TCS Daily


The Great Tug-of-War

By Arnold Kling - June 7, 2007 12:00 AM

"[In 1937] Roosevelt was listening to and following the advice of another set of advisers: the anti-big business crowd...Corcoran, Cohen, Ickes, Hopkins, and Robert Jackson were telling the president he must use the opportunity of the downturn to move in for the kill when it came to big business."
-- Amity Shlaes, The Forgotten Man

Franklin D. Roosevelt's economic policies during the 1930's were a terrible failure. Why, then, is he so revered in history? I believe that Roosevelt's restrospective halo is derived in part from the fact that he catered to the anti-capitalist trend among intellectuals. This trend long preceded Roosevelt, and it persists to this day. Historians are predominantly anti-capitalist, which inclines them to favor Roosevelt. And if historians do nothing else, they do influence our view of history.

This essay is about the history of polarized intellectual views of capitalism. I make no claims that my thesis is original. On the contrary, it is a central theme in a number of recent books, including Jerry Z. Muller's difficult but highly rewarding treatise The Mind and the Market, Deirdre McCloskey's erudite and offbeat The Bourgeois Virtues, and Brink Lindsey's just-published perspective on capitalists, beatniks and hippies The Age of Abundance.

McCloskey talks about the anti-capitalist "clerisy," as she describes the academics and others who hold the bourgeoisie in contempt. Lindsey describes the way that post-WWII affluence in the United States helped foster widespread cultural experimentation and criticism, with protestors attacking the very capitalist institutions that enabled such experimentation and criticism. Muller offers an intellectual history of the controversy about capitalism. He shows, for example, how Joseph Schumpeter predicted exactly the sort of critical rebellion against capitalism that Lindsey chronicles.

The Two Sides

GMU economist Robin Hanson notes that ideological positions tend to come in "clumps." He writes,

The policy world can thought of as consisting of a few Tug-O-War "ropes" set up in this high dimensional policy space. If you want to find a comfortable place in this world, where the people around you are reassured that you are "one of them," you need to continually and clearly telegraph your loyalty by treating each policy issue as another opportunity to find more supporting arguments for your side of the key dimensions. That is, pick a rope and pull on it.

Below is a table that summarizes the two sides in the tug-of-war over capitalism.

Issue

Pro-Capitalist

Anti-Capitalist

Market Prices

valuable signals

corrupt

Our Behavior in Markets

rational, ethical

greedy

Solve Social Problems

spontaneous order

deliberate planning

Social Heroes

entrepreneurs

policymakers

Wealth Acquisition

positive-sum

zero-sum

Business Success

largely deserved

comes from exploitation

Business Failure

necessary

disastrous

Those of us on the pro-capitalist (P) side tend to approve of the price system, because we think it helps send signals. Those on the anti-capitalist (A) side see prices as corrupt. For example, when the price of gasoline goes up, P's say that this tells people to consume less and to produce more. A's see gouging. Where P's address the problem of pollution with taxes, A's want to regulate and punish polluters. Where P's see no problem with using a market for organ transplants, A's would view such a market as inhumane.

Does the market teach us to behave ethically or unethically? P's look at the positive aspects of market behavior. We learn to make rational calculations of costs and benefits. We develop habits and ethics of dealing with strangers peacefully. We engage in transactions for mutual benefit, without coercion. P's point out that other forms of human interaction, such as competition in a status hierarchy, cause more friction than market trading.

A's see markets as fostering greed. They would prefer that people interact on the basis of higher motives.

P's believe that decentralized, un-coordinated, and trial-and-error processes can solve problems better than centralized, planned processes. The watch on my wrist can be thought of as coming from a centralized, planned process -- you can think in terms of a watchmaker. My wrist itself, which is more complex and can perform a greater variety of functions, came from the decentralized, trial-and-error process known as evolution.

Decentralized, evolutionary processes produce more elegant solutions than central planning. One reason for that is local knowledge. A single planner cannot know everything needed to solve a complex problem. (In fact, because of the need for local knowledge, today there is no single watchmaker. My wristwatch results from a combination of centralized and decentralized processes.)

Another advantage for trial-and-error is that it takes advantage of diversity. Imagine that you had lost an earring on a large lawn, and you had two groups of people -- experts and amateurs -- to help you find it. If you can pick just one person to search for the earring, you should choose an expert, who will look in the most likely location using the best search technique. However, if you have to pick between the two groups, you might be better off going with the amateurs. The experts will all tend to look in the same place and in the same way. The amateurs will tend to look in diverse locations in diverse ways.

I use this example to illustrate why Scott Page, author of The Difference, argues that diversity trumps ability. It helps explain why entrepreneurial trial-and-error often comes up with better, more innovative ideas than the bureaucrats of large corporations.

Heroes

For the P's, the social heroes are the entrepreneurs. We see entrepreneurs as The real solution to poverty.

For A's, the social heroes are anti-capitalist policymakers. Roosevelt was redistributionist and contemptuous of private industry. His economics was arguably about on par with that of Hugo Chavez. Like Chavez, he had a huge popular following. Just as Chavez was preceded by economic failure, Roosevelt took office at a time when the economy was in depression. The net result of Roosevelt's policies was that the American economy was still in depression right up until the Second World War. And the A's lionized him.

Many mainstream economists are A's. They see the need for heroic policymakers to come in and correct the many market failures that they discern. Roosevelt elevated the role of intellectuals in government, giving them opportunities to be heroes, and this in turn helped solidify his heroic status among intellectuals.

Zero Sum

Jerry Muller points out that anti-capitalism can be traced as far back as the Greeks and to ancient religious tradition. Throughout much of human history, it was natural to see wealth as fixed, so that if one person were particularly wealthy then others would be correspondingly poor. This zero-sum perspective naturally leads merchants and profitable market activity to be viewed with suspicion and hostility.

Modern P's see market activity as positive-sum. In a voluntary trade, both sides are better off. Widespread trade makes many people better off. Competitive innovation is an extreme example of a positive-sum game, leading to very large cumulative improvements in the living standards.

Nonetheless, A's still see wealth in zero-sum terms. They see the rich as having too much wealth, and they see a need for redistribution.

For the P's, business success is a good thing. For any one individual, it may represent luck, but overall business success is correlated with the introduction of innovations that improve our lives. For A's business success comes from exploitation. P's look at Wal-Mart and see efficiency and lower prices. A's look at Wal-Mart and see a large, profitable firm hiring employees at low wages and benefits.

For the P's, business failure is also a good thing. In order for productivity to improve, obsolete products and inefficient processes need to disappear. A's focus on the adverse consequences of firms going out of business.

Unsettled Debate

Robin Hanson is pessimistic that differences such as those that exist between P's and A's will be resolved through reasoned argument. People have their identities wrapped up in their particular sides of the tug-of-war. See my essay on trust cues.

Jerry Muller reminds us that over one hundred years ago, Vilfredo Pareto was equally pessimistic. In his chapter on Joseph Schumpeter, Muller writes,

Pareto's 1901 essay "The Rise and Fall of Elites," conveys two themes to which Schumpeter would return time and time again: the inevitability of elites, and the importance of nonrational and nonlogical drives in explaining social action. Pareto suggested that the victory of socialism was "most probable and almost inevitable." Yet, he predicted...the reality of elites would not change. It was almost impossible to convince socialists of the fallacy of their doctrine, Pareto asserted, since they were enthusiasts of a substitute religion. In such circumstances, arguments are invented to justify actions that were arrived at before the facts were examined, motivated by nonrational drives.

Part of the A's outlook is that the economy can no longer improve. As Amity Shlaes and Jerry Muller point out, there was a widespread belief in the 1930's that capitalism had run its course. As Muller puts it,

Analysts of very diverse political hues concluded that the era of dynamic capitalism was over and that the United States and other "mature economies" had entered into a period of long-term economic stagnation. Some argued that there were no new technologies in sight for consumers to buy. Others feared that natural resources were nearing exhaustion, or that slowing population growth translated into a lack of consumer demand. Such assumptions lay behind Roosevelt's 1932 campaign address...

For pro-capitalists, capitalism offers an endless wellspring of renewal. For anti-capitalists, there seems to be an endless wellspring of reasons for capitalism's doom. The tug-of-war between the two sides is likely to be endless.

Arnold Kling is author of Learning Economics.

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110 Comments

"diversity trumps ability"
An over heioght semi-trailer became wedged under a bridge.
Experts debated how to get the truck out.

An amateur suggested letting the air out of the tires.

A Contradiction
A's see business success as bad, because it comes from exploitation. They also see business failure as bad, because it hurts the little guy.

Am I the only one who thinks this is a little bit contradictory? If business is evil, then shouldn't they be *hoping* for its failure? And if business failure is bad, shouldn't they prefer them to succeed, because it screws the little guy less?

Then again, this is assuming that a ( nigh certainly ) leftist is going to have to take an internally consistent position.

Trial and Error
In business, trial and error produces success eventually; typically, about +/- 10% of the trials are successful.

In government action, there is only one trial, with the same liklihood of success as above. However, government generally appears unable to acknowledge error and allow the failed program to die. Rather, the error is enshrined, in an attempt to make it unassailable. The errors only result in obvious failures when government lacks the resources to continue the failure.

This is nowhere more dangerously embodied than in socialism, which has been tried numerous times and has failed consistently. In several cases, the acknowledgement of the error has been put off until the damage became sufficiently massive that the ultimate failure could not be further delayed. However, despite this track record, many US socialists still believe that socialism has failed only because it was implemented and managed by others who were not as intelligent; and, that if only they had the chance, they could demonstrate socialism's ultimate strength and virtue.

"All animals are equal, but some animals are more equal than others.", George Orwell. US socialists still long to become the pigs!

Killing the goose (PETA, where are you?)
A's know that capitalism is the goose that funds their power.

Most have enough sense not to kill it, but they will keep it caged and underfed so only they will be able to keep the eggs.

Where is PETA when you need them?

Cognitive Dissidence...
The left has always excelled at cognitive dissidence.

another aspect to the elite vs. merchants
For many generations, the "elites" were the royals and nobles. They spent their lives telling other people what to do. They gained their power not from what they did, but from who their father was, and what powerfull people they were able to do favors for.

Over the generations, these elites began to view their position in society as "natural", "God given", "the proper way to organize society".

There is a long history of the "elites" looking down on people who labor manually. But this disdain was tempered with pity for those who had nothing.

To the elite, the worst of all possible people were the merchants. These people not only worked for a living, but they, through there efforts, threatened to become as rich and powerfull as the elites themselves.

This was something that could not be tolerated.

And ever since, the elite have been looking for ways to restore the natural order to the universe. That is, themselves on top, giving directions to the masses.

attitudes of the elites
Above everything else, the elites prize stability. Anythig that rocks the boat, so to speak, threatens their priviledged positions.

Successfull businesses rock the boat.
Failing businesses rock the boat.

I don't know...
whether to shoot myself in despair, or to revel that the anti-capitalists at least can't win the war...

Why is everything black and white?
The dichotomies are almost all completely bogus and simple minded. I mean:

Market Prices are generally "valuable signals' but can sometimes signal corrupt practices - that is, a market being manipulative.

Our Behavior in Markets is often rational, ethical but with money at stake can and often is emotional: not just greedy but also fearful, and surely it's not anti-capitalist to recognize this - people have made large amounts of money recognizing it.

This seems just silly. Social Problems arise out of spontaneous order. They can be addressed by government planning, but trying to do so is not "anti-capitalist," because often times the action helps businesses - and is designed to.

Social Heroes: surely the contributions of entrepreneurs are widely admired. Some political leaders are admired, but "policymakers" can apply to corporate bureaucrats as well as government ones, and I don't know many who admire them. Artists are also thought admirable by many people so are scientists. But captialist/anti-capitalist?

Wealth Acquisition: again, it depends on the career. Lots of wealth creates jobs and helps people and is positive-sum. Some people make lots of money redistributively, channeling what used to be other people's stuff into their pockets, zero-sum, via shady practices or manipulation or corruption. You can be very much in favor of one kind and against the other other - if you're against the latter dooes that make you anti-captialist

Business Success: See above, many successful people have earned their success - and this includes the many people who have made fortunes in the entertainment industry, a ruthlessly individualist and cuthroat business. Then you have people who were born on third base and think they hit a triple. The same applied to failure. Recognizing this is not "anti-capitalist."

Business Failure: I guess we're talking about the depression. It's not clear in retropsect that the depression was "necessary." And whether or not you endorse Roosevelt's actions (many of which didn't work) it was in fact disastrous, with a terrible toll in human loss. You don't have to be anti-capitalist to think that some attitude beyond "the market will someday provide" is a reasonable response.

Finally, in geneal - do we really need still more us v. them labeling, rather than looking at issues ontheir own merits and the facts?

In the gray zone
"Outrages against the Chinese people continue. Corruption and mismanagement by Party cadres are sapping the life out of China's deeply-conflicted "socialist market" economy. Those parts of the modernization process that delivered remedy from suffering are now at risk of being undone.

The reversal of the irrational economic policies allowed the Chinese people to direct their boundless energies and impressive skills towards enriching themselves. Yet now in a cruel twist of fate, those who trusted their hard-earned savings to the state-managed banks are in for a most unpleasant surprise. Somewhere between 25 and 40 percent of their assets were squandered on supporting failed state-run enterprises."

http://www.tcsdaily.com/article.aspx?id=060507B

Capitalism and socialism do not mix well for long.

No, more black and white, even blacker black and whiter white
You bring up China and say:

>Capitalism and socialism do not mix well for long.

But what you're sliding past is the fact that capitalism and "socialism" -- in your bizarrely extreme formulation, any government involvement in or regulation of economic activity - are mixing in every nation and village on the planet.

"...mix well for long"
well and less well, they have mixed for the entire length of human history.

I agree with this
Heart Attack!! breathing stops, chest hurts, feeling queasy!

Lemuel I agree with you completely. But this requires a more in-depth discussion than is generally aplicable for this site.

It also causes many slippery slope situations where some of these knuckleheads might find themselves in very uncomfortable situations as they feel their base values are being erroded.

but this is my territory, in the middle; where the left and right nuts fear to tread.

Let's examine the final point as it is a very good one.
"Business Failure: I guess we're talking about the depression. It's not clear in retropsect that the depression was "necessary." And whether or not you endorse Roosevelt's actions (many of which didn't work) it was in fact disastrous, with a terrible toll in human loss. You don't have to be anti-capitalist to think that some attitude beyond "the market will someday provide" is a reasonable response."

Ahhh, here you set yourself apart from "them" directly. Many on the economic right do think just that, if the markets had run their course the depression would have been over by 1933, or 35 at the latest. You disagree and say that direct government action and intervention was a reasonable response.

You are both wrong, then and now. The depression created too many opportunities for economic piracy, too many weak individuals and companies. Letting the markets run their course would have been more disasterous for many that the way it was handled. Still, the government did nothing to support many of these businesses and bring workers back to work through the economy. Instead they took a socialist route and created even more problems. Both lines of though are bankrupt. A better course would have been to try and give these struggling companies breaks that guaranteed putting workers back on the job. But some of the regulatory deals that came out of this did do their job, so all was not wrong in the governmental action scene either.

Today, it is indeed true that some business failure is necessary to continue revolution and innovation in the business sector. But some of the problems are not related to that. Much of our manufacturing losses come because of a strong dollar and higher wages in a global economy.

A certain amount of strategic protectionism certainly could keep those jobs in our economy and work to the world's advantage. But it would take a genius to cover all the bases properly.

Still, small but excellent examples have shown how this can work; one was Harley-Davidson, in my opinion. A huge tariff only on large displacement motorcycles gave the company the leverage it needed to improve itself and it's sales, it also spurred overseas motorcycle makers to come up with high-powered cruisers under 1000CC. Some very good bikes were developed and Harley became a world leader in the big bike market; a big win-win for all.

The fact is that there is room for, and need for, both letting the market run and keeping some governmental eye on where it is running to.

The biggest cause pf loss of manufacturing jobs is the fact that manufacturing jobs can be more...
..easily engineered out of existence than can be service jobs. Thus the percent of people in manufacturing will fall relative total jobs over time. If you consider agriculture as a form of manufacture, and I do not see how you would not it is product production, it has long been this way.

BTW According to economists Russ Roberts and Mike Munger between 1990 and 2000 china lost more manufacturing jobs than any other country.

http://www.econtalk.org/#a002353



"some business failure is necessary"
You make this sound like a formula.

Why is business failure "necessary"?

Necessary for whom or what?

The fact that it happens doesn't mean business failure is required for free markets to exist.

You also can not discount the charisma of Roosevelt.
Roosevelt was a true leader with a personality on par with 3 or 4 individuals in American history: Regean, Teddy Roosevelt, Jackson and Washington himself. His ability to explain a position and build consensus was incredible and it was shown when he fought the most basic principals in the Constitution he swore an oath to protect.

True, some can and that was the reference…
When I said that some business failure is necessary. But that is not the case in many manufacturing sectors in the U.S. right now. The whole "global Market" situation is the cause in many cases these days. But, even many of those cases, could fall into the category of "necessary failure". It is why I said it would take a genius to really cull the herd correctly and why I made an example of H-D and how protectionism done right can help everyone.

Really?
"The fact that it happens doesn't mean business failure is required for free markets to exist."

Ahhhh but it does! The problem with any type of protectionism is that it props up ineffeciency in the vast majority of cases. Some business types are just wrong for the market they are trying to break into or poorly managed and those are the new small businesses that fail every day. In the world of big business, some have a lot invested in infrastructure and can't easily re-tool as technology advanced, their failure makes way for newer and better businesses in the market.

A good example of this is Wal-Mart. They are killing mom and pops, other big box stores, and some small independent alliances (Like IGA). Why? Because they are big enough to beat the pants off the little guys in pricing and they are responsive enough to the desires of their customers to smack around big guys like K-Mart. Personally I like going into Wal-Mart, their is always someone there to great me with a warm smile, I seldom have trouble finding someone to help me when I need it and the prices are pretty good. They are as responsive and helpful as many mom and pops and they are priced below most other big outlets. Plus, it is the mall for the poor guy, one-stop shopping at it's best.

don't get the Idea that I think Wal-Mart is some great thing. It is a business and as such it is a cash generator for it's owners, stockholders and employees; it is niether good or evil, it just is what it is - a company.

But Wal-Mart has a down side. The employees are often underpaid, they often create more unemployment than they do employment when they come in (it takes fewer employees to run a single Wal-mart than it does a dozen mom and pops and a K-Mart) and, in spite of their PR campaign, they do not contribute much to the local community or the local economy. All of this is especially true when they move into towns with a population under 10,000. When you live in a smaller town a new Wal-Mart is accompanied by a noticable sucking sound - that is the sound of cash going out of circulation in the community.

Still, I shop there when I'm in the vicinity. Wal-Mart is just another business to me. It has it's positives and negatives like any other business.

Thanks for your thoughtful response
I don't quarrel with your criticisms of what Roosevelt did: as I noted myself, many New Deal programs didn't work and even the ones that did proved better at helping assorted groups (old people, for example) than in restoring prosperity and the economy.

no arguement here
I didn't mean to sound quarrelsome at all. In fact, I tried to show were government working with business can produce a win-win for everyone.
And I agree on the helping of certain groups, but the question is what was the cost to everyone else? Was it worth the help given or was there a better way. In the case of your example I would say you are right, there was no better way under the circumstances.

Zero Sum thinking
Competition doesn't mean business MUST fail.

Competition results in more efficient operations.

In spite of big box stores and Wal Mart, Ace Hardware seems to be doing pretty well.

Find your market, compete and be prepared to change, or else you will surely fail.

Black and White
Social problems can be address by government planning? What does this mean?

It is really a contradiction how the left supposedly wants the government out of personal lives and yet seeks national health care, etc.

Which is it? Either you take responsibility or you don't.

As to business:

Business is ruthless and inherently individualistic. I am a staunch individualistic. Individual rights, private property, they all make the foundations of a free and dynamic society. I want to plow my own seeds. So why does this make me somehow evil?

I am 100% in favor of moral and legitimate business and I think in a moral and just society that opportunity of equality is the goal, not equlaity of outcome which is a joke. There is no way you can have equality of outcome unless you push for the lowest common denominator for all.

Business is like football, it is ruthless but who cares as long as the people play by the rules, as most do. The market is like the sea. Heartless and unrelenting.

Sure you have crooks and jail they deserve. I am in business and I play by the rules to the letter. I do not agree with many but I still play by them. This does not shake my faith that a free market delivers the best on time and cheapest.

Own a cell phone? The market at work.. Sure I hate cell companies. They have managed, like banks, to get the POLITICIANS to slant the market in their favor. However, who would have thought that cells would be so available and cheap...

As to those who are not the top tier, well a free market allows US to employ THEM.

THe problem is the welfare state encourges those who would produce not to.

The depression? The market will correct itself just as the enviornment will.

All dynamic systems are self balancing; This means that the climate, for whatever reason, will adjust itself to balance. We may not like the outcome ( I dounbt human global warming) but it will balance.

Economies are the same. The depression was a correction. I claim that today, we would riot. We spoiled by comparison. It is scary.

Are we a nation or are we a nation of pussies?

A's most selfish
There seems to be a universal trait among animals and humans, selfishness.
In particular, I think everyone has observed dogs or cats or many other animals chasing other animals away from the food, even though there is sufficient quantities.
Children will take toys just to prevent others from playing with them even if they don't want to play.
Many soap operas have been written about selfish lovers who, if they can't be the one, then no one can. People have been murdered over this.
Instead of "if you love it set it free", "if you set it free, and it won't return, hunt it down and kill it", is the motto for some.

Those opposed to free market capitalism are the same kind of people. If they can't be successful or rich, then no one can and they will use the force of the state to cover for their inadequacy.

Those who understand free market capitalism know that the only way they can succeed in business is to satisfy the needs of their customers. The fact that they cannot do this without compensation demonstrates the customer values the product or service and wants to preserve future access. The more business he can send to the capitalist, the more likely the capitalist will be there tomorrow. But if the capitalist becomes arrogant, in a free market, the customer can find another capitalist keeping everyone honest and providing the most efficient products and services.

Capitalists who don't respect their customers use the power of the state to control competition. The politicians become corrupt and the selfish are satisfied.

Based upon what happens in politics today, the selfish are winning.

No way to defend capitalism
Come on. An article in defense of capitalism and the word right does not appear in it?

Actually it (the word right) does (appear once in the article), but NOT in the context of an Individual’s Right to freedom of action in the economic sphere.

I think, what is generally meant is;
that it is necessary to let the failing businesses fail (instead of propping them up artificially).

But more clarity would have been better.

It's called creative destruction
Joseph Schumpeter came up with the idea in the 40s. Here's an example. Let's say there is a business that sells tons and tons of CDs. Call them Tower Records. They stock a wide range of music in large stores but typically charge $16-$20 for most CDs. Target and WalMart come along, stocking the most popular titles at lower prices (short head). Amazon comes along, stocking an even wider variety but not requiring local space (long tail). Apple iTunes (Music) Store comes along, offering legitimate digital downloads and debundling the album format.

The people at Tower Records all lose their jobs and the company closes all its stores. Consumers change their buying habits. CD sales actually decline over a decade and aren't replaced by digital sales. The music labels go through M&As and general upheaval. And yet, today, there is probably a more thriving market for music, with more musicians participating commercially, unseen markets (ringtones), independent labels (e.g. Magnatune), etc.

Tower's real failure makes it unlikely that another company would try that model for the foreseeable future, ensuring that resources are applied to models that might have better chances of success. So, yeah, failure is just as useful and necessary as success.

IBM typewriters
IBM used to make mainframe computers, typewriters and PCs.

Instead of going out of business, IBM adapted to market conditions and are still in business.

WANG failed to anticipate the market and now have monuments to their failure in Lowell, MA.

Business will fail.

It is not a requirement of capitalism that businesses MUST fail.

Free markets and capitalism
Social sciences suffer from imprecise definitions.

"Conservative" and "liberal" get tossed about without being well defined.

What is meant by "capitalism"? Is it a requirement for a free market? Is capitalism a subset of free markets?

I use the term capitalism as a method of financing a business. Free markets are not a requirement for capitalism to exist and many capitalist don't want free markets. They would prefer to hire lobbyists and use the state coercion to limit competition.

Ok let's talk black and white
you offer:

>Social problems can be address by government planning? What does this mean?

Let's take the opposite: "social problems cannot be addressed by government," and apply it to problems like pollution, public health, unsafe products, etc. Where does that leave us.

>t is really a contradiction how the left supposedly wants the government out of personal lives and yet seeks national health care, etc.

And it's really a contradiction that the right supposedly wants governent out of personal lives but yet seeks to regulate personal decisions on sex and health care.

etc. etc. etc.

Is there some reason you can't just address each issue on it's own merits?

>The depression? The market will correct itself just as the enviornment will.

In the long run, sure. But as Keynes said, in the long run we're all dead.

My point is that their is not much reason to try to hold onto...
...manufacturing through trade restriction because the relative number manufacturing jobs is always falling anyway. If your goal is to provide better jobs for less capable people it is IMO better to target that goal, ignoring sector, weather service or manufacturing. BTW Also manufacturing jobs are often much harder work and in worse conditions, so they must pay higher wages but are not necessarily better overall jobs. For example in my area there is a manufacturer who pays much higher wages than the local service companies but he is having trouble getting and keeping employees because the work is hard. The company would like to run 3 shifts but are currently running one and a half shifts. The company obviously needs either to improve the work environment or pay more money but it shows that people prefer the services jobs even at lower pay.

With most women working I am not sure that there is high demand for higher paying but harder work.

So, in the short run it doesn’t matter what the GOVAGs do, is it?
No need for any Code of Ethics for them (GOVAGs), is it?

They can chase a man all the way to the SCOTUS (Wickard v. Filburn, 317 U.S. 111 (1942)) for the “crime” of trying to remain alive (I mean, for the “crime” of producing more wheat than was “permitted” to), is it?

What are you talking about??
In the short run what governments do makes a huge difference. What you're not recognizing is that the choice is about what to do, and that doing nothing is just one choice among a huge number of alternatives. But your view seems to be doing nothing is always the right thing.

>No need for any Code of Ethics
Nothing I said in any way implies this.

>They can chase a man all the way to the SCOTUS
I'm sorry, where did I say every single thing Roosevelt (or any other President) did was right?

if you say so
Marjon, at some point it does mean just that. When too many crowd any market, someone must go.

Ace Hardware is holding it's own. Home Depot and Lowes are kicking their ass on the big project items and appliances, but Ace is staying in business through customer service and selling nuts, bolt, nails and paint. They are also holding their ground on yard maintenence equipment. Ace will stay in business only as long as they do that and remain an effective supplier to small independent stores in little farm towns.

Requirements of capitalism
"It is not a requirement of capitalism that businesses MUST fail."

True. Just like it's not a requirement of dessert to have chocolate syrup on ice cream. The chocolate syrup makes it better though. Just as continual tumult makes capitalism better. Failure frees up resources for better endeavors.

But don't mistake the above truth for an excuse for government intervention when business fails. Take Harley Davidson for example... It is touted as a success story of government bail outs. Harley's continued existence probably slowed down the entry of smaller shops into low-end American style cycles. Instead, such shops have focussed on exotic (expensive) choppers. Harley had its lunch eaten in the 80s because it wasn't delivering a touring/commuter bike that anyone wanted. And despite Honda having to put GoldWings on boats to get them here, Harley couldn't even compete on price!

At any rate marjon, capitalism and dynamism go hand in hand. Dynamism means that there will be winners and losers and continual churn. While failure is not a requirement, it is a damned useful feature.

Try the Wikipedia definition
http://en.wikipedia.org/wiki/Capitalism

The first line: "Capitalism generally refers to an economic system in which the means of production are mostly privately held."

Further down, the article explains that most modern theories of capitalism rely on the neoclassical vision: markets coordinate themselves, government mostly keeps hands off.

Obviously, individual actors will try to bring government in on their side, and politicians will enjoy sticking their fingers in and trying to pick winners and losers. They'll moralize over who deserves to be helped and who to be hindered. Politicians have a history of making far worse decisions than market actors, and there's plenty of theory explaining why things will always be that way. But in our democracy, our government has a certain amount of prerogative to muck things up.

You very well know what I am talking about
Don’t’ feign ignorance.

The question is HOW the GOVAGs are supposed to chose from among the huge number of alternatives.

That is what I mean. You know it and have consistently avoided answering that question.

If you don’t approve of FDR’s restrictions on wheat farming, WHAT are your reasons? IF you approve of FDR’s SSS, WHAT are your reasons? Do they square with the (US) Constitution or you don’t care if the GOVAGs’ actions are Constitutional or not?

That is what I mean.

By the way, both in the short run and the long run, what the GOVAGs do and don’t makes a huge difference.

capitalism: exploitation of man by man
And socialism is the exact opposit. The best definition of capitalism is: private property, free markets, rule of law. If one guy wants to be subsidised, that's not capitalism, if another guy tries to get the government give it a monopoly, not capitalism. Most itellectual are left leaning so denigrate it with false examples and definitions.

Not the way you're phrasing it, I don't
>The question is HOW [ we the people] are supposed to chose from among the huge number of alternatives.

The same way we deal with alternatives in other areas; carefully, lawfully, and with an awareness that if something doesn't work,we mayhavetochangecourse.

>f you don’t approve of FDR’s restrictions on wheat farming, WHAT are your reasons? IF you approve of FDR’s SSS, WHAT are your reasons? Do they square with the (US) Constitution or you don’t care if the GOVAGs’ actions are Constitutional or not?

Look, I don't see any reason to go down a list of things done 60 years ago and discuss which I thought were right and which were wrong with someone who doesn't think government should ever do anything at all. It's pointless. Social security has worked very well, and has withstood constitutional tests. You don't like it? Thank you for sharing.

>By the way, both in the short run and the long run, what [government does and doesn't do] makes a huge difference.

D'uh. So maybe that's a reason why doing nothing may not be always be the best course of action.

YES you DO
You are feigning ignorance because you have no (Constitutional) leg to stand on, for the positions you have taken.

The American independence and Government was predicated on the self-evident truth that all men (and women) have unalienable Rights to Life, Liberty and the pursuit of Happiness and Governments must be constituted and GOVAGs (selected from among the populace in a specific manner) entrusted with just Powers to secure these Rights.

It (American independence) was NOT predicated on (another) self-evident truth that a vast majority of men (and women) will face problems of various kinds and intensity for different durations in the course of their lives and therefore Governments must be constituted and GOVAGs entrusted with Powers to “solve” these problems.

Because you are not able to cast the vast majority of GOVAGs’ actions (aggrandizing power to themselves to “solve” the various “problems” faced by the populace) during (and before and after) the Depression as necessary for securing the Rights of people to Life, Liberty and Pursuit of Happiness and because for some reason, you DO NOT want to jettison the philosophical discussion that led to American Independence and the Constitution that resulted from such discussions, you are feigning ignorance.

If you don’t want to argue about what has happened 60 years ago, why did you start the discussion at all? Fortunately, the GOVAGs have not (YET) passed a law (ala the truancy laws) forcing you to spend time at these forums.

In reply to (this statement of fact by me)

“By the way, both in the short run and the long run, what the GOVAGs do and don’t, makes a huge difference.”

you wrote;

“D'uh. So maybe that's a reason why doing nothing may not be always be the best course of action.”

The question which you consistently refuse to answer is; how do the GOVAGs decide whether they should do something or do nothing? And if they decide to do something, what should that be (from among the vast majority of alternatives, as you yourself have stated)? What are YOUR guidelines for them (the GOVAGs) to make such decisions or no guidelines are needed?

You DO know that that is the question.

No Subject
"Capitalism and socialism are mixing in every nation and village on the planet."

That's right. That's why a so-called "black and white" view needs to be taken, even though clearly the author is writing about tendencies, not absolutes (given the fact that only tendencies, not absolutes, exist).

The "black and white" view is called analysis. That is, taking things apart to look at their individual components to achieve a better understanding of what happens when those components get put back together.

(Incidentally, Marjon is correct about what socialism is. It might not be your pretty little textbook definition, but it's correct.)

If our capitalist economy were to root out its tangled roots of socialism that misguided so-called "elites" like FDR allow to grow around the capitalist rhizome, we would have a superior system to what we have now. Governments simply have no place in the market. The government is there to enforce contractual agreements between individuals and to be the Court of Final Appeal when a situation cannot be resolved rationally between individual contractors. It is not there to create market policy.

It's absurd to say that a panel of bureaucrats need to sit down and look at every little instance of perceived--or real--exploitation, Scroogeness, deceit, and so on and decide what should be done about it by the government,or if it should be left alone in the hands of the market, whether they act in consultation with more local authorities and businessmen or whether they take complete authority to make the decision themselves. For this is inevitably going to lead to a freedom-strangling, rights-robbing socialist order sooner or later. That's the insidious way that socialism works. Observe: http://www.freetrade.org/node/493

The fact that socialism is so entangled with capitalism is the very economic problem of this nation.

How to Mix a Socialist-Capitalist Cocktail
"Both letting the market run and keeping some governmental eye on where it is running to."

There is one proper place for socialism in our lives.

It is not in politics. It is not in the economy. It is not in the market place.

It is in the individual family and among good friends. In relationships that fall under these definitions, socialsm is rampant--as it should be. And no government needs to force things to be that way.

Once you get into any interactions beyond the level of family or good friends, socialism is completely powerless as a force for good. Beyond that circumference of activity, only capitalism prevails to bring justice.

I agree
Good point!

Failure
What I think he is trying to say is, capitalism in principle allows that every business COULD be a success. Capitalist systems, in and of themselves, do NOT cause businesses to fail.

But needless to say, given human nature, that is never going to be the case. Given human nature, there will always be failing businesses. And these should not be artificially saved by any government.

Doing Nothing Takes a Lot of Doing. Try It.
"Doing nothing is always the right thing."

In terms of the federal government and the market, that is absolutely correct.

Once again, you're very naive about that decision making process in which the government figures out "what to do".

Nothing that the federal government figures out to do will ever be as good as private solutions, and almost always will end in the loss of liberty, higher prices, and a more bloated federal system in which the left hand doesn't know what the right hand is doing.

So succinct. So True. Thank you
And thanks for the other complement also.

And for the Cocktail post.

Almost every man (and woman) is frequently consumed by passions and emotions that compel them "to do" so many things, not all of them Right even for themselves.

Family, Social Taboos, Culture and Religion guide them to do nothing in many cases. And it is not easy.

Very good post.

Why is there even a question?
This debate (anti v. pro capitalism) is nonsense. The issue is settled. The US has proved that capitalism is the only economic system that is viable. Why are we debating this? How much proof does one need to be convinced that command economies and socialism don't work.

Furthermore, a capitalist system derives from the basic principle of individual freedom.

Ultimately, those that still debate this are rejecting individual freedom for some utopian dream that can never be achieved.

Let's move on to debating more important things.

Red Herrings
We were not talking about Public Health and Pollution. Were talking about the social welfare state. Why don't you stick to the real issue?

National Health, Welfare, SSI, Medicare, entitlements. All other spending is a drop compared with these items.

In fact, I argue that the decay and inner city crime is the direct result of the welfare state. The entitlement society brings on social decay and failure. More PC and more social engineering, more crime and failure. Al Sharpton and Jesse are prime examples of race baiters who perpetuate the failures of the social welfare state.

I wonder how many people would stay in inner cities if suddenly they had to support themselves 100%?

The social welfare state is a utter failure.

If a man buys a home does he not take care of it? Compare that to a home given by the state? Now extend that to the subsidy of bad decisions. Am I supposed to subsidise every persons failure to save for retirement or the fact that sexual conduct has consequences?

Finally, what conservative wants to regulate health and sex? Are you talking abortion and Homosexuality?

Well abortion is a stark matter for debate. Risk to mother, rape, sure.

Lets take the lady in NY who was pregnant with twins but aborted one because it would have taken to much a toll on her lifestyle. She would have actually had to stay home and raise her children. The ultimate liberal mindset. It is all about me.

That is plain selfish and it is wrong. But the left says, hey, sure go for it for the left is all about selfishness.

Think about it, you want what others produce, you want to engage in any type of behaviour no matter how deviant or offensive and then insist I accept it. Your guilty of all seven sins are you not?

Sorry, no can do.

I don't care what you do BUT that does not mean I have to accept it or condone it.

I was called a racist today because I critisized Arab culture. You see, I am supposed to tolerate a culture that enslaves women and promeote jihad to children and death to Jews. This is defined as tolerance. I am thus a racist because I despise what they do and teach.

I am supposed to celebrate diversity. No can do. My respect has to be earned and they have not earned it.

YOu see Lemming, I don't care what others think. I see the world as black and white.

There is right and wrong. Either way, the market will prevail.

why it's a question
Many people don't agree that the matter is settled. Sure capitalism means freedom, but liberals are more interested in control of people rather than freedom. So they like to obfuscate the issue by using tortured logic about how having less freedom is better for you. Look how most of the teachers, and profs, and the MSM, most intellectuals, mostly left wing, anti-capitalist. It's also trendy to be anti-capitalists too, fashionable amongst spoilt people who owe their well being to capitalism. While they lounge around Starbucks drinking $5 designer coffee they bad mouth the system that make it all possible.

Interesting
"Once you get into any interactions beyond the level of family or good friends, socialism is completely powerless as a force for good. Beyond that circumference of activity, only capitalism prevails to bring justice."

All things need checks and balances, even capitalism. Bring a plant from one eco-system into another and it will often thrive and take over, destroying all natural vegitation int he region. why? No natural limits to it's growth exist in the new eco-system. This is a problem with noxious weeds all throughout agricultural lands. This is the same with anything that is allowed to operate unencumbered. Capitalism must be watched and properly directed or it will strangle the very economy it is supposed to save.

One problem I see is that most of you have never seen truely free markets so you don't know how they work, or don't work.

Is the issue settled?
I agree with Dietmar on this one. The fact that we're continuing to debate this means it is far from settled. Moreover, the U.S. is far from a pure free enterprise system.

If a Democrat becomes President in 2008, it is likely the health care "system" will be the next subject for even more governmental regulation, if not complete "nationaization."

Maybe then we'll see whether it works better than it does now.

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