Fermion & I seem locked in an on-going argument over how best to rule the economic world -- a bitter battle between a so-called "market democracy" approach and a so-called "capitalist" approach, respectively. In order to avoid pouring copious quantities of text into other people's nice threads (sincere apologies to Paul for threadjacking the Manifesto!), this thread serves as a central repository for our logorrheic streams. (I placed this thread in "General" because discussions of global economic models seemed more QF than OT, but feel free to move the thread.)Fermion proposes a scheme called "market democracy" that purports to cure the ills of capitalism and I argue that his scheme is unworkable, not an example of a market, probably not democratic, and is merely an innovation-stifling attempt to return to central planning. No doubt, he'll say "not so" and argue that capitalism is a scheme by which the parasitic rich get richer while exploiting the downtrodden workers.The core of the dispute seems to come down to a series of questions that the two us have divergent answers for:1. Can one create a "market mechanism" in which producers, consumers, AND at least one community participate in a market-based 3-way (or more-way) exchange of goods, money, and taxes? I say its not possible due to the multiway-nature of the transaction -- whereas a 2-way transaction has a nice equilibrium clearing price on the curves of supply and demand, no such equilibrium is likely in a 3-way. Moreover, because the community is a monopsony, the transactions will be skewed to the nonnegotiable demands of the community and inefficient from the standpoints of both the producer and consumer.2. Are the "laws" of physics, chemistry, etc. "owned" by anyone and should consumers pay royalties for products that employ these laws? I say they are not "owned" by any community or even by humanity but exist outside of our one species on this one planet. Moreover, assuming the community seizes them by fiat, I can see no objective mechanism for deciding how much of these laws are employed by any given product as an objective basis for taxing that product. Finally, I see no way to allocate the royalties derived from using "f=ma" to local, state, federal, and global communities of both the producer and consumer. At best, the ownership of natural laws is a means of justifying more taxation without delivering more service to the taxed entities.3. How are the answers to the above operationalized for every new product, product variant, and every transaction? I claim that the scheme is unworkable due the volume and complexity of process and the costs layered on to innovation by some community tax board. I liken this to the problem of running a restaurant in Prague under the socialists -- you couldn't change the menu without getting government approval. I am also singularly skeptical that any community will have the knowledge needed to properly evaluate products/services -- the information asymmetries will imply that producer and consumer have far better insight into value than would any community representative. Moreover, I'm skeptical that "the community" will behave in a democratic fashion because the vociferous and politically connected will gravitate to control those segments of the economy that they most care about (e.g., anti-abortionists will infest the women's health service taxation committee, anti-evolutionists will infest the book committee, automaker CEOs will sway the car taxation committee, etc.) In short, the scheme seems a full-employment act for lawyers, bureaucrats, and politicians to argue over every new product and every new transaction.I'm sure there's more and that Fermion will have much to say.I do hope that others contribute to this thread, (catcalls and brickbats, at least). At the very least, perhaps some will find amusement in our bitter battle (and relief that it is not inundating their threads).

How shall we know when a correct conclusion is made?

QuoteOriginally posted by: DJAverageHow shall we know when a correct conclusion is made? Perhaps (no guarantees, mind you) the conclusion will be reached when we have the heat death of the universe.

Discussion was a total BS (bad word) in my view.Point is about surplus value (Marx's term). Who will take it? And the answer is who controls (owns) business. In capitalist society entrepreneur has control and receives surplus value, in socialist society the society itself (in form of state) does the same.P.S. Surplus value here is an accounting profit as the difference between sale price and cost.P.P.S. And I don't want to argue about that anymore.

I did find the discussion interesting.Fermion has been making some thought-provoking critics to the way that "owners" of production/ideas are rewarded, without the community's appropriate take.But I agree with T4A that it's impossible to establish a community committee to imparcially and fairly establish an objetive value to ownership of productions and ideas.We already have in place mechanisms such as taxes on products/comsumption/income, patent laws, government sovereignty over natural resources and representative democracy, and by looking at their performance we could infer what has worked and what has not.In genreal, I'd agree with T4A: Better to have a system that produces winners and losers, but where they are not chosen by a committee, than to have a committee chose them in the name of fairness (historical results show that those communities failed to progress as a whole). Trying to solve these problems by edicts and laws will most likely freeze prejudices and misconceptions than promote changes.

QuoteOriginally posted by: torontosimpleguyDiscussion was a total BS (bad word) in my view.The first brickbat!QuoteOriginally posted by: torontosimpleguyPoint is about surplus value (Marx's term). Who will take it? And the answer is who controls (owns) business. In capitalist society entrepreneur has control and receives surplus value, in socialist society the society itself (in form of state) does the same.P.S. Surplus value here is an accounting profit as the difference between sale price and cost.And sometimes the customer takes the surplus value (e.g., Wal-Mart or Dell's relationships with suppliers). In general, the value is shared based on the relative utility of the alternatives to the transaction (if any). Sometimes the producer-customer split in surplus varies during the quarter -- many companies have a spike in sales at the end of each quarter when the sales folk push to meet quota (and give away the surplus to do it).QuoteOriginally posted by: torontosimpleguyP.P.S. And I don't want to argue about that anymore.This is the argument clinic. Being hit-on-the-head lessons are in OT in the Gaza thread.

You didn't get it.1. I was talking about concept of surplus value or profit. Wal-Mart has its profit and supplier has its profit.2. My point is that society can't control profit if it doesn't control business. And taxes are included in cost. So, society can only control level of taxes and entrepreneur still controls the profit. And he wants society to control the profit. But it requires the change of ownership.

QuoteOriginally posted by: torontosimpleguyYou didn't get it.1. I was talking about concept of surplus value or profit. Wal-Mart has its profit and supplier has its profit.My apologies. But if a supplier negotiates one price with one customer and a different price with a different customer, the supplier has surely foregone some of the supplier's surplus to that customer that got the better deal. Yes, both supplier and Wal-Mart have their respective profits, but if the Wal-Mart negotiator is tough, then some of the supplier's profit is shifted to Wal-Mart's income statement. (And just to be clear, Wal-Mart is no isolated example. This issue of how the total profit (consumer retail price minus cost of production) of a product is split along a supply chain is very common in retail, technology, automotive, etc. Some customers simply have more power to negotiate for a lower price = lower profit for the producer.)QuoteOriginally posted by: torontosimpleguy2. My point is that society can't control profit if it doesn't control business. And taxes are included in cost. So, society can only control level of taxes and entrepreneur still controls the profit. And he wants society to control the profit. But it requires the change of ownership.I agree, although I do think customers play a role in profit and a dominant customer may have substantial control over the profits of small entrepreneurs.

QuoteOriginally posted by: MCarreiraI did find the discussion interesting.Fermion has been making some thought-provoking critics to the way that "owners" of production/ideas are rewarded, without the community's appropriate take.But I agree with T4A that it's impossible to establish a community committee to imparcially and fairly establish an objetive value to ownership of productions and ideas.We already have in place mechanisms such as taxes on products/comsumption/income, patent laws, government sovereignty over natural resources and representative democracy, and by looking at their performance we could infer what has worked and what has not.Exactly! I suspect that the "market democracy" approach is a convoluted scheme that will replace the current system with a much more complex version of the current system. Moreover, it will shift the emphasis of producers from trying to satisfy the customer to jumping through the hoops of the bureaucratic committees that claim to represent the community but that really represent a political class of privileged apparatchiks.QuoteOriginally posted by: MCarreiraIn general, I'd agree with T4A: Better to have a system that produces winners and losers, but where they are not chosen by a committee, than to have a committee chose them in the name of fairness (historical results show that those communities failed to progress as a whole). Trying to solve these problems by edicts and laws will most likely freeze prejudices and misconceptions than promote changes.That is my fear, too. EDIT: Your comment reminds me of a story from the Wall Street Journal many years ago. A man moved to Germany and tried to start a shoe-shining service. But he could not get a business license because "Shoe Shiner" was not on the list of possible businesses. Perhaps Germans don't mind dull shoes and the government didn't want this fellow wasting his time, but I think that should be up the entrepreneur to decide!

QuoteOriginally posted by: torontosimpleguyYou didn't get it.1. I was talking about concept of surplus value or profit. Wal-Mart has its profit and supplier has its profit.2. My point is that society can't control profit if it doesn't control business. And taxes are included in cost. So, society can only control level of taxes and entrepreneur still controls the profit. And he wants society to control the profit. But it requires the change of ownership.Society doesnt need to have the ownership (eg voting shares) of a business entity. Society via its representatives, that is the government at various levels, can set rules, laws and regulations give licenses and pemissions regarding every aspect of the business. Its much more than just setting tax rates. Taxes are the least....the society can set restrictions such as where the business will operate, when and how, if i will operate at all. There can be costs about the set occupational health and safety standards, regulations about the minimum number of employees, the minimum wages, the minimum severance packages, the maximum workforce % that can be fired each month, the list can be endless. Moreover, society can impose fines for violation of those regulations, sometimes so heavy that can lead a business to bankruptcy actually.Hope this makes sense.

QuoteOriginally posted by: AnthisQuoteOriginally posted by: torontosimpleguyYou didn't get it.1. I was talking about concept of surplus value or profit. Wal-Mart has its profit and supplier has its profit.2. My point is that society can't control profit if it doesn't control business. And taxes are included in cost. So, society can only control level of taxes and entrepreneur still controls the profit. And he wants society to control the profit. But it requires the change of ownership.Society doesnt need to have the ownership (eg voting shares) of a business entity. Society via its representatives, that is the government at various levels, can set rules, laws and regulations give licenses and pemissions regarding every aspect of the business. Its much more than just setting tax rates. Taxes are the least....the society can set restrictions such as where the business will operate, when and how, if i will operate at all. There can be costs about the set occupational health and safety standards, regulations about the minimum number of employees, the minimum wages, the minimum severance packages, the maximum workforce % that can be fired each month, the list can be endless. Moreover, society can impose fines for violation of those regulations, sometimes so heavy that can lead a business to bankruptcy actually.Hope this makes sense.It does make sense. But as someone who has watched or participated in new companies, those regulations come with a high cost that stifles innovation, new job creation, and improvement in standards of living. This cost is largely hidden because it affects an invisible group -- people that will, in the future, consider starting businesses.Moreover, well-intended regulation is one means by which the rich get richer because a large company can more readily absorb and amortize the administrative costs of regulation than can a small company. In fact, in some cases, large companies have promoted regulation for competitive advantage (e..g, higher efficiency standard for airconditions and new reporting regulations for meat-packing plants). Large companies may support a costly regulation because they know the regulation will hit smaller competitors especially hard. Yes, society may gain some benefit (e.g. more efficient air conditioners or safer meat) but at a cost of concentrating the market in fewer and fewer of the largest companies. (Maybe large companies will like Fermion's approach as a way to make it hard for smaller competitors! )

When i wrote my previous comments i didnt have in mind the issue of economies of scale and scope that favour the larger market players over the smaller ones in the market. I just tried to show torontosimpleguy that society doesnt necessarily need to own voting stock of a company in order to control it. Its the distinguish between stakeholders and mere stockholders.On the other hand, yes entrepreneurs/capitalists dont like any restrictions imposed by regulations at all. In this case the only restriction comes from within and its called sense of ethics. Usually the same persons who fret about government regulations dont have any problem receiving government assistance, grants, subventions, tax breaks even bail outs. But is this the kind of entrepreneurs the society really needs? People that thrieve by convicting others to poverty or even worse to longer term health problems? People that thrieve at the expense environment? People that want laws tailormade for them just like their suit? I dont think so, but i know this may vary in different cultures, nations, or even diffeent people. But i believe an entrepreneuer or a manager has much more to consider than just the intertemporal optimization of earnings per share. Nike case comes to mind. An American firm decided to move some of its production lines to lower cost countries in Asia leaving american people unemployed. In the new host countries they were welcomed by their potentially corrupted governments with neo-colonial terms. Probably land, natural resources and infrastructure was ceded, tax rates may have been negligible no pension systems, no regulations about labour and occupational health and safety. Then Nike had been accused that their products are made by badly paid workers and children. Nike defended that thanks to Nike those people are able to survive. In other words without Nike those people wouldnt have had a spade to dig their graves. And certain other people with prestige and status tried to justify the unjustifiable. Obviously I dont buy their excuses. If Nike managers were thinking anything more than just earnings per share, would have paid their employees decent salaries, in order to allow them to send their children to school and not being forced to bring them to work, or much worse lease them to pedophiles.... Nike could have exhibited some limited sense of corporate responsibility and fund a school and a primary healthcare unit for those children. Certainly it doesnt cost a fortune, especially for a firm like Nike. Even if it does, i dont think i would mind to spend a few bucks more when buying a Nike product if I were assured that this was not made by a child or a starving worker or that those bucks will contribute to a child's education and healthcare. But since i dont have any such assurance i would rather buy something else from a rival firm, even at a higher price.

IMO, simplified:Democracy is accepted under the assumption: many, many lousy managers make excellent decisions TOGETHER. In other words, the democratic system has more wisdom than any individual member.Free-market is accepted under the assumption (Collector said this) that it has more wisdom than any individual participant.How to combine? IMO, by treating economy and social affairs strictly orthogonal. "Economy" shall transform knowledge into margins under minimum-rule conditions. "Social" shall organize the distribution of the output.So, ideologies should concentrate on the distribution and not creation.Example: I think, the innovation and automation spiral will decrease work volumes drastically and lift entry levels (less work in thin air). Full-employment, possibility, is THE lie of the 21th century?So, we probably need to think of a basic-salary for ALL citizens substituting all complicated transfer-payments (employed or unemployed). Find new forms of mixed self-organized and dependent work ... create task forces for creating non-material goods ... Everything, within the framework of the above principles?

QuoteOriginally posted by: AnthisI just tried to show that society doesnt necessarily need to own voting stock of a company in order to control it. Its the distinguish between stakeholders and mere stockholders.Nike case comes to mind. ........Good points about stakeholders vs. shareholders. Clearly governments have a say in what and how companies operate without taking equity stakes in companies. But government are virtual owners of companies in both financial and control terms. Aren't taxes first in line, ahead of both bond holders and shareholders, for claims on a company's income and assets? And aren't government de jure co-managers of companies in the regulations that mandate workplace conditions and product features?I agree with you that Nike's behavior can be flipped to the consumer -- if consumers were willing to pay a decent price for shoes, shoe companies could pay a decent price for the labor in those shoes. Yet, it seems that only a minority of consumers would do this. I remember "Buy American" campaigns a couple of decades ago -- they didn't work because consumers weren't wiling to pay more. The de-industrialization of America is as much about consumer behavior as it is about retailer and producer behavior. And I won't touch the issue that it is probably immoral to pay $X/hour to a Western worker (and charge consumers more) if paying $X/2 would enable an impoverished third-world worker to have a much better life. Perhaps one could say that until wages and standards of living are equalized around the globe, the people of the developed nations shouldn't get a raise (and may deserve a pay cut).

QuoteOriginally posted by: exneratunriskIMO, simplified:Democracy is accepted under the assumption: many, many lousy managers make excellent decisions TOGETHER. In other words, the democratic system has more wisdom than any individual member.Free-market is accepted under the assumption (Collector said this) that it has more wisdom than any individual participant.How to combine? IMO, by treating economy and social affairs strictly orthogonal. "Economy" shall transform knowledge into margins under minimum-rule conditions. "Social" shall organize the distribution of the output.So, ideologies should concentrate on the distribution and not creation.Example: I think, the innovation and automation spiral will decrease work volumes drastically and lift entry levels (less work in thin air). Full-employment, possibility, is THE lie of the 21th century?So, we probably need to think of a basic-salary for ALL citizens substituting all complicated transfer-payments (employed or unemployed). Find new forms of mixed self-organized and dependent work ... create task forces for creating non-material goods ... Everything, within the framework of the above principles?I'm not sure that we can separate the social from the economic or the distribution from the creation -- they seem intertwined rather than orthogonal to me. Both the structure and volatility of the distribution function (and I mean that in sense of both the governmental wealth-redistribution function and the supply chain retail distribution) will affect the creation of value by entrepreneurs and by individuals. The incentives for value or surplus creation as either an entrpreuer or worker affect decision to create that surplus. The more surplus extracted by government and, the greater the uncertainty about the government's surplus extraction (e.g., capricious taxation committees), then the less incentive to create it in the first place. For example, studies show that the more you pay an unemployed person, the less incentive they have to become an employed person. Similarly, angel investors and venture capitalists generally only invest in companies that have the potential to return 5-30X the investment (due to the extreme rate of new venture failure). To the extent that a government would cap returns on ultra-profitable businesses, it stifles investment in any business. A poll in France, a number of years ago, found that inheriting money was viewed as more respectable than making money as an entrepreneur. I thought that explained a lot about the state of the French economy. Without those unseemly entrepreneurs, no one will have more money to inherit.I do agree that full-employment is impossible -- a basic model of demand and supply creation in the labor market will prove the inevitability of some unemployment and an increasing likelihood of inflation as unemployment decreases to zero. Even during the best of boom-times, there are unemployed people and even during the deepest depressions, there are job openings. What can be said is that the 20th & 21st century brought massive improvements in the mobility of people and information that enabled a much better matching between available jobs and available people, thus reducing unemployment. Unfortunately, the recent decades also brought accelerated volatility, globalization, and two-earner families, which increased unemployment.The challenge, for society, is to encourage both new job creation and new job seeking. That implies creating differential incentives that encourage business growth and discourage people staying unemployed. It also implies providing the tools to aid entrepreneurs and job seekers. For entrepreneurs, that includes a stable playing field of low-cost regulations. For job seekers, it probably means providing no-cost training/education and career services. Clearly, some economic surpluses must be harvested from the private economy to provide for public social needs (e.g. shared infrastructure, conflict prevention/resolution, and social stability measures). But that harvesting must be done carefully and lightly so as not to damage the engine of the economy.