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I think we'll just agree to disagree on this. I could attempt to convince you of my point of view, but I would not be successful, just as you would not be successful attempting to convince me of your point of view. We are just worlds apart on this. I do not agree with a single thing you wrote.
In the real world, of course, Capitalism is imperfect, just as are centrally planned command-and-control economies. Governmental entities do the best they can, sometimes falling short, sometimes overreaching.
I think there is a better way of looking at this question. Over the last 80 years or so, there has been a gradual convergence on a single economic system--capitalism with significant government input as a regulator and an economic actor. Countries that were once more "purely" capitalistic (take the US, for example) have increased State influence on the economy (in the case of the US, this has probably been more by government spending than by regulation). Countries that were once more "purely" command and control, like China, have loosened the reins and allowed less fettered capitalism. There are a handful of exceptions, but I think this model has emerged as the world's choice outside of some failed states and North Korea. Where there was a chasm between the Soviet economic system and the U.S. economic system of the 1930s, there is, relatively, a sliver between the contemporary economic systems of China and the United States (and France, Great Britain, Turkey, Vietnam, Japan, etc.).
Quote:
Originally Posted by Expected Returns
It seems to me you're substituting your judgement for that of actual purchasers that some houses and consumer goods are devoid of true value because of these cognitive biases and consumer addictions to which you refer. Surely you also acknowledge that you, yourself, have your own cognitive biases. I'll certainly agree that none of us are purely rational, calculating homo economicus. We all make mistakes, of course. I think you and I might likely agree that a teenager spending his hard earned money on a $200 pair of sneakers is a bad decision, but somehow that decision is right for that teenager.
Substituting our own judgment for that of others is a very slippery slope. It requires interpersonal utility comparisons, which of course cannot occur. All we can do is compare our own utility of $200 sneakers with the utility of alternate uses for that $200. We cannot do the comparison on behalf of that teenager.
Well, there are a number of studies examining particular irrationalities of the human mind, and some of those irrationalities dent the backbone of capitalist economics--that the marketplace is full of rational actors. Here is a nice overview: The Law and Economics of Irrational Behavior - Google Books
There are, of course, viewpoints suggesting that what appears to be irrationality is simply rationality that the observer does not understand.
I think there is a better way of looking at this question. Over the last 80 years or so, there has been a gradual convergence on a single economic system--capitalism with significant government input as a regulator and an economic actor. Countries that were once more "purely" capitalistic (take the US, for example) have increased State influence on the economy (in the case of the US, this has probably been more by government spending than by regulation). Countries that were once more "purely" command and control, like China, have loosened the reins and allowed less fettered capitalism. There are a handful of exceptions, but I think this model has emerged as the world's choice outside of some failed states and North Korea. Where there was a chasm between the Soviet economic system and the U.S. economic system of the 1930s, there is, relatively, a sliver between the contemporary economic systems of China and the United States (and France, Great Britain, Turkey, Vietnam, Japan, etc.).
Well, there are a number of studies examining particular irrationalities of the human mind, and some of those irrationalities dent the backbone of capitalist economics--that the marketplace is full of rational actors. Here is a nice overview: The Law and Economics of Irrational Behavior - Google Books
There are, of course, viewpoints suggesting that what appears to be irrationality is simply rationality that the observer does not understand.
At some level, you say potayto, I say potahto.
I would say most irrationality is rationality that the observer doesn't understand. The thing is different people have drastically different viewpoints, faiths, lifestyles, cultures, etc. there isn't one rationality.
Similarly what people call inconsistent is often consistent.
Humans do have irrational behavior sometimes, especially when they are pushed to the extreme.
I would say most irrationality is rationality that the observer doesn't understand. The thing is different people have drastically different viewpoints, faiths, lifestyles, cultures, etc. there isn't one rationality.
Similarly what people call inconsistent is often consistent.
Humans do have irrational behavior sometimes, especially when they are pushed to the extreme.
The irrationality I mean to point out is less about conscious beliefs, lifestyle, viewpoint, or even culture. It is more like the way that our brain is hardwired in ways that are simply irrational.
For example, if you repeat a word over and over in rapid succession, the semantic meaning of the word is lost to your brain.
Getting a song "stuck in your head" is actually not a whole song, but a segment of it. Your brain follows the segment, but gets stuck in a particular loop and cannot move on to the next segment.
Confirmation bias is a well-known irrationality in which humans ignore evidence and people that contradict our views.
Groupthink is another example, where a group of people will tend to agree with each other, not because they have thought of a rational solution, but because of their relationship as a group (aka ingroup bias).
Positive expectation bias is a phenomenon in which humans think that bad luck will be followed by good luck. This is connected to the irrational, but common, belief that a flipped coin having landed on heads five times in a row increases the likelihood that the coin will land on tails on the next toss.
Stockholm Syndrome is certainly a phenomenon that could be classified as an irrational response to captivity.
Behaviorists have found that we rationalize poor decisions (including poor purchases) to avoid cognitive dissonance.
There is also the phenomenon in which many people fear flying while they are completely comfortable driving, which is fundamentally irrational given the comparative safety of commercial air travel versus travel by car.
Baader-Meinhof is a phenomenon in which becoming aware of something causes one to then notice its appearance elsewhere. This is also called "frequency illusion."
The brain is biased against change, even if the status quo is observably worse.
This post could be ten times as long describing these sorts of unsupported cognitive biases and illogic traps.
I would say most irrationality is rationality that the observer doesn't understand. The thing is different people have drastically different viewpoints, faiths, lifestyles, cultures, etc. there isn't one rationality.
Similarly what people call inconsistent is often consistent.
Humans do have irrational behavior sometimes, especially when they are pushed to the extreme.
Interesting that you mention this - just today, I was reading this myself:
Surprise, surprise. Obama is Bush 2.0. The Bush tax cuts were kept in place for most people. (Obamacare added a bunch of taxes, but those just took place this year and is a separate discussion).
Wow, I guess so long as you can buy Cheetos at Walmart you would be happy. I hardly think the trickle down economics works. It is stupid and less and less people can afford to buy goods. Hope they don't shut off your cable TV someday. What would you do with your bowl of Cheetos if you can't have some TV on?
Your ratio picture is little more than subtle anti-Americanism.
My uncle owns a small business and employs six guys, so he's technically a CEO. Two of his guys are journeymen and make mid $30ks. The two mid level techs make $45k. The senior techs make between $55-$60k. My uncle usually makes $250k, minimum, and has years up to a half million. The employees get a bonus according to how profitable the company was that you.
Does my uncle get paid more? Certainly, but it's nowhere near the 475:1 ratio. He also deserves to be paid more, as he has to prospect new business, comply with government regulations, do back-end administrative work, etc. He also has a lot more responsibility than any one of his guys individually. If one of his guys does a bad job, they may be out of work, and have hardship on their own families, but if my uncle does a poor job of running the business, not only is his livelihood in jeopardy, but also those of his six guys and their families.
There are hundreds of thousands of businesses like this in the US, many of which are not nearly as profitable as my uncle's and the owner/CEO is only making a modest living.
Your ratio is only for the biggest companies, and probably for only egregious cases and outliers. Ellison and Safra Catz from Oracle make tens upon tens of millions, but if you're making a good wage at Oracle, does it even really matter what some top exec is bringing in? If I'm making $100k, I really don't care what Ellison brings in - these people are so far removed from the average person getting upset is pointless. The cases that really get people upset are companies like Wal-Mart.
Didn't the crash of 2007 and rising inequality and poverty in America prove well enough that the "dream of the 80s" is no longer alive? I hear libertarian and conservative types and even some liberals still sing the praise of deregulation and flat taxes.
We haven't had anything resembling a true free market economy in at least 100 years (if ever). So all these arguments about capitalism not working, about how we've deregulated the economy etc. are laughable.
Over the last 80 years or so, there has been a gradual convergence on a single economic system--capitalism with significant government input as a regulator and an economic actor.
Economics was classical economics. Then 100 year ago neo-classical economics came about for vested interest reasons. This conflated LAND into CAPITAL. Since then the system has failed twice on a world-wide scale and frequent minor boom and busts.
The lenders are taking no risk. That's the problem. They ran to da gubernment.
They ran to the Govt because they know that 'debtors' are considered 'precious cargo'. If colluding debtors were held accountable, the dubiously opportunistic creditors would not be able to run to the Govt for help—IOW, it neutralizes moral hazard!
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Originally Posted by gwynedd1
One may be enticed in doing so, but this becomes more suspect with easy credit fooling people into believing housing was sound, only to have the creditors bailed out.
I think it's about time for the people to STOP BEING FOOLED by easy credit. Especially that it appears that debtors' are not being fooled; they're gaming via moral hazard.
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Originally Posted by gwynedd1
At the very least if we allowed the chumps to go bust back in 2008, then all the dead financial weight would be gone.
Absolutely! Just do forget that the 'precious cargo' must also go bust.
Quote:
Originally Posted by gwynedd1
They also should have tax shifted onto oil while shifting taxes off labor and capital.
Yep. I've been wishing for a ~.50 cent national gas tax for many years now.
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