Anatomy of an Economic Ignoramus

Discussion in 'Economy' started by Kevin_Kennedy, Sep 10, 2009.

  1. Kevin_Kennedy
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    Kevin_Kennedy Defend Liberty

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    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.
     
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  2. Polk
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    Polk Classic

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    Wow. His arguments are really laughable.
     
  3. Oscar Wao
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    Oscar Wao Victory is Mine

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    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...
     
    Last edited: Sep 10, 2009
  4. Annie
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    Annie Diamond Member

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    Another new thread based upon another, without links. On top of that, the quote omits the poster. This to me is more than frustrating.
     
  5. Big Black Dog
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    Big Black Dog Gold Member Supporting Member

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    People like this are really scary...
     
  6. Oscar Wao
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    Oscar Wao Victory is Mine

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    Who?
     
  7. Kevin_Kennedy
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    Kevin_Kennedy Defend Liberty

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

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    What?
     
  9. Polk
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    Polk Classic

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    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.
     
    Last edited: Sep 10, 2009
  10. Kevin_Kennedy
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    Kevin_Kennedy Defend Liberty

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    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.
     

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