QuoteOriginally posted by: AashAs to T4A's point regarding dispersion of power, what does one do when power is dispersed to centres that have grown so large as to be comparable to government in power? On the face of it, it would almost seem that in the interest of avoiding centralisation of power, any entity deemed to big to fail should be allowed to fail when it does. Is there any basis to the idea that the size of any financial entity should be limited? Is there any other way to disperse power than through capital?There are a couple of very interesting and important failure modes related to dispersion of power.First, in some industries, the value structure for suppliers, the company, or customers is such that the company can grow to capture a majority of the flows (and profits) in that industry or product category. Economies of scale or scope -- with a dash of anti-competitive behavior -- can lead to monopolistic or monopsonistic conditions. For that reason, most capitalist societies have some form of anti-monopoly regulations. Yet even if monopolies aren't well regulated, the history of innovation shows a marked tendency for newcomers to displace dominant incumbents. Monopolies, like empires, eventually rot and fail.Second, this crisis reveals a more insidious failure mode in human economic systems -- the potential for widespread adoption of an erroneous model. Even if every bank remains small, if all banks adopt the same incorrect pricing model, then all banks will fail. One can see this as an example in which the key failure mode of central planning can infect a distributed/competitive capitalism system. In that regard, all human systems (whether socialistic or capitalistic) are susceptible to the madness and delusions of crowds.

QuoteOriginally posted by: Traden4AlphaMy on-going concern is that the safety net can become a couch and the government's collection process can become a noose This is the most critical thing. Can we imagine a society where people sit on the couch as fully accepted members? Not so long ago, in my territories, we preached the women-stay-in-the-kitchen ideology and the economic system did without close to 50% of the society?I found this extremely stupid, because for wealth development, many men should have stayed-in-the-garage instead.I would rather fear that we are not mature for the couch (except Freud's) ?

QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: FermionQuoteanything other than capitalism will be more corrupt, according to youIs there any argument that might cause you to change them? If not (as seems to be the case) then you are no different to any other true believer who puts their superstition above reason.That's a low-quality straw man and you know it.Not at all. I thought you knew what "straw man" meant, but apparently you don't. You made it abundantly clear that your belief was more important than reasoned argument. And the example you challenge me with exhibits the same error:QuoteLet me ask you this, Fermion, is there any argument that might cause you to change your belief that an electron has the opposite charge of a proton?Yes, any reasoned argument that caused me to doubt it. I look forward to you giving me one.QuoteIf not (as seems to be the case) then you are no different to any other true believer who puts their superstition about particle charge above reason.Which is clearly not the case with me, although it is with you. QuoteMy beliefs about people, like your beliefs about particle charge, stem from a rather large body of research. In my case, that work spans cognitive science, evolutionary biology, iterated game theory, behavioral economics, and anthropology. If sufficient quantities of that research were invalidated by new empirical data (not ideological argument), then I would change my beliefs.The issue is neither empirical data, nor ideological argument (I leave that to you) but reasoned argument. I have repeatedly presented to you a reasoned argument for limiting private ownership in a very specific way and you have never responded to it in a reasoned way. You have always (many times now in different threads) resorted to:1. Pretending that I have argued something else (a straw man)2. Ideological assertions about it resulting in more corruption than capitalism3. Ideological assertions about individuals being more important than the interests of the community.4. And so onI long for the day when you actually address the argument.

QuoteOriginally posted by: Traden4Alpha[QuoteOriginally posted by: exneratunriskIn any socioeconomic system this can only be mapped by organizing economy and social affairs orthogonal?I agree because the economy is far more dynamic than are social affairs. The keys to a growing economy would seem to include innovation, flexibility, and knowledge transfer. All of which are seriously inhibited by capitalism, which permits capital concentrated in few hands to constrain them for the purpose of accumulating more capital -- as I have explained many times over, but which you continue to ignore, except to make the baseless ideological assertion that, despite its faults, capitalism is better than any alternative.

QuoteOriginally posted by: exneratunriskIn any socioeconomic system this can only be mapped by organizing economy and social affairs orthogonal?Capitalism as the symbol of a capital-oriented economy, how it has been celebrated up to now, does not fit ... Socialism, as it is commonly understood, not at all.I agree entirely. I would add, that whilst economics and politics need to be essentially orthogonal, there is a principle by which we can achieve this. That principle is to apply to economics the same structure that we ambitiously seek to apply to politics: democracy!Democratic markets offer a route to achieve that in which participants vote with their money in the same way that in politics people vote with their ballot paper. Just as democracy in politics requires an absence of monarchs, aristocrats, dictators, bureaucrats, democracy in economics requires an absence of private sector capitalists and planned economy dictatorships. To achieve this one has to limit the role of private and public sectors to their legitimate spheres of influence. This requires that the public sector has the responsibility to manage the framework for democratic production and markets without any rights to manage (or compete in) production directly.

QuoteOriginally posted by: exneratunriskQuoteOriginally posted by: Traden4AlphaMy on-going concern is that the safety net can become a couch and the government's collection process can become a noose This is the most critical thing. Can we imagine a society where people sit on the couch as fully accepted members? Not so long ago, in my territories, we preached the women-stay-in-the-kitchen ideology and the economic system did without close to 50% of the society?I found this extremely stupid, because for wealth development, many men should have stayed-in-the-garage instead.I would rather fear that we are not mature for the couch (except Freud's) ?That would seem to pose a bit of a paradox. On the one hand, we think everyone in a modern civil society should enjoy some minimum standard of living. On the other hand, we think that everyone should contribute to society in some way. Thus, money earned through gainful employment is not socially-equivalent to money received as a social benefit. This implies either creating/maintaining a stigma for being "on the dole," mandating some form of community service labor for beneficiaries, or providing only a sub-poverty-level social benefit to strongly encourage gainful employment.The problem can become multi-generational in the case of structural unemployment in which some kids are raised in an unemployed households (and even neighborhoods) to become unemployed adults because they never saw their parents or friends' parent go to work (assuming that society doesn't require employment as a prerequisite for procreation).

QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: exneratunriskQuoteOriginally posted by: Traden4AlphaMy on-going concern is that the safety net can become a couch and the government's collection process can become a noose This is the most critical thing. Can we imagine a society where people sit on the couch as fully accepted members? Not so long ago, in my territories, we preached the women-stay-in-the-kitchen ideology and the economic system did without close to 50% of the society?I found this extremely stupid, because for wealth development, many men should have stayed-in-the-garage instead.I would rather fear that we are not mature for the couch (except Freud's) ?That would seem to pose a bit of a paradox. On the one hand, we think everyone in a modern civil society should enjoy some minimum standard of living. On the other hand, we think that everyone should contribute to society in some way. Thus, money earned through gainful employment is not socially-equivalent to money received as a social benefit. This implies either creating/maintaining a stigma for being "on the dole," mandating some form of community service labor for beneficiaries, or providing only a sub-poverty-level social benefit to strongly encourage gainful employment.No it doesn't. In the absence of rational economic principles, there is no means to measure1. How much production is necessary.2. How much work it requires.3. Who should do that work.4. What incentives/rewards are needed for those who choose to do that work.5. What safety net can be provided for those who for one reason or another do not contribute directly through choice to wealth production.

I haven't followed this fascinating discussion closely enough, but I have a question that may or may not be tangential.Essentially, it's a sort of chicken/egg discussion that we were having with some of my colleagues. My view is that there's one inherent problem with the theoretical concept of fully deregulated free markets/capitalism. That problem centers around the agency/incentive issues that seem to inevitably arise in markets and eventually lead to bubbles and general pro-cyclical behavior. To me these incentive issues are embedded in free mkts/capitalism by design and all other phenomena, such as excess leverage, are corollaries. My colleague, on the other hand, insisted that, actually, incentive issues would not have arisen in absence of excess liquidity. His view is that such excess liquidity/leverage is a result of political meddling in the free mkts. Without the meddling, goes his opinion, the free mkt would have been able to allocate capital efficiently, which would have prevented excess liquidity, which, in turn, would ensure that incentive issues had no fertile soil to flourish in.Do people here have a view on this chicken/egg issue? Again, apologies if I am inadvertently hijacking this thread. It's not my intent, as I think my question is related.

QuoteOriginally posted by: FermionDemocratic markets offer a route to achieve that in which participants vote with their money in the same way that in politics people vote with their ballot paper. Just as democracy in politics requires an absence of monarchs, aristocrats, dictators, bureaucrats, democracy in economics requires an absence of private sector capitalists and planned economy dictatorships. To achieve this one has to limit the role of private and public sectors to their legitimate spheres of influence. This requires that the public sector has the responsibility to manage the framework for democratic production and markets without any rights to manage (or compete in) production directly.Sometimes it is so simple. Democracy is the identifier I missed myself when driving my spinning wheel of free markets and a regulated social system.But I have some problems with the-public-sector-has-the-responsibility-to-manage ...At least here in Europe, the ps has conquered its remunerative and privileged niche in the wealth system and tend to grow and consume most of the income of the wealth system itself.How to organize a slim but powerful ps, which works in your sense ? Which ideology or political representation of it has an answer?

QuoteOriginally posted by: Traden4AlphaThat would seem to pose a bit of a paradox. On the one hand, we think everyone in a modern civil society should enjoy some minimum standard of living. On the other hand, we think that everyone should contribute to society in some way. Thus, money earned through gainful employment is not socially-equivalent to money received as a social benefit. This implies either creating/maintaining a stigma for being "on the dole," mandating some form of community service labor for beneficiaries, or providing only a sub-poverty-level social benefit to strongly encourage gainful employment.The problem can become multi-generational in the case of structural unemployment in which some kids are raised in an unemployed households (and even neighborhoods) to become unemployed adults because they never saw their parents or friends' parent go to work (assuming that society doesn't require employment as a prerequisite for procreation).As mathematician I escape into the pathologic cases, if I do not have an answer. What if one person created the total wealth for a community. Would we still apply a "utility function" in the sense of dependent-labor?I post here in my working time. As CEO, I should be pushed by my share holder (myself) to work much harder on developing markets, marketing strategies, development and deployment plans. And in fact, I could ... but discussing with Wilmotters intensively does part of the job. It sharpens my understanding on human needs and wants, dreams, passions, frustrations, ... I get eyes of markets and industry, I get a lot of innovative ideas, financial and off topic, .... If exhibit, nobody sees me "working "..?

QuoteOriginally posted by: MartinghoulI haven't followed this fascinating discussion closely enough, but I have a question that may or may not be tangential.Essentially, it's a sort of chicken/egg discussion that we were having with some of my colleagues. My view is that there's one inherent problem with the theoretical concept of fully deregulated free markets/capitalism. That problem centers around the agency/incentive issues that seem to inevitably arise in markets and eventually lead to bubbles and general pro-cyclical behavior. To me these incentive issues are embedded in free mkts/capitalism by design and all other phenomena, such as excess leverage, are corollaries. My colleague, on the other hand, insisted that, actually, incentive issues would not have arisen in absence of excess liquidity. His view is that such excess liquidity/leverage is a result of political meddling in the free mkts. Without the meddling, goes his opinion, the free mkt would have been able to allocate capital efficiently, which would have prevented excess liquidity, which, in turn, would ensure that incentive issues had no fertile soil to flourish in.Do people here have a view on this chicken/egg issue? Again, apologies if I am inadvertently hijacking this thread. It's not my intent, as I think my question is related.Agency/incentive issues occur in all human systems, not just markets. Anytime the positive and negative consequences of an act are separated in either time or space, the agents have incentives for "misbehavior". These can occur inside organizations, bureaucracies, dictatorships, socialist system, capitalist systems, etc. In theory, a free market and transparency can reduce some types of agency/incentive problems assuming that the bad consequences follow sufficiently closely that the market can learn that Agent X provides low quality, is a scam, etc.If the positive consequences of actions become too salient and too persistent relative to the negative consequences (e.g., everyone's making a profit), then the feedback mechanism of the market can fail (Note: other economic/decision-making systems will have this same problem too because they have even poorer feedback mechanisms than do markets). For example, the deeply held belief that housing could only appreciate in price (pumped by post-dot-com flight-to-quality and central bank interest rate policies) created the perfect environment for the housing bubble.I do tend to agree that excess liquidity was a strong driver of the housing bubble but I see it as part of a self-amplifying condition rather than chicken-egg. The peculiarities of housing (in which the monthly cost of the house is proportional to the interest rate but the price of the house can be inversely proportional to the interest rate) means that a declining interest rate environment can create a self-amplifying asset price dynamic. The very natural (and rational!) assumption that a rising price is indicative of rising value then serves as a confirmation and incentive to allocate still greater amounts of capital to that sector. And in allocating increasing amounts of capital to a sector, the excess supply of capital induces further declines in interest rates. But I'd also add that the rise of China contributed to the housing bubble because the massive deflation of consumer goods from Asia masked the massive inflation induced by excess liquidity.One additional factor that is a serious problem for all democratic systems (including market-capitalist systems) is the confounding role of transparency via low-cost telecommunications in exacerbating incentive problems. The internet makes it too easy for participants to find "the best" choice. That sounds like a blessing for improving efficient allocation, but it creates a winner-take-all environment which creates intense selection pressure to appear to be "the best." In the context of housing, it created massive incentives to offer ever-lower interest rates, ever-lower down-payments, and ever-more lax documentation terms. In the context of housing, lenders had overwhelming incentives to offer ARMs and negative amortization loans and borrowers had overwhelming incentives (and abilities) to find and use these instruments.

QuoteOriginally posted by: exneratunriskQuoteOriginally posted by: FermionDemocratic markets offer a route to achieve that in which participants vote with their money in the same way that in politics people vote with their ballot paper. Just as democracy in politics requires an absence of monarchs, aristocrats, dictators, bureaucrats, democracy in economics requires an absence of private sector capitalists and planned economy dictatorships. To achieve this one has to limit the role of private and public sectors to their legitimate spheres of influence. This requires that the public sector has the responsibility to manage the framework for democratic production and markets without any rights to manage (or compete in) production directly.Sometimes it is so simple. Democracy is the identifier I missed myself when driving my spinning wheel of free markets and a regulated social system.But I have some problems with the-public-sector-has-the-responsibility-to-manage ...At least here in Europe, the ps has conquered its remunerative and privileged niche in the wealth system and tend to grow and consume most of the income of the wealth system itself.How to organize a slim but powerful ps, which works in your sense ? Which ideology or political representation of it has an answer?Like I said, to distinguish between the production environment and production itself. The constant class struggle in Europe has resulted in a "mixed economy" where there are no such clear boundaries. Sometimes in some places the public sector (e.g. nationalised industry) creates bureaucracy and inefficiency whilst at other times in other places (e.g. banking and insurance), the private sector has Europe by the balls. One of the results is that manufacturing industries are continually going to government for subsidies in one form or another. My feeling is that this should be the other way round: banking, insurance and key resources need strong regulation, whereas productive activity needs to be private sector without any subsidies.

QuoteOriginally posted by: MartinghoulI haven't followed this fascinating discussion closely enough, but I have a question that may or may not be tangential.Essentially, it's a sort of chicken/egg discussion that we were having with some of my colleagues. My view is that there's one inherent problem with the theoretical concept of fully deregulated free markets/capitalism. That problem centers around the agency/incentive issues that seem to inevitably arise in markets and eventually lead to bubbles and general pro-cyclical behavior. To me these incentive issues are embedded in free mkts/capitalism by design and all other phenomena, such as excess leverage, are corollaries. My colleague, on the other hand, insisted that, actually, incentive issues would not have arisen in absence of excess liquidity. His view is that such excess liquidity/leverage is a result of political meddling in the free mkts. Without the meddling, goes his opinion, the free mkt would have been able to allocate capital efficiently, which would have prevented excess liquidity, which, in turn, would ensure that incentive issues had no fertile soil to flourish in.Do people here have a view on this chicken/egg issue? Again, apologies if I am inadvertently hijacking this thread. It's not my intent, as I think my question is related.The description "chicken/egg" is appropriate. The system is unstable, even when in equilibrium, both de-stabilising affects multiply the effect of each other. Your colleague's errors are:1. The self-contradiction of assuming that an equilibrium state could be stable, while at the same time complaining that a presidential sneeze will de-stabilise it.2. Pretending that governmental meddling doesn't ever come in response to private sector demands.3. Wishful thinking that the mythical "free market" will allocate capital efficiently.

QuoteOriginally posted by: exneratunriskI post here in my working time. As CEO, I should be pushed by my share holder (myself) to work much harder on developing markets, marketing strategies, development and deployment plans. And in fact, I could ... but discussing with Wilmotters intensively does part of the job. It sharpens my understanding on human needs and wants, dreams, passions, frustrations, ... I get eyes of markets and industry, I get a lot of innovative ideas, financial and off topic, .... If exhibit, nobody sees me "working "..? This is a true challenge of the modern government economist or central banker. Life was so much easier when the regulatory minions could count the widgets leaving the factory loading dock, tally the tons of wheat arriving from foreign shores, and audit the containers flowing through the customs houses of the sea ports.I, too, visit and post on Wilmott for the ideas. But am I importing or exporting? Where does Wilmott.com appear on the balance of trade and GDP figures of the nations of its denizens? Are these internationally-available ideas to be accounted as revenues or assets, costs or liabilities? Are they long-term or short-term? Can we even mark them to market or model if neither of these are defined? I pity the poor economic regulator in this age of fiber-optically exchanged intangibles.This seems, to me, to be where capitalism excels because it allows individuals to decide how to control of their most precious means of production -- their minds.

QuoteOriginally posted by: Traden4AlphaThis seems, to me, to be where capitalism excels because it allows individuals to decide how to control of their most precious means of production -- their minds.As usual, when it comes to ascribing benefits or disadvantages to capitalism, you have them backwards. For the vast majority of the population, capitalism detracts from the individual freedom you desire.