Has libertarianism ever been tried in the real world?

[Ziggurat]

I didn't say the increased labor costs were negligible to the economy as a whole. I said that in a competitive market some of the increased cost is going to come out of profits which means that there isn't a 1:1 ratio of increased labor cost to increased prices of goods and therefore higher wages have a net benefit for the economy.

Because profits do nothing for an economy? Do they just disappear into the void? No, they do not. Sorry, your math doesn't make any sense.

Say for example we both manufacture widgets that we sell for $99.95 and that were designed to hit this price point. Let's say that labor is 20% of the cost of manufacturing the widget, and we both make a 10% profit. Suddenly there's a government mandated increase in wages which raises the per-unit labor cost by $5. You can price your widget at $105 and I can decide to let my profits get cut in half and keep the $99.95 price point. Unless you take a corresponding hit in profits and lower your prices back down, I'm going to steal all of your business.

What utter nonsense. Why wouldn't you have cut your profits in half BEFORE the change in labor laws so that you could steal all my business? Because there's a minimum profit businesses are willing to accept before it becomes advantageous to just close up shop and sell everything off. And in a competitive environment, most businesses will operate close to that point most of the time. So in a competitive market, if you raise labor costs for everyone, you raise the prices that everyone will charge, because they will STILL have a minimum profit they can operate on.

Meanwhile we both benefit from increased sales as our employees can now afford to buy more of our widgets.

More nonsense. Sales of a product to an employee are ALWAYS going to be negligible, and increasing salaries to increase employee consumption is the economic equivalent of a perpetual motion machine.

Having that extra money go to a worker to be spent and recirculated into the economy is always going to be better for the economy than having it sit in your or my bank account.

As if employees never save, or owners never invest or spend.

 

[Ziggurat]

Economics isn't a zero-sum game.

Indeed, it is not, because production is not a fixed quantity. But tell me: what do you think the effect of preventing work is on production?

 

[GreNME]

But a company's balance sheet is.

True, but a company's balance sheet isn't this mythical "the market" that's being discussed.

 

[GreNME]

Indeed, it is not, because production is not a fixed quantity. But tell me: what do you think the effect of preventing work is on production?

Considering you're requiring me to accept conditions arbitrarily to answer, all I can say is "prevent work" is an intellectually dishonest descriptor. Regulation has long-term purposes, while day-to-day production needs address short-term impetus. Trying to conflate the two into a reasonable argument is juvenile and not actually addressing the "why regulation" questions in a positive or negative stance.

 

[Ziggurat]

Considering you're requiring me to accept conditions arbitrarily to answer, all I can say is "prevent work" is an intellectually dishonest descriptor.

No it isn't. It's a description you don't like, but it's still accurate.

Regulation has long-term purposes

Confusing purposes with effects is a rather common mistake.

 

[Richard Masters]

Which is why it doesn't make sense to try to shape government based on any rigid ideology.

My personal philosophy is that regulations of the marketplace are sometimes necessary and helpful to the functioning of the economy and society as a whole. Therefore it makes the most sense to take things on a case by case basis and not arbitrarily take certain categories of regulation off the table for ideological reasons.

Wow, you are describing consequentialist libertarianism!

 

[psychictv]

Because profits do nothing for an economy? Do they just disappear into the void? No, they do not.

That depends. Quite often they go overseas so they do, in a sense, disappear into the void. Sometimes profits are saved or invested in ways that don't help the economy. Giving money to someone who already has a large amount of money in the bank is going to do very little for the economy compared to giving that money to somebody who lives from paycheck to paycheck.

Why wouldn't you have cut your profits in half BEFORE the change in labor laws so that you could steal all my business? Because there's a minimum profit businesses are willing to accept before it becomes advantageous to just close up shop and sell everything off.

And the temporary adjustments required by the increase in wages might require you to cut your profits below that "minimum" point. If there's nothing to cut then yes, you'll have to raise prices. But there will be situations where there is plenty of profit to cut and enough competition to make price raises impractical, so again, the net effect of increased wages will be positive.

Sales of a product to an employee are ALWAYS going to be negligible, and increasing salaries to increase employee consumption is the economic equivalent of a perpetual motion machine.

So Henry Ford was wrong?

 

[GreNME]

No it isn't. It's a description you don't like, but it's still accurate.

If by "accurate" you mean "conforming to Ziggurat's own personal reality," then you might be right. Whether I like it or not is irrelevant.

Confusing purposes with effects is a rather common mistake.

Making up arbitrary effects and leaving out purposes seems to be your favorite.

 

[Ziggurat]

That depends. Quite often they go overseas so they do, in a sense, disappear into the void.

Not even then, given that the economy is global.

Sometimes profits are saved or invested in ways that don't help the economy.

Sometimes wages are saved or spent in ways that don't help the economy.

Giving money to someone who already has a large amount of money in the bank is going to do very little for the economy compared to giving that money to somebody who lives from paycheck to paycheck.

Evidence?

But there will be situations where there is plenty of profit to cut and enough competition to make price raises impractical

I'm sorry, but that makes no sense. If there are "plenty of profits to cut", then you aren't actually in a competitive environment. And if everyone's costs increase, why would raising costs be impractical? You haven't made any sense on this topic.

So Henry Ford was wrong?

I believe that is an urban legend. Ford indeed raised the wages of his workers considerably, and as a side effect it may have enabled them to buy cars, but I have seen no real evidence that this is what motivated him, and there are other, far more logical, motives for such a raise. In particular, worker turnover was terrible before the raises, and such turnover had a very strong and negative effect on productivity. But raising wages, Ford dropped worker turnover to a fraction of its previous levels, thereby increasing productivity. Considering how many more cars Ford produced than workers he employed, it makes little economic sense to spend any significant amount of money trying to get workers to buy cars.

 

[Ziggurat]

Making up arbitrary effects and leaving out purposes seems to be your favorite.

I'm not making up effects. Preventing work is a rather obvious effect of child labor laws. Hell, it's even an intended effect.

 

[psychictv]

Evidence?

LOL. Evidence? But I'm just making unsubstantiated claims that "feel" right. Kind of like "the market will fix it" and every other claim made by libertarians.

 

[Ziggurat]

LOL. Evidence? But I'm just making unsubstantiated claims that "feel" right.

Indeed. So don't expect agreement.

 

[ponderingturtle]

Well, to be clear...I'm talking about the Libertarianism where government does not interfere in the free market...as championed by John Stossel, Penn Jillette, Ron Paul and others.

Sure look at 150 years ago. Far more libertarian than it is now.

 

[elbe]

Corporations don't have the power to enact force on the population, the government does. If a corporation goes corrupt and starts doing dastardly things like making phony products and so on, they'll be punished by the government and also will lose their customers and go out of business. If the government goes corrupt and starts doing dastardly things...we're in deep trouble.

That's a very odd view that's not exactly in line with reality.

 

[leftysergeant]

Sadly, no, that is not always the case. Sometimes the alternatives really are worse

Bull flops. The only reason it would be in anybody's legitimate interest to employ children would be that there is more work to be done than there are people to do the work.

If the alternative is poverty, then it is clear that the adults are not being paid a day's decent provisions for a day's work, which is to say that the factory workers have conspired to steal labor.

 

[psychictv]

Indeed. So don't expect agreement.

Well, if you really care...

"But is there any evidence to support the assumption that increased wages cause inflation? This study updates and expands earlier research into this question and finds little support for the view that higher wages cause higher prices. On the contrary, the authors find more evidence that higher prices lead to wage growth."
http://www.clevelandfed.org/research/PolicyDis/pd1.PDF

"Much empirical evidence suggests that wage increases do not lead to inflation."
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=906568

"Wage and price rises, in brief, are usually a consequence of inflation. They can cause it only to the extent that they force an increase in the money supply."
http://mises.org/story/2914

Edit: oops, I just realized I gave evidence for the wrong claim. I can debunk supply side economics later if you would like although we're getting way off topic.

 

[David Wong]

Sure look at 150 years ago. Far more libertarian than it is now.

Just to be clear, are Libertarians saying that Libertarianism is better for the functioning of the market, than the current system, or are they saying that it is better for the overall quality of life of the people who live within the system?

Surely they can't argue for the latter, since history says as our system became less Libertarian, quality of life went up. And by quality of life, I'm not speaking in terms of some etherial sense of happiness, but measurable factors such as life expectancy, quality of air, water, food, shelter, sanitation and medicine, working conditions, etc. In countries where they are closer to the Libertarian ideal than we are (again, like Somalia) those factors are clearly, measurably worse.

I guess that's what I don't get. One Libertarian (the guy who runs survivalblog) says he'd like to see all laws, court decisions and tax codes reversed to 1932 level. Does he believe quality of life was better in 1932 than it is now, and that we need to work to achieve that level once again?

If we're not talking about quality of life of the citizens, then what are we talking about? And if we are talking about quality of life, why would Libertarianism stand against a law that has proven to improve it (such as environmental regulations, universal public education, and universal health care).

I suppose that's the sticking point, it seems like they stand against these measures, not because avoiding them improves life at all, but because of some dogma that says it doesn't matter if a government program improves life, the fact that it's government means it should not be passed.

 

[GreNME]

Corporations don't have the power to enact force on the population, the government does. If a corporation goes corrupt and starts doing dastardly things like making phony products and so on, they'll be punished by the government and also will lose their customers and go out of business. If the government goes corrupt and starts doing dastardly things...we're in deep trouble.

You know, EGarrett, again I mean no disrespect, but statements like this imply a naivete in approach to political and economic systems that requires ignorance, willful or otherwise, in order to even maintain a facade of seriousness. To put it bluntly: reality simply doesn't correlate with your statement, not in the least.

The first example of what I mean would be the company we know today as the Chiquita Brands International. The company has a long, sordid history (touched on in this 1973 article) of bribing government officials in Central and South American nations where it did business, and of using the Cold War to fight Central American regulations against its abusive business practices (the scandals eventually led to Eli Black, mentioned in the article, to kill himself). More recently, however, Chiquita Brands Intl. was prosecuted for supplying money to terrorists-- [sarcasm]but it's "okay," they weren't Muslim terrorists and they were only terrorizing Central American populations[/sarcasm]. As of the 2007 article, some Chiquita executives were still facing extradition charges. Your implication that the "dastardly things" a corporation might do would revolve around the quality of products they bring to the market is demonstrably false.

My second example is the rather well-known and iconic story of Standard Oil, particularly with regard to its strong-arming of competitors and the use of both inflated and deflated pricing to drive the competition into bankruptcy or acquisition. While the case can certainly be made that Standard managed to bring the cost of oil and kerosene down to remarkably affordable levels, the manner in which they went about acquiring the means to do so has little to do with efficiency or superior product and far more to do with skirting the rule of law and leveraging influence to supply-chains and politicians alike. While the effects brought about by Standard Oil's huge size and production are a good case for Laissez Faire oversight by the government, the illegal or extra-legal (whichever way you wish to define it) methods employed would have been just as equally against the rule of law under a Libertarian system as they would have under today's system, and considering the Laissez Faire economy of the time, even after the Sherman Act of 1890, Standard's history of flouting or bending commerce and transportation laws in their favor were no secret. That conspiracy theorists like to ride this wagon into la-la-land with their Grand Universal Conspiracy ideas has no bearing on the real and destructive practices of a corporation like Standard.

One of the stronger criticisms of the Libertarian philosophy is that there exists little (if any) accounting for the dangers of monopolies and their known damaging characteristics, with dismissals invoking "the market" as if that were some type of panacea or magical solution that would invalidate the concerns that are existent and demonstrable. Arguments are made that regulations and government intervention inhibit "the market" and products available to the population, yet in the last 30 years advancement in telephony make it possible to visit this forum from a tiny portable phone, despite Ma Bell having been fractured by the government into smaller pieces. Computers can be purchased for less than $500 despite IBM's loss of a corner market. And the Internet itself has grown by leaps and bounds despite a constant forest of regulations and government interventions that you've probably never noticed since the popularity has moved forward seamlessly despite governments working hard to keep teleco business interests from fracturing the Internet as an entity into separate pipelines of corporate focus (instead requiring interaction and integration).

As I said, the statement you made differentiating between corporate and government behaviors is simply not supported by reality.

 

[GreNME]

Just to be clear, are Libertarians saying that Libertarianism is better for the functioning of the market, than the current system, or are they saying that it is better for the overall quality of life of the people who live within the system?

Well, this is why I'm asking the questions I am of EGarrett. All too often, once the governance angle of the Libertarian philosophy is pinned down (or cornered), "the market" begins popping up as if it were an answer to many of society's problems, usually with the implication that government intervention has slowed down progress socially as well as economically.

 

[Ziggurat]

Bull flops. The only reason it would be in anybody's legitimate interest to employ children would be that there is more work to be done than there are people to do the work.

No. There is no lump sum of labor. People will employ children if the wages required to hire children are sufficiently low. Children are no different than any other worker in this respect. In the US, the wages it would take to hire most children are above what the labor of children are worth, so very few children would be hired even in the absence of child labor laws.

If the alternative is poverty

There are worse alternatives than simply poverty.