Anatomy of an Economic Ignoramus

[Kevin_Kennedy]

We all encounter more than our share of foolish blog posts. Most of the time you simply have to let them be. You could spend the rest of your life correcting drones and automatons who will never have an original or unconventional thought no matter how much you prod them. Their seventh-grade teacher, who was also the track coach, taught them what they know, and they're sticking to it.

Once in a while, though, for your own sake and for the sake of readers who suspect the post is all wrong but aren't quite sure why, you let loose with a full-blown response. And that's what I'm doing here in reaction to a blog entry called "Peter Schiff: Medicare Recipients Are Lazy People Who Refuse to Pay for Their Own Health Care."

Anatomy of an Economic Ignoramus - Thomas E. Woods, Jr. - Mises Institute

A nice reply to some of the typical nonsensical arguments you hear against free markets.

 

[Polk]

Wow. His arguments are really laughable.

 

[Oscar Wao]

Economic Ignoramous? That's being too kind to Obama. Seriously, what IS Mr. President's background in economics?

I'd sooner have my eye doctor try to tell me about my dental health, than listen to this Administration on proper economic policy.

I know it doesn't directly speak of Obama, but...

 

[Annie]

We all encounter more than our share of foolish blog posts. Most of the time you simply have to let them be. You could spend the rest of your life correcting drones and automatons who will never have an original or unconventional thought no matter how much you prod them. Their seventh-grade teacher, who was also the track coach, taught them what they know, and they're sticking to it.

Once in a while, though, for your own sake and for the sake of readers who suspect the post is all wrong but aren't quite sure why, you let loose with a full-blown response. And that's what I'm doing here in reaction to a blog entry called "Peter Schiff: Medicare Recipients Are Lazy People Who Refuse to Pay for Their Own Health Care."

Anatomy of an Economic Ignoramus - Thomas E. Woods, Jr. - Mises Institute

A nice reply to some of the typical nonsensical arguments you hear against free markets.

Another new thread based upon another, without links. On top of that, the quote omits the poster. This to me is more than frustrating.

 

[Big Black Dog]

People like this are really scary...

 

[Oscar Wao]

People like this are really scary...

Who?

 

[Kevin_Kennedy]

Wow. His arguments are really laughable.

You could address them and enlighten us as to why they were laughable, if you wanted.

 

[Kevin_Kennedy]

We all encounter more than our share of foolish blog posts. Most of the time you simply have to let them be. You could spend the rest of your life correcting drones and automatons who will never have an original or unconventional thought no matter how much you prod them. Their seventh-grade teacher, who was also the track coach, taught them what they know, and they're sticking to it.

Once in a while, though, for your own sake and for the sake of readers who suspect the post is all wrong but aren't quite sure why, you let loose with a full-blown response. And that's what I'm doing here in reaction to a blog entry called "Peter Schiff: Medicare Recipients Are Lazy People Who Refuse to Pay for Their Own Health Care."

Anatomy of an Economic Ignoramus - Thomas E. Woods, Jr. - Mises Institute

A nice reply to some of the typical nonsensical arguments you hear against free markets.

Another new thread based upon another, without links. On top of that, the quote omits the poster. This to me is more than frustrating.

What?

 

[Polk]

Wow. His arguments are really laughable.

You could address them and enlighten us as to why they were laughable, if you wanted.

I'll take the argument he's attacking to make the list (to avoid having to c/p large blocks of text), but respond to the argument me makes against it.

- "If free market principles were allowed to rule, like Schiff wants, what that means is everything is based on maximizing profit."

When most people make this argument, they're not claiming as the author asserts that market allocation is bad. What they're arguing is that it's not perfect. That's pretty obviously true. Markets are good at managing most types of goods. There are goods, however, that this is not the case for and market allocation can result in outcomes that are bad for society. When a company pumps waste into rivers and streams or into the air, that negatively impacts my quality of life, but doing so is rational to them. As an individual, however, I really have no way of stopping them from violating my rights. They could be prevented from doing so by not allowing they to produce things that harm me without my consent, but that's not really a workable system. After all, there is no real way to divert smog around some houses and not others. The only way to address this issue is in a centralized manner. That centralized system can use market mechanisms (look at the market for sulfur dioxide in the United States), but the free market doesn't create these sorts of protections.

Beyond that, there is a human concern angle here. Hospitals could maximize profits by refusing to provide emergency care to persons without insurance. However, I think most people would find that sort of trafficking in human blood to be highly disturbing and immoral.

- "Two major byproducts occur when the only concern of an economy is profit.
1. Quality goes down because corners must be cut to save money and compete (See China)."

That statement is unquestionably true. Outside of the market for certain high-end goods or among a small group of consumers, the primary pressure over time is to make the same good, but make it cheaper. Then the question comes of how to make it cheaper. Sometimes that's by better manufacturing processes or other technological innovations, but often it comes from just doing a half-assed job. Without a government to provide a venue for those harmed by faulty products, manufactures would be free to take all sorts of risk.

- "2. Wages go down, because it [employers' drive for profits] pits workers against one another. For example, if there are no labor regulations, I can pay a woman significantly less than a man to do the same job. This forces wages down, because now a man must settle for a depressed wage if he wants a job."

Looking at wage growth in the developed world, this is unquestionably true as well. As the global economy becomes more open, there will be an even greater downward pressure on wages in the developed world. Yes, employers must compete for labor, it's not really the same thing. The number of employers is vastly smaller than the number of workers. This is even more true if we focus on a given area. Workers are not really able to set terms in the same way firms are. If a firm can't find workers, it goes out of business. If a worker can't find a job, he starves to death. One is the death of an artificial construct. The other is death of a living being. The incentives work differently in those cases.

- "If there is no regulation of the "market forces" by the government, you essentially place the power in the hands of CEO's who have no accountability to anyone but their share holders, and in order to keep the share holders happy, profit must be maximized by any means necessary. If that means exploitation and corruption, so be it."

Another case where the "outrageous" argument he is responding to is right on the money. Employers have no incentive to uphold contacts if nothing will happen to them if they violate them.

 

[Kevin_Kennedy]

Wow. His arguments are really laughable.

You could address them and enlighten us as to why they were laughable, if you wanted.

I'll take the argument he's attacking to make the list (to avoid having to c/p large blocks of text), but respond to the argument me makes against it.

- "If free market principles were allowed to rule, like Schiff wants, what that means is everything is based on maximizing profit."

When most people make this argument, they're not claiming as the author asserts that market allocation is bad. What they're arguing is that it's not perfect. That's pretty obviously true. Markets are good at managing most types of goods. There are goods, however, that this is not the case for and market allocation can result in outcomes that are bad for society. When a company pumps waste into rivers and streams or into the air, that negatively impacts my quality of life, but doing so is rational to them. As an individual, however, I really have no way of stopping them from violating my rights. They could be prevented from doing so by not allowing they to produce things that harm me without my consent, but that's not really a workable system. After all, there is no real way to divert smog around some houses and not others. The only way to address this issue is in a centralized manner. That centralized system can use market mechanisms (look at the market for sulfur dioxide in the United States), but the free market doesn't create these sorts of protections.

Beyond that, there is a human concern angle here. Hospitals could maximize profits by refusing to provide emergency care to persons without insurance. However, I think most people would find that sort of trafficking in human blood to be highly disturbing and immoral.

- "Two major byproducts occur when the only concern of an economy is profit.
1. Quality goes down because corners must be cut to save money and compete (See China)."

That statement is unquestionably true. Outside of the market for certain high-end goods or among a small group of consumers, the primary pressure over time is to make the same good, but make it cheaper. Then the question comes of how to make it cheaper. Sometimes that's by better manufacturing processes or other technological innovations, but often it comes from just doing a half-assed job. Without a government to provide a venue for those harmed by faulty products, manufactures would be free to take all sorts of risk.

- "2. Wages go down, because it [employers' drive for profits] pits workers against one another. For example, if there are no labor regulations, I can pay a woman significantly less than a man to do the same job. This forces wages down, because now a man must settle for a depressed wage if he wants a job."

Looking at wage growth in the developed world, this is unquestionably true as well. As the global economy becomes more open, there will be an even greater downward pressure on wages in the developed world. Yes, employers must compete for labor, it's not really the same thing. The number of employers is vastly smaller than the number of workers. This is even more true if we focus on a given area. Workers are not really able to set terms in the same way firms are. If a firm can't find workers, it goes out of business. If a worker can't find a job, he starves to death. One is the death of an artificial construct. The other is death of a living being. The incentives work differently in those cases.

- "If there is no regulation of the "market forces" by the government, you essentially place the power in the hands of CEO's who have no accountability to anyone but their share holders, and in order to keep the share holders happy, profit must be maximized by any means necessary. If that means exploitation and corruption, so be it."

Another case where the "outrageous" argument he is responding to is right on the money. Employers have no incentive to uphold contacts if nothing will happen to them if they violate them.

Woods addressed how the free market would deal with pollution in the article.

The incentive is to increase quality and lower prices, as the market dictates, otherwise you risk driving your customers away.

We can simply quote Woods for this one. "But for a simple reply to the claim that under competitive conditions wages will fall, we ask the simple question: has this in fact happened?

During the 19th century, without any of the institutions that Che thinks make wages rise, real wages quadrupled."

Breaking a contract would be fraud.

 

[Polk]

You could address them and enlighten us as to why they were laughable, if you wanted.

I'll take the argument he's attacking to make the list (to avoid having to c/p large blocks of text), but respond to the argument me makes against it.

- "If free market principles were allowed to rule, like Schiff wants, what that means is everything is based on maximizing profit."

When most people make this argument, they're not claiming as the author asserts that market allocation is bad. What they're arguing is that it's not perfect. That's pretty obviously true. Markets are good at managing most types of goods. There are goods, however, that this is not the case for and market allocation can result in outcomes that are bad for society. When a company pumps waste into rivers and streams or into the air, that negatively impacts my quality of life, but doing so is rational to them. As an individual, however, I really have no way of stopping them from violating my rights. They could be prevented from doing so by not allowing they to produce things that harm me without my consent, but that's not really a workable system. After all, there is no real way to divert smog around some houses and not others. The only way to address this issue is in a centralized manner. That centralized system can use market mechanisms (look at the market for sulfur dioxide in the United States), but the free market doesn't create these sorts of protections.

Beyond that, there is a human concern angle here. Hospitals could maximize profits by refusing to provide emergency care to persons without insurance. However, I think most people would find that sort of trafficking in human blood to be highly disturbing and immoral.

- "Two major byproducts occur when the only concern of an economy is profit.
1. Quality goes down because corners must be cut to save money and compete (See China)."

That statement is unquestionably true. Outside of the market for certain high-end goods or among a small group of consumers, the primary pressure over time is to make the same good, but make it cheaper. Then the question comes of how to make it cheaper. Sometimes that's by better manufacturing processes or other technological innovations, but often it comes from just doing a half-assed job. Without a government to provide a venue for those harmed by faulty products, manufactures would be free to take all sorts of risk.

- "2. Wages go down, because it [employers' drive for profits] pits workers against one another. For example, if there are no labor regulations, I can pay a woman significantly less than a man to do the same job. This forces wages down, because now a man must settle for a depressed wage if he wants a job."

Looking at wage growth in the developed world, this is unquestionably true as well. As the global economy becomes more open, there will be an even greater downward pressure on wages in the developed world. Yes, employers must compete for labor, it's not really the same thing. The number of employers is vastly smaller than the number of workers. This is even more true if we focus on a given area. Workers are not really able to set terms in the same way firms are. If a firm can't find workers, it goes out of business. If a worker can't find a job, he starves to death. One is the death of an artificial construct. The other is death of a living being. The incentives work differently in those cases.

- "If there is no regulation of the "market forces" by the government, you essentially place the power in the hands of CEO's who have no accountability to anyone but their share holders, and in order to keep the share holders happy, profit must be maximized by any means necessary. If that means exploitation and corruption, so be it."

Another case where the "outrageous" argument he is responding to is right on the money. Employers have no incentive to uphold contacts if nothing will happen to them if they violate them.

Woods addressed how the free market would deal with pollution in the article.

Not really. He links to an article that makes a vague argument that if you can show a lot of harm, you may be entitled to something.

The incentive is to increase quality and lower prices, as the market dictates, otherwise you risk driving your customers away.

We can simply quote Woods for this one. "But for a simple reply to the claim that under competitive conditions wages will fall, we ask the simple question: has this in fact happened?

During the 19th century, without any of the institutions that Che thinks make wages rise, real wages quadrupled."

That's an irrelevant comparison to the modern day. A world in which capital is highly mobile, but labor isn't to be comparable extent, is radically different from a world where most people don't travel 30 miles beyond their birthplace in their entire lifetime.

Breaking a contract would be fraud.

What punishment for fraud is their in a world without governments? None.

 

[Kevin_Kennedy]

Who said anything about not having a government? Though it has been argued that in the absence of government, or even with a government, the market could supply courts.

 

[eagleseven]

- "If free market principles were allowed to rule, like Schiff wants, what that means is everything is based on maximizing profit."

When most people make this argument, they're not claiming as the author asserts that market allocation is bad. What they're arguing is that it's not perfect. That's pretty obviously true. Markets are good at managing most types of goods. There are goods, however, that this is not the case for and market allocation can result in outcomes that are bad for society. When a company pumps waste into rivers and streams or into the air, that negatively impacts my quality of life, but doing so is rational to them. As an individual, however, I really have no way of stopping them from violating my rights. They could be prevented from doing so by not allowing they to produce things that harm me without my consent, but that's not really a workable system. After all, there is no real way to divert smog around some houses and not others. The only way to address this issue is in a centralized manner. That centralized system can use market mechanisms (look at the market for sulfur dioxide in the United States), but the free market doesn't create these sorts of protections.

In neoclassical economics, these are known as public goods, are precisely defined, and well-known. Thus, to maximize efficiency, government must provide these public goods, no more, and no less.

This is quite hard for many people to understand, unfortunately.

Beyond that, there is a human concern angle here. Hospitals could maximize profits by refusing to provide emergency care to persons without insurance. However, I think most people would find that sort of trafficking in human blood to be highly disturbing and immoral.

For-profit marketplaces do not preclude the existence of charities. We could very well see a "Gates Foundation Free Clinic" network develop around the country in the absence of mandated health insurance. Universities give out millions in scholarships every year independent of the government.

"Two major byproducts occur when the only concern of an economy is profit.
1. Quality goes down because corners must be cut to save money and compete (See China)."

That statement is unquestionably true. Outside of the market for certain high-end goods or among a small group of consumers, the primary pressure over time is to make the same good, but make it cheaper. Then the question comes of how to make it cheaper. Sometimes that's by better manufacturing processes or other technological innovations, but often it comes from just doing a half-assed job. Without a government to provide a venue for those harmed by faulty products, manufactures would be free to take all sorts of risk.

The consumer's desire for quality counterbalances the producer's desire to cut costs, and so this statement is false. If a company consistently abuses its customers, it will go out of business. Unless, of course, if that company is government-owned (GM).

Even the poor avoid restaurants that make you ill.

"2. Wages go down, because it [employers' drive for profits] pits workers against one another. For example, if there are no labor regulations, I can pay a woman significantly less than a man to do the same job. This forces wages down, because now a man must settle for a depressed wage if he wants a job."

Looking at wage growth in the developed world, this is unquestionably true as well. As the global economy becomes more open, there will be an even greater downward pressure on wages in the developed world. Yes, employers must compete for labor, it's not really the same thing. The number of employers is vastly smaller than the number of workers. This is even more true if we focus on a given area. Workers are not really able to set terms in the same way firms are. If a firm can't find workers, it goes out of business. If a worker can't find a job, he starves to death. One is the death of an artificial construct. The other is death of a living being. The incentives work differently in those cases.

Again, you are looking at only half of the equation. The pain felt by developed world workers is less than the benefit to 3rd-world workers. The factory jobs that the Chinese are taking from Americans are FAR superior to subsistence farming and the constant threat of starvation.

By blocking free trade, you are hurting 3rd-world workers for the UAW's benefit.

"If there is no regulation of the "market forces" by the government, you essentially place the power in the hands of CEO's who have no accountability to anyone but their share holders, and in order to keep the share holders happy, profit must be maximized by any means necessary. If that means exploitation and corruption, so be it."

The Federal government exists to punish fraud and corruption. A fraudulent CEO gets arrested (like Enron), while a fraudulent politician gets promoted.

Another case where the "outrageous" argument he is responding to is right on the money. Employers have no incentive to uphold contacts if nothing will happen to them if they violate them.

Red Herring. Anti-fraud law enforcement is a public good even the staunchest libertarians support.

 

[eagleseven]

Pollution can be solved with a market-friendly Pigouvian tax, not some byzantine cap-and-trade system.

 

[Oddball]

Who said anything about not having a government? Though it has been argued that in the absence of government, or even with a government, the market could supply courts.

That's a typical retort of the two dimensional Hegelian "thinker" (for lack of a better term).

"If you're not for my overbearing do-gooder nanny gubmint, then you must be an anarchist!!!"

Polkie is the master of this argument.

 

[Oddball]

Nice ad hom with no explanation how that is so, professor.

 

[Polk]

Who said anything about not having a government?

That's the ultimate goal of the people like the author of the column.

Though it has been argued that in the absence of government, or even with a government, the market could supply courts.

Yeah, because having justice open to the highest bidder (more so than it already is) is a great idea...

 

[Polk]

In neoclassical economics, these are known as public goods, are precisely defined, and well-known. Thus, to maximize efficiency, government must provide these public goods, no more, and no less.

This is quite hard for many people to understand, unfortunately.

The entire point is they are not well-known. Some cases meet universal agreement, while others are hotly disputed.

For-profit marketplaces do not preclude the existence of charities. We could very well see a "Gates Foundation Free Clinic" network develop around the country in the absence of mandated health insurance. Universities give out millions in scholarships every year independent of the government.

That doesn't true address the issue though, unless you assume the resources devoted to charity are infinite.

The consumer's desire for quality counterbalances the producer's desire to cut costs, and so this statement is false. If a company consistently abuses its customers, it will go out of business. Unless, of course, if that company is government-owned (GM).

Even the poor avoid restaurants that make you ill.

But how will they know which restaurants make you ill? Short of a massive outbreak of illness caused by a restaurant, people generally rely on the health department.

Again, you are looking at only half of the equation. The pain felt by developed world workers is less than the benefit to 3rd-world workers. The factory jobs that the Chinese are taking from Americans are FAR superior to subsistence farming and the constant threat of starvation.

By blocking free trade, you are hurting 3rd-world workers for the UAW's benefit.

It's not the role of the American government to promote the interests of Chinese peasents.

"If there is no regulation of the "market forces" by the government, you essentially place the power in the hands of CEO's who have no accountability to anyone but their share holders, and in order to keep the share holders happy, profit must be maximized by any means necessary. If that means exploitation and corruption, so be it."

The Federal government exists to punish fraud and corruption. A fraudulent CEO gets arrested (like Enron), while a fraudulent politician gets promoted.
[/quote]

That wasn't my argument, that was the argument I was quoting. That being said, those CEOs are only punished because a government exists to do so. If left to the markets, they'd get away scot-free.

Another case where the "outrageous" argument he is responding to is right on the money. Employers have no incentive to uphold contacts if nothing will happen to them if they violate them.

Red Herring. Anti-fraud law enforcement is a public good even the staunchest libertarians support.

They support the concept, but trust it to be enforced by the market. That's not at all realistic.

 

[Kevin_Kennedy]

Who said anything about not having a government?

That's the ultimate goal of the people like the author of the column.

Though it has been argued that in the absence of government, or even with a government, the market could supply courts.

Yeah, because having justice open to the highest bidder (more so than it already is) is a great idea...

I'll need some proof that Thomas Woods is indeed an anarcho-capitalist, as I've never seen him profess to be. It's true that some Misesian's are anarcho-capitalists, but not all of them.

 

[eagleseven]

That doesn't true address the issue though, unless you assume the resources devoted to charity are infinite.

The poor will always be with us.

But how will they know which restaurants make you ill? Short of a massive outbreak of illness caused by a restaurant, people generally rely on the health department.

I don't know about you, but here in NY we rely upon word-of-mouth. If just a few people get sick at a restaurant, the entire neighborhood will soon know about it.

It's not the role of the American government to promote the interests of Chinese peasents.

I was under the impression that liberals desire to build up the 3rd world and eliminate poverty?

That wasn't my argument, that was the argument I was quoting. That being said, those CEOs are only punished because a government exists to do so. If left to the markets, they'd get away scot-free.

Nobody of any significance is arguing for the elimination of government police. We're not anarchists.

They support the concept, but trust it to be enforced by the market. That's not at all realistic.

I have not heard any arguments for the elimination of our police forces, and I read libertarian magazines daily.

I believe you are confusing libertarians for anarchists?