[ExI] Valid economic reasoning should never go out of style/was Re: More on Health Costs
pharos at gmail.com
Fri May 29 14:48:28 UTC 2009
On 5/28/09, Dan wrote:
> We should be looking for valid economic reasoning -- not reasoning that
> is either old fashioned or new fangled. Historically, the urge to sluff off valid
> economic reasoning is very strong. The "new economy" talk of the railroad
> era -- yes, they had it back then too! -- led investors, policy-makers, and the
> general public to believe that bad policies -- policies that failed previously
> and that were theoretically unsound (even given the state of theory in the
> 19th century) -- would somehow work out. And the boom-bust cycle resulted.
No. The boom-bust cycle in inherent in laissez-faire capitalism.
(I know you and some libertarian economic theorists deny this).
But that's the way it works in the real world.
One of your entrepreneurs starts selling a new widget which becomes
popular. Everybody else and their dog join in, adding features to the
widgets. Some widgets become very rare and expensive. People start
speculating on widget futures. People start investing in widgets for
their pension scheme. Then it all collapses when everybody decides
they don't want any more widgets.
It's just the herd mentality.
> This is actually a rather old fashioned view of wealth and of production.
> The valid economic way to look at wealth and production is NOT to concretely
> look at farms and factories and assume that only specific physical goods are
> wealth. Instead, wealth is what people value (if no one wanted oil, e.g., it
> wouldn't be considered part of wealth or useful to obtaining wealth);
> production is the process of transforming something into something more
> desirable (and this can be anything at all from the construction worker laying
> slabs to produce a building to the singer singing a song to produce music
> people want to hear). That is a very wide and all inclusive view of wealth
> and of production. It's not limited to who has the most farms or the bigger
Wealth is power. That's why people want millions of dollars.
The millionaires get the best girls and have a yacht and a private jet.
> I don't think this has to do with being moralistic. One can completely take
> values out of the theory: malinvestments are malinvestments not because
> Lee or I don't like them, but because they lead to a production structure that
> doesn't sustain in the long run -- one that eventually must be corrected -- not
> because people are all moralistic but because eventually projects invested
> in fail and fail much more frequently than can be accounted for by simple,
> unsystematic entrepreneurial error.* That's an objective truth -- not
> dependent on our values or morality or misdiagnoses.
Boom-bust entrepreneurs *always* fail. The whole point is to enable a
boom in widgets and suck money from the population (while it is
fashionable for everybody to have a widget). Then, cash in the huge
salaries, sell the company for millions, and watch the bust from your
island mansion. It has very little to do with creating 'value'.
December 22, 2008. Quote:
It's time to drive the final nail into the coffin of laissez-faire
capitalism by treating it like the discredited ideology it inarguably
is. If not, the Dr. Frankensteins of the right will surely try to
revive the monster and send it marauding through our economy once
We've only just begun to bury the financially dead, and the free
market fundamentalists are already looking to deflect the blame.
December 20, 2008. Quote:
There are plenty of culprits, like lenders who peddled easy credit,
consumers who took on mortgages they could not afford and Wall Street
chieftains who loaded up on mortgage-backed securities without regard
to the risk.
But the story of how we got here is partly one of Mr. Bush’s own
making, according to a review of his tenure that included interviews
with dozens of current and former administration officials.
>From his earliest days in office, Mr. Bush paired his belief that
Americans do best when they own their own home with his conviction
that markets do best when let alone.
He pushed hard to expand homeownership, especially among minorities,
an initiative that dovetailed with his ambition to expand the
Republican tent — and with the business interests of some of his
biggest donors. But his housing policies and hands-off approach to
regulation encouraged lax lending standards.
More information about the extropy-chat