4 ms·

I think you may be responding to what you think I said, rather than what I actually said. Can you give an example of a sentence or passage in the original that

by pg 17y ago

I think you may be responding to what you think I said, rather than what I actually said. Can you give an example of a sentence or passage in the original that you feel is false?

tc 17y ago
Unrelated to the criticisms above... Having not reread this essay for a few years, I'd forgotten what a wonderful piece this was. Your exploration of the common fallacies that lead people astray is particularly clearheaded and well supported. However, you might want to reconsider the way you lumped, in passing, speculators together with thieves -- implying that neither create value. Thieves clearly destroy value, whereas speculators add information to markets. They create value in a very abstract way that is difficult to recognize, but is nonetheless there. A speculator that accurately foresees a shortage of grain in 6 months and therefore buys grain futures provides a service to society (by raising the future price of grain over the spot price, causing people to warehouse grain, which will take grain off the spot market, pushing up the spot price, moderating present demand for grain, and preventing an acute shortage).
- Luff 17y ago
  Technically, thieves redistribute value, they don't destroy it. Speculators, on the other hand, can destroy capital by making bad investments. They can also just get lucky by investing in a rising economy.(thereby not contributing any information of value)
  - tc 17y ago
    In the real world, thieves destroy wealth in the process of redistributing. They break windows, they cause people to hire security guards, and their actions make people feel vulnerable and insecure -- all wealth-destroying. The redistribution isn't zero-cost to the thief either. The gas used by the thief to get to his target is destroyed wealth. Thieves also redistribute goods in such ways as to lower their value. Let's say a biotech company pays $20k for a microscope. A thief steals the microscope and pawns it to someone for $20 who just thinks the microscope looks cool. Wealth has been destroyed through the misallocation of resources caused by the improper redistribution. As for speculators destroying wealth by making bad investments: yes, they can, but they lose money when they do so, which is a self-correcting process. The CEO of a company can also destroy wealth by misallocating resources. As for speculators getting lucky: yes, they can do that as well, but random chance tends not to be sustainable (a random strategy will lose on average after transaction fees), causing a self-correction that tends towards mitigating noise. Anyway, if they are lucky and right, they've still added valuable correct information, just as a company that randomly happens onto a successful product still created value. As for speculators getting lucky by investing in a rising market: if the market rise is supported by fundamentals, then the speculators are still adding value by allocating resources towards worthwhile enterprises. What's the difference at that point between speculators and investors? If the rising market isn't supported by fundamental wealth creation (e.g. the central bank is printing money), there will be a correction, and the (long) speculators will lose money. Don't get too tied up on the word information. Market processes allocate scarce resources in such a way as to maximize total wealth and wealth creation (as best as can be done with the information available). Sometimes correct speculation aids that process indirectly by sending price signals. Other times correct speculation adds value by directly allocating resources where they can best be used (investing money in a startup, or in a pool of companies, or in bonds, for example).
david927 17y ago
Can I apologize? My daughter was pulling at me and I started to skim. I'll read it in length, give it time, and then post again. Mea culpa.
- david927 17y ago
  Ok, I'm back and I have time now. In the real world, wealth is (except for a few specialists like thieves and speculators) something you have to create, not something that's distributed by Daddy. That makes it sounds like those who are wealthy created that wealth, and those who did not, did not create wealth. That would require a perfect meritocracy. Do you really believe that what we live in, in this world? Of the Forbes 400, around 70% inherited more than a million or came from wealthy backgrounds.[1] (So for the vast majority, they actually, quite literally, got it from Daddy.) You get paid by doing or making something people want, and those who make more money are often simply better at doing what people want. Top actors make a lot more money than B-list actors. Are top actors better actors than B-list? Sometimes, but often not. They usually were in more popular films. And that's often a consequence of what other films came out when it opened, the editor, the opening-day weather, etc. There are a thousand factors that go into making a film and an actor doesn't have a lot of control over them when signing on to a project. It's called luck. Actors are on an upward spiral or a downward spiral and it almost never has anything to do with their acting or "giving people what they want". It would be nice if the world was less complex place, but it's not. So are they getting paid vastly more because they're worth it, or because there can only be so many top actors and they happen to be one. Natural monopolies are more than just dams and bridges, and for the fortunate in them, there's nothing meritocratic about it. When we say that one kind of work is overpaid and another underpaid, what are we really saying? In a free market, prices are determined by what buyers want. But in a free market, with no oversight, we would get dangerous chemicals in our food, kids pajamas that explode from a spark, etc. You know all those crazy regulations we have? A lot of them are because companies tried to violate those exact rules. A market may say it's OK to sneak imflammable chemicals into those pajamas. A market may say it's OK that a clerk can make $2/hour -- but we can then say, no, that's not enough for the clerk to live on. You can vote with how you spend your money, but you can also vote at the polls. They're both valid ways of getting things done. The difference is like that between hard and soft skills. Managing a group of great hard-skill guys who can't work together and can't be managed is high-performance/low-control. A bunch of guys who communicate and work well together, but don't get anything done, and you have high-control/low-performance. The trick is to mix hard and soft skills to get both. Both market and social concerns are valid and need to be monitored, tuned. A baseball player is payed a lot? People are willing to pay a lot to see him. Good for him; he got dollar votes. A woman is working two part-time minimum wage jobs because neither company wants to make her full-time to avoid paying benefits and she still can't feed her family? Not good for her, or us to allow it; we need to vote at the polls. One often hears a policy criticized on the grounds that it would increase the income gap between rich and poor. As if it were an axiom that this would be bad. At a certain extreme, in either direction, it can be devastating. I don't tink I have to defend that the "no income gap" is a calamity. But at a certain point the other way and you also get devastating results. It's a fine balance. With a large disparity in income, you get lower economic mobility and society as a whole suffers tremendously. It creates huge problems that are well documented and easy to see if you simply travel. There's been a lot of work done on this [2], and the best I can put simply is that if the gap gets too big, instead of increasing motivation it decreases it, much as with an extended duration of being unemployed. You need rich people in your society not so much because in spending their money they create jobs, but because of what they have to do to get rich. Again, you're fantasizing that this is all a meritocracy. Most wealthy people were born that way. We all hear of large leaps of economic mobility based on merit, but that's unfortunately the exception. I'm not saying, "Don't let people get rich." I'm saying, "There is nothing that the incentive of $50 million at a 35% tax rate will give you that $50 million at 45% won't." And yet if that 10% is spent on education and other enablers of economic mobility, your pool of Henry Fords who can build that tractor just got bigger. [1] http://www.faireconomy.org/press_room/1997/born_on_third_base_sources_of_wealth_of_1997_forbes_400 http://www.faireconomy.org/press_room/1997/born_on_third_bas...) [2] http://www.mentalhealth.org.uk/media/news-releases/news-releases-2009/10-march-2009 http://www.mentalhealth.org.uk/media/news-releases/news-rele...

by pg 17y ago

I think you may be responding to what you think I said, rather than what I actually said. Can you give an example of a sentence or passage in the original that you feel is false?

tc 17y ago

Unrelated to the criticisms above... Having not reread this essay for a few years, I'd forgotten what a wonderful piece this was. Your exploration of the common fallacies that lead people astray is particularly clearheaded and well supported. However, you might want to reconsider the way you lumped, in passing, speculators together with thieves -- implying that neither create value. Thieves clearly destroy value, whereas speculators add information to markets. They create value in a very abstract way that is difficult to recognize, but is nonetheless there. A speculator that accurately foresees a shortage of grain in 6 months and therefore buys grain futures provides a service to society (by raising the future price of grain over the spot price, causing people to warehouse grain, which will take grain off the spot market, pushing up the spot price, moderating present demand for grain, and preventing an acute shortage).

Luff 17y ago
Technically, thieves redistribute value, they don't destroy it. Speculators, on the other hand, can destroy capital by making bad investments. They can also just get lucky by investing in a rising economy.(thereby not contributing any information of value)
- tc 17y ago
  In the real world, thieves destroy wealth in the process of redistributing. They break windows, they cause people to hire security guards, and their actions make people feel vulnerable and insecure -- all wealth-destroying. The redistribution isn't zero-cost to the thief either. The gas used by the thief to get to his target is destroyed wealth. Thieves also redistribute goods in such ways as to lower their value. Let's say a biotech company pays $20k for a microscope. A thief steals the microscope and pawns it to someone for $20 who just thinks the microscope looks cool. Wealth has been destroyed through the misallocation of resources caused by the improper redistribution. As for speculators destroying wealth by making bad investments: yes, they can, but they lose money when they do so, which is a self-correcting process. The CEO of a company can also destroy wealth by misallocating resources. As for speculators getting lucky: yes, they can do that as well, but random chance tends not to be sustainable (a random strategy will lose on average after transaction fees), causing a self-correction that tends towards mitigating noise. Anyway, if they are lucky and right, they've still added valuable correct information, just as a company that randomly happens onto a successful product still created value. As for speculators getting lucky by investing in a rising market: if the market rise is supported by fundamentals, then the speculators are still adding value by allocating resources towards worthwhile enterprises. What's the difference at that point between speculators and investors? If the rising market isn't supported by fundamental wealth creation (e.g. the central bank is printing money), there will be a correction, and the (long) speculators will lose money. Don't get too tied up on the word information. Market processes allocate scarce resources in such a way as to maximize total wealth and wealth creation (as best as can be done with the information available). Sometimes correct speculation aids that process indirectly by sending price signals. Other times correct speculation adds value by directly allocating resources where they can best be used (investing money in a startup, or in a pool of companies, or in bonds, for example).

david927 17y ago

Can I apologize? My daughter was pulling at me and I started to skim. I'll read it in length, give it time, and then post again. Mea culpa.

david927 17y ago
Ok, I'm back and I have time now. In the real world, wealth is (except for a few specialists like thieves and speculators) something you have to create, not something that's distributed by Daddy. That makes it sounds like those who are wealthy created that wealth, and those who did not, did not create wealth. That would require a perfect meritocracy. Do you really believe that what we live in, in this world? Of the Forbes 400, around 70% inherited more than a million or came from wealthy backgrounds.[1] (So for the vast majority, they actually, quite literally, got it from Daddy.) You get paid by doing or making something people want, and those who make more money are often simply better at doing what people want. Top actors make a lot more money than B-list actors. Are top actors better actors than B-list? Sometimes, but often not. They usually were in more popular films. And that's often a consequence of what other films came out when it opened, the editor, the opening-day weather, etc. There are a thousand factors that go into making a film and an actor doesn't have a lot of control over them when signing on to a project. It's called luck. Actors are on an upward spiral or a downward spiral and it almost never has anything to do with their acting or "giving people what they want". It would be nice if the world was less complex place, but it's not. So are they getting paid vastly more because they're worth it, or because there can only be so many top actors and they happen to be one. Natural monopolies are more than just dams and bridges, and for the fortunate in them, there's nothing meritocratic about it. When we say that one kind of work is overpaid and another underpaid, what are we really saying? In a free market, prices are determined by what buyers want. But in a free market, with no oversight, we would get dangerous chemicals in our food, kids pajamas that explode from a spark, etc. You know all those crazy regulations we have? A lot of them are because companies tried to violate those exact rules. A market may say it's OK to sneak imflammable chemicals into those pajamas. A market may say it's OK that a clerk can make $2/hour -- but we can then say, no, that's not enough for the clerk to live on. You can vote with how you spend your money, but you can also vote at the polls. They're both valid ways of getting things done. The difference is like that between hard and soft skills. Managing a group of great hard-skill guys who can't work together and can't be managed is high-performance/low-control. A bunch of guys who communicate and work well together, but don't get anything done, and you have high-control/low-performance. The trick is to mix hard and soft skills to get both. Both market and social concerns are valid and need to be monitored, tuned. A baseball player is payed a lot? People are willing to pay a lot to see him. Good for him; he got dollar votes. A woman is working two part-time minimum wage jobs because neither company wants to make her full-time to avoid paying benefits and she still can't feed her family? Not good for her, or us to allow it; we need to vote at the polls. One often hears a policy criticized on the grounds that it would increase the income gap between rich and poor. As if it were an axiom that this would be bad. At a certain extreme, in either direction, it can be devastating. I don't tink I have to defend that the "no income gap" is a calamity. But at a certain point the other way and you also get devastating results. It's a fine balance. With a large disparity in income, you get lower economic mobility and society as a whole suffers tremendously. It creates huge problems that are well documented and easy to see if you simply travel. There's been a lot of work done on this [2], and the best I can put simply is that if the gap gets too big, instead of increasing motivation it decreases it, much as with an extended duration of being unemployed. You need rich people in your society not so much because in spending their money they create jobs, but because of what they have to do to get rich. Again, you're fantasizing that this is all a meritocracy. Most wealthy people were born that way. We all hear of large leaps of economic mobility based on merit, but that's unfortunately the exception. I'm not saying, "Don't let people get rich." I'm saying, "There is nothing that the incentive of $50 million at a 35% tax rate will give you that $50 million at 45% won't." And yet if that 10% is spent on education and other enablers of economic mobility, your pool of Henry Fords who can build that tractor just got bigger. [1] http://www.faireconomy.org/press_room/1997/born_on_third_base_sources_of_wealth_of_1997_forbes_400 http://www.faireconomy.org/press_room/1997/born_on_third_bas...) [2] http://www.mentalhealth.org.uk/media/news-releases/news-releases-2009/10-march-2009 http://www.mentalhealth.org.uk/media/news-releases/news-rele...