The budget battles

[kenberg]

 

 

 

 

It very much is like giving your Uncle $10 bucks each payday to hold for you for 20 years and then when you ask for it back he tells you that you can only get 1/2 back as he lost the rest of it at the track.

 

 

 

This is very much how I understood the argument of Krauthammer that I referred to earlier.

 

There is an old song:

 

I had a little money and I gave it to friend

He said he'd pay me double and that this was just a lend

Later he told me, that the horse was slow

Why he gave that horse my money, that's something I don't know

[PassedOut]

Indeed they deduct medicare from my Social Security check. I have never checked the figures but my impression was that it wasn't enough to cover what it pays out, and I'm healthy.

 

I am still a little skeptical. We hear a lot about how much of the Federal budget is taken up by Medicare, do we not? But if the costs of Medicare are paid for by employee/employer/retiree contributions then there is no immediate problem, right? Long term yes, immediate no. Are we speaking here of these contributions as theoretically covering the costs or actually covering the costs?

Well a lot of money has been going into the SMI fund from general revenues, and I can't say for sure that it was all for the unfunded part D and not part B. So I my memory might have failed me on that.

 

The problem with Medicare is long term because of the changing demographics, but that looming problem makes it more difficult to recover from the debt built up (foolishly) over the past decade.

[blackshoe]

I was reading about how the free market is supposed to work (at least according to Mises and Rothbard and them) and it occurred to me to wonder about something. It seems "the market" is the aggregate of interactions between producers and consumers — but virtually everyone is a producer in some sense (workers "produce" their work, for example). But, um, what do politicians produce?

[awm]

I was reading about how the free market is supposed to work (at least according to Mises and Rothbard and them) and it occurred to me to wonder about something. It seems "the market" is the aggregate of interactions between producers and consumers — but virtually everyone is a producer in some sense (workers "produce" their work, for example). But, um, what do politicians produce?

 

Like anyone in a managerial or executive position, the job of politicians is to determine allocation of resources (in this case our country's resources). Good decisions in this regard are very "productive" by reducing waste and creating efficiencies where public goods are attained at less cost (to individuals or society as a whole). Not all production is a physical product, obviously.

 

Certainly we can argue that many politicians seem not to be very good at their job, in that a great many of our national resources are squandered on military adventures overseas, that the manner in which our country obtains money is not very efficient for the economy (i.e. higher tax rates for individuals who can't spare the money than for billionaire investors who can't even spend their money), and that a great deal of time is wasted arguing about procedural things (i.e. Obama's many non-controversial judicial appointments) rather than directing our national resources to solve very serious economic problems (i.e. unemployment). But a well-functioning government potentially adds a lot of productivity (i.e. it is much cheaper to enforce food sanitation than to deal with mass sickness from poor public health, it is much cheaper to have a functional police force than for everyone to acquire firearms and spend the time/energy to defend their own property from thieves, it is much cheaper to provide low-cost preventative health care to everyone than to bog down emergency rooms treating preventable issues later when they have become much worse).

[phil_20686]

 

Indeed they deduct medicare from my Social Security check. I have never checked the figures but my impression was that it wasn't enough to cover what it pays out, and I'm healthy.

 

 

Well indeed, that is the idea of a pay as you go entitlement system. A kind of schematic set up can be imagined as all workers pay in a fixed % of their income, and the proceeds are divided among the elderly. If one was to hold demographics constant, and raise productivity per worker by 2% per year, then every generation would get back significantly more than than they put in, because the current crop of workers is always more productive than the current crop of elderly were when they were working. In the post war era this was even further enhanced by demographics which were significantly more sloped towards productive ages.

 

If productivity stagnates and demographics stay constant, then each generation should get back exactly what they put in. However, now entitlement programs are being hit by a triple whammy:

(1) Demographics are significantly skewed towards the elderly: This will increase for about the next 20 or so years, then start to fall back, according to consensus estimates*

(2) Peoples expectations are increasing very rapidly.**

(3) GDP is depressed.

 

* Population statistics are alwyas wrong, normally by a colossal margin.

** By this i mean that we could easily afford to give all our elderly 1970's levels of healthcare, but our healthcare technology has increased far faster than productivity in the wider economy, and hence we can no longer afford to give everyone everything that was possible in the way that we could before.

[phil_20686]

Like anyone in a managerial or executive position, the job of politicians is to determine allocation of resources (in this case our country's resources). Good decisions in this regard are very "productive" by reducing waste and creating efficiencies where public goods are attained at less cost (to individuals or society as a whole). Not all production is a physical product, obviously.

 

I'm not sure that this is quite it. There are lots of parts of the economy that exist either to make production more efficient, or because we just like it better. Corporate law is an example to the former. Companies will not be prepared to enter into complicated arrangements with other companies in order to produce joint ventures without a strong legal system and legal protections. This reduces fraud and increases trust between participants, and allows for a greater variety of trade agreements. Healthcare is mostly an example of the latter. We all just think that the world is a little (or a lot) better when the elderly are not left to die in their beds.

[kenberg]

 

 

** By this i mean that we could easily afford to give all our elderly 1970's levels of healthcare, but our healthcare technology has increased far faster than productivity in the wider economy, and hence we can no longer afford to give everyone everything that was possible in the way that we could before.

 

 

I pulled out your ** item because I think that it is the crux, or at least one crux. Being 72, I am getting increased opportunity to see this close up. A friend recently died. I will not go into the details but he spent more than a month in a very high quality hospital getting very high quality care. There was a reasonable chance for success and indeed at one point it appeared that we were over the hump and all would be well. but it was not to be. I believe all decisions were right, there was a reasonable chance at success, but I suppose the cost was pretty high. One of the procedures had to be put off for a bit because the surgeon was out of the country attending to the needs of a king or a prince or some such. This guy probably does not come cheap.

 

Most of what was done probably could not have been don't twenty years ago. Nothing done was extravagant by modern standards, there was no prolonging of life for someone who for all practical purposes was gone, but twenty years ago it would not have been done because it couldn't have been done.

 

I accept that I will someday wear out and die. I am not in any hurry for this to happen. I think that most people my age accept the fact that spending a fortune to keep us alive for an extra two weeks is not reasonable but the situation is rarely that clearcut.

 

 

 

A few posts back I mentioned that a big problem is lack of realism. Of course that is also because the problems are difficult. It's a simple fact that we cannot afford to do everything that technology makes it possible to do. How to address this is a very sticky problem. In the case of my friend I believe we were well on the right side of whatever line there is, but that's not to say I know the proper location for that line.

[blackshoe]

Like anyone in a managerial or executive position, the job of politicians is to determine allocation of resources (in this case our country's resources). Good decisions in this regard are very "productive" by reducing waste and creating efficiencies where public goods are attained at less cost (to individuals or society as a whole). Not all production is a physical product, obviously.

 

Certainly we can argue that many politicians seem not to be very good at their job, in that a great many of our national resources are squandered on military adventures overseas, that the manner in which our country obtains money is not very efficient for the economy (i.e. higher tax rates for individuals who can't spare the money than for billionaire investors who can't even spend their money), and that a great deal of time is wasted arguing about procedural things (i.e. Obama's many non-controversial judicial appointments) rather than directing our national resources to solve very serious economic problems (i.e. unemployment). But a well-functioning government potentially adds a lot of productivity (i.e. it is much cheaper to enforce food sanitation than to deal with mass sickness from poor public health, it is much cheaper to have a functional police force than for everyone to acquire firearms and spend the time/energy to defend their own property from thieves, it is much cheaper to provide low-cost preventative health care to everyone than to bog down emergency rooms treating preventable issues later when they have become much worse).

 

Not a free market view, that first paragraph. I think the free market view is that government tends to increase waste and create inefficiencies, rather than the other way 'round.

 

As for "the manner in which our country obtains money", there was an author, whose name escapes me at the moment, who suggested that wealth can be acquired either through free and voluntary exchange (which he labelled "the economic means") or through coercion and theft (which he labelled "the political means"). In regards to the latter, he said "government is the organization of the political means". I suspect this is where libertarians get their "taxation is theft" sound bite. Be that as it may, I'm not sure I agree (and I am sure that free market economists don't agree) that the examples you cite are truly examples of advantages of "a well functioning government".

A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government. — Thomas Jefferson

[hrothgar]

Not a free market view, that first paragraph. I think the free market view is that government tends to increase waste and create inefficiencies, rather than the other way 'round.

 

As for "the manner in which our country obtains money", there was an author, whose name escapes me at the moment, who suggested that wealth can be acquired either through free and voluntary exchange (which he labelled "the economic means") or through coercion and theft (which he labelled "the political means"). In regards to the latter, he said "government is the organization of the political means". I suspect this is where libertarians get their "taxation is theft" sound bite. Be that as it may, I'm not sure I agree (and I am sure that free market economists don't agree) that the examples you cite are truly examples of advantages of "a well functioning government".

 

As I mentioned earlier, I think that you'd be much better served familiarizing yourself with actual economics texts rather than whatever political screeds you're using.

 

I'd like to recommend a simple thought experiment for you:

 

Look at all the criticisms that your "free market economists" level against the evil, evil government.

Then take a look at any kind of large corporation.

I think that you'll see some remarkable similarities.

The corporate planning exercises that large companies use are almost identical to old central planning methodologies used in Eastern Europe.

 

Simply put, the whole government/free enterprise distinction is pretty much meaningless.

Issues such as size of the organization and whether or not workers are institutionally aligned with policy ends are much more important.

 

(As a practical example, Soviet style central planning worked pretty well back in the early days of the revolution, back when the workers actually bought into the model and were willing to provide accurate information to the planners. In a similar vein, I'd argue that the US military is a pretty good example of a central planning system that historically worked very well at providing basic services for the troops. (The procurement system is *****ed beyond belief, however, areas like the education system for dependents and the like scaled pretty well)

[hrothgar]

good piece on Sully's blog today

 

http://andrewsullivan.thedailybeast.com/2011/09/goodbye-to-all-that-the-lofgren-thesis.html

[kenberg]

A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government. — Thomas Jefferson

[/Quote]

 

I'm in favor of looking back at the wisdom of Jefferson and others. We need to take it all in, as a whole. Jefferson's idea of a free market was running a large plantation based on slave labor. He lived in the world he lived in. But times change. Foreign policy, for the Founders, largely meant minding our own business. Well, except for Manifest Destiny. Again, times change.

 

Jefferson advocated a government that derived its just powers from the consent of the governed. Since it is unlikely that any such power will have universal consent, what does this mean? It appears to mean that "the people", in some manner, can give the government powers even if some object. Now Jefferson and others were, I believe, a little wary of democracy in an extreme form, but it would appear he thought "the people" should somehow pass laws for "the common good". Taxing people to build highways probably has the consent of the people, it is for the common good. I don't think one should cite Jefferson to support the idea that this is theft.

 

I guess we are in for some sort of foundational discussion as politics rolls on. I see many on the right as having totally gone off the deep end. They believe they speak for both Jesus and the Founding Fathers. There is room for doubt.

[blackshoe]

Yes, times change. Manifest destiny was a Nineteenth Century idea, though some aspects of it still hold sway.

From the link above: The belief in an American mission to promote and defend democracy throughout the world, as expounded by Abraham Lincoln and Woodrow Wilson, continues to have an influence on American political ideology.

 

In an interesting aside, L. Neil Smith, in the libertarian sf novel The Probability Broach, postulated an alternate Earth in which the Federalists lost power rather early in North America. Instead a libertarian society arose. All this because their version of the Declaration of Independence differed from ours by one word: Theirs said "government derives its just powers from the unanimous consent of the governed". One could argue this would never work, but in a representative republic it can come close (read the book).

 

I did not quote Jefferson to support the idea that taxation is theft. I quoted him to support the idea that the examples Adam gave are not truly those of a "well functioning government".

 

Rand proposed that government has three functions: objective application of retaliatory force against citizens who initiate force against other citizens (the police function), objective application of retaliatory force against foreign nations or nationals who initiate force against our citizens (the military function), and the arbitration of disputes (the civil court system). Works for me, although libertarians believe that at least two of those functions (police and courts) can be handled by the free market. As for the military, Eldridge Gerry, in the debates on the Bill of Rights in the House of Representatives, described a standing army (which we have in fact had in this country since the end of WWII) as "the bane of liberty". I'm pretty sure Eisenhower, who warned against the "military-industrial complex" would have agreed with him, at least up to a point. I'm sure Mr. Gerry's ghost was appalled when the militia was finally "nationalized" via the formation of the National Guard in the early 20th century.

 

I'm not sure Jefferson ever used the phrase "the common good". I am sure there is no unanimous ;) agreement on what the term means.

 

Kenberg: I guess we are in for some sort of foundational discussion as politics rolls on. I see many on the right as having totally gone off the deep end. They believe they speak for both Jesus and the Founding Fathers. There is room for doubt.

 

I think it's time we as a nation had such a discussion. Without partisan politics, without political backbiting. I don't have much hope for it, though. As for the right, yes, some have gone off the deep end. There is no doubt in my mind that no one currently alive speaks for either the Founding Fathers or for Jesus. OTOH, the left has its share of whackos, too. And then there's the idea that "left" and "right" don't adequately describe the political spectrum, which is more likely to have many dimensions than it is to have just one. Jerry Pournelle and others have suggested several two dimensional spectra, and I think it was Pournelle who said that even two is inadequate.

[PassedOut]

I think it's time we as a nation had such a discussion. Without partisan politics, without political backbiting. I don't have much hope for it, though. As for the right, yes, some have gone off the deep end. There is no doubt in my mind that no one currently alive speaks for either the Founding Fathers or for Jesus. OTOH, the left has its share of whackos, too. And then there's the idea that "left" and "right" don't adequately describe the political spectrum, which is more likely to have many dimensions than it is to have just one. Jerry Pournelle and others have suggested several two dimensional spectra, and I think it was Pournelle who said that even two is inadequate.

Of course there are crazies on the left, but it is not proportionate. It seems to me that "discussion without backbiting" has gotten difficult because one of the two major parties in the US has become dependent on a large group of right-wing crazies, pretty much as described in the Sullivan piece Richard mentioned.

 

But we can have a civil discussion here.

 

I don't consider right-wing crazies to be conservative at all: using "conservative" to describe them is Orwellian. Sullivan's description is closer to the mark:

 

If your view of conservatism is one rooted in an instinctual, but agile, defense of tradition, in a belief in practical wisdom that alters constantly with circumstance, in moderation and the defense of the middle class as the stabilizing ballast of democracy, in limited but strong government ... then the GOP is no longer your party (or mine).

I've been in business all of my life, believe in the free market and fiscal responsibility, don't believe in military adventurism, and am an actual conservative. I say that a limited but strong government is exactly what we need: otherwise we could have stayed with the original Articles of Confederation.

 

I noticed that you did not address the specific examples that Adam gave. For example:

 

i.e. it is much cheaper to enforce food sanitation than to deal with mass sickness from poor public health

Don't you think that is true?

 

From what I can see, the government provides vital services like this (and others) more effectively than does the free market. It's possible to believe in the free market without maintaining that it is the solution to every problem.

 

As a conservative businessman, I absolutely support strong consumer protection laws and strong environmental protection laws, strictly enforced. Those laws set the framework for honest competition in the free market. So long as they are equally applied, no ethical business is hurt.

 

In my view, the whiners who complain about too much governmental regulation (and I know some) are simply too incompetent to run an honest business. Going back to Adam's example, folks should not have to worry about getting spoiled food, for example, and honest grocers shouldn't have to compete with those who want to make a buck by selling it.

[hrothgar]

 

Rand proposed that government has three functions: objective application of retaliatory force against citizens who initiate force against other citizens (the police function), objective application of retaliatory force against foreign nations or nationals who initiate force against our citizens (the military function), and the arbitration of disputes (the civil court system).

 

 

Why should I give a rat's ass what Rand thinks? Do you honestly believe that Rand's philosophies have any relation to the US Constitution or, for that matter, any nation state currently in existence?

 

I personally happen to like the Supreme Court's decision regarding the General Welfare clause of the 16th amendment as articulated in United States versus Butler which ruled that

 

to pay the Debts and provide for the common Defence and general Welfare of the United States

 

should be interpreted as follows:

 

The clause confers a power separate and distinct from those later enumerated [,] is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. … It results that the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution.

[hrothgar]

A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government. — Thomas Jefferson

 

This would be Thomas "Louisiana Purchase" Jefferson?

[awm]

Not a free market view, that first paragraph. I think the free market view is that government tends to increase waste and create inefficiencies, rather than the other way 'round.

 

It's difficult to come up with a correct economic theory if you start from an axiom which is demonstrably untrue.

 

Certainly there are areas where government is more wasteful or less efficient than private industry. But there are also areas where the opposite is true. The situations where government is most necessary typically suffer from "tragedy of the commons" game theoretic situations, or involve massive economies of scale, or involve situations where morality conflicts with free market principles.

 

Food safety is a good example. No one really wants to eat contaminated food and get sick. Thus virtually everyone (aside from perhaps a few farmers who grow all their own food) benefits from having food inspectors and standards. There are significant advantages to having a small number of experts do this rather than everyone trying to inspect the entire production process of everything they eat. Can this be handled well by private enterprise? Certainly we could imagine a privately-run organization which inspects food, then makes the results of such inspections available for a subscription fee (say). However, it will be difficult for such a firm to make money. If most other people subscribe to such a service, I can then rely on the market to drive those restaurants or markets which sell unsafe food out of business. Thus there is little reason for me to pay for my own subscription. Even if only a few people have an actual subscription to the service, I can simply rely on word-of-mouth (or a friend's subscription) rather than getting my own. Even though I really don't want to eat contaminated food, as long as the inspection company is in business I can probably manage this without giving the inspectors any money. Of course, this leads to a problem and the inspection service might now go out of business. Perhaps more likely, they will start taking payoffs from the food producers to "look the other way" when they notice shoddy health practices. The net effect is that food safety inspections just don't work as a private enterprise. Nonetheless, we are (almost) all better off to have these inspections and most of us would be willing to pay a few dollars every year to make sure that reliable inspections occur (although obviously if these inspections would occur anyway without my contribution, I might rather keep my money). This is the sort of area where a government-based approach works wonderfully and creates efficiency.

 

This is not to say that everything should be government-run, or that the government is somehow always more efficient. Most innovation in terms of coming up with new products and such does come from the private sector. For example, if the government ran automotive companies we would probably have rather expensive cars and would not see the massive improvements in automobile safety and energy-efficiency that we have seen over the past decades. On the other hand, if automobile companies were not required by law to make safer cars (and were not vulnerable to lawsuits if people die in accidents in ways that could've been prevented by safer cars), then we would probably not see safety improvements either. So in that case government regulation can produce benefits (better safety, lower hospital bills, etc) even though a government takeover would be massively inefficient.

[blackshoe]

I don't consider right-wing crazies to be conservative at all: using "conservative" to describe them is Orwellian.

"Reactionary" is probably a better description.

 

Here is Jerry Pournelle's take on the political spectrum.

 

I've been in business all of my life, believe in the free market and fiscal responsibility, don't believe in military adventurism, and am an actual conservative. I say that a limited but strong government is exactly what we need: otherwise we could have stayed with the original Articles of Confederation.

 

Well, maybe. Times do change, and I suspect, as did Smith in The Probability Broach, that the Articles of Confederation would have had to change with them.

 

I noticed that you did not address the specific examples that Adam gave. For example:

 

It is much cheaper to enforce food sanitation than to deal with mass sickness from poor public health.

 

Don't you think that is true?

 

Well, it sure sounds good, but I'm not sure that a deeper analysis than I can give it wouldn't show that it isn't. For example, see Bastiat's Parable of the Broken Window.

 

From what I can see, the government provides vital services like this (and others) more effectively than does the free market. It's possible to believe in the free market without maintaining that it is the solution to every problem.

 

As a conservative businessman, I absolutely support strong consumer protection laws and strong environmental protection laws, strictly enforced. Those laws set the framework for honest competition in the free market. So long as they are equally applied, no ethical business is hurt.

 

Sticking the word "vital" in there does tend to color the debate a bit, doesn't it? :P

 

One of the problems with debates on economics and government is that we have experiences of some things, and no experiences of others. No one alive today has seen a true free market, for example. And some of the backward looks into history claim that "see, this was a free market, and it didn't work," when in fact what they're looking at wasn't a free market at all.

 

Seems to me the Golden Rule would set the framework for honest competition in the free market quite well, without any government involvement — if people would follow it. And as for "no ethical business is hurt", I refer you again to Bastiat's Parable.

 

In my view, the whiners who complain about too much governmental regulation (and I know some) are simply too incompetent to run an honest business. Going back to Adam's example, folks should not have to worry about getting spoiled food, for example, and honest grocers shouldn't have to compete with those who want to make a buck by selling it.

 

And in the free market, neither the consumers nor the honest grocers would have to worry about that for long, since the incompetent whiner would be out of business pretty quickly. Suppose also that our legal system was better set to hold Mr. Whiner responsible for whatever damage he caused to others. One interesting suggestion I've seen is that if you owe someone something, and cannot pay, you go to work for them — or perhaps for someone else — with some mutually agreeable contract until the debt is paid. This is an extension of the idea that each individual is personally responsible for his own actions. I suppose it's not perfect (what is?) but it's interesting.

[blackshoe]

It's difficult to come up with a correct economic theory if you start from an axiom which is demonstrably untrue.

 

I did not say that "government is inefficient" is an axiom, nor, I think, do the free market economists.

 

Certainly there are areas where government is more wasteful or less efficient than private industry. But there are also areas where the opposite is true. The situations where government is most necessary typically suffer from "tragedy of the commons" game theoretic situations, or involve massive economies of scale, or involve situations where morality conflicts with free market principles.

 

I suppose the space race was an example of "massive economies of scale". Maybe. I suspect that the "tragedy of the commons" is not very common. I'll have to do some research on it, though. As for "morality" conflicting with free market principles, I don't see how that's possible, unless you hold that Willy Sutton's "morality" is just as valid as anyone else's. I don't believe that, though. Last post, I mentioned the Golden Rule. Seems to me that's morality enough for the free market.

 

Food safety is a good example. No one really wants to eat contaminated food and get sick. Thus virtually everyone (aside from perhaps a few farmers who grow all their own food) benefits from having food inspectors and standards. There are significant advantages to having a small number of experts do this rather than everyone trying to inspect the entire production process of everything they eat. Can this be handled well by private enterprise? Certainly we could imagine a privately-run organization which inspects food, then makes the results of such inspections available for a subscription fee (say). However, it will be difficult for such a firm to make money. If most other people subscribe to such a service, I can then rely on the market to drive those restaurants or markets which sell unsafe food out of business. Thus there is little reason for me to pay for my own subscription. Even if only a few people have an actual subscription to the service, I can simply rely on word-of-mouth (or a friend's subscription) rather than getting my own. Even though I really don't want to eat contaminated food, as long as the inspection company is in business I can probably manage this without giving the inspectors any money. Of course, this leads to a problem and the inspection service might now go out of business. Perhaps more likely, they will start taking payoffs from the food producers to "look the other way" when they notice shoddy health practices. The net effect is that food safety inspections just don't work as a private enterprise. Nonetheless, we are (almost) all better off to have these inspections and most of us would be willing to pay a few dollars every year to make sure that reliable inspections occur (although obviously if these inspections would occur anyway without my contribution, I might rather keep my money). This is the sort of area where a government-based approach works wonderfully and creates efficiency.

Underwriter's Laboratories has been around for more than a century. They don't seem to be hurting. And your scenario of "I don't have to subscribe, because others do" is short sighted and irrational.

 

This is not to say that everything should be government-run, or that the government is somehow always more efficient. Most innovation in terms of coming up with new products and such does come from the private sector. For example, if the government ran automotive companies we would probably have rather expensive cars and would not see the massive improvements in automobile safety and energy-efficiency that we have seen over the past decades. On the other hand, if automobile companies were not required by law to make safer cars (and were not vulnerable to lawsuits if people die in accidents in ways that could've been prevented by safer cars), then we would probably not see safety improvements either. So in that case government regulation can produce benefits (better safety, lower hospital bills, etc) even though a government takeover would be massively inefficient.

 

Maybe. I'm still not convinced. Franz Oppenheimer suggested there are two means by which man satisfies his desires: one is by free market exchange (which he labelled "the economic means"), the other by coercion and theft ("the political means"). He described the state as "the organization of the political means". Maybe that's an overreaction — Jefferson certainly felt that government has a place in our lives, as did Rand, and many others. But I don't think either Jefferson or Rand felt that the state (or any other group, for that matter) has any right to impose its desires on people by force. Yet that is how government works. :(

[mike777]

This is an old but on going debate in real life and on the forums.

 

 

Is the Central gov. better at capital allocation than capitalist markets.

 

 

See the whole capital allocation debate vs human rights debate as in health care.

 

iN THE EXTREME:

 

one side says they leave the poor to die in the streets alone

other side says you steal from the productive to give to the lazy or create the dependent who politics/class will live off of and enslave.

[PassedOut]

And in the free market, neither the consumers nor the honest grocers would have to worry about that for long, since the incompetent whiner would be out of business pretty quickly. Suppose also that our legal system was better set to hold Mr. Whiner responsible for whatever damage he caused to others.

How would "holding Mr. Whiner responsible" be done without regulations and enforcement? And wouldn't doing so require eliminating the protections that people running corporations have today?

 

Are you saying that in a truly free market, people would not build factories on rivers and send their polutants downstream? Nor pump toxins into the air?

 

By the way, your critique of my use of the word "vital" in that sentence was on the mark. Point taken.

<_<

[mike777]

How would "holding Mr. Whiner responsible" be done without regulations and enforcement? And wouldn't doing so require eliminating the protections that people running corporations have today?

 

Are you saying that in a truly free market, people would not build factories on rivers and send their polutants downstream? Nor pump toxins into the air?

 

By the way, your critique of my use of the word "vital" in that sentence was on the mark. Point taken.

<_<

 

 

Yes this is an old but very very common debate:

 

 

How do we stop capitalists from killing the rest of us.

 

Or as greedy/selfish capitalist put it

1) option one...some die bbut many more saved

2) many die and then many many more die......

 

 

------------

 

 

option three

 

 

central govt steps in and solves all the problems and no one dies.

[onoway]

It's difficult to come up with a correct economic theory if you start from an axiom which is demonstrably untrue.

 

Certainly there are areas where government is more wasteful or less efficient than private industry. But there are also areas where the opposite is true. The situations where government is most necessary typically suffer from "tragedy of the commons" game theoretic situations, or involve massive economies of scale, or involve situations where morality conflicts with free market principles.

 

Food safety is a good example. No one really wants to eat contaminated food and get sick. Thus virtually everyone (aside from perhaps a few farmers who grow all their own food) benefits from having food inspectors and standards. There are significant advantages to having a small number of experts do this rather than everyone trying to inspect the entire production process of everything they eat. Can this be handled well by private enterprise? Certainly we could imagine a privately-run organization which inspects food, then makes the results of such inspections available for a subscription fee (say). However, it will be difficult for such a firm to make money. If most other people subscribe to such a service, I can then rely on the market to drive those restaurants or markets which sell unsafe food out of business. Thus there is little reason for me to pay for my own subscription. Even if only a few people have an actual subscription to the service, I can simply rely on word-of-mouth (or a friend's subscription) rather than getting my own. Even though I really don't want to eat contaminated food, as long as the inspection company is in business I can probably manage this without giving the inspectors any money. Of course, this leads to a problem and the inspection service might now go out of business. Perhaps more likely, they will start taking payoffs from the food producers to "look the other way" when they notice shoddy health practices. The net effect is that food safety inspections just don't work as a private enterprise. Nonetheless, we are (almost) all better off to have these inspections and most of us would be willing to pay a few dollars every year to make sure that reliable inspections occur (although obviously if these inspections would occur anyway without my contribution, I might rather keep my money). This is the sort of area where a government-based approach works wonderfully and creates efficiency.

 

 

Joel Salatin of polyface farms has some very interesting points to make about this.

 

Quite aside from the slaughter house issues:

The inspectors are never able to keep up in the first place; every city has places that have had multiple warnings about violations. Food safety courses abound in photos of the most incredible kind..people storing meat on the floor under dripping pipes, thawed fish sitting on counters so long that it is actually at room temperature; fans that haven't been cleaned in so long that they are dripping rancid grease into the food..mice droppings just separated out of the food which is then prepared and served...the list goes on and on and many of the offending places get warnings time after time but nothing is actually done. I forget which city it was in the States where someone used to keep track of the violations written up by the food inspectors but it was quite interesting in a gruesome sort of way how many businesses got cited again and again and again, apparently simply proceeding with business as usual after each visit. Happens everywhere according to people who should know.

 

People are so far removed in North America at least from having any understanding of where their food comes from or how it gets to them that it's really easy to raise spectres where none exist. Joel also makes the point that the public is told it's fine to consume cocoa puffs and sodapop but not ok to buy a jar of pickles or a loaf of bread made in a home kitchen. Gotta have that fridge that's not allowed to hold that lemon pie or veggie dip unless it's destined for the farmer's market. Gotta have that separate sink dedicated only for people to wash their hands in. No matter that there's no record of any problems with food sold through farmer's markets. No matter that most people who are enthusiastic about cooking or baking often have kitchens as clean or cleaner than most restaurants.In most of the States and Canada, the days of someone making a few extra dollars by baking brownies or banana bread and taking them to a farmer's market on Saturday are done, unless the baker has access to a commercial kitchen.

 

We have had inspectors come to camp and care less if the freezer kept things frozen properly or if someone was sneezing into the food, or if the food handlers appeared to have washed their hands in the last week; they wanted to sneak around and find out if anyone was smoking in their room. Not that they had any reason to think anyone was, but what a coup if they could nab someone! Or another who threw out a whole day's baking because the cook had balanced one of the baking pans on an empty clean egg tray to raise it from the counter to cool faster. The baking was sitting on silicon paper in the pan and the pan was about three times as big as the egg tray it was sitting on so there wasn't any way the egg tray could come near the food. The inspector apparently carried the trays out to the garbage and dumped them herself, assuming that the other baking had been handled the same way.

 

OTOH not so long ago I bought a package of duly inspected meat from a large grocery stop and when I opened the package I was greeted by a very live worm easing its way out of the meat. Pasteurizing milk was undertaken not because it made the milk better, but because then they could take milk which was possibly not quite what it should be and make it safe. Properly handled raw milk from healthy cows is not only safe but better for you if you are going to drink milk. Improperly handled milk..the cow wasn't cleaned before the milking machine was put on or she isn't healthy might be another story. So pasteurize everything and then you don't have to worry about it, instead of making sure that things are right to start out with. Now lots of people apparently think that raw milk is some sort of poison magically transformed into something healthy through pasteurization, instead of a process where it's possible to lower your standards of production and count on technology to make up for it.

 

These are the sorts of thing you think benefits everyone except some few farmers who grow their own food?

[hrothgar]

I agree with the bulk of what Adam has to say, but I'd like to offer a minor correction: The expression "Tragedy of the Commons" doesn't cover the example that Adam provides.

 

Public economics spends lots of time dealing with market imperfections (examples where a free market won't yield an efficient outcome)

 

There are many such examples, most of which fall into a small number of buckets

 

1. Natural monopoly

2. Public goods

3. Overexploitation of a common resource

 

The example that Adam provided falls into the "public good" category.

Formally, the expression "Tragedy of the Commons" refers to overexploitation of a shared resource

[phil_20686]

 

(1) not so long ago I bought a package of duly inspected meat from a large grocery stop and when I opened the package I was greeted by a very live worm easing its way out of the meat.

 

(2) Pasteurizing milk was undertaken not because it made the milk better, but because then they could take milk which was possibly not quite what it should be and make it safe. Properly handled raw milk from healthy cows is not only safe but better for you if you are going to drink milk. Improperly handled milk..the cow wasn't cleaned before the milking machine was put on or she isn't healthy might be another story. So pasteurize everything and then you don't have to worry about it, instead of making sure that things are right to start out with. Now lots of people apparently think that raw milk is some sort of poison magically transformed into something healthy through pasteurization, instead of a process where it's possible to lower your standards of production and count on technology to make up for it.

 

These are the sorts of thing you think benefits everyone except some few farmers who grow their own food?

 

(1) These things happen, I am confident that if we asked everyone on the forum whether event X had ever happened to them or their friends (one handshake) you could find an example of most ten sigma events.

 

(2) This isn't even nearly true. Pasteurization was invented with the express intentions of making milk last longer before it spoiled, and of killing disease causing microbes in milk. Louis Pastuer was not completely sure what disease could be got from milk, but it was known at that time that TB was a disease found in cattle aswell as humans. In practice TB is a normal infection in cattle similar to the common cold in severity, but some strains are extremely virulent in un vaccinated humans. Pasteurization massively reduced the incidence of TB, and scarlet fever in children, and almost entirely eliminated puerperal fever, all child-killers at that time. Raw milk can also carry, e.coli, salmonella, and diphtheria.

 

Pasteurization is one of the few preventative medicine techniques whose benefits are huge. Its up there with vaccination. A lot of its benefit is the fact that most diseases you can get from milk are a-symptomatic in cattle, so you would have to test literally every single cow in order to make milk "safe" without pasteurization, and you would have to do so every week or so, and even then a cow could get sick between tests. While this is "possible" it is certainly vastly more expensive.

[phil_20686]

you could find an example of most ten sigma events.

 

Ok this isnt true, the number i had in my head for a ten sigma event was one in 400,000,000. Which, for a daily event, only requires one to assemble roughly a million man-years of life between a group. For a group with average afre of 50, that would be about 20,000 people. Apparently the average number of people that one is on speaking terms with is about 300, so that would need only 700 forum members. However, one in 400,000,000 is only a six sigma event. Ten sigma is one in 10^23 roughly. That would require about 10^19 people with average age 50. Therefore, there is only a one in ten to the ten chance that an person currently living would have seen a specific ten sigma event.