Goldman Sachs May Be Forced to Fundamentally Question How Capitalism Is Working(bloomberg.com)
bloomberg.com
Goldman Sachs May Be Forced to Fundamentally Question How Capitalism Is Working
http://www.bloomberg.com/news/articles/2016-02-03/goldman-sachs-says-it-may-be-forced-to-fundamentally-question-how-capitalism-is-working
12 comments
A lot of Americans are obsessed with "capitalism" and "the free market", but don't even understand the basic assumptions that must be true for free markets to work like perfect information, interchangeable goods and services, and a lack of market power for any single entity. Like, the basic—the most basic—assumptions.
Capitalism has become synonymous in the collective mind with "don't make laws, laws are government interference and socialism." Just look at the way people on the right talk about removing Obamacare and letting the "free market" do its thing. But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place. The same is true in banking, albeit some might argue to a lesser extent.
You've got oligopoly or monopoly firms in many industries that are "too big to fail", have near total market power, and make many decisions (some around pricing) behind closed doors or with little transparency (let alone anything close to complete information), and then expect markets to run efficiently? You can't bake the perfect cake if you don't have any of the ingredients in the first place.
Capitalism has become synonymous in the collective mind with "don't make laws, laws are government interference and socialism." Just look at the way people on the right talk about removing Obamacare and letting the "free market" do its thing. But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place. The same is true in banking, albeit some might argue to a lesser extent.
You've got oligopoly or monopoly firms in many industries that are "too big to fail", have near total market power, and make many decisions (some around pricing) behind closed doors or with little transparency (let alone anything close to complete information), and then expect markets to run efficiently? You can't bake the perfect cake if you don't have any of the ingredients in the first place.
A little rant that I have been saving up:
"Capitalism" is not the same thing as "free market" is not the same thing as "laissez faire."
A "free market" means lots of buyers and sellers participating on even playing field. Even Adam Smith acknowledged that government regulation is necessary in order to ensure that the market remains free. When people argue for the removal of laws and regulation, they are actually arguing for laissez faire economics which, in a nutshell, means for the government to stay out of it. Left to their own devices, however, capitalists will naturally (and rationally) try to tilt the playing field in their favour. Capitalism, for what it is worth, is people investing their free capital into economic enterprises in order to glean a return.
So, I am, actually, a strong proponent of capitalism operating under free markets. I am against capitalism, however, under a completely laissez faire economy.
"Capitalism" is not the same thing as "free market" is not the same thing as "laissez faire."
A "free market" means lots of buyers and sellers participating on even playing field. Even Adam Smith acknowledged that government regulation is necessary in order to ensure that the market remains free. When people argue for the removal of laws and regulation, they are actually arguing for laissez faire economics which, in a nutshell, means for the government to stay out of it. Left to their own devices, however, capitalists will naturally (and rationally) try to tilt the playing field in their favour. Capitalism, for what it is worth, is people investing their free capital into economic enterprises in order to glean a return.
So, I am, actually, a strong proponent of capitalism operating under free markets. I am against capitalism, however, under a completely laissez faire economy.
A "free market" means lots of buyers and sellers participating on even playing field.
I've never seen this definition used before. Even playing field is a grossly inappropriate and unattainable normative ideal. Even playing field means homogenization, which is completely antithetical to a market as a vehicle for coordinating entrepreneurial plans, necessarily implying imperfections and heterogeneity.
Even Adam Smith acknowledged that government regulation is necessary in order to ensure that the market remains free.
Regulation is certainly necessary, at least in the sense of property rights enforcement and dispute adjudication. Government regulation it need not be, and it need not be anything more than a minimal legal institutional framework.
Left to their own devices, however, capitalists will naturally (and rationally) try to tilt the playing field in their favour.
How did you reach this conclusion? It makes no sense whatsoever. If anything, we would expect this behavior to occur only where there are large amounts of government regulation. That is to say, when there is more opportunity to exploit the political method over the economic method. Otherwise, how will they tilt the playing field? By forming cartels? Those are brittle. Any attempt at trying to use market power leaves you vulnerable to undercutting in some way in the absence of special privileges.
I am against capitalism, however, under a completely laissez faire economy.
Your taxonomy is worthless.
I've never seen this definition used before. Even playing field is a grossly inappropriate and unattainable normative ideal. Even playing field means homogenization, which is completely antithetical to a market as a vehicle for coordinating entrepreneurial plans, necessarily implying imperfections and heterogeneity.
Even Adam Smith acknowledged that government regulation is necessary in order to ensure that the market remains free.
Regulation is certainly necessary, at least in the sense of property rights enforcement and dispute adjudication. Government regulation it need not be, and it need not be anything more than a minimal legal institutional framework.
Left to their own devices, however, capitalists will naturally (and rationally) try to tilt the playing field in their favour.
How did you reach this conclusion? It makes no sense whatsoever. If anything, we would expect this behavior to occur only where there are large amounts of government regulation. That is to say, when there is more opportunity to exploit the political method over the economic method. Otherwise, how will they tilt the playing field? By forming cartels? Those are brittle. Any attempt at trying to use market power leaves you vulnerable to undercutting in some way in the absence of special privileges.
I am against capitalism, however, under a completely laissez faire economy.
Your taxonomy is worthless.
> Even playing field means homogenization, which is completely antithetical to a market as a vehicle for coordinating entrepreneurial plans, necessarily implying imperfections and heterogeneity.
There is a difference between random variations and the extreme differences in capital and power we have right now.
The benefit that a free market is expected to give to society is, as far as I know, that it will cause a "survival of the fittest" scenario in which the best solutions for a problem gain widespread acceptance and bad solutions die out. But that of course only works if there is actual competition - which in many fields isn't the case in our current situation.
> Otherwise, how will they tilt the playing field? For example by becoming powerful enough that you can control certain market segments instead of just being a player. This power can be reached by becoming a de-facto monopoly in another related segment. One example of this are smartphones and the "app economy". Apple and Google provide OSes of the vast majority of smartphones on the planet - this gives then the power to create their own controlled markets for apps. No government interference necessary, yet if Google decides tomorrow to block your app to protect their own competing product, you couldn't do anything about it.
Similar thinks can happen with large-scale accumulation of property. You agree tgat property enforcement is necessary - but if one entity owns enough property, then even the simple enforcement can be a tool to stifle competition. (See the problems with patents and intellectual property)
There is a difference between random variations and the extreme differences in capital and power we have right now.
The benefit that a free market is expected to give to society is, as far as I know, that it will cause a "survival of the fittest" scenario in which the best solutions for a problem gain widespread acceptance and bad solutions die out. But that of course only works if there is actual competition - which in many fields isn't the case in our current situation.
> Otherwise, how will they tilt the playing field? For example by becoming powerful enough that you can control certain market segments instead of just being a player. This power can be reached by becoming a de-facto monopoly in another related segment. One example of this are smartphones and the "app economy". Apple and Google provide OSes of the vast majority of smartphones on the planet - this gives then the power to create their own controlled markets for apps. No government interference necessary, yet if Google decides tomorrow to block your app to protect their own competing product, you couldn't do anything about it.
Similar thinks can happen with large-scale accumulation of property. You agree tgat property enforcement is necessary - but if one entity owns enough property, then even the simple enforcement can be a tool to stifle competition. (See the problems with patents and intellectual property)
The benefit that a free market is expected to give to society is, as far as I know, that it will cause a "survival of the fittest" scenario in which the best solutions for a problem gain widespread acceptance and bad solutions die out.
Not at all the case. You're injecting Social Darwinist assumptions. The benefit of a free market is in having individuals coordinate their plans most efficiently based on their subjective preferences and valuations, with prices as an epistemic vehicle for conveying notions of scarcity, opportunity for arbitrage or other criteria. It is thus a continuous and dynamic disequilibrium process that one cannot anticipate through outside observation, as optimal outcomes are by definition always being revised, renewed and discovered endogenously.
But that of course only works if there is actual competition - which in many fields isn't the case in our current situation.
Competitiveness is one aspect, but a much more important one is constestability. Free markets are by definition ones allowing for the greatest degree of it. And I absolutely agree that our current situation is far from optimal. We are not discussing our current situation, however. Monopolies are a multifaceted subject, many of them based on rents obtained from IP law and hardly "natural".
Similar thinks can happen with large-scale accumulation of property.
There are things called diseconomies of scale that put upper bounds on the profitability and viability of being too big. Economic calculation issues set in, principal-agent inefficiencies, coordination problems and so forth. It is only through the subsidy of an exogenous body such as government that one can hobble along in inefficacy for exorbitantly long times.
Not at all the case. You're injecting Social Darwinist assumptions. The benefit of a free market is in having individuals coordinate their plans most efficiently based on their subjective preferences and valuations, with prices as an epistemic vehicle for conveying notions of scarcity, opportunity for arbitrage or other criteria. It is thus a continuous and dynamic disequilibrium process that one cannot anticipate through outside observation, as optimal outcomes are by definition always being revised, renewed and discovered endogenously.
But that of course only works if there is actual competition - which in many fields isn't the case in our current situation.
Competitiveness is one aspect, but a much more important one is constestability. Free markets are by definition ones allowing for the greatest degree of it. And I absolutely agree that our current situation is far from optimal. We are not discussing our current situation, however. Monopolies are a multifaceted subject, many of them based on rents obtained from IP law and hardly "natural".
Similar thinks can happen with large-scale accumulation of property.
There are things called diseconomies of scale that put upper bounds on the profitability and viability of being too big. Economic calculation issues set in, principal-agent inefficiencies, coordination problems and so forth. It is only through the subsidy of an exogenous body such as government that one can hobble along in inefficacy for exorbitantly long times.
I've never seen this definition used before.
I don't know what to tell you. The definition (admittedly paraphrased) comes from Adam Smith. The gist is that anyone can freely participate in the market on an equal or fair basis without artificial constraint. There is sometimes a need for strong regulation to prevent larger participants from using their size to gain an unfair advantage in the market.
Government regulation it need not be . . .
Can you give me an example of effective non-governmental regulation that doesn't ultimately derive its authority from the government?
How did you reach this conclusion? . . .
I am currently reading a book about the so-called "Robber Barons" of the later half of the 19th century. If you want to see what truly unconstrained capitalism looks like, I suggest you read up on this period: fraud, price-fixing, market manipulations, extortion, bribery . . . they even resorted to armed conflict with their rivals on occasion. The fact that capitalists continue to try to exploit any advantage that they can in the face of strong regulation is precisely my point. Heck, even in my own comparatively small investments, I seek to exploit any advantage that I can. It is not rocket science; it is acting in one's own best interest. The job of regulation is to ensure (as much as is reasonably possible) that no one gains an unfair advantage.
I've talked a lot about regulation, so I want to make clear that I am not in favour of endless reams of red tape. Regulation should be as complex as it needs to be, but no more complex. What regulations there are should be strongly enforced. The current reality does not really live up to this ideal; there are many ineffective or unnecessary regulations, and there are regulations that are missing entirely. Nevertheless, I am talking about an ideal vision that we should strive toward.
I don't know what to tell you. The definition (admittedly paraphrased) comes from Adam Smith. The gist is that anyone can freely participate in the market on an equal or fair basis without artificial constraint. There is sometimes a need for strong regulation to prevent larger participants from using their size to gain an unfair advantage in the market.
Government regulation it need not be . . .
Can you give me an example of effective non-governmental regulation that doesn't ultimately derive its authority from the government?
How did you reach this conclusion? . . .
I am currently reading a book about the so-called "Robber Barons" of the later half of the 19th century. If you want to see what truly unconstrained capitalism looks like, I suggest you read up on this period: fraud, price-fixing, market manipulations, extortion, bribery . . . they even resorted to armed conflict with their rivals on occasion. The fact that capitalists continue to try to exploit any advantage that they can in the face of strong regulation is precisely my point. Heck, even in my own comparatively small investments, I seek to exploit any advantage that I can. It is not rocket science; it is acting in one's own best interest. The job of regulation is to ensure (as much as is reasonably possible) that no one gains an unfair advantage.
I've talked a lot about regulation, so I want to make clear that I am not in favour of endless reams of red tape. Regulation should be as complex as it needs to be, but no more complex. What regulations there are should be strongly enforced. The current reality does not really live up to this ideal; there are many ineffective or unnecessary regulations, and there are regulations that are missing entirely. Nevertheless, I am talking about an ideal vision that we should strive toward.
There is sometimes a need for strong regulation to prevent larger participants from using their size to gain an unfair advantage in the market.
The Coasian revolution and public choice schools have since challenged this narrative quite significantly, and have had an impact on economic discourse, though not on mainstream discussion.
The job of regulation is to ensure (as much as is reasonably possible) that no one gains an unfair advantage.
George Stigler devastated that interpretation, as well.
Nevertheless, I am talking about an ideal vision that we should strive toward.
Indeed, this is an ideal discussion. Hence I can't give you a straight example of a "non-governmental regulation that doesn't ultimately derive authority from government," though in fairness this is ambiguous. It happens that the judicial branch is governmental, but the very act of informal bargaining between property owners is endogenous, non-governmental regulation. You could also argue that private certification and standards agencies are endogenous regulators.
I am currently reading a book about the so-called "Robber Barons" of the later half of the 19th century. If you want to see what truly unconstrained capitalism looks like, I suggest you read up on this period: fraud, price-fixing, market manipulations, extortion, bribery
The so-called "robber baron" era was not one of truly unconstrained capitalism at all. The "robber baron" era had the strict mercantilist and interventionist policies of Alexander Hamilton, Friedrich List and the American School economists in full effect. Above all, it was driven by a complex interaction of tariffs (people keep forgetting how important tariffs were in United States history), land law acts and railroad subsidies, with heavy political collusion.
After you're done with that book, I suggest you read Gabriel Kolko's Railroads and Regulation, 1877-1916 to get a fuller picture. Ironically, the author was a member of the New Left.
The Coasian revolution and public choice schools have since challenged this narrative quite significantly, and have had an impact on economic discourse, though not on mainstream discussion.
The job of regulation is to ensure (as much as is reasonably possible) that no one gains an unfair advantage.
George Stigler devastated that interpretation, as well.
Nevertheless, I am talking about an ideal vision that we should strive toward.
Indeed, this is an ideal discussion. Hence I can't give you a straight example of a "non-governmental regulation that doesn't ultimately derive authority from government," though in fairness this is ambiguous. It happens that the judicial branch is governmental, but the very act of informal bargaining between property owners is endogenous, non-governmental regulation. You could also argue that private certification and standards agencies are endogenous regulators.
I am currently reading a book about the so-called "Robber Barons" of the later half of the 19th century. If you want to see what truly unconstrained capitalism looks like, I suggest you read up on this period: fraud, price-fixing, market manipulations, extortion, bribery
The so-called "robber baron" era was not one of truly unconstrained capitalism at all. The "robber baron" era had the strict mercantilist and interventionist policies of Alexander Hamilton, Friedrich List and the American School economists in full effect. Above all, it was driven by a complex interaction of tariffs (people keep forgetting how important tariffs were in United States history), land law acts and railroad subsidies, with heavy political collusion.
After you're done with that book, I suggest you read Gabriel Kolko's Railroads and Regulation, 1877-1916 to get a fuller picture. Ironically, the author was a member of the New Left.
>The Coasian revolution and public choice schools have since challenged this narrative quite significantly
And yet, Microsoft in the 90s and early 00s still happened. And there doesn't seem to be anything in what you've said that would demonstrate that we no longer need anti-trust laws (which are one form of regulation).
>The so-called "robber baron" era was not one of truly unconstrained capitalism at all. The "robber baron" era had the strict mercantilist and interventionist policies of Alexander Hamilton, Friedrich List and the American School economists in full effect.
A "No True Scotsman" response at its finest. But it doesn't really respond to the point: removing regulation without putting some other constraints into the market is basically asking for a return to the 19th century market. And no one has come up with something that really works any better than regulation for many of these areas of the market.
>I can't give you a straight example of a "non-governmental regulation that doesn't ultimately derive authority from government," though in fairness this is ambiguous.
But, again, the entire point is that lassez faire supporters can't even give an "ideal" replacement for the government's role in regulation, consumer protection, anti-trust, or even dispute settlements that doesn't basically do exactly the same thing as government. Only being less transparent, and more costly to new players in a market (e.g. "binding arbitration").
And yet, Microsoft in the 90s and early 00s still happened. And there doesn't seem to be anything in what you've said that would demonstrate that we no longer need anti-trust laws (which are one form of regulation).
>The so-called "robber baron" era was not one of truly unconstrained capitalism at all. The "robber baron" era had the strict mercantilist and interventionist policies of Alexander Hamilton, Friedrich List and the American School economists in full effect.
A "No True Scotsman" response at its finest. But it doesn't really respond to the point: removing regulation without putting some other constraints into the market is basically asking for a return to the 19th century market. And no one has come up with something that really works any better than regulation for many of these areas of the market.
>I can't give you a straight example of a "non-governmental regulation that doesn't ultimately derive authority from government," though in fairness this is ambiguous.
But, again, the entire point is that lassez faire supporters can't even give an "ideal" replacement for the government's role in regulation, consumer protection, anti-trust, or even dispute settlements that doesn't basically do exactly the same thing as government. Only being less transparent, and more costly to new players in a market (e.g. "binding arbitration").
I never voiced a categorical opposition to all forms of regulation. I just have a general preference for endogenously emerging one over exogenous statute. Remember we are discussing theory, not the actually existing mixed economy. Of course a Microsoft can and has happened under the latter, though legal action also took place.
Nor was that a "No True Scotsman" reply. It's straightforward history. The Hamiltonian program prevailed over Jeffersonian democracy.
Granted, you're failing to draw a distinction between the state and government in the abstract sense of having governance. I would dispute alternate forms of governance being less transparent. If anything, the principle of subsidiarity by which issues of governance should be handled at the most localized and decentralized level would ensure greater transparency and a more effective participation.
"Consumer protection" has been handled by trade associations, private standards bodies and other institutions for centuries. Modern states have largely not devised any particularly new or innovative approaches, merely shifted the ownership thereof.
Nor was that a "No True Scotsman" reply. It's straightforward history. The Hamiltonian program prevailed over Jeffersonian democracy.
Granted, you're failing to draw a distinction between the state and government in the abstract sense of having governance. I would dispute alternate forms of governance being less transparent. If anything, the principle of subsidiarity by which issues of governance should be handled at the most localized and decentralized level would ensure greater transparency and a more effective participation.
"Consumer protection" has been handled by trade associations, private standards bodies and other institutions for centuries. Modern states have largely not devised any particularly new or innovative approaches, merely shifted the ownership thereof.
Personally I think the major problem with capitalism is it ignores sustainability and assumes there is always an unlimited potential for growth when in reality we live on a planet of finite resources. Growth isn't a bad thing but unsustainable growth is. When the system is geared around maximizing profits it leads to a drive to dig up more, consume more and emit more at the lowest cost and damn the consequences.
Thus you get things like Sweatshops, Ok Tedi disaster etc.
Without regulation there's a good chance we'd still not have catalytic converters, we'd still be living with CFCs, Asbestos and DDT. I'm sure you can think of a dozen other examples the market has repeatedly shown it is not capable of regulating itself.
Thus you get things like Sweatshops, Ok Tedi disaster etc.
Without regulation there's a good chance we'd still not have catalytic converters, we'd still be living with CFCs, Asbestos and DDT. I'm sure you can think of a dozen other examples the market has repeatedly shown it is not capable of regulating itself.
when in reality we live on a planet of finite resources
There's an awful lot of matter and energy in our lightcone, there's no fundamental reason we can't keep growing for millions of years.
There's an awful lot of matter and energy in our lightcone, there's no fundamental reason we can't keep growing for millions of years.
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>But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place.
Please expound on the history of this (the "NEVER" part)and also enumerate on what the "assumptions necessary" are.
>Just look at the way people on the right talk about removing Obamacare and letting the "free market" do its thing.
Obviously the removal of Obamacare would be insufficient to produce a free market in health care and it would take a lot more repealing of laws (many at the state level) before a free market could "do its thing".
>Capitalism has become synonymous in the collective mind with "don't make laws, laws are government interference and socialism."
I'm not so sure there is any majority which claims this. I find much more common the idea that most of society's problems are caused by capitalism, caused by a "market failure", or that free enterprise is insufficient to resolve said problem and the only solution is government action.
Please expound on the history of this (the "NEVER" part)and also enumerate on what the "assumptions necessary" are.
>Just look at the way people on the right talk about removing Obamacare and letting the "free market" do its thing.
Obviously the removal of Obamacare would be insufficient to produce a free market in health care and it would take a lot more repealing of laws (many at the state level) before a free market could "do its thing".
>Capitalism has become synonymous in the collective mind with "don't make laws, laws are government interference and socialism."
I'm not so sure there is any majority which claims this. I find much more common the idea that most of society's problems are caused by capitalism, caused by a "market failure", or that free enterprise is insufficient to resolve said problem and the only solution is government action.
With the exception of Kaiser and a few other smaller providers, pricing in healthcare is completely opaque. Consumers can't make informed decisions because they essentially have no information. In most cases if you call a provider and ask what the price of something is they can't tell you. It's a myriad of "what insurance you do have" and "it depends".
I would suspect that was not the case 50 years ago. There are plenty of "medical tourist" destinations where you can go to get a very complicated medical procedure done and they will tell you exactly how much it will cost before hand.
From a U.S. physician's perspective, knowing what insurance you have is obviously going to be a prerequisite to estimating the cost (unless its one of the rare doctors who accepts no insurance). Different insurances cover different things, different providers, different procedures, different prescriptions, then there's the issue of deductibles, contracted costs, etc. It's a complicated mess, and while I don't know enough about the laws affecting health insurance companies and doctors, I would suspect there are regulations which exasperate the problem. Clearly Obamacare (mandating everyone have insurance) is not going to fix the problem.
From a U.S. physician's perspective, knowing what insurance you have is obviously going to be a prerequisite to estimating the cost (unless its one of the rare doctors who accepts no insurance). Different insurances cover different things, different providers, different procedures, different prescriptions, then there's the issue of deductibles, contracted costs, etc. It's a complicated mess, and while I don't know enough about the laws affecting health insurance companies and doctors, I would suspect there are regulations which exasperate the problem. Clearly Obamacare (mandating everyone have insurance) is not going to fix the problem.
Perfect information is not required for a free market. Market efficiency is related to information availability though. That is, perfect information and zero cost transactions are some of the requirements for a maximally efficient market, but a market can be "good" or "good enough" to outperform other systems without perfect information (which is impossible), or zero cost transactions.
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True
I think that Healthcare would solve 95% of its problems with a truly Free Market, but to have that you need a very strict law enforcing fair and transparent rules to all (like mandatory transparent pricing), elimination of bottlenecks (like MD graduation and facilitate hiring from overseas), liability and regulation limitation and other things.
I think that Healthcare would solve 95% of its problems with a truly Free Market, but to have that you need a very strict law enforcing fair and transparent rules to all (like mandatory transparent pricing), elimination of bottlenecks (like MD graduation and facilitate hiring from overseas), liability and regulation limitation and other things.
You will never get there. It's just unrealistic. There are products that are too specialized and have no competition. There are long term contracts that prevent all sorts of efficiencies. There are parts of the supply chain that operate on timelines measured in decades.
Everywhere else works better
> There are long term contracts that prevent all sorts of efficiencies.
Yeah, then those who signed those contracts will be less efficient, and maybe go bankrupt. That happens in several cases, not limited to healthcare
> There are long term contracts that prevent all sorts of efficiencies.
Yeah, then those who signed those contracts will be less efficient, and maybe go bankrupt. That happens in several cases, not limited to healthcare
You really don't want necessary healthcare companies going bankrupt on a regular basis.
Perhaps healthcare could be efficient on a long enough time scale. When we all live to 1,000 years old maybe it won't matter so much.
Perhaps healthcare could be efficient on a long enough time scale. When we all live to 1,000 years old maybe it won't matter so much.
"Perfect information" is an assumption used in static Paretian general equilibrium models, but it does not reflect any existing dynamic reality, and it is not at all a necessary prerequisite for free markets. Market power is vulnerable. "Interchangeable goods and services" - I honestly have no idea how you could come up with such a delusional prerequisite.
You seem to have confused neoclassical models for an attainable ideal compatible with empirical reality. But our world is one of disequilibrium, dispersed knowledge, plan coordination - ones most apt for a market and a free one at that. You are completely out of vogue.
You seem to have confused neoclassical models for an attainable ideal compatible with empirical reality. But our world is one of disequilibrium, dispersed knowledge, plan coordination - ones most apt for a market and a free one at that. You are completely out of vogue.
> But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place.
Has it occurred to you that regulation might have something to do with that?
Has it occurred to you that regulation might have something to do with that?
But what's the alternative? Even physicians haven't consistently self-regulated -- and if you don't have regulation, you get incompetent amateurs and snake-oil salesmen (like the contemporary sellers of homeopathic cures) passing themselves off as doctors and defrauding the sick.
> This isn't a criticism of capitalism.
> This is an acknowledgment our current "capitalist" financial system isn't able to produce "capitalism" itself.
That's a No True Scotsman argument intended to shield capitalism from any criticism. "The system isn't working? Then it must not be real capitalism."
> This is an acknowledgment our current "capitalist" financial system isn't able to produce "capitalism" itself.
That's a No True Scotsman argument intended to shield capitalism from any criticism. "The system isn't working? Then it must not be real capitalism."
No.
That's about recognizing there would be no mean reversion, a great indicative of the existence of crony monopolies and, therefore, lack of capitalism.
That's about recognizing there would be no mean reversion, a great indicative of the existence of crony monopolies and, therefore, lack of capitalism.
How can capitalism result in anything other than crony monopolies?
In the end, it boils down to whether firms in a given industry have increasing or decreasing returns to scale. For example, there are no hairdresser empires as this tends to be a profession that can already be operated efficiently at a small scale. Other sectors, especially those with high fixed costs, tend to produce monopolies.
Yes, but it's also a huge indictment of "free market proponents" who tend to oppose any regulation, as it implies the need for muscular regulation of the market.
In American political terms, calling it an indictment of 'capitalism' is a little imprecise but not really wrong.
In American political terms, calling it an indictment of 'capitalism' is a little imprecise but not really wrong.
It's a bit hyperbolic to call it a huge indictment. Or in fact, an indictment at all. It's more like a mildly divergent opinion.
It could be viewed as No True Scotsman, but in this case I don't think it is.
Goldman talks about "reversion to the mean", which is a generally-accepted thing in the financial world. If you've got above-average returns, people tend to take note, and try to get some of those returns, and so there's more competition for those returns, and that goes on until there aren't excessive returns any longer. This is a generally-accepted thing because it's been observed a bunch of times. It's the normal functioning of a market.
So if Goldman is questioning whether this is going to happen this time, it's a recognition that the markets aren't functioning the way they normally do - which I think is financedfuture's point. (He/she is going a step further, and [EDIT]implying that either the financial firms or the government broke the system that had been working, which, if the system historically worked and now doesn't, seems like a reasonable guess.)
Goldman talks about "reversion to the mean", which is a generally-accepted thing in the financial world. If you've got above-average returns, people tend to take note, and try to get some of those returns, and so there's more competition for those returns, and that goes on until there aren't excessive returns any longer. This is a generally-accepted thing because it's been observed a bunch of times. It's the normal functioning of a market.
So if Goldman is questioning whether this is going to happen this time, it's a recognition that the markets aren't functioning the way they normally do - which I think is financedfuture's point. (He/she is going a step further, and [EDIT]implying that either the financial firms or the government broke the system that had been working, which, if the system historically worked and now doesn't, seems like a reasonable guess.)
Because the government keeps either bailing it out or protecting some actors when it should be punishing them to a much bigger degree.
Some may say, wait a minute, but if the government does that, doesn't it mean it interferes with the "free market" and whatnot? I think to have a real free market, you need a fair market. If some companies violate the law to get ahead, they should be punished. Or at the very least be allowed to fail when they reach their own individual "bust" after some high growth from risking with people's deposits.
The point is they can't have their cake and eat it, too.
Some may say, wait a minute, but if the government does that, doesn't it mean it interferes with the "free market" and whatnot? I think to have a real free market, you need a fair market. If some companies violate the law to get ahead, they should be punished. Or at the very least be allowed to fail when they reach their own individual "bust" after some high growth from risking with people's deposits.
The point is they can't have their cake and eat it, too.
The government should not be intervening in the market (through bailouts or subsidies) on behalf of an anointed market player (or group of players).
It should set the same rules for everybody and enforce them. If someone is not playing by the rules, they should be punished.
While an ideal fair/"free" market can probably never be reached, the US has seen better than the abomination we have now.
It should set the same rules for everybody and enforce them. If someone is not playing by the rules, they should be punished.
While an ideal fair/"free" market can probably never be reached, the US has seen better than the abomination we have now.
Rethink capitalism - aka rebalance capitalism and socialism, two sides of the same coin.
The government plays a regulatory, distributive role in society, allowing profits to accrue to capitalists but setting taxes and running social programs at the proper level to ensure that society as a whole functions smoothly, and that there are opportunities for everyone to improve their situation.
Most of the economic world is in agreement that financial deregulation was a huge contributing factor in the crash of 2007-08. The repeal of Glass-Steagall allowed banks to take on too much risk with too little supervision.
This would have been fine if the banks had been the only ones punished when their bets went bad - but they had also been allowed to accrue so much power (through consolidation/M&A) that it was impossible to let them face the consequences of their own bad decisions and fail. So they had to be underwritten with public money in the form of QE.
A functional society requires healthy levels of both capitalism and socialism to survive. But the most important thing in my opinion, is that those who intentionally commit fraud or do not act in the fiduciary interest of their stakeholders are adequately punished. This last part is of course the rub - how can you tell if the leaders of business and finance were intentionally setting up their dependents for a crash? What is the adequate punishment?
The government plays a regulatory, distributive role in society, allowing profits to accrue to capitalists but setting taxes and running social programs at the proper level to ensure that society as a whole functions smoothly, and that there are opportunities for everyone to improve their situation.
Most of the economic world is in agreement that financial deregulation was a huge contributing factor in the crash of 2007-08. The repeal of Glass-Steagall allowed banks to take on too much risk with too little supervision.
This would have been fine if the banks had been the only ones punished when their bets went bad - but they had also been allowed to accrue so much power (through consolidation/M&A) that it was impossible to let them face the consequences of their own bad decisions and fail. So they had to be underwritten with public money in the form of QE.
A functional society requires healthy levels of both capitalism and socialism to survive. But the most important thing in my opinion, is that those who intentionally commit fraud or do not act in the fiduciary interest of their stakeholders are adequately punished. This last part is of course the rub - how can you tell if the leaders of business and finance were intentionally setting up their dependents for a crash? What is the adequate punishment?
> The government plays a regulatory, distributive role in society
"We shall see the entire people transformed into petitioners. Landed property, agriculture, industry, commerce, shipping, industrial companies, all will bestir themselves to claim favors from the State... Everyone will have good reasons to prove that legal fraternity should be interpreted in this sense: "Let me have the benefits, and let others pay the costs." Everyone's effort will be directed toward snatching a scrap of fraternal privilege from the legislature. The suffering classes, although having the greatest claim, will not always have the greatest success."
Perhaps Bastiat was overoptimistic. The suffering classes will almost never have the greatest success; as over time the path to becoming wealthy becomes more and more dependent on the ability to extract benefits that the government doles out with increasingly byzantine rules and "arbitrary (i.e. cronyist)" process (think SBIRs).
Goldman Sachs is the least worthy company to have to "rethink capitalism" - it itself is such a cronyist organization that in many circles it's nicknamed "government sachs". If Goldman Sachs is only now saying, "there are broader questions to be asked about the efficacy of capitalism" - that's stunningly oblivious about its own actions. If anything Goldman Sachs should be asking itself about the efficacy of government in doing anything but redistributing wealth upwards.
"We shall see the entire people transformed into petitioners. Landed property, agriculture, industry, commerce, shipping, industrial companies, all will bestir themselves to claim favors from the State... Everyone will have good reasons to prove that legal fraternity should be interpreted in this sense: "Let me have the benefits, and let others pay the costs." Everyone's effort will be directed toward snatching a scrap of fraternal privilege from the legislature. The suffering classes, although having the greatest claim, will not always have the greatest success."
Perhaps Bastiat was overoptimistic. The suffering classes will almost never have the greatest success; as over time the path to becoming wealthy becomes more and more dependent on the ability to extract benefits that the government doles out with increasingly byzantine rules and "arbitrary (i.e. cronyist)" process (think SBIRs).
Goldman Sachs is the least worthy company to have to "rethink capitalism" - it itself is such a cronyist organization that in many circles it's nicknamed "government sachs". If Goldman Sachs is only now saying, "there are broader questions to be asked about the efficacy of capitalism" - that's stunningly oblivious about its own actions. If anything Goldman Sachs should be asking itself about the efficacy of government in doing anything but redistributing wealth upwards.
In case you haven't noticed, this has been how virtually all first-world states have operated for decades. This social democratic ideal has not worked out, but has led to a dysfunctional corporate statism where mere "deregulation" (which is a misnomer, as most cases of deregulation have really been regulatory adjustments in an overall baroque framework that unsurprisingly lead to new pathological regulatory states - just because you cut some edges off the graph doesn't mean the nodes are going to stand still) can lead to catastrophe. This is an example of the state being entrusted to ensure smooth regulation, and failing miserably at their task.
In fact, many banking panics and examples of financial fragility have originated from pathological financial regulations guided by desires of the state to subvert various public finance constraints. Authors like George Selgin, Kevin Dowd and Lawrence H. White have written on this subject.
In fact, many banking panics and examples of financial fragility have originated from pathological financial regulations guided by desires of the state to subvert various public finance constraints. Authors like George Selgin, Kevin Dowd and Lawrence H. White have written on this subject.
I'm not sure what you're advocating for - pure capitalism with no government oversight and regulation?
I'm advocating for actually getting acquainted with economic literature and not repeating moronic talking points about "redistributive and regulatory role of governments" that are filled with theoretical and empirical problems, and in any event are not a radical new idea but how it has always been to begin with. Whether it was anti-vagrancy and poor laws or the modern welfare state. Whether it was mercantilism or the state-guided capitalism of today.
I understand your frustration, but you are not going to win any support or convince anyone to read somewhat obscure economic literature by being caustic and attacking old ideas simply for being old.
How would you structure society and how would this work in a more efficient manner than the government that we have now? If you a) define the problems and b) give me some tangible examples of how you/these authors think we should fix these problems I'm more than happy to read and think about them.
How would you structure society and how would this work in a more efficient manner than the government that we have now? If you a) define the problems and b) give me some tangible examples of how you/these authors think we should fix these problems I'm more than happy to read and think about them.
Firstly, most common standards for gauging market failure and inefficiency are based on static, institution-less Paretian general equilibrium and/or social choice models that require interpersonal utility comparisons, among other things. The public choice and Virginia school of political economy have critiqued those. More broadly, the subject of dynamic market process has been explored by Roy Cordato, Gerald P O'Driscoll and Mario Rizzo (The Economics of Time and Ignorance), Israel Kirzner and other later Austrian School authors.
I already listed you three authors about banking and finance. More broadly, we already live in the system that you advocate, and it does not work.
I already listed you three authors about banking and finance. More broadly, we already live in the system that you advocate, and it does not work.
> More broadly, we already live in the system that you advocate, and it does not work.
You still haven't made any specific argument as to why the system of balancing capitalism and socialism does not work, and could not continue to work without some rebalancing of the scales. Briefly, what is the alternative?
You still haven't made any specific argument as to why the system of balancing capitalism and socialism does not work, and could not continue to work without some rebalancing of the scales. Briefly, what is the alternative?
What we think of as 'capitalism', in many ways is more akin to mercantilism or oligarchy. Corruption is basically codified as 'lobbying', and governments enact all sorts of stupid laws to the benefit of large, incumbent corporations, preventing the free market from actually functioning.
And of course, these unnatural barriers to competition allow inefficiencies, concentration of wealth, and so on.
The 'free market' is somewhat of a myth. The west has never truly had 'free markets', in the past monopolies have been bought, wealthy merchants, nobility and corporations have patronized governments and monarchs, and tariffs and subsidies have been ever-present.
The current arguments for free markets have to do with price discovery, personal freedom and 'fairness', however we need to realize that these sacred cows are myths, and that if we want to build a better society, it may be time to rethink exactly how we distribute resources.
And of course, these unnatural barriers to competition allow inefficiencies, concentration of wealth, and so on.
The 'free market' is somewhat of a myth. The west has never truly had 'free markets', in the past monopolies have been bought, wealthy merchants, nobility and corporations have patronized governments and monarchs, and tariffs and subsidies have been ever-present.
The current arguments for free markets have to do with price discovery, personal freedom and 'fairness', however we need to realize that these sacred cows are myths, and that if we want to build a better society, it may be time to rethink exactly how we distribute resources.
The reason for this is barriers to entry to be a big corporation are getting bigger. (This is the only fundamental truth that the author fails to mention!)
However, the barriers to entry to be an entrepreneur are far far lower. Corporations still compete with each other on innovation but now more than ever this is through buying small and medium sized companies said entrepreneurs have created :)
So, this is neither good nor bad, just a shift in where the competitive opportunities are. Hint, it's getting easier for the little guys to compete.
However, the barriers to entry to be an entrepreneur are far far lower. Corporations still compete with each other on innovation but now more than ever this is through buying small and medium sized companies said entrepreneurs have created :)
So, this is neither good nor bad, just a shift in where the competitive opportunities are. Hint, it's getting easier for the little guys to compete.
No.
Little guys compete with each other to start a niche SaaS app for passive income.
Only CEOs of huge corporations are able to build electric cars and smartphones or process financial transactions.
Little guys compete with each other to start a niche SaaS app for passive income.
Only CEOs of huge corporations are able to build electric cars and smartphones or process financial transactions.
>Only CEOs of huge corporations are able to ... process financial transactions.
Is that true? Isn't Stripe a counterexample to this?
Is that true? Isn't Stripe a counterexample to this?
> So, this is neither good nor bad, just a shift in where the competitive opportunities are.
Many see this shift itself as a bad thing. Instead of having career options in stable companies, most people (who necessarily can't all be founders or early employees in the places you allege are still sources of entrepreneurship) are forced to accept unsatisfactory compensation, benefits, and employment stability -- in return for foosball tables and dog-friendly offices.
I interpret the comments about barrier to entry in exactly this way. If it's easier to "enter" low-status entrepreneurship (e.g. start-ups), but this easiness is offset by a disproportional lessening of the potential upside (especially the stability and security upsides), then it could still be a net loss overall.
It is a means of restructuring the process by which the deployment of capital is used to extract productivity -- a restructuring that transforms the process into even more of a transfer of wealth from poor to rich.
Many see this shift itself as a bad thing. Instead of having career options in stable companies, most people (who necessarily can't all be founders or early employees in the places you allege are still sources of entrepreneurship) are forced to accept unsatisfactory compensation, benefits, and employment stability -- in return for foosball tables and dog-friendly offices.
I interpret the comments about barrier to entry in exactly this way. If it's easier to "enter" low-status entrepreneurship (e.g. start-ups), but this easiness is offset by a disproportional lessening of the potential upside (especially the stability and security upsides), then it could still be a net loss overall.
It is a means of restructuring the process by which the deployment of capital is used to extract productivity -- a restructuring that transforms the process into even more of a transfer of wealth from poor to rich.
Rate of entrepreneurship in the US has declined, and is overwhelmingly class, race, and sex based. It's borderline sociopathic to assert that it's getting easier for the little guys to compete.
Further, it is far riskier for the little guys to compete. Big corporations have been externalizing R&D risk to the state and now to entrepreneurs. Most startups fail and when they do, Goldman Sachs isn't picking up the tab, the state and entrepreneurs are.
I don't know about that, but it is flat-out psychopatic to claim that the rate of entrepreneurship in the US has declined when it has been increasing faster than ever in the past few years[1].
[1] http://stats.oecd.org/Index.aspx?DataSetCode=TIMELY_BDS_ISIC...
[1] http://stats.oecd.org/Index.aspx?DataSetCode=TIMELY_BDS_ISIC...
Neither of these things seem 'sociopathic' or 'psychopathic' in any way - maybe 'ignorant' or 'misinformed'?
> sociopathic ... psychopathic
I don't think either of you understand what those words mean.
I don't think either of you understand what those words mean.
Asserting that one's company hit a triple when it was born on third base is self-serving and manipulative.
You seem to be asserting that this is what most "entrepreneurship" is. Can you justify/document that assertion, or should we just take it as merely one person's opinion?
So in other words, on this subject nobody is mistaken, nobody suffers from cognitive dissonance, and all disagreement happens because those who disagree with you are manipulative liars?
Ofc entrepreneurship has gone up since 2011, silly!
Gallup has some info on long-term pre-recession trends, which blow the recent slight tick upwards out of the water.
http://www.gallup.com/businessjournal/180431/american-entrep...
Never quite followed the plethora of "Capitalism isn't working" articles. And the alternative is?? There always seems to be some political agenda involved.
there is no alternative, not a better one at least, not now. look at other possibilities - ie central planning is a major fail over longer time (I lived in one of those systems, no thank you).
IMHO what fails in all other systems is to take into account human nature, and not some ideal working guy that never actually lived. people are lazy, care more about themselves rather than company good, some are plain evil etc. very few work on themselves unless they see the carrot at the end of the stick (bonus?).
in capitalism it's cash, which can get you quite far in life, so most are chasing it (even you probably are - if your employer stopped paying you today, would you come in tomorrow?). this chase can easily ruin your life, makes people do regretful decisions but overall, it pushes mankind far beyond (and much faster) that it would achieve without this perpetual force.
I'll claim one thing, feel free to disagree - capitalism ain't often the best system for a single person, but (if all internal mechanisms work) it's probably best for the advancement of mankind. and these days, we need to advance to not destroy ourselves (for that, we already have capability)
IMHO what fails in all other systems is to take into account human nature, and not some ideal working guy that never actually lived. people are lazy, care more about themselves rather than company good, some are plain evil etc. very few work on themselves unless they see the carrot at the end of the stick (bonus?).
in capitalism it's cash, which can get you quite far in life, so most are chasing it (even you probably are - if your employer stopped paying you today, would you come in tomorrow?). this chase can easily ruin your life, makes people do regretful decisions but overall, it pushes mankind far beyond (and much faster) that it would achieve without this perpetual force.
I'll claim one thing, feel free to disagree - capitalism ain't often the best system for a single person, but (if all internal mechanisms work) it's probably best for the advancement of mankind. and these days, we need to advance to not destroy ourselves (for that, we already have capability)
I'd agree with this. (I also briefly lived in a socialist paradise myself.)
I'm not a fan of capitalism, but everything else has historically been worse. The only pre-capitalist system that may have worked well was distributism, but that was under an aristocratic rule.
I think the modern fair market issues we have in all 1st world nations isn't a feature of capitalism - it's the failure to reign in plutocratic tendencies.
Democratic nations have a tendency to ignore oligarchs as they initially grow industry and produce lots of growth. Long term though, they tend to become parasites on the budget and political vampires.
I'm not a fan of capitalism, but everything else has historically been worse. The only pre-capitalist system that may have worked well was distributism, but that was under an aristocratic rule.
I think the modern fair market issues we have in all 1st world nations isn't a feature of capitalism - it's the failure to reign in plutocratic tendencies.
Democratic nations have a tendency to ignore oligarchs as they initially grow industry and produce lots of growth. Long term though, they tend to become parasites on the budget and political vampires.
I agree that the statement is wrong. For me is something more like "the way we try to apply capitalism is not working". But as some people only accepts "capitalism" as their way of applying it, the dialogue gets confusing. "Capitalism is not working" can be translated as "the way some people defines Capitalism is not working". And I agree with that as much as the numbers indicate a growth slowdown or even recession in all major economies.
I don't think that most people advocates for abandoning capitalism, but to improve how we do things in a way that helps everyone instead of a selected few. Better public education, better health care, better work conditions is still capitalism but just of a different kind.
Indeed, anyone who uses the word should also provide their definition of it.
I don't think that's the take away of the article. It's pointing out that Goldman Sachs may be open to recognizing that there are inefficiencies in our market, and that it's not benefiting from some attributes of capitalism as a result.
Anyone who seriously claims that capitalism inherently doesn't work is typically talking about something much more specific, like cultural/social interactions with capitalism, or (again) efficiency concerns.
Anyone who seriously claims that capitalism inherently doesn't work is typically talking about something much more specific, like cultural/social interactions with capitalism, or (again) efficiency concerns.
I'm not sure why this should come to surprise anyone. The big banks have always been in favor of government intervention in the market. They don't want a free market because 1) it's very possible that parts of their business would be considered fraudulent (fractional reserve banking) in a free market and they would be liable. 2) their existence is maintained by government programs: Federal Reserve, FDIC, bailouts, etc. 3) more regulations create bigger barriers for competitors, squeezing out the small guys from the market.
1 is assuming every consumer is totally informed and can understand the things a bank is doing. IMO no laymen could understand financial structures and whatnot, even if they had all the information. I don't have data to back it up (though neither did you) but "Big banks have always been in favor of government intervention" sounds untrue.
The alternative is mixed capitalism and socialism since living in a purely capitalist or socialist state is a horrible dystopia. The alternative is adjusting the proportions of capitalism and socialism we use to create our economic system.
It's pretty meaningless to say it's a political agenda - when you're talking at national scale everything is political.
It's a Goldman Sachs analyst pointing out anomalies in global capital flow. Where are seeing an agenda?
>We are always wary of guiding for mean reversion. But, if we are wrong and high margins manage to endure for the next few years (particularly when global demand growth is below trend), there are broader questions to be asked about the efficacy of capitalism.
I find this title to be misleading. The above quote can be paraphrased as, "We think profit margins will revert to the mean. If they don't, we will be really surprised that capitalism isn't working as we think it should."
I find this title to be misleading. The above quote can be paraphrased as, "We think profit margins will revert to the mean. If they don't, we will be really surprised that capitalism isn't working as we think it should."
Here is a much more thought out analysis from a generally excellent econ blog:
http://www.philosophicaleconomics.com/2015/05/profit-margins...
http://www.philosophicaleconomics.com/2015/05/profit-margins...
No one has a clue about what's going on in this article. Nothing substantial it seems.
What I see in their chart is profit margins are generally in the 6-8% range with dips down to ~2% after economic recessions. It would seem to me that profit margins may be slightly higher than the historical average, but only slightly (though I would need a chart with a much longer x-axis to say anything with confidence).
As for the free market (I believe "capitalism" is the wrong word to use) squeezing the margins to zero, that works great in theory. However, the real world is made up of real people with imperfect information, so maintaining a slightly above zero profit margin doesn't surprise me, even when averaged across the entire economy.
As for the free market (I believe "capitalism" is the wrong word to use) squeezing the margins to zero, that works great in theory. However, the real world is made up of real people with imperfect information, so maintaining a slightly above zero profit margin doesn't surprise me, even when averaged across the entire economy.
Yes, but you're missing some context. Specifically the theory that, historically, business profits have always been limited to a set percentage of overall GDP. Everytime it tries to expand beyond a certain point, the market seems to correct either through increased competition driving that number down or labor pushing back to get workers a greater share, or government taxation/regulation (in a few rare cases) pushing this back down.
It may seem like a historically high range of a few percentage points is no big deal, but it would be very surprising for that amount to stay constant over time and (when you account for compounding effects), it actually would be a big deal if it did stay at that level.
It may seem like a historically high range of a few percentage points is no big deal, but it would be very surprising for that amount to stay constant over time and (when you account for compounding effects), it actually would be a big deal if it did stay at that level.
I don't think I'm missing anything. What I was saying was that, from their chart at least, the current level appears to be completely normal or perhaps only slightly high. I'm willing to admit that their chart could be misleading, but they failed to clearly make their point and really didn't convince me that anything unusual is going on.
This is the result of blue ocean strategy in play (whether consciously applied or by accident). When it's easier for me to create a new market and reap huge profits, than to struggle into fighting with Big Co for a share of their huge profits... guess which way I'd rather go. At the end, both I and Big Co win.
We are already living in a new time period - a new age in world history, fundamentally different from all other ages experienced by humans so far. We have entered the age of ubiquitous abundance. All economic, political, moral and philosophical frameworks revolving around the concept of scarcity are fast becoming obsolete.
We are already living in a new time period - a new age in world history, fundamentally different from all other ages experienced by humans so far. We have entered the age of ubiquitous abundance. All economic, political, moral and philosophical frameworks revolving around the concept of scarcity are fast becoming obsolete.
Scarcity is not a property of physical abundance, but of use. To say that scarcity is over would effectively mean all wants have been satisfied and the economy has reached its final state of rest, and this is ludicrous. You can have a bundle of inert goods, but as soon as they are employed to fulfill plans, they become different goods where spatial, territorial and property constraints enter into motion.
Also people have been saying this for a long time and it has yet to bear out. Galbraith was railing on about the affluent society, how corporations are somehow artificially inventing wants through advertising and the necessity of an activist state. Developed countries have had their states get larger and more activist to no avail.
Also people have been saying this for a long time and it has yet to bear out. Galbraith was railing on about the affluent society, how corporations are somehow artificially inventing wants through advertising and the necessity of an activist state. Developed countries have had their states get larger and more activist to no avail.
I don't see it. Unless you mean debt subsidized growth involving inserting "internet" or "mobile" into existing things and calling them "blue oceans". I think what Goldman Sachs is trying to say is that capitalism ( in any flavor: laissez faire or mixed economy ) might favor evolution to a small number of large entrenched winners rather than eternal competition and churn.
Neither the GS analysis, nor cursory observation of daily reality can possibly lead to any such conclusion. Wealth is increasing, globally, at an accelerating pace. The number of players creating and sharing such wealth is also increasing at an accelerating pace. These trends are not showing any signs of slowing down, much less of reversing (and might in fact be non-reversible).
As a consequence, global well-being (by any reasonable measure) is also increasing at an accelerating pace.
Note that this DOES NOT contradict the fact that various "inequality gaps" are also increasing at an accelerating pace. This is natural.
As a consequence, global well-being (by any reasonable measure) is also increasing at an accelerating pace.
Note that this DOES NOT contradict the fact that various "inequality gaps" are also increasing at an accelerating pace. This is natural.
> As a consequence, global well-being (by any reasonable measure) is also increasing at an accelerating pace.
Meanwhile, in reality:
- corruption / inability to problem-solve in most governments in any reasonable amount of time is more and more evident as transparency / software insecurity increases, and there's no obvious way to fix this
- business advantages through technology, information asymmetry, lack of competition, and very cheap labor accelerates, businesses which have a singular goal in mind with little care for negative externalities
- species diversity plummets
- climate change remains negatively positive (zika incoming everyone, I'm sure we'll figure it out in time, just don't have any babies in the meantime)
- wage slavery becomes more and more real for more and more people, in the US particularly through people taking on debt for what used to be a non-risky endeavor (higher education) but which actually turned out to be foolish once they were ready to work
Remember, the only thing that matters is that you get yours; that's the name of the game and it's only so long until the consequences of this utterly delusional approach of infinite growth in a closed system will find its way to the homes of the rich and powerful, too. Who in their right mind, excluding miraculously well-executed altruistic AI proliferation appearing, is looking to the future and saying, "we're doing it everyone! things are getting better and better!".
Do you have any idea what 3 billion+ people living in poverty looks like? Because that is now, and it's fucking shameful how little we care about our communities, our planet, in this race to greater and greater "wealth".
Meanwhile, in reality:
- corruption / inability to problem-solve in most governments in any reasonable amount of time is more and more evident as transparency / software insecurity increases, and there's no obvious way to fix this
- business advantages through technology, information asymmetry, lack of competition, and very cheap labor accelerates, businesses which have a singular goal in mind with little care for negative externalities
- species diversity plummets
- climate change remains negatively positive (zika incoming everyone, I'm sure we'll figure it out in time, just don't have any babies in the meantime)
- wage slavery becomes more and more real for more and more people, in the US particularly through people taking on debt for what used to be a non-risky endeavor (higher education) but which actually turned out to be foolish once they were ready to work
Remember, the only thing that matters is that you get yours; that's the name of the game and it's only so long until the consequences of this utterly delusional approach of infinite growth in a closed system will find its way to the homes of the rich and powerful, too. Who in their right mind, excluding miraculously well-executed altruistic AI proliferation appearing, is looking to the future and saying, "we're doing it everyone! things are getting better and better!".
Do you have any idea what 3 billion+ people living in poverty looks like? Because that is now, and it's fucking shameful how little we care about our communities, our planet, in this race to greater and greater "wealth".
You're defining global well-being from a very American viewpoint. Poverty, war, actual slavery, child labor, hunger, disease, etc are dying out on a global scale.
Certain physical goods will always be scarce and there is a limit to energy utilization. I agree that subsistence work for survival is on the way out but I'm unconvinced humans will stop competing for status and resources because of abundance.
If advances in technology teach us anything at all, it is that there can be no scarcity of physical goods. There is nothing that can not be made in abundance, at marginal cost.
The scarcity of energy is even more difficult to defend. There can not possibly be any such thing, it is a truly ridiculous perception.
The ONLY remaining value, then, is in individualism. In bringing forth a unique perspective.
Competing for status is indeed a natural human tendency, that isn't going anywhere any time soon.. But it can no longer equate to competing for resources.
The scarcity of energy is even more difficult to defend. There can not possibly be any such thing, it is a truly ridiculous perception.
The ONLY remaining value, then, is in individualism. In bringing forth a unique perspective.
Competing for status is indeed a natural human tendency, that isn't going anywhere any time soon.. But it can no longer equate to competing for resources.
I'm not sure how to unpack this. If there isn't energy scarcity, why does petroleum cost money? Scarcity isn't just a question of production, but also one of consumption. With some goods (e.g. food), we could reach a point where the entire population of the world cannot consume more. With others (energy is a salient example), there seems to be no upper limit on consumption. There will always be a finite amount, and people want to use it differently. This is exactly the problem markets are purported to solve.
Land is a scarce resource. Downtown properties in urban cities, beachfront properties, lake front properties.
Access to a hot new chef's 5 star restaurant on a Friday night.
Energy consumption can not increase without bound. Every human on the planet can not have a 10GW datacenter to simulate their own perfect Matrix where they are King of all creation. The thermodynamics of waste heat certainly puts limits on potential energy utilization for 15 billion humans.
Your inability to conceive of limitations that are certainly present, is not an indication that those limitations do not exist.
Access to a hot new chef's 5 star restaurant on a Friday night.
Energy consumption can not increase without bound. Every human on the planet can not have a 10GW datacenter to simulate their own perfect Matrix where they are King of all creation. The thermodynamics of waste heat certainly puts limits on potential energy utilization for 15 billion humans.
Your inability to conceive of limitations that are certainly present, is not an indication that those limitations do not exist.
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Does anyone know the brand or model of that beautiful keyboard with the orange and green keys in the photo just above the title?
Bloomberg keyboard with specialised func keys for std cmds.
The newer ones look amazing: https://qzprod.files.wordpress.com/2013/05/bloomberg_keyboar... They have that certain beauty of something carefully designed for a specific domain.
Just reading that headline makes me think to myself. Why ask Goldman Sachs? They are clearly ahead of the capitalism game so of course they are gonna say it works well!?!?
Asking the richest capitalists in the world if capitalism works is a silly question if you ask me...
Asking the richest capitalists in the world if capitalism works is a silly question if you ask me...
Yes, but having them say we may have to question whether it works is big news.
True, I think I was influenced by the sensationalist headline.
This isn't a criticism of capitalism.
This is an acknowledgment our current "capitalist" financial system isn't able to produce "capitalism" itself.