brc »

nmrm wrote: post #16
brc wrote: post #6

Earlier quoted context omitted.

Except that it is nothing like communism. Communism is defined by a complete lack of freedom to change the status quo. In turn, the lack of freedom to change the status quo means that development and progress is dramatically slowed, slowing down improvements in quality of life - as people themselves would prefer. Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory…

> Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory capture has occured (eg taxi licences, car dealerships). Value for whom? The problem is that "effective way to deliver value" is measured in terms of corporate profit (value to shareholders), not in terms of the actual thing being produced. So firms can produce less value to the economy at-large (fewer flights,…

>Have you seen many airline start-ups in the past half century or so?

Yes, several.

Virgin Atlantic, Virgin Australia and Virgin America were all startup airlines that have gone on to have success despite being in highly regulated businesses. Virgin Australia was started in 2000 with $4 million and two planes and now has a market cap of $1.5 billion. It entered an oligopoly market with two airlines and cracked it wide open.

Even companies with gentlemans agreements are susceptible to entry by new competitors - even if it requires large amounts of cash - there are plenty of people with large pools of cash looking for opportunities. It happens so often that I am genuinely shocked that people think it doesn't.

Re: How America became uncompetitive and unequal

#63

Post by brc »

audunw wrote: post #51
brc wrote: post #6

Earlier quoted context omitted.

Except that it is nothing like communism. Communism is defined by a complete lack of freedom to change the status quo. In turn, the lack of freedom to change the status quo means that development and progress is dramatically slowed, slowing down improvements in quality of life - as people themselves would prefer. Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory…

"Communism is defined by a complete lack of freedom to change the status quo." Communism is as diverse as capitalism, and this is neither the text-book definition, nor the real-world definition. Is the definition of capitalism a complete lack of freedom to change the status quo because that was the case under Pinochet? The text-book definition is the common ownership of the means of production. Is China still communi…

I wasn't trying to define communism - if I was doing that I would say it was the public ownership of the means of production - or something along those lines.

A better way of putting it would be 'all countries who have turned to communism have a lack of freedom to change the status quo'. It's not the definition of communism - or even one of it's stated goals - but the lack of ability for individuals to benefit from their efforts creates a situation where the status quo is difficult to change.

Your example of China illustrates this perfectly - all the while that mao-ist communism held sway, China went nowhere - or backwards - in terms of changing. The current weak-communism allows people to retain the rewards of their benefits - and so the dynamism of china has increased greatly.

I'm not talking at the single voter level - I'm more talking at the Bill Gates/Steve Jobs/Elon Musk level. You need strong individual change agents to move the whole game forwards, and in a publicly-owned, incentive destroying regime, these individuals never flourish. That is what entrenches the status quo, and that is why communism is characterized by a lack of status quo. There certainly is no argument that communism causes stagnation, the results are quite shocking even if you remove the tendency for brutal dictators to leverage themselves into the position of power and murder their opponents.

I agree that democracy at the federal level is very flawed, particularly in the EU, but also in the US, where Federal departments and laws overrule too many local and state laws. The success of Federalism lies in the reuiqrements of individual regions to compete in terms of opportunity and the ability of like-minded people to gather and control their destiny. Texas and Oregon should be allowed to evolve in different directions, as should Sweden and Greece. Forcing harmonious regultions and taxation on them makes both areas feel aggrieved. The benefits from Federalism are really about applicability of similar laws, common defense and completely free trade within the borders. The drawbacks are losing your voice by vote dilution. The balance has to be at the point where a federal government is limited as to the extent it can override state laws.

Re: How America became uncompetitive and unequal

#64

Post by brc »

brazzy wrote: post #7
grondilu wrote: post #3

Earlier quoted context omitted.

The answer is simple : economic freedom. If companies have the right to merge, it's not because "right-wing free-market ideologues" think it is best for the economy, it's because it is their business and they are free to organize it as they will. Saying that only "many players can ensure progress continues" and thus prohibiting companies to merge is interfering with economic freedom in the name of "I know better", an…

You could not possibly be more wrong. Monpolies are the exact opposite of economic freedom and amount to a planned economy, except the plan is not even nominally for the good of everyone.

Monopolies can only happen with a large and determined government to reinforce them. Actual monopolies are exceedingly rare, and nobody has ever provided me with an example where the monopoly power was not in part or wholly provided by the government. No monopoly can overcome the power of technological innovation and the desire for lower cost goods and services in even the medium term.

Monopolies and planned economies are two sides of the over-sized/too-powerful government coin.

I'm all for stopping monopolies from forming, but the solution to that is not anti-trust style laws, but a focus on preventing the conditions that allow monopolies to continue.

Re: How America became uncompetitive and unequal

#65

Post by brc »

leaveyou wrote: post #14

Consolidation is also favored by cheap money (yes, back to money monopoly thingy). Above some threshold and especially if you are in good relations with a bank, it is far easier to buy your competitors and dismantle them by selling their assets than to compete with them. It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD, while in t…

It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD

It was bad because the only effective way of determining which goods should be produced and which should not is via the price system. It's a fatal conceit of planners that they can predict and determine what people want - even right down to how many loaves of bread they want.

It's the whole reason why some startups fail and others succeed, but nobody really knows why at the outset. Replace the dynamism of Silicon Valley with a government planning board and the whole thing would be dead in 2 years.

The actual idealogy behind it doesn't matter - if you think you can plan an economy, you're already creating trouble.

Control of the economy is most definitely not in the hands of 'unaccountable private banks'. Banks rarely even feature in most startup stories - the market innovated around them by forming venture funds and employing individuals who were skilled at allocating the capital in them. It's simply not true that banks control the economy, and anyone is free to start their own bank or perform their own lending if they like.

Re: How America became uncompetitive and unequal

#66

Post by brc »

leaveyou wrote: post #46
spindritf wrote: post #29

Earlier quoted context omitted.

It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD It wasn't judged as bad because of nomenklatura, or rigged elections. Few people care about these. It was bad because you couldn't get basic goods. There were shortages of sugar and toiler paper. Not war-time shortages, decades after the war. Which is why the current system will con…

"It was bad because you couldn't get basic goods". True. But the current system is (even more?) problematic because you can't get basic JOBS. And not only that but a fundamental part of the current system is the accelerating race of getting rid of jobs. And not only that but now, unlike ever before, the system uses the best tools against jobs: software & automation.

Well, that is just not true. Technological innovation has been automating jobs since, well, the Romans built aqueducts and hydro-power and stopped people having to haul water in buckets up hills and bashing grain with a rock.

There are more people employed now than at any time in history. That's only possible with automation. Even since the time of the Luddites, people have been freed from drudgery and poor jobs and have higher quality of life, despite industry after industry being dissolved.

For each product that is produced at lower cost and higher quality through automation, extra spending is released by the consumers who get to purchase those products at lower cost relative to their income. The extra spending either goes into savings (good) or spending (still good) which in turn creates new industries which create new jobs.

Essentially, you can't have a gaming and micro-brewing industry without the more menial tasks being replaced by automation. I want no part of a future where new innovations can't happen because we insist on slowing technical progress to keep people in menial jobs.

The process has been repeating for a millenia - you have to have a very compelling reason to suggest that it will somehow stop because of more technology.

Re: How America became uncompetitive and unequal

#67

Post by ergoproxy »

nhaehnle wrote: post #58
ergoproxy wrote: post #28

Earlier quoted context omitted.

I was speaking specifically of monopoly power, i.e., the power to raise or lower prices in the market. And no, neither government nor private firms should have this power. Monopoly power is an example of market failure. In a competitive market, all participants are price takers , i.e., passive agents incapable of changing the market price. In perfect competition, in every transaction, at least one party is better off…

I appreciate your engagement in this discussion. I think the notion of a competitive market as you define it [0] is inherently flawed. To quote: > all participants are price takers, i.e., passive agents incapable of changing the market price That makes no sense. If all participants cannot influence the price, then where does the price come from? Logically speaking, once you abstract away from all sorts of fluff, ever…

> That makes no sense. If all participants cannot influence the price, then where does the price come from?

You are assuming that the dynamics of an economic system is nothing but a summation of the individual dynamics. This assumption excludes the possibility of the emergence of complex structures from simple individual behaviors.

I strongly suggest you take a look at the subjects of Complex Systems[1] theory, Nonlinear dynamics[2], Catastrophe theory[3], and Chaos theory[4]---all consistent, mathematically well grounded theories which allow for the emergence[5] of aggregate behavior that cannot be explained simply in terms of individual behaviors. There is also the emerging field of Complex economics[6]. Donald Saari wrote an introductory paper called the Mathematical Complexity of Simple Economics[7].

[1] http://en.wikipedia.org/wiki/Complex_systems [2] http://en.wikipedia.org/wiki/Dynamical_system [3] http://en.wikipedia.org/wiki/Catastrophe_theory [4] http://en.wikipedia.org/wiki/Chaos_theory [5] http://en.wikipedia.org/wiki/Emergence [6] http://en.wikipedia.org/wiki/Complexity_economics [7] http://www.ams.org/notices/199502/saari.pdf

Re: How America became uncompetitive and unequal

#68

Post by nhaehnle »

ergoproxy wrote: post #67
nhaehnle wrote: post #58

Earlier quoted context omitted.

I appreciate your engagement in this discussion. I think the notion of a competitive market as you define it [0] is inherently flawed. To quote: > all participants are price takers, i.e., passive agents incapable of changing the market price That makes no sense. If all participants cannot influence the price, then where does the price come from? Logically speaking, once you abstract away from all sorts of fluff, ever…

> That makes no sense. If all participants cannot influence the price, then where does the price come from? You are assuming that the dynamics of an economic system is nothing but a summation of the individual dynamics. This assumption excludes the possibility of the emergence of complex structures from simple individual behaviors. I strongly suggest you take a look at the subjects of Complex Systems[1] theory, Nonli…

What you write is not an argument against what I wrote, and you make incorrect assumptions about what I'm assuming.

You yourself talk about the possibility of the emergence of complex structures from simple individual behaviors.

In other words, you acknowledge that it is the individual behaviors that are necessary for the complex structures to exist. There may not be a simple linear relationship between the individual action and the ultimate outcome, but that doesn't change the fact that individual actions have an influence on the market price.

It also doesn't change the fact that without individual actions, a market price would never change (and would never exist in the first place), and that therefore, individuals have some power over the market price.

That does not mean that an individual can just dictate what the price should be without any constraints, but it does mean that your definition of a competitive market is a meaningless phantasy that cannot possibly exist.

The whole field of optimal control theory is about how to control complex structures that emerge from individual controls.

Edit to add: By the way, outside of the theoretical argument, I think it's a good idea to take a brief look at what kind of markets exist empirically. In all markets that actually exist, it is obvious that there are actors who are capable of changing the market price.

This holds for exchanges, where actors change the price by buying or selling. It also holds for more everyday markets where it's typically the seller who puts up a sticker price. For example, the people running a supermarket set the price for the items in the supermarket.

One last thought: My argument is basically that for every market, there is some function f whose outputs are the prices in the market, and that the only inputs of this function is the history of actions of market participants (the shape of the function depends on the structure of the market).

My argument then continues to say that since the market price is a function of only the actions of the market participants, there must be at least one market participant whose actions influence the price, otherwise the price could never change. This is a simple mathematical statement.

Your attempted counter-argument is that the function f could be very complicated, which is completely irrelevant to my argument.

Re: How America became uncompetitive and unequal

#69

Post by leaveyou »

brc wrote: post #66
leaveyou wrote: post #46

Earlier quoted context omitted.

"It was bad because you couldn't get basic goods". True. But the current system is (even more?) problematic because you can't get basic JOBS. And not only that but a fundamental part of the current system is the accelerating race of getting rid of jobs. And not only that but now, unlike ever before, the system uses the best tools against jobs: software & automation.

Well, that is just not true. Technological innovation has been automating jobs since, well, the Romans built aqueducts and hydro-power and stopped people having to haul water in buckets up hills and bashing grain with a rock. There are more people employed now than at any time in history. That's only possible with automation. Even since the time of the Luddites, people have been freed from drudgery and poor jobs and…

I agree with you on many points. Trying to keep my messages short, I made them too ambiguous. I'm not a Luddite. My only worry is that Thomas Piketty may be right. I don't know where you live, but where I come from, there is a very small percent of shareholders/capital owners/producers and a very large number of consumers/labor owners. The consumers have less and less money and the producers need less and less labor. Are you sure a system like this is stable ? Technology and innovation is great if it works for you and useless if it's someone else's and he has no incentives to share it with you.

Re: How America became uncompetitive and unequal

#70

Post by leaveyou »

brc wrote: post #65
leaveyou wrote: post #14

Consolidation is also favored by cheap money (yes, back to money monopoly thingy). Above some threshold and especially if you are in good relations with a bank, it is far easier to buy your competitors and dismantle them by selling their assets than to compete with them. It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD, while in t…

It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD It was bad because the only effective way of determining which goods should be produced and which should not is via the price system. It's a fatal conceit of planners that they can predict and determine what people want - even right down to how many loaves of bread they want. It's t…

Again, I agree with you with one exception: banks have an unfair advantage and a monopoly over money creation. With the fractional reserve banking, banks take interest on money they don't have and in partnership with large corporations (in which banks may have vested interests and which are dependent on banks), banks can "determine which products should be produced and which should not" before the market has any word about it (by buying competitors, buying critical suppliers of competitors, patents..). Banks do control and steer the economy more than any other actor.
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