The Market for Liberty, or how the Mahon Report made me a free-market anarchist

Permabear

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Valmont

Excellent, I've printed it off and will begin this evening. (Not the Mahon report, mind you!)

Eliot Rosewater

Hmmm ... I'm currently heading into a month long study break so I could probably join you on this one. I haven't read any anarchist books!

(I might have to temporarily sacrifice Ayn Rand for it, but I'm not enjoying Atlas Shrugged anyway...I hope we can still be friends )

Can start on Monday -- away for the weekend.

Valmont

Eliot Rosewater wrote: »

(I might have to temporarily sacrifice Ayn Rand for it, but I'm not enjoying Atlas Shrugged anyway...I hope we can still be friends )

Haha!

The first chapter is steeped in Ayn Rand's system of ethics -- it reads just like Galt's speech.:pac:

Well not really but the flavour is there.

Cannibal Ox

I've made my way into the second part and this is kind of what I'm thinking.

The first part was fairly bog standard liberalism, so grand. It even included your classical mire of how to guarantee the security of the individual without an authority, but they say they'll address that later in the piece, so I'll leave them with that.

But in the second part, they start evoking evolution in such a way as if it can provide a position to divine certain essential features of human nature. They then go on to try and do this, even going so far as to assume that a human nature is relative to the environment in which it produces insofar as it thinks what to produce in that environment.

This brings up all sorts of issues that they aren't really considering. On a very simple level, you can't really build essential features of an animal on a theory of change and then go on to assert a universal quality. If you want to make that argument, you're going to have to do a hell of a lot more groundwork than they do.

If productivity is relative to the environment and if, as I guess everyone will agree, there are different environments, then productivity is not a thing that we can define as a fundamental feature of a human being, but a multiplicity of productivities that can only be defined in relation to the particular environment those productivities exist within, which would assume the existence of a multiplicity of human natures.

They are trying to assert universal laws and rules that can provide a program for social and political change based on an essential nature of human beings. But the approach they've taken means that you cannot assert an essential nature applicable to all human beings because your fundamentals are built on a theory of change and a nature that is relative to the environment it finds itself in.

And then they start talking about thinking and I imagined for a moment that if I were a psychologist or a neurologist, I'd probably close the window about now. Because the writers are just fundamentally wrong in how they approach mental processes.

I mean that as a joke rather then an insult, but if you don't like that, then try and square the idea that "...man must initiate and maintain the process of thinking by an act of choice, no one else can force him to think or do his thinking for him." with everything we know about consciousness, genes and evolution.

We know that you do not make a choice to think. It is possible that you can reflect on your thought processes and make a reflexive choice based on those processes, but the idea that you choose to think is tantamount to saying that thinking about thinking is prior to thinking.

I read more, but if I keep going on this'll be too long, so I'm going to stop here.

Permabear

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KyussBishop

Out of my curiosity regarding Libertarianism the last while, have read a couple of chapters in but am currently massively sidetracked researching Objectivism, which the book appears to base some of its core principals on.

There's a lot of controversy over some of Ayn Rand's theories, which I know very little about at the moment, but I remember there being some fairly well pointed arguments against these principals.

The whole 'self-interest as morality' thing (among much else) doesn't sit well with me at all, but I don't know enough to provide a thorough argument against it yet.

c_man

I'll admit to having never heard of the term. Is 'free-market anarchism' another name for Anarcho-capitalism? If not, where do the differences lie?

Permabear

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Channel Zero

Permabear wrote: »

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Thanks. Just a quick post and will leave ye at it.

Ok, have just read the first 60 or so pages. Let's see. What have we got so far:

• Greed is good. Altruism is bad. Government is evil, it's actually "slavery" and "the cause of many of our social ills". (Always thought it was poverty and inequality myself)

• Taxation is theft.

• There's actually no such thing as civil rights, or any other form of collective rights. Or at least there shouldn't be in Freedomland.

• "Free" unfettered markets are the only way. Any form of regulation is bad bad bad and leads to instability and distortion. Free markets will of course 'stabilise' themselves and will not lead to ever increasing monopoly of power and wealth in the hands of a few.

• All workers rights and the minimum wage need to be abolished. It's bad for business you see. It's bad for everyone in fact.

• Abolish all welfare as it's apparently also bad for us. In Freedomland, the wealthy will of course pick up the slack, providing healthcare and welfare to their chosen serfs.. i mean less fortunate citizens out of their own pockets. This will also have the added effect of forcing the poor to have less children, as they can't afford them. (page 45) So that's that sorted and boxed off!

• Abolish all forms of public education. Why? Because it's inefficient. Privatise it and make it available only to those who can afford it. This is of course a good thing. Ditto public health care.

• Scrap the F.D.A. and all government regulation of food standards. It's a silly concept and only does such pointless things like protecting consumers and ensuring food is safe to eat.

• Obviously scrap things like prescription drug regulation. If a company manufactures a dangerous drug and people start to drop dead, sure it won't take long for people to cotton on to the fact and stop buying it. Self-regulating see? Oh and scrap the idea of doctors needing a license to practice. Stupid things those licenses. The logic of this is that Dr. Nick Riviera types whose "treatments" harmed their patients wouldn't stay in business long. Again beautifully self-regulating.

• Abolish public ownership of land. Anything with the potential for being property would be in private hands. Everything; land, streets, parks, beaches. The lot. "The situation of total property ownership would automatically solve many of the problems plaguing our present society. For instance, shiftless elements of the population, who had acquired no property and were unwilling to work in order to earn enough money to rent living quarters, would be literally pushed to the geographic edge of the society. One cannot sleep on park benches if the private owners of the park doesn't permit bums on his property; one can't search the back alleys for garbage if he is trespassing on alleys belonging to a corporation; one can't even be a beachcomber if all the beaches are owned." (page 61)

KyussBishop

^^ I didn't get that far (though as far as I did get, I was building up a similar litany of issues in notepad)

I'm really really curious what proponents of libertarianism think of all that; maybe this text is just an extreme version of libertarian principles, I'm still trying to keep an open mind and be open to reasonable alternative implementations (that still fit libertarianism).

The more I read up on it though, the more (apparently pretty glaring) flaws I start to see in libertarian principles; a lot of the posters I've seen supporting it across various subforums seem to be smart enough people, and not generally extreme in their views, so I'm finding it very hard to understand how some of them are supporting a movement, which appears to have some very messed up worldviews.

southsiderosie

Hm. I will try to give this a read next week. I am reading a lot of Habermas right now, so I suspect that this book will give me something radically different to consider. :pac:

Eliot Rosewater

Channel Zero wrote: »

Ok, have just read the first 60 or so pages. Let's see. What have we got so far:

In fairness, listing out some of the consequences of the book just for "shock value" is hardly the best way to discuss it or to determine its merit. For example, the mantra "tax is theft" is something that appears slightly ridiculous to people when they hear it, but that doesn't necessarily mean that the statement is without merit. In fact, if one believes, like the authors do, that all government action is illegitimate then one is kind of compelled to believe that "tax is theft". The (Concise Oxford) definition of steal is "Take without permission", after all.

Specifically about collective rights, that's a very serious philosophical/moral issue that can't be brushed aside just because we're so used to the collective having such strong rights. If individuals don't have the right to initiate force against other individuals to get what they want, why does this right suddenly appear when 50%+1 individuals get together?

Eliot Rosewater

KyussBishop wrote: »

The more I read up on it though, the more (apparently pretty glaring) flaws I start to see in libertarian principles; a lot of the posters I've seen supporting it across various subforums seem to be smart enough people, and not generally extreme in their views, so I'm finding it very hard to understand how some of them are supporting a movement, which appears to have some very messed up worldviews.

That's an interesting point. The worldview espoused in Market for Liberty is more extreme than the one I would promote on Boards or in real life. First, I am not sure if my actual view is as anarchist at the author's (I have not found it necessarily to "pin my colors to the mask" other than to say that I am broadly libertarian.) Second, discussing a particular topic as one does on Boards is different to the kind of thing the book is aiming for.

The book is trying to give a logically consistent account of all of human action based on one premise, that individuals cannot initiate force against other individuals. Perhaps it's inevitable that such a book will paint the most extreme view possible. There's no scope for what we would call compromise or middle-ground, or ignoring certain issues, as it is aiming for such total logical and moral consistency. On the other hand, when I'm discussing, say, political corruption it's not necessary for me to completely espouse a consistent world view -- I can just "zoom in" on the particular issue at hand and discuss that is psuedo-isolation. I can argue about corruption in such a way as to make my views on social welfare irrelevant -- but the point of the book is to link everything together.

Permabear

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A Primal Nut

Certainly, the incompetance of government is the strongest argument for libertarianism. It's ironic that so many socialists criticise government, call it corrupt, but at the same time wish that the government controlled everything.

That said I'm not an out-an-out libertarian by any means.

Scofflaw

Permabear wrote: »

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That is also a parody, though, since the limits on what the state can do are defined by dialogue with the people. The libertarian tendency to conflate democratic states with tyrannies is not something that lends them credibility.

cordially,
Scofflaw

Permabear

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benway

Eliot Rosewater wrote:

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Permabear wrote: »

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I think that this is a grossly simplistic reading. In practice, the Supreme Court, in the late 60s and early 70s, driven by Judge Walsh, acted as a counterbalance to the legislature in seeking to vindicate the rights of the individual, the likes of Ryan -v- AG, McGee -v- AG, and the general jurisprudence of unenumerated rights had a profound role in defining a sphere of individual liberty, enforceable as against any prospective encroachment by the state.

Obviously, this process took time, and adapted to a changing society, plus I still wouldn't regard it as anywhere near complete.

Point is, there's a mechanism within the "statist" paradigm to ameliorate the worst effects of majoritarian rule. I think that the state model is much more sophisticated, robust and nuanced than you may be giving it credit for.

20Cent

Reading it at the moment.

Are they seriously contending that the mentally ill should be sold for medical experiments on page 103?

NOT trolling, read it.

Permabear

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Permabear

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benway

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Maybe this is a typo, but it appears to me that it's the insurer or other "creditor" who will be selling the misfortunate's services. Very fine definition between committing someone to a research institution to discharge a "debt", and selling them, from where I see it.

Noting the similarity in the view of mental illness to the kind of Randroid psychotherapy set out in the Rothbard article you posted.

Permabear wrote: »

Twenty years and six governments later, that decision has still not been enshrined in law.

Because it's accepted that women can travel to England relatively easily in order to avail of these services, I would imagine that the bullet would have been bitten a long, long time ago if this weren't the case.

Political pragmatism has its place - lawmaking around abortion is a hugely divisive issue, even now.

And yes, I am quite content to allow majoritarian rule, better that than the whims of an elite vanguard. I would wish for greater democratic accountability, but it's better than no accountability at all, as would be the case with private sector governance.

I would also like to see an expanded sphere of enforcable individual rights, including socioeconomic rights, but that's an ongoing process. The point is that there are safeguards built in to the system - checks and balances.

Suryavarman

Scofflaw wrote: »

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Permabear hasn't claimed that the people don't limit the power of the state, he just claimed that those limits aren't reached very often. To look at some of the specific examples he gave:

Permabear wrote: »

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Nearly every single country on the planet currently deems most recreational drugs to be illegal. And in every country it isn't illegal to ingest these recreational drugs, the amount of these drugs one can possess at any one time is strictly limited.

what clothes she wears

As Permabear pointed out, in France it is currently illegal for a woman to wear a burkha in public. A 2011 poll found that 66% of British people were in favour of banning people from wearing the burkha.

what thoughts she expresses

Only last week a British student was jailed for tweeting some racist statements. In Ireland it is illegal to engage in blasphemy.

what sexual practices she engages in

It was only in 1993 that homosexuality was criminalised in Ireland. In most western countries it is still illegal to get married to somebody of the same sex.

and how much of her own money she can keep.

What country doesn't currently levy an income tax? Tax cuts for high earners are frequently labeled by many in the media as "giveaways" as if it is the government's money and that which isn't taxed, is a gift.

So Scofflaw are these examples of government power not tyrannical or are even western democracies partial to occasional tyranny?

benway

Suryavarman wrote: »

As Permabear pointed out, in France it is currently illegal for a woman to wear a burkha in public. A 2011 poll found that 66% of British people were in favour of banning people from wearing the burkha.

It's unlikely that such a law would be constitutionally sound in this country.

The current position is that curtailments of constitutional rights should be in pursuance of a legitimate policy goal, and proportionate to the issue. Personally, I think this is a reasonable compromise.

Do you believe, by that rate, that individual rights should be absolute, and may not be subject to any qualification or limits?

Suryavarman

benway wrote: »

It's unlikely that such a law would be constitutionally sound in this country.

The current position is that curtailments of constitutional rights should be in pursuance of a legitimate policy goal, and proportionate to the issue. Personally, I think this is a reasonable compromise.

If it were in pursuance of a legitimate policy goal then would you find it acceptable for the Government to ban the burkha?

Do you believe, by that rate, that individual rights should be absolute, and may not be subject to any qualification or limits?

As long as individuals are not initiating force against another individual then I believe that there should be no limit on individual rights.

benway

Suryavarman wrote: »

If it were in pursuance of a legitimate policy goal then would you find it acceptable for the Government to ban the burkha?

Can't see how it would be proportionate to any legitimate policy goal, but if such a goal could be cogently maintained, the delimitation to individual rights of religious freedom and expression are minimised, and any delimitation is shown to be proportionate to that particular goal, then yes.

Only the right to life is more-or-less absolute ... which is why abortion is such a difficult area.

Suryavarman wrote: »

As long as individuals are not initiating force against another individual then I believe that there should be no limit on individual rights.

Is that only physical force? There are plenty of other categories of coercion and oppression, why should they be excluded?

KyussBishop

Interesting points of view regarding the state; I can see the merits of arguments regarding state tyranny, and it is a genuine danger, though personally I think that (slowly) over time, state intervention (on the social side anyway) is being continuously rolled back to balanced levels.

Some of the primary examples would be feminist movements, in the US equality for black people, and LGBT rights; it is a very monumentally slow change, but it's happening.
There are cases of states misusing and inappropriately expanding their powers of societal control (various forms of prohibition, for one), but (in western societies mostly) it seems to be on a constant trend of (slow) improvement.

Anyway, ya, I don't want to rehash these social arguments much, as I'm all for rolling back state intervention in most (don't know if all) societal things.

Permabear wrote: »

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I agree with that, and libertarian views in general when it comes to social things (thus far at least, as am still learning the full extent of it), and have noticed that it seems to be libertarian economic policies which are the most controversial part of things (something I've been bringing up a bit on main politics forum).

Libertarian economic policies appear to be (by a long way) the most fundamentally flawed/weak part of libertarian principles; there appear to be a lot of enormous problems with the policies, which would disproportionately harm the poor (making them poorer), and which have the potential to create corporate tyrannies that would be more harmful than analogous state tyrannies.

An example of a problem I've been trying to find an answer for would be this:

KyussBishop wrote: »

[Libertarian regulation of banks and the financial markets:]
The principle problem I could see with this, was that if you deregulate the banks and financial markets, and (rightly) insist on not bailing out banks that fail, you get a scenario where customers of banks get unfairly harmed, through no fault of their own.

It would happen like this:
In an unregulated market, banks will be opaque about their business practices (how they invest customers/shareholders money), leaving customers with no way to gauge the risk of putting their money in a particular bank, whereas shareholders can demand some level of information and can make a more informed risk.

In an unregulated market with opaque business practices, it is easier for the owners of a bank to undertake risky practices with other peoples money and get away with it, leading to the inevitability that some bank will eventually collapse through fraud or mismanagement.

When a bank collapses, the shareholders will lose their money (they had opportunity to ascertain the risks, fine), but the customers of the bank will lose their money too (they had no way to determine risk, or determine which bank is better/worse than any other, so you can't put fault on the customers).


This seems inherently unfair on the customers of the bank, and could potentially ruin the lives of many customers, or at least effectively wipe out the 'x' years of their lives they spent earning that money. To me, that seems totally unacceptable.

Is there a solution to this issue, which is not inherently unfair on banks customers, and which still sticks to libertarian principles? To me, the solution to this (though not compatible with strict libertarianism) is to regulate the banks adequately and enforce transparency.

Suryavarman

benway wrote: »

Is that only physical force? There are plenty of other categories of coercion and oppression, why should they be excluded?

I also believe that a credible threat of violence would be considered force. TBH I haven't really given much thought as to what can defined as force.

benway

Suryavarman wrote: »

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I think you probably should. Personally, I think that people's rights to being duplicitous, fraudulent, to blackmail others, to apply emotional and psychological manipulation, to threaten another with unemployment, or financial ruin through spurious legal proceedings should also be curtailed.

Along with many, many others.

Permabear wrote: »

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I read quite a bit of the report myself. Have you completely forgotten about the private sector's role in all of this? They're equally complicit in corruption to the politicians.

As if market manipulation, price-fixing, cartels and financial bullying would magically disappear in your market utopia ...

Plus, how would you propose to deal with, say a section of Dublin going all Hamsterdam once all drugs were legalised? Or with the real social consequences of letting the banks fail?

The fundamental point I think that anarchists of every stripe are missing is that we can't just wish away power, only recognise its discourses and its effects, as well as its physical manifestations, and either resist, direct or ameliorate as best we can.

Why a state based solution is preferable, is that it is designed around mechanisms designed to do just that, however imperfect they may be. A libertarian arrangement is basically in invitation to unchecked private sector power - I don't see how that's preferable to trying fix the state's undoubted flaws. Baby with the bathwater territory, if you ask me.

Suryavarman

KyussBishop wrote: »

Some of the primary examples would be feminist movements, in the US equality for black people, and LGBT rights; it is a very monumentally slow change, but it's happening.
There are cases of states misusing and inappropriately expanding their powers of societal control (various forms of prohibition, for one), but (in western societies mostly) it seems to be on a constant trend of (slow) improvement.

I'd agree that in the area of equal rights there is a steady rollback of state power. In this area though the government is going beyond giving people equal treatment before the law and enacting affirmative action policies and anti-discrimination laws. In other areas though government is increasingly curbing our freedoms. Many countries are increasing limits on freedom of speech and increasing the cost of exercising certain freedoms through an increase in sin taxes.

Libertarian economic policies appear to be (by a long way) the most fundamentally flawed/weak part of libertarian principles; there appear to be a lot of enormous problems with the policies, which would disproportionately harm the poor (making them poorer), and which have the potential to create corporate tyrannies that would be more harmful than analogous state tyrannies.

The way many libertarians look at this is that much of what government is doing is harming the poor and helping to create large powerful corporations. We for the most part also accept that in the short run, the poor will be worse off because of our policies but they will, in the long run, be better off through faster economic growth and more opportunities to enter into commerce.

If you look at historical examples of corporations with a lot of power you will be hard pressed to find one that got into that position without a lot of government help. If we were to live in a libertarian/anarchist society it would be much easier for people to enter into business and much harder for corporations to maintain positions of power.

An example of a problem I've been trying to find an answer for would be this:

I'll deal with that now:

The principle problem I could see with this, was that if you deregulate the banks and financial markets, and (rightly) insist on not bailing out banks that fail, you get a scenario where customers of banks get unfairly harmed, through no fault of their own.

In a highly regulated market like we have now the taxpayer gets unfairly harmed through having to bailout failed banks. This is surely a much more unfair scenario than what you would claim to happen in an unregulated market. Also in an unregulated market without deposit insurance or bailouts there would be an incentive for savers to seek out banks with more conservative lending practices. If savers fail to do that then I have no sympathy with them.

It would happen like this:
In an unregulated market, banks will be opaque about their business practices (how they invest customers/shareholders money), leaving customers with no way to gauge the risk of putting their money in a particular bank, whereas shareholders can demand some level of information and can make a more informed risk.

Banks are opaque about lending practices now as goverment has created the moral hazard of people thinking that because government is regulating banks they are all safe to save with. What makes you think that they will be opaque in a free market when people are trying to find out how risky their lending practices are before they save with them? Also you have to remember that all information that shareholders receive is freely available for all to see.

In an unregulated market with opaque business practices, it is easier for the owners of a bank to undertake risky practices with other peoples money and get away with it, leading to the inevitability that some bank will eventually collapse through fraud or mismanagement.

As I have already said, there is good reason to believe that banks will not be opaque in a free market. It is then up to the saver whether they are going to save with a bank with risky loaning policies. If a bank engages in fraud and fails, then savers and shareholders would be able to sue the fraudsters. If a bank fails through mismanagement then that's just tough luck, bad businesses fail all the time and banks shouldn't be any different.

When a bank collapses, the shareholders will lose their money (they had opportunity to ascertain the risks, fine), but the customers of the bank will lose their money too (they had no way to determine risk, or determine which bank is better/worse than any other, so you can't put fault on the customers).

Customers of a bank have the same information available to them as shareholders do.

This seems inherently unfair on the customers of the bank, and could potentially ruin the lives of many customers, or at least effectively wipe out the 'x' years of their lives they spent earning that money. To me, that seems totally unacceptable.

Most financial experts advise that people should diversify their investment portfolios. If people are keeping their life savings in one bank and that bank fails, then they have nobody to blame but themselves. Also if a bank fails it is highly unlikely that savers would be completely wiped out.

Is there a solution to this issue, which is not inherently unfair on banks customers, and which still sticks to libertarian principles? To me, the solution to this (though not compatible with strict libertarianism) is to regulate the banks adequately and enforce transparency.

As I have pointed out, I believe that most of your assumptions are false and that there is no need for regulation of banks.

20Cent

Permabear wrote: »

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So what does this mean?

"One solution that suggests itself is to sell his services as a subject of study by medical and psychiatric doctors who are doing research on the causes and cures of insanity"

Suryavarman

benway wrote: »

I think you probably should.

For starts I'll deal with some of the examples you have given.

Personally, I think that people's rights to being duplicitous

I don't see anything wrong with people engaging in duplicitous behaviour

fraudulent

As far as I and most libertarians are concerned, fraud is the same as theft and would be considered force.

to blackmail others

I see nothing wrong with blackmail. Black mail is the just requesting payment in return for keeping a secret. Is there any reason people should be punished for requesting payment for providing a service?

to apply emotional and psychological manipulation

This would depend on the way manipulation was used. Most, if not all, examples of coercive manipulation would be better by a more specific term.

to threaten another with unemployment

The only person that can make you unemployed is your boss. The circumstances under which somebodies boss can sack them would depend on the contract.

or financial ruin through spurious legal proceedings should also be curtailed.

Legal proceedings defined as spurious would very likely be thrown out of court or would result in minimal cost.

karma_

Suryavarman wrote: »

For starts I'll deal with some of the examples you have given.



I don't see anything wrong with people engaging in duplicitous behaviour



As far as I and most libertarians are concerned, fraud is the same as theft and would be considered force.



I see nothing wrong with blackmail. Black mail is the just requesting payment in return for keeping a secret. Is there any reason people should be punished for requesting payment for providing a service?



This would depend on the way manipulation was used. Most, if not all, examples of coercive manipulation would be better by a more specific term.



The only person that can make you unemployed is your boss. The circumstances under which somebodies boss can sack them would depend on the contract.



Legal proceedings defined as spurious would very likely be thrown out of court or would result in minimal cost.

Is it any wonder why libertarianism is despised by so many?

I do have a problem with duplicity, blackmail and manipulation.

benway

Suryavarman wrote: »

In a highly regulated market like we have now the taxpayer gets unfairly harmed through having to bailout failed banks. This is surely a much more unfair scenario than what you would claim to happen in an unregulated market.

The banking market made an attempt to deregulate, which led to its failure.

Suryavarman wrote: »

Also in an unregulated market without deposit insurance or bailouts there would be an incentive for savers to seek out banks with more conservative lending practices. If savers fail to do that then I have no sympathy with them.

Which, if people behave rationally, will lead to capital flight from banks perceived to be weaker towards stronger banks, which will probably lead to a global cartel of a handful of unaccountable, supremely powerful corporations emerging.

I don't see anything wrong with people engaging in duplicitous behaviour

Enron.

As far as I and most libertarians are concerned, fraud is the same as theft and would be considered force.

Stretching your definition of force pretty much to breaking point here, are you not?

I see nothing wrong with blackmail. Black mail is the just requesting payment in return for keeping a secret. Is there any reason people should be punished for requesting payment for providing a service?

Yes, when it's immoral, or contrary to the public interest. And yes, there is such a thing.

The only person that can make you unemployed is your boss. The circumstances under which somebodies boss can sack them would depend on the contract.

The law of contract is currently based on the fiction of a bargain between parties of equivalent power, but even at that, it recognises that, in very many instances, this is not the reality. Employers are in a much more powerful position than employees, for one good example, and the law counterbalances this.

Taking a wild guess that collective bargaining and enforced minimum terms in employment contracts would be out of bounds, by your reckoning? That is an invitation to exploitation, and A Bad Thing. Why do you think these laws were introduced in the first place?

Legal proceedings defined as spurious would very likely be thrown out of court or would result in minimal cost.

Get yourself a better solicitor. I see legal bullying all the time, massively complex issues can be spun out of very little.

KyussBishop

Suryavarman wrote: »

I'd agree that in the area of equal rights there is a steady rollback of state power. In this area though the government is going beyond giving people equal treatment before the law and enacting affirmative action policies and anti-discrimination laws. In other areas though government is increasingly curbing our freedoms. Many countries are increasing limits on freedom of speech and increasing the cost of exercising certain freedoms through an increase in sin taxes.

Ok ya I agree with that; freedom of speech, particularly the threat of internet censorship, is something that has definitely been at the fore of my attention lately.

Suryavarman wrote: »

The way many libertarians look at this is that much of what government is doing is harming the poor and helping to create large powerful corporations. We for the most part also accept that in the short run, the poor will be worse off because of our policies but they will, in the long run, be better off through faster economic growth and more opportunities to enter into commerce.

If you look at historical examples of corporations with a lot of power you will be hard pressed to find one that got into that position without a lot of government help. If we were to live in a libertarian/anarchist society it would be much easier for people to enter into business and much harder for corporations to maintain positions of power.

Okey, this is quite an interesting point of view to it all. Lets assume that at the beginning, as you say, the poor are worse off; what exact mechanism will change this over the course of time?

From my point of view, in a libertarian economy money rules all, and once a corporation achieves a monopoly (or a collective of corporations co-operate to create an oligopoly), they would have every motive to keep the poor people poor, to limit their choices and gain maximum profit from them?

Once the poor are down, how do they get back up? Would the market not continually suck all their money away for maximum profit?

Suryavarman wrote: »

In a highly regulated market like we have now the taxpayer gets unfairly harmed through having to bailout failed banks. This is surely a much more unfair scenario than what you would claim to happen in an unregulated market. Also in an unregulated market without deposit insurance or bailouts there would be an incentive for savers to seek out banks with more conservative lending practices. If savers fail to do that then I have no sympathy with them.

Well, I don't think regulation equates to bailouts; we didn't have regulation prior to this economic crisis (just a regulator in-name-only), so the regulation would be aimed at preventing banks failing in the first place.

In the unregulated market, I don't think savers will be able to know which banks have conservative lending practices, due to lack-of-transparency/opaqueness.

Suryavarman wrote: »

Banks are opaque about lending practices now as goverment has created the moral hazard of people thinking that because government is regulating banks they are all safe to save with. What makes you think that they will be opaque in a free market when people are trying to find out how risky their lending practices are before they save with them? Also you have to remember that all information that shareholders receive is freely available for all to see.

Well, risky lending practices that led to the current economic crisis, were absolutely incredibly (in the most literal sense) profitable in the short term, and made a relatively small number of people staggeringly rich.

In the libertarian money-rules-all economy, these enormous profits will be the reason banks will stay opaque, as they have everything to gain from customers not knowing their risky practices, and more importantly, not having a choice (probably forming an oligopoly to remove choice).

With regulation, governments can enforce transparency on lending practices for banks, which means everyone stays informed.


I think we can all agree, that knowing what banks lending practices are (and the risk therein) can only possibly be a good thing, and is somewhat essential for the market, and that opaqueness and risky lending are absolutely catastrophic and harmful not just to the market/economy but to people as well (as we are seeing now).

Simply, I don't see a good reason not to enforce transparency there, and to do that, basically means regulation of some degree.

Suryavarman wrote: »

As I have already said, there is good reason to believe that banks will not be opaque in a free market. It is then up to the saver whether they are going to save with a bank with risky loaning policies. If a bank engages in fraud and fails, then savers and shareholders would be able to sue the fraudsters. If a bank fails through mismanagement then that's just tough luck, bad businesses fail all the time and banks shouldn't be any different.

Well see, I differentiate between investors/shareholders who have a stake in the bank, and savers i.e. customers; the purpose of a bank is (essentially) to store a persons money in a secure place.

So, investors/shareholders are taking a risk in the bank, customers generally want their money to be kept safe; customers do get a certain amount of interest on their money, but this should only be as an incentive to use a particular bank (i.e. competing interest rates), it should not negate keeping a customers funds secure.

If a bank can fail and wipe out all its customers money, it is crazy to view that as tough luck for the customers, because it can utterly and totally destroy a persons life (and at the very least, wipe out 'x' number of years of someones life, that they spent earning that money); that can't ever be acceptable, and it basically opens up the entire population to a form of 'violence' from fraudulent banks.

In this situation, libertarian policies are deterrent and reactive, but not preventative; this means that there will always be a way to abuse the system for personal profit (profit being the core motivation in libertarian society), and somebody definitely will game the system eventually, potentially destroying the lives of a very large amount of people.

Just a quick example: As owner of a bank in Ireland, buy up a stake in a business in a relatively corrupt country (lets say Russia), invest all of a banks money in said business (no regulation to stop you), skip country, cash out, and live life as a billionaire in Russia after massively harming or destroying the lives of much of your customers.

Suryavarman wrote: »

Most financial experts advise that people should diversify their investment portfolios. If people are keeping their life savings in one bank and that bank fails, then they have nobody to blame but themselves. Also if a bank fails it is highly unlikely that savers would be completely wiped out.

As I have pointed out, I believe that most of your assumptions are false and that there is no need for regulation of banks.

Unchecked risky lending practices lead to market bubbles (because a lot more money is assumed to exist than there really is), allowing a higher percentage of overall wealth to be concentrated in the hands of those profiting from the lending, and a smaller percentage in the rest of the population.

When the bubble pops, a lot of the markets value will be wiped out and banks will lose a lot of their money; a situation where half the market is wiped out, could e.g. lead to all customers of all banks losing half their money (even if they diversify their money across all banks).

The people profiting from risky lending will also lose half their money, but they still end up massively profiting from it all; the end result, is they have (effectively) exploited the markets to take half the populations money.

There is such an enormous motivate for profit here, and it is incredibly easy to exploit the market like this without regulation and transparency, if you get all of the banks (or most of them) co-operating; how can you mitigate all of this?


I mean, you can't assume the market will sort itself out; maybe there is a way to sort out all of this which is still compatible with libertarianism, but (and this is the most important question) what exact mechanism will that be?

Suryavarman

karma_ wrote: »

Is it any wonder why libertarianism is despised by so many?

I do have a problem with duplicity, blackmail and manipulation.

I can understand why you would have a problem with them. Why do you think the government should do something about them?

benway wrote: »

The banking market made an attempt to deregulate, which led to its failure.

The reason the banking sector failed was because of the creation of cheap credit by central banks which lead to a housing bubble which inevitably burst.

Out of interest which regulations that were repealed would have prevented this crisis?

Which, if people behave rationally, will lead to capital flight from banks perceived to be weaker towards stronger banks, which will probably lead to a global cartel of a handful of unaccountable, supremely powerful corporations emerging.

If those banks continue to offer a good service then there isn't anything wrong with there only being a few of them. I would maintain that it is highly unlikely that only a tiny percentage of banks are going to engage in conservative loaning practices. Some people will also continue to save with riskier banks in exchange for higher returns.

Enron.

A great example of why people shouldn't deal with people/companies that engage in duplicitous practices. Anyone that had bothered to do some careful research before buying Enron would have noticed the dodgy practices they were engaging in and wouldn't have invested in Enron. If anything the Enron scandal was a reminder of why people should take care when investing their money.

Stretching your definition of force pretty much to breaking point here, are you not?

No not at all. Fraud is similar to breaking the terms of a contract. If you promise to sell me a Sony TV with the intention of providing me with a Sharp TV and then proceed to do that you have defrauded me. In doing that you have broken the terms of our agreement and in effect stolen from me.

Yes, when it's immoral, or contrary to the public interest. And yes, there is such a thing.

When is blackmail immoral? If people don't want to be blackmailed then they shouldn't keep secrets. If anything blackmail should be encouraged. At least with blackmail you have a chance of securing someones silence on a matter before they tell somebody. If they go ahead and tell your secret without giving you the chance to be blackmailed then you are much worse off than if you had successfully been blackmailed.

The law of contract is currently based on the fiction of a bargain between parties of equivalent power, but even at that, it recognises that, in very many instances, this is not the reality. Employers are in a much more powerful position than employees, for one good example, and the law counterbalances this.

Employers are in a more powerful position during a period of high unemployment like we have now. During a period of low unemployment however the employee is in the position of power. Given the fact that low unemployment is more common than high unemployment, employees enjoy much more power in the labour market than employers.

Taking a wild guess that collective bargaining and enforced minimum terms in employment contracts would be out of bounds, by your reckoning? That is an invitation to exploitation, and A Bad Thing. Why do you think these laws were introduced in the first place?

Of course enforced minimum standards are out of bounds. Government shouldn't be favouring one party over another. I don't on the other hand see anything wrong with collective bargaining.

The reason these laws were introduced in the first place was because unions lobbied governments to introduce legislation to hamper competing labour.

KyussBishop wrote: »

Okey, this is quite an interesting point of view to it all. Lets assume that at the beginning, as you say, the poor are worse off; what exact mechanism will change this over the course of time?

The only process by which the condition of the ordinary man can be improved in the long run is through free markets. The way markets do this is by directing resources into the areas of the economy where it is most needed. The tendency of free markets is then to make those resources as productive as possible. By making those resources more productive output can increase and then lead to larger profits. The larger profits will attract more businesses into the market. The increased competition for labour will increase wages and the increased competition for market share will decrease prices. Both of these things will improve the lot of the ordinary person.

From my point of view, in a libertarian economy money rules all, and once a corporation achieves a monopoly (or a collective of corporations co-operate to create an oligopoly), they would have every motive to keep the poor people poor, to limit their choices and gain maximum profit from them?

I can't understand why you think that corporations have an incentive to keep people poor? I also don't understand how keeping people poor will allow businesses to maximise profits.

Once the poor are down, how do they get back up? Would the market not continually suck all their money away for maximum profit?

Before the introduction of the welfare state western nations had a long history of mutual aid societies to help the poor. There is plenty of reason to believe that if the welfare state is dismantled these societies will return.

If, as you say it will, the market "sucks all their money" away, it has to give them something in return. That something in return is going to be improving their well-being so I don't understand what you mean here.

Well, I don't think regulation equates to bailouts; we didn't have regulation prior to this economic crisis (just a regulator in-name-only), so the regulation would be aimed at preventing banks failing in the first place.

Deposit insurance equates to bailouts when banks fail. I also find it quite absurd that you think regulators have more interest in preventing a business from failing than the business owners.

Sorry to disappoint you but we did have regulation before this crisis. A lot of it. If you are trying to argue that regulation wasn't enforced you are going to have do a hell of a lot of work trying to convince me that we should be giving the government more power to protect politically connected businesses.

In the unregulated market, I don't think savers will be able to know which banks have conservative lending practices, due to lack-of-transparency/opaqueness.

A free market will lead to banks being clear about lending practices in order to attract deposits. If they aren't clear about their practices then customers shouldn't deposit with them.

Well, risky lending practices that led to the current economic crisis, were absolutely incredibly (in the most literal sense) profitable in the short term, and made a relatively small number of people staggeringly rich.

In the libertarian money-rules-all economy, these enormous profits will be the reason banks will stay opaque, as they have everything to gain from customers not knowing their risky practices, and more importantly, not having a choice (probably forming an oligopoly to remove choice).

In a libertarian economy it would have been IMPOSSIBLE for banks to make these profits as there would have been no central bank providing them with cheap credit.

With regulation, governments can enforce transparency on lending practices for banks, which means everyone stays informed.

They don't though. They just lead to more opaqueness as customers assume everything is hunky-dory because good old government is looking out for them.

I think we can all agree, that knowing what banks lending practices are (and the risk therein) can only possibly be a good thing, and is somewhat essential for the market, and that opaqueness and risky lending are absolutely catastrophic and harmful not just to the market/economy but to people as well (as we are seeing now).

I agree that clarity is a good thing. I do not agree that risky lending is a bad thing. All lending is risky. Lending is a vital part of the market economy, including high risk lending.

Simply, I don't see a good reason not to enforce transparency there, and to do that, basically means regulation of some degree.

If the market leads to transparency then there is no reason for government to enforce transparency.

Well see, I differentiate between investors/shareholders who have a stake in the bank, and savers i.e. customers; the purpose of a bank is (essentially) to store a persons money in a secure place.

Both shareholders and customers have a stake in the bank and should be aware of the risks of that bank going under. The purpose of a bank is to earn a modest return on ones deposit. If somebody wants a secure place to store their money they should get a safe for their house.

So, investors/shareholders are taking a risk in the bank, customers generally want their money to be kept safe; customers do get a certain amount of interest on their money, but this should only be as an incentive to use a particular bank (i.e. competing interest rates), it should not negate keeping a customers funds secure.

Why should customers get a return on their money if they aren't taking any risks?

If a bank can fail and wipe out all its customers money, it is crazy to view that as tough luck for the customers, because it can utterly and totally destroy a persons life (and at the very least, wipe out 'x' number of years of someones life, that they spent earning that money); that can't ever be acceptable, and it basically opens up the entire population to a form of 'violence' from fraudulent banks.

Yes it can destroy someones life if they were foolish enough to store their life's savings in one place. TBH I have no sympathy for foolish people. If they want security they should spread their money out across different institutions or keep the money in a safe at home.

In this situation, libertarian policies are deterrent and reactive, but not preventative; this means that there will always be a way to abuse the system for personal profit (profit being the core motivation in libertarian society), and somebody definitely will game the system eventually, potentially destroying the lives of a very large amount of people.

The core motivation in a libertarian society is the same as any other society so I can't understand why you made that distinction.

It is possible to game any system. In a libertarian society however the number of people one can harm through their mistakes is limited to the people that voluntarily cooperate with them in their endeavours. Whereas in our current system politically connected bankers have every single current and many future Irish taxpayers on the hook for their recklessness.

Just a quick example: As owner of a bank in Ireland, buy up a stake in a business in a relatively corrupt country (lets say Russia), invest all of a banks money in said business (no regulation to stop you), skip country, cash out, and live life as a billionaire in Russia after massively harming or destroying the lives of much of your customers.

Then the customers press charges of fraud against the banker and they get their money back.

Unchecked risky lending practices lead to market bubbles (because a lot more money is assumed to exist than there really is), allowing a higher percentage of overall wealth to be concentrated in the hands of those profiting from the lending, and a smaller percentage in the rest of the population.

The only time more goods can seem to exist than there really is, is when a central bank artificially inflates the money supply. Since libertarians generally advocate the abolition of the central bank that isn't a problem with a libertarian society.

When the bubble pops, a lot of the markets value will be wiped out and banks will lose a lot of their money; a situation where half the market is wiped out, could e.g. lead to all customers of all banks losing half their money (even if they diversify their money across all banks).

The money doesn't disappear permanently. It eventually comes back when the market starts growing again.

The people profiting from risky lending will also lose half their money, but they still end up massively profiting from it all; the end result, is they have (effectively) exploited the markets to take half the populations money.

How can they be massively profiting from it all when they are after losing half their money?

There is such an enormous motivate for profit here, and it is incredibly easy to exploit the market like this without regulation and transparency, if you get all of the banks (or most of them) co-operating; how can you mitigate all of this?

If this is such a big problem then the various stock exchanges will introduce rules to prevent people pumping the market up like this.

I mean, you can't assume the market will sort itself out; maybe there is a way to sort out all of this which is still compatible with libertarianism, but (and this is the most important question) what exact mechanism will that be?

Yes I can assume that markets will sort themselves out and I believe I have explained why I believe that over the course of this post.

Channel Zero

Suryavarman wrote: »

The way many libertarians look at this is that much of what government is doing is harming the poor

That's because it suits libertarians to look at it this way.
Am in agreement with you that governments can and do harm the poor by their policies. What i take issue with is that your proposed solution of withdrawing all forms of universal welfare, healthcare and education for them is going to improve their lot. It's not exactly rocket science to figure out what would happen. I'm afraid that no amount of libertarian rhetorical window-dressing or long-winded anarcho-capitalist drivel can disguise that.

The way many libertarians look at this is that much of what government is doing is helping to create large powerful corporations.

Hold the phone. Libertarians now think the preponderance of large powerful corporations is a bad thing?
Ok, it makes sense now. That's why the Libertarian party and their Tea party friends were the first to protest down at Wall St when those large powerful corporations like Goldman Sachs brought the world economy to it's knees. Oh wait...

No. It's fair to say Libertarians as free marketeers are not against large powerful corporations at all, nor are free market anarchists. They're just against governments "helping" them.
So in Freedomland, Goldman Sachs and company can breathe a sigh of relief. They can carry on, but without the chains of regulation or taxation, and expand greatly on practices like speculation on food prices (consigning millions to hunger and poverty), naked credit default swaps, and any other lovely scheme they dream up to part people with their money. It is a free market after all.

We for the most part also accept that in the short run, the poor will be worse off because of our policies but they will, in the long run, be better off through faster economic growth and more opportunities to enter into commerce.

I'm confident we'll never find out whether that's true or not, as turkeys generally don't vote for Christmas. Serfs don't vote for serfdom. In saying that, we both know politics is a deceptive game. I don't doubt there will a certain amount of support come election time, especially if its more repugnant policies can be kept suitably clouded by vague promises, lies and propaganda. The Koch brothers are doing exactly that.

If we were to live in a libertarian/anarchist society it would be.. much harder for corporations to maintain positions of power.

Don't make me laugh. It would be much easier.
No tax. No regulations. No labour laws. No problem. They'd thrive. Even an economics dunce like me can work that out.
They have far too much power as it is. The system needs root and branch reform as the poster benway said on another thread. This ideology is certainly not a solution. It's the distilled essence of all that is wrong with the world. Corporate influence and greed needs to be flushed out of politics, not ushered in to take over. And it will be sooner or later in my opinion.

KyussBishop

Suryavarman wrote: »

...

Hmm Interesting post; there's much I disagree with, but there's plenty I'll need to research first before replying to (learning economics as I go here).

Suryavarman

Channel Zero wrote: »

That's because it suits libertarians to look at it this way.
Am in agreement with you that governments can and do harm the poor by their policies. What i take issue with is that your proposed solution of withdrawing all forms of universal welfare, healthcare and education for them is going to improve their lot. It's not exactly rocket science to figure out what would happen. I'm afraid that no amount of libertarian rhetorical window-dressing or long-winded anarcho-capitalist drivel can disguise that.

When government expands, the economy doesn't expand as fast. When the economy doesn't expand as fast, people don't earn as much income as they would have without those increases in the size of government. This includes poor people. Greater government involvement in education and healthcare ends up reducing the quality and cost of both. So through government involvement costs increase and quality decreases so that a minority of the population can access those services a little earlier than they would have been able to do in the market economy.

The increase in the services that the government offers also leads to increased dependency on the government. This reduces the incentives for poor people to work, making them much worse off in the long run as they end up earning less than they would have without those government interferences in the market.

Hold the phone. Libertarians now think the preponderance of large powerful corporations is a bad thing?
Ok, it makes sense now. That's why the Libertarian party and their Tea party friends were the first to protest down at Wall St when those large powerful corporations like Goldman Sachs brought the world economy to it's knees. Oh wait...

When corporations grow because of the help of government then it is a bad thing. When they do it through offering superior products or services then it is okay.

No. It's fair to say Libertarians as free marketeers are not against large powerful corporations at all, nor are free market anarchists. They're just against governments "helping" them.
So in Freedomland, Goldman Sachs and company can breathe a sigh of relief. They can carry on, but without the chains of regulation or taxation, and expand greatly on practices like speculation on food prices (consigning millions to hunger and poverty), naked credit default swaps, and any other lovely scheme they dream up to part people with their money. It is a free market after all.

Nobody benefits from burdensome financial regulations as much as the big banks. If the financial sector wasn't so heavily regulated, smaller banks wouldn't be crippled by having to comply with ridiculous regulations that the big banks probably lobbied for.

I think it's fair to assume that you don't know what the purpose of speculation is so I will explain it for you. When the price of something falls but is expected to rise in the future speculators buy that good. The reason those prices fall is because of an increase in supply and the reason prices rise is because of a decrease in supply. So when there is a large increase in supply speculators buy up the good stopping the price from falling too much and they then release those goods back onto the market when they are in short supply to stop the price from rising. In the end speculators do a huge amount to decrease market volatility and prevent violent price swings.

As for naked credit default swaps, if there is a large amount of people in the market holding CDS on a particular security then that suggests to investors that the security is a very risky investment. Surely you agree that is very important that people know how risky an investment is?

I'm confident we'll never find out whether that's true or not, as turkeys generally don't vote for Christmas. Serfs don't vote for serfdom. In saying that, we both know politics is a deceptive game. I don't doubt there will a certain amount of support come election time, especially if its more repugnant policies can be kept suitably clouded by vague promises, lies and propaganda. The Koch brothers are doing exactly that.

I realise that the average voter doesn't have a clue about what they are voting for so I am also pessimistic of a libertarian system arriving through the ballot box.

Don't make me laugh. It would be much easier.
No tax. No regulations. No labour laws. No problem. They'd thrive. Even an economics dunce like me can work that out.
They have far too much power as it is. The system needs root and branch reform as the poster benway said on another thread. This ideology is certainly not a solution. It's the distilled essence of all that is wrong with the world. Corporate influence and greed needs to be flushed out of politics, not ushered in to take over. And it will be sooner or later in my opinion.

So you propose replacing our current batch of politicians with robots?

KyussBishop

Researching a bunch of things trying to get a better handle on the (much better, more detailed) arguments for libertarian economics; I wonder though, is there any kind of past economic system or economy I can study which is analogous or close to the one libertarianism would put in? (including lack of central bank)

If not, what can I study which lends some empirical weight to its economic policies? (if it's not been tried fully before, that doesn't disqualify it at all, but it does make it kind of a risky venture into the unknown, so the more evidence supporting the theory the better)

Suryavarman

KyussBishop wrote: »

Researching a bunch of things trying to get a better handle on the (much better, more detailed) arguments for libertarian economics; I wonder though, is there any kind of past economic system or economy I can study which is analogous or close to the one libertarianism would put in? (including lack of central bank)

If not, what can I study which lends some empirical weight to its economic policies? (if it's not been tried fully before, that doesn't disqualify it at all, but it does make it kind of a risky venture into the unknown, so the more evidence supporting the theory the better)

The US from the end of the civil war up until WWI would be close to what a libertarian economy would look like. It is necessary to point out that although it didn't have a central bank, the government did intervene in the supply of money which many libertarians would contend distorted the market and led to recessions. Sweden (believe it or not) around the same period could be considered an even better example of a libertarian economy although reading material might be hard to come by. Here is a paper that gives a quick look at Sweden's experiment with free banking from 1830-1903 if you are interested.

Even today there are examples of various libertarian policies at work but nowhere are all policies tried at the same time.

KyussBishop

Christ, been reading up on a load of stuff all night...there's actually an enormous amount of endless reading you can embark on trying to properly understand the morals and economics (and problems therein) behind all of this, which is something I didn't expect.

I can see how these principals can suck people in, because there's so much reading and understanding required for parts of it, that you're soon forgetting the fundamentally distasteful parts of it all, and getting drawn in by the seductive (but currently entirely untested) promises it provides, and it's appeal to self-interest.

Even though I still disagree with it (albeit trying to keep an open mind), I'm fast seeing that there might not be a succinct and clear argument or point that can settle it one way or the other, for myself or others.
I seriously dislike the subjective nature of it, because I don't think you can definitively prove it's fúcked up until a country tries it.

I do think the general arguments I encounter against it are good, and altogether provide a good case that it's unworkable in pure form, but none of them nail it and I can easily see most/all of them leading to lengthy nitpicking.


Speaking of which, will have a go at replying to previous posts now:

Suryavarman wrote:

When is blackmail immoral? If people don't want to be blackmailed then they shouldn't keep secrets. If anything blackmail should be encouraged. At least with blackmail you have a chance of securing someones silence on a matter before they tell somebody. If they go ahead and tell your secret without giving you the chance to be blackmailed then you are much worse off than if you had successfully been blackmailed.

Can you explain this to me, as it triggers an automatic 'wtf' reaction for me.
If someone hacks into a persons phone, finds a nude picture of them or their GF, are you saying it is ok (i.e. not immoral) to blackmail that person? Maybe you don't think that, it just seems to be compatible with what you said.

Suryavarman wrote:

The only process by which the condition of the ordinary man can be improved in the long run is through free markets. The way markets do this is by directing resources into the areas of the economy where it is most needed. The tendency of free markets is then to make those resources as productive as possible. By making those resources more productive output can increase and then lead to larger profits. The larger profits will attract more businesses into the market. The increased competition for labour will increase wages and the increased competition for market share will decrease prices. Both of these things will improve the lot of the ordinary person.

Yes but we're talking about poor people not ordinary people, who might not even be able to afford the basic education or training needed to get those jobs. If the poor start off at a disadvantage, what mechanism is going to pull them up, rather than push them down with high living costs?

Suryavarman wrote:

I can't understand why you think that corporations have an incentive to keep people poor? I also don't understand how keeping people poor will allow businesses to maximise profits.

It's not so much an incentive as an end-effect; once a bunch of corporations form an oligopoly in an essential market people can't avoid, and push competition out, they can milk the population dry.

Suryavarman wrote:

Before the introduction of the welfare state western nations had a long history of mutual aid societies to help the poor. There is plenty of reason to believe that if the welfare state is dismantled these societies will return.

Hmm, can you give an example of a past aid society like this? The only analogous thing I can think of are aid groups in Africa; they barely help enough to keep people alive, never mind give them a hand up.

Suryavarman wrote:

Deposit insurance equates to bailouts when banks fail. I also find it quite absurd that you think regulators have more interest in preventing a business from failing than the business owners.

Sorry to disappoint you but we did have regulation before this crisis. A lot of it. If you are trying to argue that regulation wasn't enforced you are going to have do a hell of a lot of work trying to convince me that we should be giving the government more power to protect politically connected businesses.

That doesn't follow from what I said; regulation can exist without bailouts. You seem to be selectively picking your definitions of 'regulation' here, applying it very broadly; I'm talking about applying it in such a way that prevents banks from failing, and only that (more on that later).

Suryavarman wrote:

A free market will lead to banks being clear about lending practices in order to attract deposits. If they aren't clear about their practices then customers shouldn't deposit with them.

All well and good in theory, but in practice it's likely to lead to a market which favours opaqueness; it's simple, if banks are opaque and all have risky lending practices, they can make a hell of a lot more money (not to mention, entice depositors with higher interest).

Suryavarman wrote:

KyussBishop wrote:

Well, risky lending practices that led to the current economic crisis, were absolutely incredibly (in the most literal sense) profitable in the short term, and made a relatively small number of people staggeringly rich.

In the libertarian money-rules-all economy, these enormous profits will be the reason banks will stay opaque, as they have everything to gain from customers not knowing their risky practices, and more importantly, not having a choice (probably forming an oligopoly to remove choice).

In a libertarian economy it would have been IMPOSSIBLE for banks to make these profits as there would have been no central bank providing them with cheap credit.

The cheap credit did massively inflate their profits, yes; what I meant though, is the banks taking their customers money, and investing that in excessively risky ways, making a lot of profit in the process.

Suryavarman wrote:

They don't though. They just lead to more opaqueness as customers assume everything is hunky-dory because good old government is looking out for them.

There's no reason they can't enforce transparency; it's a certainty in my mind, that banks will remain opaque in a free market, as described above.

Suryavarman wrote:

I agree that clarity is a good thing. I do not agree that risky lending is a bad thing. All lending is risky. Lending is a vital part of the market economy, including high risk lending.

Risky lending in the absence of proper safeguards, like what has happened.

Suryavarman wrote:

Both shareholders and customers have a stake in the bank and should be aware of the risks of that bank going under. The purpose of a bank is to earn a modest return on ones deposit. If somebody wants a secure place to store their money they should get a safe for their house.

Couldn't disagree more here, a bank account needs to be secure; it seems to me, the banking system should be split into so called 'safe banks' and separate investment banks, going by 'narrow banking' principles:
https://en.wikipedia.org/wiki/Narrow_banking

Don't know why it's not like this already, customers should have the choice on what banks do with their money, even if it means paying the bank to store it in full reserve.
This would give everyday bank accounts the security they need, whilst people looking to invest could do that specifically in the separate banks; the 'safe banks' would be highly regulated, to provide the best security.

I'm not sure of the appropriate level of regulation for the investment banks, but this would be a much better system, giving customers a better choice on what to do with their money; it's basically a mix of fractional and full reserve banking.

The safe banks would likely fundamentally require regulation (that is not incompatible with libertarianism, unless you're purist, due to the very specific purpose of safe banks), but the investment banks would be open to the usual arguments for/against regulation.

Suryavarman wrote:

KyussBishop wrote:

In this situation, libertarian policies are deterrent and reactive, but not preventative; this means that there will always be a way to abuse the system for personal profit (profit being the core motivation in libertarian society), and somebody definitely will game the system eventually, potentially destroying the lives of a very large amount of people.

It is possible to game any system. In a libertarian society however the number of people one can harm through their mistakes is limited to the people that voluntarily cooperate with them in their endeavours.

So lets take that to its logical conclusion, you are advocating a system where eventually, some banks customers will definitely be harmed, and with a market of opaque business practices, those customers will have no way to inform themselves which bank is least risky, so the harm come to them is no fault of their own.

As I've said a lot with this example, it's an unacceptable situation, and can ruin peoples lives; regulating banks (even if you only do it for the 'safe' banks I talk of above), completely solves this problem, so there really is no excuse not to do this, especially when people would have the option to voluntarily go with investment banks instead if they were ok with the risks.

Suryavarman wrote:

KyussBishop wrote:

Just a quick example: As owner of a bank in Ireland, buy up a stake in a business in a relatively corrupt country (lets say Russia), invest all of a banks money in said business (no regulation to stop you), skip country, cash out, and live life as a billionaire in Russia after massively harming or destroying the lives of much of your customers.

Then the customers press charges of fraud against the banker and they get their money back.

Nope, he's in Russia (or *insert-better-example-of-corrupt-country-here*) on his new multi-billion-euro cruise boat; nobody gets their money back.

Suryavarman wrote:

KyussBishop wrote:

Unchecked risky lending practices lead to market bubbles (because a lot more money is assumed to exist than there really is), allowing a higher percentage of overall wealth to be concentrated in the hands of those profiting from the lending, and a smaller percentage in the rest of the population.

The only time more goods can seem to exist than there really is, is when a central bank artificially inflates the money supply. Since libertarians generally advocate the abolition of the central bank that isn't a problem with a libertarian society.

Market bubbles can be created by risky speculation, and foreign investment can function in a similar role to increased credit from the central bank.

Suryavarman wrote:

KyussBishop wrote:

When the bubble pops, a lot of the markets value will be wiped out and banks will lose a lot of their money; a situation where half the market is wiped out, could e.g. lead to all customers of all banks losing half their money (even if they diversify their money across all banks).

The money doesn't disappear permanently. It eventually comes back when the market starts growing again.

KyussBishop wrote:

The people profiting from risky lending will also lose half their money, but they still end up massively profiting from it all; the end result, is they have (effectively) exploited the markets to take half the populations money.

How can they be massively profiting from it all when they are after losing half their money?

Ah oops, I misstated that quite badly The profits would need to be removed from the market in their inflated state (cashed in or moved to a different market), such that when the market collapses they keep the inflated amount; wouldn't be near half the populations money though.

Suryavarman wrote:

If this is such a big problem then the various stock exchanges will introduce rules to prevent people pumping the market up like this.

It happened in the current crisis and they didn't (also, sounds an awful lot like regulation).

benway

Suryavarman wrote: »

The reason the banking sector failed was because of the creation of cheap credit by central banks which lead to a housing bubble which inevitably burst.

So Hayek would have us believe. It's all about the central banks, and it's all about the money supply. I think that this is a very narrow, and wholly unsatisfactory explanation.

Suryavarman wrote: »

Out of interest which regulations that were repealed would have prevented this crisis?

Two obvious examples - Clinton's Commodity Futures Modernization Act deregulated derivatives, pretty much laying the foundations for the sub-prime crisis, and Bush the Younger's repeal of The Glass-Steagall Act drove in the final nail, removing a New Deal era safeguard against financial sector misfeasance.

These were the two that primarily brought down the whole house of cards. Obviously, Europe was moving in a similar direction, I seem to recall "light touch" regulation being something of a war-cry for the PDs around the turn of the century, but the US was the first domino.

Suryavarman wrote: »

A great example of why people shouldn't deal with people/companies that engage in duplicitous practices. Anyone that had bothered to do some careful research before buying Enron would have noticed the dodgy practices they were engaging in and wouldn't have invested in Enron. If anything the Enron scandal was a reminder of why people should take care when investing their money.

Ah here. Keep drinking that kool-aid, son.

The whole problem with duplicitousness is that the rubes generally don't know that they've been swindled until it's too late.

The markets got it all wrong on Enron.

This was because of lax regulation, exemplified by the Commodity Futures Act, the acceptance of mark to market accounting, deregulation in the energy market, all desirable, according the libertarian doctrine, combined with brazen duplicitousness. This is the kind of behaviour you're tacitly condoning.

Suryavarman wrote: »

Yes I can assume that markets will sort themselves out and I believe I have explained why I believe that over the course of this post.

You can assume that all you like, it's not going to make it true. Your faith in the markets is admirable, but it's no more persuasive than a cave-man's faith in his sun god.

KyussBishop wrote: »

I'm fast seeing that there might not be a succinct and clear argument or point that can settle it one way or the other, for myself or others.
I seriously dislike the subjective nature of it, because I don't think you can definitively prove it's fúcked up until a country tries it.

Some good posting, but I disagree - I think it can be settled fairly easily. Examples like the Great Depression, Enron, the current financial debacle, the Asian crisis in the late 90s, the Russian collapse under Yeltsin, and Iraqs collapse in to chaos once the US established "free" markets, all show that libertarian style economics do not work in practice ... or, more to the point, that they only work for a tiny elite of oligarchs and vultures.

Suryavarman wrote: »

The US from the end of the civil war up until WWI would be close to what a libertarian economy would look like.

Up until the Great Depression, don't you mean? Laissez-faire led to a depression in the 1880s, followed by another one in the early 1920s, followed by the Great Depression. The New Deal model worked a hell of a lot better, and was deemed necessary following these catastrophes.

Face it, libertarian style economics has failed spectacularly every single time it's been implemented, anywhere in the world, without any single exception that I'm aware of.

To be honest, I find it hard to credit that people are still bashing the free market bible in 2012, after everything that's happened. Takes quite the feat of cognitive dissonance ...

Suryavarman

KyussBishop wrote: »

Can you explain this to me, as it triggers an automatic 'wtf' reaction for me.
If someone hacks into a persons phone, finds a nude picture of them or their GF, are you saying it is ok (i.e. not immoral) to blackmail that person? Maybe you don't think that, it just seems to be compatible with what you said.

The blackmail part would be OK. The hacking on the other hand would be the electronic equivalent to breaking and entering.

Also, I don't mean that blackmail isn't immoral. When I say something is OK, I mean it shouldn't be illegal.

Yes but we're talking about poor people not ordinary people, who might not even be able to afford the basic education or training needed to get those jobs. If the poor start off at a disadvantage, what mechanism is going to pull them up, rather than push them down with high living costs?

I don't buy the argument that poor people won't be able to get an education in a libertarian society. Not only is education outrageously expensive nowadays due to government inefficiencies and overpaid teachers, there would also be charity to look after those that cannot afford an education on their own.

A look at the education system of Britain in the 19th century would give a good picture of what would happen in a libertarian society. If you're interested in learning more about it, I would suggest picking up Education and the State by E.G. West. According to the book, as of 1858, out of an estimated 2,655,767 children that should have been at school, 2,535,462 did go to school. Much of the shortfall could be explained by children that were home schooled or who disabilities. Although at this time a third of the funding for education was coming from government, the tax revenue came predominantly from taxing goods such as food and tobacco. Had those taxes not existed, it is reasonable to assume that schools could have been funded entirely through the private sector.

It's not so much an incentive as an end-effect; once a bunch of corporations form an oligopoly in an essential market people can't avoid, and push competition out, they can milk the population dry.

How are they supposed to continue to do this in the long run? How are they supposed to continuously keep competition out of the market?

Hmm, can you give an example of a past aid society like this? The only analogous thing I can think of are aid groups in Africa; they barely help enough to keep people alive, never mind give them a hand up.

These two articles give a good overview of mutual aid societies in the US.

That doesn't follow from what I said; regulation can exist without bailouts. You seem to be selectively picking your definitions of 'regulation' here, applying it very broadly; I'm talking about applying it in such a way that prevents banks from failing, and only that (more on that later).

Why do you think the regulators have more interest in preventing a business from failing than the business owners?

All well and good in theory, but in practice it's likely to lead to a market which favours opaqueness; it's simple, if banks are opaque and all have risky lending practices, they can make a hell of a lot more money (not to mention, entice depositors with higher interest).

What makes you think that every bank is going to engage in high risk loans? Why do you think that banks don't value security over return?

The cheap credit did massively inflate their profits, yes; what I meant though, is the banks taking their customers money, and investing that in excessively risky ways, making a lot of profit in the process.

There is no evidence to suggest that, other than a small number of banks, banks will engage in high risk loans without access to artificial credit.

There's no reason they can't enforce transparency; it's a certainty in my mind, that banks will remain opaque in a free market, as described above.

I'm still waiting for you to give a logical explanation why every bank is going to engage in opaque lending practices.

Risky lending in the absence of proper safeguards, like what has happened.

I don't think that sentence makes sense as a reply to what I typed.

Couldn't disagree more here, a bank account needs to be secure; it seems to me, the banking system should be split into so called 'safe banks' and separate investment banks, going by 'narrow banking' principles:
https://en.wikipedia.org/wiki/Narrow_banking

Don't know why it's not like this already, customers should have the choice on what banks do with their money, even if it means paying the bank to store it in full reserve.
This would give everyday bank accounts the security they need, whilst people looking to invest could do that specifically in the separate banks; the 'safe banks' would be highly regulated, to provide the best security.

I'm not sure of the appropriate level of regulation for the investment banks, but this would be a much better system, giving customers a better choice on what to do with their money; it's basically a mix of fractional and full reserve banking.

The safe banks would likely fundamentally require regulation (that is not incompatible with libertarianism, unless you're purist, due to the very specific purpose of safe banks), but the investment banks would be open to the usual arguments for/against regulation.

Plenty of libertarians argue that in a true free market banks will break up into full reserve and investment banks. There also plenty of reason that fractional reserve banks would keep higher reserves and/or engage in more liquid investing practices.

So lets take that to its logical conclusion, you are advocating a system where eventually, some banks customers will definitely be harmed, and with a market of opaque business practices, those customers will have no way to inform themselves which bank is least risky, so the harm come to them is no fault of their own.

I have already dealt with your claim that banks would engage in opaque lending practices.

If they save with a bank with opaque lending practices and that bank then goes under, they are at fault for saving with that bank.

As I've said a lot with this example, it's an unacceptable situation, and can ruin peoples lives; regulating banks (even if you only do it for the 'safe' banks I talk of above), completely solves this problem, so there really is no excuse not to do this, especially when people would have the option to voluntarily go with investment banks instead if they were ok with the risks.

People voluntarily save with banks now because they are OK with the risks those banks take.

Nope, he's in Russia (or *insert-better-example-of-corrupt-country-here*) on his new multi-billion-euro cruise boat; nobody gets their money back.

Well then get the Russians to extradite him. If they don't do it, it'd just more proof that governments are incompetent at their jobs.

There is also just as much chance of this happening in the society you envision, so what do you propose doing?

Market bubbles can be created by risky speculation, and foreign investment can function in a similar role to increased credit from the central bank.

No it can't. Foreign investment is real money. If too much money is flowing into one market instead of another, then the other market will become cheap relative to the market being invested in. This would result in money flowing back out of the expensive market into the cheap market before the before a bubble develops.

Ah oops, I misstated that quite badly The profits would need to be removed from the market in their inflated state (cashed in or moved to a different market), such that when the market collapses they keep the inflated amount; wouldn't be near half the populations money though.

How is everyone supposed to cash out and make a profit at the right time?

It happened in the current crisis and they didn't (also, sounds an awful lot like regulation).

It didn't happen during the current crisis. The current crisis was caused by people investing in stocks and taking on overly risky positions because investment was made cheaper through the creation of artificial credit.

The situation you mentioned would involve using real money, this means that the stock that is being pumped up would become increasingly dear relative to other stocks. This would result in people staying away from the overpriced stock and into cheap stocks preventing the pumped up stock from getting too large.

No it isn't regulation. Regulation is when the government forces business owners to do something. What I am proposing is business owners voluntarily taking measures to improve the reputation of their business.

benway wrote: »

So Hayek would have us believe. It's all about the central banks, and it's all about the money supply. I think that this is a very narrow, and wholly unsatisfactory explanation.

Well the man won a Noble Prize for his work on that theory so there must be some substance to the theory.

Why do you think recessions occur?

Two obvious examples - Clinton's Commodity Futures Modernization Act deregulated derivatives, pretty much laying the foundations for the sub-prime crisis, and Bush the Younger's repeal of The Glass-Steagall Act drove in the final nail, removing a New Deal era safeguard against financial sector misfeasance.

These were the two that primarily brought down the whole house of cards. Obviously, Europe was moving in a similar direction, I seem to recall "light touch" regulation being something of a war-cry for the PDs around the turn of the century, but the US was the first domino.

These are just a spurious correlations. How would these repeals have prevented the housing crisis?

Ah here. Keep drinking that kool-aid, son.

The whole problem with duplicitousness is that the rubes generally don't know that they've been swindled until it's too late.

The markets got it all wrong on Enron.

This was because of lax regulation, exemplified by the Commodity Futures Act, the acceptance of mark to market accounting, deregulation in the energy market, all desirable, according the libertarian doctrine, combined with brazen duplicitousness. This is the kind of behaviour you're tacitly condoning.

The market didn't get it wrong on Enron. Enron and the people who invested in it, got it wrong. That people couldn't see that Enron was being run badly was their own fault.

You can assume that all you like, it's not going to make it true. Your faith in the markets is admirable, but it's no more persuasive than a cave-man's faith in his sun god.

Your continued faith in governments ability to regulate the market and prevent bad things from happening despite it's non stop failure to do so isn't very persuasive either.

Some good posting, but I disagree - I think it can be settled fairly easily. Examples like the Great Depression, Enron, the current financial debacle, the Asian crisis in the late 90s, the Russian collapse under Yeltsin, and Iraqs collapse in to chaos once the US established "free" markets, all show that libertarian style economics do not work in practice ... or, more to the point, that they only work for a tiny elite of oligarchs and vultures.

The Great Depression? As Murray Rothbard pointed out in America's Great Depression the money supply expanded by 61.8% over the course of the 1920's despite the gold reserve only increasing by 15%. This created an unsustainable boom that eventually ended in recession. The recession then became a depression due to Herbert Hoover's meddling in the economy and was prolonged by FDR's continuance and expansion of that intervention. It was a textbook example of government intervention in the marketplace causing negative economic outcomes.

The current financial crisis is just a modern version of the Great Depression. From the expansion of the money supply right down to the government intervention afterwards.

The Asian Crisis was a result of governments manipulating their currency in order to make it cheap relative to other currencies and increase exports.

Russia under Yeltsin? Yeah because an economy trying to recover from a disastrous 70 year experiment with socialism and rampant inflation is such a great example of libertarianism :rolleyes:

Up until the Great Depression, don't you mean? Laissez-faire led to a depression in the 1880s, followed by another one in the early 1920s, followed by the Great Depression. The New Deal model worked a hell of a lot better, and was deemed necessary following these catastrophes.

Face it, libertarian style economics has failed spectacularly every single time it's been implemented, anywhere in the world, without any single exception that I'm aware of.

To be honest, I find it hard to credit that people are still bashing the free market bible in 2012, after everything that's happened. Takes quite the feat of cognitive dissonance ...

No I don't mean up until the Great Depression as the Federal Reserve was founded in 1913. The New Deal was also a miserable failure. The only people that still think the New Deal worked are Keynesian economists and politicians.

Also, there was no depression in the 1880's. The growth America experienced over that decade was absolutely phenomenal.

benway

Suryavarman wrote: »

Well the man won a Noble Prize for his work on that theory so there must be some substance to the theory.

O Rly? Personally, I think the Nobel in Economics has as much to do with politics as scientific merit. My broheim Phillip Mirowski is currently working on this:

Suryavarman wrote: »

Why do you think recessions occur?

These are just a spurious correlations. How would these repeals have prevented the housing crisis?

Various reasons for recessions, but too much freedom in the financial markets, leading to widespread fraud, misfeasance, and irrational exuberance is one consistent reason for a massive crash and depression.

If you can't see how banking deregulation was the sine qua non for the current crisis, you should probably google Collateralized Debt Obligation.

Suryavarman wrote: »

The market didn't get it wrong on Enron. Enron and the people who invested in it, got it wrong. That people couldn't see that Enron was being run badly was their own fault.

Ahahahahahahahahahahahahahahaha. That is all.

Suryavarman wrote: »

Your continued faith in governments ability to regulate the market and prevent bad things from happening despite it's non stop failure to do so isn't very persuasive either.

Actually, it's my skepticism of any other outcome from unregulated private sector actors' relentless pursuit of profit other than disaster for society at a whole. Not the same thing.

I also doubt government's ability to regulate the market, but it's the best counterbalance we've got against private sector rapaciousness, plus history shows that any attempt to allow the "magic of the markets" to run free has ended in crash, credit crunch and depression.

Suryavarman wrote: »

The recession then became a depression due to Herbert Hoover's meddling in the economy and was prolonged by FDR's continuance and expansion of that intervention. It was a textbook example of government intervention in the marketplace.

Textbook example of cognitive dissonance.

A laissez faire approach allowed the private sector to create the bubble, and the catastrophe - if the government hadn't intervened, things would be a lot more Mad Max / Lord of the Flies than they are now. Same applies to today's crisis.

Suryavarman wrote: »

The Asian Crisis was a result of governments manipulating their currency in order to make it cheap relative to other currencies and increase exports.

Nope, it was a result of deregulation. Once the border was opened, foreign speculative capital flooded in, drove a property boom, which burst, necessitating a bailout, which primarily went to pay off those same foreign creditors. Sound familiar?

Suryavarman wrote: »

Russia under Yeltsin? Yeah because an economy trying to recover from a disastrous 70 year experiment with socialism and rampant inflation is such a great example of libertarianism :rolleyes:

What did they do, other than Privatise Fúcking Everything, Deregulate Fúcking Everything, remove all price controls, etc. Sounds pretty libertarian to me - a lot of the advisors were Chicago School of Economics alumni and all.

And how did it pan out, exactly?

Suryavarman wrote: »

The New Deal was also a miserable failure.

How's about you try to prove that? They didn't call the from the New Deal up until the mid 70s the "Golden Era" for nothing, you know.

Suryavarman wrote: »

Also, there was no depression in the 1880's.

Wrong: http://en.wikipedia.org/wiki/Long_Depression

tl;dr

I wouldn't deregulate business and expect it not to end in disaster, just like I wouldn't abolish the criminal law and expect it not to end in disaster.

Nate--IRL--

benway wrote: »

I wouldn't deregulate business and expect it not to end in disaster, just like I wouldn't abolish the criminal law and expect it not to end in disaster.

I'm going to steal that if you don't mind.

Nate

benway

Nate--IRL-- wrote: »

I'm going to steal that if you don't mind.

Nate

Feel free ...

benway wrote:

Ahahahahahahahahahahahahahahaha. That is all.

Sorry, I shouldn't be so flippant. I just can't credit that you can't bring yourself to admit the market's disastrously inaccurate valuation of Enron may indicate that The Market isn't, in fact, All Seeing and All Knowing, Bless It's Holy Name.

Despite appearances to the contrary, I actually have a lot of sympathy with the libertarian outlook - I'm socially liberal as they come, and I believe that the market is an incredibly useful institution when it comes to the allocation of resources. But it has its limits.

What you're really talking about is transferring more power to unaccountable private sector players, in the guise of Market Forces, in my view, and that's where I get off.

The fundamental difference is that I don't believe in the invisible hand, Hayekian spontaneous order tradition, that a community of rational, self-interested actors will inevitably reach a perfect equilibrium with each other's self-interests. This underpins faith in the markets, and the idea that minimal governance will not necessarily lead to chaos.

Until I see irrefutable proof that such an arrangement is possible, and, trust me, I've looked, I will remain of the view that some kind of Leviathan, will be necessary to regulate human affairs.

The Market isn't possessed of supernatural powers, it's a human institution, beset by human irrationality, power relations, manipulation, deceit, incompetence and corruption, just like government is.

Don't worry, you won't be cast into Pit of Eternal "Any Spare Change" for admitting this ...

Suryavarman

benway wrote: »

O Rly? Personally, I think the Nobel in Economics has as much to do with politics as scientific merit. My broheim Phillip Mirowski is currently working on this:

If the Nobel in economics has as much to do with politics as economics then why was the prize also awarded to Gunnar Myrdal in the same year it was awarded to Hayek? It seems odd that people from opposite ends of political spectrum would be awarded a prize based on political persuasion at all, never mind in the same year.

Various reasons for recessions, but too much freedom in the financial markets, leading to widespread fraud, misfeasance, and irrational exuberance is one consistent reason for a massive crash and depression.

This might be able to explain why a company might crash. It doesn't do a good job of explaining why an entire economy crashes.

If you can't see how banking deregulation was the sine qua non for the current crisis, you should probably google Collateralized Debt Obligation.

So in other words you don't know what you are talking about so you are going to try and distract me by making me spend hours researching a complex financial concept on Google. Interesting debating technique.

I'm also still waiting to hear why the repeal of Glass-Steagal or the enactment of the Commodity Futures Modernisation Act caused the recession.

Actually, it's my skepticism of any other outcome from unregulated private sector actors' relentless pursuit of profit other than disaster for society at a whole. Not the same thing.

I also doubt government's ability to regulate the market, but it's the best counterbalance we've got against private sector rapaciousness, plus history shows that any attempt to allow the "magic of the markets" to run free has ended in crash, credit crunch and depression.

When markets were allowed the work at the end of 19th century America the result was widespread prosperity. On the other hand, when governments try to steer the economy through monetary and fiscal policy like they have been doing over the last century it invariably ends in "crash, credit crunch and depression"

Textbook example of cognitive dissonance.

A laissez faire approach allowed the private sector to create the bubble, and the catastrophe - if the government hadn't intervened, things would be a lot more Mad Max / Lord of the Flies than they are now. Same applies to today's crisis.

A laissez-faire approach? If you're going to deliberately ignore what I am posting then there isn't much point continuing this discussion. How on earth can the economy be considered laissez-faire when there is a central bank increasing the money supply by 61.8% when the increase in gold would only allow for an increase of 15%? There was an increase of 63.4% in unbacked money facilitated by the Federal Reserve. The bubble was caused by government mismanagement of the economy. The US Government then proceeded to prolong the depression through it's constant meddling in the economy.

Nope, it was a result of deregulation. Once the border was opened, foreign speculative capital flooded in, drove a property boom, which burst, necessitating a bailout, which primarily went to pay off those same foreign creditors. Sound familiar?

The only reason the money flowed in in the first place was because the governments had artificially cheapened their currencies to make their exports look cheap.

What did they do, other than Privatise Fúcking Everything, Deregulate Fúcking Everything, remove all price controls, etc. Sounds pretty libertarian to me - a lot of the advisors were Chicago School of Economics alumni and all.

And how did it pan out, exactly?

Well considering most of the state enterprises were sold off for cheap to politically connected business people and the central bank started printing money like it was going out of style it didn't end very well.

Also considering the Russians maintained a burdensome and corrupt regulatory system in place is it any wonder the economy didn't flourish?

How's about you try to prove that? They didn't call the from the New Deal up until the mid 70s the "Golden Era" for nothing, you know.

Well considering at the end of WWII the US Government engaged in huge austerity measures, deregulated the economy and cut taxes it isn't surprising that the economy started booming. It should also be noted that this happened when Keynesian economists were claiming that the US would go into another deep depression if they embarked on such a programme. The wheels of course began to fall off the cart after the enactment of massive welfare programmes in the late 60's and the leaving of the gold standard along with massive money printing and price controls in the 70's lead the US through a disastrous decade of high unemployment and inflation and at other times massive shortages. All of this despite the assurance of Keynesian economists that leaving gold standard would be a good thing and that it was impossible for high inflation and unemployment to occur at the same time.

Wrong: http://en.wikipedia.org/wiki/Long_Depression

tl;dr

I wouldn't deregulate business and expect it not to end in disaster, just like I wouldn't abolish the criminal law and expect it not to end in disaster.

The myth of the long depression rears it's ugly head again. If you had bothered to read to the end of that Wikipedia page you would have noticed things like these:

Furthermore, real per-capita income either stayed approximately constant (1873–1880; 1883–1885) or rose (1881–1882; 1886–1896), so that the average consumer appears to have been considerably better off at the end of the 'depression' than before.

by 1885, 'more houses were being built, twice as much tea was being consumed, and even the working classes were eating imported meat, oranges, and dairy produce in quantities unprecedented'

Prices certainly fell, but almost every other index of economic activity - output of coal and pig iron, tonnage of ships built, consumption of raw wool and cotton, import and export figures, shipping entries and clearances, railway freight clearances, joint-stock company formations, trading profits, consumption per head of wheat, meat, tea, beer, and tobacco - all of these showed an upward trend.

The era was really just one long boom, the likes of which have yet to be repeated.

benway wrote: »

Sorry, I shouldn't be so flippant. I just can't credit that you can't bring yourself to admit the market's disastrously inaccurate valuation of Enron may indicate that The Market isn't, in fact, All Seeing and All Knowing, Bless It's Holy Name.

So because one business engages in dodgy practices and fails, I must then proceed to support massive increases in regulation?

What you're really talking about is transferring more power to unaccountable private sector players, in the guise of Market Forces, in my view, and that's where I get off.

Unaccountable private sector players? Participants in a free markets are far more accountable for their actions than any government employee ever will. To claim that isn't so displays an extreme ignorance of how the market operates.

The fundamental difference is that I don't believe in the invisible hand, Hayekian spontaneous order tradition, that a community of rational, self-interested actors will inevitably reach a perfect equilibrium with each other's self-interests. This underpins faith in the markets, and the idea that minimal governance will not necessarily lead to chaos.

If you don't believe in the invisible hand or spontaneous order then you might want to take a few economics lessons.

The faith in markets doesn't rest upon the belief that they will reach a perfect equilibrium. It rests on the belief that they produce better results than any other system.

Until I see irrefutable proof that such an arrangement is possible, and, trust me, I've looked, I will remain of the view that some kind of Leviathan, will be necessary to regulate human affairs.

The Market isn't possessed of supernatural powers, it's a human institution, beset by human irrationality, power relations, manipulation, deceit, incompetence and corruption, just like government is.

Don't worry, you won't be cast into Pit of Eternal "Any Spare Change" for admitting this ...

The thing is there are forces at work in the market that prevent peoples corruption or incompetence from doing too much damage. There is nothing of that sort to stop people in government from causing great damage.

The problem with government regulation is that it assumes that every economic situation and actor is the same and that they can all be kept in check with one size fits all rules. The market on the other hand is dynamic and can constantly change as situations and participants in the market change.

benway

I would say that there's little point in going much further with this - you obviously are firm in your Faith, far be it from me to tempt you from the Path of True Righteousness™. Just a few points:

Suryavarman wrote: »

I'm also still waiting to hear why the repeal of Glass-Steagal or the enactment of the Commodity Futures Modernisation Act caused the recession.

The reason that (a) such reckless lending was engaged in, and (b) the crash so quickly took on a global significance, and (c) why it was so utterly devastating was that:

Many loans were repackaged and sold as investment-grade financial products, such as Collateralized Debt Obligations, free from the scrutiny and possible restraining influence of the Securities Commission, per the Commodity Futures Modernization Act. It was often a case of the CDO being constituted even in advances of its constituent mortgages having been executed.

These CDOs were sold as low-risk, as the mortgages were combined with lower-risk investments, with the spread thought to make them a sure thing, à la Michael Milkin's 80s junk bonds. Financial institutions all around the world had heavy positions on these "products", so when the sub-prime market in the US started to go under, it had a profound knock-on effect.

The final piece of the puzzle, at least in the US, was that the firewall Glass-Steagal had created between investment and commercial banking had been obliterated by Bush the Younger, with the effect that the "crunch" crippled the banking sector as a whole, rather than just the investment element.

It's a failure of regulation. No way around it.

When markets were allowed the work at the end of 19th century America the result was widespread prosperity.

The myth of the long depression

The era was really just one long boom, the likes of which have yet to be repeated.

Lemme guess, you've cogged a lot of that from von Mises Institute materials. It's no myth.

The late 19th century saw massive unemployment over a ten year period, consistently declining prices and widespread hardship. Growth, taken alone, is a poor indicator of a successful economic system. Especially when the key economies have the expropriation of resources from "natives" around the world artificially inflating their bottom line.

"The long depression myth"? More like the laissez-faire paradise myth.

The only reason the money flowed in in the first place was because the governments had artificially cheapened their currencies to make their exports look cheap.

That doesn't account for the massive direct investments by foreign speculators in the countries, which caused the boom. Doesn't wash, I'm afraid.

All of this despite the assurance of Keynesian economists that leaving gold standard would be a good thing and that it was impossible for high inflation and unemployment to occur at the same time.

Stagflation? Japan has gotten precisely nowhere trying to apply monetarist doctrine to the same problem.

So because one business engages in dodgy practices and fails, I must then proceed to support massive increases in regulation?

So it's one bad apple now? Chances are, where there's an Enron, there's a Fannie Mae, a Northern Rock, an Anglo, etc. We need rules to prevent these things from happening.

Unaccountable private sector players? Participants in a free markets are far more accountable for their actions than any government employee ever will. To claim that isn't so displays an extreme ignorance of how the market operates.

No, they're not. They're accountable to their shareholders. They have no accountability for the social consequences of their actions - unemployment, emigration, environmental damage, etc.

If you don't believe in the invisible hand or spontaneous order then you might want to take a few economics lessons.

The faith in markets doesn't rest upon the belief that they will reach a perfect equilibrium. It rests on the belief that they produce better results than any other system.

Ok, give me some proof then, O Righteous One, for I am lost in my ignorance.

The thing is there are forces at work in the market that prevent peoples corruption or incompetence from doing too much damage.

Again, Enron, Lemans, Northern Rock, Anglo. Your argument is invalid.

There is nothing of that sort to stop people in government from causing great damage.

Elections. Democratic accountability to the best interests of the electorate, because your position depends on their approval. If you preside over a debacle, like Fianna Fáil did, you're likely to be wiped out, like Fianna Fáil was.

The problem with government regulation is that it assumes that every economic situation and actor is the same and that they can all be kept in check with one size fits all rules. The market on the other hand is dynamic and can constantly change as situations and participants in the market change.

The problem with laissez-faire is that it assumes that actors pursuing their rational self interest will lead to a stable outcome, rather than a bubble, a crash and chaos. History says otherwise.

Eliot Rosewater

Anyway, back to the book ... I've just finished chapter 10. I can't say I've been very impressed with the book as an overall package. (My benchmark - Anarchy, State, and Utopia - could be too high!) It intends to develop an argument for an anarchist society as a whole, but keeps on zooming in on details. Some of these are interesting - like the operation of a private title deeds market - but I find a lot of the time that there's a possible logical trap. The authors keep on demonstrating how in their estimation particular parts of the anarchist society would work nicely, but this logicically doesn't translate into the overall society working as one would want it to. I'm not outright disagreeing with the anarchist position (some of the things in the book have been worthwhile) but I'm not sure this particular book is making the best "pitch" possible. Thoughts?

Permabear - how do you compare it to other texts on anarcho-capitalism you've read?

Also - was anyone else surprised by their claim that in an anarchist society fractional reserve banking would not exist? Is this not the primary means by which banks operate?