4 ms·

The correct thing to do is let the market decide. If it's profitable to do something, people will do it.

PaulDavisThe1st 6y ago
This seems profoundly naive to me. "If it's profitable do something" is beyond simplistic. Profitable compared to what? Profitable for whom? Profitable based on what assumptions? Profitable by what metric? Dollars accrued to capital? Dollars accrued to GDP? Quality of life index? Happiness index? Life expectancy numbers? Infant mortality? Profitable with what externalities forced to be part of cost-factoring? What is "the market"? What is a "decision" in this context? What is the cost benefit analysis of allowing "the market" to "decide" versus more policy-driven unfolding of the outcome? ... and so on and so on .... i.e. the usual litany of problems with free-market boosterism
- lmm 6y ago
  To refuse to decide is even more simplistic. The free market offers a clear way to decide where resources are invested. If you're going to override that and prop up failing companies, what grounds are you going to use to decide, and why do you believe your process will be better? Letting the market decide at least ensures that completely useless companies go to the wall, and companies that people are willing to spend a lot on get to continue (and, notably, it does this in a nondiscriminatory way - anyone's money is as good as anyone else's). Can your process - which is, what, Trump picks and chooses which companies don't go bankrupt? - guarantee that much?
  - PaulDavisThe1st 6y ago
    I don't propose propping up failing companies. I agree with others who have suggested that ensuring that individuals (i.e. employees/workers) are adequately protected so that the immediate aftermath of corporate failure doesn't fall on them. Remember: the usual reason why employees are not entitled to the same share of profits as investors is that "employees are not taking a risk". If we're going to start arguing that deciding to take a job at a company is just as much of a risk as investing capital, then the relationship with profit will need to change too. But the implications go beyond the people who work for corporations that fail, into communities (possibly far and wide). I don't think there are policies that can mitigage this without damaging the entrepeneurial climate, which I'd rather not do. At the same time, the incredible ease with which one can start new businesses in the US, and the trivial availability of credit, almost guarantees that we have huge numbers of businesses that play valuable roles in their communities but have absolutely no resilience to negative economic shifts. I don't know how we fix that.
    - lmm 6y ago
      Corporations are supposed to be easy-come, easy-go; the fact that it's easy to start new businesses should mean that if there's genuine need for a business then it's easy for a replacement to start. I wouldn't be surprised if e.g. a lot of bankrupt restaurants start operating again with the same kitchen and most of the same staff, because there's no reason for whoever ends up owning the place to do anything different (unless there's a long-term shift in people's behaviour - in which case we don't want the restaurants to re-open). So I think the main thing is to make sure it really is easy for replacement businesses to open (i.e. avoid situations like new businesses requiring a difficult license, or zoning that grandfathers in existing businesses but wouldn't allow similar new businesses), and to avoid having communities dominated by a small number of big companies (which mainly means not having the kind of tax loopholes that give big businesses advantages over small ones). Ultimately the losses have to be borne somewhere, and it's better that they fall on business owners and equity investors (who knew the risks they were taking) than anywhere else, even if spreading them out among taxpayers makes it looks like no-one would notice.
munk-a 6y ago
The instances where it's been profitable to maintain a standing army are quite few and far between - and allowing the market to control fire extinguishing has led to some really perverse incentives. There are things that we benefit from as a society that aren't realistic to accurately price for ethical reasons so I think this is quite too simplistic a statement.

This seems profoundly naive to me. "If it's profitable do something" is beyond simplistic. Profitable compared to what? Profitable for whom? Profitable based on what assumptions? Profitable by what metric? Dollars accrued to capital? Dollars accrued to GDP? Quality of life index? Happiness index? Life expectancy numbers? Infant mortality? Profitable with what externalities forced to be part of cost-factoring? What is "the market"? What is a "decision" in this context? What is the cost benefit analysis of allowing "the market" to "decide" versus more policy-driven unfolding of the outcome? ... and so on and so on .... i.e. the usual litany of problems with free-market boosterism

lmm 6y ago
To refuse to decide is even more simplistic. The free market offers a clear way to decide where resources are invested. If you're going to override that and prop up failing companies, what grounds are you going to use to decide, and why do you believe your process will be better? Letting the market decide at least ensures that completely useless companies go to the wall, and companies that people are willing to spend a lot on get to continue (and, notably, it does this in a nondiscriminatory way - anyone's money is as good as anyone else's). Can your process - which is, what, Trump picks and chooses which companies don't go bankrupt? - guarantee that much?
- PaulDavisThe1st 6y ago
  I don't propose propping up failing companies. I agree with others who have suggested that ensuring that individuals (i.e. employees/workers) are adequately protected so that the immediate aftermath of corporate failure doesn't fall on them. Remember: the usual reason why employees are not entitled to the same share of profits as investors is that "employees are not taking a risk". If we're going to start arguing that deciding to take a job at a company is just as much of a risk as investing capital, then the relationship with profit will need to change too. But the implications go beyond the people who work for corporations that fail, into communities (possibly far and wide). I don't think there are policies that can mitigage this without damaging the entrepeneurial climate, which I'd rather not do. At the same time, the incredible ease with which one can start new businesses in the US, and the trivial availability of credit, almost guarantees that we have huge numbers of businesses that play valuable roles in their communities but have absolutely no resilience to negative economic shifts. I don't know how we fix that.
  - lmm 6y ago
    Corporations are supposed to be easy-come, easy-go; the fact that it's easy to start new businesses should mean that if there's genuine need for a business then it's easy for a replacement to start. I wouldn't be surprised if e.g. a lot of bankrupt restaurants start operating again with the same kitchen and most of the same staff, because there's no reason for whoever ends up owning the place to do anything different (unless there's a long-term shift in people's behaviour - in which case we don't want the restaurants to re-open). So I think the main thing is to make sure it really is easy for replacement businesses to open (i.e. avoid situations like new businesses requiring a difficult license, or zoning that grandfathers in existing businesses but wouldn't allow similar new businesses), and to avoid having communities dominated by a small number of big companies (which mainly means not having the kind of tax loopholes that give big businesses advantages over small ones). Ultimately the losses have to be borne somewhere, and it's better that they fall on business owners and equity investors (who knew the risks they were taking) than anywhere else, even if spreading them out among taxpayers makes it looks like no-one would notice.

munk-a 6y ago

The instances where it's been profitable to maintain a standing army are quite few and far between - and allowing the market to control fire extinguishing has led to some really perverse incentives. There are things that we benefit from as a society that aren't realistic to accurately price for ethical reasons so I think this is quite too simplistic a statement.