1. IrvingSnodgrass - May 21, 1999 - 10:13 AM PT
Paul Krugman discusses the future of capitalism in a recent Slate column, at least as far as it pertains to ticket scalping.
Discuss Krugman's thoughts, or any thoughts you may have on the future of capitalism or economics in general.
2. uzmakk - May 21, 1999 - 3:17 PM PT
Slow start. Chuga, .......Chuga..........Chuga. I'm sure that this thread will develop a full head of steam before long and become a full- fledged Juggernaut.. After all, we are speaking about basic human behavior, something that we should all be qualified to talk about. Long live capitalism!!!? Three cheers for capitalism?!?!?!?! Lord, won't you buy me a Jag XK8. I have one word for you....plastic.
3. uzmakk - May 21, 1999 - 3:17 PM PT
Have to read Krugman yet.
4. AzureNW - May 21, 1999 - 3:30 PM PT
Socialism would probably work better than capitalism for many of the native peasants in Central and South America who are accustomed to egalitarian tribal life, but the capitalists in charge of their "democratic" governments will not allow them to build socialist societies. When NATO has defined its role in international law in settling the attrocities Yugoslavia is committing against their dissident population, I would very much like to see an organization of American states do the same thing in Mexico, Guatamala, Peru and the rest of Latin America to stop the attrocities being committed against the Indians in the name of capitalism.
5. uzmakk - May 21, 1999 - 3:37 PM PT
Here, here, Azure. You speak the truth.
6. AzureNW - May 21, 1999 - 3:45 PM PT
Hi, uzmakk. I thought you were off to distant places for a few weeks.
7. Slackjaw - May 21, 1999 - 3:50 PM PT
Azure:
do these societies have norms and customs to get around the incentive problems inherent in socialism? Are those customs specialized to a non-industrial mode of production? Could they be grafted onto an industrial mode?
8. chloel - May 21, 1999 - 4:50 PM PT
Slack
Well, Ostrom - whose _Governing the Commons_ I thought you recommended - cites some Native American groups with said 'norms and customs'. I'm not sure industrialization is the most likely problem for the mountainous parts of South America, either.
And! But! Moreover! it would be nice to avoid, once in the history of the world, the "incentive problem" of handing over common resources to a small group on the grounds that it's more efficient. (Yah! for whom?) I've also been reading Flora Thompson's _Lark Rise to Candleford_, which was written early enough to see that (in Lark Rise) peasant families had been richer before Enclosure than after, even though the land they had previously had rights to was producing more (still by their labor).
9. Slackjaw - May 21, 1999 - 5:04 PM PT
well, the question isn't whether such norms could possibly exist or have existed, but whether they are functioning and in place in these instances, and furthermore how well they could be adapted to a different mode of production. Also, Ostrom's cases, while related, are typically of a somewhat different nature than the incentive problems in socialism. Ostrom's drum is the common pool resource. The norms would have to be a little different, to deal with the different problems.
If transferring control over a resource to a small group of people reduces the welfare of some others, it is by definition not an efficiency enhancing move (in the sense that social scientists use the term). Something can't be efficient for one party and inefficient for another.
10. uzmakk - May 21, 1999 - 5:54 PM PT
Azure:
I make my last posts for a week or two tomorrow. I'm not going anywhere, just staying off the fray, working hard, and trying to get into a new groove..
11. ranheim - May 21, 1999 - 6:07 PM PT
It seems to me that too many people - especially the "political class" - in the USA just assume that capitalism is the ONLY way.
I lived in our embassy in Moscow for 2.5 years. There is no way that the "man on the street" in Moscow (or anywhere in what was then the Soviet Union) could/would understand capitalism.
They NEED a Czar or a "man on a horse".
Another 2.5 years of my misspent youth was in the Orient. Because of density of population, I believe a system other than capitalism would be in order. Living on top of each other does not appear to me to go along too well with the "dog eat dog" features of capitalism.
We in the USA need to understand that there is no reason that we should be calling the monetary shots all over the world. What are we? 260 million out of 5+ billion inhabitants of this planet?
12. AzureNW - May 21, 1999 - 7:27 PM PT
Slackjaw -
Re: Message #7
I think so. I'm looking into it.
13. AzureNW - May 21, 1999 - 7:30 PM PT
Incentive isn't a problem. Tribes function like family businesses. As to whether tribal economies can be grafted onto capitalistic economies, I'm sure it is possible.
14. AzureNW - May 21, 1999 - 7:31 PM PT
Slackjaw,
Re: Message #7
15. AzureNW - May 21, 1999 - 7:32 PM PT
[delete, I *did* already say that]
16. AzureNW - May 21, 1999 - 7:39 PM PT
"I'm sure it is possible" for a cohesive tribe like the Makah have become.
17. Slackjaw - May 21, 1999 - 9:08 PM PT
well, how cohesive a tribe is depends on how well they solve the incentive problems (and of course their ability to do that depends also on their cohesiveness).
I disagree that if a unit functions as a family, then it is incapable of experiencing incentive problems in collective actions, revelation of preferences, or revelation of abilities. I submit that families *do* experience these problems.
I imagine it is not trivial to graft customs that allow for, say, the detection of cheating in a pastoral society or tribal society onto an industrial one. Mechanisms for determining shirking would have to be different, for example. So let me not ask about possibility, but likelihood.
18. stamper - May 21, 1999 - 9:25 PM PT
Does anyone want to talk about what Krugman wrotte about. You see, it come down to this. Is it fair for some guy to gather up a bunch of what he figures other people are going to want and to sock it to them when they want it. Now the thing is that no man can see into the future so when he lays down his hard earned money he takes a risk. Oh is very easy to say it's a sure thing. Well, if you think so, do for it. You might be surprised by the result.
Now I really don't know one thing about what you fellows been talking about, about latin America and Indians and I and i really hope you do. but if i throws my mone in a poker pot because i think i know what's going on, then i better be prepared for the worse.
19. AuNaturel - May 21, 1999 - 9:40 PM PT
"Living on top of each other does not appear to me to go along too well with the "dog eat dog" features of capitalism."
Ask Hong Kong.
"We in the USA need to understand that there is no reason that we should be calling the monetary shots all over the world. What are we? 260 million out of 5+ billion inhabitants of this planet?"
We aren't "calling shots". The rest of the world is trying to imitate us. It just happens that the more closely we are imitated, the stronger the imitating economy becomes. Hell, since we started imitating ourselves even our own economy has boomed. Why argue with success?
20. AuNaturel - May 21, 1999 - 9:42 PM PT
"They NEED a Czar or a "man on a horse". "
They need George Washington on a horse, not Peter nor Catherine..
21. AuNaturel - May 21, 1999 - 9:45 PM PT
"I submit that families *do* experience these problems."
As anyone who has tried to get the kids (or the spouse) to do their share of the chores can attest to.
22. Slackjaw - May 21, 1999 - 9:57 PM PT
yes, why should population density mean trouble for capitalism? After all, it works best if there are many participants on both sides of a market.
True, firms will try to run others into the ground. Like dogs chasing the rabbit at the race track, it is essential that they never be able to run *all* others into the ground--but that doesn't seem to me to be an issue of population density.
23. stamper - May 21, 1999 - 10:04 PM PT
The only threat to the future of Capitalism is stumbleing blocks in the way. Now plese explain to me why there should be laws that prevent some eager guy from getting his hands on those tickets and taking advantage of other people? You see he cannot take advantage over them without their consent. As long as he agrees and they agree, what's the problem/
24. ptboya - May 22, 1999 - 10:54 AM PT
To answer your question Stamper…I don't think there is a problem.
The underlying problem that Kruger illustrates is that often those in a position to exercise control over markets (the team owners here) don't really trust the markets. Instead they try to manipulate the distribution of a limited supply (stadium ticket capacity). According to the theory Kruger posits, they fear that, in the long run, a crucial mass of fans will be turned away from the game itself by the inflated prices that result from competition for that limited supply of tickets.
For me, the analogy is flawed. I doubt that those fans who follow the game through media outlets would be affected by gross inflation of tickets to the live event itself. Revenues from media far exceed those at the stadium. Anyway, it seems to me that in present day America cum Hollywood, those who would be impressed by the glamor surrounding those fat cats who can afford to attend the live events probably outnumber those who are turned off by the high prices. Net net, more fans, not less.
25. AuNaturel - May 22, 1999 - 11:47 AM PT
The real problem I see with stadium and franchise owners has nothing to do with with scalping. It's the deals they cut with local governnent for subsidies. A competition sets in between communities over who can expend the most tax money (hundreds of million os bucks) to attract a club. The city council isn't spending their own money and any future benefits are usually pretty vague, things like community status and the potential for a number of low paying service sector jobs. Even a huge market like LA gets jerked around like a puppet on the issue.
26. stamper - May 22, 1999 - 12:11 PM PT
Ah Naturel
Well then, isn't the real problem the fact that govenment gets all envolved, spending money that they take from working folks? You know, if you let me spend your money, i'll do a hell of a good job, won't spare a penny, but the good willbe for me, not for you.
Same way for those politicians. they just use most of that money to stay in office. they are the stumbling blocks i was refering to.
27. Slackjaw - May 22, 1999 - 1:12 PM PT
AuNaturel: I find very curious the implied dichotomy you see between competition in government services and competition in private services, and as well, the dichotomy between people as consumers and people as voters. Communities in your above post get jerked around in a way consumers, in your worldview, never do.
28. ptboya - May 22, 1999 - 1:39 PM PT
My apologies to Krugman for confusing him with the Geo. Washington of the Afrkaaner nation (post #24).
Good point Slack…
Au… your post also assumes, as I did, that team owners, many of whom dwell in the belly of the corporate capitalism, don't beleive they will prevail in the free market; unless, of course one defines their search for the best subsidy package an exercise in shopping the market.
29. ranheim - May 24, 1999 - 3:54 PM PT
I was thinking of a state of mind in the Orient. With population density like theirs, personality traits, I believe, are somewhat different. But, I'm probably thinking in terms of ancient history. I left the Orient in 1965. My last trip to Tokyo was weeks befoe departure. This is memory that I will never lose. Near my hotel was a secondary school; the oldest kids I saw were maybe 12 or 13. One was rushing to keep up with schoolmates and a paper slipped out of one his many books. He continued running - UNTIL. An ancient oriental female began berating him - I don't speak Japanese but her tone of voice was not friendly. She was chewing him out. He sheepishly returned, picked up the stray piece of paper, and again scurried off to be with friends.
That personality - both of the elderly woman and the child - I don't associate with the agression needed in most cases to make a success of capitalism. But in the past 30 years the kind of conduct exhibited by these two may well have disappeared from Japan.
30. judithathome - May 24, 1999 - 4:07 PM PT
Today in the USA, the child would probably shoot the old woman.
31. AuNaturel - May 24, 1999 - 4:23 PM PT
"Communities in your above post get jerked around in a way consumers, in your worldview, never do."
It is an issue of concentrated benefits and diffuse pain. Put to a vote, most (not all) large bond indebtedness for a stadium usually fail. But a hefty contribution to a city council campaign chest is usually enough to overcome the pain of voting for something the public would be moderately opposed to, given a direct choice in the matter.
Additionally, when one elects a council member one elects the totality of the member. Only in extraordinary situtations does their position on a signle or even a dozen issues come to the fore. If his district opposes a third of their councilman's votes, but still supports the rest, he/she may safely vote for quite a few things that would have failed had they been presented directly to the public.
32. stostosto - May 25, 1999 - 2:34 AM PT
I am confused about ranheim's implied association between American John Wayne style aggressiveness and capitalism. I wonder if any country - the U.S. included - can be said to be capitalist if that is the yardstick to go by.
In my book Japan certainly is a capitalist society, and has been for at least three quarters of a century. It just happens to have a different culture from the U.S., leading to different kinds of specializations and also a different set of institutions. As well as a different kind of behaviour.
33. Ronski - May 25, 1999 - 9:00 AM PT
sto,
There certainly are many varieties of capitalism. I prefer to call the kind I advocate "laissez-faire," to distinguish from the other forms. Japan does not practice laissez-faire, and frankly neither does the U.S.
34. Raskolnikov - May 25, 1999 - 9:24 AM PT
I have seen the behavior that Ranheim describes many times in the US as well. Maybe growing up in a small town is considerably different than the big city, but adults berating unknown kids for misbehavior was common. Whether we listened or not depended on how well we were taught to respect adults, not on how well we were taught to be capitalists.
35. Raskolnikov - May 25, 1999 - 9:25 AM PT
"There certainly are many varieties of capitalism. I prefer to call the kind I advocate "laissez-faire," to distinguish from the other forms. Japan does not practice laissez-faire, and frankly neither does the U.S."
Thank God. :)
36. Ronski - May 25, 1999 - 11:01 AM PT
Rask,
As long as you smile when you say that, pardner, the town remains big enough for the both us. :-)
37. Wombat - May 25, 1999 - 11:05 AM PT
Has any country really practiced "laissez faire" capitalism?
38. Ronski - May 25, 1999 - 11:14 AM PT
Wombat,
No.
39. Wombat - May 25, 1999 - 11:16 AM PT
So it's the Holy Grail of Libertarians?
40. Raskolnikov - May 25, 1999 - 11:20 AM PT
I thought Hong Kong and Switzerland were the two countries that came closest to a libertarian Shangri La.
41. davidtudor - May 25, 1999 - 11:29 AM PT
The Holy Grail? They have so many that at the very least it would better be described as one of their, say, Holy Trinity.
Apropros the discussion about team owners moving franchises around based in very large measure on the "package" of goodies a given state or city is willing to provide. Interesting backlash on this in terms of the New England Patriots, where the ultimate decision (assuming that it is final - hey, one never knows) for the Pats to at least stay in Massachusetts (hey, Foxboro ain't Boston by a long shot) seemingly was based in very large measure by their noble owner realizing that his other noble owners were't going to buy into Hartford because they didn't want to run the risk of much lower TV ratings in the Boston metro area. (As someone said, the real $$$ in professional sports of course is in the media dollars.)
I wonder - is there any evidence that the NFL has suffered in the LA tv ratings?
Of course, one Green Bay (and now Nashville) really is enough for a major sports league. Hartford? HAHAHAHA.
42. JJBiener - May 25, 1999 - 11:34 AM PT
Wombat - "Has any country really practiced 'laissez faire' capitalism?"
It is kind of like trying to live a sin-free life. Just because it is impossible to achieve, that doesn't mean that it isn't a worthwhile goal even if you fall short of reaching it.
43. davidtudor - May 25, 1999 - 11:37 AM PT
Biener - that depends on how you feel about all the trampling (think little people) that would occur in a laissez faire world and the debris that would be left after the venture failed.
44. JJBiener - May 25, 1999 - 11:40 AM PT
DT - "think little people"
I think the leprecauns can take care of themselves. The rest of your post is nonsense.
45. davidtudor - May 25, 1999 - 11:46 AM PT
Biener - your 44 is not funny. But, the post you made in the Debate thread chiding others for being, shall we say, doctrinaire or dogmatic, indeed was.
Frankly, my 43 was just a mild little retort to your simplistic blather in 42.
46. Raskolnikov - May 25, 1999 - 11:47 AM PT
The difference being that a sin-free life is actually desirable. And advocates of a sin-free life don't fall back to "well, *some* sin is okay if it really makes things function better" rationales.
47. Raskolnikov - May 25, 1999 - 11:51 AM PT
sorry, that was a troll. I *really* don't want to get involved in another discussion about the merits and flaws of libertarianism.
48. ranheim - May 25, 1999 - 3:25 PM PT
#34
I too remember this from the days of my youth (rural MN). But, I thought that occurred only in the memory banks of old farts like me.
I don't like capitalism very much. I find that it is very hard on many diverse groups of people. Only one example "The lame, the halt, and the blind". However, I have NO IDEA what to replace capitalism with. Any time one includes the government (except as a referee), a huge hash is made of all the various transactions that we call capitalism for shorthand. But, this arguement has been going on in pretty much the same fashion since Adam Smith. Only the wording was different prior to Smith; but, the basic discussion pre-dates Christ.
49. ProfEmeritus - May 25, 1999 - 4:09 PM PT
Some of the discussion seems to pose a dichotomy between capitalism and an alternative system in an either-or way. That is a false assumption. All economic systems are a mix between public and private control of capital, of wealth, of production and distribution. The real issue is what kind of mix do we as a society want.
The ideal mix (optimum?)probably depends on the stage and level of development. Systems very likely pass through sequences in which more or less government participation is socially desireable. Of course, it is important to consider the meaning of "socially desireable." Is it to maximize economic growth, to achieve maximum equality of wealth ownership and income etc etc.
Krugman's article says nothing about this basic issue. In fact, I interpret it as saying nothing about the future of capitalism. What has the extent and quality of scalping to do with the evolution of capitalism? It may say something about the quality of competition, but even that is not clear to me. I consider it to be an a relatively minor issue.
There are crucial matters that have to with the publuc-private mix in the economy, but it would be foolish to debate complete laissez faire (which should be construed as NO government participation in the economy) versus the other extreme. Recently we have zig-zagged between more and less government participation and vacillated on the relative size of the government sector. Do we continue in the present direction of a somewhat smaller (federal) government role? Should we accelerate this trend? Or reverse it? The 2000 election will certainly revolve partly or mainly around these themes, although politicians may skillfully obscure the choices, the costs and the effects.
50. ranheim - May 25, 1999 - 4:13 PM PT
#40
How active do you see the referee's roll?
51. MsIvoryTower - May 25, 1999 - 4:20 PM PT
"There are crucial matters that have to with the publuc-private mix in the economy, but it would be foolish to debate complete laissez faire (which should be construed as NO government participation in the economy) versus the other extreme."
Agreed. Besides which, most people don't even begin to understand the consequences of a complete laissez faire economy. As others have noted, a thing not to be desired at all.
Generally nice commentary, ProfE.
52. MsIvoryTower - May 25, 1999 - 4:21 PM PT
Rask Message #47
I laughed.
53. ProfEmeritus - May 25, 1999 - 4:29 PM PT
MsIT
Thanks. If anyone can keep the discussion from falling into that kind of absurdum, you can.
54. FreeToChoose - May 25, 1999 - 4:58 PM PT
ranheim
"I don't like capitalism very much. I find that it is very hard on many diverse groups of people. Only one example "The lame, the halt, and the blind". "
I'm puzzled at your comment. I suspect the evidence would show a correlation between the economic status of "the lame, the halt and the blind" and the level of capitalism in countries. Not definitive evidence, but I'd be interested in whether you disagree with my supposition or have some alternative explanation if you accept it.
55. FreeToChoose - May 25, 1999 - 5:09 PM PT
ProfEmeritus
Well-said.
I agree with most of what you say.
Krugman's article, as you mention, doesn't provide any real insight into the future of capitalism, but then, it doesn't purport to. I think someone proposed a thread on the future of capitalism, and Krugman's article was close enough to use as a segue.
I don't think the issues you list will be a major part of the 2000 elections, although I wish they were. I note you include the possibility that these issues may only play a part in the election issues—my guess is that far less than a quarter (more like 10%) of political discussion in the next presidential election will relate to the issue of the appropriate level of public-private mix. I would love to be wrong.
56. FreeToChoose - May 25, 1999 - 5:12 PM PT
Oops, I forgot I was using a Microsoft product apparently inconsistent with the capabilities of a Microsoft site. An easier to read version of my last two sentences:
"I note you include the possibility that these issues may only play a part in the election issues—my guess is that far less than a quarter (more like 10%) of political discussion in the next presidential election will relate to the issue of the appropriate level of public-private mix. I would love to be wrong."
57. cllrdr - May 25, 1999 - 5:19 PM PT
Orson Welles: "What do your cards say, Tana? What's my future?"
Marlene Dietrich: "You haven't got a future. Your future is all used up."
58. jexster - May 25, 1999 - 5:24 PM PT
We are in the midst of the greatest peace and prosperity of the 20th century. Capital appears to have emerged victorious from the battle of the 'isms'.
Why is it that I think something gravely wrong with this picture, yet, for the life of me cannot put my finger on it?
HELP ME MsIT!
59. cllrdr - May 25, 1999 - 5:27 PM PT
I'll help. What's wrong is that capitalism is soul-destroying and death-obsessed.
60. jexster - May 25, 1999 - 5:29 PM PT
Message #49
Yes ProfE -
I too found Krugman's article disappointing on the central question of the thread which is why I asked IT to help me.
Might a key to glimpsing the future lie not with the G7 big shots or the JJBeiner pettit bourgeois Babbits but somewhere in the garbage strewn streets of some "Third World" nation?
Save us and help us, IT!
61. jexster - May 25, 1999 - 5:32 PM PT
Cllrdr -
When I want help from a pinko I'll ask for it :).
I know how corrosive capitalism is. That is obvious. I am also not very optimistic about any social economic system.
My interest is more technical than normative - except, of course, that Beiner's Midwest Rotarian Boosterism makes me retch.
62. coralreef - May 25, 1999 - 6:32 PM PT
"We are in the midst of the greatest peace and prosperity of the 20th century. Capital appears to have emerged victorious from the battle of the 'isms'.
Why is it that I think something gravely wrong with this picture, yet, for the life of me cannot put my finger on it?
HELP ME MsIT!"
This guy may be able to help, in lieu of MsIT being around. :-)
63. ranheim - May 25, 1999 - 6:40 PM PT
#54 Free
When the amount of disposible income is great, my example - probably a poor choice- of the lame, the halt, and the blind will be taken care of by charitible contributions. Usually via some religious organization. As an M.D. I daily come in contact with the recipients of Welfare, The Dole, Public Assistance, Aid To Dependent Children, whatever the semantics. There seems to be only very limited responces by the recipients : some hate it; some abuse it; some become dependant; others are motivated to get off the rolls and never return.
Those with defects frequently attempt to fight the good fight; but, too many fail and end up with their main emotion : resentment. It was with this in mind that I wrote the earlier comments.
I tend not to pay a lot of attention to religious spokesmen. But, I think that they may have it right. Many claim that the amount donated to the various churches has strings attached to it. In the past, when the government didn't delve so deeply into Welfare, religious organizations could hold up the disadvantaged physically and mentally and be confident of bonus contributions. Many have told me that the attitude now is "The government taxes us to do that; let them do it!"
Government intervention can always be counted on to warp a situation. The greater the intervention, the greater the warp. Any of you that have read some of my previous comments know that I trust politicians almost none. I would sooner trust the local Priest (mine is a heavily Catholic community) that my representative. But, that may well be true in every capitalistic, socialistic, whatever economy.
64. jexster - May 25, 1999 - 6:41 PM PT
Thanks CR....looks like Slate landed a winner columnist. Still, I am left a bit cold. I don't think the question is as economic as it is social.
But then again, sometimes I think I'm just in the grips of a free floating anxiety attack and neeed to increase medication.
65. Raskolnikov - May 25, 1999 - 7:28 PM PT
"Of course, it is important to consider the meaning of "socially desireable." Is it to maximize economic growth, to achieve maximum equality of wealth ownership and income etc etc."
I would argue that most people would consider some optimized mix of the two to be the most socially desirable outcome. Few people want pure economic equality if it means we are all on average a hell of a lot poorer due to disincentive effects. And few want us to maximize growth if all of the benefit falls to a very small number of people.
Time to put on Rawls' veil of ignorance and ask yourself how much inequality you are willing to put up with for a given amount of growth, not knowing where you will fall in the equality distribution.
66. stostosto - May 26, 1999 - 6:02 AM PT
Perhaps this
Landsburg article is more to the point when discussing the future of capitalism. At least as Slate columns go. And as far as the issue is the right mix of public and private goods provision. Landsburg argues with Rawls, the social thinker mentioned by Rask.
That said, I think there are many other aspects of capitalism worth discussing. For instance it seems to me Anglo-American capitalism is a rather unique form of economic system. In continental Europe there has always been a high involvement of the state (as indeed there was in imperial Britain) in the economy. Likewise the use of public listed companies has been far more limited in these countries giving rise to different patterns of ownership and finance - witness the large German and Italian family businesses, or the close relationship between German banks and German corporations.
Ten years ago, the prevailing wisdom was that the stock market driven approach in the US led to a much too short-sighted behaviour of American companies in contrast to Germany and - especially - Japan. Likewise the South East Asian miracle economies were examples to be emulated. (And, funny enough, used as showcases by libertarians and interventionists alike).
This kind of wisdom seems to be extremely sensitive to the business cycle.
67. MsIvoryTower - May 26, 1999 - 6:55 AM PT
"Ten years ago, the prevailing wisdom was that the stock market driven approach in the US led to a much too short-sighted behaviour of American companies in contrast to Germany and - especially - Japan."
And what is the prevailing wisdom now?
Personally, I still think this is a major issue in American-brand capitalism.
68. stostosto - May 26, 1999 - 7:13 AM PT
MsIT
You would probably be better positioned to judge the current prevailing wisdom in America, but my impression is that there is a confident, if not smug sense of American superiority in economic matters. This is mirrored in the ostensibly ever-surging stock market. And the trend in Europe as well as in Asia is to add American style features into their corporate life, a bigger reliance on shareholder capital being one of the most important. There are some good reasons for this, since business is arguably less dynamic than in (the most dynamic parts of) America. But come a burst in the American bubble, I predict a swift change of mood.
What is your opinion on the shortsightenedness debate, btw? Is it true that the market cannot or will not sufficiently take the longer term into consideration? The opposite stand would be, first, that many shareholders are there for the long haul, notably pension funds, and, second, that every shareholder needs to be concerned about the long term, since this is what is factored into the share price.
69. Ronski - May 26, 1999 - 7:45 AM PT
Minor point: laissez-faire is one point of libertarianism, an important one, but not all of it. Social libertarianism also matters.
So, are there any actual predictions as to the future of capitalism? Will it grow freer, or go less free? I suspect the former.
70. FreeToChoose - May 26, 1999 - 7:57 AM PT
ranheim
"As an M.D. I daily come in contact with the recipients of Welfare, The Dole, Public Assistance, Aid To Dependent Children, whatever the semantics. There seems to be only very limited responces by the recipients : some hate it; some abuse it; some become dependant; others are motivated to get off the rolls and never return."
Your examples all involved government welfare, I believe. Do you encounter people who are getting assistance from private organizations? If so, how do the attitudes compare?
"Many claim that the amount donated to the various churches has strings attached to it."
I would like to make sure I understand. When you refer to "strings" are you referring to the donation by the person to the church, or the use of the funds to provide services to the recipient? I think the latter, but I would like to make sure. If you mean the latter, do you consider it a good thing, or a bad thing?
71. FreeToChoose - May 26, 1999 - 8:01 AM PT
coralreef
You recommended a book by Krugman to someone who asked about capitalism being "gravely wrong". While I haven't read the book you cited, I have read several of the themes mentioned in it. I wouldn't have characterized it as a book outlining the grave wrongs of capitalism. Have you read the book? Can you share why or how you think it points to grave wrongs of capitalism?
72. FreeToChoose - May 26, 1999 - 8:09 AM PT
Raskolnikov
"I would argue that most people would consider some optimized mix of the two to be the most socially desirable outcome."
As an optimization problem, this sounds exceedingly difficult. Have you given any thought to the mechanics of it, or is this just intended to be a broad brush comment?
"And few want us to maximize growth if all of the benefit falls to a very small number of people."
I find it difficult to imagine that the approach maximizing growth would accrue benefits to a small minority. Is this plausible to you? There are situations, perhaps some of the South American situations where a small minority of people owned virtually all the land, where a small minority reaped most of the benefit, but these didn't turn out to be growth maximization situations.
"Time to put on Rawls' veil of ignorance and ask yourself how much inequality you are willing to put up with for a given amount of growth, not knowing where you will fall in the equality distribution."
Very interesting question. Someone mentioned Rawls a year or two ago. I did a bit of reading, but he seemed far too flaky.
73. FreeToChoose - May 26, 1999 - 8:22 AM PT
stostosto
Excellent link. I usually read Landsburg's articles, but I missed this one.
I agree that it is a much better link into the title of this thread.
The concept of neo-natal insurance is far less difficult than implied by the article. I have, with some level of seriousness, proposed a form of this to counter a growing concern in life insurance regarding genetic testing. But that is far outside the scope of this discussion, so I'll simply assert that the neo-natal concept has potential beyond a thought experiment.
74. Raskolnikov - May 26, 1999 - 9:07 AM PT
FTC:" As an optimization problem, this sounds exceedingly difficult. Have you given any thought to the mechanics of it, or is this just intended to be a broad brush comment?"
I don't expect people to actually do the math, but I think it is the right way to think about the problem. I expect most of us will follow instincts or hunches.
" I find it difficult to imagine that the approach maximizing growth would accrue benefits to a small minority. Is this plausible to you? There are situations, perhaps some of the South American situations where a small minority of people owned virtually all the land, where a small minority reaped most of the benefit, but these didn't turn out to be growth maximization situations."
I was grabbing two extreme situations. Pure equality is just as impossible to find in the real world.
" Very interesting question. Someone mentioned Rawls a year or two ago. I did a bit of reading, but he seemed far too flaky. "
I find the "veil of ignorance" idea a rather intuitive and natural method by which to assess the fairness of a given situation. How will you cut up a pie if you don't know what piece you will get? How much income inequality will you tolerate if you don't know where you will fall on the distribution? How does your choice change if some inequality increases the size of the pie?
Take 4 societies, with 4 individuals, with varying amounts of income:
A) All earn $15,000
B) Person 1 earns $10,000, P2 earns $15,000, P3 $20,000, P4, $25,000
C) Persons 1, 2, and 3 earn $5,000, person 4 earns $200,000
D) Person 1 earns $5,000, persons 2,3, and 4 earn $50,000
Assume that poverty level is at $10,000.
Which society would you pick to live in? I find this an interesting exercise.
75. Slackjaw - May 26, 1999 - 11:01 AM PT
crimony, I went on and on about taxation as prenatal income insurance over a year ago. I also made a lengthy post to you about Rawls, FTC.
Good book on ananlytical ethics: Game Theory and the Social Contract. Uses probability where Rawls fears to tread...Rawls refuses to allow for beliefs about the future, which is what leads him to the maximin criterion, which is what leads him to his Difference Principle: justice requires maximizing the 'social advantages' (appropriately defined in the text) of the least well off member of society.
76. Slackjaw - May 26, 1999 - 11:04 AM PT
And I ment it before I knew much about Mirrlees' work, I should say.
I don't understand how one could actually implement it--unless you have others buying the insurance for them. Once a person gets around to the age where one thinks about those things, we're in the ex post stage. People know their abilities pretty well by then.
77. FreeToChoose - May 26, 1999 - 11:04 AM PT
Slackjaw
"crimony, I went on and on about taxation as prenatal income insurance over a year ago."
I don't recall this. Is it archived?
"I also made a lengthy post to you about Rawls, FTC."
Yes, that was the reference that caused me to look into him a bit, and conclude he was a flake.
78. Slackjaw - May 26, 1999 - 11:07 AM PT
what does it mean to "maximize economic growth"? Discounted expected utility I can see...
as for the mechanics of that in an economy with stochastic shocks...FTC, ever heard of Stokey & Lucas? Recursive Methods in Economic Dynamics. Beautiful book.
79. Slackjaw - May 26, 1999 - 11:09 AM PT
I don't know if it's archived, but it was in the tax thread. I had a lengthy conversation about it with one Lincoln8, who claimed he experienced no variance at all in his annual income.
Flak or no, what's of lasting importance about Rawls is the analytical approach to ethics and political philosophy he used, and the veil of ignorance. Though he didn't really come up with that.
80. FreeToChoose - May 26, 1999 - 11:10 AM PT
Slackjaw.
"I don't understand how one could actually implement it--unless you have others buying the insurance for them."
Of course. Surely it is plausible to assume that parents have an interest in the economic well-being of their offspring? This would be even more plausible in a society which hasn't implemented a massive welfare program for the elderly.
81. Slackjaw - May 26, 1999 - 11:13 AM PT
yeah, but how would you price it? There's an awful lot of information available from parent characteristics about the child's type.
I guess it would just be a hell of a lot more expensive for people without good jobs or much money? Their kids are a much bigger risk, correlation-wise.
82. ranheim - May 26, 1999 - 11:15 AM PT
#70 Free
I know several local priests. One is as old as I (60s) and he says there is a marked change since his days as a young priest starting out. There was a good deal more private donation then. One of the reasons that I mentioned the govt was that he faults the govt. He says the prevailing attitude of churchgoers today is "I pay taxes for that. Let the govt take care of it!" And there ends any discussion.
He is also the source of my comments about "strings". People giving to the church today (more true should it be a substantial amount) tell him : "This is to be used ONLY to reduce the building debt" or to foreign missions; or toward the retirement of nuns/priests; etc. He tells me that there is much less in the "general fund" these days.
I hesitate to bring Pat Robertson into any rational discussion. But, I have heard claims that his Operation Blessing program succeeds in transferring 95% of monies donated to recipients. The govt on the other hand : I have read figures that 60% is administrative cost and
I have also read figures that ONLY 40% is administration. Irregardless, when the govt involves itself, many people "drop out." "I've paid my taxes; let the govt do that!" Many businesses in the USA pride themselves on being lean and mean. I believe we could use a little of this attitude in D.C. and the various States.
Assume that the govt does downsize (a doubtful premise). Should this long run of prosperity last, we could find out if private donations would go back up for LOCAL charity. I don't know the figures; it would be my guess that donations to symphony orchestras, museums, etc. is at/or near all time highs.
83. JJBiener - May 26, 1999 - 11:15 AM PT
Rask - "Which society would you pick to live in? I find this an interesting exercise."
How can you expect us to pick a society based only on outcomes. You have provided no info on the processes that resulted in those outcomes. The outcomes by themselves tell us nothing useful.
84. Slackjaw - May 26, 1999 - 11:15 AM PT
further, if the ability to infer information about children based on parents is limited, I imagine you will get some unraveling. Rather than be thought average, people who expect their kids to do really well will opt out of the system and use insurance money on bequests instead. But now there's a new highest-type member of the population, who also doesn't want to be thought average and can opt out...
85. FreeToChoose - May 26, 1999 - 11:16 AM PT
Slackjaw.
This one ?
No, I'm not familiar with it.
86. FreeToChoose - May 26, 1999 - 11:18 AM PT
Slackjaw
"yeah, but how would you price it?"
One of the problems is that it would be more expensive for those with low incomes, so it might run into political and logistical problems.
87. Slackjaw - May 26, 1999 - 11:21 AM PT
yes, that's it. Kerist, please ignore those reviews. It is neither the be-all end-all mathematical economics book (too narrowly focused) nor sand in the eye nor the Gospel According to Minnesotans.
Anyway, as you say, the math of the maximization problem is not trivial.
88. Slackjaw - May 26, 1999 - 11:22 AM PT
Message #86 as I suspected
89. FreeToChoose - May 26, 1999 - 11:23 AM PT
Slackjaw
"further, if the ability to infer information about children based on parents is limited, I imagine you will get some unraveling."
I don't agree.
If it is priced naively, that could be a problem, but if priced the way I price insurance products, it will make little difference who chooses to accept the contract. (There is a concept called adverse selection, but it is well-known and can be adjusted for in advance.)
90. FreeToChoose - May 26, 1999 - 11:24 AM PT
Slackjaw
I confess I was put off a bit by the reviews.
91. Slackjaw - May 26, 1999 - 11:25 AM PT
hahaha, I've heard of adverse selection once or twice.
92. Slackjaw - May 26, 1999 - 11:29 AM PT
whether adverse selection can be controlled in pricing insurance contracts, as with the more general phenomenon in any kind of hidden information setting, depends on what information can be elicited from buyers. The contract must be structured in such a way that people who know more relevant information about themselves than the insurance company does have an incentive to reveal it.
the condition in Message #84 is meant in part to rule that situation out. Now you may disagree that the condition would bite in this instance, but that's a different story.
93. Raskolnikov - May 26, 1999 - 11:37 AM PT
JJ:"How can you expect us to pick a society based only on outcomes. You have provided no info on the processes that resulted in those outcomes. The outcomes by themselves tell us nothing useful."
I hadn't intended it to represent outcomes, although I see I used the word "earns". Take the figures instead as the starting point in the rat race. They represent the amount of money you start out with.
94. FreeToChoose - May 26, 1999 - 11:37 AM PT
Slackjaw
I mentioned that I had given a bit of thought to a related problem (associated with genetic testing) but I haven't thought much about the insurance_for_kids_that_turn_out_to_be_not_so_hot until now (which is a cover to explain that my forthcoming thoughts are off the top of my head, as opposed to well-thought out).
Suppose we offer an insurance product to people about to become parents. We want to offer this product before the children are born, as it may be too costly after they are born.
I am assuming that the product offers some type of income floor. If the kid turns out to be unable to be gainfully employed, then the contract pays a certain minimum amount (obviously, lot's of details to worry about if we want to take this seriously).
One level of refinement is to vary the amount of the floor. A nose-in-the-air upper crust customer might decide that little Timmy cannot possibly live on less than 80000 per year. In which case the policy would be priced accordingly. OTOH, someone currently earning 20K per year might decide that little Johnny shouldn't get a guarantee above what the parents are living on. This policy might cover quite a bit less.
It still wouldn't be cheap. But if we give people a chance to opt out of part of their federal taxes if they provide evidence of an insurance policy covering the possibility that their precious darlings would become a state burden, there might be enough money to buy such a coverage.
Hmm, the idea is becoming more intriguing. Effectively, it is a form of prefunding welfare, rather than our pay as you go system.
95. FreeToChoose - May 26, 1999 - 11:42 AM PT
Slackjaw
The discussion of adverse selection is incredibly ironic.
I am playing hooky from a work project, which basically is working on codifying issues such as adverse selection. We have been attempting to define it in terms of information asymmetry.
Now I feel guilty, and must return to work.
96. Slackjaw - May 26, 1999 - 11:49 AM PT
"Effectively, it is a form of prefunding welfare, rather than our pay as you go system." Precisely.
"We have been attempting to define it in terms of information asymmetry." Have you seen the treatments in graduate micro textbooks? It is pretty well integrated with more general informational considerations. The treatment on thic topic in Kreps (A Course in Microeconomic Theory) is especially good.
97. jexster - May 26, 1999 - 3:12 PM PT
Message #66
The Landsberg article is too limited. It posits a rational world. Its written by an economist.
The question of the future of capitalism is not primarily an economic question. Philosophy, politics, social aspects predominate.
98. FreeToChoose - May 26, 1999 - 4:01 PM PT
Slackjaw
Thanks for the reference. Whatta surprise; microeconomic theory with an emphasis on game theory:)
99. FreeToChoose - May 26, 1999 - 4:12 PM PT
In Krugman's article on scalping, he makes a half-hearted attempt to explain why some people are opposed to scalping. I understood (although disagreed) most of the reasons, but there is one I don't understand.
He says:
"We seem to be heading for a future in which the crowd at a Knicks game will consist mainly of businessmen on expense accounts--and, so the management of Madison Square Garden fears, a longer-term future in which serious Knicks fans, finding that they can't afford tickets, lose interest, and therefore so do the businessmen."
Can someone elaborate on why this might be plausible?
100. jayackroyd - May 26, 1999 - 4:17 PM PT
Message #83
Suppose it's luck..