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You don’t observe a frequent knee jerk like anti-markets reaction from comments across HN? What are good examples of their “disbenefits”?

mellosouls 3y ago
You don’t observe a frequent knee jerk like anti-markets reaction from comments across HN? I find HN one of the most balanced online forums on most subjects. What are good examples of their “disbenefits”? The race to the bottom is all around us.
- alchemist1e9 3y ago
  > The race to the bottom is all around us. You live in SF by chance? Because globally and historically that’s absolutely not what the data says about markets.
  - RedCondor 3y ago
    Marketers take a lot of credit for achievements that don't belong to them. Take, for example, Hayek's rather more honest commentary on vacations and human rights generally: >[The 1948 Universal Declaration of Human Rights] is admittedly an attempt to fuse the rights of the Western liberal tradition with the altogether different concept deriving from the Marxist Russian Revolution. It adds to the list of the classical civil rights enumerated in its first twenty-one articles seven further guarantees intended to express the new ‘social and economic rights’. (…) The conception of a ‘universal right’ which assures to the peasant, to the Eskimo, and presumably to the Abominable Snowman, ‘periodic holidays with pay’ shows the absurdity of the whole thing. (…) What are the consequences of the requirement that every one should have the right ‘freely to participate in the cultural life of the community and to share in the scientific advances and its benefits’. (…) It is evident that all these ‘rights’ are based on the interpretation of society as a deliberately made organization by which everybody is employed. They could not be made universal within a system of rules of just conduct based on the conception of individual responsibility, and so require that the whole of society be converted into a single organization, that is, made totalitarian in the fullest sense of the word. https://redsails.org/concessions/ https://redsails.org/concessions/ The decay we witness today is simply the rollback of concessions copied from socialist states and artificially bolted onto capitalism to reduce socialist ferment. The consequences are predictable.
    - alchemist1e9 3y ago
      I see. So this is about “the right” to take a vacation? What are you talking about and what am I? we seem to live in different realities. I can’t even imagine somehow I would have a government “right” to take a vacation. Who is paying for it? I don’t get it.
      - RedCondor 3y ago
        All so-called "capital returns" are in reality produced by working people, and therefore people get to democratically decide what they do with them, through whatever decision-making forms they politically choose and consent to organize themselves under. Insofar as there are disagreements, because capitalist "geniuses" don't think their riches should be subject to democracy, we have a struggle between socialism and capitalism.
        alchemist1e9 3y ago
        Except history shows us that in 100% of the cases that working people seize the production and allocate the gains they do a unbelievable bad job. Socialism is the single most failed idea in human history, yet we refuse to properly teach that in our education system. I suspect in the future it will be view a bit like refusing to teach other scientific subjects, like evolution. In reality a mob of people end up producing nothing without capitalists and markets. There is a joke that the IQ of a mob is roughly the highest IQ in the mob divided by the size of the mob.
        RedCondor 3y ago
        Cool joke. I encourage anyone on the fence between this libertarian and I to read the "Concessions" essay I linked up above.
        jacquesm 3y ago
        > Socialism is the single most failed idea in human history, yet we refuse to properly teach that in our education system. Well... let's see until we have the capitalist end game before we draw that conclusion, there is a fair chance that it will make the failures of socialism look like a picnic. > I suspect in the future it will be view a bit like refusing to teach other scientific subjects, like evolution. Economic systems aren't science, they are just means of organizing large numbers of people in ways that are hopefully sensible. A system that maximizes for growth can work, for a while, but isn't long term sustainable. So depending on your horizon you may think it is a great idea or a terrible one. Markets aren't bad per-se, but they have the potential to lead to catastrophe and if you don't acknowledge that potential and deal with the risk then the chances of it happening increase.
  - jjoonathan 3y ago
    Any system that is in control and doesn't actually manage to stop progress can make this claim, monarchies and socialist systems included. Capitalism is very good at maximizing the amount of money available for investment, so it probably is uniquely qualified to make a claim to be the best system for encouraging progress, but just as clearly it aggressively funnels technology down paths that are tuned for maximum value extraction and that's not something I believe is good for society as a whole, or even progress on a long enough timescale.
    - alchemist1e9 3y ago
      For what it’s worth, not much, but me personal believe that you believe that without evidence and primary due to the propaganda governments have fed you to scapegoat the evil “capitalists” and markets as a way to deflect blame for serious problems away from themselves. Governments need to regulate to prevent harm, we all agree. Yet they claim it’s the markets doing it! No, markets do what is most efficient and optimal given the rules they can operate within. Governments are the failure point for basically all the serious problems. Instead of making neutral evidence based rules as regulations, politicians tend to reach for redistribution to buy votes, which when combined with scapegoating markets, is a winning combination to remain in power. Unfortunately history shows, unambiguously, it’s a losing combination for the society.
      - jjoonathan 3y ago
        Funny, I think that you believe what you do without evidence primarily due to the propaganda spread by the wealthy elite that own and control the system and want to deflect blame for serious problems away from themselves by blaming the government. The private sector is bigger than the public sector, both in terms of dollar expenditure and in terms of political power. Politicians have to be vetted by rich people (the campaign finance process) before they are even options for election. If you're wealthy enough to monetize policy changes, it's easy to lobby with positive net expected value, if not, it isn't. The whims of the wealthy are in the driver's seat, the will of the people is not. Quick exercise. Many people are confused about the social class they inhabit. Tax policy is the easiest way to demonstrate the actual reality, because whoever is in charge always decides that someone else should pay the taxes. Take out last year's 1040. I want you to look at 3 lines: Line 1, what you earn from working, Line 7, what you earn from owning assets, and Line 9+3/4, your unrealized capital gains. Line 1 has high tax, Line 7 has low tax, and Line 9+3/4 has no tax. Who do you think decided these tax levels? Populists? Do you feel in charge here? > markets do what is most efficient and optimal given the rules Markets don't maximize value in the colloquial sense, the value that they optimize is wealth-weighted. Feed a starving orphan? Zero market value because the orphan has no wealth to pay you. Merge up all the banks so they can load up on risk and arrange for bailouts when they go bust? Enormous market value because it makes rich investors richer, the single most weighted value in all the world. The market will ejaculate capital and connections all over this brilliant value-creating enterprise. Oh, and part of it will involve bribing public officials so you can even blame the government for allowing you to rob the plebs. Lol. Ok, so the markets don't do what people want, they do what wealth-weighted people want. What rich people want. Is that so bad? You and I still get enough weight in the process to live a decent life. Besides, Warren Buffet seems pretty humble and someone has to be diligent about the high level investment decisions, right? Well, here's the problem: financial assets are a moral hazard. Cynically, capitalism entitles rich people to get paid for being rich. Passive income is the ultimate luxury, the most valuable commodity, and rich people indulge exorbitantly. Even Warren Buffet. Especially Warren Buffet. When his passive income streams are threatened, the happy investment grandpa turns into a nasty selfish asshole out to bust the balls of the people doing the real work at the companies he owns (seriously, look into the terms of the BNSF negotiations) because on the opposite side of a passive stream is (arguably) a stream of unreciprocated labor. The counterargument is that Labor Theory of Value is clearly bunk because there's more to value than labor, but just as clearly there is moral hazard in letting someone who doesn't produce the surplus value decide what to do with the surplus value. Wouldn't they just stuff it in their pockets? Yes. That's literally what the stock market is. The entire private sector is organized explicitly for the purpose of stuffing pockets and everything else is merely an emergent consequence of that. Maybe that's ok. After all, every contract is individually agreed to, right? Problem: one side gets much more control over the rules of the game than the other, so consent is dubious. On the first day of business school they teach the prisoner's dilemma, where freedom to control the rules of a game trumps freedom to choose inside of a game. In theory, competition keeps businesses is check, but in practice businesses do everything they can to avoid competition, some successfully, so does it really? In any case, every system needs investment and investment is all about reducing consumption today (which rich people are in a unique position to do) in order to spend the money instead on a factory or a risky venture or something that is expected to make the world better tomorrow, returning a cut to the investor, rewarding success and punishing failure. This is good for everyone, right? Well, yes... when it plays out that way. But markets are amoral. They don't really know if you created value or extracted value and they don't care. The money in your pocket doesn't care if you are a highway robber or robber baron or someone who worked hard for that money. As far as markets are concerned, "create problem, sell solution" is just as legitimate an enterprise as solving an actual preexisting problem. Better, even, because fundamental value creation is hard and you have to compete, while monopolization is all about not competing. What do the best performing market sectors over the last few decades have in common (health care, housing, and education)? Monopolized scarcity. Is this really best for society? You notice how business school tends to focus less on building a better product and more on building a better moat? They know what they are doing, and while it's the best strategy for them, is this really the best way to run society? By maximizing free money for the rich and observing that a somewhat functional society springs up as a side effect? Capitalism is great at growth and terrible at stewardship. It wins a land grab but it leaves behind a nasty class structure. Is it worth it? I have no idea. I just try to win. I'm a lot less certain than I used to be, though.
  - macintux 3y ago
    The “bottom” is also subjective. I see small-town grocery stores everywhere in Indiana dying due to cheap Dollar General stores popping up next to them. So much for fresh fruit & vegetables, so much for the Amish bakeries that would distribute baked goods through the local groceries. But hey, cheaply-made goods from China are more widely available.
    - someplaceguy 3y ago
      Not every negative aspect of changes caused by a market-driven process is actually an indication that those changes are negative as a whole. You should contemplate why the market caused resources to be allocated this way, instead of your preferred way, as usually the market allocates resources more efficiently than any single person could ever hope to achieve. It may turn out that the negative changes you perceived are more than balanced by other positive changes that you weren't able to perceive. In your example, the lives ot Chinese people who benefitted from those changes may have improved a lot more than whatever setbacks you may have experienced. Or maybe people around you can now buy things they couldn't afford before. That said, this is not always true, as markets don't take into account externalities. But still, we don't know of any system of global resource allocation better than letting markets do their job while governments try to control their externalities.
- concordDance 3y ago
  > The race to the bottom is all around us. Isn't this more a side effect of corporations, advertising and corruption rather than markets themselves?
  - polygamous_bat 3y ago
    To some, they're the same thing.
Bluestrike2 3y ago
Any number of the many, many, negative externalities[0], where market transactions are unable or unwilling to capture the often serious negative effects of an activity in its price, that have been documented and researched by economists over the years? Air pollution and greenhouse gases are just two of the biggest examples, with absolutely massive external costs that are not captured in the price. There are even positive externalities with various activities where societal benefits can't be captured in the price. Regulatory capture[1] and rent-seeking are also examples where markets can fail. There are plenty of others. Markets are just tools for the exchange of economic activity. Nothing more, nothing less. But as a society, we tend to ascribe all sorts of greater meaning to them that make it harder to recognize where they come up short and actually do something about it. If knee-jerk anti-market reactions are bad, then might I propose that knee-jerk pro-market reactions are just as bad, insofar as they gloss over or outright ignore the negative aspects of markets as we've implemented them? Imagine a screwdriver. It does one job: turn a screw. If you have the right one, matched with the corresponding screw drive--let's just assume a Philips screw--at the right size, it does its job perfectly. But it'll get less effective as the tip and screw sizes diverge. What about other screw drives? There are a bunch of types where a Philips will sort of fit, and you'll probably be able to turn the screw, albeit with more effort and a greater likelihood of camming out and damaging the screw or your screwdriver. A flat-head screwdriver gets used and abused in all sorts of fun and interesting ways. You can use a flat-head screwdriver to pry open a can of paint, but an actual paint can opener is still less likely to distort or damage the lid or slip and injure you. At some point, you open the tool box and grab another tool. Maybe it's another screwdriver, because you're turning another screw. Or maybe it's a different tool altogether, one designed for the specific task at hand. Markets aren't so different, if not quite as narrowly-defined as a screwdriver. They work well in some areas, less well in others, and in some, they simply can't function. All to varying degrees. Recognizing their failures and limitations allows us try and develop policies that address their worst parts while maintaining their more desirable parts. 0. https://en.wikipedia.org/wiki/Externality https://en.wikipedia.org/wiki/Externality 1. https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture
- alchemist1e9 3y ago
  For the record I believe I agree with you. However I view it as governments are the failure point in the issues you list, not markets. They have outright failed to address the negative externalities as they have been captured by private interests. In my opinion the entire financial system is captured and the regulations they tend to introduce are simply to allow the corrupt private entities further control. One neat part of anonymous online prediction markets using unregulated digital currencies is how they exist outside this crony capitalist system. It’s not markets to blame. It’s bad government!
kybernetikos 3y ago
I would describe myself as cautiously pro market, but I think it's hard to deny that they are effective externality seeking machines. If there is any way of providing a benefit while finding a way to impose the cost diffusely, you can bet that the market will find it. Market based systems guarantee that costs will be hidden and imposed on those who don't receive the benefit to the maximum extent possible given physics and law. On top of that, it's interesting that we only use the market concept at the meta level. Vanishingly few of the businesses that compete in the marketplace are internally arranged on market principles. Instead they follow bureaucratic and oligarchic principles internally. And when the survival of the state is on the line because of war, we don't trust markets to allocate resources to get important things built quickly - rather the state takes power to directly cause some things to be built and other things not to be. Although the market gets praised for being good at allocation of capital, I would say it's good in the way evolution is good at finding things that can survive. It might find great solutions that a planned process wouldn't, but it'll take a long time and a lot of things will die in the process.
- nvm0n1 3y ago
  Isn't military work mostly done by private contractors? It's not like the USAF actually owns and operates its own plane factories. Some companies do approximate market operations internally, any company that has a notion of internal billing or where teams talk about internal customers is to some extent like this. Companies not using market principles internally isn't a strike against markets, if you believe Coase's theory of the firm i.e. companies form at the break even point on transaction costs
ajuc 3y ago
Child labor. Slave trade. Sweatshops. 1000 different environmental catastrophes. You know, the reasons we have regulation. We had markets FIRST, then we got regulation on top of that, and we never looked back.
- Turing_Machine 3y ago
  All of those things, including environmental catastrophes, existed for millennia before Adam Smith came along.
  - ajuc 3y ago
    So did markets.
- alchemist1e9 3y ago
  Absolutely government’s fundamental role in human society is regulating against harm. But somehow the narrative is markets are “bad”, they obviously aren’t as they seek out information and efficiency, which is a good thing. Markets are the one’s you should thank for telling you child labor, slaves, and sweatshops are a problem, and the environment issue, so you pressured your government to regulate those issues. Without free markets the alternative would be the government doing all those horrible things, which btw they certain used to. People are mixed up, the primary problem is government failure to regulate and be transparent. It’s very difficult for governments to admit they create the problems so academics and politicians find the boggy man of markets. Kennedy understands this topic well and while it’s unlikely he will win, I deeply hope he can somehow. We need more markets for more things with clear and clean regulations build based on empirical evidence and scientific and not created by lobbyists involved in regulatory capture.
  - ajuc 3y ago
    > But somehow the narrative is markets are “bad” The mainstream opinion is "markets are ok as long as they are well regulated". The only narrative that is trying to compete with that with any success is "markets are perfect without any regulation". Which provokes the rebuttal you refer to. I've yet to see anybody claiming seriously that "markets are inherently bad and can't be saved". Even in communism there were markets, as abysmal as that system was (and I lived in a communist country for 6 years). If our markets right now were regulated enough - we wouldn't have global warming problems. Clearly there's a lot of externalities that aren't priced-in. So - there's too much market and too little regulation.
eropple 3y ago
> What are good examples of their “disbenefits”? Overwhelmingly unaddressed externalities.
- sterlind 3y ago
  Prediction markets seem blessedly free of externalities though, compared to, say, the energy market (CO2) or textiles (child labor, sweatshops.) except for incentivizing action to tilt the odds, which is weirdly amoral. if you bet on a bad thing happening, you can cash in by making it happen yourself.
  - Regnore 3y ago
    Feeding gambling addictions is the one big externality that comes to mind.
  - someplaceguy 3y ago
    > except for incentivizing action to tilt the odds, which is weirdly amoral. It depends on what's at stake. One example is predicting someone's death. > if you bet on a bad thing happening, you can cash in by making it happen yourself. Yes, and that could be a huge problem, don't you think? It creates an incentive for a bad thing happening that wouldn't exist otherwise. I say this as someone who is in huge favor of markets but also hates their externalities.
kakwa_ 3y ago
Vast topic. Markets definitely have their issues. Here are a few: * The most obvious one is the fact it's an overhead, it doesn't produce goods or services by itself. That's not a major issue, but for example in the US ~5% (~7M of ~150M) of the workforce is dedicated to this overhead. * It's prone to internal instabilities. Too often, the markets disconnect from the underlying economic reality, sometimes with only mild effects (for example, that time petroleum prices went negative), sometimes with more serious ones (2008). * It can lead to overly quantitative views, ignoring the qualitative. It's the "metrics becoming the objective and thus compromising the value of the metric" (example: tech stock prices). * It over-emphasizes individual interests over the collective one (think for example: environmental issues & global warming). Markets definitely have their issues. But so far, the other systems we experimented with (planned economy) were even less able to cope with the incredibly difficult task of balancing an economy. Lastly, it is to be noted that we are not operating in a pure market economy. We are in an hybrid system where States (hopefully representing their people) definitely have a lot of say in economic matters and that's probably for the better.
- mschuster91 3y ago
  > Markets definitely have their issues. But so far, the other systems we experimented with (planned economy) were even less able to cope with the incredibly difficult task of balancing an economy. The worst issue that the Soviets and other attempts at central planning failed to account for was flexibility and buffer. Say a natural disaster hits and you need an extra amount of concrete for reconstruction, but all the concrete production was already allocated for something else and the plan is considered sacrosanct. Or some innovation (e.g. refrigerators, cars, washing machines) proves to be way more popular than expected, but there is no way to adapt the plan, and so you had to wait years for a Trabant car. Ironically, Western-style "free markets" eventually converged towards the same issue with the unholy invention of "just in time" manufacturing. Both capitalism and communism sought to eradicate "inefficiencies" and destabilized their entire foundation doing so.
  - kakwa_ 3y ago
    To extend, interesting read on the subject of the soviet economy: https://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/ https://chris-said.io/2016/05/11/optimizing-things-in-the-us... HN discussions: https://news.ycombinator.com/item?id=14515225 https://news.ycombinator.com/item?id=14515225 https://news.ycombinator.com/item?id=25084479 https://news.ycombinator.com/item?id=25084479
andrepd 3y ago
>What are good examples of their “disbenefits”? The fact that you are asking this with a straight face tells me everything I need to know. Even the most rabidly capitalist person recognises that there are many severe problems with capitalism (they usually argue that it's simply better than the alternatives).

mellosouls 3y ago

You don’t observe a frequent knee jerk like anti-markets reaction from comments across HN? I find HN one of the most balanced online forums on most subjects. What are good examples of their “disbenefits”? The race to the bottom is all around us.

alchemist1e9 3y ago
> The race to the bottom is all around us. You live in SF by chance? Because globally and historically that’s absolutely not what the data says about markets.
- RedCondor 3y ago
  Marketers take a lot of credit for achievements that don't belong to them. Take, for example, Hayek's rather more honest commentary on vacations and human rights generally: >[The 1948 Universal Declaration of Human Rights] is admittedly an attempt to fuse the rights of the Western liberal tradition with the altogether different concept deriving from the Marxist Russian Revolution. It adds to the list of the classical civil rights enumerated in its first twenty-one articles seven further guarantees intended to express the new ‘social and economic rights’. (…) The conception of a ‘universal right’ which assures to the peasant, to the Eskimo, and presumably to the Abominable Snowman, ‘periodic holidays with pay’ shows the absurdity of the whole thing. (…) What are the consequences of the requirement that every one should have the right ‘freely to participate in the cultural life of the community and to share in the scientific advances and its benefits’. (…) It is evident that all these ‘rights’ are based on the interpretation of society as a deliberately made organization by which everybody is employed. They could not be made universal within a system of rules of just conduct based on the conception of individual responsibility, and so require that the whole of society be converted into a single organization, that is, made totalitarian in the fullest sense of the word. https://redsails.org/concessions/ https://redsails.org/concessions/ The decay we witness today is simply the rollback of concessions copied from socialist states and artificially bolted onto capitalism to reduce socialist ferment. The consequences are predictable.
  - alchemist1e9 3y ago
    I see. So this is about “the right” to take a vacation? What are you talking about and what am I? we seem to live in different realities. I can’t even imagine somehow I would have a government “right” to take a vacation. Who is paying for it? I don’t get it.
    - RedCondor 3y ago
      All so-called "capital returns" are in reality produced by working people, and therefore people get to democratically decide what they do with them, through whatever decision-making forms they politically choose and consent to organize themselves under. Insofar as there are disagreements, because capitalist "geniuses" don't think their riches should be subject to democracy, we have a struggle between socialism and capitalism.
      - alchemist1e9 3y ago
        Except history shows us that in 100% of the cases that working people seize the production and allocate the gains they do a unbelievable bad job. Socialism is the single most failed idea in human history, yet we refuse to properly teach that in our education system. I suspect in the future it will be view a bit like refusing to teach other scientific subjects, like evolution. In reality a mob of people end up producing nothing without capitalists and markets. There is a joke that the IQ of a mob is roughly the highest IQ in the mob divided by the size of the mob.
        RedCondor 3y ago
        Cool joke. I encourage anyone on the fence between this libertarian and I to read the "Concessions" essay I linked up above.
        jacquesm 3y ago
        > Socialism is the single most failed idea in human history, yet we refuse to properly teach that in our education system. Well... let's see until we have the capitalist end game before we draw that conclusion, there is a fair chance that it will make the failures of socialism look like a picnic. > I suspect in the future it will be view a bit like refusing to teach other scientific subjects, like evolution. Economic systems aren't science, they are just means of organizing large numbers of people in ways that are hopefully sensible. A system that maximizes for growth can work, for a while, but isn't long term sustainable. So depending on your horizon you may think it is a great idea or a terrible one. Markets aren't bad per-se, but they have the potential to lead to catastrophe and if you don't acknowledge that potential and deal with the risk then the chances of it happening increase.
- jjoonathan 3y ago
  Any system that is in control and doesn't actually manage to stop progress can make this claim, monarchies and socialist systems included. Capitalism is very good at maximizing the amount of money available for investment, so it probably is uniquely qualified to make a claim to be the best system for encouraging progress, but just as clearly it aggressively funnels technology down paths that are tuned for maximum value extraction and that's not something I believe is good for society as a whole, or even progress on a long enough timescale.
  - alchemist1e9 3y ago
    For what it’s worth, not much, but me personal believe that you believe that without evidence and primary due to the propaganda governments have fed you to scapegoat the evil “capitalists” and markets as a way to deflect blame for serious problems away from themselves. Governments need to regulate to prevent harm, we all agree. Yet they claim it’s the markets doing it! No, markets do what is most efficient and optimal given the rules they can operate within. Governments are the failure point for basically all the serious problems. Instead of making neutral evidence based rules as regulations, politicians tend to reach for redistribution to buy votes, which when combined with scapegoating markets, is a winning combination to remain in power. Unfortunately history shows, unambiguously, it’s a losing combination for the society.
    - jjoonathan 3y ago
      Funny, I think that you believe what you do without evidence primarily due to the propaganda spread by the wealthy elite that own and control the system and want to deflect blame for serious problems away from themselves by blaming the government. The private sector is bigger than the public sector, both in terms of dollar expenditure and in terms of political power. Politicians have to be vetted by rich people (the campaign finance process) before they are even options for election. If you're wealthy enough to monetize policy changes, it's easy to lobby with positive net expected value, if not, it isn't. The whims of the wealthy are in the driver's seat, the will of the people is not. Quick exercise. Many people are confused about the social class they inhabit. Tax policy is the easiest way to demonstrate the actual reality, because whoever is in charge always decides that someone else should pay the taxes. Take out last year's 1040. I want you to look at 3 lines: Line 1, what you earn from working, Line 7, what you earn from owning assets, and Line 9+3/4, your unrealized capital gains. Line 1 has high tax, Line 7 has low tax, and Line 9+3/4 has no tax. Who do you think decided these tax levels? Populists? Do you feel in charge here? > markets do what is most efficient and optimal given the rules Markets don't maximize value in the colloquial sense, the value that they optimize is wealth-weighted. Feed a starving orphan? Zero market value because the orphan has no wealth to pay you. Merge up all the banks so they can load up on risk and arrange for bailouts when they go bust? Enormous market value because it makes rich investors richer, the single most weighted value in all the world. The market will ejaculate capital and connections all over this brilliant value-creating enterprise. Oh, and part of it will involve bribing public officials so you can even blame the government for allowing you to rob the plebs. Lol. Ok, so the markets don't do what people want, they do what wealth-weighted people want. What rich people want. Is that so bad? You and I still get enough weight in the process to live a decent life. Besides, Warren Buffet seems pretty humble and someone has to be diligent about the high level investment decisions, right? Well, here's the problem: financial assets are a moral hazard. Cynically, capitalism entitles rich people to get paid for being rich. Passive income is the ultimate luxury, the most valuable commodity, and rich people indulge exorbitantly. Even Warren Buffet. Especially Warren Buffet. When his passive income streams are threatened, the happy investment grandpa turns into a nasty selfish asshole out to bust the balls of the people doing the real work at the companies he owns (seriously, look into the terms of the BNSF negotiations) because on the opposite side of a passive stream is (arguably) a stream of unreciprocated labor. The counterargument is that Labor Theory of Value is clearly bunk because there's more to value than labor, but just as clearly there is moral hazard in letting someone who doesn't produce the surplus value decide what to do with the surplus value. Wouldn't they just stuff it in their pockets? Yes. That's literally what the stock market is. The entire private sector is organized explicitly for the purpose of stuffing pockets and everything else is merely an emergent consequence of that. Maybe that's ok. After all, every contract is individually agreed to, right? Problem: one side gets much more control over the rules of the game than the other, so consent is dubious. On the first day of business school they teach the prisoner's dilemma, where freedom to control the rules of a game trumps freedom to choose inside of a game. In theory, competition keeps businesses is check, but in practice businesses do everything they can to avoid competition, some successfully, so does it really? In any case, every system needs investment and investment is all about reducing consumption today (which rich people are in a unique position to do) in order to spend the money instead on a factory or a risky venture or something that is expected to make the world better tomorrow, returning a cut to the investor, rewarding success and punishing failure. This is good for everyone, right? Well, yes... when it plays out that way. But markets are amoral. They don't really know if you created value or extracted value and they don't care. The money in your pocket doesn't care if you are a highway robber or robber baron or someone who worked hard for that money. As far as markets are concerned, "create problem, sell solution" is just as legitimate an enterprise as solving an actual preexisting problem. Better, even, because fundamental value creation is hard and you have to compete, while monopolization is all about not competing. What do the best performing market sectors over the last few decades have in common (health care, housing, and education)? Monopolized scarcity. Is this really best for society? You notice how business school tends to focus less on building a better product and more on building a better moat? They know what they are doing, and while it's the best strategy for them, is this really the best way to run society? By maximizing free money for the rich and observing that a somewhat functional society springs up as a side effect? Capitalism is great at growth and terrible at stewardship. It wins a land grab but it leaves behind a nasty class structure. Is it worth it? I have no idea. I just try to win. I'm a lot less certain than I used to be, though.
- macintux 3y ago
  The “bottom” is also subjective. I see small-town grocery stores everywhere in Indiana dying due to cheap Dollar General stores popping up next to them. So much for fresh fruit & vegetables, so much for the Amish bakeries that would distribute baked goods through the local groceries. But hey, cheaply-made goods from China are more widely available.
  - someplaceguy 3y ago
    Not every negative aspect of changes caused by a market-driven process is actually an indication that those changes are negative as a whole. You should contemplate why the market caused resources to be allocated this way, instead of your preferred way, as usually the market allocates resources more efficiently than any single person could ever hope to achieve. It may turn out that the negative changes you perceived are more than balanced by other positive changes that you weren't able to perceive. In your example, the lives ot Chinese people who benefitted from those changes may have improved a lot more than whatever setbacks you may have experienced. Or maybe people around you can now buy things they couldn't afford before. That said, this is not always true, as markets don't take into account externalities. But still, we don't know of any system of global resource allocation better than letting markets do their job while governments try to control their externalities.
concordDance 3y ago
> The race to the bottom is all around us. Isn't this more a side effect of corporations, advertising and corruption rather than markets themselves?
- polygamous_bat 3y ago
  To some, they're the same thing.

Bluestrike2 3y ago

Any number of the many, many, negative externalities[0], where market transactions are unable or unwilling to capture the often serious negative effects of an activity in its price, that have been documented and researched by economists over the years? Air pollution and greenhouse gases are just two of the biggest examples, with absolutely massive external costs that are not captured in the price. There are even positive externalities with various activities where societal benefits can't be captured in the price. Regulatory capture[1] and rent-seeking are also examples where markets can fail. There are plenty of others. Markets are just tools for the exchange of economic activity. Nothing more, nothing less. But as a society, we tend to ascribe all sorts of greater meaning to them that make it harder to recognize where they come up short and actually do something about it. If knee-jerk anti-market reactions are bad, then might I propose that knee-jerk pro-market reactions are just as bad, insofar as they gloss over or outright ignore the negative aspects of markets as we've implemented them? Imagine a screwdriver. It does one job: turn a screw. If you have the right one, matched with the corresponding screw drive--let's just assume a Philips screw--at the right size, it does its job perfectly. But it'll get less effective as the tip and screw sizes diverge. What about other screw drives? There are a bunch of types where a Philips will sort of fit, and you'll probably be able to turn the screw, albeit with more effort and a greater likelihood of camming out and damaging the screw or your screwdriver. A flat-head screwdriver gets used and abused in all sorts of fun and interesting ways. You can use a flat-head screwdriver to pry open a can of paint, but an actual paint can opener is still less likely to distort or damage the lid or slip and injure you. At some point, you open the tool box and grab another tool. Maybe it's another screwdriver, because you're turning another screw. Or maybe it's a different tool altogether, one designed for the specific task at hand. Markets aren't so different, if not quite as narrowly-defined as a screwdriver. They work well in some areas, less well in others, and in some, they simply can't function. All to varying degrees. Recognizing their failures and limitations allows us try and develop policies that address their worst parts while maintaining their more desirable parts. 0. https://en.wikipedia.org/wiki/Externality https://en.wikipedia.org/wiki/Externality 1. https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture

alchemist1e9 3y ago
For the record I believe I agree with you. However I view it as governments are the failure point in the issues you list, not markets. They have outright failed to address the negative externalities as they have been captured by private interests. In my opinion the entire financial system is captured and the regulations they tend to introduce are simply to allow the corrupt private entities further control. One neat part of anonymous online prediction markets using unregulated digital currencies is how they exist outside this crony capitalist system. It’s not markets to blame. It’s bad government!

kybernetikos 3y ago

I would describe myself as cautiously pro market, but I think it's hard to deny that they are effective externality seeking machines. If there is any way of providing a benefit while finding a way to impose the cost diffusely, you can bet that the market will find it. Market based systems guarantee that costs will be hidden and imposed on those who don't receive the benefit to the maximum extent possible given physics and law. On top of that, it's interesting that we only use the market concept at the meta level. Vanishingly few of the businesses that compete in the marketplace are internally arranged on market principles. Instead they follow bureaucratic and oligarchic principles internally. And when the survival of the state is on the line because of war, we don't trust markets to allocate resources to get important things built quickly - rather the state takes power to directly cause some things to be built and other things not to be. Although the market gets praised for being good at allocation of capital, I would say it's good in the way evolution is good at finding things that can survive. It might find great solutions that a planned process wouldn't, but it'll take a long time and a lot of things will die in the process.

nvm0n1 3y ago
Isn't military work mostly done by private contractors? It's not like the USAF actually owns and operates its own plane factories. Some companies do approximate market operations internally, any company that has a notion of internal billing or where teams talk about internal customers is to some extent like this. Companies not using market principles internally isn't a strike against markets, if you believe Coase's theory of the firm i.e. companies form at the break even point on transaction costs

ajuc 3y ago

Child labor. Slave trade. Sweatshops. 1000 different environmental catastrophes. You know, the reasons we have regulation. We had markets FIRST, then we got regulation on top of that, and we never looked back.

Turing_Machine 3y ago
All of those things, including environmental catastrophes, existed for millennia before Adam Smith came along.
- ajuc 3y ago
  So did markets.
alchemist1e9 3y ago
Absolutely government’s fundamental role in human society is regulating against harm. But somehow the narrative is markets are “bad”, they obviously aren’t as they seek out information and efficiency, which is a good thing. Markets are the one’s you should thank for telling you child labor, slaves, and sweatshops are a problem, and the environment issue, so you pressured your government to regulate those issues. Without free markets the alternative would be the government doing all those horrible things, which btw they certain used to. People are mixed up, the primary problem is government failure to regulate and be transparent. It’s very difficult for governments to admit they create the problems so academics and politicians find the boggy man of markets. Kennedy understands this topic well and while it’s unlikely he will win, I deeply hope he can somehow. We need more markets for more things with clear and clean regulations build based on empirical evidence and scientific and not created by lobbyists involved in regulatory capture.
- ajuc 3y ago
  > But somehow the narrative is markets are “bad” The mainstream opinion is "markets are ok as long as they are well regulated". The only narrative that is trying to compete with that with any success is "markets are perfect without any regulation". Which provokes the rebuttal you refer to. I've yet to see anybody claiming seriously that "markets are inherently bad and can't be saved". Even in communism there were markets, as abysmal as that system was (and I lived in a communist country for 6 years). If our markets right now were regulated enough - we wouldn't have global warming problems. Clearly there's a lot of externalities that aren't priced-in. So - there's too much market and too little regulation.

eropple 3y ago

> What are good examples of their “disbenefits”? Overwhelmingly unaddressed externalities.

sterlind 3y ago
Prediction markets seem blessedly free of externalities though, compared to, say, the energy market (CO2) or textiles (child labor, sweatshops.) except for incentivizing action to tilt the odds, which is weirdly amoral. if you bet on a bad thing happening, you can cash in by making it happen yourself.
- Regnore 3y ago
  Feeding gambling addictions is the one big externality that comes to mind.
- someplaceguy 3y ago
  > except for incentivizing action to tilt the odds, which is weirdly amoral. It depends on what's at stake. One example is predicting someone's death. > if you bet on a bad thing happening, you can cash in by making it happen yourself. Yes, and that could be a huge problem, don't you think? It creates an incentive for a bad thing happening that wouldn't exist otherwise. I say this as someone who is in huge favor of markets but also hates their externalities.

kakwa_ 3y ago

Vast topic. Markets definitely have their issues. Here are a few: * The most obvious one is the fact it's an overhead, it doesn't produce goods or services by itself. That's not a major issue, but for example in the US ~5% (~7M of ~150M) of the workforce is dedicated to this overhead. * It's prone to internal instabilities. Too often, the markets disconnect from the underlying economic reality, sometimes with only mild effects (for example, that time petroleum prices went negative), sometimes with more serious ones (2008). * It can lead to overly quantitative views, ignoring the qualitative. It's the "metrics becoming the objective and thus compromising the value of the metric" (example: tech stock prices). * It over-emphasizes individual interests over the collective one (think for example: environmental issues & global warming). Markets definitely have their issues. But so far, the other systems we experimented with (planned economy) were even less able to cope with the incredibly difficult task of balancing an economy. Lastly, it is to be noted that we are not operating in a pure market economy. We are in an hybrid system where States (hopefully representing their people) definitely have a lot of say in economic matters and that's probably for the better.

mschuster91 3y ago
> Markets definitely have their issues. But so far, the other systems we experimented with (planned economy) were even less able to cope with the incredibly difficult task of balancing an economy. The worst issue that the Soviets and other attempts at central planning failed to account for was flexibility and buffer. Say a natural disaster hits and you need an extra amount of concrete for reconstruction, but all the concrete production was already allocated for something else and the plan is considered sacrosanct. Or some innovation (e.g. refrigerators, cars, washing machines) proves to be way more popular than expected, but there is no way to adapt the plan, and so you had to wait years for a Trabant car. Ironically, Western-style "free markets" eventually converged towards the same issue with the unholy invention of "just in time" manufacturing. Both capitalism and communism sought to eradicate "inefficiencies" and destabilized their entire foundation doing so.
- kakwa_ 3y ago
  To extend, interesting read on the subject of the soviet economy: https://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/ https://chris-said.io/2016/05/11/optimizing-things-in-the-us... HN discussions: https://news.ycombinator.com/item?id=14515225 https://news.ycombinator.com/item?id=14515225 https://news.ycombinator.com/item?id=25084479 https://news.ycombinator.com/item?id=25084479

andrepd 3y ago

>What are good examples of their “disbenefits”? The fact that you are asking this with a straight face tells me everything I need to know. Even the most rabidly capitalist person recognises that there are many severe problems with capitalism (they usually argue that it's simply better than the alternatives).