Is Capitalism the Root of Inequality?

[russ_watters]

I thought I was being pretty clear ... but maybe not.
Its what they call research. But its not "genuine" research. Its what will support the most expensive concoction and will give them more profit.

If you are going to make-up your own words/definitions, you can't expect me to understand what you mean unless you explain the definition. The concept of R&D is common, well defined and quantified in economic analysis:
http://www.census.gov/compendia/statab/cats/science_technology/expenditures_research_development.html

What you are calling "genuine research" is apparently some social agenda that doesn't directly have anything to do with R&D.

And we're getting off track here. Let's go back to that previous statement:

The profit motive totally nullifies any long term progress. Human nature is extremely short sighted. And capitalism glorifies in that.
Getting profits today is far more important than any benefits to humanity several years from now.

The computer, internet and forum you are posting on right now directly contradict your claim/understanding. The companies that made that happen invested enormous amounts of money in R&D, reaped enormous profits and created enormous benefit for humanity, which you are now enjoying by posting on PF.

There are numerous cases of drugs being falsely approved based on made up evidence or ignoring and suppressing evidence that contradicts what the pharma industry want.

There are frauds and thiefs in all levels of society. They are not unique to the rich or to corporations and they are not inherrent to the existence of any level of society. They have no bearing on this conversation.

 

[russ_watters]

Human nature certainly existed from when humans existed ...
But my point was slightly different.

There are several horrible aspects of human nature which should be discouraged and, if possible, eliminated. Especially our tendency to value selfish short term gain over long term benefits/gain to all of humanity or the world. Capitalism does just the opposite. It glorifies this selfish aspect of human nature.

Civilisation is all about curbing the bad aspects of human nature and encouraging its good aspects with rational benchmarks (as opposed to religious ones).

No. The reason capitalism works and no other system has is that it recognizes that human nature is - by definition - inherrent to humans and can't be changed. So rather than trying and failing to change human nature (see: communism/socialism), capitalism harnesses certain aspects of human nature to create personal and societal good.

 

[russ_watters]

I'm going to respond to this in two parts:

PursuingAmericanDreampdf.pdf

So this is a very interesting article; both the facts and the social commentary/opinion injected into it. While I would tend to agree with V50 that most mobility discussions focus on only half of the mobility, using a measure of relative mobility, this study measures both absolute and relative mobility, which is surprising/great.

Absolute mobility gives the simplest/clearest picture: the vast majority of people do better than their parents. And, in fact, the poor are more likely to exceed the success of their parents than the rich. That shouldn't be surprising, since the lower you are, the more room there is for growth. To me, these are very positive outcomes. Doing better than your parents is my understanding of what "the American Dream" means to most people, and the vast majority of people -- and virtually all of the poor do.

Relative mobility is where it becomes murky and the wording of the analysis is telling about the social commentary motivating it (nevertheless, the facts are what they are):

Amercans' relative mobility outcomes by family income show a glass half empty.

Pessimistic outlook on a by-definition neutral situation (half is half).

Only 4 percent of adults raised in the bottom half make it all the way to the top, showing the "rags-to-riches"story is more often found in Hollywood than in reality.

Of course: that's what Hollywood is for. Also note, the word "only". It's a very long way from the bottom to the top.

At the other end of the ladder, 40 percent of those raised in the top stay there as adults...

Wait, that's not the mirror-image stat: the mirror would be the fraction that fall all the way to the bottom. And if we follow a single person in isolation, if that person rises from the bottom to the top, that means everyone else drops a spot in the overall distribution, or 1 person drops one level from each quintile. It's an exact balance.

This lack of relative mobility is called "stickiness at the ends" because those at the ends of the income distribution tend to be stuck there over a generation...

Well, getting stuck at the bottom is a bad thing while getting stuck at the top is a good thing, right? If one person rising 4 levels causes 4 people to fall 1 level, is that a net positive or negative? (Trick question: it is exactly neutral)

...across the distribution, 20 percent of Americans are "falling despite the rising tide"" - they make more money than their parents did, but thave actually fallen to a lower rung of the income ladder...

So...wait, is that good or bad? As V50 said and I expanded above, by definition, the relative distribution is static: it can't change at all, much less change for the better or worse. If some people move up the ladder, an equal number must drop, by an equal amount (net). This is the flaw in trying to assess mobility in relative terms, to show economic progress/development. If you have fallen down a rung, but are still better off than your parents, that's still an improvement in standard of living. Indeed, the use of the cliche' "falling despite the rising tide" is a wrong twisting of the actual cliche' "a rising tide lifts all ships". The data shows that a rising tide does lift at least the vast majority of ships. A tide is a measure of height against a fixed baseline, so applied here, what matters to the analogy is the absolute, not the relative. It should say something like "rising despite dropping back a rung". That's the negative social commentary spin on the data, but in this case you really can't say the glass is "half-empty" because the statistics say it is more than half full.

Indeed, the other article uses the exact same analogy, but uses it correctly.

Then the next header:

Most Americans Experience Absolute Upward Mobility but Few experience Relative Upward Mobility

If you look at the chart, they list "falling despite the rising tide" as higher income but dropping a quintile in the distribution. As I said before, that's wrong. But what the chart does tell is is that only 16% of all families and only 7% of the bottom quintile experience downward absolute mobility. The vast majority (as said before) experience upwards absolute mobility. And again: the average relative upward mobility must exactly equal zero.

All-in-all, I don't see a lot of problems here. The absolute mobility is positive (is it positive enough?). The highlighting and spin try to play-up negatives in data that is essentially in mandatory equilibrium by mis-matching statistics on opposite ends of the spectrum. All you need to come away with a positive outlook is to see through that: to recognize that by definition the quintiles are static (there is a net of zero change in their size), and the only data showing actual change for positive or negative* is the absolute picture.

Then, the conclusion:

While a majority of Americans exceed their parents' family income and wealth, the extent of their absolute mobility gains are not always enough to move them to a different rung of the econonmic ladder.

Duh. By definition/design there is never any change in the net relative distribution and the absolute change is not in any way related. On average, there can't ever be "enough to move them to a different rung" because the rungs move at exactly the same rate as the average income gain!

To me, the most important and problematic piece of information in this report is the wealth mobility statistics. Half of Americans exceed their parents' wealth, which means half do worse. Given that both incomes are higher and pensions are going away and 401k's rising, you'd expect that to naturally be better. The fact that it is flat despite increases in the related inputs is a net negative. And with Social Security in jeapordy, it points to a growing problem with people not having enough saved for retirement.

There is a confusing set of stats though. In one graphic, it shows the average is 50% exceeded their parents' wealth, with more on the bottom - 72% - exceeding their parents' wealth. But then later, it says the median wealth in the bottom quintile has dropped to only a third of what it was a generation ago. These two facts seem to contradict each other. Can anyone explain that to me?

*I originally wrote that as "better or worse" instead of "positive or negative". One is a statement of mathematical fact, the other a value judgement. That is exactly what the issue of this thread is: mistaking one for the other and/or drawing a false conclusion about one based on an opinion about the other. To whit: if inequality in and of itself is "bad", then a narrowing distribution is "better" or "good", regardless of whether it results in an increase or decrease in absolute income/wealth. Most people's expectation is that rising inequality results in lower incomes at the bottom end ("the rich get richer while the poor get poorer"), but that isn't true, which is why this subject is such a problem. And the study illustrates that: the vast majority are going up in absolute terms. So if we want to be able to say things are "bad", we'll need to find another way to define "bad" and "good" that isn't tied to the math of "positive/negative" or "rising/falling". Something like "not rising fast enough is bad" or "someone rising faster than someone else is bad". Inequality is good for that because it is a derived statistic that can vary up or down. (RelativE) Mobility is not good for that because mathematically it has to be zero-sum: while the number of people going up or down can change, the sum of the up and down is always zero.

 

[lavinia]

Because capitalism created essentially all of the economic success the world has ever seen. It is the only system proven to work. Don't make the mistake that all capitalists support a "pure" form of capitalism, just like most modern socialists done actually support zero private ownership. Also, over the long-term, regulation has been increasing not decreasing. This isn't the 1880s or even the 1920s.

Also, you drew your timeframe much too wide: 20 years ago was 1995, and from 1995 to 2000, the economy grew rapidly. Yes, there were the starts of two bubbles happening then, but much of the gains were real. IE, there was a tech bubble, but there also was real growth in the tech sector.

I don't understand what you are saying here. First of all the first crash after freeing the market was in 1987 and then in the last part of the 80's and beginning of the 90's the S&l's were completely wiped out and the economy went into recession until about 1994 and the Fed funds rate was brought down from over 9% to 3 % by 1993. in 1995 there was another mini-crash after the year of FED tightening in 1994. This sent the economy into another recession. And don't forget the tech bubble after that.

To preach free markets at this point ,in my mind is to be ideological. Much of the real advance in capitalism has occurred in highly regulated times and deregulated times have been disastrous. Or do we now forget the 1920's which also involved real estate market crashes. Or how about the collapse of the Japanese economy during the 1990's after its markets were deregulated? This lasted for over a decade despite an overnight lending rate which was nearly zero. I am not saying that capitalism is bad. I am saying that free markets as they have been increasingly implemented don't work. The data is clear.

 

[russ_watters]

200705 (1).pdf

This article is more questions than answers (it is an introduction to the start of a project, not the final report). But it still has some good stuff:

And, by some measurements, we are actually a less mobile society than many other nations, including Canada, France, Germany and most Scandinavian countries. This challenges the notion of America as the land of opportunity. Despite these potentially troubling findings, the current national economic debate remains focused too narrowly on the issue of inequality, leaving aside the more important core question of whether the foundation of opportunity, economic mobility, remains intact.

Agree.

As Federal Reserve chairman Ben Bernanke recently noted: Although we Americans strive to provide equality of economic opportunity, we do not guarantee equality of economic outcomes, nor should we. Indeed, without the possibility of unequal outcomes tied to differences in effort and skill, the economic incentive for productive behavior would be eliminated, and our market-based economy — which encourages productive activity primarily through the promise of financial reward — would function far less effectively.

Strongly agree (and this is the profit motive discussed in my earlier posts to Siv), but want to clarify that equality of opportunity refers only to government provided opportunity. Government has limited ability to control for social factors such as what parents you were born to and what region of the country you were born in and no ability (yet) to control for genetics. Because of this, it isn't possible, even in principle, for there to be full mobility between quintiles and these inhereted factors have a huge impact on the "stickyness" of the top and bottom. Everyone, of course, understands that besides their genes and upbringing, a rich parent can buy a lot of opportunities for their child that a poor parent can't.

But articles like the previous pretend that the "stickiness" at the extremes are different things, even reporting different statistics to try to describe them differently. The reality, uncomfortable as it may be, is that rich parents cause their kids to be rich - and everyone agrees that that's a good thing - but poor parents also cause their kids to be poor - and that's a bad thing. Our political climate today attempts to separate and twist those things: the rich passing on their wealth is portrayed as bad, even criminal, while the poor passing on their poverty is also the rich's fault. In my opinion, that attitude is part of the reason the "stickyness" exists.

My parents are in the top quintile and I'm in the top quintile. But they didn't just give that to me, they demanded it of me. I got punished for getting bad grades, and the thought of not going to college and getting a useful degree never even occurred to me. An ex of mine, who's parents are poor, actively discouraged her from getting an education ("you'll never make it through college -- and get someone else to drive you there...and when you fail-out, you can move back home and pay us rent."). That's anecdotal, not statistical, but that's the attitude I wish were studied more. I think it's much of the root-cause of the "stickyness" on both ends.

Why? The first article mentioned that mobility between the middle three quintiles is nearly complete: your odds of ending-up in one if you started in one are the same for each quintile. But a lot of the challenges are the same for all four lower quintiles and in particular, few people below the top quintile can get their parents to pay for much of their college education. So while those at the top can buy additional opportunities, for everyone else, the opportunities are pretty much the same. So one would think mobility would be equal across the bottom four, not just the middle three. So there must be something else about the very bottom quintile that separates it from the next three. I think a lot of that something is attitude.

Now, we come to that key point we were discussing. That US citizens have a strong belief in meritocracy and their own relative economic mobility. My previous answer pointed to a split, but your second paper confirms that, overall, you are correct. So I'll concede the point, but with what I think is a relevant goalpost shift, based on the above: I suspect that the attitude differs between different income groups: in particular, those at the bottom may not believe they have the ability to get out of the bottom. I'll look to see if the studies go into that level of detail.

The uncomfortable conclusion - opinion - resulting from this is that the lack of mobility at the very top and very bottom happens in part because of a stratification of will and skill. That would mean that the US is the "land of opportunity", but that the sword's two halves are success and failure and the US does a good job of ensuring people get the one their merrits justify.

I'm sure I'll be attacked for that, but the good news is that much of peoples' "merrits" is attitude, which is in each person's power to fix.

I think that in a country where a CEO is going to make 250 times the wages of the lowest paid worker in their company, I think that, ideally, the lowest paid worker should have a better chance at being able to "pick themselves up by the bootstraps" and get to the top. I am sorry that I cannot specify exactly how much better I think mobility should be. None the less, I find it alarming that the US has one of the largest income gaps and one of the lower job mobilities...

I just meant that if the US is going to allow the CEO's of corporations to donate as much of their money as they want to whichever political candidate will allow them to make more money, then it should at least not be so difficult for people in lower income brackets to get to higher income brackets so that they can actually have some political sway.

Fair enough. These are opinions/feelings and they don't necessarily need justification, but by the same token it is tough to use such feelings as a basis for policy because it is hard to articulate why you think others should think the same way. As we'll get to below, it is hard to even know what you want.

I think a good way to combat this would be to have publicly funded elections. Or, at the very least, a significantly lower limit on how much an individual or corporation/organization can donate to a political candidate.

I agree with campaign finance reform in general. As much as any reason, because I think most marketing money is wasted because it is just money fighting money.

If you think that I just want everyone to be equally rich, you either did not read all of my comment, or you did not think about anything I wrote.

No, I write that as much as a poke to encourage disagreement by increasing specificity as anything else. As above, the problem I see with your position - indeed, with the current public discussion - is that it is open-ended. If you can't specify exactly what you want, then "total" equality is within the set of possible desires. Even after eliminating "total", you are still left with "almost total". If you can't say where you draw the line, there is no way for me to know either.

I will now elaborate upon what I meant by "equality". I think that every individual that is governed by a government should have about the same amount of political influence. I do not think that everyone should have an equal amount of money. I hope that is clear.

In terms of political influence, that is "total equality", but if we're no longer talking about income inequality at all, I guess I still have no information on what you desire for that. Anyway, while I think total equality in political influence is a lofty-sounding goal, I don't think it is reasonable/possible beyond the basic equality of everyone having one vote. Why? Because it is anti-freedom of speech. If you stand on a corner and yell your opinions, I have (and should keep) a right to use my money to buy a megaphone to drown you out with my voice. That's the reason the Citizens United decision went the way it did. It may require a Constitutional Amendment restricting freedom of speech to even go back to the laws we had a few years ago.

Now I'll make a similar vauge statement I just criticized you for: I agree that restriction is needed and don't know for sure how far I'd go. But I can say that it is nowhere near total equality. Perhaps the answer would include:
1. Limit corporate contributions by making them proportional to the number of individuals in an organization. Ie, if the individual limit is $10,000 then the corporate limit for a 100 person company would be $1 million.
2. Eliminate the concept of "soft money" contributions (and therefore the unlimited nature of them) and recognize instead that all political contribution money is spent with a specific purpose.

 

[russ_watters]

I don't understand what you are saying here. First of all the first crash after freeing the market was in 1987...

You said "last two decades": that's 1995. 1987 is closer to three decades. If that's what you meant, the situation gets even worse for your claim because now it includes most of the computer revolution in addition to the internet revolution. Those are real revolutionary advancements.

...and then in the last part of the 80's and beginning of the 90's the S&l's were completely wiped out and the economy went into recession until about 1994 and the Fed funds rate was brought down from over 9% to 3 % by 1993. in 1995 there was another mini-crash after the year of FED tightening in 1994. This sent the economy into another recession. And don't forget the tech bubble after that.

You can go back as far as you want: In 1929, the economy was also completely wiped-out by a bubble. The reality is that every 5-10 years there is an economic downturn of some size. In your now 28 year timeframe we've had 3 significant and one minor recession -- yet here we are, with no net damage. You are focusing on the "crashes" but ignoring the rockets in between them. The net effect when you combine them is at worst very little change over 28 years. And given that we are still recovering from the last one, which is the most significant one, it stands to reason that over the next couple of years we'll be in strongly positive territory again.

To preach free markets at this point ,in my mind is to be ideological.

To preach the opposite ignores more than half the history (most of the positives).

Much of the real advance in capitalism has occurred in highly regulated times and deregulated times have been disastrous. Or do we now forget the 1920's which also involved real estate market crashes. Or how about the collapse of the Japanese economy during the 1990's after its markets were deregulated? This lasted for over a decade despite an overnight lending rate which was nearly zero. I am not saying that capitalism is bad. I am saying that free markets as they have been increasingly implemented don't work. The data is clear.

No it isn't: you didn't list any "highly regulated times", so you haven't provided any basis for, much less the data itself, to support your claim!

Here's a graph of the S&P 500 since 1987, is that where you want to start? http://finance.yahoo.com/echarts?s=%5Egspc+interactive#%7B%22range%22%3A%7B%22start%22%3A%221987-02-03T17%3A00%3A00.000Z%22%2C%22end%22%3A%222015-04-08T16%3A00%3A00.000Z%22%7D%2C%22scale%22%3A%22linear%22%7D

In 1987, right before the crash, the S&P was at 317. Today it is at 2,080. Adjusted for inflation, despite two substantial bubbles/crashes, it is up by a factor of four. The data is clear: in total, the economy has risen over the past 3 decades, despite the problems of the bubbles.

 

[lavinia]

You said "last two decades": that's 1995. 1987 is closer to three decades. If that's what you meant, the situation gets even worse for your claim because now it includes most of the computer revolution in addition to the internet revolution. Those are real revolutionary advancements.

You can go back as far as you want: In 1929, the economy was also completely wiped-out by a bubble. The reality is that every 5-10 years there is an economic downturn of some size. In your now 28 year timeframe we've had 3 significant and one minor recession -- yet here we are, with no net damage. You are focusing on the "crashes" but ignoring the rockets in between them. The net effect when you combine them is at worst very little change over 28 years. And given that we are still recovering from the last one, which is the most significant one, it stands to reason that over the next couple of years we'll be in strongly positive territory again.

To preach the opposite ignores more than half the history (most of the positives).

No it isn't: you didn't list any "highly regulated times", so you haven't provided any basis for, much less the data itself, to support your claim!

Here's a graph of the S&P 500 since 1987, is that where you want to start? http://finance.yahoo.com/echarts?s=%5Egspc+interactive#%7B%22range%22%3A%7B%22start%22%3A%221987-02-03T17%3A00%3A00.000Z%22%2C%22end%22%3A%222015-04-08T16%3A00%3A00.000Z%22%7D%2C%22scale%22%3A%22linear%22%7D

In 1987, right before the crash, the S&P was at 317. Today it is at 2,080. Adjusted for inflation, despite two substantial bubbles/crashes, it is up by a factor of four. The data is clear: in total, the economy has risen over the past 3 decades, despite the problems of the bubbles.

Quoting levels of the S&P is irrelevant. That is sort of like saying that even though small pox killed hundreds of millions of people the population of the Earth is higher now than it ever was.

As far as data on regulation goes, I am no expert on economic history but it would be a pleasure to review with you the laws that came out of the Roosevelt Administration such as Glass Steagal, the regulation of credit during work war 2, what agreements on oil prices were like after the war, what the importance of Bretton Woods was and how Nixon's ending of it affected the economy. It would also be interesting to examine the eurodollar markets since they can be viewed as a from of deregulation. You seem to be an economist so perhaps you could point to research that would shed light on this.

 

[Evo]

Quoting levels of the S&P is irrelevant. That is sort of like saying that even though small pox killed hundreds of millions of people the population of the Earth is higher now than it ever was.

As far as data on regulation goes, I am no expert on economic history but it would be a pleasure to review with you the laws that came out of the Roosevelt Administration such as Glass Steagal, the regulation of credit during work war 2, what agreements on oil prices were like after the war, what the importance of Bretton Woods was and how Nixon's ending of it affected the economy. It would also be interesting to examine the eurodollar markets since they can be viewed as a from of deregulation. You seem to be an economist so perhaps you could point to research that would shed light on this.

Do you have any sources for anything you've posted? It appears that we need to bring this thread in line with our rules, so please post your sources. Thanks!

 

[russ_watters]

Quoting levels of the S&P is irrelevant. That is sort of like saying that even though small pox killed hundreds of millions of people the population of the Earth is higher now than it ever was.

Yes, despite smallpox (or better example, the plague) killing a high fraction of the worlds' population, the population has still increased. That sounds like a good analogy to me: you are the one claiming these crashes have destoryed the economy, when they have not and indeed those diseases did not destroy the human race. The data illustrating fact that the economy isn't destroyed would seem me to be a relevant counter-example to the claim that it is.

As far as data on regulation goes, I am no expert on economic history but it would be a pleasure to review with you the laws that came out of the Roosevelt Administration such as Glass Steagal, the regulation of credit during work war 2, what agreements on oil prices were like after the war, what the importance of Bretton Woods was and how Nixon's ending of it affected the economy. It would also be interesting to examine the eurodollar markets since they can be viewed as a from of deregulation. You seem to be an economist so perhaps you could point to research that would shed light on this.

[Thanks to Evo] You have to give me something here to prove your claims. You've claimed that lax policies over the past 28 years have destroyed the economy, when it isn't destroyed, so there may not be anything you can do but admit you erred in your claim. I'm not asking you for an essay on regulation, I'm asking for evidence of the economic "disaster". Let me remind you, this was your initial claim:

Even hard line free marketers now agree that the last two decades [now three decades] of deregulated markets have been a disaster. Speculation and lax regulation combined with high levels of leverage have proven to be a recipe for collapse. So why do you think the free market is so good when it has wreaked havoc upon all of us?

So in order to show the "disaster" actually happened overall, you need to show that today we are in a much worse position economically than we were two or three decades ago. If you can't show that our current situation is a "disaster" compared to 20-28 years ago, then there is no need to go the next step in explaining why the disaster happened.

More specifically, I remember the news reports of the "disaster" which was the crash of 2000. But if you want to claim a bubble-caused crash is a "disaster", you have to include the bubble itself in the analysis! The easy headlines read that people lost half their retirement savings (the S&P 500 dropped by rougly half from 2000 to 2002). But there is a clear inflection point in the graph starting in 1995 when the WWW was introduced and from 1995 until 2000, the S&P tripled, so after the bubble burst, people were left with half what they had 2 years earlier, but still 50% more than they had before the bubble started. So the net result of the bubble and its bursting was a 50% gain, not a 50% loss.

 

[Siv]

No. The reason capitalism works and no other system has is that it recognizes that human nature is - by definition - inherrent to humans and can't be changed. So rather than trying and failing to change human nature (see: communism/socialism), capitalism harnesses certain aspects of human nature to create personal and societal good.

Accepting the imperfections in human nature is one thing ... encouraging those very things which make us imperfect and short sighted is quite something else.

Communism was not the right system for us I know - as E O Wilson said - "Great system, wrong species!" but capitalism is really not much better.

Who is looking for a third alternative? No one.
They are all worshipping at the altar of capitalism

 

[Siv]

While technically any desire for money could be called a profit motive, common usage often applies to corporations whose mantra is to maximize the wealth of their shareholders. This is hardly the same as going to your job to put food on the table.

Since there has been talk about the profit motive abuses of drug companies in this thread, I asked a physician friend his opinion. He forwarded this abstract of a paper on drug company abuses. Note the use of the term "profit-motive." The authors are not using it to to mean the desire of corporate executives to support their families.

http://www.ncbi.nlm.nih.gov/pubmed/17970244

Thanks, lavinia.

There are tons of examples ... http://www.biospectrumasia.com/biospectrum/analysis/192973/worlds-big-pharma-frauds
http://www.theguardian.com/business/2012/jul/08/pharma-misbehaviour-gsk-fine

Why would pharma companies bother about researching long term health benefits of humans when they can quickly mint money today?

The world is run by corporates today, so you can imagine the inherent dangers there.

 

[russ_watters]

Accepting the imperfections in human nature is one thing ... encouraging those very things which make us imperfect and short sighted is quite something else.

I didn't say "encouraging", I said "harnessing". I even bolded it, so there would be no possibility of confusion.

Communism was not the right system for us I know - as E O Wilson said - "Great system, wrong species!" but capitalism is really not much better.

Yes, capitalism is the worst system except for all the rest.

Who is looking for a third alternative? No one.
They are all worshipping at the altar of capitalism

That's just rhetoric. There is no "worship": we're using a system that works because it works, but we're still trying to improve it.

 

[russ_watters]

I don't think I responded specifically to this, and since it has been quoted again:

While technically any desire for money could be called a profit motive, common usage often applies to corporations whose mantra is to maximize the wealth of their shareholders. This is hardly the same as going to your job to put food on the table.

You're probably right that people don't think of it that way, but they should because as you agreed, that's what it is. People would be better-off if they analyze/understand their actions in terms of how they will profit or lose because of them.

And again: there are criminal at all levels of society. Calling the criminals typical of capitalism is not only false and insulting, it also downplays the crimes.

 

[lavinia]

Do you have any sources for anything you've posted? It appears that we need to bring this thread in line with our rules, so please post your sources. Thanks!

Do you have any sources for anything you've posted? It appears that we need to bring this thread in line with our rules, so please post your sources. Thanks!

this is not a thread in which very many sources have been quoted. There is a lot of unsubstantiated statements and lots of opinion. The things that I have said cover a large span of history. Nothing is controversial. And only the question of the entire history of regulation has been questioned. I suppose you would like me to document Glass Steagal - the key regulatory measure that was eliminated during the Clinton Administration - do you need documentation for that? I disagree with you.

If you want to go after what I have said then you should close the entire thread.

 

[Siv]

I didn't say "encouraging", I said "harnessing". I even bolded it, so there would be no possibility of confusion.

Yes, capitalism is the worst system except for all the rest.

That's just rhetoric. There is no "worship": we're using a system that works because it works, but we're still trying to improve it.

The foundation of capitalism is motivating people using the profit motive. You can use nice sounding terms like "harnessing" but the fact is that the whole free market encourages this short term, selfish thinking in humans.

Can you post me some evidence of what's being done to "improve" capitalism so that it does not encourage our innate short term and selfish traits ? Thanks.

 

[lavinia]

I don't think I responded specifically to this, and since it has been quoted again:
You're probably right that people don't think of it that way, but they should because as you agreed, that's what it is. People would be better-off if they analyze/understand their actions in terms of how they will profit or lose because of them.

And again: there are criminal at all levels of society. Calling the criminals typical of capitalism is not only false and insulting, it also downplays the crimes.

How do you know that people would be better off by looking at their own balance sheet rather than the balance sheet of the country and how that affects them and their future? Can you provide data on that?

Accepting the imperfections in human nature is one thing ... encouraging those very things which make us imperfect and short sighted is quite something else.

Communism was not the right system for us I know - as E O Wilson said - "Great system, wrong species!" but capitalism is really not much better.

Who is looking for a third alternative? No one.
They are all worshipping at the altar of capitalism

There is unsubstantiated talk of human nature here. Can anyone provide the scientific basis for this? What are the paper in the literature?

 

[lavinia]

How do you know that people would be better off by looking at their own balance sheet rather than the balance sheet of the country and how that affects them and their future? Can you provide data on that?

There is unsubstantiated talk of human nature here. Can anyone provide the scientific basis for this? What are the papers in the literature? Evo where are you?

 

[lavinia]

Yes, despite smallpox (or better example, the plague) killing a high fraction of the worlds' population, the population has still increased. That sounds like a good analogy to me: you are the one claiming these crashes have destoryed the economy, when they have not and indeed those diseases did not destroy the human race. The data illustrating fact that the economy isn't destroyed would seem me to be a relevant counter-example to the claim that it is.

[Thanks to Evo] You have to give me something here to prove your claims. You've claimed that lax policies over the past 28 years have destroyed the economy, when it isn't destroyed, so there may not be anything you can do but admit you erred in your claim. I'm not asking you for an essay on regulation, I'm asking for evidence of the economic "disaster". Let me remind you, this was your initial claim:

So in order to show the "disaster" actually happened overall, you need to show that today we are in a much worse position economically than we were two or three decades ago. If you can't show that our current situation is a "disaster" compared to 20-28 years ago, then there is no need to go the next step in explaining why the disaster happened.

More specifically, I remember the news reports of the "disaster" which was the crash of 2000. But if you want to claim a bubble-caused crash is a "disaster", you have to include the bubble itself in the analysis! The easy headlines read that people lost half their retirement savings (the S&P 500 dropped by rougly half from 2000 to 2002). But there is a clear inflection point in the graph starting in 1995 when the WWW was introduced and from 1995 until 2000, the S&P tripled, so after the bubble burst, people were left with half what they had 2 years earlier, but still 50% more than they had before the bubble started. So the net result of the bubble and its bursting was a 50% gain, not a 50% loss.

Do you think the crash of 1929 and the ensuing decade of Depression was a disaster? After all we are far beyond that now.

 

[lavinia]

No. The reason capitalism works and no other system has is that it recognizes that human nature is - by definition - inherrent to humans and can't be changed. So rather than trying and failing to change human nature (see: communism/socialism), capitalism harnesses certain aspects of human nature to create personal and societal good.

What are the scientific papers on human nature here.?Can you provide references in the literature? And your statement about no other system. What is the research on that?
Again references? Evo where are you?

 

[lavinia]

Those last two sentences appear to me to directly contradict each other. If the most profitable and profit-hungry companies (tech companies, pharma companies, oil companies) are also those who spend the most on research, that tells me that the research doesn't suffer because of the profit motive. Indeed: those companies recongize that research creates profit.

The argument that some scientists make is that basic research, that is scientific understanding of Biological systems, is retarded in private research whose goal is to produce a product. Companies will for instance look for "biologically active" substances found in Nature and then modify them to have a particular effect and then monitor them through various test trials to assess the side effects and if all goes well, bring them to market. To some scientists - like my father and his wife - both of whom were research biochemists - this is not basic research. To them the problem is not whether some basic research does in fact happen in drug companies or bio-tech companies - but rather that the "profit motive" slows the process.

But perhaps I shouldn't have said this since they are now both dead so I can not get their testimonials. Sorry Evo.

 

[Siv]

What are the scientific papers on human nature here.?Can you provide references in the literature? And your statement about no other system. What is the research on that?
Again references? Evo where are you?

Whoa ... what's with all this pouncing around?
PF certainly has lost a lot of its warmth and charm

So Lavinia, you want evidence for the existence of human nature??

 

[lavinia]

Yes, despite smallpox (or better example, the plague) killing a high fraction of the worlds' population, the population has still increased. That sounds like a good analogy to me: you are the one claiming these crashes have destoryed the economy, when they have not and indeed those diseases did not destroy the human race.

I never said the economy was destroyed. You are misquoting me.
And since you feel that plagues are a good analogy what about wars or incidents of genocide? Not disasters I suppose since we have more people now that ever.

This feels like a semantic argument over the meaning of the word "disaster" rather than an argument of substance.

 

[lavinia]

Whoa ... what's with all this pouncing around?
PF certainly has lost a lot of its warmth and charm

So Lavinia, you want evidence for the existence of human nature??

I think the monitor - Evo - should not be arbitrary especially in a thread where opinion and non-scientific ideas are being used. If documentation of everything is required then everything should be documented. Human Nature is certainly an idea that demands scientific scrutiny especially since it has been used to explain why an entire economic system actually works. Otherwise it is an un proved - and vague assumption - or a philosophical concept. All of these are unacceptable in a scientific form.

There another example in this thread, the stylized claim that capitalism is the only system that works. According to the rules of PF this should require documenting several thousands years of economic history. And I would add not only with graphs and indicators but analysis of how various systems worked and why they failed or went out of existence. What is even the entire list of economic systems? What is the data? What was for instance the economic system under the Roman Empire? Did it work? How about the feudal system which seems to have lasted for centuries? What about the British colonial system? And how did it differ from the French and the Spanish? Were they the same or different systems? Did they work or were they terminated by wars or some other cause? What about the Mesopotamian economic system under the Sumerians? What about the economic system in India prior to the British?

 

[lavinia]

This suggested reading on drug companies was just sent to me by the same physician - and he is also a molecular biologist - who sent the previous links. Here is his email.

"
There is a book about the pharmaceutical industry written by one of the most respected people in American medicine - she was Editor-in-Chief of the New England Journal of Medicine. Here is the citation if you’re interested:

Angell, Marcia, The Truth About the Drug Companies, Random House, 2004"

 

[Siv]

I think the monitor - Evo - should not be arbitrary especially in a thread where opinion and non-scientific ideas are being used.
If documentation of everything is required then everything should be documented. Human Nature is certainly an idea that demands scientific scrutiny especially since it has been used to explain why an entire economic system actually works. Otherwise it is an un proved - and vague assumption - or a philosophical concept. All of these are unacceptable in a scientific form.

There is plenty of evidence for human nature, but it is vast, volumes and volumes of research papers and books.
I would have a tough time citing a few links for a forum debate.

 

[lavinia]

There is plenty of evidence for human nature, but it is vast, volumes and volumes of research papers and books.
I would have a tough time citing a few links for a forum debate.

Right. And I think we all would not have all of this information at our fingertips. That is my real point.

However, now that you mention it I would be fascinated to know what the research is on human Nature. The only things I know of are the ideas of philosophers like Rousseau and Locke and some psychologists like Freud.

 

[PWiz]

..human nature is - by definition - inherrent to humans and can't be changed.

Those are some motivating words for the misanthrope. "When they're about to become extinct, tell them 'I told you'."

 

[russ_watters]

What are the scientific papers on human nature here.?Can you provide references in the literature? And your statement about no other system. What is the research on that?
Again references? Evo where are you?

lavina, you are not entitled to try to deflect from your own failure to provide sources. But there is an easy out: just acknowledge that your claim was wrong or that it is unprovable.

Now, on human nature: Siv brought-up human nature, not me:

The profit motive nullifies any long term progress. Human nature is extremely short sighted. And capitalism glorifies that.

The intended connotation is more negative than I would use, but on the basic issue of what human nature is (the relevant aspect here) and the fact that capitalism utilizes it (or "harnesses" or "glorifies") and communism/socialism fights against it (said in a separate post), we agree. This is all common-knowledge/standard stuff that I already know, so I felt no need to ask Siv to prove it.

The disagreement is in the opinion about whether we should try to harness or contradict human nature. This is also pretty standard and it and the facts framing the argument and argument itself are easily sourced, so here you go:
http://www.wsj.com/articles/SB10001424052970204528204577011681658907746

That's the first hit for a google of "human nature cannot be changed" and discusses everything we've been discussing about it here.

Where Siv went wrong factually above is the idea that a profit motive can't produce long-term gains because clearly capitalism has.

There another example in this thread, teh stylized claim that capitalism is the only system that works.

The only system that has worked. Again, there has been general agreement in the thread that this common-knowledge fact is true. Certainly it may be possible for there to be other systems that could work. In any case, the link I posted above discusses that as well.

I never said the economy was destroyed. You are misquoting me.

"Disaster", sorry. But I don't see the difference and you have yet to explain or show what you mean using evidence.

Again, this was your claim:

even hard line free marketers now agree that the last two decades [now three decades] of deregulated markets have been a disaster.

None of what you said there mentions a recovery. So, if you didn't mean that the current state of the economy is a disaster compared with where it was 20-28 years ago, you'll need to modify your claim.

The things I have said cover a large span of history. Nothing is controversial.

Clearly, there is controversy because I have disagreed. But if it isn't controversial, you should easily be able to prove your claim.

Do you think the crash of 1929 and the ensuing decade of the Depression was a disaster?

Yes.

After all we are far beyond that now.

Indeed we are: but you used the same word to describe the last 20-28 years.

This feels like a semantic argument over the meaning of the word "disaster" rather than an argument of substance.

It's your word, not mine. I'm not arguing over its meaning at all (because I wouldn't use it) and you are completely free to tell me how you want it defined. So please do: explain how the last 20-28 years have been an economic disaster, worthy of being described with the same word you use to describe the 1930s.

 

[russ_watters]

Those are some motivating words for the misanthrope. "When they're about to become extinct, tell them 'I told you'."

I don't understand. Please explain what you mean.

 

[russ_watters]

Indeed we are: but you used the same word to describe the last 20-28 years.

It's your word, not mine. I'm not arguing over its meaning at all (because I wouldn't use it) and you are completely free to tell me how you want it defined. So please do: explain how the last 20-28 years have been an economic disaster, worthy of being described with the same word you use to describe the 1930s.

Note, that I think this comparison is a good one for illustrating why the last 28 years has NOT been a "disaster" if the Great Depression is the benchmark for defining the word.

 

[lavinia]

I respectfully disagree. If you have cancer but no symptoms yet - would you say you are in good health?To clarify - and again you have misquoted me - I said that the crash of the real estate market was the disaster. But in my opinion the seeds had been planted earlier through the deregulation of the markets and the widespread use of leveraged investments. A question for you. Do you consider Glass-Steagal to have been regulation? Do you think getting rid of it has anything to do with the economic problems that we ended up with? Also why do you think there was a turn towards speculation in our economy? e,g, the S&L crisis or the advent of mortgage derivatives in the 1980's?

- If you believe that the Depression of the 1930's was an economic disaster do you think the 10 year plus deep recession in Japan during the 1990's was a disaster?

- BTW: the word 'worthy" seems to be subjective. Again we are involved in semantics.

- As far as regulation goes I grant you that I can not document all of it - although Glass-Steagal clearly is an example. But I am challenged to produce the data and accept the challenge.

- BTW; I think it is fair to ask for documentation of the science on Human nature and what economic systems work since without this level of rigor, these ideas tend to philosophy and ideology.

 

[PWiz]

I don't understand. Please explain what you mean.

As you said, capitalism works by using some positive aspects of human nature, but inequality is something which I don't really think can be eliminated in any system. 100% fairness to all is just a theoretical concept that will never find it's way into our lives, because the fundamental nature of humans (rather, the nature of human "civilization" itself) explicitly prohibits such a notion from existing. It's just how humans are. As long as there is a winner, there will always be a loser, and we know better than to think that each one had equal opportunities and resources. Call it luck, call it intuition, whatever the case might be, some people gain more from a situation than others simply out of chance and no other reason. If one generous person makes an effort in distributing wealth evenly, his/her endeavors are brutally crushed by two others depraving others of money using lies and treachery. People always find a way to exploit the most "fair" of policies. At the end of the day, it really doesn't matter how you come to the top in this world, what matters is whether you are at the top or not (as long as you keep your hands clean in public), even though this is an outright trespassing of what's "right". Unfortunately, this is what it's all been reduced to - morality has just become something people pretend to follow when observed, and abuse to the core when unseen.

We know that this kind of thing is seen in nature too - a probability can be ascribed to all events, and momentarily inequality should therefore not be surprising. The thing is, people sustain and perpetuate this inequality to rise personally. To jump, you have to push something down (let's not confuse this with a law of physics). All these things gives some people very strong ground to resort to misanthropy.

Of course, you shouldn't think of these things as me trying to explain my beliefs as facts, I'm just pointing arguments made by misanthropes (I'm not one of them! [I wouldn't be writing all this if I were]). In case you're wondering, I'm not someone with messed up logic: trust me I hate the way things are just as much as you, and that's why I believe that we must always to do what's in our power to do what's right, to never stop trying (unless you're trying to accelerate a block to light speed). It might be an imperfect world, but it's the only one we have. I'm woefully inexperienced when it comes to life. I'm just a poor observer trying to record empirical data around me and make sense of it, and I already know that this message has a laundry list of defects. Ah, what a long boring drag this post has become. Sorry!

 

[Siv]

Where Siv went wrong factually above is the idea that a profit motive can't produce long-term gains because clearly capitalism has.

What long term gains ?
I have read Steven Pinker's book too ... but my benchmark is not how bad things were centuries ago, my benchmark is how much better it could have been ... and the opportunities we have lost.

We are destroying the environment, our entire food, health and nutrition industry is riddled with so much corruption, receipt, selfishness and greed that we have medicines which do more harm than good, we believe in health tenets that have no foundation on evidence ... is that what you call long term gains ??

 

[mheslep]

...
There are frauds and thiefs in all levels of society. They are not unique to the rich or to corporations and they are not inherrent to the existence of any level of society.

Yes, in particular frauds and thieves also occur in government, as do would-be tyrants. One could fill pages with these, the Minerals Management Service scandal, which has since changed its name, comes to mind:

The report says that eight officials in the royalty program accepted gifts from energy companies whose value exceeded limits set by ethics rules — including golf, ski and paintball outings; meals and drinks; and tickets to a Toby Keith concert, a Houston Texans football game and a Colorado Rockies baseball game.

The investigation also concluded that several of the officials “frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and gas company representatives.”

The investigation separately found that the program’s manager mixed official and personal business. In sometimes lurid detail, the report also accuses him of having intimate relations with two subordinates, one of whom regularly sold him cocaine.

http://www.nytimes.com/2008/09/11/washington/11royalty.html?_r=0

 

[mheslep]

my benchmark is how much better it could have been ... and the opportunities we have lost.

What's a good example of where that's happened? Venezuela has largely dumped capitalism, with the result that they've run out of toilet paper long with other more critical equipment like medical devices, and have brutally oppressed descent.