The logic of incentive


According to our financial experts, the reason we couldn’t punish bankers, and curtail the bonus culture, or slap a tax on banking bonuses or transactions in the UK was because the “best people for the job, will leave the country“. We were told that the market system dictates that if you take away the incentive, no matter how unjustifiably large those incentives are, the best people will all flee the country to some fucked third World country, where oversight and regulation and taxes are low. It encompasses the entire scope of human nature, and sums it up by telling us that monetary incentives are what ultimately drive us, and anything else would be evil socialism and that government should be off our backs but big business should be allowed to stab as many backs as they wish, because it’s capitalism, so it’s okay. I think that pretty much sums up Friedmanite economic theory.

The utterly ridiculous Mayor of London, Boris Johnson claimed recently that a 50p top tax rate, and an extra levy on non-doms would force 9000 bankers in Britain to flee the country. Boris’ office said:

Boris is determined to highlight to everyone, including George Osborne, that this [bonus] tax is already having an adverse impact and should it become a more permanent feature of our tax system it would have an extremely devastating impact on London’s long-term prosperity.

What interests me, is that Boris, along with every other Conservative both here and America seem unable to admit that London’s long-term prosperity was not attacked by the idea of a bonus tax, but instead by the free ride that the Conservatives gave to bankers, allowing them to gamble horrendously, for twenty five years. Why are they unable to admit that their precious free market system failed miserably? Their logic no longer applies. Johnson should therefore be ignored on this one. Especially given that the Tories matra has been that we are “all in this together“.

The article goes on to say that Goldman Sachs would consider moving their offices abroad because of a super tax suggested by Alistair Darling, the then Chancellor, earlier this year. This is the same Goldman Sachs who were forced to settle $60million out of court to stop an investigation by the Massachusetts Attorney General into whether or not Goldman promoted drastically unfair and impossible home loans across the State. This is the same Goldman Sachs that stands accused of selling dodgy packaged mortgages that they knew were going to fail, to investors, and then betting against them, making a fortune through it, prompting an ex-Goldman worker involved in the scandal to write the book “How I caused the credit crunch“, the same scandal that lead to Goldman Sachs paying a record $550million settlement after being sued by the SEC for fraud. Why are we all allowing ourselves to be held to ransom, by a bunch of criminals? Incidentally, when the 50p top rate of tax finally came into force in April 2010, Goldman did not make good on their threat. They still do business in the UK. Goldman didn’t leave. The 9000 bankers didn’t leave. The Tories, as ever, were wrong.

Now, ignoring the logistics of moving to another country so quickly, upping your family out of the place they call home, simply because you now only make 1.2million instead of 1.5million in bonuses each year; the apparent science that offering higher rewards will improve performance, is actually flawed and realistically cannot be called a science. It is a manipulation more than anything. A threat. Keep paying us unjustifiably high amounts of money, or we’ll leave, and your country is screwed. It is why politicians are effectively useless, because they have very little say over economic matters. We all know these bankers will not leave the country in one huge banking emigration day.

A group of economists working out of M.I.T and the University of Chicago conducted an experiment using a number of students. They gave the students a number of assignments, including mathematical and scientific problems to solve. They offered the first group a very small amount of money as an incentive to complete the assignments. They offered a second group a higher amount, and they offered a third group a large amount of money. The theory put forward by the defenders of market principles, or those with free-market-failure-denial would argue that those offered the most amount of money, would perform the best. The reality was different. The students offered the highest incentive, failed miserably. The students offered the medium amount and the students offered the lowest amount both ended up with similar results. Both beating the students offered the most.

The economists then took the experiment to Madurai, in India, with higher incentives, fearing that maybe there wasn’t enough difference in incentive when the experiment was conducted on students in the US. In India, they offered the first group a weeks wages, they offered the second group; a months wages, and the third group; two months wages. The stakes in India for such rewards, would be far higher than at M.I.T. Again, those offered the smallest incentive performed pretty much identically to those offered the medium sized reward. Those offered the top incentive, did the worst again. So, the higher the incentive, the lower the performance. Why? Firstly, we now have to accept that free market theory is just that; a theory, and whilst some of it is relevant and works well, there is much of it that has failed recently, and analysing the entire process in this way, can only be a good thing.

It is true that if you don’t give people the money they clearly deserve for the work they have done, they will not perform highly, they will be unmotivated and annoyed. So yes, money as an incentive does work to an extent. The experiment showed that when you give someone a simple task and tell them they will be paid a certain amount for completing that task, the incentive works. But when you give people a difficult task, which requires long term thought, creativity and problem solving skills of the highest calibre, the incentive doesn’t work. I’d suggest the reason for this, isn’t simply ‘human nature’, it is mainly because our society and our universal culture rewards greed and excess and so that trait of greed which exists in all of us, becomes amplified. Human nature is so vastly complex, to sum it up in such a simple way and create an economic system around it, is a problem. And so a highly problematic task, is rewarded in three ways according to the research, and those three ways are personal from than simply the need for money. Those three things are Autonomy, Mastery and Purpose.

Autonomy states that if you want a difficult and complex task completed, self direction is better. Figuring it out for yourself is far more rewarding than having someone tell you how it’s done, it is far better than having a demanding manager micro-managing your every move. Leave your workers to do the job their way. Social commentator Dan Pink points out that the Australian software company Atlassian tell their employees that on one day of the second quarter, they can spend the next 24 hours working on whatever project they want, with whomever they way, and any way they want, they have to then show their results the following day at a staff meeting filled with drinks and cakes. That one day has lead to huge advances in software fixes and new ideas and creations. This did not involve a promise of a bonus or any extra money. They performed to the best of their ability, without the need for more money.

Mastery means improving and understanding what we are doing, far better than when we started. I read a lot of history books, not because it is economically valuable, but because I enjoy it, and I like to know that I can debate and talk about historical events with a degree of mastery. People add to opensource, in their spare time for no money reward, but because the work is autonomous, and they improve and learn as they go. What they create, then becomes free, they do not sell it. It is not economically valuable for the individual. Evil Communism at work again.

Purpose, is pretty self explanatory. A company without its eye on a purpose, becomes pretty dangerous. Now, right winged economics would have us believe that a primary motive for any company should be profit making. This isn’t true. Look again at Goldman Sachs. They took their eye off their purpose to provide sensible mortgages and a helpful responsible banking service, and instead kept their eye firmly on profit, which has been catastrophic. Profit and purpose should be interlinked. Purpose should serve the community, and not just shareholders. There must be a reason for people to want to improve.

Now, what this all means is that when you combine the three, it is interesting to note that our motives, are based almost firmly on concepts that don’t involve money. Money certainly plays its part, we all want to feel secure, but once we have a degree of security, we are not just consumers nor economic statistics, we have personal reasons for the work we do. If we leave people to it; dress in what makes you feel comfortable, talk in a way that isn’t imposed on you from those above, create, innovate and at the same time laugh and talk, instead of simply saying “look, if you do this, you get $2000, but do it my way. Oh and there’s a really important person coming through the office later, when you see him, make sure you bow and call him Sir, for he is above you.“, you will almost always see better results. Once the boss is off your back and the carrot made out of gold has been put away, and employees are treated like people rather than cogs in a money making machine, you will almost always see better results. The logic is now based on quite strong research. Free market obsessives can no longer claim their way is the only way, and this makes me happy.

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13 Responses to The logic of incentive

  1. Black Flag says:

    Futile,

    Why are they unable to admit that their precious free market system failed miserably

    No, it didn’t.

    What failed was Government-run corporate banking system.

    As long as YOU are prohibited from engaging in banking transactions by writ of law, the banking system is NOT an example of the free market.

    The banking law prevents competition – and guarantees the government cronies unfettered access to mercantilist profits at your expense. As long as the free market is prevented from acting here, you will ALWAYS be the victim.

    Goldman Sachs et al did what any man with a brain would do if government gave you the ability to print money at will – you’d print as much as you could, too.

    You should be advocating FOR a free market ….

    As far as increasing taxes on highly mobile people, yes, many will leave.

  2. Black Flag says:

    . The theory put forward by the defenders of market principles, or those with free-market-failure-denial would argue that those offered the most amount of money, would perform the best. The reality was different. The students offered the highest incentive, failed miserably. The students offered the medium amount and the students offered the lowest amount both ended up with similar results. Both beating the students offered the most.

    No, this experiment did not prove a darn thing about incentives and money.

    It proved that human beings apply different valuations to their tasks.

    There are people who work for no money and love their job. There are people who work for millions and hate their job.

    Work merely buys money in trade for effort. It doesn’t matter a hoot in Hades whether YOU love that effort or not – all that matters is the participants in the trade see value in that trade.

    Personally you’d rather spend your life energy in happy pursuits – but this is not a matter of economic determination – that is a personal subjective value judgment of your own time and energy.

  3. I recognise that you are never going to admit that market values could in any way cause any sort of negative affect, and that you believe government is the problem entirely.
    I have said before, whilst I don’t trust either, I place more trust in Government than I ever will in those out simply to please shareholders.

  4. Black Flag says:

    Futile,

    Market value is a contradiction. The market does not “value” – People do. The Market is the consequence of human action – not the cause of human action.

    So, if you see the Market do “something” – you are blinded by a fog surrounding the PEOPLE who are ACTING.

    If you see a “negative” – you must penetrate to the human action which creates it.

    If you complain about a bank, you have to penetrate the human action behind it.

    If competition is prvented by government writ; if companies are protected from loss by government writ; if officers of such companies are immune from the losses and negative consequences by government writ; if officers of such companies enjoy full benefit of profit and positive consequences by government writ; …. and because of all of this, the people running such companies act recklessly …where do you think the problem has its roots?

    Government is the use of violence on non-violent people. Government creates LAW – the use of violence to enforce edicts.

    You are afraid of men who are -by law- PREVENTED from using violence on non-violent men.

    You do not fear men who -by law- HAVE NO PREVENTION from using violence on non-violent men.

    You do understand, then, I think you are one completely muddled up fellow.

  5. “As far as increasing taxes on highly mobile people, yes, many will leave.”
    – Well no, because they didn’t leave. Goldman Sachs threatened too, but didn’t. 9000 bankers, did not leave. It is bullshit.

    No, I think by your odd logic, i would appear muddled up. But I simply disagree with you. I don’t buy this whole cynicism surrounding the use of violence and non-violence. I see the point you are making, but I disagree profoundly. I like that we have regulations that prevent amoral markets from slipping into the realm of immorality. Thatcher unleashed a bunch of pro-market reforms on the UK during the ’80s, and it created mass misery, the north of England was pretty much gutted out, because the government cut funds to local government in the hope that business would flourish and fill the gap. It didn’t. Wages were kept low not by governments, but by an understanding between companies not to undercut each other. Whilst wages were kept low, the fortunes of the guys at the top shot up. Now, you may blame government using whatever logic you wish; be it because they allowed them to do it, or because they are violent by nature, or because they threatened to shoot the poor confused bosses if they didn’t become horrendously greedy, either way it is pro-market reform that caused the misery at that time. IMF enduced pro-market reforms have caused misery across the globe.
    I am not afraid of businessmen, although, I know that their aims have nothing to do with growth for the sake of humanity and everything to do with growth for the benefit of buying a new yacht. I believe the fundamental logic behind a free market system; individualism, is grotesque in itself. I do not accept the principle. I support government interference, when it helps those who need it most. For example, my dad had a heart attack a few years back and our tax funded single payer healthcare system saved his life. We, at that time, would never have been able to afford private healthcare. The idea of non-universal healthcare, or if you had your say; non-universal everything including police and fire protection makes me shudder. What about protections against things like appalling working conditions and child labour? How do you regulate against that without any regulatory body that governs the way business is conducted? If business were free from all restrictions, the World would be fucking horrendous.
    I do not like that people complain that the Government has too much say over my life, and yet it is my boss who tells me how to dress, how long my facial hair should be, how I should address people. If I disagree with him, he can fire me and I therefore have no income. He has massive control over my life.
    I agree, the banks were protected by government. Lack of severe oversight and regulation. They should have been regulated harshly. The banks over in Australia, pretty much escaped the entire crises, because the regulation is tough. Our regulations were not tough enough.
    You are suggesting that the market is run by the people as a collective. It isn’t. It is created, manipulated, twisted, and forced onto us all by a very select few, with obscene wealth.
    To me, government must act as a counter balance against the excesses of the market.
    You and I disagree profoundly on this.

  6. Black Flag says:

    Futile,

    But I simply disagree with you.

    And I’d accept that – EXCEPT you offer no compelling argument to justify your disagreement.

    You do not offer definitions.

    You do not offer explanation to identify your premise, theory and reasoning for you to reach your conclusions.

    You merely offer unsupported commentary on these subjects.

    For example, you call it “cynicism” regarding violence.

    But it is the premise of government action – all of it. So how can that be cynical?

    That would be like saying “Oh, you are so cynical to always insist geometry is based on the premise of a ‘point’!!”

    Government self-claims the sole and exclusive right to initiate violence.

    It is defining component that makes “government” a government

    Do you know if you cannot use violence to enforce your edicts you cannot be declared a government. It is fundamental.

    Thus, it cannot be cynicism if it is fundamental.

    I disagree profoundly.

    Based on what argument? What is your definition? Does it fit the necessities that makes government?

    Children disagree that eating too much candy is bad. But their arguments are incoherent.

    The same here. You disagree but offer nothing else.

    I like that we have regulations that prevent amoral markets from slipping into the realm of immorality.

    What right do you have to use violence on other men to enforce your morals???

    IF other men believe you are immoral because of your attitude, you have given them the right to attack you – because you took claim to using violence to enforce yours.

    The only right a man has to use violence is to protect FROM violence.

    I like True Law – Law (the use of violence) to protect, prohibit, and restitution from the use of violence. We call this “self-defense”.

    If you want to codify it into some book (shrug) — it really makes no difference (like codifying the law of gravity into a book makes no difference to the law of gravity either).

    But as soon as you subscribe yourself to use LAW (the use of violence) to enforce yourself upon NON-VIOLENT MEN, you have equally condemned yourself to others using violence on your non-violent actions.

    If you don’t like how I dress, don’t like my profanity, don’t like my cheating and lying – then don’t deal with me. But none of my immoral behavior justifies you attacking me.

    Same with business and the free market. All your “government market” and still men lie and cheat. So, attacking them doesn’t stop it. So what do you – you stop GOING TO THEIR STORES.

    And enough of your type, the business goes bankrupt. Interestingly, the same power that takes out immoral companies in your violent, government world is the same one that takes out immoral companies WITHOUT THE NEED to resort to violence and government! Simply don’t buy their product!

    But if by regulation – as you demand – you give other men protection from the consequences of their reckless behavior (because that is exactly what the government-creation called a Corporation does – protect people from the consequences of failure) – you must expect that you are rewarding reckless behavior.

    So you demand MORE regulation – which prevents YOU from competing with these Corporations – which makes them MORE immune to their reckless behavior – and you are *shocked* to see the situation get worse! But you cannot comprehend why.

    Big business does not fear *more regulation* – in fact, they love it!

    The mounds of paperwork does not bother them because they have thousands of professional paper pushers working for them.

    How many DO YOU HAVE?

    Regulation keeps the “little guy” out of the marketplace – and solidifies the position of Corporations.

    With all the reams of law and paperwork – and they still act reckless you’d think you’d figure out this game.

    But it does seem it still surprises you because you still call for more of that game.

    Thatcher unleashed a bunch of pro-market reforms on the UK during the ’80s, and it created mass misery, the north of England was pretty much gutted out, because the government cut funds to local government in the hope that business would flourish and fill the gap. It didn’t.

    And it why do you think it should have?

    What economic theory do you hold (or they held) that says “Take away government stupidity in provisioning a service, so that another business will be equally stupid to provide the same idiotic service”.

    Just because government does it, does not make it economical.

    Just because government stops it, does not make it suddenly economical either.

    Government must take from the producers of society and gives to the non-producers of society

    Government NEVER takes from the non-producers of society (because there is nothing to take) and gives to the producers (they don’t need it)

    Therefore, All government action is uneconomical.

    Of course, this is self-evident, but I’ve always found it necessary to tell it anyway – and often after I tell it, people will still believe otherwise but cannot provide any coherent reason for their belief.

    Wages were kept low not by governments, but by an understanding between companies not to undercut each other.

    Do you understand that labor is just an economic good, no different then apples, cars and TV sets?

    Do you understand that if there is a over-abundance of labor, the price of labor must fall (wages must fall) – or there will be a large surplus (called “unemployment”).

    You probably understand this if I was talking about apples – but you also probably go mind-blank when someone talks about labor.

    Apples depend on a human brain to move them from a place where there are too many of them (like an apple orchard – millions of them falling off trees, there are so many) and move them to where there are too few (like my kitchen table).

    It may cost me a penny to buy an apple at an orchard, but a dollar at my grocer for a reason.

    Labor has its own brain (we hope). It has to do the SAME THING AS THE BRAIN running apples. It has to move where there is fewer labours and leave behind where there are too many. Resisting this is like an apple that falls of a tree in an orchard – if it is not moved – it rots.

    I understand your humanity. You suffer when you see other humans rotting because they refuse to move. But they have a brain, and that is their choice (unlike the apple) to stay and rot.

    IMF enduced pro-market reforms have caused misery across the globe.

    Boy, you are packed full of propaganda!

    The IMF is nothing at all pro-market.

    The IMF is created by GOVERNMENT.
    The IMF is funded by GOVERNMENT.

    They are the economic tool of government intervention into foreign markets.

    They are the complete OPPOSITE of the Free Market.

    I am not afraid of businessmen, although, I know that their aims have nothing to do with growth for the sake of humanity and everything to do with growth for the benefit of buying a new yacht.

    So you believe boat builders deserve to suffer and be unemployed so that your *more favorite* labours can enjoy big screen TV?

    I believe the fundamental logic behind a free market system; individualism, is grotesque in itself. I do not accept the principle.

    So you would be a slave to another man, instead of being your own man?

    I support government interference, when it helps those who need it most.

    Do you believe a man who is hungry can steal food from me to feed himself?

    And if I resist his theft to save the food for my kid, am I a murderer?

    But I fail, and my child starves, who can I steal from? You? And if you resist, I have a right to kill you to steal your food to feed my child?

    And if I win and that starves you, who will you steal from?

    And who determines how much food you have a right to “steal”? How much “hunger” can I relieve by stealing? All of it? Only enough for me to crawl? All that I can eat without bursting? Can I steal for tomorrow too and create some left-overs so I don’t have to steal, say for a week? A month? A year? How much can I steal for how long?

    Can I only steal for me or can I steal for my friend too?
    ——–

    And what do you think would happen to society that justified theft on “demand”?

    Social order exists because of the rule of right of property

    We have but two ways to determine the use of anything.

    (1) By force

    (2) By right

    Using (1) creates Barbarianism and destroys social order and civilization. This is the choice of government and criminals.

    Using (2) creates Civilization and builds social order. This is the choice of free men who wish to remain free.

    Choose wisely, my young netizen!

    For example, my dad had a heart attack a few years back and our tax funded single payer healthcare system saved his life. We, at that time, would never have been able to afford private healthcare.

    Why do you believe a service – that you seem to completely believe is desired by everyone – is so expensive?

    IF everyone wants a computer, computer companies make them as fast as they can.

    Yet, you claim everyone wants health services, yet …. it is incredibly expensive.

    It isn’t that we don’t know HOW to provide health.

    It isn’t that we don’t know HOW to “manufacture” doctors and nurses and pills.

    So, do you know why it is expensive or do you just stumble right along and never really investigated this economic bizarreness?

    I’ll help.

    Yes, your government. By prohibiting the offering of health services without a government piece of paper, the market has been monopolized by institutions whose best interests are met by increasing the costs of health services

    Since competition has been prevented by government writ, they are immune to market forces of price – hence, can charge any price with near impunity.

    As long as the government prevents competition, the price of your health care will be extremely high.

    But your solution is to make the system worse

    First, you agree to the installation of a monopoly on provisioning – by licensing and government control – thus creating the cost problem.

    TO solve this, you bizarrely believe a monopoly on purchasing is the answer – by having government become the sole purchaser of all monopoly provided services!

    Your answer to a selling monopoly is to create a buyer monopoly!

    The problem is the monopoly! Making another one makes the system worse, not better.

    But you have no economic theory to explain why if one monopoly is bad, two is better – yet you believe it!

    You are suggesting that the market is run by the people as a collective. It isn’t.

    Here you are right, but you do not understand (as demonstrated by what you followed this with).

    Hold this thought hard:

    The Market is NOT run by the People no more than gravity exists because you are sitting there.

    Like gravity between you and the earth, the market is a CONSEQUENCE of human existence.

    The market is not designed. It was not “invented”. No ancient Einstein woke up one morning and said “Hey I think TRADE is a good thing, let’s do it!”

    The Market is a consequence of the aggregate actions of men – whose choice of actions is uncoordinated and subjective to the values of individual men – but while achieving their subjective wants and needs NATURALLY creates a system of VOLUNTARY economic trade for the benefit of ALL who participate in that trade

    It is created, manipulated, twisted, and forced onto us all by a very select few, with obscene wealth.

    To me, government must act as a counter balance against the excesses of the market.

    The ONLY WAY men of wealth can FORCE you to do anything is to put a gun to your head.

    The ONLY WAY they can put a gun to your head WHILE PREVENTING YOU DEFENDING YOURSELF is if they use a GOVERNMENT GUN. You defending yourself from government action MAKES YOU A CRIMINAL, not them.

    Government is the very REASON men of wealth have the power to FORCE themselves upon you and the market place. Without government, they would be violent criminals. With government, they are law makers making monopolies that stop YOU from earning.

    You complain, but the cause of your complaint is your own demand of action.

    You are truly your own worse enemy.

    If you disagree with me, provide a coherent reasoning from premise and theory to support your belief.

  7. Black Flag says:

    Rereading this, I see it isn’t that clear

    So to rephrase a bit:

    The Market is NOT run by the People no more than gravity is CREATED by an act of a man

    Gravity is a CONSEQUENCE of matter. You do not do “anything” but exist, and gravity exits.

    The free market is the same – it is a CONSEQUENCE of human action. No person “creates a free market”. By voluntary trade, it “exists”.

  8. David says:

    Hesitating to interfere in a private discussion (the like of which I think I have seen before), and going back to the original posting:
    “It is true that if you don’t give people the money they clearly deserve for the work they have done, they will not perform highly, they will be unmotivated and annoyed. So yes, money as an incentive does work to an extent.”
    I am not sure that I agree in this respect; in this instance money is merely a means to prevent someone from feeling exploited and undignified – it’s not the money, it’s the dignity. Why do the low paid sometimes tell their boss that they can “stuff the job”?

    Perhaps there are two different types of people; some, who once they have a “sufficiency” (however they define that), are no longer really influenced by money but seek other means of self-realisation. Then there are those who measure their “value” (to whom?) purely in terms of how much money they earn; for these people possibly you have to offer high bonuses to keep them – whether those bonuses actually lead to high performance is another matter.

  9. Stella Mojito says:

    Your criticism of government makes sense, essentially it involved the idea that public sector bureaucratic workers are, like marketplace actors, utility maximizes. With this I can sympathize, but let’s look at reasons beyond the clunky critiques of human nature please.

    Similarly, I agree with your: “if by regulation – as you demand – you give other men protection from the consequences of their reckless behavior (because that is exactly what the government-creation called a Corporation does – protect people from the consequences of failure) – you must expect that you are rewarding reckless behavior.” However, from reading Jamie’s blog I would not suggest he feels a form of government in its current form could provide this effective regulation he speaks of. Government is a superstructure, an edifice that contains relationships of power which have helped shape the close relationship between a political elite (in that its demographic overwhelmingly derives from similar backgrounds that perpetuate themselves [mountains of evidence for this]) and a financial sector elite who are more or less the same (just look at the lobby industry). It is a plutocracy, it doesn’t matter which of the three real choices (in Britain) got in; all parties would and must continue the ideology laid down for them.

    “So you demand MORE regulation – which prevents YOU from competing with these Corporations – which makes them MORE immune to their reckless behavior – and you are *shocked* to see the situation get worse! But you cannot comprehend why.” Regulation could be independent regulators (symbiotic –‘working with’, or interstitial –‘working apart’ from government) whose members do/will/have not worked for the boards they monitor…ensuring an adherence to the legal system is at least a first step towards transparent fiscal practices. Does a free market mean no rules?
    “What economic theory do you hold (or they held) that says “Take away government stupidity in provisioning a service, so that another business will be equally stupid to provide the same idiotic service””. Efficiency is important but it is not the be all and end all, human relations are number one (that is a universalist ethic I think should be accepted), to penalize persons because they happen to live and identify with a social world anathema to the cold, utilitarian logic of the market is really a detaching tactic, schizophrenic to a human nature rooted in language, communication and consciousness. I feel that you are underestimating the harming affect of concentrated capital power in a supposedly democratic market system. I’m afraid you are leaning to a human nature that harks back to an age when we were slugs.

    Again, a dubious axiom: “Therefore, All government action is uneconomical.” Hmmm…quite a generalizing statement, if being efficient and economical meant more than living a dignified life in a world that tries to cater for people attached to something more than their immediate interests then perhaps you are right. I don’t agree though, the rational agent of utility maximizes is a simple view of human nature that is logically coherent merely because it is simple. Everything up to and including romantic relationships can be understood in terms of utility maximization. Thus, the search for a partner can be interpreted as a petty entrepreurial activity in a competitive market, in which – acting on information and incentives – couples form property-based relational contracts as a means for effectively utilizing resources, and the relationship is only sustained for as long as each maximises the utility that the other receives.

    “Do you understand that labor is just an economic good, no different then apples, cars and TV sets?” Labour is not an object, it is a subjective multitude of beings. Labour rests on living entities (often whose final position within the dynamic of power relations that construct their life-world is unfortunately largely pre-determined.
    “I understand your humanity. You suffer when you see other humans rotting because they refuse to move. But they have a brain, and that is their choice (unlike the apple) to stay and rot.”

    Your assumptions on human nature ars made apparent here, I suppose the world is a big Zero-sum game (we are all self-seeking pleasure maximisers in public choice theory) where everyone starts from the same point, like a foot-race, and it is the neutral sifting mechanism of meritocracy (based on personal agency) that makes all fair-ish….hmmm? It appears that the ‘rational utility maximizer’ has been inducted into a caste of rational beings from which the great unwashed are excluded…Ridiculous!

    Meriticracy is a myth in that it rests on the assumption we all have equal access to opportunity (I will omit the more standard equality of opportunity spiel), that we start off on a level pegging…hmmm? Do you believe this to be true? There is plenty of evidence the points to the relationship between societies of relatively high inequality in the OECD countries (Britain, Portugal, USA) and a lack of social mobility, perpetuation of privilege, low self-esteem and higher levels of anxiety, etc, etc. Do you believe a true free-market would iron this kink out?

    Again I believe I can see the assumption behind your logic, “So you believe boat builders deserve to suffer and be unemployed so that your *more favorite* labours can enjoy big screen TV?” This problem deserves more attention; you wish to relativise actions and consequences perhaps? Your system works on its limited level. A level that omits a concept of human nature that goes beyond just selfish individualism. The free market is a hypothesis that rests upon the neutral arbitrator of chances (of votes) within the market place…This is fine, but you must then of course say that underlying structural power relations do not play a role in an individual’s socialization, that material deprivation relative to others does not have an impact on a person’s life chances, that social status plays no role in a persons self-esteem (especially of the young), that inequality and a hierarchized society do not affect any of these, that they are superfluous, irrelevant to a person’s life. Do you believe this to be true? Remember, I’m not looking for true material equality (that itself is ridiculous), but a level of equality on a scale where people can actually still relate to each other.

    “Since competition has been prevented by government writ, they are immune to market forces of price – hence, can charge any price with near impunity.” To be honest, I can read this and find your arguments quite plausible, except that the reality of government and private business is almost entirely symbiotic, to even contemplate a free-market system you must address the underlying structural issues of our own time first, while socialists are lambasted as utopians you on this principle are adhering to policies that are uber-utopian; Far beyond any practical relevance to today’s world.

    “As long as the government prevents competition, the price of your health care will be extremely high.” As a favour, could you provide real-life examples of free, undiluted competition that has helped health services perform a better service?

    “Like gravity between you and the earth, the market is a CONSEQUENCE of human existence.” You suggest that there is no free-market (I agree), and so I assume you accept that the economic system is a perpetual dynamic being constantly designed and defined by its monopolistic users, but by dropping-in a phrase like this you are hinting at the transcendental nature of the market (its plotonic ideal form…a caveat if ever I saw one)

    “The market is not designed. It was not “invented”. No ancient Einstein woke up one morning and said “Hey I think TRADE is a good thing, let’s do it!” Same as above.
    “The Market is a consequence of the aggregate actions of men” So is society, so is language, so is everything, you have drowned the meaning of the Market in a vulgar circular non-meaning. “– whose choice of actions is uncoordinated and subjective to the values of individual men – but while achieving their subjective wants and needs NATURALLY creates a system of VOLUNTARY economic trade for the benefit of ALL who participate in that trade.” Utility maximisation optimally takes place through the act of exchange, and that exchange can take place between the drug dealer and the addict as much as the lover and the pursued. This kookiness, where it is not merely circular and vulgar, descends into absurdity when the suitability of the theory can only be established through an ad hoc proliferation of conceptual innovations, as when – for example – Becker explains criminal recidivism in terms of a “preference for risk”. This naturalises and universalises the cut-throat self-advancement of career-minded bourgois WASPs, distilling it into a set of puerile anthropological axioms.

    I believe that both an idea of a free-market and our current governmental practices are wastes of time: Free-market, everything has a value?…Absurd? Imposing value categories on a continually dynamic world would eventually become paradoxical. Also, would the market (the collective will of rational individuals…apparently) not serve those with the largest might?

    As for governments and Democracy, it’s just tokenistic participation. Democracy is objectified as an institution. It is made abstract, it is presented as above, beyond and separate from our everyday lives and too big to fathom. Human agency comes into this in that, sure…people don’t act…and so shouldn’t they get the government they deserve? Hmmm…This human nature centered argument avoids the necessary confrontation that we live in an unequal society (the rich need the poor to be rich, thus surely the duty of the materially strong to the materially weak has to be taken seriously). Simply, that a person’s subjective agency is hugely affected by their early socialization and the dominant ideologies that have shaped their social narrative. Apathy is not necessarily human nature; it is just as much a product of political and social disempowerment.

    You talk of human agency as if it exists as a transcendental property, as if the practices, the forms and the roles people play are not affected by underlying issues of socialization and so the market is attractive because it provides a glimmer of hope towards a sorting system based on merit…As if the market is a social equalizer and arbitrator of fairness in itself!

    Instead of freedom ‘from others’ we need an expansion of the axiom so that it is a freedom ‘too become what you can’. Then we will scratch at the underlying structural deficiencies within society that inhibit our lives. I will not reduce your argument to a support for merely individualism and rational self interest as human nature; instead, I feel that by limiting your theory to a freedom ‘from’ you are forgetting that decisions have externalities, and that relativising all actions because they adhere to the axiom of freedom ‘from´ means that we further separate ourselves from the consequences our actions. You base your truths on many assumptions and that is why free-marketers can seem rather smug when they idolize their economic logic and extend it to human nature.

  10. Black Flag says:

    Hi Stella,

    However, from reading Jamie’s blog I would not suggest he feels a form of government in its current form could provide this effective regulation he speaks of.

    I agree, he does not see this form of government provisioning “effective” regulation.

    My point to him is: there exists no form of government that provisions “effective” regulation on a Free Market.

    He is looking for a way to stop reckless men -who by grant of government get the right to avoid consequences of that recklessness- by instituting more of the same government that gave such grant.

    If the goal was really to inhibit recklessness, the answer is easy: let the consequences be delivered unmitigated. Literally, overnight, these actors would backflip.

    But that would mean no regulation, for it is regulation that makes the allowances to mitigate consequences.

    But Futile doesn’t want that – he wants regulation!

    Government is a superstructure…

    Eloquence aside, I agree.

    Government holds violent power. Men of wealth do not wish such power to be applied to them.

    Thus, the purchase – men of wealth will buy government power. Government gets wealthy, and men of wealth get a formidable tool to protect themselves from you and Futile, while using the tool on you and Futile to get even more wealthy.

    Regulation could be independent regulators (symbiotic –‘working with’, or interstitial –‘working apart’ from government) whose members do/will/have not worked for the boards they monitor…ensuring an adherence to the legal system is at least a first step towards transparent fiscal practices. Does a free market mean no rules?

    No, a free market means it is free – that is, voluntary.

    You do not have a gun to your head to buy (or not buy). Thus the decision for you to enter into a trade (or not to enter into a trade) are yours – and yours only to make.

    What ever reasons (or not) to trade (or not) is -solely- yours.

    What I think about you in your trade is irrelevant, because I have no participation.

    The free market ends when violence is introduced, that is, it is no longer voluntary.

    Efficiency is important but it is not the be all and end all,

    “Effective” is my standard. You can be incredibly efficient with zero effectiveness – and that will get you nowhere.

    human relations are number one (that is a universalist ethic I think should be accepted), to penalize persons because they happen to live and identify with a social world anathema to the cold, utilitarian logic of the market is really a detaching tactic, schizophrenic to a human nature rooted in language, communication and consciousness.

    Economics, like all forces of Nature, have no subjective values.

    Gravity plunges a pious man and an evil man equally to their deaths should both leap off a cliff.

    Same with the laws of economics.

    Humans make the choices – laws of economics do not apply here in the making of individual choices as they are subject to that individual.

    What the laws of economic says is “If you do “X”, the consequence will be “Y””

    If “Y” is the desired consequence, then all is well.

    But if “Y” is not your desire, then demanding “X” is irrational, and no matter how much frothing at the mouth will cause “Y” to be avoided while doing “X”. To pretend it will or to lie about it doesn’t change a thing about “Y” either.

    So when Futile insists that more regulation is necessary to reduce recklessness, yet it is that very regulation that increases the recklessness – it is obvious his procedure and his aim are not aligned at all. To demand that it is the fault of the law of economics that caused this failure is irrational.

    I feel that you are underestimating the harming affect of concentrated capital power in a supposedly democratic market system. I’m afraid you are leaning to a human nature that harks back to an age when we were slugs.

    In fact, I am not underestimating it at all – I am highlighting it!

    Concentration of capital in a free market system is NEVER a threat. It has no violent power – Free Market exists on voluntary exchange – you can have all the money in the world, but you can’t buy my kid; so capital can ONLY be effective if there are VOLUNTARY participants in the trade in a free market.

    Fatal concentration of capital in democratic market systems is wholly unavoidable!.

    By a mere vote, my kid can be taken from me and sent off to die.

    If by mere vote a man can be relieved of his wealth, those that control the vote can -without much resistance- seize tremendous wealth upon themselves. It is then no surprise that the masses often vote for someone else’s money.

    The chase devolves, then, to a race to control the government.

    All of this has absolutely nothing to do with economics – it is all politics – and the economic market place reels in perversion upon perversion as political decisions replace economic ones.

    In the end, as you pointed out, a symbiosis of wealth and government violence transfers wealth from the people to the Elite. This transfer can only occur under the involuntary systems of government force and violence.

    It is the violence that undermines the social order, not the Free Market of voluntary action.

    Again, a dubious axiom: “Therefore, All government action is uneconomical.”

    It is not dubious at all – it is a fact.

    You cannot improve an economy by replacing economic decision making with non-economical (political) decision making. This is completely self-evident. Destroying economic decision making cannot IMPROVE economic decision making.

    To claim that political decisions make better economics is wholly false and a
    contradiction. Political decisions –by definition– are not economical.

    Most certainly, as a human being, you can value the outcome of a political decision to be higher in value then the outcome of an economical decision.

    The Law of Economics has no standing in you determining your values.

    Just know, that your economy will degrade in favor of your political choice. If that is “ok” with you, then you’ve made your choice willingly. You’ve traded some of your prosperity for a sense of ethereal happiness, then be happy!

    But do not justify the political decision based on economics! It can’t be done.

    And anyone who tries is a liar, a scoundrel and corrupt. The reason politicians are corrupt is because they fully understand that the People will revolt if the politic decisions undermine their economic welfare. Economics is the Mother of Politics.

    Thus, the politician chose to lie constantly about their political decisions saying it will improve the economics of their People – it cannot, no more than you can create matter without energy.

    I have never claimed that all human decisions must be made economically.

    I personally don’t do that at all. I provide the economic resources to my family based on an emotional decision that is generally devoid of any economic reasoning. I do not measure their economic inputs into the family unit as a measure of the family decision making either. Economically, I am a huge loser in my family. I provide all the goods and they, very few – and they consume most of the goods, and I the lest yet everyone has a say on how to spend MY economic income!

    But I am happy because that is my choice – to forgo economic prosperity for me and achieve some human emotional experience instead

    But I most certainly don’t go around justifying this by claiming I making a better economic decision by doing this!

    Labour is not an object,

    So? Neither is love, and people trade money for it.

    Because it is not an “object” by your definition does not make it “not an economic good”.

    An economic good is anything that is valued by a human being

    Nothing has value unless it is valued by a human being.

    Your assumptions on human nature ars made apparent here, I suppose the world is a big Zero-sum game

    Do not make mistakes of assumption.

    As above, if we are talking economics, the laws of economics are immutable.

    If a man complains about not finding a job, he is either a liar or he is ignorant and does not understand even himself.

    What he really is saying, He does not want to trade his labor for the offering currently presented to him.

    That is his choice and he is free to make it. It is his effort and he it is his choice of what effort he wishes to engage and at what trade he wishes to make with it.

    But if others are unwilling to trade for that laborit is their right too.

    They do not trade with him because his price is too high. There are many others who can effort the same way at a lower price.

    You want to buy ONE apple.
    Why would you buy an apple from a store that is more expensive than the same apple from the same store! Of course you wouldn’t!

    You’d go to the cashier, and they ask $1 for that apple, and $2 for the other.

    You’d say “Huh??, they are similar apples.”
    And if they said: “Yep, but that apple we want $2”, you put it down and buy the $1.

    So why do you believe labor does not follow the same law of economics?

    If I am hiring a man to mow my lawn – and have two bids – and they are essentially the same, why would I buy the more expensive one, when the cheaper one does exactly the same job.

    So, for a man to complain about “not finding a job” is bizarre. Either reprice yourself in THAT market …

    OR

    Move to a market that is scarce in labor, if you want to hold your price.

    But don’t COMPLAIN about not having a job – because that would be complaining about your own free choice of action – and complaining about how stupid you are while continuing to act in the same stupid way is wholly irrational.

    Do you believe this to be true?

    I hold no specific belief about merit.

    I hold specific belief about VALUE.

    You could be the most meritorious man alive as a dog catcher. Great! But I would not hire you because you are the best – I do not hire you because I do not value dog catchers as I don’t need them.

    However, if I am in the market to hire a dog catcher, I value merit in dog catchers

    Hope that example clears up some things.

    Do you believe a true free-market would iron this kink out?

    In all economic matters, the free market is the optimum. All other systems – which require violence and force to be applied inside the economic system always pervert and degrade the economics.

    Some twist it in ways worse and other less worse – but all other systems that are not free market create perversions and degrade the economy.

    It is the Free Market system that is ironing out the kink.

    The problem is: to fix it requires humans to suffer. They have to change their ways, abandon the way things were, and do something different. People don’t like that, so they will easily follow a liar who claims that he can iron out the kink without pain.

    But it cannot be done – all that happens is a bigger, deeper kink

    Eventually, the Market wins – because it is a law of nature and nature always wins eventually.

    …and then it will unkink. Suddenly, completely, devastatingly – and the people will suffer. But they have to suffer – there is no path to fixing the problem other than uprooting what does not work and adhering to what does work

    Pay me now, or you will really pay in the future. But you will pay.

    The free market is a hypothesis that rests upon the neutral arbitrator of chances (of votes) within the market place…

    No.

    The free market rests on one thing – and one thing only.

    Freedom. This is why we say “FREE” market system. The VOLUNTARY trade between participants is the core, underlying requirement of free market systems.

    This is fine, but you must then of course say that underlying structural power relations do not play a role in an individual’s socialization,

    I do not say that at all, nor required to.

    The role of the individual is to act. He is best to act for himself, free from the violence of others.

    How he may choose to interact with others is his choice as well – knowing full well his actions will create consequences with others and their actions.

    When men respect other men’s freedom – that is, do not impose upon another man – voluntary action and trade can occur. This provides the optimum economy for all participants – for each man can choose his own value on the goods he has and the goods he wants, and thus each man can obtain his most valued good for himself without imposition of another mans value.

    You get what you really want and I get what I really want.
    We both win.

    To be honest, I can read this and find your arguments quite plausible, except

    …and show you have no counter argument at all except to claim my argument is Utopian (oh, the irony! – St. Thomas More, who wrote Utopia penned a State where there was no freedom, no private property, everybody believed the same, and were taught the same thing …. this is your world, sir – and most definitely opposite of mine!)

    Far beyond any practical relevance to today’s world.

    Ah, the “Practical” man – a man who will surrender his principles for a short-lived advantage!

    Yes, the “Practical” man can be found at the root of all human evil.

    As a favour, could you provide real-life examples of free, undiluted competition that has helped health services perform a better service?

    My argument derives from universal truths – arguments that you have no counter against.

    To then demand examples within a system that does that fails in many ways of a free market is specious. It is akin to describing how a refrigerator works, and you demanding demonstration of it …without the refrigerator.

    However, anecdotal, I offer my own experience.

    I have family health insurance – it covers me for everything; including long term care due to disease, accident or cancer, etc. It covers me anywhere in the world I may chose to live or “wander through”, no exceptions.

    It costs me -for my whole family – under $100 a month.

    I’m sure you are aghast – you’d die for a plan like mine (pun intended 🙂 ).

    Ah! But the deductible is $10,000. Thus, my plan provider won’t be nickle’d away with petty claims – which represent 95% of them in your socialist system. I take care of the small broken bones, cuts, colds and sniffles and pains – and in trade, they’ll take care of all of the financially devastating ones (if they occur).

    Further, I’ve not had to pay through the nose either.

    I injured my back while on an international contract. I went to the hospital – which had a wait time. Oh! Cash! No wait time….

    Doctor’s fee: with insurance, $1500. Cash: $250.

    Yes, Stella good ol’competiton for cash always wins.

    You suggest that there is no free-market (I agree),

    No.

    I suggest that the Free Market is like gravity. You can argue gravity doesn’t exist as you launch yourself up in a jump. I’ll wait a few seconds, and then see if your argument changes….

    Same with the free market – you can certainly pervert it and distort it with intrusions. But, in the end, it is futile – it always wins, and always will remove the perversions and undistort itself. Like jumping, you can jump again – and probably claim – again- gravity doesn’t exist; and yes, you can distort and twist even harder the economy and avoid Free Market.

    But the Free Market is immutable. It will deliver the consequences you demand – systemic economic pain and suffering.

    So is society, so is language, so is everything, you have drowned the meaning of the Market in a vulgar circular non-meaning.

    Not quite.

    Language is invented. That is why we have many of them.

    Society is a construct based on paradigms of social order. Most of these paradigms are taught by rote, and are fraught with contradictions – manmade – thus, we have many societies.

    Economics is the aggregate of the consequences of the ACTIONS of INDIVIDUALS. Yes, many of the features of Society share the same aggregation – but does not dispute the root of economics either.

    The same Law of Economics works on ancient societies and primitive societies, advanced and civilized societies, across different languages and different cultures.

    The English do not suffer a different economic law then the French or the Russians.

    A man does not suffer a different economic law than a woman or a boy or a girl.

    Becker explains criminal recidivism in terms of a “preference for risk”.

    ..or it could be a mental disease.

    Free-market, everything has a value?…Absurd?

    Yes, because that is not what the free market says.

    Air has no value – and as such it has no price. You breath (for now) for free.

    Air is a scuba tank has value – especially if you are under the water. You do not breath for free – you pay for it.

    Things have value only if a human values it. If a human does not value it, it has no value.

    Thus, “everything has a value” is NOT part of the requirement of any market system. Many things have no value. An economic system is ONLY concerned with things that HUMANS value.

    Imposing value categories on a continually dynamic world would eventually become paradoxical.

    Correct! Imposing upon another man your values is an act of evil.

    You may value snake oil and I do not. You imposing your value of snake oil on me will create conflict.

    Also, would the market (the collective will of rational individuals…apparently) not serve those with the largest might?

    There are many markets that do so. But not the FREE market.

    “Might” infers violent imposition – contradiction to freedom. If “Might” and violence are part of your economic system, it is not a system of Free Market – but a perversion.

    Democracy is objectified as an institution.

    Institutions are roots to much of the worse evils of humanity – whether in political force or as religions.

    The replacing of a man individual with an abstraction as the highest order can only be seen by a reasoned man as bizarre.

    Instead of freedom ‘from others’ we need an expansion of the axiom so that it is a freedom ‘too become what you can’.

    Never!

    You propose “Positive Freedom” – the freedom to become “something”- as the highest order.

    But no matter what, you can never swim like a fish nor fly like a bird. The Universe, itself, denies you this – and thus, Positive Freedom simply does not exist in the Universe for you to attain it.

    “Negative Freedom” – the freedom from “something” – is the highest order.

    Human freedom is measured by not the lack of imposition of the Universe, but measured by the lack of imposition of another man.

    From that point, free from imposition, a man can achieve is greatest desires.

  11. Stella Mojito says:

    Hi there,

    Interesting points you make, do you think it is interesting how Berlin’s negative liberty concepts were successfully appropriated by a British/US right-wing (the parties are so similar both in the US and Britain that I don’t know what right-wing means anymore)? I mean, to see the largest increase in statepower while claiming at the rhetorical level that quite the opposite was happening took some stones (Just look at Reagan, Bush, Clinton, Bush 2, Obama, Thatcher, Major, BLAIR, BROWN, AND Cameron)! I found that a lot of supposed free-marketers had alligned with conservative elements within society, why do you think this is?
    Is this not because many people have appropriated the free-market stance (i.e.Silicon Valley high-tech business people) and probably think that rules to capital are totally crazy because all they want to do is make money and they figure that the fastest and easiest way to make money is to be at peace with everybody….would any of these want to give up their strong state, with all their state subsidies…probably not. Surely conservatives/republicans have been the vanguard for increased state-power at least as much as their labour/democratic party counterparts (if not a hell of a lot more!). Should I then conclude that many Free-marketers are merely fakes, much like those champagne socialists! What do you feel about this?

    Also, as a libertarian (from North America at a guess) what are your views on the current political practices following the financial crisis?

    Also, when you say that the market is an ‘immutable law of nature’, that it will ultimately ‘win-out, when? Now this is an unfair question, so I will qualify it by noting how many Marxists believed in the transhistorical truth about the working-class revolution, that it was inevitable and anticipated…they were wrong. Your free market natural law is logically cogent and almost beautiful, but it is a simulacra, it exists within its own self-referential logic. Not that it has no relevance to reality but you surely must see the dogmatism that goes with believing in a similarly transhistorical system….In fact the free market is currently the system of all systems! I guess it often depends on which philosophers you read as to whether you think systems are a natural/good thing or not.

    Also, I guess we will have to disagree on immutable laws of nature…you must understand that while a logical system may seem brilliant there are alawys other rationales, competing, emerging, descending, how can a free marketer have the gaul to believe they have the truth, as it happens, the only universalist truth of nature! How modest! I feel that much uf economics is a logical fetishism, useful, but over the top. Whre do your premises lead you on human nature, I would argue public choice theory is an assumption masqerading as truth so that mathematical and economical theories work.

    That said, you have reminded me of a lot of stuff I had forgotten, which is good, how do you feel about anarcho syndaclism? After all, it is a free market system existing within a stateless society? It escapes those negative/positive liberty state orientated models, plus it seems that the people element is perhaps raised above the capital element/the dead element.

  12. Black Flag says:

    Hi Stella,

    Interesting points you make, do you think it is interesting how Berlin’s negative liberty concepts were successfully appropriated by a British/US right-wing (the parties are so similar both in the US and Britain that I don’t know what right-wing means anymore)? I mean, to see the largest increase in statepower while claiming at the rhetorical level that quite the opposite was happening took some stones (Just look at Reagan, Bush, Clinton, Bush 2, Obama, Thatcher, Major, BLAIR, BROWN, AND Cameron)! I found that a lot of supposed free-marketers had alligned with conservative elements within society, why do you think this is?

    Do I find it interesting? In a manner of speaking, I suppose. I find it inevitable.

    People in general do not understand themselves, their freedom or their own principles. They typically have had their core concepts shoved down their throat – delivered by rote in public schools – and have accepted them without thinking.

    Thus, they are easily confused and guilt-ed into making poor decisions.

    Many people think they believe in freedom, but as soon as you test them, you find out that they believe in their own freedom, but do not believe others should have the same freedom.

    I call it “Freedom for me, and not for you” ideology.

    But sadly, they do not understand that if they cannot accept the freedom of others, they themselves will be enslaved equally as well.

    would any of these want to give up their strong state, with all their state subsidies…probably not.

    Many people easily surrender their principles for a short-term and short-lived gain.

    As Gandhi said “They love evil too much to leave it alone”.

    . Should I then conclude that many Free-marketers are merely fakes, much like those champagne socialists! What do you feel about this?

    I would tend to agree.

    Also, as a libertarian (from North America at a guess) what are your views on the current political practices following the financial crisis?

    I am not a libertarian.

    If a label needs to be applied to me, it would be “Sovereign Individualist”.

    The financial crisis is due to the artificial discounting of credit, starting back in World War One. We don’t call the era the “Roaring 20’s” for nothing.

    Governments were terrified of the economic consequences of the worst war (to that time) in history. Economic destruction on a scale like never before.

    The reckoning of the economic destruction had to be exercised – it’s a Law of Economics. But the economic turmoil would likely invoke political outcry and possibly overthrow the Powers That Be.

    The Elite witnessed the overthrow of the Czar, and they knew what happened to the Elite there, and were terrified of a similar outcome of the economic reckoning.

    To avoid this, the Elite artificially lowered the cost of credit, masking the destruction of capital. Thus began the “Boom/Crack up” cycle we are still suffering.

    But the Law of Economics cannot be denied. Every reinsertion of government intervention to avoid the reckoning of the past mis-allocation of wealth only makes the valleys deeper and deadlier.

    We still have not reckoned WW1, and now we have piled on the reckoning of WW2, Korea, the War on Poverty, Vietnam, the Cold War, the Drug War and the War on Terror – to identify only a few “wars”.

    The depth of the valley could be deep enough to destroy Western Civilization.

    But, the governments still avoid the necessary task – which is for government to leave the market place. They avoid it because it is politically impossible.

    To leave would mean government would have to stop paying monies to people who did not earn it – ending social programs.

    But attempting that would cause these people to riot – Public Choice Theory says this –

    and the cities would burn.

    We see this in Greece – where it wasn’t even a cut back, but a “hold steady” and the people set the cities on fire.

    So government cannot stop, thus the cycle will continue and deepen until economic destruction is complete.

    And then the cities will burn.

    Also, when you say that the market is an ‘immutable law of nature’, that it will ultimately ‘win-out, when?

    I do not know.

    The science of economics is unlike the science of physics. Human action dictates economics, and humans are one hardy and tenacious set of biology! Humans can muddle along in futile resistance for a very long time.

    But nature itself knows no time. It is infinitely patient, and infinitely secure in its winning. It has no doubts.

    Your free market natural law is logically cogent and almost beautiful, but it is a simulacra, it exists within its own self-referential logic.

    I would say it is rooted in a premise – no different then, say, geometry.

    We do not claim geometry is self-referential.

    We say it has a “premise” and in geometry that is a “point”.

    All geometry starts with this statement: “There exists a point” and *poof* geometry exists. From there I can prove a circle ( a point in motion at a fixed distance from a stationary point), a line (the shortest distance between two points), a torus (..a much more verbal description I will not let you suffer…), etc. but I can never prove the “point” – it is axiomatic.

    The free market is the same thing.

    The premise is freedom.

    For you to act, you must be free to act.

    To move your arm, you must be free to move your arm, to stand, you must be free to stand, etc. Freedom is the root of all your actions – you must be free to act for you to live. Without freedom, nothing else matters.

    If freedom is our axiom, then the Free Market is derived explicitly from that.

    The Free Market exists when men are Free to trade with each other.

    In fact the free market is currently the system of all systems!

    It is the optimum, if we hold freedom as the root of social order. Other systems can exist, but they will exist at a less than optimum state.

    You can put petrol in your car and it will run optimally – you can use cooking oil, and your car may run – but not optimally.

    I would argue public choice theory is an assumption masqerading as truth so that mathematical and economical theories work.

    It is a theory – merely a human attempt to explain a law of nature.

    anarcho syndaclism? After all, it is a free market system existing within a stateless society? It escapes those negative/positive liberty state orientated models, plus it seems that the people element is perhaps raised above the capital element/the dead element.

    As above, I don’t subscribe to a particular label.

    The existence of money and capital is a natural creation of the individual actions of men in aggregate. I believe it is improbable that society can exist without.

    There will always be a means for men to price and measure value.

  13. body language…

    The logic of incentive « Futile Democracy…

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