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> It's funny that for something supposedly pragmatic and empirical, as capitalism, there are people invoking the "no true capitalism" defense. This is hugely d

> It's funny that for something supposedly pragmatic and empirical, as capitalism, there are people invoking the "no true capitalism" defense. This is hugely disingenuous. It's about as fair as crying "no true socialism" if someone were to say "moving towards socialism leads to mass famine! Just look at Mao!". I think part of what makes conversations like this so frustrating for everyone involved is that people are using vastly different definitions. Those decrying capitalism are usually defining "socialism" as a mixed-market economy and capitalism as an unfettered "pure" Randian market economy. (In conversations critical of socialism, you usually see the opposite dynamic). The fact of the matter is that mixed-market economies are basically ubiquitous at this point, and for good reason. It's a lot easier to find a common understanding on which to debate when everyone is clear what the actual disagreement is: the market is good at certain things and bad at others, and gov't action is a sensible alternative in the areas it's better at (of which there are quite a few, not least dealing with externalities) or a damaging hindrance in the areas where it's worse than the market mechanism (explicitly setting prices, in most cases). The disagreement is over which things go in which category, which is a far less flame-baity way of thinking of it than "capitalism/socialism is just bad!".

eli_gottlieb 11y ago
> the market is good at certain things and bad at others, and gov't action is a sensible alternative in the areas it's better at (of which there are quite a few, not least dealing with externalities) or a damaging hindrance in the areas where it's worse than the market mechanism (explicitly setting prices, in most cases). I don't think that's actually true[1]: >Two German microeconomists tested the “widely accepted” hypothesis that “prices in a planned economy are arbitrarily set exchange ratios without any relation to relative scarcities or economic valuations [whereas] capitalist market prices are close to equilibrium levels.” They employed a technique that analyzes the distribution of an economy’s inputs among industries to measure how far the pattern diverges from that which would be expected to prevail under perfectly optimal neoclassical prices. Examining East German and West German data from 1987, they arrived at an “astonishing result”: the divergence was 16.1% in the West and 16.5% in the East, a trivial difference. The gap in the West’s favor, they wrote, was greatest in the manufacturing sectors, where something like competitive conditions may have existed. But in the bulk of the West German economy — which was then being hailed globally as Modell Deutschland — monopolies, taxes, subsidies, and so on actually left its price structure further from the “efficient” optimum than in the moribund Communist system behind the Berlin Wall. Or in other words, mixed economies can easily operate just as far from the Efficient Market Hypothesis as centrally-planned economies. The Efficient Market Hypothesis should probably be considered more like a Carnot engine than like a real internal combustion engine: some substantial degree of inefficiency is probably an inevitable result of operating in the real world. [1] -- https://www.jacobinmag.com/2012/12/the-red-and-the-black/ https://www.jacobinmag.com/2012/12/the-red-and-the-black/
- icebraining 11y ago
  The Efficient Market Hypothesis should probably be considered more like a Carnot engine than like a real internal combustion engine: some substantial degree of inefficiency is probably an inevitable result of operating in the real world. That's a specious conclusion; the paper explicitly says that the inefficiency is due to the degree of management present in West Germany, which was significant. It's not like the EMH says the market prices are theoretically perfect; it only says they're better than whatever individual or group can calculate. And the paper you cite provides evidence for that. "To sum up, the unexpected similarity of overall deviance between actual prices and eigenprices in East and West does not warrant the conclusion that East German pricing behaviour was not so bad after all and more or less guided by relative scarcities. In those sectors where market forces prevail in the West, East German actual prices deviate significantly more from eigenprices. However, the similarity of the overall indicator testifies to the fact that a sizeable part of West German GNP is not produced under competitive market conditions. It obviously is the case in sectors with predominant public ownership rights and strong government influence." (Emphasis mine) https://www.europa-uni.de/de/forschung/institut/institut_fit/publikationen/discussion_papers/1996/96-4-DietzWag.pdf https://www.europa-uni.de/de/forschung/institut/institut_fit...
- wutbrodo 11y ago
  > the bulk of the West German economy — which was then being hailed globally as Modell Deutschland — monopolies, taxes, subsidies, and so on actually left its price structure further from the “efficient” optimum than in the moribund Communist system behind the Berlin Wall. This isn't really contradicting what I said. As they say, the gap in the West's favor was greatest in the places where the market was relied upon in contrast to a system full of "monopolies, taxes, and subsidies". Neither West Germany nor East Germany had particularly market-oriented economies. To wit, the market mechanism efficiently provides a price level but that doesn't mean you can't mess it up by poorly planned gov't intervention in the economy (and to be clear, I mean "gov't intervention that is poorly planned", not that gov't intervention is per se ill-advised).

eli_gottlieb 11y ago

> the market is good at certain things and bad at others, and gov't action is a sensible alternative in the areas it's better at (of which there are quite a few, not least dealing with externalities) or a damaging hindrance in the areas where it's worse than the market mechanism (explicitly setting prices, in most cases). I don't think that's actually true[1]: >Two German microeconomists tested the “widely accepted” hypothesis that “prices in a planned economy are arbitrarily set exchange ratios without any relation to relative scarcities or economic valuations [whereas] capitalist market prices are close to equilibrium levels.” They employed a technique that analyzes the distribution of an economy’s inputs among industries to measure how far the pattern diverges from that which would be expected to prevail under perfectly optimal neoclassical prices. Examining East German and West German data from 1987, they arrived at an “astonishing result”: the divergence was 16.1% in the West and 16.5% in the East, a trivial difference. The gap in the West’s favor, they wrote, was greatest in the manufacturing sectors, where something like competitive conditions may have existed. But in the bulk of the West German economy — which was then being hailed globally as Modell Deutschland — monopolies, taxes, subsidies, and so on actually left its price structure further from the “efficient” optimum than in the moribund Communist system behind the Berlin Wall. Or in other words, mixed economies can easily operate just as far from the Efficient Market Hypothesis as centrally-planned economies. The Efficient Market Hypothesis should probably be considered more like a Carnot engine than like a real internal combustion engine: some substantial degree of inefficiency is probably an inevitable result of operating in the real world. [1] -- https://www.jacobinmag.com/2012/12/the-red-and-the-black/ https://www.jacobinmag.com/2012/12/the-red-and-the-black/

icebraining 11y ago
The Efficient Market Hypothesis should probably be considered more like a Carnot engine than like a real internal combustion engine: some substantial degree of inefficiency is probably an inevitable result of operating in the real world. That's a specious conclusion; the paper explicitly says that the inefficiency is due to the degree of management present in West Germany, which was significant. It's not like the EMH says the market prices are theoretically perfect; it only says they're better than whatever individual or group can calculate. And the paper you cite provides evidence for that. "To sum up, the unexpected similarity of overall deviance between actual prices and eigenprices in East and West does not warrant the conclusion that East German pricing behaviour was not so bad after all and more or less guided by relative scarcities. In those sectors where market forces prevail in the West, East German actual prices deviate significantly more from eigenprices. However, the similarity of the overall indicator testifies to the fact that a sizeable part of West German GNP is not produced under competitive market conditions. It obviously is the case in sectors with predominant public ownership rights and strong government influence." (Emphasis mine) https://www.europa-uni.de/de/forschung/institut/institut_fit/publikationen/discussion_papers/1996/96-4-DietzWag.pdf https://www.europa-uni.de/de/forschung/institut/institut_fit...
wutbrodo 11y ago
> the bulk of the West German economy — which was then being hailed globally as Modell Deutschland — monopolies, taxes, subsidies, and so on actually left its price structure further from the “efficient” optimum than in the moribund Communist system behind the Berlin Wall. This isn't really contradicting what I said. As they say, the gap in the West's favor was greatest in the places where the market was relied upon in contrast to a system full of "monopolies, taxes, and subsidies". Neither West Germany nor East Germany had particularly market-oriented economies. To wit, the market mechanism efficiently provides a price level but that doesn't mean you can't mess it up by poorly planned gov't intervention in the economy (and to be clear, I mean "gov't intervention that is poorly planned", not that gov't intervention is per se ill-advised).