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Economics: What might work, what should work, what has worked (command v. open market)


Ser Scot A Ellison

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2 hours ago, Rippounet said:

Isn't it ironic that, come to think of it, both private AND public ownership of the means of production lead to less democracy? 

Wouldn't this mean there is no relationship between means of production and democracy?  As in, if you both increase and decrease on a private/public scale, and each leads to less democracy, the former by definition has a null effect on the latter.  Unless there's some magic middle ground.

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3 hours ago, Rippounet said:

Isn't it ironic that, come to think of it, both private AND public ownership of the means of production lead to less democracy? 

This has been known for longer than economists have been around. Just about every culture realized that capital tends to conglomerate into the control of the few and has taken steps to counteract the trend since not doing so tends to destroy that culture. The Pacific Coast indigenous peoples used the potlatch ceremony, Bronze Age and Iron Age peoples buried the goods of the wealthy with them, and modern societies have death taxes. Doing away with the redistribution of wealth upon the death of the controller of that wealth will destroy our society just as fast as Trump seems bent on doing. 

People should be given the choice of either spending their wealth in their lifetime or have it forfeited to the state upon their death. 

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6 hours ago, Scott de Montevideo! said:

Isn't part of the problem that there are competing interests when we compare political and economic needs.  There is certainly overlap but economic interests tend to favor efficiency and efficiency isn't really a prime concern in many political contexts. 

I am genuinely not sure what you're saying here. Both systems are political AND economic in nature.

In fact, I'm with the people who like to remind everyone that the original name for economics is political economics.

Also, careful how you define "efficiency" here. What is viewed as economically  "efficient" nowadays seldom aligns with the common/greater good. Unless you take negative externalities into account big time (and correct for them), efficiency is just an illusion.

6 hours ago, DMC said:

Wouldn't this mean there is no relationship between means of production and democracy?  

No, there most definitely IS a relationship. 

I'm tempted to say that it's very difficult for the people to keep significant power over the means of production when said means of production are considerable. In other words, this may be a problem linked to how advanced our societies are.
So I'd say the relationship is... hmmm... proportional ? (not sure it's the right word here): the smaller (and simpler) the means of production and the easier it is to exercize democratic control over them and vice-versa.

4 hours ago, maarsen said:

This has been known for longer than economists have been around. Just about every culture realized that capital tends to conglomerate into the control of the few and has taken steps to counteract the trend since not doing so tends to destroy that culture. The Pacific Coast indigenous peoples used the potlatch ceremony, Bronze Age and Iron Age peoples buried the goods of the wealthy with them, and modern societies have death taxes. Doing away with the redistribution of wealth upon the death of the controller of that wealth will destroy our society just as fast as Trump seems bent on doing. 

People should be given the choice of either spending their wealth in their lifetime or have it forfeited to the state upon their death. 

Agree 150%. I think this line of thought goes in the right direction. Private or public... It doesn't matter, the problem is temporal.

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2 minutes ago, Rippounet said:

No, there most definitely IS a relationship. 

I'm tempted to say that it's very difficult for the people to keep significant power over the means of production when said means of production are considerable. In other words, this may be a problem linked to how advanced our societies are.
So I'd say the relationship is... hmmm... proportional ? (not sure it's the right word here): the smaller (and simpler) the means of production and the easier it is to exercize democratic control over them and vice-versa.

To the bolded, I'm not sure I understand.  My point is conceiving this as a quantitative relationship (which my training makes me wont to do), there is no discernible relationship unless you operationalize means of production as an ordinal variable in which "2" grants more democracy while "1" and "3" lead to less (hence my middle ground statement).  In terms of proportionality, it just sounds like you're saying it's easier for smaller states - which, ok, but doesn't really get at the point.

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6 minutes ago, Rippounet said:

I am genuinely not sure what you're saying here. Both systems are political AND economic in nature.

In fact, I'm with the people who like to remind everyone that the original name for economics is political economics.

Also, careful how you define "efficiency" here. What is viewed as economically  "efficient" nowadays seldom aligns with the common/greater good. Unless you take negative externalities into account big time (and correct for them), efficiency is just an illusion.

No, there most definitely IS a relationship. 

I'm tempted to say that it's very difficult for the people to keep significant power over the means of production when said means of production are considerable. In other words, this may be a problem linked to how advanced our societies are.
So I'd say the relationship is... hmmm... proportional ? (not sure it's the right word here): the smaller (and simpler) the means of production and the easier it is to exercize democratic control over them and vice-versa.

Agree 150%. I think this line of thought goes in the right direction. Private or public... It doesn't matter, the problem is temporal.

Taking anthropology courses in university gave me a real insight into human behaviour. Cultures adapt just as plants and animals do to ensure long term survival. Once you realize that human history becomes much more understandable. I keep repeating to myself that Trump is a short term phenomenon. 

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47 minutes ago, DMC said:

To the bolded, I'm not sure I understand.  My point is conceiving this as a quantitative relationship (which my training makes me wont to do), there is no discernible relationship unless you operationalize means of production as an ordinal variable in which "2" grants more democracy while "1" and "3" lead to less (hence my middle ground statement).  In terms of proportionality, it just sounds like you're saying it's easier for smaller states - which, ok, but doesn't really get at the point.

Ah yes, I get your point. 

Well certainly you could say the issue is not so much with the means of production than with democracy itself generally speaking  - which only really works on a small scale anyway. 

I guess my point is that control over the means of production and democratic institutions should operate on a similar size (which I'm not sure is the case right now). That that size should be small is also fairly obvious I think, but not quite the same point. 

As for a middle ground... I think China is showing us it doesn't provide any magic. 

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4 minutes ago, Rippounet said:

Well certainly you could say the issue is not so much with the means of production than with democracy itself generally speaking  - which only really works on a small scale anyway. 

I guess my point is that control over the means of production and democratic institutions should operate on a similar size (which I'm not sure is the case right now). That that size should be small is also fairly obvious I think, but not quite the same point. 

I agree democracy works better on a small scale.  Hell, from Madison to Montesquieu to the ancient Greeks they all thought that.  My query is focused on the bolded - how does that work?  How do you make the control over the economy (which is really what we mean by "means of production") commiserate in "size" with democratic institutions.  This seems like a conflation of terms to me, at best.

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Either you abolish transnational companies* or you create a world government with the power to regulate them  (the former being much better and easier than the latter).

Hey I never said I was being realistic m'okay? :rolleyes:

Edit: and in the case of a large nation like the US, keeping corporations to state-level would be necessary. 

Edit2: and while we're at it, it goes without saying that both horizontal and vertical monopolies should be forbidden. 

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The smart Martin Wolf on the result of the “libertarian” overlords taking the place over.

https://www.ft.com/content/3aea8668-88e2-11e8-bf9e-8771d5404543

 

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Who lost “our” America? The American elite, especially the Republican elite. Mr Trump is the price of tax cuts for billionaires. They sowed the wind; the world is reaping the whirlwind. Should we expect the old America back? Not until someone finds a more politically successful way of meeting the needs and anxieties of ordinary people.

 

More on "libertarian" feudal overlord games.

https://www.washingtonpost.com/news/wonk/wp/2018/07/18/businesses-have-hijacked-capitalism-and-left-workers-behind/

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Now, up until a few years ago, this last part was something we knew about only anecdotally. Companies don't exactly advertise that they're colluding against their workers. But as even sandwich shop employees, doggy day-care workers and summer camp counselors have found themselves subject to noncompetes — which were originally aimed at preventing top executives from taking trade secrets to a rival, not locking minimum-wage workers into a state of semi-feudal dependency — economists have begun to study the issue.

It would seem some certain sorts of people are less enthusiastic about the "free market" when it comes to labor markets.

.........................................................................................................................................

I usually don’t agree with much that is written in the National Review.

But, there is much to agree here that the Euro as currently configured is very bad Juju.
https://www.nationalreview.com/2018/07/euro-zone-crisis-should-integrate-or-separate/

Quote

German leaders, in particular, want the euro zone to continue and flourish, while opposing its further fiscal and financial integration. Chancellor Angela Merkel and German central-bank head Jens Weidmann have both pushed back against proposals to reduce the euro zone’s risk of economic shock through further integration. Without German support, these reforms are all but dead.

There is much to admire, I think, about Merkel. But, she is very wrong about this.

Also interesting:

Quote

The U.S. contains states with very different economies, too, so one might well ask how the Federal Reserve can get monetary policy right for the entire “dollar zone.” The answer is that the dollar zone is closer to being an optimal currency area (OCA) than the euro zone.

 

Quote

Being an OCA means the monetary authority does not have to get monetary policy perfectly right for each region. That is because an OCA has economic “shock absorbers” in place that allow for a gentler adjustment to inappropriate regional monetary policy.

 

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6 hours ago, Rippounet said:

Either you abolish transnational companies* or you create a world government with the power to regulate them  (the former being much better and easier than the latter).

Hey I never said I was being realistic m'okay? :rolleyes:

Edit: and in the case of a large nation like the US, keeping corporations to state-level would be necessary. 

Edit2: and while we're at it, it goes without saying that both horizontal and vertical monopolies should be forbidden. 

You didn't answer my question.  Just challenging your thinking, which sometimes elicits more interesting conversation.  No need for the eyeroll emoji.

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The relationship between economic and democratic freedom/equality/control is obviously not linear (if one grants that it can be captured quantitatively at all). The interaction between these and other factors rather leads to something like metastable equilibria with "chaotic" phases between them.

Everybody in history knew that if one wanted a somewhat equal distribution of political power (historically, a rare desideratum anyway) there could not be too broad a range of economic power differences. (Unless you have hierarchies in place that explicitly and strongly restrain the use of economic power, say a Platonic or Heinleinian state where a rich guy is not even allowed to vote because he has not served in the military and a militarist hierarchy would severely limit the political influence of capital. But this would be an explicitly hierarchic system with no claims to democracy.) It was often somewhat easier to achieve because the majority had no power anyway and to keep the economic difference between free landowners or similar groups who wielded the political power "democratically" within a certain range is easier than with modern populaces where all who would have been slaves, helots, serfs etc. have the right to vote.

Anyway, I think it is misleading to say that in a soviet style or whatever economy the public ownership of the means of production leads to less democracy. Such systems restricted freedoms quite independently of that. It is usually not the case that they started democratically and the control of the MOP by the state led to less democracy in the political sphere. A truly collectivist/syndicalist control of the MOP would have democratic procedures built in from the beginning and there would not be a stark contrast between economic and political decisionmaking and control. But this has very rarely been tried, AFAIK.

 

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1 hour ago, Jo498 said:

The interaction between these and other factors rather leads to something like metastable equilibria with "chaotic" phases between them.

Well that clears things right up.

1 hour ago, Jo498 said:

Anyway, I think it is misleading to say that in a soviet style or whatever economy the public ownership of the means of production leads to less democracy.

Agreed.

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2 hours ago, DMC said:

Well that clears things right up.

Agreed.

My point is that when this collectivist model has been tried in the USSR, China, Venezuala, Cuba, etc. it has not resulted in real democracy.  I understand that correlation does not equal causation but correlations this consistent are hard to ignore or discount.  When the State is given full control of the means of production it has resulted in cronyism and corruption not equal division of wealth.  Call me cynical but I don’t see any other result coming from yet another experiment in this type.

The hybrid model with public and private ownership of capital seems best to me.

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What I meant is that Rippounet's claim does not imply that there is no connection if the connection is non-linear. virtually every relation is non-linear outside the bounds of idealized modelling, so the non-existence of a linear relation does not imply that there is no relation.

The broadly social democratic consensus with public control of certain industries (transportation, energy etc.) and the comparably tight control of the "free market" in the West between ca. 1945 and the 1980s kept both economic differences as well as the political influence of ultra-high-net-worth and their buddies in check. It was not stable in the long run but nothing in history and society, certainly nothing in the last ca. 400 years was stable in the long run. (Unlike the claims of Hayek and others social democracy (in a wide sense) did not d/evolve into soviet-style serfdom but rather into Dickens-style serfdom for the less lucky or less ruthless, i.e. what Hayek calls freedom) We are at the tail end of this social democratic period and still hope/believe that we could go back there and avoid the undue influence of the top .1%.

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9 minutes ago, Scott de Montevideo! said:

My point is that when this collectivist model has been tried in the USSR, China, Venezuala, Cuba, etc. it has not resulted in real democracy.  I understand that correlation does not equal causation but correlations this consistent are hard to ignore or discount.  When the State is given full control of the means of production it has resulted in cronyism and corruption not equal division of wealth.  Call me cynical but I don’t see any other result coming from yet another experiment in this type.

My point was that these systems were never democratic in the first place. They did not become less democratic because the state controlled the MoP. And I do not think anyone could claim that countries with some stately controlled MoP (transportation, energy etc.) and rather strict control of market forces, like "socialist" France or Sweden in the 1980s became less democratic.

And while there certainly was cronyism and corruption in the socialist states, I am not quite sure if this was always worse than in many "democratic" states. (Democracy per se has no magical measures against corruption.) Furthermore, despite/regardless of the corruption the distribution of wealth was in fact far more equal in eastern bloc countries. And this does not simply mean that everyone was poor. As far as I recall East Germany, Hungary or Czechoslovakia in the 1970s-early 80s were on average more prosperous than Greece, Ireland, Portugal or other poor capitalist countries. Also note that countries like Albania or Bulgaria were rather poor before they became socialist. They would have had a long way to go regardless of the political system. Overall, socialism started in countries that, even according to Marxist doctrine, weren't really ready for it yet. Namely the mostly agrarian Russian Empire, not industrialized France or Germany. The Soviet union managed to get to Sputnik in 40 years after the revolution despite civil war in the beginning and that little war against the Nazis in the 40s. It was gruelling, but so were processes of development in 19th and 20th century capitalist countries as well.

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If we are talking longer trends then another fact is that Western countries that adopted free market based systems in the 1800's have increased their incomes per person thirty or forty times over by now, after adjusting for inflation. In addition, hours worked per citizen have been cut in half or thereabouts.

This should be put into comparison with the preceding ten thousand years or so, where living standards were more or less stagnant with minor fluctuations due to wars and epidemics.  

The income of the average Chinese has increased fifteen times over since they started scrapping Communism in favor of a more market based system 50 years ago. 

While you can certainly debate which particular form of capitalism should be practiced, in terms of business regulations, size of the welfare state, strength of labour unions and so on, it is bizarre to want to replace it with something we already know is much, much worse. 

 

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30 minutes ago, Khaleesi did nothing wrong said:

If we are talking longer trends then another fact is that Western countries that adopted free market based systems in the 1800's have increased their incomes per person thirty or forty times over by now, after adjusting for inflation. In addition, hours worked per citizen have been cut in half or thereabouts.

This should be put into comparison with the preceding ten thousand years or so, where living standards were more or less stagnant with minor fluctuations due to wars and epidemics.  

The income of the average Chinese has increased fifteen times over since they started scrapping Communism in favor of a more market based system 50 years ago. 

While you can certainly debate which particular form of capitalism should be practiced, in terms of business regulations, size of the welfare state, strength of labour unions and so on, it is bizarre to want to replace it with something we already know is much, much worse. 

 

Well, yes.  If you're on the left why not aim to create a society like Denmark, which has impressive social services, and redistributes income, but still has a an efficient market economy, rather than doing things like confiscating assets or banning the stock market?  Denmark is a model that works very well, from a left wing point of view, so why go for models that work badly?

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1 hour ago, Scott de Montevideo! said:

My point is that when this collectivist model has been tried in the USSR, China, Venezuala, Cuba, etc. it has not resulted in real democracy.  I understand that correlation does not equal causation but correlations this consistent are hard to ignore or discount.  When the State is given full control of the means of production it has resulted in cronyism and corruption not equal division of wealth.  Call me cynical but I don’t see any other result coming from yet another experiment in this type.

The hybrid model with public and private ownership of capital seems best to me.

Unfortunately, the Presidential/Electoral College system in the USA  does not result in real democracy either. Just look at your present situation. And no, parliamentary systems have their flaws also. Just look at my situation up here in Ontario.

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1 hour ago, Scott de Montevideo! said:

My point is that when this collectivist model has been tried in the USSR, China, Venezuala, Cuba, etc. it has not resulted in real democracy.  I understand that correlation does not equal causation but correlations this consistent are hard to ignore or discount.  When the State is given full control of the means of production it has resulted in cronyism and corruption not equal division of wealth.  Call me cynical but I don’t see any other result coming from yet another experiment in this type.

The hybrid model with public and private ownership of capital seems best to me.

First, I agree wholeheartedly with the bolded.  Second, I think you're looking for correlation in the wrong way.  Communism requires the state controls the means of production, but the same is not true vice-versa.  There are plenty examples of command economies that have nothing to do with communism nor a "collectivist model."  In other words, the sample is much larger.  Third, as the bolded suggests, it's better to think of means of production as a continuum rather than a dichotomy.  And in that respect, there are obviously a multitude of states with higher rates of state control than the US that also happen to be more democratic.  Looking at the media is an illustrative example:  completely state-run media is clearly not healthy for democracy.  But providing for state-run, along with private, media is also clearly optimal when compared to the predominately privatized media of the US.

1 hour ago, Jo498 said:

What I meant is that Rippounet's claim does not imply that there is no connection if the connection is non-linear. virtually every relation is non-linear outside the bounds of idealized modelling, so the non-existence of a linear relation does not imply that there is no relation.

I understand the relationship is non-linear (if there is one) - hence my middle ground remarks - but my point is it's still not clear what relationship is being hypothesized, whether it be a bell-curve, u-shaped, curvilinear, multi-peaked, what have you.  Is there a relationship between the two?  I don't know, but I've yet to see a clear explanation for what precisely that relationship may be that can be held up to scrutiny.

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3 hours ago, DMC said:

First, I agree wholeheartedly with the bolded.  Second, I think you're looking for correlation in the wrong way.  Communism requires the state controls the means of production, but the same is not true vice-versa.  There are plenty examples of command economies that have nothing to do with communism nor a "collectivist model."  In other words, the sample is much larger.  Third, as the bolded suggests, it's better to think of means of production as a continuum rather than a dichotomy.  And in that respect, there are obviously a multitude of states with higher rates of state control than the US that also happen to be more democratic.  Looking at the media is an illustrative example:  completely state-run media is clearly not healthy for democracy.  But providing for state-run, along with private, media is also clearly optimal when compared to the predominately privatized media of the US.

 

I appreciate that point.  My point is that those state that go for the "State owns the means of production" tend to be those that are repressive and authoritarian.  If there is an example of a State that owns the means of production that isn't repressive and authoritarian I'd be interested to look into it.

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