13 ms·

Why and how capitalism needs to be reformed

28 points by burlesona 6y ago

mc32 6y ago
Automation and population shrink and aging. What are we going to do about them? Japan has been dealing with pop reduction and aging and to a lesser extent automation; however automation and pop drop and aging have dovetailed quite complementarily. What happens when automation exceeds the drop in pop?
eric4smith 6y ago
I don’t think anyone can “reform” capitalism. Think about it, it’s at the root of how dominant humans behaved since the beginning of time. It’s literally the 80/20 rule in practice. 20% of humans want to create things (generally). And capitalism is the most efficient way to do it at scale. Look back in human history to see signs of this in every country, city, town and village. There is always that “rich” person in your town that owns a lot of land and businesses. Always. Why do we think we can stop or change this feature or humans?
- jkhdigital 6y ago
  I don’t get it either... capitalism isn’t some intentional decision that society somehow collectively makes, it is more like the natural order of economic transactions that arises in the presence of (1) property rights, and (2) freedom of association. Most of the things Ray talks about are not intrinsic features of capitalism, but simply institutions that seem to interact with a capitalist economic structure in notable ways e.g. central banking.
  - Conlectus 6y ago
    Property rights are the name of the game though right? The extent to which you are allowed to own property is the fundamental design mechanism for an economy system. Simple versions being taxation, more extensive being things like collectivist anarchism.
  - dragonwriter 6y ago
    > capitalism isn’t some intentional decision that society somehow collectively makes, Yes, it is. Historically, it is an intentional decision society collectively makes at the behest of and for the benefit of thr mercantile class. > that arises in the presence of (1) property rights, and (2) freedom of association Property rights are much older than capitalism, freedom of association as a widespread normn is newer and not super consistently found with capitalism. The particular structure of property rights that characterizes capitalism, which is very different from the system of property rights that characterized, say, feudalism, is not the same thing as “property rights” generally, though supporters of capitalism often confuse the two concepts.
- beej71 6y ago
  We regulate capitalism all the time. You just make something "cost" more by fining, taxing, or sending people to prison, and then people choose the now-cheaper Made-In-USA alternative.
  - eric4smith 6y ago
    Good. Wake me up when that happens.
jkhdigital 6y ago
> The problem is that capitalists typically don’t know how to divide the pie well and socialists typically don’t know how to grow it well. Thanks Ray, I didn’t realize it was so simple! Maybe you should just stick to investing and donate your money to worthwhile charities if you want to improve the world.
- alfiedotwtf 6y ago
  If you read the whole thing, you'll see that he's doing exactly that - $100M to be exact.
nemo44x 6y ago
This is all wrong. Focusing on “gaps” doesn’t make any sense. The upper middle class has greatly expanded over the last 50 years (from essentially not existing to making up 30% of the population today). The lower class has shrunk. Yes there is more variance in the middle class and upper middle class but the middle class is absolutely mobile into the upper middle class while impoverished people basically don’t exist anymore. Appalachia in the 60’s is a whole lot different than today. The blue collar middle class life is absolutely accessible. But you have to get up on time and do a job. Skilled trades have a huge labor shortage. Factories struggle to hire while offering good wages. Because you need to reliably show up sober and be willing to work. I have numerous friends that supervise modern factories (these are not repetitive widget jobs - they train you abd you have a growth arc) and they are constantly short labor while offering good pay and benefits. It’s hard to find responsible people that want this work - an elite over production of responsible people via universities I think. Same with skilled trade - plumbers, etc. a huge shortage today. Prices are insane to contract these people, the market clearly indicating we need to allocate there. There’s a good middle class life out there if you’re willing to accept it. Capital works.
- christophilus 6y ago
  I mostly agree. I think we need a free(er) market in education. The Joel Greenblatt charter schools would soon be available everywhere, if market dynamics were allowed. We also are undeniably in need of healthcare reform, and on that front, I think we need to just make up our minds and choose between a single payer system or a free market. The Frankenstein we have today is the worst. And we need to break up monopolies, starting with cable companies / ISPs.
  - alfiedotwtf 6y ago
    Laissez-faire in education will create an even greater gap as schools will not have a shared curriculum by definition
    - AstralStorm 6y ago
      Most importantly it will drain funding from the already hurting schools in poor areas, while the job "market", or rather employers, will demand ever better, more specialized education in many areas to have a job that provides a living wage. Schools in poor areas are not a profitable enterprise. Companies do not even run schools if they can help it.
lend000 6y ago
Well researched and interesting data from Dalio, as always. However, I think most of his conclusions and recommendations are both vague and overly complex. Yes, public education is not great in the United States. But it never was -- the world just got more complex. Whereas a grade school dropout could find intuitive work that contributed to the economy even just 60 years ago, and could grow their wealth intuitively (you know, saving money in a bank or under a mattress), there are a couple of things that changed all that. 1. Automation. I imagine there is an upper limit on how many people can work in the service industry, which is one of the last holdouts of unskilled labor against automation. 2. Inflation. The CPI weights are garbage. When 2 trillion dollars are injected into stocks and bonds, inflating both of the markets (stonks higher and interest rates lower), the person who has no access to credit and no significant amount of their net worth in stocks is the one who is left behind. Obviously (or maybe not, to inflation denialists), this exacerbates wealth inequality. The richer you are, the higher percentage your net worth will grow from this policy, on average. This has been going on since the end of Bretton Woods, to a less dramatic degree than the COVID stimulus (more often focused on interest rate manipulation). This is also when the income inequality trend takes off. There are countless other correlated data plots, like some of the ones included by Dalio, and surely, there are multiple factors. However, the causality for inflation is the most direct and measurable. One more thing: taxes. In 1913, the first federal income tax had about the same maximum tax bracket that we have in 2020: $500,000. That was closer to $15 million back then. There's your problem. Hardly anyone talks about how broken these tax brackets are, and instead clamor for wealth taxes and closing those elusive loopholes by adding even more complexity to the tax code, because that always works. The top 10 wealthiest Americans are almost all self-made who didn't have to do anything fancy on their taxes to get to where they are -- just pay the highest capital gains rate on billions which happens to be significantly less than the rate on someone making 10,000 times less. If your representative is complaining about tax reform and not mentioning the brackets, they either don't want to fix the problem or are too clueless to deserve your vote.
alfiedotwtf 6y ago
The way he talks about marriages and divorce in Part One made me suspect that he would introduce religion as an answer in Part Two. Anyway... I don’t see anything new in this article, apart from “we need to think more long-term”, which doesn’t work in the 3-4 year political cycle. From what I’ve learned going through the economic classics lately, is that a) economists get things wrong, and b) economics isn’t an exactly (if at all) a science. Even the great John Maynard Keynes in The General Theory of Employment, Interest, and Money says that once interest rates fall to zero, we will have full employment... yet here we are. So like all other economics articles that have high hopes you see here on HN, I would take this article with a heavy grain of salt
xtian 6y ago
So the capitalist system is “saving money to buy stocks” and the solution to fix it is “bipartisanship” and “metrics”? Gotta say he does make a strong case for the failure of the US education system.
stevenalowe 6y ago
Capitalism is the worst economic system, except for all the others
- AstralStorm 6y ago
  Including the ones we haven't tried?
  - adamcstephens 6y ago
    Others tried them, but the US spent decades overthrowing governments and supporting authoritarian dictators to ensure alternatives wouldn’t have a chance to be successful.
phailhaus 6y ago
For such a well-researched and thought-out writeup, I was surprised by the weakness of the recommendations. He says: > I believe that reality works like a machine with cause/effect relationships that produce outcomes, and that when the outcomes fall short of the goals one needs to diagnose why the machine is working inadequately and then reform it I agree with that completely; the current system has set up a network of incentives which, coupled with the breakneck pace of technology, is causing the wealth gap. And yet, the recommendations don't seem like systemic changes at all, they're more like "I would get a commission together and Do It Better."
- adamcstephens 6y ago
  I think it’s tough to recommend systemic changes when you start out with a fundamental belief that the basics of the system are the most perfect system ever. I’m of the opinion that you can reform capitalism, but to do so you may need to change who benefits. Take worker cooperatives for example. They could be a central policy that would counteract inequality, give people more decision in their own lives and give them skin in the game. Teach people to be smarter isn’t going to be enough, especially when the employers of the lower end of earners specifically want human robots who don’t think for themselves.
JarlUlvi 6y ago
The biggest problem I see in his writing is the scant coverage for culture C U L T U R E According to M-W that is, the customary beliefs, social forms, and material traits of a racial, religious, or social group. Certain groups have a strong inclination towards wealth because they culturally emphasize: 1. strong education 2. family unity 3. saving/investment 4. literacy 5. networking Groups that do not emphasize these things then, fail to achive wealth, generally speaking.

28 points by burlesona 6y ago

mc32 6y ago

Automation and population shrink and aging. What are we going to do about them? Japan has been dealing with pop reduction and aging and to a lesser extent automation; however automation and pop drop and aging have dovetailed quite complementarily. What happens when automation exceeds the drop in pop?

eric4smith 6y ago

I don’t think anyone can “reform” capitalism. Think about it, it’s at the root of how dominant humans behaved since the beginning of time. It’s literally the 80/20 rule in practice. 20% of humans want to create things (generally). And capitalism is the most efficient way to do it at scale. Look back in human history to see signs of this in every country, city, town and village. There is always that “rich” person in your town that owns a lot of land and businesses. Always. Why do we think we can stop or change this feature or humans?

jkhdigital 6y ago
I don’t get it either... capitalism isn’t some intentional decision that society somehow collectively makes, it is more like the natural order of economic transactions that arises in the presence of (1) property rights, and (2) freedom of association. Most of the things Ray talks about are not intrinsic features of capitalism, but simply institutions that seem to interact with a capitalist economic structure in notable ways e.g. central banking.
- Conlectus 6y ago
  Property rights are the name of the game though right? The extent to which you are allowed to own property is the fundamental design mechanism for an economy system. Simple versions being taxation, more extensive being things like collectivist anarchism.
- dragonwriter 6y ago
  > capitalism isn’t some intentional decision that society somehow collectively makes, Yes, it is. Historically, it is an intentional decision society collectively makes at the behest of and for the benefit of thr mercantile class. > that arises in the presence of (1) property rights, and (2) freedom of association Property rights are much older than capitalism, freedom of association as a widespread normn is newer and not super consistently found with capitalism. The particular structure of property rights that characterizes capitalism, which is very different from the system of property rights that characterized, say, feudalism, is not the same thing as “property rights” generally, though supporters of capitalism often confuse the two concepts.
beej71 6y ago
We regulate capitalism all the time. You just make something "cost" more by fining, taxing, or sending people to prison, and then people choose the now-cheaper Made-In-USA alternative.
- eric4smith 6y ago
  Good. Wake me up when that happens.

jkhdigital 6y ago

> The problem is that capitalists typically don’t know how to divide the pie well and socialists typically don’t know how to grow it well. Thanks Ray, I didn’t realize it was so simple! Maybe you should just stick to investing and donate your money to worthwhile charities if you want to improve the world.

alfiedotwtf 6y ago
If you read the whole thing, you'll see that he's doing exactly that - $100M to be exact.

nemo44x 6y ago

This is all wrong. Focusing on “gaps” doesn’t make any sense. The upper middle class has greatly expanded over the last 50 years (from essentially not existing to making up 30% of the population today). The lower class has shrunk. Yes there is more variance in the middle class and upper middle class but the middle class is absolutely mobile into the upper middle class while impoverished people basically don’t exist anymore. Appalachia in the 60’s is a whole lot different than today. The blue collar middle class life is absolutely accessible. But you have to get up on time and do a job. Skilled trades have a huge labor shortage. Factories struggle to hire while offering good wages. Because you need to reliably show up sober and be willing to work. I have numerous friends that supervise modern factories (these are not repetitive widget jobs - they train you abd you have a growth arc) and they are constantly short labor while offering good pay and benefits. It’s hard to find responsible people that want this work - an elite over production of responsible people via universities I think. Same with skilled trade - plumbers, etc. a huge shortage today. Prices are insane to contract these people, the market clearly indicating we need to allocate there. There’s a good middle class life out there if you’re willing to accept it. Capital works.

christophilus 6y ago
I mostly agree. I think we need a free(er) market in education. The Joel Greenblatt charter schools would soon be available everywhere, if market dynamics were allowed. We also are undeniably in need of healthcare reform, and on that front, I think we need to just make up our minds and choose between a single payer system or a free market. The Frankenstein we have today is the worst. And we need to break up monopolies, starting with cable companies / ISPs.
- alfiedotwtf 6y ago
  Laissez-faire in education will create an even greater gap as schools will not have a shared curriculum by definition
  - AstralStorm 6y ago
    Most importantly it will drain funding from the already hurting schools in poor areas, while the job "market", or rather employers, will demand ever better, more specialized education in many areas to have a job that provides a living wage. Schools in poor areas are not a profitable enterprise. Companies do not even run schools if they can help it.

lend000 6y ago

Well researched and interesting data from Dalio, as always. However, I think most of his conclusions and recommendations are both vague and overly complex. Yes, public education is not great in the United States. But it never was -- the world just got more complex. Whereas a grade school dropout could find intuitive work that contributed to the economy even just 60 years ago, and could grow their wealth intuitively (you know, saving money in a bank or under a mattress), there are a couple of things that changed all that. 1. Automation. I imagine there is an upper limit on how many people can work in the service industry, which is one of the last holdouts of unskilled labor against automation. 2. Inflation. The CPI weights are garbage. When 2 trillion dollars are injected into stocks and bonds, inflating both of the markets (stonks higher and interest rates lower), the person who has no access to credit and no significant amount of their net worth in stocks is the one who is left behind. Obviously (or maybe not, to inflation denialists), this exacerbates wealth inequality. The richer you are, the higher percentage your net worth will grow from this policy, on average. This has been going on since the end of Bretton Woods, to a less dramatic degree than the COVID stimulus (more often focused on interest rate manipulation). This is also when the income inequality trend takes off. There are countless other correlated data plots, like some of the ones included by Dalio, and surely, there are multiple factors. However, the causality for inflation is the most direct and measurable. One more thing: taxes. In 1913, the first federal income tax had about the same maximum tax bracket that we have in 2020: $500,000. That was closer to $15 million back then. There's your problem. Hardly anyone talks about how broken these tax brackets are, and instead clamor for wealth taxes and closing those elusive loopholes by adding even more complexity to the tax code, because that always works. The top 10 wealthiest Americans are almost all self-made who didn't have to do anything fancy on their taxes to get to where they are -- just pay the highest capital gains rate on billions which happens to be significantly less than the rate on someone making 10,000 times less. If your representative is complaining about tax reform and not mentioning the brackets, they either don't want to fix the problem or are too clueless to deserve your vote.

alfiedotwtf 6y ago

The way he talks about marriages and divorce in Part One made me suspect that he would introduce religion as an answer in Part Two. Anyway... I don’t see anything new in this article, apart from “we need to think more long-term”, which doesn’t work in the 3-4 year political cycle. From what I’ve learned going through the economic classics lately, is that a) economists get things wrong, and b) economics isn’t an exactly (if at all) a science. Even the great John Maynard Keynes in The General Theory of Employment, Interest, and Money says that once interest rates fall to zero, we will have full employment... yet here we are. So like all other economics articles that have high hopes you see here on HN, I would take this article with a heavy grain of salt

xtian 6y ago

So the capitalist system is “saving money to buy stocks” and the solution to fix it is “bipartisanship” and “metrics”? Gotta say he does make a strong case for the failure of the US education system.

stevenalowe 6y ago

Capitalism is the worst economic system, except for all the others

AstralStorm 6y ago
Including the ones we haven't tried?
- adamcstephens 6y ago
  Others tried them, but the US spent decades overthrowing governments and supporting authoritarian dictators to ensure alternatives wouldn’t have a chance to be successful.

phailhaus 6y ago

For such a well-researched and thought-out writeup, I was surprised by the weakness of the recommendations. He says: > I believe that reality works like a machine with cause/effect relationships that produce outcomes, and that when the outcomes fall short of the goals one needs to diagnose why the machine is working inadequately and then reform it I agree with that completely; the current system has set up a network of incentives which, coupled with the breakneck pace of technology, is causing the wealth gap. And yet, the recommendations don't seem like systemic changes at all, they're more like "I would get a commission together and Do It Better."

adamcstephens 6y ago
I think it’s tough to recommend systemic changes when you start out with a fundamental belief that the basics of the system are the most perfect system ever. I’m of the opinion that you can reform capitalism, but to do so you may need to change who benefits. Take worker cooperatives for example. They could be a central policy that would counteract inequality, give people more decision in their own lives and give them skin in the game. Teach people to be smarter isn’t going to be enough, especially when the employers of the lower end of earners specifically want human robots who don’t think for themselves.

JarlUlvi 6y ago

The biggest problem I see in his writing is the scant coverage for culture C U L T U R E According to M-W that is, the customary beliefs, social forms, and material traits of a racial, religious, or social group. Certain groups have a strong inclination towards wealth because they culturally emphasize: 1. strong education 2. family unity 3. saving/investment 4. literacy 5. networking Groups that do not emphasize these things then, fail to achive wealth, generally speaking.