Atlas Shrugged

Permabear

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Valmont

legspin wrote: »

The FDA is a bad example, purely for the fact that it's first duty is to the safety of the public. If that puts a hold on the innovation of the pharmaceutical and food industries then so be it. They'll just have to innovate a safer product to do what they want it to do.

By making it prohibitively expensive to have new drugs approved, one could argue that the FDA doesn't protect the public by clogging up the testing and delivery of new products. Not to mention how they have been captured by pharmaceutical companies who can have studies buried or replicated if necessary (although I can only verify that this has occurred with anti-depressant medication). The FDA also strengthens an unhealthy oligopoly of powerful pharmaceutical companies: what small and innovative start-up could afford to pay the hundreds of millions of dollars in regulatory fees (573,258,400 dollars for 86 new drugs in 2010). One can't argue that the state doesn't stifle innovation and growth, it's too easy to find counter-examples, they're almost everywhere we look.

And I'm not sure the military is a good example given the United States department of Defense produces more than five times the amount of hazardous chemical waste every year than the five biggest chemical corporations. If we tried to defend a private company against such a terrible environmental record because of their contribution to technological progress, we would be quickly judged for putting economic growth over the environment.

Permabear

Permabear wrote: »

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Well if subsidies and bail-outs are also technically legitimate then what's your issue with them? I thought it was the principle rather than the legality.

I love how Google, Apple, and other companies are now responsible for the spying activities of governments!

Well when they're putting backdoors into everything for governments to use then yes, they are somewhat responsible.

If governments are demanding information from tech companies, and using the coercive blunt instrument of secret courts to obtain it, what exactly are the companies involved supposed to do?

But hey, it's legal, that's all that matters, no?

diveout

Deleted User wrote: »

Well if subsidies and bail-outs are also technically legitimate then what's your issue with them? I thought it was the principle rather than the legality.


Well when they're putting backdoors into everything for governments to use then yes, they are somewhat responsible.


But hey, it's legal, that's all that matters, no?

Well, yes, when you have secret courts that can charge you with treason, it definitely does matter.

magicbastarder

what amazes me is the notion that these wonderful beneficient companies would be more benign than the governments.
would i like to live in a country run the way google wants? that sounds like a nightmare.

MrPudding

Permabear wrote: »

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So what was the cause of the most recent (2007/2008) financial crisis? My understanding of it, I am not an economist or financier, is that it was caused by instrument like CDOs and how the banks used them to shift liabilities off book and extend themselves further than the regulations would otherwise have allowed.

I came across an interesting article a couple of months ago, which I must dig out. It was an analysis of all the financial crises of the last couple of hundred years. What was interesting was that, in most cases, the crisis was preceded by a slackening of regulation of the banks.

Anyway, as I say, I am not an economist, but I would be really interested in finding out the actual cause of the crisis and how instruments like CDOs and the behaviour of the banks had nothing to do with it.

MrP

Valmont

magicbastarder wrote: »

what amazes me is the notion that these wonderful beneficient companies would be more benign than the governments.
would i like to live in a country run the way google wants? that sounds like a nightmare.

At least you would be able to find everything.

Karl Stein

In Atlas Shrugged, which Rand considered her masterpiece, the wealthy corporate producers are the engines of the American economy, but they are constantly stymied by invasive legislation and terrible government regulations.

npr.org

The 'wealthy corporate producers' are not the engine of an economy - the engine of a capitalistic economy is a robust middle-class and a healthy economic ecosystem.

Entrepreneurs and investors like me actually don't create the jobs -- not sustainable ones, anyway.

Yes, we can create jobs temporarily, by starting companies and funding losses for a while. And, yes, we are a necessary part of the economy's job-creation engine. But to suggest that we alone are responsible for the jobs that sustain the other 300 million Americans is the height of self-importance and delusion.

So, if rich people do not create the jobs, what does?

A healthy economic ecosystem — one in which most participants (especially the middle class) have plenty of money to spend.

businessinsider.com

Permabear

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Permabear

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Karl Stein

Permabear wrote: »

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What?

People work for employers

You don't say?

the bulk of whom are corporations

You know corporations are fictional entities created by government don't you?

that would not exist had someone not taken the risk to set them up.

So let me try to understand what you're saying because it's not at all clear what point you're trying to make.

Are you saying that businesses only exist because someone has decided out of the goodness of their heart to set one up so they can 'create' jobs?

Is this your point?

MrPudding

Permabear wrote: »

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Ah, ok, CDOs don't cause financial meltdowns, people cause financial meltdowns. Now where have I heard that before...

Permabear wrote: »

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But for how long must we not overreact to them? After how many financial meltdowns caused by bad management or greed or whatever are we allowed to step in?

Permabear wrote: »

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And lets not forget all the government legislation mandating service intervals, pilot rest periods and all the other stuff, you know, th things that actually make air travel safe that airlines probably would not other with if they thought they could get away with it.

Permabear wrote: »

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Yeah, what could possibly go wrong?

MrP

Karl Stein

Permabear wrote: »

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'It's analogous to airplanes'.

Financial speculation/manipulation should never be compared with actual real world achievements like mass transit by way of powered flight.

But the wizards were frauds, whether they knew it or not, and their magic turned out to be no more than a collection of cheap stage tricks. Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.

Paul Krugman

Turtwig

Karl Stein wrote: »

'It's analogous to airplanes'.

Financial speculation/manipulation should never be compared with actual real world achievements like mass transit by way of powered flight.

Why not?

Karl Stein

Turtwig wrote: »

Why not?

Because it's nothing even approaching analogous. Financial speculation/manipulation is not physics.

More reality asserting itself for job 'Creationists'.

I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small.

Nick Hanauer

KahBoom

Fraud in business/finance/banking revolves in large part around maximizing short-term profits (and lavishly rewarding management/executives for this), by engaging in practices which are unsustainable long-term for either the company, industry or whole economy.

Complex financial instruments that allow the true level of risk to be obscured, packaged up, and sold-on/moved-around, happen to be an excellent way of creating such short-term profits, while externalizing the cost of the risk onto the rest of the economy, and deferring responsibility for creating that risk.

It's essentially a legalized form of fraud - and proponents from the industry that profit from this, assert that completely removing all restrictions on this kind of destructive practice, will somehow be less destructive than restricting it more.

magicbastarder

Karl Stein wrote: »

Financial speculation/manipulation should never be compared with actual real world achievements like mass transit by way of powered flight.

especially when talking about crashes. the financial meltdown of a few years back was a system failure, whereas a plane crash could at best be compared to a single bank or business going belly up, with no other businesses affected at all.

to compare the meltdown to a plane crash is either overstating the effect of a plane crash, or understating the effect of the meltdown to a comical degree.

MrPudding

magicbastarder wrote: »

especially when talking about crashes. the financial meltdown of a few years back was a system failure, whereas a plane crash could at best be compared to a single bank or business going belly up, with no other businesses affected at all.

to compare the meltdown to a plane crash is either overstating the effect of a plane crash, or understating the effect of the meltdown to a comical degree.

It is also an extremely poor analogy, at least for what PB is trying to argue, when you consider it is one of the most highly regulated industries on earth. And not nice soft self regulation, but proper state regulation that lays down strict rules about how airlines must operate and how their planes must be maintained.

To read PB's post one might think be is trying to suggest the airlines and manufacturers got air travel to where it is today all by themselves, where as the reality is probably more like they were dragged kicking and screaming to where we are today.

MrP

Permabear

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diveout

MrPudding wrote: »

It is also an extremely poor analogy, at least for what PB is trying to argue, when you consider it is one of the most highly regulated industries on earth. And not nice soft self regulation, but proper state regulation that lays down strict rules about how airlines must operate and how their planes must be maintained.

To read PB's post one might think be is trying to suggest the airlines and manufacturers got air travel to where it is today all by themselves, where as the reality is probably more like they were dragged kicking and screaming to where we are today.

MrP

An imperfect metaphor does not invalidate the point. He is an economist not a literary writer.

marienbad

Permabear wrote: »

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That makes it more frightening not less, if personages such as this think it is valid. No wonder we are where we are .

Permabear

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marienbad

Permabear wrote: »

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That is not an answer, it is a quite stunningly stupid comparision on any level and if you can't see that you are just as guilty of FUD as you say the left is.

Brian Shanahan

PopePalpatine wrote: »

Can you elaborate upon these "financial innovations", and where the government is battling you?

There are none, apart from using computers to game the stock market through high frequency trading (and that is more of a case of using a new technology better able to abuse a problem in the system to better abuse the problem in the system than a true innovation). Pretty much every financial "innovation" that is around today (they are still as prevalent today as they were prior to 2008, that is why I am predicting another, larger, crash in the near future, any time anybody asks me about the economy) is in essence equivalent to a financial instrument that was being mightily abused prior to the 1929 crash.

Oh and permabear's work does tell a lot as to why he's a libertarian, trading, banking &c. to tend to inculcate a "fúck you, I got mine!" attitude to everybody else.

Valmont

If I save up some capital, buy a factory and some machines and then hire workers to operate them for me, how can we say I haven't 'created' jobs?

Brian Shanahan

MrPudding wrote: »

Anyway, as I say, I am not an economist, but I would be really interested in finding out the actual cause of the crisis and how instruments like CDOs and the behaviour of the banks had nothing to do with it.

MrP

Never ask an economist for an evaluation of economic performance, its like going to a homeopath to get a cure for the strange lump growing on your breast.

The biggest problem with most economics today is that economics build a model, e.g. efficient market hypothesis, and fit reality around so that it agrees with the model. The problem with EMH stems from two basic assumptions (which are common to all "free market" and libertarian theories) that a) all actors (people) with in an ecomonic system are perfectly rational who act at all times in a manner best fitted to increase their economic standing, and b) all information relevant to all actors within the system is immediately and perfectly available to all, and all actors make full use of that information. Anyone who has spent more than a couple of minutes talking to a real person would know that a) is tosh, and anyone who has ever read the financial pages of any newspaper will know that b) is impossible (insider trading and pyramid schemes are both rampant, if b) held true then you wouldn't even need to legislate against them).

If you want to know about economics to talk to a psychologist.

Brian Shanahan

Turtwig wrote: »

Why not?

Because all it is is a form of gambling.

Pherekydes

Valmont wrote: »

If I save up some capital, buy a factory and some machines and then hire workers to operate them for me, how can we say I haven't 'created' jobs?

This quote, referenced above, sums it up:

I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small.

Nick Hanauer

magicbastarder

Permabear wrote: »

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yeah, like all the other experts, who had predicted the end of boom/bust economics.

bnt

Funnily enough, I think the economic world of Atlas Shrugged was rather optimistic when it came to "job creation". The "captains of industry" in the book employed lots of of people and didn't mind doing so. Folks need to understand that Atlas Shrugged dates from the 1950s, when it seemed that this really was the future, that industry would create jobs for everyone, and employees wouldn't be seen as a burden. Detroit was expanding to suit General Motors, California had its burgeoning aerospace industry, and so on. It seemed that capitalism really could deliver prosperity for all Americans, and that Communism threatened that.

Where Rand got it wrong was in thinking that all that happened without government involvement, or could, but that meant ignorance of the effect of the G.I. Bill, or the rise of the Military-Industrial complex, among other things. (Just who was buying all those planes?) We can argue in retrospect over whether the Soviet Union was a real threat, but at the time it was certainly a job creator in both itself and the USA.

Nowadays, Detroit is in the headlines for all the wrong reasons, and employees are seen as a liability, a cost centre to be rationalised by automation and outsourcing. The more it costs an employer to take someone on, the more employment is taxed, the less keen employers are to employ: this is hardly a controversial idea, and not one that Rand invented. Employers would also like to be able to lay people off easily, to meet changing business demands, rather than have to pay people to do nothing. This works against the need for stable employment: people like to settle down and buy houses, etc.

So when it comes to employment, I think we're looking to find a balance between two extremes. On the one hand, the free market ideal of totally flexible employment, where businesses can hire and fire people as needed, with as little overhead as possible. That means a government that isn't in the picture at all, not taxing employers for employing. On the other hand you have a unionised workforce, with a government behind them to enforce the rules. Enforcement means bureaucracy, and that's got to be paid for. A Union workforce is a smaller workforce - since each employer is costing the company more on average - so provision has to be made for the unemployed, so that means taxes to pay for benefits, and so on.

Note that I'm not advocating in favour of either extreme, but it's clear that Rand was, in Atlas Shrugged. In the book, it was the government who treated workers with contempt, not the book's "heroes". One simplistic interpretation of Communism, with its slogan "from each according to his ability, to each according to his needs", is that you take from the productive and give to the unproductive, without any attempt to make the unproductive more productive. People would be paid to do nothing - and it would always be the government who paid, because there would be no private industry.