Why capitalism is worth conserving (and its new populist critics on the right are wrong)
“Whether the critiques come from politicians like Josh Hawley or pundits like Tucker Carlson, free-market conservatives are increasingly scolded for being overly committed to economic freedom. To no surprise, the Left continues its own critiques as it always has, spurring a strange, unspoken alliance among otherwise ideological foes.” - Acton
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In all of this (this is the key) the patient does not care at all about whether the fee is high or low.
Yes, but isn’t this because of 3rd party payers. When I first got (and still have) a high deductible plan, I used my healthcare differently because I was paying for it. An office visit was no longer $15 co pay. It was now $75. Health care is a problem but I don’t think the solutions being offered are the right ones.
The other way to get money is to trick people into thinking your product or service is more valuable than it is.
Two things: First, it is still a free exchange. There is a price for stupidity. We have yet to know how high that price can go, but we know it is a voluntary price.
Second, value is almost entirely relative. You could offer me the best eye equipment surgery in the world for $1000 and it is of no value to me. I would pass. You, on the other hand, would find $1000 to be quite a bargain, I imagine. By the same token, something that is valuable to me might not be valuable to you. My house would be of no value to you. There is almost no price low enough to make it worth anything because it is in the wrong place. (Of course you could resell it but that’s a slightly different discussion.)
You mention the housing market. The bubble collapse was a great deal more complex than just a disconnect. I think it was the relatively easy availability of money, the number of two income families which drives up the price. In fact, I would say the housing market is a good indication (perhaps the best) of how the free market works. A house is only worth what someone is willing to pay for it. There is no real “inherent value” in the house. It is all individual. As above, a 3000 square foot house that is a six hours away from me has no value to me. On the other hand, a 2000 square foot house five minutes away had great value for me. So I paid a lot more for the latter than I would for the former.
[Mark_Smith]The problem is, right now, most of the wealth in the US is held by people with little concern for “virtue.” Capitalism in the US is sick because the wealthy are not virtuous. They get themselves richer while arguing over paying an employee another $0.15 an hour. They sell out to foreign companies. They move plants overseas. They raid retirement funds. They scream about paying a fair tax rate. On and on.
Capitalism has worked for a good long while in the US because, on balance, there was virtue. I suspect that has gone away.
Yeah, I agree with some of this… If I am made king, I will require foreign companies to either follow all the regulations we put on our businesses (OSHA, FMLA, etc. etc. etc.) or pay a fee on imports equivalent to it’s cost.
On the other hand, you cannot lay the accusation of greed solely on the bosses. The consumers have decided that they want the LOWEST price, regardless of origin (and working conditions in those locations). What’s the result? We have a big family gathering every Christmas (about 20 of us with everybody, especially kids, opening presents). One time near the end I said, ok, try to find a gift opened today that wasn’t made in China. It was depressing.
…You mention the housing market. The bubble collapse was a great deal more complex than just a disconnect. I think it was the relatively easy availability of money, the number of two income families which drives up the price. In fact, I would say the housing market is a good indication (perhaps the best) of how the free market works. A house is only worth what someone is willing to pay for it. There is no real “inherent value” in the house. It is all individual. As above, a 3000 square foot house that is a six hours away from me has no value to me. On the other hand, a 2000 square foot house five minutes away had great value for me. So I paid a lot more for the latter than I would for the former.
You’re right it’s complicated. But, as I understand it, here’s how the housing bubble happened.
First the local bank gives you a loan to buy a house. Presumably, the bank wants to make sure the house is worth what it’s loaning you. So due diligence (limiting loan amount to real value, independent assessment, down-payment, etc.) In this simple scenario, the local bank gets a return for their investment and risk in the form of interest. The interest has to be low to be competitive, so they really want to make sure they do due diligence, because foreclosures that aren’t covered by home value will kill them.
Then along comes a Guy with a huge amount of funds he wants to invest. He buys a bunch these loans from the local banks. His return is a little less than what the bank would have had, but he didn’t have to do the due diligence. He assumes that the banks were diligent. After all, they were risking their own money, so. Now two things happen in a cart-horse fashion: Banks realize that whatever risk they take on will be taken off their hands pretty quick by the Guy. So they get less worried about the risk side and start allowing higher loan amounts for houses. This drives up prices, and thus, local housing values. Meanwhile individual investors see housing values going up and they want to invest, which further drives the banks to extend higher loans.
EDIT: This is why I say there’s a disconnect. The bank doing the due diligence knows he won’t actually be bearing the risk of the investment because he is going to sell the loan.
This is why I say there’s a disconnect.
Yes, I think that is largely correct as I understand it. I think the other side is government mandates regarding loans being made available to people who probably couldn’t afford them and the economic collapse in general which, I think, was wider than the housing bubble. So the net result is that people bought bigger houses with bigger monthly payments than they could afford because money was cheap and government and lenders lowered the bar. Then, many of them lost their jobs which meant they could no longer make the payments. Then the market crashed which led to some people actually “moving up” to a bigger house in a better neighborhood and walking away from their old house which then flooded the market with more houses that were dirt cheap.
So it is quite a story most of which I don’t grasp the details.
[Dan Miller]Yeah, I agree with some of this… If I am made king, I will require foreign companies to either follow all the regulations we put on our businesses (OSHA, FMLA, etc. etc. etc.) or pay a fee on imports equivalent to it’s cost.
On the other hand, you cannot lay the accusation of greed solely on the bosses. The consumers have decided that they want the LOWEST price, regardless of origin (and working conditions in those locations). What’s the result? We have a big family gathering every Christmas (about 20 of us with everybody, especially kids, opening presents). One time near the end I said, ok, try to find a gift opened today that wasn’t made in China. It was depressing.
The problem with this discussion is what is the alternative? Should the single mother trying to make ends meet have to pay more for a product so that the US can compete for her business? I say let everyone buy the product they want at the best price they can and that is the beauty of capitalism. As Larry said, our quality of life greatly exceeds that of our ancestors. That is in large part due to market forces and ingenuity that, if not substantially rewarded, would not have happened.
[Larry]“In capitalism, man exploits man. In communism, it’s the other way around.”
Cute and often quoted, but not really true. As has been pointed out, capitalism requires you to produce something that someone is willing to part with their money over. It is virtually the only way to get money. If you can’t produce that product, you work for someone who does. So there is an inherent outward focus as well. A capitalist has to serve his fellowman by providing something that said fellow man considers valuable enough to give him money for. For the most part, it’s not exploitation because it is voluntary.
[My emphasis in bold above]
I generally agree with your assessment of capitalism, except for the case (which you mention in another post) of someone NOT getting what they paid for, which can be, and many times is, due to fraud. While it is true that the exchange is still voluntary, I don’t think you can argue that people unfairly taking advantage of others in a capitalist transaction is NOT exploitation.
As Dan mentioned, people also need to be aware of caveat emptor, which is more necessary in a capitalist system. Even with buyer knowledge and wisdom being more necessary, I still think capitalism is the superior system.
Dave Barnhart
[josh p]But a big part of it is wages and working conditions in China and similar countries. So while we think it is immoral to employ people in certain conditions, the bottom line is that it makes corporations more profitable to do so. And we happily accept the “good deals” that these conditions make possible. But the result is that we cannot compete as manufactures, so those jobs go overseas.The problem with this discussion is what is the alternative? Should the single mother trying to make ends meet have to pay more for a product so that the US can compete for her business? I say let everyone buy the product they want at the best price they can and that is the beauty of capitalism. As Larry said, our quality of life greatly exceeds that of our ancestors. That is in large part due to market forces and ingenuity that, if not substantially rewarded, would not have happened.
That’s why I think that worker’s laws should be compensated for by tariffs based on the cost of doing business related to the higher cost of employing Americans in the USA. Then yes, it’s a fair playing field, so let them compete in the market.
How could that work though? Who decides what a “fair wage” is another country? Shouldn’t it be the people who want the job? Are you aware that people often bribe up to a years salary to get those supposedly unethically low-paying jobs?
I’ve discussed my views on tariffs here before so I won’t get into it again but basically I believe they are foolish.
Yeah - and I’m not gonna be king anyways… :)
Also, I would like to turn to the Scriptures…
If I am made king, I will require foreign companies to either follow all the regulations we put on our businesses (OSHA, FMLA, etc. etc. etc.) or pay a fee on imports equivalent to it’s cost.
But this assumes that the regulations should be in place. Perhaps we need to rethink that end of it.
[Larry]is that the average adult has the exact same buying power today he had 30 years ago
Try buying a smart phone 30 years ago. Or getting high speed internet. Or a flat screen TV. Or any number of other things. The truth is that the buying power is greater because what you can buy with the same amount of money is better stuff. 30 years ago, a good laptop computer was available. It was expensive. It was large. And it wasn’t very good.
So this type of nostalgia is a bit misleading because we aren’t buying the same things.
The economy is complex. Thinking it can be explained in a few short paragraphs is a symptom of the lightness of our age.
I’m sorry, but this response is silly.
[Larry]If I am made king, I will require foreign companies to either follow all the regulations we put on our businesses (OSHA, FMLA, etc. etc. etc.) or pay a fee on imports equivalent to it’s cost.
But this assumes that the regulations should be in place. Perhaps we need to rethink that end of it.
Either is fine. It is telling that some would object to the inhumanity of lessons regulations here, but are not bothered by the lack of any protections abroad.
@Mark_Smith:
In Applied Economics, Thomas Sowell points out that running water is kind of a new thing. If you have running water in your house for pennies a gallon, that’s increase buying power. If you lived in ancient Greece, running water would mean owning a slave, which is significantly more expensive.
Michael Osborne
Philadelphia, PA
[M. Osborne]@Mark_Smith:
In Applied Economics, Thomas Sowell points out that running water is kind of a new thing. If you have running water in your house for pennies a gallon, that’s increase buying power. If you lived in ancient Greece, running water would mean owning a slave, which is significantly more expensive.
Hah! That’s tripe that rich guys tell us so we think our iphones replace real respect. Business people spell respect $$$$$, and they don’t give any of that to their employees. A few do of course. I am talking about the vast majority.
Look, if you are happy that you haven’t gotten a real raise in 30 years, fine and dandy. Console yourself with cell phones and wireless. I’ll take that and a real raise.
[Mark_Smith]Hah! That’s tripe that rich guys tell us so we think our iphones replace real respect. Business people spell respect $$$$$, and they don’t give any of that to their employees. A few do of course. I am talking about the vast majority.
Look, if you are happy that you haven’t gotten a real raise in 30 years, fine and dandy. Console yourself with cell phones and wireless. I’ll take that and a real raise.
How much should they give? Who decides? Are their employees indentured servants or free to quit?
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