Economics and Communities

[spenser1058]

My heavens, I actually found something to agree with Tucker Carlson on. It seems laissez-faire capitalism may not be written on stone tablets sent down by God as the only way to run an economy and may indeed be leaving too many Americans behind.

Glad to have you with us, Mr. Carlson!

https://www.vox.com/platform/amp/2019/1/10/18171912/tucker-carlson-fox-news-populism-conservatism-trump-gop

From Vox

[dcluley98]

Pure capitalism is a system that inherently rewards and exploits the imbalance of greed vs. wants/needs and constant growth for the sake of it. That is not the way things work in nature.  It is obvious to anybody who has ever studied physics/chemistry/thermodynamics that this system is flawed in its basic principles and doomed to fail eventually. 

Thing is, it is propped up by a political system that does just enough to make it limp along and keep the status quo for as long as possible. It is not somehow a mistake that the system has led to an inordinate amount of wealth disparity. That is inherent in the system. Usually, in the natural/physical world, systems of inherent disequilibrium reach a point where they reset, and equilibrium is re-established. In capitalism, this can happen in several ways, some more violent or harmful to the participants than others, such as societal revolts, revolutions, wars, famine, economic collapse, exhaustion of resources, environmental and population-based epidemics, etc.

There are less harmful ways to move the system back toward equilibrium in a more organized fashion, however, through governmental regulation or a peaceful recognition of majority benefit for the greater good, or as is seen many times throughout capitalism charity among humans. 

Let us hope in our times, our equilibrium is re-established via the latter methods, for the sake of us and our progeny. 

Edited January 12, 2019 by dcluley98

[aent]

12 hours ago, dcluley98 said:

Pure capitalism is a system that inherently rewards and exploits the imbalance of greed vs. wants/needs and constant growth for the sake of it. That is not the way things work in nature.  It is obvious to anybody who has ever studied physics/chemistry/thermodynamics that this system is flawed in its basic principles and doomed to fail eventually. 

That is so far from the truth. And we've never had anything even close to pure capitalism. There are too many smart people who fight for regulations, which invariably help the big corporations and hurt the little guys who struggle to navigate through them. Many of them in the name of protecting the little guy (licensing, etc). When writing any sort of complex regulation (which is pretty much all is), its near impossible to know the unintended consequences.

[dcluley98]

Feel free to provide your synopsis of our capitalistic society. I would welcome a reasoned opposing opinion. 

All counter-arguments are welcome. 

Also, I agree that we have never had anything close to pure capitalism. That would probably have corrected itself far earlier and more frequently. Though not ideal, at least it would be more efficient. 

Edited January 12, 2019 by dcluley98

[aent]

I mean, I think it would be ideal (although not realistic).  Capitalism is the system that encourages people to do the most work they can to have society be as advanced as physically possible. Its what pushes the prices down to set a very high standard for poor people, even if it does create a huge separation. And if you work hard enough, its not difficult to jump up classes, as long as you combine it with good life decisions (no having kids before you can afford it, controlling spending/debt, etc).

Capitalism is what brings us the convenience of Amazon. The problem is when politicians see capitalism work in that way, they also beg to hand Amazon a billion dollar handout when Amazon asks, which is the opposite of capitalism. You need a level playing field for everyone, those massive incentives Amazon just got made it harder for anyone to compete with them and more like they become a monopoly, but if they do, its the government incentives that pushed them there.

[dcluley98]

I don't disagree that capitalism has led to great innovation in western society, which we may not have seen under another system such as communism or socialism. Capitalism's ability to drive growth and get the most out of people via market forces is one of it's greatest strengths. Inherent in the mechanism that creates this great effect of innovation and growth, are also other side effects that can have deleterious consequences. Things such as wealth disparity, concentration of power, exploitation of labor and resources, pollution and destruction of our environment, monopolistic control that leads to reduction of personal choice freedom (ahem, Amazon), reduced privacy and security, etc.  

Letting market forces dictate outcomes can have both positive and negative effects in different ways. One of the main problems we have is that it is not pure capitalism, but capitalism somewhat regulated by a political system.  In the scientific world, to regulate a system that has inherent disequilibrium, the system engineer would put in place controls to regulate the feedback loops and try to make it approach a more stable ongoing state. (Think of it like the cooling system/radiator on an internal combustion engine). What we have right now is a broken political and legislative system and bureaucracy that is doing a poor job of controlling these feedback forces. 

The system itself, and the controls in place on it are not immune to the eventual destructive force of disequilibrium. Eventually, it WILL reset. Everything resets and returns to a state of equilibrium and neutrality, given a long enough time horizon. 

[aent]

10 hours ago, dcluley98 said:

Things such as wealth disparity, concentration of power, exploitation of labor and resources, pollution and destruction of our environment, monopolistic control that leads to reduction of personal choice freedom (ahem, Amazon), reduced privacy and security, etc.  

See, I don't view wealth disparity as a problem, as long as the poor are getting richer as well. Things are improving for them, and capitalism keeps that happening, even if it leads to plenty of wealth disparity.

Exploitation of the common resources and destruction of the environment and other commons that have no real ownership is the real problem with pure capitalism (tragedy of the commons)

I don't believe Amazon would be able to reduce our personal choice freedom without massive government subsidies that other companies don't get. The problem is Amazon is getting billions of them. But thats not part of real capitalism, thats crony capitalism.

10 hours ago, dcluley98 said:

The system itself, and the controls in place on it are not immune to the eventual destructive force of disequilibrium. Eventually, it WILL reset. Everything resets and returns to a state of equilibrium and neutrality, given a long enough time horizon. 

Yeah, there will be ups and downs, but that is literally true under every system, and i believe they're a bit less under capitalism compared to systems closer to communism, which has literally led to 100s of millions of people dying.

[dcluley98]

You are very correct about it being true for all systems. I am not advocating communism or socialism by any means. I am advocating for a better regulated system of capitalism. 

[aent]

42 minutes ago, dcluley98 said:

You are very correct about it being true for all systems. I am not advocating communism or socialism by any means. I am advocating for a better regulated system of capitalism. 

As always, the key is in the gruesome details. How do we better regulate it?

My view is its too regulated. Things like licensing are just stopping the little guys.

I thought this list was interesting and relevant:

https://subsidytracker.goodjobsfirst.org/prog.php?detail=t&sort=desc

Amazon is about to jump into the top 10 of that list with its HQ subsidies when they're applied. Its astonishing how much subsidy money we give to the companies we're worried about becoming monopolies.

[dcluley98]

"How do we better regulate it?"

The short answer to that is "I don't know, but what we are doing now isn't working."
  
This may be controversial, but I would advocate for tax reform and a system of Universal Basic Income as well as better controls on concentration of power, as well as a complete revision of the Fair Labor Standards Act to better protect the rights of workers and put in controls to index fair wages along with inflation/the economy, fixing our healthcare and education systems so that affordable heathcare does not need to be tied to an employer and students do not need to go into massive debt to get a degree (I completely understand that this can be somewhat of a personal decision, but I still think usurious student loans are a major problem), better regulations for environmental protection and energy production to drive the economy to protect our environment and preserve our natural resources, and any sort of policy that leads to more efficiency in our society such as renewable energy, recycling, public transportation, etc. 

Agree with you on subsidies to large corporations, such as Amazon. That is ludicrous. 

 

[dcluley98]

Aent, I take it from your comments, that you have a libertarian leaning. I used to be somewhat of a libertarian when I was younger, then 2008 happened. Now I am more of a "less government is better, but better government is more important" type of guy with somewhat populist bent. Most people think I am a democrat, but that is not true. I am an independent and none of the parties, D, R, Libertarian, Green, etc. have ever represented my personal beliefs exactly. I lean somewhat liberal because that is a better fit, but it is not how I think the world works. Politics has been about extremes lately, which is disconcerting to me. I think it should be more about the bell curve and the greatest good for the most people. I have always wanted a more logical "Middle Party" based on what is best for most and helpful to the everyday person in society.  Our government is awful, and does many things that are not beneficial to the regular people that live in our society. Several of the things you bring up I agree with, though I may have a slightly different underlying ideology than you do. 

[spenser1058]

“Democracy is the worst form of government except all the others that have been tried from time to time.”

Sir Winston Churchill 

[dcluley98]

That is a good quote, though I disagree. 

I think that the meritocracy of certain native tribal societies may have been superior. 

[spenser1058]

9 minutes ago, dcluley98 said:

That is a good quote, though I disagree. 

I think that the meritocracy of certain native tribal societies may have been superior. 

Perhaps it depends on the scale of the society?

[dcluley98]

Probably. The purely democratic Greek City-States were among the most fruitful in history, but they were limited in scale and also always warring with one another, as were some of the tribal nations, to which I am referring. The scale of the United States may be prohibitive to such systems. 

[aent]

6 minutes ago, dcluley98 said:

Aent, I take it from your comments, that you have a libertarian leaning. I used to be somewhat of a libertarian when I was younger, then 2008 happened. Now I am more of a "less government is better, but better government is more important" type of guy with somewhat populist bent. Most people think I am a democrat, but that is not true. I am an independent and none of the parties, D, R, Libertarian, Green, etc. have ever represented my personal beliefs exactly. I lean somewhat liberal because that is a better fit, but it is not how I think the world works. Politics has been about extremes lately, which is disconcerting to me. I think it should be more about the bell curve and the greatest good for the most people. I have always wanted a more logical "Middle Party" based on what is best for most and helpful to the everyday person in society.  Our government is awful, and does many things that are not beneficial to the regular people that live in our society. Several of the things you bring up I agree with, though I may have a slightly different underlying ideology than you do. 

Yeah, I describe myself as a libertarian, but with the caveat that many other libertarians fail to recognize the tragedy of the commons and that is one of the few roles of government to control.

For 2008 and the housing crisis and subsequent banking/financial system disaster, I believe that was an awful lot of the governments fault as well. They were pushing way too hard the idea that every American has the right to own a home, its the American dream, the government should make sure that dream comes true for most Americans. That wasn't the private industry's doing... for the most part, they weren't willing to give loans with 0% or 3.5% down, which started the disaster.... they typically wanted people to have a 20% stake in the home on day 1, which really would have done a lot to limit or eliminate any bank losses during the correction and prevented it from spiraling out of control. The FHA/USDA loans also pushed people to sprawl, live in suburban and rural areas, making it bad for the environment and increasing our costs in other areas, hidden by subsidies.

I was listening to an auto podcast the other month about GM discontinuing its sedan lineup in the US, as Ford also announced they are doing, and they were talking about how that move ultimately avoids the need of expensive tech to comply with the rules... (this is from memory so forgive any mistakes) getting every vehicle classed as a light duty utility vehicle makes the requirements much less then passenger vehicles, and averaging rules could cause sedan sales to ultimately need more efficient SUVs and trucks, making them more expensive as well. The simple, more profitable solution is to eliminate the sedans, having less stringent emission requirements, and push people that bigger is better, so their latest round of increases in efficiency improvements appears that its going to push people to larger vehicle, making the impact on the environment much worse! 

Cash for clunkers is another example of a program that was sold as helping the environment, but did literally the opposite, in addition to hurting the auto companies and our economy as a whole. Its just every time they come up with these convoluted programs, they don't work.

My ideal system, if it could be done well, would be to eliminate all the laws against "bad" behaviors, excluding ones that are violent or involve infringing on other's property rights. Change our method of taxing to a sin tax system on those "bad" behaviors, to fund the rest of the government, and eliminate taxes on things we find desirable (yes, that means eliminating the income tax, property tax, and sales tax). Have heavier taxes on the things we find non-desirable or effecting the commons (including the environment), so start taxing fuel enough to cover the environmental cleanup, along with the roads we need the government to maintain, even if we end up increasing gas prices by a couple bucks a gallon. That will push people to more efficient cars and public transit better then our current system. I don't mind keeping all user taxes designed to cover maintenance from those utilizing the service (tolls, park fees, etc). Tax drugs, cigarettes, etc...

The really hard (impossible) part is determining the appropriate balance of each, and avoiding the industry from biasing that determination. And not missing some taxes on other bad alternatives, so my system might not be realistic. But I don't think our current one is either, but we here have it lol

[dcluley98]

I might disagree with some of your opinions, Aent, but that was a very interesting read! 

"Hi, I'm from the government, and I'm here to help!" 

Edited January 14, 2019 by dcluley98

[dcluley98]

I have always been in favor of more use/consumption based taxation vs. status quo taxation. It seems like a more equitable solution for me. I also think individuals should be taxed less, and larger more powerful corporations should be taxed more. This would help to balance the labor vs. capital equation. 

You bring up many very good ideas that I can agree with. 

[gibby]

26 minutes ago, aent said:

That wasn't the private industry's doing... for the most part, they weren't willing to give loans with 0% or 3.5% down, which started the disaster...

What are you basing this on?  This is like the exact opposite of what actually happened.

[aent]

Just now, gibby said:

What are you basing this on?  This is like the exact opposite of what actually happened.

Fannie and Freddie are not real corporations, they're like USPS. The government mandates exactly what they do, they're a government sponsored enterprise. Fannie was created as part of the New Deal. While other banks may have sold those mortgages with low interest rates, it was on the basis that they could resell them to Fannie and Freddie. The low down payment loans that were under 10% were nearly all sold to them, except for a few low risk profiles like doctors.

Now, maybe Fannie and Freddie and the regulations that pushed them to do that were pushed by other financial institutions, that sounds likely, but its surely not pure capitalism that 0% and 3.5% down loans were offered to nearly everybody, mostly on the basis of the location of the home. I believe it was even in the charter of Fannie and Freddie was to help low income people get to own their own home, something the democrats pushed in the early 90s and signed into their charter.

 

[dcluley98]

It was a combination of government regulation and private corporate greed that led to the housing collapse. I would put more onus on private corporations, however. The "innovation" of packaging loans into tranches of CDS garbage and the ratings agencies approving them as high quality and giving a stamp of approval was initiated by all large for-profit (too much profit) private enterprises (Big Banks, Wall Street Firms, and S&P, Moody's, Fitch) that contributed the most to this crisis.

The government could have done a lot more in oversight and also not encouraged lending to risky low-income people, but it is far from their fault entirely for what the private companies did to take advantage and to exploit the general public for profit. Where the government REALLY failed is in bailing out the corporations, as opposed to putting the money back into the hands of people to make them whole, and infrastructure and local institutions and small business to drive the economy. The government should have let the greedy corporations fail, and find other ways to drive the recovery. The government is beholden to these large corporations it seems to my eyes and experience, however. 

The best account I have ever read from this, and one who called it like it was before it happened and while it was happening is Barry Ritholtz. Read his book "Bailout Nation" if you want to know what really occurred. 

Edited January 14, 2019 by dcluley98

[gibby]

I read that book in 2009.  It outlines everything very well.

[dcluley98]

My monthly reminder to be more like Gibby. . . Stoic, aware, and well read. 

Thank you, Gibby. 

[aent]

So I heard that there is now a push for HUD to finally modify the post-housing-crisis, Obama-era regulations that made building new low and middle-class condos in downtowns completely impratical for developers to build, when compared to the suburban sprawl we all hate.

From what I heard, they're pushing to allow HUD lower the minimum owner-occupancy and pre-sale rate before issuing loans based on the individual project, and allow up to 45% commercial space while still allow FHA guaranteed low down payment loans... the rules are basically going to become much more similar to single family home communities like they used to be before the crisis.

Will this be enough to re-ignite interest in building some condos downtown instead of all of the apartments we've been getting?

[spenser1058]

Just like in Hurricane Andrew, Habitat for Humanity houses fared better against Hurricane Michael than those constructed by for-profit builders.

Unlike after Andrew, the geniuses in Tallahassee refuse to act to strengthen building codes in the Panhandle:

https://www.npr.org/2019/06/01/728644987/no-move-to-tighten-building-codes-as-hurricane-season-starts-in-florida

From NPR