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> centrally directed plans cannot perfectly allocate resources and there is no such thing as 'efficient' capitalism, no matter how smart the committee who deci

> centrally directed plans cannot perfectly allocate resources and there is no such thing as 'efficient' capitalism, no matter how smart the committee who decides where to steer things is. I honestly have no idea at all where you thought I was making this point. The entire premise behind my comment was the preservation of the ability of the market and the profit motive to direct capital (i.e. capitalism), and I drew an explicit contrast to Soviet-style central direction of capital. "The whole point of free-market capitalism is that.... there is no such thing as efficient capitalism"? What? Efficient capitalism is capitalism in which the flow of capital (by free markets) to where it will create the most wealth is unimpeded. Every time this flow is blocked or diverted by some external factor, that's a loss of efficiency. If some factor that was irrelevant to wealth creation determined that people born in the month of March (or people of a certain race) were not allowed to go to good schools (even if their parents can afford it), that would be a (somewhat silly) loss of efficiency in capital. "Deciding" that people born to middle class or lower parents don't deserve the kind of education that's increasingly critical to survive in the modern economy is basically the same thing in terms of its effect on wealth creation (though of course it's more palatable ethically). All too often, people conflate capitalism with "government that's as small as possible", when it's blindingly obvious that this couldn't be farther from the truth. For an obvious example, contract enforcement is an essential for markets to function. Responsible regulation is another case (A company dumping toxic waste into a town's river and causing cancer among its citizens is a case of the company's capital direction decision-making process not being exposed to all the costs to the economy; the company could theoretically destroy more wealth than it creates for society). To get to my point, a big part of America's historical economic dynamism (aside from the fact that we've got probably the richest geography in the entire world) was the fact that we didn't have class systems as entrenched as Europe did. Whether your idea was successful was (more) dependent on whether it was _good_ and would create wealth, as opposed to how you knew or how you were born. Arbitrarily closing off the class of potential entrepreneurs to people who are "high-born" obviously reduces the potential for new sources of innovation (and thus wealth generated for society). Being able to afford a private school or being able to afford to live in a district with a good public school (where you pay your "tuition" in the price of your house) is the modern equivalent of being "high-born" (it's certainly much more flexible than strict class systems, but it has much the same effect). As far as healthcare and basic income, this should be particularly familiar to anyone reading HN. The idea that your healthcare should be tied to your employer is insanely stupid. This system very clearly incentivizes being an employee over being an entrepreneur which, again, is not the way to have a healthy, innovative economy*. Every time a person is prevented from building a startup solely out of fear that their kid might get sick and they won't have good healthcare, that's a loss of efficiency. A similar argument trivially applies to basic income. The US (in contrast to our formerly deserved reputation of the probability of rags-to-riches stories) has worse economic mobility than most of the developed world. It's absolutely pathetic that we've gotten to this state given that this was a big source of our historical economic dominance. TL;DR: Efficiency in capitalism is the unimpeded flow of capital to where it is most needed. This is best achieved by a meritocracy of ideas. Anything that affects that flow negatively is an inefficiency. Healthcare, education, and a basic income have nothing to do with the government directing the economy's capital but rather with the government ensuring that capital can flow correctly.

dnautics 13y ago
>Efficiency in capitalism is the unimpeded flow of capital to where it is most needed. Who decides what is 'most needed'? What about 'wants' versus 'needs'? Are they chopped liver in capitalism? Where do you draw the line between a want, and a lesser need, and a most need? >Anything that affects that flow negatively is an inefficiency. What constitutes "negative" versus "positive" "flow"? Are you talking about net capital flows? Just the total amount of dollars that are being moved? Is this the same or not as actual value created? How do you measure such a thing? >Healthcare, education, and a basic income have nothing to do with the government directing the economy's capital but rather with the government ensuring that capital can flow correctly. Again, what is "correct" flow? Who decides? Rolling back a few paragraphs: > Every time this flow is blocked or diverted by some external factor, that's a loss of efficiency. What is an 'external factor'? Last I checked, the economy is everything. Lest these seem nit-picky comments, I'm trying to isolate some questions I have about your fundamental understanding of economics vis a vis mine. It's possible I'm missing something, since I have very little formal econ training.
- wutbrodo 13y ago
  > Who decides what is 'most needed'? Are they chopped liver in capitalism? I almost feel like you're deliberately misunderstanding me. The only places you're disagreeing with me are _the places that I agree with you_. I am saying that capitalism is the best way to allocate resources, not centralized distribution as in Communism. Instead of trying to figure out where you're misunderstanding me, I'll start from extremely basic economics. I'm sure you know some (all?) of this, but just bear with me as we're clearly talking past each other here. The goal of economics is generally to maximize utility. [What is utility?] Utility is best (and simplistically) described as "what people want". This is the end-all and be-all of what economics strives for. I'll be using "wealth" and "utility" interchangeably here. Note that 'wants vs needs' is irrelevant, since a person's "wants" are generally considered to be a superset of their needs (barring a few exceptions, like children or severe cases of mental disability). [Who decides what is 'most needed/wanted'?] Each person decides for themselves. The person who knows what I want is me. I express this preference by buying shit. It's as simple as that. No one needs to "draw lines" for every want and need, because (again), I'm not talking about fucking Communism (in which, theoretically, all resources are explicitly and centrally allocated). [How does one "create wealth"? Isn't one person's gain necessarily another's loss?] No. In order for a consensual transaction to take place, both sides (by definition) must be willing participants. Barring asymmetric information, etc, this means that both people are better off. If both people are better off, a net gain in society's wealth has just occurred. This is how the poorest person in today's society is better off than the average person 500 years ago: the accumulation of half a millennium of wealth creation across society. [What constitutes a "negative" vs a "positive" flow of capital?] Using the above definition of wealth creation, capital should flow to the places where it creates wealth (remember, this means more people will get what they want). A negative flow of capital is to a place that either creates wealth extremely inefficiently, or destroys wealth. [How can wealth be destroyed or created inefficiently? Didn't you just say that every transaction creates wealth for both sides?] In a simple transaction, this is always true, since a participant would not willingly participate if he were not going to be better off. In more complex transactions (basically everything in the modern world), this isn't the case. If you dump toxic waste into a town's river to save on disposal costs, and you cause a spate of cancer cases across the town, the cost that is being borne by the townspeople is not reflected in the transaction. Neither you (the seller) nor your buyer knows (and cares) what happens to the townspeople, and thus that cost is not reflected in the supply/demand graph that leads you to complete the transaction. This is known as an externality. The people bearing the costs are not the people whose incentives matter to the completion of the transaction (the townspeople have no direct control over your manufacture or the price the buyer pays you). This kind of trade destroys wealth when the costs borne by the newly stricken cancer patients are higher than the savings from avoiding proper waste disposal. In that scenario, the "wants" of the patients have been violated to a greater degree than the "wants" of the buyer/seller in the transaction. [What is an 'external factor'? Last I checked, the economy is everything] I don't blame you for not getting this one; Externality is a commonly used term in economics but probably not one you'd hear without formal econ education. With that association in mind, I thought it was clear that I meant "external to the parties whose incentives determine the parameters of the transaction". For example, see the above paragraph's description of the consumer and the toxic waste-dumping producer. TL;DR: No matter how many times you keep trying to twist my comments into advocating central planning and Communism, the fact remains that every single thing I've said is in support of capitalism in its purest form. Preventing market failures is one of the things that's necessary for capitalism to work. Defining free markets as "free from regulation" is as stupid an economic policy as Communism is. Free markets means that capital is free to flow where the most wealth will be created, and wealth creation is a universal goal (There are disagreements on the degree to which it should be sacrificed for humans rights concerns, but that's another subject entirely). Market failures are cases where purely free markets fail to deliver the best outcomes (as defined by wealth creation). http://en.wikipedia.org/wiki/Market_failure http://en.wikipedia.org/wiki/Market_failure

dnautics 13y ago

>Efficiency in capitalism is the unimpeded flow of capital to where it is most needed. Who decides what is 'most needed'? What about 'wants' versus 'needs'? Are they chopped liver in capitalism? Where do you draw the line between a want, and a lesser need, and a most need? >Anything that affects that flow negatively is an inefficiency. What constitutes "negative" versus "positive" "flow"? Are you talking about net capital flows? Just the total amount of dollars that are being moved? Is this the same or not as actual value created? How do you measure such a thing? >Healthcare, education, and a basic income have nothing to do with the government directing the economy's capital but rather with the government ensuring that capital can flow correctly. Again, what is "correct" flow? Who decides? Rolling back a few paragraphs: > Every time this flow is blocked or diverted by some external factor, that's a loss of efficiency. What is an 'external factor'? Last I checked, the economy is everything. Lest these seem nit-picky comments, I'm trying to isolate some questions I have about your fundamental understanding of economics vis a vis mine. It's possible I'm missing something, since I have very little formal econ training.

wutbrodo 13y ago
> Who decides what is 'most needed'? Are they chopped liver in capitalism? I almost feel like you're deliberately misunderstanding me. The only places you're disagreeing with me are _the places that I agree with you_. I am saying that capitalism is the best way to allocate resources, not centralized distribution as in Communism. Instead of trying to figure out where you're misunderstanding me, I'll start from extremely basic economics. I'm sure you know some (all?) of this, but just bear with me as we're clearly talking past each other here. The goal of economics is generally to maximize utility. [What is utility?] Utility is best (and simplistically) described as "what people want". This is the end-all and be-all of what economics strives for. I'll be using "wealth" and "utility" interchangeably here. Note that 'wants vs needs' is irrelevant, since a person's "wants" are generally considered to be a superset of their needs (barring a few exceptions, like children or severe cases of mental disability). [Who decides what is 'most needed/wanted'?] Each person decides for themselves. The person who knows what I want is me. I express this preference by buying shit. It's as simple as that. No one needs to "draw lines" for every want and need, because (again), I'm not talking about fucking Communism (in which, theoretically, all resources are explicitly and centrally allocated). [How does one "create wealth"? Isn't one person's gain necessarily another's loss?] No. In order for a consensual transaction to take place, both sides (by definition) must be willing participants. Barring asymmetric information, etc, this means that both people are better off. If both people are better off, a net gain in society's wealth has just occurred. This is how the poorest person in today's society is better off than the average person 500 years ago: the accumulation of half a millennium of wealth creation across society. [What constitutes a "negative" vs a "positive" flow of capital?] Using the above definition of wealth creation, capital should flow to the places where it creates wealth (remember, this means more people will get what they want). A negative flow of capital is to a place that either creates wealth extremely inefficiently, or destroys wealth. [How can wealth be destroyed or created inefficiently? Didn't you just say that every transaction creates wealth for both sides?] In a simple transaction, this is always true, since a participant would not willingly participate if he were not going to be better off. In more complex transactions (basically everything in the modern world), this isn't the case. If you dump toxic waste into a town's river to save on disposal costs, and you cause a spate of cancer cases across the town, the cost that is being borne by the townspeople is not reflected in the transaction. Neither you (the seller) nor your buyer knows (and cares) what happens to the townspeople, and thus that cost is not reflected in the supply/demand graph that leads you to complete the transaction. This is known as an externality. The people bearing the costs are not the people whose incentives matter to the completion of the transaction (the townspeople have no direct control over your manufacture or the price the buyer pays you). This kind of trade destroys wealth when the costs borne by the newly stricken cancer patients are higher than the savings from avoiding proper waste disposal. In that scenario, the "wants" of the patients have been violated to a greater degree than the "wants" of the buyer/seller in the transaction. [What is an 'external factor'? Last I checked, the economy is everything] I don't blame you for not getting this one; Externality is a commonly used term in economics but probably not one you'd hear without formal econ education. With that association in mind, I thought it was clear that I meant "external to the parties whose incentives determine the parameters of the transaction". For example, see the above paragraph's description of the consumer and the toxic waste-dumping producer. TL;DR: No matter how many times you keep trying to twist my comments into advocating central planning and Communism, the fact remains that every single thing I've said is in support of capitalism in its purest form. Preventing market failures is one of the things that's necessary for capitalism to work. Defining free markets as "free from regulation" is as stupid an economic policy as Communism is. Free markets means that capital is free to flow where the most wealth will be created, and wealth creation is a universal goal (There are disagreements on the degree to which it should be sacrificed for humans rights concerns, but that's another subject entirely). Market failures are cases where purely free markets fail to deliver the best outcomes (as defined by wealth creation). http://en.wikipedia.org/wiki/Market_failure http://en.wikipedia.org/wiki/Market_failure