MISCHIEVOUS FREE MARKETS. In all the discussions of economic problems that I read, and hear about, there is one problem that never seems to get mentioned, or addressed. That problem is the fact that a free market system is inherently unfair, unfair to the point of creating an exaggerated unfairness. Although the word "free" in "free markets" implies, ideally, no unfair manipulation of the market by humans, there is an obvious and pronounced natural unfairness in the results of free market operations. The basic unfairness is that for the sale of a given type of product or service there are always many fewer "winners" than "losers" of the available market within the practical transportation and communication range of a given group of sellers. If every person had a different product or service to sell then a free market would simply function to determine the relative barter value of each product or service. But, of course, many people will be trying to sell similar products or services. In this situation the free market will favor the very smallest minority of sellers who are able to supply the products, or services, at even just a slightly lower price than any of the rest. The consequence of this selection process is that if someone can provide a product or service at, say, 2% less than his competitors, he will likely get a 100% to 1000 plus % increase in his sales volume and income. Is this disproportionate increase in income relative to price drop fair? Has this seller really provided 1000% more economic benefit to his community? I think not. I believe it is just the result of a mischievous over rewarding idiosyncrasy of a free market system. This unfair result can, of course, be quickly escalated into a much further unfair advantage. A free market has been shown to be much better at selecting useful production priorities than does a planned economy, mostly because it puts a great many heads together working on the problem rather than just a few, but it leaves the matter of an economically sound distribution of income in as indifferent and primitive state as the law of the jungle. The free market idiosyncrasy referred to above does a great job of building up "the nation's" capital facilities, but do these capital facilities, and their income, really belong, quantitatively, to most of the people of the nation, or to just a comparatively few? There is a mantra that goes "Capital investment creates jobs". It is true, of course, that if capitalists can hire people fast enough to create improved capital facilities faster than the use of improved capital facilities replaces the need for workers, or if they can produce "make work" products and services like grossly redundant Dot Coms, then there will be a concurrent increase in the number of jobs. But this is an obvious treadmill which the Federal Reserve has a very hard time keeping well oiled, and I personally can't picture it running well forever. I will not drone on here, though, about all the kinks in the capitalist machinery. I simply want to make the point that the typical distribution of income brought about by a free market system tends to be drastically unfair without any necessary intention on the part of its participants, although I'm sure that most people who are involved in trade, or even just contemplate it theoretically, understand the winning and loosing odds involved. But nobody seems to mention that this situation spells economic and social trouble. I think that this natural tendency toward a maldistribution of income in a free market system could be most easily compensated for by the use of a negative income tax rather than the expensive, clumsy, abusable institutions we currently have. I welcome contrary comments.
Fairfield ... Re. "In all the discussions of economic problems that I read, and here about, there is one problem that never seems to get mentioned, or addressed. That problem is the fact that a free market system is in- herently unfair, unfair to the point of creating an exaggerated unfairness. " Like 'volume discounts' that permit a high-volume retailer to undersell the small volume retailer, the so-fondly-remembered mom & pop stores that were so convenient, and drive them out of business while all the price conscious buyers, while bemoaning the loss of 'their neighbor- hood store', jump in their SUV's and drive to WalMart, never considering the 'hidden' cost of not walking, or even driving, a block or so. Ah, the madness of it all! Take care, and welcome to Sciforums. PS Sorry about not being 'contrary'.
Greetings - What precisely are you trying to say here? That the people who do a better job of running a business than anyone else be punished? Why on earth should benefit to the community be factored into business strategy? Also, who determines what 'fair' is? And fair to whom? And why does a difference in results equate to unfair? What if they translated this to the Olympics; should a team that performs better than another team have some of its points taken away because the system must therefore be unfair? Thanks, FyreStar
FyreStar said: "Why on earth should benefit to the community be factored into business strategy?" I did not recommend a business strategy. I recommended a social strategy (Negative income tax). I believe businesses should be entirely relieved of any direct social burdens, as such burdens carry an obvious conflict of interest. People might just as well ask business to run the whole government for them in the public's interaest. FyreStar said: "Also, who determines what 'fair' is? And fair to whom?" In our country the U. S. Constitution says the majority of the people can decide what's fair (with a little refereeing by the Supreme Court). FyreStar said: "What if they translated this to the Olympics; should a team that performs better than another team have some of its points taken away because the system must therefore be unfair?" The purpose of the Olympics is to select a small minority of winners. This does not seem to me to be a wise pursuit for an economic system. Also, the word "fair" is not exactly off the table at the Olympics.
Fairfield **a free market system is inherently unfair, unfair to the point of creating an exaggerated unfairness. ** Nobody ever said life would be fair. Please Register or Log in to view the hidden image! But just for using the word idiosyncrasy, you can have a million brownie points (50 cents cheeper than my competitor's rates) ++what can I say?? I like big wordsPlease Register or Log in to view the hidden image! ++ ~Aphrodite~
Dear Goddess Aphrodite: Regarding your tendered offer of 3/5/02 of a million brownie points ($.50 discount from list price), for long words like idiosinkcrosea, to assure against possible future default in payment I need the following information before negotiations can begin: Your Debt/Equity for the most recent quarter. Your Price/Cash Flow for the trailing 12 months. Your Net Profit Margin for the trailing 12 months Has the accounting firm Arthur Anderson been band from Mount Olympus? Thank you. Respectfully yours, Fairfield.
Fairfeild We goddesses don't do much dealing in money. I am not aware of my financial status at the moment, you will have to take it up with my accountant. Go to www.mount_olympus_investments.god and see if you can find my account information. Sorry for the inconveniencePlease Register or Log in to view the hidden image! ~Aphrodite~
Dear Goddess Aphrodite: This communication is to inform you that your accounting department at www.mount_olympus_investments.god is not providing the necessary accessibility and transparency to support and consummate a transaction of so large a size as 1 million brownie points. Considering the dire fate that befell the late Gods Of Enron, who, like you, were not exactly aware of their financial status, I humbly recommend that you examine your accounting department closely for any irregularities. I feel that a fall of the Goddess Of Love, unlike the fall of the Gods Of Enron, would be a serious disaster for all the world. Respectfully yours, Fairfield.
Fairfeild Thank you very much for your concern over my financial stability. I will look into my account as soon as possible and make sure all is in good order. ~Aphrodite~
Hi Fairfield: I missed this thread until you mentioned in my Argentina thread. Here are my thoughts... Because Free Market System is an ecosystem, it is much more complex to draw a quick conclusion on a specific attribute. It is like saying thunderstorms are bad because sometimes they kill people...or damage property...This is one of those Emergent Complexity subjects... In a specific instance, I can agree with you since as a ecosystem it covers a large number of cause-effect relationships. Several things to considerthough. There is no such thing as an absolute free market since everything is regulated by law or human perception. The nine states that are suing Microsoft not because they want market place to decide but interested in protecting their constituents. If they have their way (see my thread in computer section), you will have 5 different version of windows that will not talk to each other and the entire computer industry will get fragmented. Technology growth will slow down back to the mainframe days dominated by IBM again. Linux will be free - as long as you buy a hardware paying through the nose. Just because you drop price does not mean you can sell - even commodity items. There are lots of other factors that decides who buys what, when and where. Human perception and customer relationship plays a great part too (ask IBM). The reason so called free market works so well is that, like a pyramid scheme, people work their butt off to make it a success. So the productivity goes up. I say pyramid scheme, because in some situations like dotcoms, it was. A large number of products that are sold in this country are junk and has been that way for years (remember Instamatic cameras?) yet people buy them. As long as people work hard to buy junk, we have our free market. What is wrong with that? The other part is the demand. There is always pent up demand for stuff everywhere on this planet. Once those demands are identified, people work hard to produce those items in the hope that they will get rich in the process. In a controlled economy, no such mechanisms or incentives exist to bring about products or services to support those demand. So the founder and the worker that worked so hard for a piece of the rainbow - ultimately get rewarded. But once a company is fully established for many years and is publicly traded- that company becomes like a small government. New ideas are ignored (polaroid, exodus, kmart) and the company no longer can compete in the ecosystem. They try to use the government and other loopholes in the law to manipulate the market (Enron...). Nothing humans make is perfect...it is a work in progress...we learn from our mistakes and try to do better...more equitable for all. Even doctors who take oaths to serve humanity get greedy too... Because economy is a complex ecosystem, countries like Argentina have a difficulty understanding that complexity and hence the problems...
Hi Kmguru: I have decided to move my thread, on Mischievous Free Markets, to the World Politics and Eventsforum, as I think this Ethics forum is a virtual hideout. It's too bad that there isn't a separate Economics forum, as I think a lot of nonexpert but interested people would like to discuss this subject with experts like you, and among themselves. If you have any further comment for this thread will you pleas go to the Issues and World Politics and Eventsforum. Thank you. Fairfield
Fairfield I see a free market as a system in which people can gain material wealth and comfort according to their individual merits, or lack of merits. If I can make the best chairs in the world, and I work hard at it, I want more money than some drunk fool who paints old garbage bins and sells them as chairs. Free market, free trade, it's all about the merits of personal production. It's fair. Unfair would be if one person works thrice as hard as another and the system forces the same wage and living conditions on them both. "Free" market in this sense implies control and operation by humans, which is as it should be, for the reasons just explained. Fair or unfair manipulation by humans is an integral part of a free market. As long as humans are involved. The way that minority of sellers achieves its position is through cheap production and post-production, and generally this involves a lowering of standards as they seek cheaper labour and materials. The way individuals then compete with mass-producers is by aiming for quality rather than quantity. There will always be a market for quality. Again, this is fair. Let's see. The mass-producer pays a lot more tax than smaller producers. The mass-producer, in seeking cheaper labour, brings wealth into poorer areas that desperately need economic activity, possibly saving many lives and generally improving the area (even though the intention may be only to have cheap labour). Hell, the mass-producer might even be saving lives in the poorer areas, unlike the smaller producer. I don't like to put dollar values on lives, but I'd say that gets your 1000%. Welcome to class polarisation. Inherent in any free market which is not regulated well enough by the state. IE: If the state maintained control of public assets (such as hospitals and state schools), and taxes actually paid for public use of those things like they should, the class polarisation would be far less damaging. As you say, it can't run on for ever. Class polarisation is not static, and won't reverse. If it gets bad enough, it may lead to all sorts of strife, maybe even a communist or socialist revolution. A negative income tax? A flat rate of tax for everyone is the best way to handle tax. Any taxable entity should pay one flat rate.
What the U.S. Constitution Says Fairfield said: "In our country the U. S. Constitution says the majority of the people can decide what's fair (with a little refereeing by the Supreme Court)." I would be very interested in reading the part of the U.S. Constitution that says that. Please give me directions..........
The freest markets produce the most wealth and the highest standard of living for all in a given society. It is no accident that there are more Rolls Royces and BMWs, per capita in Hong Kong, than anywhere else in the world, even though it has one of the densest populations, per square mile, in the world. Hong Kong has for many years had the lowest taxes and regulations in the world and that has created incredible wealth for all who are willing to work hard. Conversely, the most poverty stricken societies in the world are the ones that have had the most govt. interference in their markets, usually justified with the mantra of "making things fair." No better way to drag everyone down to the lowest levels of economic existence, than to have the govt. create "fairness" for us.
While that is true, it is not as simple. Culture has a lot to do with it. One can not draw the conclusion that those governments who have a tight reign on the economy should overnight switch to market economy and walla...they will get rich...(like Russia and Argentina) Present world economy is a chaotic system. Those economists who understand the mathematics behind chaotic systems will do well. I have not seen an economic text book that discusses chaotic system. Faifield - I will start a new thread in world affairs that will get more visibility. Because people post a lot, we may have to keep the economic threads alive by timely posting. If we get more visibility, we may ask for a separate "economic" section and move my Argentina threads...and solve world problems there....
Hi Adam: Thanks for the welcome on the Argentina Crises thread. I love all the benefits of a free market economic system that you describe, when they are obtainable from a "level playing field", but you concede that the wealth of the nation is continually concentrating into fewer hands, although you call it "class polarization", which makes it sound more like a difference in the people involved rather than a difference in where the wealth is located among the people. Where are the great (semi) levelers of the past, like the Homestead Act, which got the workers of this nation off to such a rip roaring start in the beginning of this nation; and the G.I. Education Bill after World war 2, which did the same thing for the nations workers in a more modern economic setting? Why wait for special events to do something so useful and beneficial? Here are a couple of URLs you might find interesting. http://www.sharedcapitalism.org/scfacts.html http://www.brook.edu/views/op-ed/baker/19990205.htm Fairfield
Fairfield said: "In our country the U. S. Constitution says the majority of the people can decide what's fair (with a little refereeing by the Supreme Court)." Hi Bob39: I guess I rather over paraphrased the U. S. Contitution here, but the net results are pretty much the same. . The legislatures of all the states and the U. S. government are each allowed to make laws, including laws against practices which are deemed unfair by the majority of the legislators in any given legislative body, in concert with the opinions of the majority of people represented by those legislators, if such legislators desire to get reelected. Fairfield
Adam said: "The mass-producer, in seeking cheaper labour, brings wealth into poorer areas that desperately need economic activity, possibly saving many lives and generally improving the area (even though the intention may be only to have cheap labour)." Since machines with artificial energy can apparently, eventually, do any kind of labor better and more cheaply than humans, even humans on subsistence pay, what makes you think that "good competition" won't also force the "mass-producer" to eventually replace even his lowest paid workers with machines?. Fairfield.
I expect that will indeed happen. The lowest paid workers will, over time, be replaced by cheaper machines. This has happened in Australia. Gradually, the wage-bracket being replaced by machines is getting higher, so fewer and fewer blue-collar jobs exist here. On the other hand, with fewer people required for labour and manufacturing, more people are available for seeking education, performing white-collar work, doing research, art, and so on. Eventually, I think we may see nations in which almost all labour is performed by machines, and the citizens only do work they want to do. But even in that case, some labour will be farmed off to poorer nations. But then in those poorer nations, gradually the same process will occur I think.
Now managing that dynamics will be a problem...as is happening now with US unemployment in white collar is rising rapidly...most of our blue collar jobs are already gone to automation and outsourcing to Mexico, China, Asia, South America.... The situation is so influx that even the Mexico jobs moved out to China in just seven to ten years. I recently presented a plan to bring back some jobs to our local area. The plan is complex because there is no more simple solutions - but the local political contact phoo-phooed it. They dont care if people are on welfare and the tax base is going down. The middle class pays through the nose through various tax system....
