Bailout and blame: Views on capitalism and misinformation.

For the serious discussion of weighty matters and worldly issues. No off-topic posts allowed.

Moderators: Azrael, Moderators General, Prelates

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Fri Dec 26, 2008 3:27 pm UTC

I've had many discussions with very intelligent people about the massive US bailout of lending institutions at the tax-payer's expense. No one seems to disagree that the banks went too far and were reckless with their lending practices. However, many smart people seem to blame the people who over-borrowed more than they do the banks who lent them money. Personally, I feel the success of this 'blame the borrowers' meme might be the bank's biggest scam of all.

My experience is that most of the debtors lived beyond their means and they are culpable (Yes, there are many people who ended up in over their heads due to misfortune alone, but I don't think this group is in the majority). However, if you can count on anything, you can count on people acting irresponsibly. Banks know this.

The biggest travesty is if financially 'smart' people allow the banks to shift the blame while we pay for their scam. If we do, the bank is taking our money too.

I find the internet community has a strong libertarian contingent. Very often I find myself agreeing with libertarian ideals. However, I think some people who feel that the most good comes from the individual sometimes willfully overlook human nature as a whole. We humans just aren't that savvy. Individuals acting in what they see to be their own best interests doesn't always produce the best results when you sum up the results of their actions. Here's the fundamental problem as I see it:

Capitalism ultimately fails because it doesn't account for human nature. Capitalism assumes each individual will work in his/her own best interests. To achieve this, each individual must have information enabling them to decide what is best for them. Unfortunately, people will act selfishly and distort information to further their own interests. As resources become unevenly distributed, the control of information becomes uneven.

I think the US capitalist system has gotten to the point where the people with the most resources are distorting information to such an extent, most individuals are not able to act in their own best interests.

In short, I believe we found where capitalism breaks.

Solutions: 1) Educate people so they can better act to their advantage. 2) Free information from private interests.

Edited to a) remove patronization and b) make it clear that this *will not* turn into another cage match debate concerning capitalism, socialism and communism. Nor human nature, either.

-Az
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

User avatar
segmentation fault
Posts: 1770
Joined: Wed Dec 05, 2007 4:10 pm UTC
Location: Nu Jersey
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby segmentation fault » Fri Dec 26, 2008 4:43 pm UTC

markkat wrote:1) Educate people so they can better act to their advantage.


essentially this is what needs to be done. its not just an economic problem, but a social one as well. people just arent educated enough, and it almost seems that the media in this country enforces and propagates the naivety. yeah its easy to blame those greedy poor people who only wanted to own a home, but when you have banks come in and say "buy this house" youre obvious response is going to be "uh i cant really afford it." that is, until the bank says "YES YOU CAN! HERES HOW..."

they were manipulated by the banks. it wasnt greedy people trying to live beyond their means. it was a scam, which the uneducated fell for.

however, these people are going to exist. not only will there always be a low end on the intelligence scale, there will always be people smart enough to devise a new plan to take their money.
people are like LDL cholesterol for the internet

qbg
Posts: 586
Joined: Tue Dec 18, 2007 3:37 pm UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby qbg » Fri Dec 26, 2008 5:39 pm UTC

markkat wrote:Solutions: 1) Educate people so they can better act to their advantage.

This would be fine and all, but one would have to work against the system that is in place to achieve this. As you already pointed out, "Unfortunately, people will act selfishly and distort information to further their own interests." The question then I believe is how could we work against this unfortunate trend, and is there a way that would let us do so without significantly denaturing capitalism? The internet is one possible approach that wouldn't really denature capitalism, but is it effective enough? I remember reading an interview with Noam Chomsky that touched on this subject, and IIRC, although he thought the internet was great, that it still isn't quite enough.
2) Free information from private interests.

I'm not sure at all how you could do this without at least denaturing capitalism to a sizable degree.

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Fri Dec 26, 2008 7:08 pm UTC

qbg wrote:The question then I believe is how could we work against this unfortunate trend, and is there a way that would let us do so without significantly denaturing capitalism? The internet is one possible approach that wouldn't really denature capitalism, but is it effective enough?


As long as we maintain/promote net-neutrality, I think the internet functions as a positive force in this aspect.

Personally, I would not be adverse to the government guaranteeing more bandwidth for non-commercial media. This could even be seen as a 1st Amendment issue. Citizens should have a voice that does not depend on a for-profit entity, but upon the government, which works for them.

I don't worry too much about de-naturing capitalism. IMO capitalism is a function of human nature that can be harnessed to drive an economy and progress. However, it has it's limitations, including a potential to self-destruct if resource consumption is not moderated. I don't see capitalism in danger of disappearing, it just needs to be used in a healthy, sustainable way.

IMHO, the more we recognize what capitalism is not good at, or what it's pitfalls are, the better we can employ it where it thrives and rewards us.
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

Rysto
Posts: 1460
Joined: Wed Mar 21, 2007 4:07 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Rysto » Fri Dec 26, 2008 11:38 pm UTC

markkat wrote:Personally, I would not be adverse to the government guaranteeing more bandwidth for non-commercial media.

I'm really not sure what you're trying to say here. Are you saying that the government should subsidize non-commercial media to allow them to pay for websites and whatnot, or are you suggesting that ISPs should be forced to devote a proportion of their infrastructure for the delivery of "non-commercial media"?

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Sat Dec 27, 2008 1:46 am UTC

Rysto wrote:I'm really not sure what you're trying to say here. Are you saying that the government should subsidize non-commercial media to allow them to pay for websites and whatnot, or are you suggesting that ISPs should be forced to devote a proportion of their infrastructure for the delivery of "non-commercial media"?


Sorry, I was speaking of 'bandwidth' in very broad terms. I should have said as much. What I mean, is that for whatever broadcast medium, including the EM spectrum, room can be allotted for non-commercial public use. I think things like PBS, NPR and even CSPAN are examples of this. I'd like to see even more content variety, however. I'd like if the NIH and NSF had channels. Community TV is great. I'm not sure if ISPs should be forced to provide infrastructure, but the government could rent some for the purpose.

I think the people should have non-commercial outlets for information and expression. It might go some distance towards a better educated public. One that was more diverse in their views, more savvy, and ultimately, less beholden to information that carried a message tied to a profit. -Part solutions 1 and 2 from my original post.

This might seem tangential to my OP, but I don't think it is.
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

User avatar
Indon
Posts: 4433
Joined: Thu Oct 18, 2007 5:21 pm UTC
Location: Alabama :(
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Indon » Mon Jan 12, 2009 6:38 pm UTC

I don't view consumer education as a one-time thing, but rather as an ongoing arms race between the people who want to lie to consumers to get their money, and consumers who don't want to give their money to liars. If people learn about one advertising technique that exploits X feature of the human brain, then advertisers will just make commercials that exploit Y feature instead.
So, I like talking. So if you want to talk about something with me, feel free to send me a PM.

My blog, now rarely updated.

Image

Heisenberg
Posts: 3789
Joined: Wed May 14, 2008 8:48 pm UTC
Location: Uncertain

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Heisenberg » Mon Jan 12, 2009 7:45 pm UTC

Personally, I appreciated This American Life's reporting on the current economic situation. Their programs "Giant Pool of Money" and "Another Frightening Show About The Economy" were very enlightening on the subject. website

I think they did a good job of describing the market forces that opened up this can of worms, and dispelling both the myths assigning blame to the "evil bankers" and "irresponsible consumers." They do bring up cases of intentional deception by lenders and intentional deceit by consumers, but point out that these cases comprised a small minority of loans.

Another topic they present is the political blame. They go out of their way to show that, regardless of the finger-pointing, this crisis was not caused solely by Democratic nor Republican legislation. I would encourage anyone who has not yet heard these programs to take a listen. They offer an interesting perspective.

User avatar
IntoxicatedPirate
Posts: 13
Joined: Fri Jan 09, 2009 8:58 pm UTC
Location: Northern Virginia
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby IntoxicatedPirate » Mon Jan 12, 2009 8:40 pm UTC

Capitalism requires a free, open market to function properly. The argument has always been that most of the fluctuations are caused by external interference in the system, whether it be government regulation or individual disregard for the law (see: Madoff). So, with this being the case, how can one postulate that capitalism has failed when an open financial market was illusory to begin with? The Federal Reserve has openly manipulated interest rates and capital holdings for years, with their dabbling increasing since the 2001 recession. The collapse of the housing industry (and, subsequently, the financial sector) should not be linked to the lenders or the borrowers, but by the surplus of sub-prime loans created by the artificially low lending rate that was being propagated by the Federal Reserve.

Econ 101: Prices will find an equilibrium through consumer/producer action and if there is a price ceiling below said equilibrium, quantity demand will increase. Loans, however, have a very, very small turnover price, unlike physical goods and services, so it was still "viable" to loan at that level, therefore banks were more than happy to meet that demand. Unfortunately, lenders underestimated the amount of delinquencies and borrowers overestimated their future buying power (or underestimated their future payments, either/or).

If Capitalism is well and truly collapsing, you may need to tell the markets that are reacting exactly as expected, per a monetarist point of view; the relatively open-trade retail market has decreased in sales because of the overall fall of the real wage, thereby causing a decrease in production (supply) to match the falling sales (demand). Ultimately, this is where Capitalist doom-sayers' arguments tend to fail: they incorrectly latch on to one area (in this case, the credit crunch), ignoring every other example that runs contradictory to their cause.
Drink up, me 'earties, yo ho!

User avatar
JBJ
Posts: 1263
Joined: Fri Dec 12, 2008 6:20 pm UTC
Location: a point or extent in space

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JBJ » Tue Jan 13, 2009 7:39 pm UTC

I disagree with the original assertion that we've found where capitalism breaks. Any well designed system will have built in redundancy and regulation. The redundancy is accomplished by a seperation of duties, and the power of regulation needs to be held by a seperate entity. Power corrupts, absolute power corrupts absolutely applies.

In the US Constitution, these principles are built into the framework. The seperation of the branches of government is the redundancy, and the power of regulation (elections) is held by the people. This is my argument against why a true democracy will fail. You cannot place the power in the hands of the regulators. Not directly on topic, but relevant to my argument.

The US market has the built in law of supply and demand as a regulation, but the holder of that power, banks, consumers, and investors, are part of the system. During the crash of 1929, attempts were made by several banks stop the crash by buying huge amounts of stock at higher than market values to prop up the market. A valiant attempt, but it ultimately failed. This is where capitalism broke, by putting the power in the hands of the regulators. In 1933, the Glass-Steagall Act, and in 1934, the commission of the SEC, "fixed" capitalism by segregating commercial and investment banks and creating a seperate entity to hold the power of regulation on the stock market.

Now there is of course a flaw in both systems. In the US government, the people can break the system by voting into office incompetent or corrupt officials. But because of the seperation of powers, it would have to be quite a concerted effort to fill up all areas of government. A similar flaw exists with the market system. Consumers and investors can push the market out of balance, but it takes a concerted effort. The regulatory powers of the SEC and the various acts it enforces should reign the market back in before it gets too far out of balance.

So what about the Federal Reserve? The Fed is supposed to be a regulatory institution over private commercial banks. But the Fed also has the power to set monetary policy and supply. So who regulates the Fed? Technically, nobody. They operate within guidelines set by Congress, and their Board of Governors is appointed by the President and confirmed by the Congress. But where the Congress can't pass a law without the President's signature (I know, they can with 2/3 majority), and a company can't be publicly traded unless they are certified by the SEC, who gives approval to the Fed? Like I said, no one. The Fed can act without authorization from anyone.

So, while I maintain that capitalism isn't technically broken, there is a serious flaw with it at the moment. But it can be fixed. Our investment market has appropriate regulation and oversight. Our commercial banking system is well regulated by the Fed. It needs to be fixed by repealing Gramm-Leach-Bliley to re-segregate commercial and investment banks, disallowing the securitization of loans, and by putting the monetary policy back in the hands of the Treasury department under approval of Congress.

Our monetary policy is broken. We have too much power in the hands of the regulators. The decisions of the Fed, specifically with regard to interest rates, has a dramatic effect on the investment market. Low interest rates encourage borrowing, but they also discourage saving so people turn to investments in the market. Higher interest rates discourage borrowing, but encourage saving so people turn away from investing.

Interest rates were held too low for too long which drove people to look for new investments. There is a conflict of interest in turning an instrument like a mortgage into a security. This does not excuse the behavior of people and banks making bad investments, but it originates with the unregulated power of the Fed over monetary policy.
So, you sacked the cocky khaki Kicky Sack sock plucker?
The second cocky khaki Kicky Sack sock plucker I've sacked since the sixth sitting sheet slitter got sick.

btilly
Posts: 1877
Joined: Tue Nov 06, 2007 7:08 pm UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby btilly » Tue Jan 13, 2009 8:22 pm UTC

We've known for a long time the fact that free markets cannot reliably provide public goods. What this financial crisis should teach us is that the stability of our financial system is a public good. And therefore it can't be provided by the free market.

After the Great Depression a number of measures were enacted to avoid a recurrence. They included the separation of commercial banking from investment banking, and rules limiting how much leverage a bank could exercise. In recent years those measures were eroded and largely eliminated. Surprise, commercial banks began taking bigger risks (making them less financial stable), and investment banks went to their maximum leverage. Furthermore new types of institutions came around that weren't banks but financially acted a lot like banks.

Many of the risks taken were major. However there was a huge incentive problem. Sure, you might individually realize that the toxic loans you are packaging up aren't likely to be worth what you're getting for them as a bond. But playing along makes you lots of money. Worse yet, taking a stand against them causes your returns to be worse than your competitors, with the results that your boss (or the board of directors, same thing) is going to come at you with hard questions about how Morgan Stanley can make all of this easy money while you can't. Taking the stand on principle may be wise, but management is eventually going to find someone who will give them the answer they want. Your incentives do not align with the public good of financial stability.

The advice given by economics Nobel prize-winner, Paul Krugman is that we need to set up the old regulations again. Except that this time we have to regulate anything that acts like a bank in that it borrows short and lends long. Meaning that if you make long-term loans then finance them with short-term credit (like, say, the non-bank Countrywide), then you need to follow the rules that apply to banks.

I think he is right. After this crisis some variation on that advice will be followed, and will work. Until future generations, having seen decades of financial stability, erode the regulations in the name of short-term profits. And then we'll suffer another major crisis.
Some of us exist to find out what can and can't be done.

Others exist to hold the beer.

User avatar
Garm
Posts: 2241
Joined: Wed Sep 26, 2007 5:29 pm UTC
Location: Usually at work. Otherwise, Longmont, CO.

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Garm » Wed Jan 14, 2009 5:01 pm UTC

btilly wrote:Many of the risks taken were major. However there was a huge incentive problem. Sure, you might individually realize that the toxic loans you are packaging up aren't likely to be worth what you're getting for them as a bond. But playing along makes you lots of money. Worse yet, taking a stand against them causes your returns to be worse than your competitors, with the results that your boss (or the board of directors, same thing) is going to come at you with hard questions about how Morgan Stanley can make all of this easy money while you can't. Taking the stand on principle may be wise, but management is eventually going to find someone who will give them the answer they want. Your incentives do not align with the public good of financial stability.


I'm not even sure that the people packaging up the securities realized how toxic the mortgages were. The ratings agencies need to share the blame here for a lot of what's going on. They were the one's who kept the mortgage packages at inflated value through their false ratings.
Those who make peaceful revolution impossible will make violent revolution inevitable.
- JFK

btilly
Posts: 1877
Joined: Tue Nov 06, 2007 7:08 pm UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby btilly » Wed Jan 14, 2009 5:43 pm UTC

Garm wrote:
btilly wrote:Many of the risks taken were major. However there was a huge incentive problem. Sure, you might individually realize that the toxic loans you are packaging up aren't likely to be worth what you're getting for them as a bond. But playing along makes you lots of money. Worse yet, taking a stand against them causes your returns to be worse than your competitors, with the results that your boss (or the board of directors, same thing) is going to come at you with hard questions about how Morgan Stanley can make all of this easy money while you can't. Taking the stand on principle may be wise, but management is eventually going to find someone who will give them the answer they want. Your incentives do not align with the public good of financial stability.

I'm not even sure that the people packaging up the securities realized how toxic the mortgages were. The ratings agencies need to share the blame here for a lot of what's going on. They were the one's who kept the mortgage packages at inflated value through their false ratings.

I guarantee that plenty of them did. I say that from knowing some personally.

While there is blame to go around, it is impossible to look at one institution and say that they were the cause. For instance take the rating agencies. Sure, they handed out ratings that they shouldn't have. But consider that there are 3 major rating agencies. If any one rating agency balks, they don't get business and the others do. Plus if the rating is similar to what the others gave, nobody could fault you for being wrong. This put pressure on the rating agencies to come out with similar ratings to the others, but just a shade more generous. And since everyone would use whatever rating agency was currently most generous, this put constant pressure on the other two rating agencies to lower their standards. The result was a form of grade inflation.

This is a variant of the well-known problem of shopping around until you find someone who will give you the answer you want to hear. You don't ever say you want someone to lie. You hint that you want to be "aggressive", and then drop anyone who is "not aggressive enough". If you are waving around large amounts of cash then before long you can find someone to give the answer that you want. Even if it requires lying. A well-known example of this phenomena is that this is how Enron found auditors who would sign off on their paper schemes.

The same thing happened on multiple levels. I've described what it looked like for rating agencies, but move on to investment banks. Any time one investment bank lowered their standards for loans, lending institutions streamed their loans to them. (Often the deal would be that they would accept the junk if they got the good stuff. Lending the junk was attractive, so they suddenly got the lions share of the debt.) That bank was able to do that because they convinced the rating agencies to rate bonds which had some of these loans mixed in. Enter great profits as you securitized and sold bonds for a quick profit. The other investment banks were suddenly under pressure to do likewise since they were losing business fast. They shopped around, found how the other one got that crap rated, and matched tactics. The race to the bottom was on.

As Upton Sinclair said a long time ago, It is difficult to get a man to understand something when his job depends on not understanding it. A lot of people's very high-paying jobs depended on them not understanding the fact that the sub-prime market had structural risks that securitization did not mitigate. And they indeed had difficulty understanding that until the survival of their employers (and therefore their jobs) depended upon them figuring it out quickly.
Some of us exist to find out what can and can't be done.

Others exist to hold the beer.

Heisenberg
Posts: 3789
Joined: Wed May 14, 2008 8:48 pm UTC
Location: Uncertain

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Heisenberg » Thu Jan 15, 2009 4:25 pm UTC

Garm wrote:They were the one's who kept the mortgage packages at inflated value through their false ratings.

Part of the problem was that no one had ever done anything like this before. The people rating these investment packages were estimating the possible foreclosure rates based on historical data. Obviously, NINA loans would have a higher foreclosure rate, but no one had any data on how high it would be.

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Fri Jan 16, 2009 7:16 am UTC

The OP's argument is based on the assumption that the banks that lent irresponsibility going bankrupt is a bad outcome. In capitalism and libertarian views, those banks should go out of business and that is a very good outcome.

If a business made a series of mistakes and mal investments, it should go out of business via bankruptcy. There is no such thing as "too big to fail" in capitalism. That term only exists in systems better described as "crony capitalism" or fascism (merger of the corporate & state power).

The capital (assets) those banks had need to be freed up via the bankruptcy process, to be determine a correct value of the assets and put under competent management (banks that did not lend recklessly in the boom). The management teams that made the mistakes will be wiped out.

Saying Capitalism is bad because companies go out of business is like saying Baseball is bad because one team always loses. Losses and companies going bankrupt are inherent to the system. Take away the losses, and you are no longer describing capitalism.

Capitalism is a system of profit and loss. Losses are just as important economic indicators as profits. When companies suffer massive losses, it serves as a great case study for other companies on what not to do (hmm maybe it's not a good idea to leverage my bank to the hilt on a house of cards).

The bailouts are preventing capitalism from functioning correctly. Therefor this thread is more a discussion on the impacts of fascist policy, not capitalism.
Privatized profits and socialized losses is pure fascism, and that is what is happening in the financial (and now auto) industry currently.

btilly
Posts: 1877
Joined: Tue Nov 06, 2007 7:08 pm UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby btilly » Fri Jan 16, 2009 8:37 am UTC

JPA wrote:The OP's argument is based on the assumption that the banks that lent irresponsibility going bankrupt is a bad outcome. In capitalism and libertarian views, those banks should go out of business and that is a very good outcome.

That was the view of the US government in 1929. Not long after the entire banking system collapsed, the monetary system nearly did likewise, and the USA entered the Great Depression. Economists are essentially universally agreed that the lack of response to the original stock market crash was a major contributing factor.

The connection is that a healthy financial institution which has absolutely nothing wrong with it can turn unhealthy and collapse very quickly if the public loses confidence that it is healthy. And when the public sees previously healthy banks unexpectedly disappear, you get an air of panic in which rumor quickly turns into crowds asking for their money back, which turns into another bank collapse.

Now as recently as a year ago this statement could have been controversial. In recent decades there has been a movement towards the belief that free markets always know best. There was a movement towards the belief that the problems of the Great Depression could never happen again and we didn't have to worry about it. And these theories justified a lot of decisions that made a lot of people rich. Rich people are very influential, and so the theories had very strong support.

This is no longer true. What convinced the skeptics was how the credit crunch instantly became the far larger financial crisis when Lehman went bankrupt. A company like Lehman does not just go bankrupt. I guarantee you that Henry Paulson saw the books and decided that bankruptcy was the best course. But within hours it was dead obvious to everyone that they were wrong. And it probably wasn't coincidence that the 2008 Nobel prize in Economics went to an economist who has been telling people for years that the lessons from the Great Depression are still relevant, and could happen again.
Some of us exist to find out what can and can't be done.

Others exist to hold the beer.

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Fri Jan 16, 2009 10:02 am UTC

btilly wrote:
JPA wrote:The OP's argument is based on the assumption that the banks that lent irresponsibility going bankrupt is a bad outcome. In capitalism and libertarian views, those banks should go out of business and that is a very good outcome.

That was the view of the US government in 1929. Not long after the entire banking system collapsed, the monetary system nearly did likewise, and the USA entered the Great Depression. Economists are essentially universally agreed that the lack of response to the original stock market crash was a major contributing factor.


That is not true. Economists have shown that the government intervention increased the depth and length of the great depression.
http://econpapers.repec.org/paper/fipfedmwp/597.htm
Hoover's tax hikes being the most damaging.

In fact, the crash of 1929 was the first crash in which government intervention became policy
http://mises.org/rothbard/agd.pdf page 186.
Previous market crashes were strictly laissez-faire (1819, 1837)

The connection is that a healthy financial institution which has absolutely nothing wrong with it can turn unhealthy and collapse very quickly if the public loses confidence that it is healthy. And when the public sees previously healthy banks unexpectedly disappear, you get an air of panic in which rumor quickly turns into crowds asking for their money back, which turns into another bank collapse.


I am well aware of the long history of instability of fractional reserve banking. It is worse now with implied "safety nets" like FDIC which just create moral hazard and more capital put into an unstable banking system. Guess what? FDIC doesn't have the funds to cover even a few banks failing next year. It has 1% reserves to its potential liabilities.

A company like Lehman does not just go bankrupt.

why not? because they are rich and powerful? Because they are politically connected? Because we live in a fascist state?

I guarantee you that Henry Paulson saw the books and decided that bankruptcy was the best course. But within hours it was dead obvious to everyone that they were wrong.

Why? Why was it wrong to let an insolvent bank go out of business? Your argument has the burden of proof. $750 billion burden of proof. (maybe trillions more in liabilities)

Here are a few sources that show that the broad, industry wide credit crisis was a myth. The only crisis was for banks that were insolvent. Gee, I wonder why people won't lend money to insolvent banks?

http://www.minneapolisfed.org/research/WP/WP666.pdf
http://hnn.us/blogs/entries/54828.html

I have no disagreement that we arein a deep recession. But the credit crisis was the boogey man to scare $750b in tax dollars into failed banks. History will show that the "credit crunch" was very much like "WMDs" in Iraq. Scare tactics.

And it probably wasn't coincidence that the 2008 Nobel prize in Economics went to an economist who has been telling people for years that the lessons from the Great Depression are still relevant, and could happen again.

Heh, Paul "We can spend our way into prosperity" Krugman? Give me a break. He won it for trade theory anyway, nothing to do with monetary policy, public policy or the great depression.

User avatar
Ixtellor
There are like 4 posters on XKCD that no more about ...
Posts: 3113
Joined: Sun Jan 13, 2008 3:31 pm UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Ixtellor » Fri Jan 16, 2009 6:07 pm UTC

JPA wrote:That is not true. Economists have shown that the government intervention increased the depth and length of the great depression.
http://econpapers.repec.org/paper/fipfedmwp/597.htm
Hoover's tax hikes being the most damaging.


This 'argument' has no conclusion. Its still being debated. Linking one paper that makes your conclusion, can easily be countered with others on the opposing side.

Hoover did the exact opposite of what Keyneisan philosophy calls for in that situation. Its just as much an argument for Keynes.

The only way will ever know who is correct between Keynesian and Monatarists debates is if countries strictly apply their forumla to a countries economy. We know that Monatarism failed in GB when they tried it, and we know that Governments around the world are horrible and using Keynes theories because they never cut back during booms, thus unable to 'prove' anything other than gov spending can increase aggregate demand.

JPA wrote:Here are a few sources that show that the broad, industry wide credit crisis was a myth. The only crisis was for banks that were insolvent. Gee, I wonder why people won't lend money to insolvent banks?

http://www.minneapolisfed.org/research/WP/WP666.pdf
http://hnn.us/blogs/entries/54828.html


1) First link isn't working.
2) Second link fails to explain what affect gov action had on loanable funds. Seems you could easily make the argument, the funds are being lent BECAUSE of gov action.
3) I don't feel like debating the 'credit crunch' right now, because I don't know how familiar you are with liquidity protection, asset backed commerical paper markets, credit enhancment providers, credit default swap premiums, LIBOR rates, and bank exposure to ABCP conduits.
Not saying "I win, it proves my point" but that I usually encounter two problems: People have no idea what I am talking about OR there knowledge is soo vastly superior to mine, I have no idea what they are talking about. I hope you fall into the latter and can explain to me the nuclear bomb going off in the ABCP markets wouldn't create a credit crunch.

4) I have yet to make up my mind about if the government needed to prevent some of those companies from going under, but I am inclined to believe that saving AIG was a MUST because of their staggering presence as both liquidity and credit enhancment providers.

5) The more I think about it, the more I think the government should have just purchased all the sub-prime mortgages at market value NOT the initial loan, and held them to such time as they could be sold at a profit. The biggest argument against, for me, would be the logistical costs feasibility of such a program.
(it solves 2 problems with 1 stone, the problem of mass eviction and foreclosure, as well as bank solvency)
[I am not sure if it would have solved capital ratios problems and bank solvency]


Ixtellor
The Revolution will not be Twitterized.

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Fri Jan 16, 2009 7:53 pm UTC

a few points

My link to the paper was to show that it is not true that "Economists are essentially universally agreed that the lack of response ..." There is debate still going on that subject.

My understanding was that Japan took a Keynesian approach to the 1990 recession (deficit spending, 0% interest rate) and the result was the "lost decade", just a prolonged recession. I'd love to see an informed opinion about what Japan did/did not do and what were the results, because I worry the US is essentially doing the same now.

I do not disagree there would have been tremendous upheaval in the financial markets. What I believe is:
- investors and counterparties to these financial institutions are the morally correct people to take the losses, not future US tax payers
- healthy and/or small financial institutions were capable of filling the void left by the collapse (eventually). There would have been a huge opportunity for prudent companies who sat on the sidelines during the CDO madness.

User avatar
Indon
Posts: 4433
Joined: Thu Oct 18, 2007 5:21 pm UTC
Location: Alabama :(
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Indon » Mon Jan 26, 2009 5:35 pm UTC

JPA wrote:The OP's argument is based on the assumption that the banks that lent irresponsibility going bankrupt is a bad outcome. In capitalism and libertarian views, those banks should go out of business and that is a very good outcome.


Ideally, sure it's good in the long run.

But since economics is about interdependency, when a big crash happens, it screws everyone over.

I'm not going to comment about trying to mitigate it or repair the damage, that's a discussion about what works, and it's already happened.

I just feel I should note that it is in the best interest of most individuals to regulate markets to prevent huge crashes that affect them, and that furthermore such prevention is most definitely a public good.
So, I like talking. So if you want to talk about something with me, feel free to send me a PM.

My blog, now rarely updated.

Image

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Tue Jan 27, 2009 5:08 pm UTC

I think this thread is no longer focusing on what I intended to discuss.

My main point is that Capitalism requires all parties to act in their own best interests. That is how a free market and its participants can adapt take advantage of new conditions. This is Econ 101. However, what I see the problem to be, is that as resources become unevenly distributed, it is human nature to use those resources to distort available information. That is, those with the most can skew market information to their advantage. As a result, the information available to those with the least decreases in quality to such an extent that they can no longer act in their best interests.

In short: The 'Haves' convince the 'Have-nots' that they are acting in their own best interests when in fact, they are working for the interests of the 'Haves'.

For this reason, I think market-free but market-related information is vital to a healthy Capitalist economy. Capitalsm is great, but it has its disadvantages. We need to recognize what they are in order to make the most of it. Yes, we should take advantage of Capitalism. However, it should be scrutinized and like anything else.
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

User avatar
Indon
Posts: 4433
Joined: Thu Oct 18, 2007 5:21 pm UTC
Location: Alabama :(
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Indon » Tue Jan 27, 2009 5:41 pm UTC

How do you get market-free information?
So, I like talking. So if you want to talk about something with me, feel free to send me a PM.

My blog, now rarely updated.

Image

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Tue Jan 27, 2009 8:20 pm UTC

Well, of course nothing is 100% market-free. But there are degrees, no doubt. For example, information on PBS is less beholden to the market than information on Fox. But it's not worth arguing for absolutes.

The point is, in order for Capitalism to function well, all participants need information enabling them to act in their own best interests. -That might be best achieved by regulation and structure outside of private interests.

'Socialist-like' structures supporting (or even enhancing) 'Capitalist-like' ones. We already do it in the US. Roads are an example. EDIT: The internet is another.
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Wed Jan 28, 2009 4:44 am UTC

umm how is internet a the socialist structure?

it's a completely voluntary networks of networks, agreeing to use a common protocol by voluntary consent not government decree. The networks are privately owned and operated, and most of them only let traffic on their network only if they are getting paid.

or did the government provide us xkcd forums we are posting to right now?

Note that only responses to this question which bring the thread back on track should be posted.

~CM

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Wed Jan 28, 2009 1:25 pm UTC

JPA wrote:umm how is internet a the socialist structure? ...


The 'Net Neutrality' that exists makes the internet pretty 'socialist-like'. Of course, those that own the 'networks' are getting paid, but it would be dishonest to assert the government doesn't regulate and subsidize it for open-use (or ease of entry) and commerce. This has been happening since the telegraph. Of course, the internet isn't 100% capitalistic, nor 100% socialistic. It has components of each.

In fact, that is case and point.

The point is, the economy is sufficiently complex that it might not make sense to apply one economic principle to the entire system. Sometimes the effort to achieve purism is not worth what is gained. No doubt, Capitalism might be great if its purist form could be achieved. However, it does not follow that all efforts towards that 'pure form' are worthwhile, or are even beneficial.

In fact, it could easily be the case that some aspects of our society would be more efficient if we used a hybrid of economic tools. As an example, I believe it is important some outlets for information be provided by not-for-profit entities. (In order to reduce information distortion due to what I mentioned above) Information is a useful resource for participants in an economy, and is of a different content when provided by for-profit or not-for-profit institutions. I believe both forms are important for a healthy efficient economy, -even one based upon Capitalist ideals.

Personally, I don't understand the 'one method works for everything' notion for economic and/or social functions. This is never the reality of any complex system, and I think there is an important lesson to be learned there. Much efficiency can be gained if we are willing to accept methods in degrees and to become comfortable with a plurality of systems when we are solving problems. -Any hybrid is just a hybrid by name. Nomenclature might make it easier to teach classes, but it might actually hinder progress.
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Thu Jan 29, 2009 7:42 am UTC

markkat wrote:
JPA wrote:umm how is internet a the socialist structure? ...


The 'Net Neutrality' that exists makes the internet pretty 'socialist-like'. Of course, those that own the 'networks' are getting paid, but it would be dishonest to assert the government doesn't regulate and subsidize it for open-use (or ease of entry) and commerce. This has been happening since the telegraph. Of course, the internet isn't 100% capitalistic, nor 100% socialistic. It has components of each.


Private companies agreeing to peer traffic is in no way Socialism. There is no 'Net Neutrality' laws on the internet presently, and the reason why private networks peer traffic neutrally is because they have found it is in their best interest

Socialism is "state or collective ownership and administration of the means of production and distribution of goods, and a society characterized by equal opportunities for all individuals with a fair or egalitarian method of compensation". The internet has none of these attributes, zero, zilch. If the workers that dug ditches and laid fiber in the ground decided what kind of traffic and to whom got to use the internet, then you could make a case.

I believe you have made an incorrect assumption that system where people share and get along = socialism, and a system where people are greedy and non collaborative = capitalism. History has shown that (free market) capitalism encourages people to get along, trade, and be collaborative with others.

You've been spoken to about your tone before. This is not a behavior pattern that you want to fall into.

-Az


Please show me some data on what fraction of internet build out is subsidized by tax dollars, or is a "public good" delivered by government. I doubt you will be able to find data that even 1% of the costs of building and maintaining the internet is coming from tax dollars.


In fact, it could easily be the case that some aspects of our society would be more efficient if we used a hybrid of economic tools. As an example, I believe it is important some outlets for information be provided by not-for-profit entities. (In order to reduce information distortion due to what I mentioned above) Information is a useful resource for participants in an economy, and is of a different content when provided by for-profit or not-for-profit institutions. I believe both forms are important for a healthy efficient economy, -even one based upon Capitalist ideals.

Personally, I don't understand the 'one method works for everything' notion for economic and/or social functions. This is never the reality of any complex system, and I think there is an important lesson to be learned there. Much efficiency can be gained if we are willing to accept methods in degrees and to become comfortable with a plurality of systems when we are solving problems. -Any hybrid is just a hybrid by name. Nomenclature might make it easier to teach classes, but it might actually hinder progress.


1) Agreed information asymmetry does hurt free market operation, but you have given no reasons why you need a monopoly org with the force of law to provide information to the market? What can a government for this problem that a non profit can't? Why is better to have only 1 org providing people with info to make decisions, and not a set of competing orgs giving diverse opinions and information? Why would you give this important task to a position that is easily corruptible in a political position? (yes, with billions at stake, that political appointment will be corrupt)

If you are saying non profits can provide this information, than you are make the case for a system called capitalism. in Socialism, your only source of market info would be a monolithic government.

2) It's not a matter of "one method is works for everything". It's a matter of freedom, economic freedom. If you give in to a "just a bit of socialism" you giving up your economic freedom, and you will eventually be giving up more and more. The USA is not a free market capitalist society. Under close examination, an outside observer would conclude we live in a fascist society (merger of corporate and state power).
So you can give up your economic freedom, one tax hike at a time, for the "good of us all" or whatever propaganda they use. But you are just bowing to your masters, and you can not have civil liberty without economic liberty. That is why you find people so adamant about one system works for everything, because those people care about their freedom. All other systems are designed for one thing; the centralization of power.

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Thu Jan 29, 2009 1:08 pm UTC

JPA wrote:2) It's not a matter of "one method is works for everything". It's a matter of freedom, economic freedom. If you give in to a "just a bit of socialism" you giving up your economic freedom, and you will eventually be giving up more and more. The USA is not a free market capitalist society. Under close examination, an outside observer would conclude we live in a fascist society (merger of corporate and state power).
So you can give up your economic freedom, one tax hike at a time, for the "good of us all" or whatever propaganda they use. But you are just bowing to your masters, and you can not have civil liberty without economic liberty. That is why you find people so adamant about one system works for everything, because those people care about their freedom. All other systems are designed for one thing; the centralization of power.


This seems extremist to me. You make some good points, but it is obvious your mind is made up and this is not a discussion. Your tone is condescending and you simplify my arguments before countering them.

JPA wrote:I believe you have made an incorrect assumption that system where people share and get along = socialism, and a system where people are greedy and non collaborative = capitalism. History has shown that (free market) capitalism encourages people to get along, trade, and be collaborative with others.


I think you should look into the Orphan Drug Act. I think it's a response to when free-market principles don't provide the best result. However, I worry that you will only spend your energies deciding how free-market principles better deal with non-profitable treatments for rare diseases than any governmental structure.
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Thu Jan 29, 2009 6:42 pm UTC

Yes, I admit to being a skeptic to anyone peddling that "a little bit of socialism" is good for us. A much better writer than me pointed out that that is the "road to serfdom". However, I am not foolish enough to dismiss anyone's idea outright, I will always read well thought out ideas objectively.

Now for your example of orphan drugs. First of all, with the heavy regulation and government granted patent monopolies, the pharmaceutical industry is clearly not a free market, and the orphan drug problem can not be classified as a free market failure. It would be more accurate to say it's a regulated market "failure", and conventional political wisdom usually solves regulated market problems with ... more regulation!

So I can only theorize about a) would we have an orphan drug problem in a free market b) is it really a problem that should be solved through the use of force (forced redistribution of wealth via the government).

- in a true free market drug industry, production costs would be significantly lower which certainly lower the barrier for drug production for orphan drugs
- in a true free market drug industry, start up costs would be significantly lower which could lead to smaller, specialized drug firms serving niche needs

For more information on what happens when governments don't grant patent monopolies, check out chapter 9 of a thought provoking book,Against Intellectual Monopoly

Now for b) is it really a problem that should be solved through the use of force (forced redistribution of wealth via the government). Consider the fact they every dollar redirected to the research of orphan or obscure diseases is a dollar taken away from research of a more mainstream disease or problem. By definition the disease that has more people or people who can pay more money is being de-prioritized by the orphan drug disease. Using a crude example, every dollar forced into cystic fibrosis research is taking away from research of penis erectile dysfunction(or weight control, etc).
Is it morally correct to suppress the happiness of the many (over weight people, men who can't get erections) for the chance at life of the few (cystic fibrosis)? If so, to what degree? Is it better have more people alive and poorer than fewer people alive but richer and happier?

(btw a much harder issue for free market advocates would have been why research is directed to treatment of disease, not a cure. As Chris Rock pointed out "ain't no money in the cure". Nobody got rich off eradicating polio, but plenty of people are getting rich treating cancer and AIDS)

User avatar
Indon
Posts: 4433
Joined: Thu Oct 18, 2007 5:21 pm UTC
Location: Alabama :(
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Indon » Fri Jan 30, 2009 9:23 pm UTC

markkat wrote:Well, of course nothing is 100% market-free. But there are degrees, no doubt. For example, information on PBS is less beholden to the market than information on Fox. But it's not worth arguing for absolutes.

What makes PBS less market-reliant than Fox? Both get the money they need to continue running from a specific demographic, don't they?

JPA wrote:Private companies agreeing to peer traffic is in no way Socialism. There is no 'Net Neutrality' laws on the internet presently, and the reason why private networks peer traffic neutrally is because they have found it is in their best interest


In order to tie this back to the point, I should note that it is not in the best interest for an ISP to operate under net neutrality.

What is in their best interest is to let others think that they operate under net neutrality, while in practice promoting their own service over others. Imagine if you were in a large-scale Prisoner's Dillemma and you had the option to play Hawk while advertising you're playing Dove. Obviously, this is the best scenario for any given player.

The problem is in that scenario cooperation rapidly disintegrates. The only way to maintain it is, some way or another, to force information on each organization's activities out for the purview of other groups (so that groups can react to an aggressive strategy correctly) - and since this information is required to maintain the integrity of the system, it is incredibly valuable.

How do you deal with information required for the integrity of an industry that is, essentially, as valuable as the industry upon which it relies?
So, I like talking. So if you want to talk about something with me, feel free to send me a PM.

My blog, now rarely updated.

Image

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Sat Jan 31, 2009 7:31 pm UTC

Your logic is mostly correct, but external force is not the only option to force information in market transactions. The market participants are fully capable of forcing information parity. Additionally, it is in the best interest of the supplier to keep the market functioning (even if it hurts his profits).

Going back to our ISP example, google has just released a bandwidth/content verifier for ISP consumers. http://blogs.wsj.com/digits/2009/01/28/google-launches-a-net-neutrality-test/
This is a perfect example of a free market self correcting information disparity. No need for government intervention, where the guys with guns get to pick the winners and losers (or set the rules to favor someone) and create a system with unintended consequences.

It has been show to be true (so far) that asymmetric information leads to market collapse, which in our ISP example would be very bad. Comcast (and it's shareholders) would loose tremendously if the ISP market started collapsing (even if meant lower profit margins by allowing consumers to know/choose what kind of bandwidth/ccontent limits it is imposing).

Or using the user car market the original research was based on; the market used cars with no information on condition is/has collapsed (buyers can't trust sellers, prices drop to reflect this risk, less sellers because prices drop, repeat...) but user cars with information (certified pre-owned, warranties, inspected used cars) is thriving. The used cars sellers are voluntarily giving this information, because it is in their best interest.

Now pulling this all back to the original topic, there is a lot of misinformation going on in the mainstream media (and here on this forum) about free market capitalism. This misinformation is "manufacturing consent" of public policy that leads to one outcome: the centralization of wealth and power into the hands of the few.
Here are a few of the misinformation/propaganda I have seen the most of:
1) America has a free market economy
2) the housing bubble was created by wall street greed and credit default swaps
3) The Great Depression was caused by government inaction
4) Recessions can be made less severe by government spending

1) clearly false: we have a central bank price fixing the future value of money, the federal register of regulations is 10,000 pages long, the bush administration added more regulation than any previous previous administration in SOX
2) yes people are greedy and CDS was the tool used, but that oversupply of money that inflated the bubble had to come from somewhere. That somewhere was the federal reserve pricing fixing interest rates at 1% 8 years ago. Also the moral hazard created by implicit government backing of Fanny Mae/Freddy Mac also fueled the bubble. The third primary cause was the government granted monopoly of rating agencies (S&P, Moody) that gave AAA rating to subprime backed securities, which mislead people into thinking that it was a "safe" investment.
3) Very big topic. Read America's Great Depression by Murray Rothbard http://mises.org/rothbard/agd.pdf
4) Another big topic worth of it's own thread. Here is a pretty good blog post covering the how Keynesian economics has been discredited http://globaleconomicanalysis.blogspot.com/2009/01/how-something-for-nothing-ideas-become.html

User avatar
Indon
Posts: 4433
Joined: Thu Oct 18, 2007 5:21 pm UTC
Location: Alabama :(
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Indon » Mon Feb 02, 2009 7:56 pm UTC

JPA wrote:Going back to our ISP example, google has just released a bandwidth/content verifier for ISP consumers. http://blogs.wsj.com/digits/2009/01/28/google-launches-a-net-neutrality-test/
This is a perfect example of a free market self correcting information disparity. No need for government intervention, where the guys with guns get to pick the winners and losers (or set the rules to favor someone) and create a system with unintended consequences.

Firstly, Google is far from indicative of market operation in any industry - Google, as a company, is highly anomalous in its' operations. That, arguably, is even one of the sources of their success thus far.

Relying on companies like Google to correct markets is not a smart bet.

Secondly, Google is collecting its' information, but what will they do with it? While I consider it likely that Google will in fact handle the information ethically (which ties back to my first point), that is by no means required on their part. Information on traffic management by ISPs could easily be used exploitatively, rather than fairly.

Thirdly, assuming Google will use the information ethically, it's in the interest of the ISP's to taint google's data to the best of their abilities.

JPA wrote:It has been show to be true (so far) that asymmetric information leads to market collapse, which in our ISP example would be very bad. Comcast (and it's shareholders) would loose tremendously if the ISP market started collapsing (even if meant lower profit margins by allowing consumers to know/choose what kind of bandwidth/ccontent limits it is imposing).

But this is only over the long term, and it's not in the interest of anyone involved to work on the long term.

This is, ultimately, because a company is a commodity, and if you don't think it's going to do well in the immediate future, you can just sell it off and buy another company you think will do better in the immediate future. So why should the shareholders care about the long-term?

Similarly, the executives must act in the best interest of shareholders - which, as noted, is not the long-term interest of the company, but the short-term profit margins. Oh, Mr. CEO, how well did we do last quarter? Oh, not well enough, you didn't meet the shareholder's expectations and the stock got rated down by a major mutual fund. We'll just fire you and hire someone more interested in spiking the numbers.

There's nobody to stop market failures because there's ultimately nobody significant to the situation interested in doing so.
So, I like talking. So if you want to talk about something with me, feel free to send me a PM.

My blog, now rarely updated.

Image

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Fri Feb 06, 2009 2:17 pm UTC

I just heard about this non-for profit news organization called 'ProPublica' on NPR this morning, and thought of this thread. In short ProPublica is a news organization financed by a wealth couple.

ProPublica is interesting as it represents a not-for-profit news source that, due to its financial independence from advertisers, might produce a substantially different product than the mainstream media. That said, if these wealthy donors had a message, it would probably bias the information.

I'm thinking libertarian-leaning folk might see ProPublica as a free-market success. -I'd be interested to know. I'm happy to see it, as I think a plurality of news sources is what Capitalism needs. My main point: If Capitalism is to work well, we need useful information to be able to act in our own best interests. I don't believe one mode of news is in the public's best interests. Thus, I see the consolidation of MSM outlets as a negative thing. IMO, adding private non-profit news to public news and commercial news means better information as I can compare the information between different sources.

Is this and example of Capitalism correcting for itself? Information decreased in quality and now ProPublica is a new 'product' for a new consumer demand? -I'd like to think so.
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Sun Feb 08, 2009 7:09 am UTC

I consider myself a libertarian and read propublica every day. I was introduced to it via a card carrying member of the US socialist party.
I absolutely believe propublica is a free market success (even with it's slight liberal editorial slant, because the free market represents liberals too).

If you need information for your best interest and 1) are willing to pay for it (with time or money) 2) others people need similar information, I guarantee a free market will provide you with that information.

Do not confuse today's mainstream media with a free market. What we have today is a by product of decades of government granted monopolies (TV/radio broadcast licenses, cable licenses that control what stations go on cable, and even more sinister is government access given to friendly media orgs e.g. CIA & Time's long relationship). I think it's common knowledge that only 5 corporations own a vast majority of US media (source http://www.corporations.org/media/ )

I believe the internet is blowing this media oligopoly up, but it will take years if not decades to make a dent in the current media corps mindshare. Propublica, citizen's media, federated media, indynews, etc are all examples free market entrepreneurial spirit in action. I also believe media business models need to evolve (past simple impression based ads) to reach its full potential and take down some of the media heavyweights. This is especially hard in the short term, because good investigative reporting takes a lot of resources (opposed to covering paris hilton and sports).

I'd also like to point out that class of society that could most benefit from better media reporting (middle and upper middle class) is currently being taxed into oblivion. You really don't need to continue posting 'I'm a libertarian and think I get taxed too much' in every thread. Save it for an appropriate topic. -Az

User avatar
Caaw
Posts: 7
Joined: Wed Feb 11, 2009 1:58 am UTC
Location: California

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Caaw » Wed Feb 11, 2009 4:06 am UTC

I'm sort of confused as to the debate going on in this thread.

My reaction to the subject line, however, is thus:

Misinformation and capitalism go hand in hand.

Is not P.T. Barnum a significant figure within the annals of capitalism? He has even been called the "patron saint" of capitalism.

I agreed with the poster who affirmed that throughout the history of capitalism, there have been cycles of boom and bust. Why should we now say that the sky is falling?

I guess to many this particular crisis is different, but, at the end of the day: Those big factories that produce cars aren't just going to fall into disarray and rust. The infrastructure of our system exists though the owners might change. We might have some hard times, but, to say that this is the breaking point of capitalism -- eh.

Another poster pointed towards the steady drum of deregulation as a culprit for our current situation, suggesting that we will most likely enact new forms of regulation to protect ourselves in the future -- but that somewhere far down the line, a generation lulled into a sense of security will begin to dismantle those regulations in favor of short-term gain. Seems reasonable enough to me!

I suppose since the gist of the original post was that we are being manipulated by those in control, it would be appropriate to point out that many of the concepts argued within this very thread seem to stem from arguments being held upon the world media stage itself. Regulation vs Deregulation. Capitalism vs Socialism (and the evils of). Free markets vs Regulation (republicans vs democrats?). Are these the debates that the OP feels are being manipulated by the media?

I meant this post to be just the first line about Barnum, but ended up with this. Sorry if I'm off the mark -- like I said, I was a bit confused while reading this thread.

User avatar
markkat
Posts: 107
Joined: Wed May 02, 2007 4:37 pm UTC
Location: Mitten
Contact:

Re: Bailout and blame: Views on capitalism and misinformation.

Postby markkat » Wed Feb 11, 2009 1:20 pm UTC

I agree with the assessment of: "Misinformation and capitalism go hand in hand." -To the extent that human nature employs misinformation if it provides an advantage. I believe this will happen in any system.
Caaw wrote:I suppose since the gist of the original post was that we are being manipulated by those in control, it would be appropriate to point out that many of the concepts argued within this very thread seem to stem from arguments being held upon the world media stage itself. Regulation vs Deregulation. Capitalism vs Socialism (and the evils of). Free markets vs Regulation (republicans vs democrats?). Are these the debates that the OP feels are being manipulated by the media

As the OP, this is right on the mark. Our debate has been defined by the powers that be. As an example, JPA is comfortable calling himself a libertarian. This might make it easier for us to understand his position in broad strokes. However, how much of what we infer from that actually represents JPA's personal philosophy and how much represents a position defined by the current power players on the media stage? I'm sure I've over-simplified JPA's position just by reading his statement. It's inevitable. Unless my understanding of libertarianism and JPA's understanding of libertarianism are the same, he's been misrepresented.

You see, in my OP, I was not saying 'Capitalism is bad'. It's just a tool. However, I did say: 'Capitalism + the natural desire to misinform' can be bad as resources (here the control of information) become disparate to a large degree. Thus, we should take note of this phenomenon and apply Capitalism carefully.

Nevertheless, I think because our debates have been defined for us, and due to the natural human desire for tribalism, many will continue to join one team (socialist, libertarian, communist, etc...) and see any flaws in their philosophy only to be flaws in improper execution; All the while these people over-look an absurdity in arguing for a pure implementation of their philosophy despite realities of human nature and the law of diminishing returns. -This is why those that control the media can greatly define (and diminish) our discussions, and this is right on point with my OP.

IMO, pluralism is often seen as impure, impractical and impotent; this despite the fact that pluralism has always been the reality we live with. I think if we got more comfortable with implementing philosophies in degrees, we might find more economic/social success and stability.
I don't know how 5E D&D will be played, but 6E D&D will be played with paper and pencils.
Wayfarers Role-playing Game. -Ye Olde Gaming Companye.

User avatar
Ixtellor
There are like 4 posters on XKCD that no more about ...
Posts: 3113
Joined: Sun Jan 13, 2008 3:31 pm UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Ixtellor » Fri Feb 13, 2009 7:02 pm UTC

markkat wrote:Solutions: 1) Educate people so they can better act to their advantage


1) Educating people can be subjective. One mans education is another mans propaganda.
The bank bailout is a very very complicated subject, that are going to make people make some opinion based judgements. (I believe the bailout will lead to increased liquidity versus I believe the bailout will be squandered by the bankers) We don't know what is going to happen, so the best you can do is give them both sides.

2) Some people don't want to hear conflicting opinions and can't handle honest debate. They are soo tied to a particular ideology that debate is dangerous to their identity and will make irrational justifications and excuses for denying, what others will perceive as fact. (ex. FACT: you can't prove the existance of God - Most religious people can't handle this and refuse to accept it. So will resort to bizarre irrational rebuttals - My grandma saw jesus, I feel jesus, etc)

markkat wrote:To achieve this, each individual must have information enabling them to decide what is best for them. Unfortunately,


1) Correct. An Example is rural-poor-white people who have been in poverty for generations,(see appalachia) who continue to vote for Republicans because they want to reduce welfare and government social safety net programs. Maybe welfare isn't best for the country, but it would certainly be a tangible gain for people in that region.

Ixtellor

P.S. I'm BACK!!!! So Bring on the economic/political threads.
The Revolution will not be Twitterized.

mrandrewv
Posts: 97
Joined: Wed May 16, 2007 2:30 pm UTC
Location: Cape Town, South Africa

Re: Bailout and blame: Views on capitalism and misinformation.

Postby mrandrewv » Mon Feb 16, 2009 3:00 pm UTC

About the education = propaganda thing.
This is true, but it isn't a flaw in the idea. You are already offering an education, that educaiton should involve warnings about the pitfalls in the financial system. In South African schools there is a section on why credit card debt is only for the foolish, and I am very glad that it is there.

If your educaiton system doesn't prepare the average student for the real pitfalls of the real world then it isn't doing its job.

About the conflicting debate thing: I've recently learned alot about that, but I'm not going to post it here, see new topic ;)
It's all very interesting...

User avatar
Ixtellor
There are like 4 posters on XKCD that no more about ...
Posts: 3113
Joined: Sun Jan 13, 2008 3:31 pm UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Ixtellor » Tue Feb 17, 2009 8:18 pm UTC

mrandrewv wrote:About the education = propaganda thing.
This is true, but it isn't a flaw in the idea. You are already offering an education, that educaiton should involve warnings about the pitfalls in the financial system. In South African schools there is a section on why credit card debt is only for the foolish, and I am very glad that it is there.

If your educaiton system doesn't prepare the average student for the real pitfalls of the real world then it isn't doing its job.

About the conflicting debate thing: I've recently learned alot about that, but I'm not going to post it here, see new topic ;)


Only 15 States in the USA require Economics for part of a HS education. Many others offer it as an elective but not a requirement. So yes, many children will never hear good 'real world' advise about credit and getting your good financial habits in order.

Ixtellor
The Revolution will not be Twitterized.

JPA
Posts: 30
Joined: Tue Dec 23, 2008 5:41 am UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby JPA » Sat Mar 07, 2009 9:26 pm UTC

Ixtellor wrote:
Only 15 States in the USA require Economics for part of a HS education. Many others offer it as an elective but not a requirement. So yes, many children will never hear good 'real world' advise about credit and getting your good financial habits in order.

Ixtellor


Relying on state regulations to sufficiently educate the next generation is part of the problem. The real question is how many parents teach their children children economic and financial best practices? or select schools that teach economics?

Spuddly
Posts: 264
Joined: Sat Mar 01, 2008 7:11 pm UTC

Re: Bailout and blame: Views on capitalism and misinformation.

Postby Spuddly » Thu Mar 12, 2009 3:01 pm UTC

markkat wrote:I think this thread is no longer focusing on what I intended to discuss.

My main point is that Capitalism requires all parties to act in their own best interests. That is how a free market and its participants can adapt take advantage of new conditions. This is Econ 101. However, what I see the problem to be, is that as resources become unevenly distributed, it is human nature to use those resources to distort available information. That is, those with the most can skew market information to their advantage. As a result, the information available to those with the least decreases in quality to such an extent that they can no longer act in their best interests.

In short: The 'Haves' convince the 'Have-nots' that they are acting in their own best interests when in fact, they are working for the interests of the 'Haves'.

For this reason, I think market-free but market-related information is vital to a healthy Capitalist economy. Capitalsm is great, but it has its disadvantages. We need to recognize what they are in order to make the most of it. Yes, we should take advantage of Capitalism. However, it should be scrutinized and like anything else.


It is also in the best interest of the "have-nots", ie, consumers, to find out information. Your example of banks collapsing is only relevant in so far that we made banks largely immune from market pressure. Banks have enjoyed almost 90 years of insulation from market pressure- they get bailed out, the Fed prints them money, there can't be any bank runs. Banks have become, more or less, extensions of the Fed. If banks were forced to fail for their bad lending now, and last decade, and the decade before that, perhaps they would stop making bad loans. What the economy needs is more business men leaping out of their office windows. If businesses had to suffer the same dire consequences of bad decision making as consumers, you would see a more efficient market.
Give me your eyes;
I need sunshine.


Return to “Serious Business”

Who is online

Users browsing this forum: No registered users and 11 guests