Is Friedman Right?

[Pardalis]

So your analogy isn't even close.

See here:

[admitted oversimplification]

That was exactly my point.

 

[Skeptic Ginger]

...The Libertarian model doesn't say that there shouldn't be anyone verifying the claims of companies, they just think that it doesn't need to be the government doing it. There are plenty of consumer advocacy groups in this country.

And what, they are going to fix the problems by some counter advertising? What enforcement would they be using against big bucks false advertising, for example?

...Monopolies actually are inefficient, should you look at the graphs a monopolistic market....[snip]

Your point? Did I say I disagreed? No.

...But if you look around today, you see that the only true monopolies in place are those put into place BY THE GOVERNMENT.

This is some bizarre, knee jerk, 'government is evil' statement that doesn't even make sense. Just which monopolies would you be referring to here?

...This is ridiculous. It's not the having of wealth that matters, its how you got it that can lead to violent overthrow. If you're a hereditary monarch who taxes working people to death so you can build palaces for yourself, you're going to cause resentment.

Could you cite an historical example, because otherwise I don't have a clue what you are on about here.

...Partially. I think mostly it has to do with the fact that it leads to dictators in the large scale for a very simple reason. When you concentrate the needs of a large group of people into the hands of the few, when you tell them a small group of people at the national level can take care of providing them with food, electricity, water, transportation, medicine, education and every other individual need, you have centralized power. If you're an individual sitting at the head of this government and you have control over what the people need to survive, that's a level of power that's very hard to walk away from.

I do not advocate a strong government. I advocate regulation against propaganda and false advertising and against concentration of media ownership so we can maintain informed citizen involvement in government.

 

[Skeptic Ginger]

See here:



That was exactly my point.

And your specific objection to my oversimplification was?

 

[Richard Masters]

When this "great man" gave governmental advice to Augusto Pinochet, and then tried to lecture the world on freedom you have to question both his morality and his sense of irony.

I'm not going to take an absolutist position on Friedman, but spending one hour with Augusto Pinochet doesn't strike me as association in the way you appear to mean it.

Friedman and [l]ibertarianism run against many of the things that Pinochet did. You can't logically fault Friedman for advice he did not give.

Chile is one of the strongest economies in Latin America today, and China is becoming a superpower. Both accepted and put into practice Friedman's advice.

 

[Richard Masters]

That's fine. Except you're still left with the attribution of evil motives to Friedman. That "free market theory" does not concern itself directly with the notion of justice or evil does not mean you and I should not. The accusation against him is more than just that his policies will inadvertently lead to harm: the accusation is that he intends harm. Claiming that libertarianism doesn't address the issue of social justice doesn't solve the problem with the accusation against him. How can you not recognize this?

Very well put.

 

[Richard Masters]

[admitted oversimplification] But put Libertarian views into practice and you actually get greedy people acting to defraud others if there is no regulation to stop them. Because there are enough people with a greedy nature that the Libertarian model fails. For example, the market forces are distorted by advertising. You don't get the best product as long as the people selling the crummy product can get people to buy stuff based on false or misleading advertising. So how does the Libertarian model deal with that? Not well.

But libertarianism is not mutually exclusive with regulation. I do agree, however, that market forces are distorted by advertising.

You don't get the best product as long as the people selling the crummy product can get people to buy stuff based on false or misleading advertising. So how does the Libertarian model deal with that? Not well.

[l]ibertarianism isn't perfect, but it is not much different regarding misleading advertising than what we currently have. How does the libertarian model deal with it? Word of mouth, a savvy entrepreneur who knows a certain product is crappy and advertises a better one, private certification agencies, contract law, etc.

Shermer argues in his latest book along with a few other Libertarians that monopolies are inefficient and the market forces will take care of them on their own. But what that leaves out of the equation is concentration of wealth. That is not the same as monopolies. The way the 'market forces' correct concentrated wealth is with violent overthrow. That is what has happened time and time again in history.

Does concentration of wealth follow from free-market ideas?

Concentrated wealth also leads to concentrated political power and that leads to corruption and cronyism. Again, that is what we see in practice. Fascism is not what we see when we plug evolution theory into a computer simulation model.

But you are assuming that from free-markets comes concentrated wealth. Here is what a left-libertarian has to say.

The chief substantive difference between distributists and left-wing free marketers, it seems to me, involves not so much our sympathies or goals as our understanding of causality. To take much distributist rhetoric at face value, it seems to imply that the present concentration of wealth and capital emerged from laissez-faire and is the natural result of a free market, and that some form of state intervention is necessary to prevent wealth from being concentrated in fewer and fewer hands. The left-wing free marketer, on the other hand, sees the natural tendency of the market as egalitarian and decentralist, and sees the present day system of corporate power and concentrated wealth as the result of massive state intervention on behalf of the wealthy and powerful.The left-wing free marketer says the same thing his radical free market ancestors said:remove all state subsidies to big business, and all special privileges protecting it from competition, and the market will operate as dynamite at the foundations of corporate power; let the dynamite of the market operate, and we will see a decentralized economy of small-scale industry producing for local markets, with widespread cooperative ownership and self-employment.

http://distributism.blogspot.com/2007/09/libertarianism-and-distributism.html

 

[Sefarst]

And what, they are going to fix the problems by some counter advertising? What enforcement would they be using against big bucks false advertising, for example?

They could run a consumer advocacy site and it would be consumers' responsibility to research their purchases.

Your point? Did I say I disagreed? No.

Then you agree with most of the Libertarians who say government regulation should not be in place against monopolies?

This is some bizarre, knee jerk, 'government is evil' statement that doesn't even make sense. Just which monopolies would you be referring to here?

Where I live, there are plenty of government sanctioned monopolies [Georgia Power being perhaps the best example]. For another example, look at the history of AT&T and the Kingsbury Commitment back in 1913.

Could you cite an historical example, because otherwise I don't have a clue what you are on about here.

See above.

I do not advocate a strong government. I advocate regulation against propaganda and false advertising and against concentration of media ownership so we can maintain informed citizen involvement in government.

Concentration of media ownership, i.e. a media monopoly? So you DO have a problem with monopolies?

 

[Skeptic Ginger]

But libertarianism is not mutually exclusive with regulation. I do agree, however, that market forces are distorted by advertising.

[l]ibertarianism isn't perfect, but it is not much different regarding misleading advertising than what we currently have. How does the libertarian model deal with it? Word of mouth, a savvy entrepreneur who knows a certain product is crappy and advertises a better one, private certification agencies, contract law, etc.

Does concentration of wealth follow from free-market ideas?

But you are assuming that from free-markets comes concentrated wealth. Here is what a left-libertarian has to say.

Totalitarianism doesn't follow a communist economic system necessarily either, and right wing dictators don't have to follow capitalism but we sure supported a lot of them in the name of capitalism.

What I am suggesting is that regardless of the pure economic principles, Libertarianism (aka laissez faire capitalism) and communism, there are certain qualities of those two economic systems that combined with human nature don't do well when put into practice. One is all individualism and one is no individualism. What has worked the best is what the Western world has really done, that is, put a combination of the two into practice. Unfortunately some of our leaders were not so concerned that we established mirror governments and economic systems in the countries we were taking advantage of. That, I believe, was the result of the power inequality but that's another subject.

Some things do best as community sourced despite the belief by a lot of capitalists that the government can't do anything better than the market can. If you look at the actual evidence, countries with national health care provide a better standard of care for less money than we do in this country. You can argue ad nauseum that this reason or that aspect accounts for the difference rather than the nationalized/privatized variables, (no sense doing that here, there are other threads on the subject). But the evidence right now is that the nationalized systems do better per dollar spent.

We are doing quite well with government sourced police and fire. Sherman argued with me that he wouldn't mind private police services like Blackwater. Well I would, and who polices the police when the guy hiring them decides to bully someone else? It just is totally unworkable unless you have some kind of arbitration and that would be a mess. Bush has privatized all number of things and the result has been departments with all sorts of stuff outsourced to cronies and Bush will doers. How does having private sources of government services being the cronies of the President serve the public better than a government source which is accountable to the public?

It may not be inherent in the economic system, but privatizing everything lends itself all too well to cronyism and lack of oversight.

Obviously some things are better served in the private market. But the blanket myth that the government can't provide certain public services and that private markets are always more efficient is just that, a myth.

I can give you an example where the market produces a bad product. With insurance of all kinds the best product is profit for the insurer, not the best product for the ultimate consumer. That hasn't been working very well at all lately since some company has sold its consulting services to some of these companies and advised them to cut back on paying claims rather than increasing market share.

 

[RandFan]

Corruption benefits a few, at the expense of the rest of society. For those who benefit it is obviously in their self-interest to maintain or expand such corruption.

Henry Ford believed it was in his best interest to increase the wages of his workers. He was right.

There are many such examples. Many wealthy individuals fight corruption because they don't want to live in countries like Mexico where the wealthy have come to believe that it really is a zero sum game.

I'm not saying that corruption doesn't exist in America. I'm saying that it is much less endemic and more importantly that your conclusion doesn't follow from your premise.

 

[Skeptic Ginger]

They could run a consumer advocacy site and it would be consumers' responsibility to research their purchases.

Never effective enough to counter the massive capital sunk into advertising and there would never be adequate funding. It is better if we have government oversight of false advertising. This has lapsed significantly under Bush's polices favoring letting the market take care of itself.

Then you agree with most of the Libertarians who say government regulation should not be in place against monopolies?


Where I live, there are plenty of government sanctioned monopolies [Georgia Power being perhaps the best example]. For another example, look at the history of AT&T and the Kingsbury Commitment back in 1913.


See above.


Concentration of media ownership, i.e. a media monopoly? So you DO have a problem with monopolies?

What you are describing as bad monopolies have all been worsened by our current government's policy of deregulating everything and letting market forces act. The outcome has been poor.

When utilities were government sponsored monopolies like AT&T, the promise was if we stopped regulating them and let the market forces work instead, things would be fine. My private utilities, cable, phone, and Internet costs have continually gone up, products change on a regular basis specifically to make it difficult for the consumer to compare services and the companies now are in the habit of forcing people to either pay a few extra hundred dollars up front or commit to 2 years of service. It is a mess.

My regulated utilities, power, gas and garbage are run by semi private companies, water and sewer are run by the city, have only risen by as much as the cost for the products, in fact our water, sewer and garbage rates remain incredibly low.


Keep in mind here that people seem to want to lump me into some socialist category just because I advocate some government run services and more regulations not less. That doesn't mean I don't think the free market works for most things, because I do. Like I said, I think regulated capitalism works just fine. We had more of that under 8 years of Clinton and we did pretty well in this country. Bush and his 6 years of unrestrained Republican control favoring letting business keep its own house have had terrible results. If you look at their policies, they have refused to enforce regulations as a way of ignoring the balance of powers and they have outsourced tons of government services to the private sector but mostly to cronies. We are certainly not better off.

 

[Sefarst]

Never effective enough to counter the massive capital sunk into advertising and there would never be adequate funding. It is better if we have government oversight of false advertising. This has lapsed significantly under Bush's polices favoring letting the market take care of itself.

I'm not sure if you've noticed or been reading Randi's Swift, but his loudest complaint in the last few months has been the government's inability to stop false advertising. From Airbourne to Head On to Kinoki Foot Pads to Trudeau's books. And, worse yet, in many other countries, government subsidies are given to Homeopathy and acupuncture.

What you are describing as bad monopolies have all been worsened by our current government's policy of deregulating everything and letting market forces act. The outcome has been poor.

Deregulating everything? Where are you living? We have seen more and more regulation in the last few decades, most recently Bush proposed broad new sweeping powers for the Federal Reserve to regulate the money supply.

When utilities were government sponsored monopolies like AT&T, the promise was if we stopped regulating them and let the market forces work instead, things would be fine. My private utilities, cable, phone, and Internet costs have continually gone up, products change on a regular basis specifically to make it difficult for the consumer to compare services and the companies now are in the habit of forcing people to either pay a few extra hundred dollars up front or commit to 2 years of service. It is a mess.

We're talking about efficiency of resources, not cheapest prices. The increase in prices is more to the result in the increase in fuel costs and overall inflation.

My regulated utilities, power, gas and garbage are run by semi private companies, water and sewer are run by the city, have only risen by as much as the cost for the products, in fact our water, sewer and garbage rates remain incredibly low.

Anecdotal.

Keep in mind here that people seem to want to lump me into some socialist category just because I advocate some government run services and more regulations not less. That doesn't mean I don't think the free market works for most things, because I do. Like I said, I think regulated capitalism works just fine. We had more of that under 8 years of Clinton and we did pretty well in this country. Bush and his 6 years of unrestrained Republican control favoring letting business keep its own house have had terrible results. If you look at their policies, they have refused to enforce regulations as a way of ignoring the balance of powers and they have outsourced tons of government services to the private sector but mostly to cronies. We are certainly not better off.

As I said, Bush is far from the deregulation hound you try to make him out to be. Bush engaged in protectionism to protect the steel industry in the US, new oversight committees have been created, and he bailed out Bear Stearns, to name a few things. The current financial crisis is a result of too much liquidity in the market compounded with some poor congressional legislation.

 

[Skeptic Ginger]

I'm not sure if you've noticed or been reading Randi's Swift, but his loudest complaint in the last few months has been the government's inability to stop false advertising. From Airbourne to Head On to Kinoki Foot Pads to Trudeau's books. And, worse yet, in many other countries, government subsidies are given to Homeopathy and acupuncture.

Inability vs not willing to are too different things. This current administration has gutted regulatory enforcement as a means of getting around the balance of powers.

Deregulating everything? Where are you living? We have seen more and more regulation in the last few decades, most recently Bush proposed broad new sweeping powers for the Federal Reserve to regulate the money supply.

I'm not for or against the current Federal Reserve actions per se, but to call these sweeping regulations when the changes were needed because of the industry's total meltdown without any regulations and oversight is a bizarre way to describe what is going on.

We're talking about efficiency of resources, not cheapest prices. The increase in prices is more to the result in the increase in fuel costs and overall inflation.

What does this have to do with forcing up front payments or 2 year contracts and continual shifting of service "packages" to prevent cost comparisons from actually being done?

Anecdotal.

Right, an anecdote which applies equally to every utility customer around.

As I said, Bush is far from the deregulation hound you try to make him out to be. Bush engaged in protectionism to protect the steel industry in the US, new oversight committees have been created, and he bailed out Bear Stearns, to name a few things. The current financial crisis is a result of too much liquidity in the market compounded with some poor congressional legislation.

I don't have the time to correct you on this nonsense. This administration has gutted regulatory bodies right and left. Look up the problem with Bush failing to appoint people needed to enforce regulations for a place to start. I already described the failure of OSHA to carry through on worker protection from TB that was in the final rule stage when Bush took office. Rummy went to town with private contractors for half of what the Pentagon has previously been in charge of.

 

[Sefarst]

Inability vs not willing to are too different things. This current administration has gutted regulatory enforcement as a means of getting around the balance of powers.

So if the government is unable to stop false advertising, but keeps demanding money for it, that is considered a good thing? Most people would consider that a waste. If I thought I could fly by waving my arms and stood in the street every day flapping like an idiot, would you admire my willingness despite my inability? Would you be willing to pay money for food for me that I may continue my arm flapping uninterrupted by work?

I'm not for or against the current Federal Reserve actions per se, but to call these sweeping regulations when the changes were needed because of the industry's total meltdown without any regulations and oversight is a bizarre way to describe what is going on.

But it is regulation. If you want to characterize the Bush administration as a hardcore deregulator, you would be almost completely wrong. Just the opposite has occurred during his administration.

What does this have to do with forcing up front payments or 2 year contracts and continual shifting of service "packages" to prevent cost comparisons from actually being done?

The companies expect fuel cost increases and inflation to occur. They have been occuring for quite some time now. These costs have been incorporated into their business models. I'm not sure what you're talking about when you talk about service packages, though.

Right, an anecdote which applies equally to every utility customer around.

Not me, my water and sewage have actually increased by a substantial rate. Looking at my last bill, I'd calculate 9% increase per gallon in price since a a year and a half ago. My cable has only increased $2 (from $25 to $27), an increase of 8%. Hence why I emphasize that your calculations are only anecdotal. It depends on where you live as well as a dozen other factors. For instance, my water and sewage are more expensive because my area is currently in a bad drought.

I don't have the time to correct you on this nonsense. This administration has gutted regulatory bodies right and left. Look up the problem with Bush failing to appoint people needed to enforce regulations for a place to start. I already described the failure of OSHA to carry through on worker protection from TB that was in the final rule stage when Bush took office. Rummy went to town with private contractors for half of what the Pentagon has previously been in charge of.

From the environment to the economy, Bush has added more regulations. You barely provide any examples to the contrary here.

 

[Cain]

Sefarst,

You're full of crap. I do not know of any modern administration that has not increased regulation in some sectors of the economy while deregulating. For the Bush regime look at housing, mining, energy, "healthy forests," "clear skies." The general push for deregulation did get start a few decades back, specifically in the late 70s. The climate changed. There was actually a pretty good article in a recent issue of (I want to say) New York Times Magazine discussing Lewis Powell's infamous "memo" in the early 70s. Obviously you cannot just look at this President, or even the executive branch. The focus of the aforementioned article was the Supreme Court, but with Bush you wouldn't just look at the laws on the books but the agencies in charge of regulating industry, and the people in charge of running those agencies. Enforcement is a joke.

I'm sure we could find someone from Public Citizen (or the Heritage Foundation) all too willing to cite what Bush has done (or has not done). Of course Public Citizen will say it's an outrage, a new low, and Heritage will say Bush has not gone nearly far enough, but you're totally missing the big picture.

 

[Skeptic Ginger]

Thanks Cain, I am a bit tired and I hate leaving those distorted views of the facts unanswered. It's not like all the conversation in political discussions right now isn't about how lack of regulation led to our current economic troubles in the financial markets. Again it boggles the mind how anyone can view that as the fault of too much regulation or the government acting too much as opposed to not enough.

 

[pbergeron]

... But put Libertarian views into practice and you actually get greedy people acting to defraud others if there is no regulation to stop them. Because there are enough people with a greedy nature that the Libertarian model fails. For example, the market forces are distorted by advertising. You don't get the best product as long as the people selling the crummy product can get people to buy stuff based on false or misleading advertising. So how does the Libertarian model deal with that? Not well.

...

How does regulation solve the greed problem, if the ones doing the regulating are themselves greedy?

What kind of business model is the one you cited? Wouldn't the customers themselves "regulate" the businesses?

Sure Company X may win the short-term battle by quickly selling products using saavy advertising methods, but this would be a horrible business model for a company looking to survive long term. It wouldn't take me very long to figure out that the product they convinced me into buying was crappy. Now they have lost my business and my trust.

...

If you look at their policies, they have refused to enforce regulations as a way of ignoring the balance of powers and they have outsourced tons of government services to the private sector but mostly to cronies. We are certainly not better off.

Is this admitting that those in our government are actually capable of being corrupt? How then is this supposed to convince me to want more government regulation? Someone has to enforce the regulation. Can the enforcer not be corrupt as well?


The entire issue here seems to be determining who we can trust. To think that the government is infallible and will only act in the best interest of the people is misguided. These people can be bought. It is like Sefarst says, EVERYONE is greedy.

 

[Mycroft]

Basically I expect the upper classes to use their superior financial means and economic position to advance their position as much as possible within the legal limits, regardless of any detrimental effects on society as a whole. Which is why I support an elaborate regulatory system to prevent such detriments, with measures in place to punish those who cross it. And that's the opposite of the libertarian position.

I think the logical disconnect is in looking at the upper classes as a single cohesive group that will act in concert to advance common interests rather than as the group of individuals that they really are.

I've never met a wealthy person who had any interest in keeping anyone else down.

 

[Mycroft]

Free market theory assumes rational self-interest, as far as I know it makes no mention of justice whatsoever. Which is the point, rational self-interest for one person can result in tremendous injustice to others.

To their credit, libertarians do oppose murder and support property rights. I'm not allowed to take your posessions without your permission. That is good, but insufficient.

Suppose I create a pension fund. People put their money in, I invest it and pay myself a handsome wage plus a bonus proportional to the yearly gain. That encourages me to take high risks, increasing my bonus. Unfortunately, because of the high risk the fund went bust during the credit crunch. Fortunately (for me), I still have much of the money I made.

No murder was commited, and the people who put their money in did so voluntarily. Too bad they lost everything, including their pensions. The point is that one has to commit neither murder nor theft to rob old ladies. Without comprehensive regulation it can be done legally in a libertarian society. And without the prospect of punishment it would be in my rational self-interest to do so, regardless of how immoral it is.

Rational self-interest would be for the people contributing to the pension fund (and who are depending on it for their retirement) to not hire managers who will put their money at high-risk. Friedman would have likely recommended a different fund where the manager was compensated differently.

Anyone who has followed recent news on the Bear Sterns collapse and buyout understands there are a lot of questions being raised about how investment bankers are paid, and rightly so, but none of that proves Friedman wrong.

 

[Mycroft]

But what that leaves out of the equation is concentration of wealth. That is not the same as monopolies. The way the 'market forces' correct concentrated wealth is with violent overthrow. That is what has happened time and time again in history.

What is it about "concentrated wealth" that needs correcting?

The issue isn't if a few people have a lot of wealth, the real issue is the availability of wealth to the masses. Starving people will revolt regardless of the relative wealth of the upper class, but if the average person is comfortable and well fed, then it doesn't matter how many Warren Buffets or Bill Gates you got running around with their tens of billions of dollars.

Concentrated wealth also leads to concentrated political power and that leads to corruption and cronyism.

I don't see how that necessarily follows. Certainly there can be corruption and cronyism with little concentration of wealth. Doesn't this have more to do with the rule of law in the society in question?

 

[Mycroft]

They could run a consumer advocacy site and it would be consumers' responsibility to research their purchases.

This seems to be a logical disconnect of libertarians.

Nobody has the time and resources to research every purchase they make.

Consumer advocacy groups can be fronts for paid advertising, industry shills, or motivated by a political agenda.

The truth is some degree of government oversight is necessary.