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This is a little more than just a matter of the intrinsic fallibility of human nature. There's also a structural flaw in capitalism itself that allows these mas

This is a little more than just a matter of the intrinsic fallibility of human nature. There's also a structural flaw in capitalism itself that allows these massive wastes of resources to be perpetuated: https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Greater_fool_theory

solipsism 7y ago
I don't think it's fair to call this a flaw in capitalism. Valuations are only as rational as the fallible humans making valuation decisions. Imagining a capitalist system composed of all rational actors, this problem would disappear completely. This isn't a structural flaw in capitalism, that's expecting too much of capitalism.
- pytester 7y ago
  >Imagining a capitalist system composed of all rational actors, this problem would disappear completely. Yes, because it's pretty easy to imagine a functioning social system based upon people not being people. >that's expecting too much of capitalism. That irrational behavior in the wasteful allocation of resources doesn't generate a negative feedback loop that causes even more waste?
  - solipsism 7y ago
    That irrational behavior in the wasteful allocation of resources doesn't generate a negative feedback loop that causes even more waste? Who said it didn't? I think you're missing my point. The irrational behavior is a flaw. But it's not fair to call it a structural flaw of capitalism. The flaw is prior to capitalism. It's like saying toilets are flawed because people piss on the seat.
- wpietri 7y ago
  It's definitely a flaw in capitalism, because we concentrate decision-making control for large sums of capital (that is, yesterday's labor [1]) in the hands of a small number of people. And quite often those people are irrationally greedy sociopaths who are comfortable with, say, burning billions of dollars on the off chance that it will get them very rich. Of course, no decision-making apparatus is perfect. Our current version of capitalism with all its flaws might be the optimal way to run a society. But we should be clear-eyed about those flaws. [1] https://www.brainyquote.com/quotes/abraham_lincoln_395631 https://www.brainyquote.com/quotes/abraham_lincoln_395631
  - solipsism 7y ago
    The number of people making the decisions doesn't matter. Democratize things as much as you want and you'll often get irrational choices. By your logic, literally every single endeavor that involves human decision-making is flawed in that exact same same way. Socialism is flawed because humans are in the loop. Representative democracies, monarchies, oligarchies, and anarchy are flawed because humans are in the loop. Both science and religion have the same flaw, because humans are in the loop. It's not that it's untrue... It's just common to any venture where humans are in the loop, so it carries almost no information and isn't worth saying. I guess capitalism is flawed because resources are not infinite? Is capitalism flawed because humans die? Is Usain Bolt flawed because he has only two legs?
    - wpietri 7y ago
      Yes, but the kinds of bad choices you get using different decision processes will be different. WeWork is a very capitalist boondoggle. It's not the kind of failure you'd see even in Mittelstand capitalism. Let alone Mondragon-style cooperatives, which could reasonably be called capitalist. And it's definitely not what you'd see in an ejido or a European-style commons. American-style venture capitalism is almost unique in terms of the amount of resources a single person can allocate. I think only authoritarian regimes come close to letting one person decide to bet $12 billion on a poorly-considered vision.
    - pytester 7y ago
      >The number of people making the decisions doesn't matter. Democratize things as much as you want and you'll often get irrational choices. Of course you will. The point about the greater fool theory is that the market system for equities generates a negative feedback loop rather than being dampened by rational actors in the system. This perpetuates an enormously wasteful misallocation of resources. >I guess capitalism is flawed because resources are not infinite? Is capitalism flawed because humans die? Something tells me that if I were talking about the soviet shoe factory principle you wouldn't be so eager to excuse socialist misallocation of resources. Could it be that your argument is based more upon tribalism than logic?
- anoncake 7y ago
  > Imagining a capitalist system composed of all rational actors, this problem would disappear completely. No, not at all. The exploiters would just be better at exploiting.
  - solipsism 7y ago
    Uh, what? In finance and economics, the greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants. By definition... the problem disappears if actors are rational. This is not a contentious matter of argument. It's in the definition.
    - wpietri 7y ago
      Not really, unless you mean it in some sort of religious sense. You still have information asymmetries, power asymmetries, different priors, and bounded rationality. Plus the inherent limitations of any system of decision making.

solipsism 7y ago

I don't think it's fair to call this a flaw in capitalism. Valuations are only as rational as the fallible humans making valuation decisions. Imagining a capitalist system composed of all rational actors, this problem would disappear completely. This isn't a structural flaw in capitalism, that's expecting too much of capitalism.

pytester 7y ago
>Imagining a capitalist system composed of all rational actors, this problem would disappear completely. Yes, because it's pretty easy to imagine a functioning social system based upon people not being people. >that's expecting too much of capitalism. That irrational behavior in the wasteful allocation of resources doesn't generate a negative feedback loop that causes even more waste?
- solipsism 7y ago
  That irrational behavior in the wasteful allocation of resources doesn't generate a negative feedback loop that causes even more waste? Who said it didn't? I think you're missing my point. The irrational behavior is a flaw. But it's not fair to call it a structural flaw of capitalism. The flaw is prior to capitalism. It's like saying toilets are flawed because people piss on the seat.
wpietri 7y ago
It's definitely a flaw in capitalism, because we concentrate decision-making control for large sums of capital (that is, yesterday's labor [1]) in the hands of a small number of people. And quite often those people are irrationally greedy sociopaths who are comfortable with, say, burning billions of dollars on the off chance that it will get them very rich. Of course, no decision-making apparatus is perfect. Our current version of capitalism with all its flaws might be the optimal way to run a society. But we should be clear-eyed about those flaws. [1] https://www.brainyquote.com/quotes/abraham_lincoln_395631 https://www.brainyquote.com/quotes/abraham_lincoln_395631
- solipsism 7y ago
  The number of people making the decisions doesn't matter. Democratize things as much as you want and you'll often get irrational choices. By your logic, literally every single endeavor that involves human decision-making is flawed in that exact same same way. Socialism is flawed because humans are in the loop. Representative democracies, monarchies, oligarchies, and anarchy are flawed because humans are in the loop. Both science and religion have the same flaw, because humans are in the loop. It's not that it's untrue... It's just common to any venture where humans are in the loop, so it carries almost no information and isn't worth saying. I guess capitalism is flawed because resources are not infinite? Is capitalism flawed because humans die? Is Usain Bolt flawed because he has only two legs?
  - wpietri 7y ago
    Yes, but the kinds of bad choices you get using different decision processes will be different. WeWork is a very capitalist boondoggle. It's not the kind of failure you'd see even in Mittelstand capitalism. Let alone Mondragon-style cooperatives, which could reasonably be called capitalist. And it's definitely not what you'd see in an ejido or a European-style commons. American-style venture capitalism is almost unique in terms of the amount of resources a single person can allocate. I think only authoritarian regimes come close to letting one person decide to bet $12 billion on a poorly-considered vision.
  - pytester 7y ago
    >The number of people making the decisions doesn't matter. Democratize things as much as you want and you'll often get irrational choices. Of course you will. The point about the greater fool theory is that the market system for equities generates a negative feedback loop rather than being dampened by rational actors in the system. This perpetuates an enormously wasteful misallocation of resources. >I guess capitalism is flawed because resources are not infinite? Is capitalism flawed because humans die? Something tells me that if I were talking about the soviet shoe factory principle you wouldn't be so eager to excuse socialist misallocation of resources. Could it be that your argument is based more upon tribalism than logic?
anoncake 7y ago
> Imagining a capitalist system composed of all rational actors, this problem would disappear completely. No, not at all. The exploiters would just be better at exploiting.
- solipsism 7y ago
  Uh, what? In finance and economics, the greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants. By definition... the problem disappears if actors are rational. This is not a contentious matter of argument. It's in the definition.
  - wpietri 7y ago
    Not really, unless you mean it in some sort of religious sense. You still have information asymmetries, power asymmetries, different priors, and bounded rationality. Plus the inherent limitations of any system of decision making.