It is often said by libertarians, or “radicals for capitalism”, to coin Ayn Rand’s phrase, that Big Business is often lousy at defending the market and in fact is only too happy to co-opt the State to make life hard for competitors. I was reminded of this fact when noted Libertarian Alliance author, Sean Gabb, made much of this point in a talk on Friday evening. It appears that the U.S. retailing giant WalMart may be guilty of this by lobbying for a rise in the U.S. minimum wage.
Debate continues as to what exactly is the impact of a minimum wage on the unemployment rate in a country, but in theory at any rate, raising the marginal cost of hiring a worker presumably makes it less likely that said persons will be hired, other things being equal. Marginal Revolution, the U.S. economics blog, has a take on the issue here. Other useful discussions at the Von Mises Institute here, and taking a more supportive view of such laws, is this paper here.
Even if one takes the assumption that minimum wage laws don’t always raise unemployment overall, the businesses that lobby for them may think they do, or think that by raising their would-be competitors’ costs, that it will strengthen their own market position. In short, there is nothing very altruistic about it.
And Walmart, to take this firm as an example, is also renowned as a beneficiary of eminent domain land-grabs. Funnily enough, this has become something of a cause celebre for parts of the left, who ironically, are relying on the same sorts of defences of property rights that I referred to a few days back on this site. It would be nice if the left embraced property rights as a cause. Stranger things have happened.
It may not be altruistic, but it might be smart business. Wal-mart is intensely disliked by many on the left, to the point that a lot of folks refuse to shop there on principle. These are also the same people who are likely to be in favor of a minimum wage increase. Wal-mart may reason that though their costs won’t rise much or at all, they might pick up some additional customers. In this case, calling for an increase in the minimum wage and not getting it might be better (for Wal-mart) than getting the raise.
Wal-mart is intensely disliked by many on the left, to the point that a lot of folks refuse to shop there on principle.
If Wal-Mart thinks it can gain leftiest customers by lobbying for a leftist cause, Wal-mart needs to hire someone new to do their thinking for them. The left’s dislike of Wal-mart is largely a knee-jerk elitism that can’t be dispelled. The left will always refuse to shop there on “principle” because poor people shop at Wal-Mart. I’d say Wal-mart’s biggest reason is that a minimum wage increase wouldn’t hurt them at all—they already pay well above minimum wage to nearly all employees—but some of their competition would lose big. Wal-mart doesn’t give two flips about gaining customers from the left. It doesn’t need them.
Raising the minimum wage reduces employment and increases labor pool, actually having an effect of lowering the combined average incomes of the employed and newly unemployed. A bigger labor pool turns it into an employers market.
As long as they don’t get it raised above their own internal typical lowest wages, it’s a money making move for them.
Increased employment costs would have a minimal impact on Wal-Marts main competitors, but will have a dramatic impact on new entrants – future potential competitors. That’s the issue here.
An interesting post with resonance in the UK, as the authorities start to look at ways to tie Tesco down. I resent interference in any market unless the market leader is actively abusing its market position, to the detriment of the market itself.
These giants will say that the consumer determines market position. However it it true that industry giants are never passive. For example, it’s well known that the oil industry giants have acquired the smaller businesses of energy innovators and then buried them. By abusing their market power, they act to slow down the natural development of the market they dominate, which is intolerable.
At the end of the day, the consumer does have a choice. You dont have to shop at either of these two outlets and in the US and UK there are a large number of competitors to choose from, all equally supporting measures to tie down the giants without innovating much at all themselves. However the line is crossed when market leaders prevent the future choices of consumers, by closing down future competition. Personally I think the jury is still out on Tesco and Wal-Mart, but it certainly wouldn’t surprise me if they both pursue anti-free market strategies to maintain thier dominance, and in those proven cases they should be penalised.
Ted says: “and in those proven cases they should be penalised.”
By whom? The government?
Yes. Who do you think created the free market?
EG
I’d take a look at this commentary too. Apparently Wal-Mart has a problem– their wages are fairly low, but they give fairly good health benefits. Since the cost of health benefits is rising faster than low-end cash wages, that means that the health benefits are making up a larger proportion of total income. In return, Wal-Mart is suffering from adverse selection– sicker people are applying to work there because of the health benefits, healthier people are turned off by the low wages.
Therefore, Wal-Mart is trying to switch around their compensation (and the structure of their benefits) to encourage healthier workers and discourage the sick from applying.
However, to finish my argument, Wal-Mart feels that if they’re going to raise wages to combat the adverse selection, they want to force their competitors to raise wages as well, by agitating for a raise in the minimum wage, rather than letting the market work.
EG:
do explain how the government “created” the free market… I’ll stop laughing now.
Verity
Take your point. I am assuming its possible to have a govt in place which sees the difference between market abuse, to be penalised, and innovation, which should be rewarded.
Then again – pigs might fly!
Ted,
For example, it’s well known that the oil industry giants have acquired the smaller businesses of energy innovators and then buried them.
Is it “well known” or is it just leftist propaganda, which, when shouted loud enough turns to be a “well known” ?
Could you provide some links to substantiate that “well known” fact ?
It is in the interests of the state that the economy works, and the best of way achieving this is requiring it to work as freely as possible, which, paradoxically perhaps for the limited outlook of some, does actually require rules to be enforced to keep it free. Outside of SMALL business, the market simply doesn’t stay free without compulsion because business doesn’t like free markets.
If you care to look at history, you can see numerous examples of the natural tendency of business to avoid the free market in the form of various guilds and restrictive practices – the business equivalent of unions, really. Regulation requiring a free market is simply a step in economic evolution as the market matures & enlarges and as technology develops.
Laugh all you want, but read some history first. And Adam Smith, for that matter.
EG
I agree with EG’s position here, if not his reasoning. The State did not create the free market (any more than it created free speech or self defense), but if a State serves any purpose, it is to defend the free market from pirates, thieves, and other scoundrels. Standard Oil and Microsoft abused their market power. If Wal*Mart or Tesco are using their market power to the detriment of thirds parties who would freely enter into contracts with each other absent the scoundrel’s meddling, the State has a duty to prevent this.
John Thacker’s assertions are generally correct, but since Wal*Mart’s unfortunate health care situation is also a product of government regulations (and there is a 0% chance of changing that), it isn’t totally unreasonable for Wal*Mart to follow this course of action. I mean, it’s one thing to have principles, but it’s another entirely to punish your shareholders because of them.
Yes. Who do you think created the free market?
Er, I would suggest it was individuals who have been bartering in one form or another since the dawn of time, well before any form of “state” was even dreamt of.
If you care to look at history, you can see numerous examples of the natural tendency of business to avoid the free market in the form of various guilds and restrictive practices
And if you care to look at history you will find that the response taken by people was to set up shop outside the realm of the guilds, i.e outside of the city walls where production and trade flourished in the abscence of such restrictions. The state wasn’t required at any point and I would suggest that over history it has in fact sided with the vested interests and provided the enforcement of those restrictive practices. David Landes has some good examples of this process in his excellent “On the Wealth and Poverty of Nations”.
Human nature will find workarounds to a minimum wage and those workarounds are more likely to benefit the wealthier classes than the wretches unable to earn a “living wage.”
Babysitters, dishwashers, busboys, pool boys, taxi drivers will be turned into independent contractors (self-employed) and be exempt form the minimum wage. Good entry level jobs with promotional potential will turn into non-paid internships and only those who are independent financially will be able to accept them. This will accentuate the bright line between the so-called haves and have nots and not facilitate any upward class mobility whatsoever.
If you can “hire” people as interns or volunteers who are renumerated by VIP contacts, experience, gifts, trips, tuition assistance, college credit, expenses, or workspace facilities you have achieved, as an employer, a relatively low risk way of developing and screening “employees.” You need not worry about any of the controls and regulation of employees, benefits, diversity, safety until they make the cut and get promoted to employee status.
The government and Congress are full of unpaid interns carrying a lot of water and being supported by their families until such time as they can get a paid job. Low pay turns into no pay and excludes masses from an opportunity to get a start in a career. It’s a disgraceful idea attractive only to socialist control freaks who flunked economics.
Regarding whether the state creates free markets….
Do you consider the class A drugs market in the west to be a free market? If so, then I suppose the answer to the question is ‘yes’.
Personally, I don’t consider the drugs market to be free, because a larger drug dealer can execute a smaller dealers sales force, and the smaller dealer can’t do anything about it. On the other hand, it’s true, the government doesn’t tax trades within the market, no place arbitrary restraints on it.
No person is ever free from interference in their affairs. I consider the average businessperson operating under a modern capitalist state to be much freer in their ability to trade than a businessperson in a stateless society.
So, I think that the modern ‘laissez faire’ state is indeed the root of the free market as we talk about it now.
Well, E.G., for once I couldn’t agree with you more. It >strong>IS in the interests of the state that the economy works, much like it was in the interests of pirates in the 18th century that others had sea-worthy vessels.
However, I would suggest that you’re confusing the “creation” of the free market with the state’s parasitic interest in it’s hosts continued good health.
oops.. I’ll get the hang of bolding and italicizing things one of these days!
sorry… the word IS above should be IS… like that!
In relation to the rights issues discussed in recent posts, check “The Rights and Wrongs of Alan Dershowitz” at the Claremont Review of books. I accessed thru Powerline.
The contrast between natural and positive, or social construct, rights is explored.
Jacob
My point was that governments as well as market giants purchase or disrupt the innovations of individuals and small enterprises to maintain their control of markets. Nothing leftist about it, in fact the victims are often full blooded capitalists.
I have managed to collect quite a list of energy inventions that have somehow avoided being utilised in the market place. You may not beleive they all work, but it would be very difficult to claim that all of them are fabrications, still the evidence is here – you decide yourself.
Hydrogen power
Yull Brown – from Sydney Australia developed a method of extracting hydrogen from water in 1978 and utilising it as a car fuel and fuel for welders. After much publicity (see The Bulletin (Aust) Aug 22, 1989) he had managed to raise over 2 million dollars but has failed to fully develop his invention.
Edward Estevel – from Spain developed a classic ‘water to auto engine’ system in the late 1960’s extracting the hydrogen out of water to use as fuel. This system was highly heralded, then sank among other such ‘high hope’ hydrogen system amid rumours of foul play.
Sam Leach – of Los Angeles developed a revolutionary hydrogen extraction process during the mid seventies. The unit easily extracted free hydrogen from water and was small enough to fit under the hood of automobiles. In 1976 two independent labs in LA tested this generator with perfect results. Mr M.J. Mirkin who began the Budget car rental system purchased the rights to the device from the inventor who was said to be very concerned about his personal security.
Rodger Billings – of Provo, Utah headed a group of inventors that developed a system converting ordinary cars to run on Hydrogen. Instead of using heavy hydrogen tanks, he used metal alloys called Hydrides, to store vast amounts of hydrogen.When hot exhaust gases passed through these Hydride containers it released the gas to burn in the standard engines. Billings estimated the conversion would cost around US$500 and greatly improve fuel consumption.
Archie Blue – an inventor from Christchurch, New Zealand developed a car that runs purely on water by the extraction of hydrogen. An alleged offer of 500 million dollars from “Arab interests” was not enough to convince him to sell but never-the-less he has been unable to take his engine to the market place.
Electric engines
Wayne Henthron – from Los Angeles built an “Electromatic Auto” in 1976 that managed to regenerate its own electricity. In normal stop and go driving it gave several hundred miles of service between recharges. The system worked by the wiring of the batteries to act as capacitors once the car was moving along with four standard auto alternators acting to keep the batteries charged. With little official interest in his system the inventor resolved to make the car available to the public to do so, is now involved with the World Federation of Science and Engineering – 15532 Computer Lane, Huntington Beach, CA, 92649.
Joseph R. Zubris – developed in 1969 an electric car circuit design (US PAT #3,809,978) that he estimated cost him $100 a year to operate. Using an old ten horse electric truck motor, he worked out a unique system to get peak performance from his old 1961 Mercury engine that he ran from this power plant. The device actually cut energy drain on electric car starting by 75%, and by weakening excitation after getting started, produced a 100% mileage gain over conventional electric motors. The inventor was shocked to find the lack of reaction from larger business interests, and so in the early seventies began selling licenses to interested smaller concerns for $500. Last known address was Zubris Electrical Company, 1320 Dorchester Ave, Boston, Ma, 02122.
Richard Diggs – developed at an inventors workshop (I.W. international) his “Liquid Electricity Engine” that he believed could power a large truck for 25,000 miles from a single portable unit of his electrical fuel. Liquid electricity violated a number of the well known physical laws that the inventor pointed out. The inventor was also aware of the profound impact the invention could have upon the world’s economy – if it could be developed.
B. Von Platen – a 65 year old Swedish inventor made a major breakthrough in the field of Thermo-electric engines with his “Hot and Cold Engine” – based on the fact that wires of different metals produce electricity if they are joined and heated,the inventors secret breakthrough is said to give more than 30% more efficiency than regular motors, and with a radioactive isotope for power (hmmm?!) it could be completely free from fossil fuels. Volvo of Sweden bought the rights to this in 1975.
Steam engines
Oliver Yunick – developed a super efficient steam engine in 1970 (pop.Sci.Dec.1970) able to compete admirably with combustion engines.
DuPont Laboratories – built one of the most advanced steam engines in late 1971 using a recyclable fluid of the freon family. It is assumed to contain no need for an external condensor, valves, or tubes. (Pop.Sci.Jan1972)
William Bolon – from Rialto, California, developed an unusual steam engine design in 1971, that was said to get up to 50 miles to the gallon. The engine used only 17 moving parts and weighed less than 50 pounds and eliminated the usual transmission and drive train in an automatic. After much publicity, the inventors factory was fire bombed with damage totaling $600,000 . Letters to the Whitehouse were ignored so the inventor finally gave up and let Indonesian interests have the design.
Air power
Roy J. Meyers – from LA built an air powered car in 1931. (air has been used for years to power localised underground mine engines) Myers, an engineer, built a 114lb, 6 cylinder radial air engine that produced over 180 HP. Newspaper articles at the time reported that the vehicle could cruise several hundred miles at low speeds.
Vittorio Sorgato – of Milan, Italy also created a very impressive air powered vehicle in the 70’s using compressed air stored as a liquid. After a great deal of initial interest from Italian sources his invention is now all but forgotten.
Robert Alexander – from Montebello, Ca. spent 45 days and around $500 to put together a car (US PAT #3913004) based on a small 7/8ths 12 v-motor that provided the initial power. Once going , a hydraulic and air system took over and recharged the small electric energy drain. The inventor and his partner were determined that the auto industry would not bury their “super power” system. To no avail.
Joseph P Troyan – designed an air powered flywheel that could propel an automobile for 2c a mile. Using a principle of “ratio amplification of motion” in a closed system, the Troyan motor (US PAT # 040011) was easily attached to electric generators for pollution-free variable power systems.
David McClintock – created his free energy device known as the “McClintock Air Motor” (US PAT #2,982,26100) which is a cross between a diesel engine with three cylinders with a compression ratio of 27 to 1, and a rotary engine with solar and plenary gears. It burns no fuel, but becomes self-running by driving it’s own air compressor.
Magnetic energy
John W. Keeley – developed a car in the 1920’s using principles similar to Nikola Tesla’s, drawing harmonic magnetic energies from the planet itself. The electric car ran from high frequency electricity that was received when he simply broadcast the re-radiated atmospheric energy from a unit on his house roof. GM and the other Detroit oil “powers” offered the inventor 35 million dollars which was turned down when they would not guarantee to market the engine. Henry Ford – later bought and successfully shelved the invention.
Harold Adams – of Lake Isabella, California, worked out a motor thought to be similar to Keeley’s. It was demonstrated for many persons, including Naval scientists around the late 1940’s before it to “disappeared” from our history.
Dr Keith E. Kenyon – of Van Nuys, California discovered a discrepancy in long accepted laws relating to electric motor magnets, and so built a radically different motor that could theoretically run a car on a very small amount of electrical current. When demonstrated to physicists and engineers in 1976 those present admitted that it worked remarkably well but because it was beyond the ‘accepted’ laws of physics they chose to ignore it.
Bob Teal – of Madison, Florida was a retired electronics engineer when he invented his Magna-Pulsion Engine which ran by means of six tiny electromagnets and a secret timing device. Requiring no fuel, the engine emitted no gases. It was so simple in design it required very little maintanence and a small motorcycle battery was enough power to get it started. The engine has been met with little else but skepticism.
Lester J. Hendershot – built his Hendershot Generator in the late 1920’s largely through trial and error. He wove together a number of flat coils of wire and placed stainless steel rings, sticks of carbon and permanent magnets in various positions as an experiment. To his surprise it actually produced current. The generator raised considerable attention at the time.
Howard Johnson – developed a motor thats power is generated purely by magnetism. It took six years of legal hassles to patent his design (US PAT #4,151,431) – more information is available from the “Permanent Magnet Research Institute”
P.O. Box 199, Blacksburg, Virginia 24063. He is currently offering licensing rights.
Edwin V. Gray – developed in the early seventies an engine that uses no fuel and produces no waste, The engine that runs itself is U.S. Pat #3,890,548.
Petroleum additives
Guido Franch – from Michigan U.S.A. began demonstrating in the mid seventies his “water-to-gas miracle” a fuel he created by adding to water a small quantity of “conversion powder” which was easily processed from coal. He claimed it could be processed for a few cents per gallon if mass produced. The fuel was tested by Chemists at Havoline Chemical of Michigan and the local University, and both concluded it worked more efficiently than gasoline. Franch continued to put on demonstrations for years but said the auto manufacturers, Government, and private companies just weren’t interested in his
revolutionary fuel.
Dr Alfred R. Globus – working for United International Research developed a Hydro-fuel mixture around the mid-seventies. The fuel was a mixture of 45% gasoline, 50% or more of water, and small percentages of United’s “Hydrelate” which acted as a bonding agent. It was estimated that a hundred million gallons of fuel could be saved per day if
this fuel were utilised but alas nobody seemed interested.
John Andrews – a Portuguese chemist who in 1974 developed a fuel additive that enabled ordinary gasoline to be mixed with water reducing fuel costs down to 2c a gallon. After successfully demonstrating the substance, impressed Navy officials when going to negotiate for the formula found the inventor missing and his lab ransacked.
Water and Alcohol Motor – Jean Chambrin, an engineer in Paris ran his private cars on a mixture of denatured alcohol and water. The inventor / mechanical engineer claimed his motor design could be mass produced at a fraction of the cost of present engines. He received nothing but publicity that led him to take great precautions in regard to his personnel security.
Mavrin D. Martin – from the University of Arizona developed in 1977 a “fuel reformer” catalytic reactor that was estimated to double mileage. The device was designed to cut exhaust emissions by mixing water with Hydro-carbon fuels to produce an efficient Hydrogen, Methane, Carbon-Monoxide fuel.
Improving fuel efficiency
Edward La Force – from Vermont U.S.A. designed with his brother Robert, a highly efficient engine that burnt all the usually wasted heavier gasoline molecules. The ‘Los Angeles Examiner’ (Dec. 29, 1974) reported that the cams, timing and so on were altered on stock Detroit engines. These modifications not only eliminated most of the pollution from the motor but by completely burning all the fuel, the mileage was usually doubled. After much publicity the US EPA examined the cars and found the motor designs were not good enough. Few people believed the EPA including a number of Senators who brought
up the matter in a Congressional hearing in March 1975. The result was still silence.
Eric Cottell – was one of the pioneers of ultrasonic fuel systems. This involved using sonic transducers to ‘vibrate’ existing fuels down to much smaller particles, making it burn up to 20% more efficiently. Cottell then went on to discover that super fine S-ionised water could be mixed perfectly with up to 70% oil or gas in these systems, this was followed by
much publicity (e.g. Newsweek, June 17,1974) and then, once again – silence.
L. Mills. Beam – had his super-mileage carburetor bought out in the 1920’s. In the late 60’s he worked out a catalytic vegetable compound that produced the same super mileage results. In principle it was nothing more than a method of using the hot exhaust gases of an engine to vapourise the liquid gas being burned. By rearranging the molecules of gas and diesel, he was able to triple mileage rates, while obtaining better combustion, mileage and emission control. He was refused and rejected by U.S. State and Federal Air Pollution and Environmental Pollution agencies and was finally forced to sell his formula abroad in the mid-seventies just to survive.
John W. Gulley – of Gratz Kentucky managed 115 mpg from his 8 cylinder Buick using a similar vapourising method as that employed by L.M. Beam. “Detroit interests” bought and suppressed the device in 1950.
SHELL research of London – produced a ‘Vapipe’ unit in the early seventies that also vapourised the petroleum at around 40 degrees centigrade, and used a sophisticated pressure loss reduction system, but alas was not marketed because it did not meet Federal emission standards.
Russell Bourke – designed an engine in 1932 with only two moving parts. He connected two pistons to a refined “Scotch Yoke” crankshaft and came up with an engine that was superior in most respects to any competitive engine. His design burned any cheap carbon based fuel and delivered great mileage and performance. Article after article was published
acclaiming his engine but once again, to no avail. “The Bourke Engine Documentary” is the revealing book the inventor assembled just before his death.
New fuels
Clayton J. Querles – from Lucerne Valley, California took a 10,000 mile trip across the country in his 1949 Buick on $10 worth of carbide by building a simple carbide generator which worked on the order of a miners lamp. He claimed that half a pound of acetylene pressure was sufficient to keep his car running, but because acetylene was dangerous, he put a safety valve on his generator and ran the outlet gas through water to ensure there would be no ‘blow back’. The inventor also toyed successfully with methods of fuel vapourisation. (see Sun-Telegram 11/2/74.)
Joseph Papp – built the highly regarded Papp engine in the 60’s that could run on a 15 cents an hour secret combination of expandable gases. Instead of burning fuel, this engine used electricity to expand the gas in hermetically sealed cylinders. The first prototype was a simple ninety horsepower Volvo engine with upper end modifications. Attaching the Volvo pistons to pistons fitting the sealed cylinders, the engine worked perfectly with an output of three hundred horsepower. The inventor claimed it would cost about twenty five dollars to charge each cylinder every sixty thousand miles. The idea has gotten nowhere
amid accusations of suppression by the media.
Carburetors
G.A. Moore. – one of the most productive inventors of carburetors, he held some 17,000 patents of which 250 were related to the automobile and it’s carburetion. Industry today relies on his air brakes and fuel injection systems, it continues to completely ignore his systems for reducing pollution, gaining more mileage and improving overall engine efficiency. More info from “The Works of George Arlington Moore” published by the Madison Company. (See US PAT #’s 1,633,791 to 2,123,485 for 17 interesting developments.)
Joseph Bascle – created the Bascle carburetor in the mid 50’s. The carburetor raised mileage by 25% and reduced pollution by 45%. It’s inventor, a well known Baton Rouge researcher remodified every carburetor in the local Yellow Cab fleet, shortly after his arrival there.
Kendig Carburetors – were originally hand made for racing cars by a small group of mechanics in Los Angeles in the early seventies under the title of Variable Venture Carburetors. Eventually a young college student bought one of their less sophisticated prototypes for his old Mercury “gas hog”, when he entered it in a Californian air pollution run – he won easily – not only did the carburetor reduce pollution, it gave almost twice the mileage. Within a week the student was told to remove the carburetor as it was not approved by the Air Resources Board. The simpler Kendig model was due for production
in 1975 but has yet to be produced.
C.N. Pogue – from Winnipeg, Canada, developed a carburetor (US PAT# 2,026,789) in the late 1930’s that used superheated steam in it’s system and managed at least 200 miles per gallon. Much local interest, including threats from professional thieves, was not enough publicity to see this invention through to the market place.
John R. Fish – developed his “Fish” carburetor in the early 1940’s that was tested by Ford who admitted that the invention was a third more efficient than theirs. The design can also be easily switched to alcohol. Nevertheless the inventor was hindered from manufacture and distribution in almost every possible way, he once even resorted to selling by mail order, only to be stopped by the Post Office. The device can be currently bought from “Fuel systems of America” Box 9333, Tarcoma, Washington 98401 – U.S.ph:(206) 922-2228. (US PAT’s 2,214,273 and 2,236,595 and 2,775,818.)
The Dresserator – was created around the early 70’s in Santa Ana, California by Lester Berriman. It was based on a super-accurate mixture control using greatly enhanced airflow, and could run a car on up to a 22-to-1 fuel mixture. Test cars passed the pollution control standards with ease and managed up to an 18% mileage gain. Although Holley Carburetor and Ford signed agreements to manufacture the design in 1974, nothing has been heard of since.
Mark J. Meierbachtol – from San Bernardino, California patented a carburetor ( U.S. Patent # 3,432,281 March, 11, 69) that managed significantly greater mileage than was usual.
For more information consult SUPPRESSED INVENTIONS AND OTHER DISCOVERIES by Brian O’Leary, Christopher Bird, Jeane Manning, and Barry Lynes, Auckland Institute of Technology Press, Private bag 92006, Auckland, New Zealand. ISBN No 0-9583334-7-5. Along with references noted.
Ted,
Wow !
What an impressive compilation of fairy tales !
“Liquid electricity violated a number of the well known physical laws that the inventor pointed out”
Indeed.
Seems you preffer to beleive in fairy tales rather than in laws of physics. A pitty so many people, prominent, important pundits, do the same.
Then, villains must be invented to explain what prevents us from reaching nirvana: Bush-Hitler-Halliburton, Big-Oil, Big-Whatever ….
Ok. I quit.
Gary Farber comments on the Wal-mart memo in his blog, linked from your front page. Scan down to “WAL-MART TALKS TO ITSELF”.
Johnathan:
Getting back to the point alluded to in your title! …
I agree. And if you think about it there is no earthly reason why capitalists should be any more keen on free markets than anybody else, or, I should add, any less. A big business is just as capable of being seduced into becoming a welfare case as is a poor person, and for all the same reasons, and by all the same kinds of process.
I’ve often heard you say in conversation, and I agree, that the word “capitalism” is part of the problem here. When we – our side in this argument – hear this word, we mean – or I hope we mean – a set of rules, which will inevitably result in some capitalists thriving mightily, but where all must play by those same rules.
When others hear “capitalism” they hear “capital” getting special privileges from the government. As in “unionism” or “feminism”. Unionists and women must have a privileged legal position to compensate them for their weaknesses in the “free” society. That’s the argument. And now these damned pro-capitalism maniacs want capital to get extra privileges, despite having won the battle in the free society. If that’s what they hear, no wonder they hate the idea.
Okay, a lot of leftists hear this deliberately, and know that what they are really up against is a belief about what the rules should be, and how those rules will have better consequences than their arrangements ever will.
But many third parties tuning in to the denate in all honesty and for the first time are, I surmise, genuinely put off by this world.
After all Karl Marx pretty much invented it, did he not? I see why we use the word and glory in it, following Ayn Rand in particular. It’s a good propaganda technigue to embrace and glory in the insults of one’s opponents. This is a trick that Mark Streyn, to name just one writer, uses a lot, and very effective and entertaining it is. But in this case, I think, it does have its dangers.
“… in theory at any rate, raising the marginal cost of hiring a worker presumably makes it less likely that said persons will be hired, other things being equal.”
In theory, things are not that simple. Labour markets, notoriously, have a Z-shaped supply curve, with the consequence labour markets have (typically) dual equilibria. If one is going to apply theory, it is good to make sure to apply the right one.
Ted —
Giving you the benefit of the doubt (though I’ll admit it’s a lot…) and at the risk of getting chastized for even bothering, I’ll slightly expand on what Jacob said:
Your original claim as we understood it was a.) Innovators have come up with better energy systems and b.) oil interests have prevented those inventions from being used.
I won’t put it out of the realm of possibility, but when we consider that leftist propoganda or fairy tales, there are a number of things we are looking for as evidence to the contrary:
1. Reliable sources and references
2. A demonstration that innovation is actually “better.” This includes:
a. That it’s scientifically possible. Note it’s entirely possible to get a patent on a product that doesn’t actually work.
Or, if you happen to reject fundamental scientific notions of conservation of energy, thermodynamics, etc. (as a number of your examples do) at least produce a demonstration — heck, there are even free diagrams and instructions for the McClintock Air Engine on the US patent site (BTW, your patent number for it is wrong; it’s 2,982,261.) But I have trouble believing that we’ve had a perputual motion machine on our hands for 47 years and it’s just that nobody’s bothered to build one…
b. It is “better” in a total sense — performance, pollution, availability of fuel, initial cost and the cost to use. I’m willing to believe a number of the mentioned inventions are actually more fuel efficient, but that doesn’t make them better. There’s a wide gulf between big-business supression and market rejection.
That you can create vehicles that get 90 miles to the gallon is no big deal — they’re called motorcycles; it’s just that not everyone wants a motorcycle. Offering a cramped shell that maxes out at 60mph between recharges every 100 miles when I want a luxury sedan isn’t “better.” Moreover, even at current gas prices, an engine that gets 50 miles to the gallon but costs an extra $7,000 isn’t an improvement.
3. Evidence that it was actually supressed by oil interests, not other causes (such as cost, lack of fuel availablity, not actually working, etc.)
A number of your examples include patents and start-up companies…. I’d consider that evidence that it wasn’t supressed. Additionally, for a number of your examples to work you also have demonstrate that govermental environmental deptarments are so deep in the pockets of big oil, they’re intentionally making regulations promoting pollution. (That they are un-intentionally I already believe, environment as a luxury good, pollution controls that prevent innovation, etc. )
Lindsay, jargon alert! Can I hear that once more in simple speak? I don’t know what you said.
Brian, absolutely.
I half understand where EG is coming from where he stated that “governments created the market”. I think what he means is that governments can set down certain groundrules which can help grease the wheels of human transactions. At least I think that is what he meant. If not, then he is talking his usual statist blather.
All that is needed for a market in fact is set of rules. And as I have have pointed out elsewhere, government is not essential for that. Consider the history of the Common Law in England or the evolution of legal codes in parts of the world. (A big issue all of its own, of course.)
Regarding the suppressed inventions, I am fascinated by the idea of an engine which has only two moving parts, yet includes a crankshaft and pistons.
I would advise anyone who comes up with or rediscovers one of these hyper-efficient engines to keep their fool mouth shut, start generating with it, and selling the electricity to the national grid whilst claiming it is from a windmill. That should rake in money whilst avoiding the evil oil companies’ assassins.
“governments created the market”.
In some upside-down, distorted way, this is actually correct.
Govenments have the power to destroy markets, confiscate property and kill it by regulation. There are abundant examples of that.
So, when, in it’s immense benevolence and wisdom, government refrains from totally and absolutely killing the market – it can be said that the market exists thanks to the government.
By the way – the reverse could also be true – i.e. governments were created by the markets – people engaged in productive economic activity desired and needed an adequate legal framework – and therefore created government. Nice idea, but historically it didn’t happen that way.
Actually, what happens is that as society and the economy develop and become more complex, the scope for market abuse increases. The mediaeval market is a perfectly valid thing to bring up, but it only really works on a small scale – and those markets were small scale. As with much in libertarian and semi-libertarian thought, reality is somewhat more complex than theory.
Many of a libertarian bent do seem to recognise the fairly obvious fact that business does not want a free market. A larger and more complex market only increases the possibilities of market freedom being compromised by business, and reduces the possibility of the well-informed consumer defeating this by using his information – the amount of information required becomes far too great for people to cope with. Since the self-regulating mechanism of the informed consumer no longer functions effectively due to the complexity of the market, the range of goods and services on offer and the absolute values of the potential rewards for abuse, some other form of regulatory mechanism has to be found. In practice, the only way so far found to actually do this is state regulation.
Going back to a early industrial era system of a largely unregulated market on the basis that it worked then so it will work now is surely the triumph of wishful thinking over pragmatic reality. It completely ignores the historical facts of what actually happens when you try to apply the unregulated model to an increasingly complex market, and it attempts to scale directly from small to large, which in this case simply does not work. Not that this has ever stopped anyone from advancing the theory, possibly safe in the knowledge that it’s never going to happen anyway so no need to worry about explaining its practical failings.
The reality is that this model has already been tried and found to be so lamentably wanting in industrial economies that it has long since been abandoned. I see no reason to repeat the lessons of socio-economic history just so libertarians can finally figure out what the rest of the world already knows.
EG
You’re quite correct, government is not necessary for that. In theory.
In practice it is necessary, however. That’s life – reality sadly fails to live up to the expectations of theory.
EG
Euan, I don’t accept that as a market gets more complex that the feedback loop of consumer choice becomes less effective in raising efficiency, quality of service, etc. I just don’t buy that (‘scuse the pun!). Take the Internet, for instance. It has made it much easier for people to compare different products, hunt around for bargains, filter out duds, and so on. (Think how much easier for instance it is to book a holiday on-line and compare prices for flights).
In fact many market inefficiencies caused by gaps in knowledge last for far shorter periods of time because of technology like this.
Even if markets are more complex, it hardly suggests that government intervention to fix that “problem”, if problem it is, is much of a solution. Experience tells me otherwise.
“Many of a libertarian bent do seem to recognise the fairly obvious fact that business does not want a free market”
“business” is such a vague and non-descript definition that it cannot be used to generalize. In a large and diverse group such as “business” there are a whole range of possibilities of what “they” would “want”.
But none of that matters if those who are in charge of forceable government coercion choose to use that power sparingly and responsibly.
To xcredit governments with creating free markets is like crediting he rooster for the dawn.
Euan, could you explain, if not on this thread, what on earth “pragmatic reality” is? Can you eat it?
“That’s life – reality sadly fails to live up to the expectations of theory.
EG”
Perhaps you should check your theory. Theory should “live up” to reality, not the other way around.
Stock and commodity markets, whose membership is voluntary, have great numbers of rules and regulation that are NOT imposed by the state but are agreed by the market participants.
Your lack of understand of how and why markets work is considerable.
Somebody (I forget who, maybe Rand?) made a very strong case that government intervention greatly prolonged and deepened the Great Depression ’29~’39. It was only when the government got distracted by war and ‘neglected’ the economy that it was able to recover.
As to the discussion going on here, as long as EG is allowed to homogenize free enterprises and protected businesses into one catagory, he will be able to ‘prove’ that free enterprise destroys free markets.
Euan held is ground with this statement in a previous thread.
Unless you agree with his stance, there is no point in debating him.
I should add that Euan regards 90% market share as monopoly regardles of how it was achieved.
Kindly stop that. I REPEATEDLY said that Microsoft (90% market share in operating systems) and state education (90% share in provision of schools) are NOT monopolies because there is choice. If you think otherwise, please point out where you think I said so.
Once you accept that you cannot actually do this because I did not say it, you could gracefully withdraw your comment & refrain from wilfully misrepresenting my clearly expressed view. I’m not holding my breath, of course.
EG
Is the mail address you use valid? If so, I will do it by email.
EG
I think this analysis misses one thing: the people running the biggest businesses are often the same group of people running the modern state. The Triumph of Conservatism at the turn of the 20th century put a management class in control both of government and of large corporations. Government rules were made to assist large corporations, and large corporations made healthy donations to political parties, as well as agitated for and promoted the modern welfare/warfare state.
In the UK, the big businessmen are knighted. In the US, the Senators leave office and become “directors” for large politically-connected corporations. Hand in glove, chaps.
– Josh
Pragmatic reality!!?
I’m still waiting for the explanation of Z curves!!
Reminds me of the Severn Bore. Something going the wrong way.
And so successful was it that an independent body had to be set up to enforce the rules.
In economics, reality often unaccountably fails to live up to the expectations of theories intended to explain it. This is why economics is more of an art than a science, and much of it guesswork.
EG
This is correct, but…
Although it is quite in order to say that for a specific product the rise of technologies such as the internet does indeed make it easier for the consumer to access and even filter the available information, the problem is that there are so many different types of product to consider. For this idea to work in practice to the extent it could replace regulation it would be necessary for the same thing to happen in all or most categories of products and for all or most products within the categories.
Now, of course that can happen, and in many cases it does. However, that’s not all it requires. The prospective consumer has to wade through the morass of data readily available for all these things. Whilst it is true that he doesn’t have to do all the product research himself, he still has to research the research carried out by others. He is STILL left with piles of information to assess. And which opinion does he believe? How does he know that the reviewer has not got some grudge against a supplier? Or is being paid by another supplier? Does he have to research the research carried out by others on the research carried out by the first lot of researchers? How is this an improvement?
It can be argued that he doesn’t know if the data resulting from the regulation is impartial or honest. But then, what is the superiority of the “independent” research carried out if it has the same flaws? It can be argued that he is compelled to pay for the results of state regulation, but then the independent researchers also need to be paid. Where does their money come from? And is he not just paying for that anyway in the form of prices increased to cover the cost of advertising?
The real killer for this notion, though, is the simple fact that people tend not to do it. Whilst it may reasonably be expected that a prospective purchaser will thoroughly research the purchase of a single large purchase such as a house or car, or a relatively infrequent and moderately expensive one such as air tickets, the probability of them doing the same thing for trivial items like food, clothes, toys, and so on is much less. And of course they just don’t.
It’s fine if all you buy are a few simple everyday items, which has been the case for much of civilised human existence but is no longer. This model of regulation by reputation and enlightened self-interest simply doesn’t work on a large scale in complex economies, although as I said before it is fine for the small scale – but this is why it has been long since abandoned. Back to assuming that what works in a simple agrarian society will work in a complex industrialised or post-industrial society – it just doesn’t.
EG
I stand corrected. By Euan. (wince).
I went back a re-read the definition he prefers.
As I read that definition, it’s about market control and not market share. I believe it’s correct to interpret that exclusive control by definition means total market share, but total market share does not necessarily mean exclusive control.
My apologies, Euan.
The definition I prefer is,
So that leaves us with just our disagreement over your statements that
and that Microsoft’s market share and state school’s market share are, in reality, the same thing.
“This model of regulation by reputation and enlightened self-interest simply doesn’t work on a large scale in complex economies.”
Therefore we must adopt the model of regulation by the state, as the state is omnipotent, and of infinite wisdom, and state regulators aren’t subject to the same limitations on acquiring absolute knowlede in complex economies … they being somehow superhuman, and totally devoid of interests too…
These notions of “perfect competition”… “perfect knowledge”… are chimeras. There is no such thing, and it is not required for a free economy to function. A free economy functions well because it makes the best use of distributed and fragmented knowledge.
Sorry. Must preview.
Please explain why you think it is is only valid to use the term monopoly when the monopoly comes about by state action. Why do you think you can use the term when the state does something but not when private interest does exactly the same thing? Why is this fair or reasonable?
Explain why one is a monopoly and the other is not.
Since there is a choice in both cases, and since neither monopolises the market, and since you are not required to use either one, what exactly is the difference? BTW, in almost all cases when you by a PC you pay for a Microsoft licence, even if you don’t want it and don’t take a copy of the software. The discount for not taking Windows with your computer is normally zero, so in most cases when buying a computer you can say that you pay for Windows whether you use it or not.
No. *sigh* Why always with the extreme positions?
We use the system of state regulation because no other system has yet been found that does the job as well in a complex industrial economy. The state is not infinitely wise and it does not have to be – it just has to be more effective at regulating the market than the market is itself. At a small scale in a simple agrarian economy, it is not, but in a larger industrialised economy it is.
Who the hell said it was?
The problem with the regulation-by-reputation method is not that it requires perfect knowledge, but that it requires SUFFICIENT knowledge. The degree of knowledge that is sufficient for it to work seems to be greater than the degree of knowledge the vast majority of people are prepared to process, and if this is so then it cannot work. I say this is so, and this is why it cannot work, and equally I say that this explains the historical fact that it works in simple agrarian economies but not in complex industrial ones.
How do you explain the inconvenient fact that people don’t do what this model of market regulation says they do?
EG
Euan, I was being my mischievious self in asking you about what on earth you meant by pragamatic reality! Seriously, old chap, tell us in public.
I still disagree that modern markets are so complex that the bracing winds of consumer choice are less harsh than they would be in the era of Adam Smith. And of course many markets exist now that did not exist then, like sophisticated financial derivatives, for example.
Consider how ferociously competitive the computer market is, or the hi-fi market, or the market for financial products like insurance, or the DiY market. Try telling anyone who works in these fields that consumers are not demanding, to the point of being a pain at times.
Of course it can be bewildering to be faced with all this consumer choice. I guess it is the flipside of the terrific fecundity of modern capitalism. I take a more robust attitude. It is bewildering at times but also exciting.
Because the state uses force. Truly private enterprise cannot. You seem to be telling me that complying with the government is optional in UK. I can tell you certainly it is not here.
For ten years, I used only Macs. During this entire time, there were no laws requiring me to pay MS for an OS that I didn’t have to take delivery of. There were no laws requiring me to use an OS that meets MS standards or go to jail. There were no laws requiring me to have any computer at all. It was free market choice.
It’s this whole thing ‘voluntary’ that you seem to be missing. Right now, a father of a kinder gardener (k-g is 5-6 years old) is serving 1 year probation after a plea bargain. What was his crime? Trespassing. Where was he trespassing? At an ‘open’ school board meeting. Why did the school board have him arrested? Because they are teaching kinder gardeners about ‘diversity’. He wanted his child to be excused from discussions of homosexuality. They refused. He insisted. They had him arrested.
But according to you, since he had the option of paying first the bloated state school fees, and then the option of paying additional private school fees, and the option of sending his son to private schools who had the option of complying with state mandated ‘education’ standards, that all these options add up to mean there is no difference between government mandated compliance and market based choice.
I’m all for tolerance. Adults should be free to live their lives without government interference. But is there anyone else on this site that thinks the government’s authority should extend to indoctrinating kinder gardeners on alternative lifestyles against the will of the child’s parents? This is Kelo for kids, eminent domain over children.
and
When you make such absurd statements, it yields absurd conclusions. You just don’t get it. I for the life of me can’t understand what you are doing on an individual rights oriented site.
Government = Force
Market = Choice
So how does that make it a monopoly?
Monopoly means exclusive control of something. If the state uses force to back up its requirements, that’s one thing, but if there is an option to not use the state’s provided solution (in this case, education), it is NOT a monopoly.
Really, that’s absurd. How can it possibly be against the parents’ will when the parent have a choice of sending their child to another school or educating the child at home?
I do. I just don’t agree with it. I certainly don’t agree with it when it comes down to citing emotive cases, abusing the language to suit ideological preconceptions and applying different criteria to different entities doing the same thing.
EG
I think in looking at monopolies, it pays to understand how they came about, what kept them in that position, whether threats to their status are being contained by state aid, and so on. We need to think about the process by which a monopoly came into being to figure out its nature and whether it is harmful or not. That is something I learned both from the Chicago and Austrian schools of classical economics. Midwesterner is absolutely right to stress this. A lot of commentary about Big Business completely ignores this.
Just because firm X has a big share of a market, for instance, is not ipso facto proof that that firm is somehow harming the consumer. If that firm remains strong because it is brilliant at anticipating consumer demands, is innovative, responsive and so forth, who can complain? If on the other hand its position is made possible by political favours and the like, then it is a problem.
Take Walmart, which I criticised in my article. If that firm is big because it is a cracking good business, I have no problem.
Indeed, but it also pays to be clear about what a monopoly actually IS. Monopoly is sole and exclusive control of a given thing by a single entity. In this case we are talking about education.
State education is not a monopoly as long as there are non-state schools available, or as long as one has the option of educating one’s children at home, or both. Since both these criteria are met, state education CANNOT by classed as a monopoly under any definition of the term. To insist, in the face of reality, that it is a monopoly is simply abusing the English language.
It will not do to decry as monopoly a 90% market share by the state but to say a 90% market share held by a private company cannot be a monopoly. That’s just absurd and self-serving.
Whether the monopoly came to be because of meritorious private endeavour, collusion between private parties, market abuse or state mandate DOES NOT affect whether or not it is a monopoly.
I’ve been for some minutes trying to think of one non-government assisted entity that I am compelled to do business with. I thought of the post Ma-Bell phone service but that doesn’t even qualify. You can get you internet from the cable tv guys and your phone from any number of cell providers.
Electric power is a government regulated and protected service.
I’m sure, as big as our economy is, there must be some free market businesses that I can’t avoid. I just can’t think of any. The ‘monopolies’ all seem to have the government protecting their market position in some way.
Can anybody out there still on the thread offer any candidates? There must be a few.
Euan,
I’m not sure that I agree with your ‘state education is not a monopoly’ argument.
In the UK, the law requires that your child is educated between certain ages. You are then compulsorily taxed to pay for state provision and cannot get the amount of money that the state spends on this back to spend on alternative providers.
You MAY be (many are not) able to purchase or provide education from another source, but you still have to pay for the state system and cannot get state funding for any other provision.
So for those that can’t afford private education (and many can’t afford private education because of the taxes they have to pay for state education) or can’t afford (because they have to work to live) or aren’t able to home educate, a monopoly provider situation exists – enforced by law. A monopoly does not mean that everyone has to use one provider – it means that some people have to use a single provider. Whether something is a monopoly or not should be looked at from the individual’s perspective.
Even for the minority that can still afford an alternative, the ‘monopoly’ supplier gets their money anyway. Isn’t this one of the characteristics of a monopoly – the customer has to pay for you so it can give you as little as it likes in return?
If this is not the case, when has anyone successfully managed to prosecute the state for an unsatisfacory education?
No, it doesn’t. Ideological loading again.
EG
It is not “ideological loading”, Euan. HJHJ expressed his point most clearly. If X percent of the population are forced to use service X through no choice of their own and lack any viable alternative, and that state of affairs is created by the state, then that sounds like a monopoly to me. Period. .
HJHJ
Thank you. It’s exhausting arguing with a stuck phonograph. I should stop. But it was valuable because you also expanded my thoughts on the subject with your analysis of monopoly over a segment of the population.
Contrary to Euan’s un substantiated denial, under his qualification a total monopoly on telephone service in one state would not be a monopoly because people in another state aren’t effected.
Sorry to come in to this thread late. I’d like to talk about another one of Euan’s earlier points. He writes:
I would like some more explanation on this because I don’t really see how this makes a case against free market efficiency? People don’t spend much time researching food and the like because these markets are settled. Maybe they don’t get ideal products, but they get something that meets their needs at a cost they can afford, and that is all that’s required. Those people, of course, who DO care a great deal about their food are free to pay considerably more for greater quality. The market for such products isn’t large because most people don’t care – but these things are nevertheless available to those who do. A $1000 bottle of wine, for example, is completely wasted on me because I haven’t acquired the palate necessary to appreciate it. Therefore, insisting on quality in my price range in wine is a little silly. All I need is something adequate at a reasonable price: this is what the market gives me.
In the area of health and safety, I really don’t see what the government’s doing that the market can’t do on its own. Most health regulations are, let’s face it, fairly fussy and arbitrary. Cigarettes and alchohol, both of which are known to cause massive and chronic health problems, are perfectly legal, on the basis that their users accept certain risks. That’s as it should be. I cannot, however, go out (in the US, anyway) and purchase a gallon of unpasteurized milk because they’re afraid I’ll get sick. And this sickness, I might add, is (a) rare, (b) non-lethal, and (c) definitely not chronic. What those of us who like fresh milk have to do is go to the farmer directly and tell the police, if they happen to be watching, that we’re buying it for our pets. I personally find this situation completely absurd.
In short, government regulations are not nearly as enlightened and consistent as it might be convenient for some to believe. I agree that they make sense in cases where we’re protecting people from things that they cannot avoid. For example – I’m fully in agreement with prohibiting hospitals from dumping used needles in the local lake. But when it’s a matter of what kind of milk I can and cannot buy, or what kind of steak I can and cannot order in a restaurant (I like it very bloody – which is illegal in North Carolina) – then I really do wish they’d leave decisions about my health up to me as it is, after all, my responsibility to maintain it.
Joshua – It’s pressure from the insurance lobby.
In Britain, and European countries, all of which have socialist medicine – you do not choose the level of coverage you wish to pay for – the government poses as a protector of the public purse. This is hard to argue against, because they are saying that your behaviour may cause events which will cause you to be financed by the taxpayer. In the commercial environment of the US, it is the same: the companies obliged by legal contract to pay for your treatment do not want you to get sick by your own hand.
I think this will become more intense in the next 10 years, and probably worse still 20 years from now.
As medical technology continues to improve, there will be more, and more expensive, solutions for every illness, I think we will become more and more curtailed … by socialised medicine and providers of private medical insurance. I cannot see any way round it.
Can anyone else?
Verity
I think one of the most important things we can do to reduce/prevent that trend is to completely end the practice of ‘deep pockets'(Link). Wiki’s is a poor description. What it amounts to is, if someone has money, make them pay the bill.
How this plays out, for one example, is waivers of liability that have no standing. A saw says ‘for adult use only’, some kid amputates his hand with his parent’s help, and the saw manufactorer has to pay up anyway. Why? Because they and their insurance have ‘deep pockets’.
Years ago I had a dog with a known aggression problem when unsupervised. The household liability insurance company required a rider on the policy that specifically denied claims involving the dog.
It is possible that a court might have made them pay anyway, had there been an incident. Until we can get contracts to be honored to mean what they say, businesses and other interests will try to use law to modify our behaviour to reduce their risk exposure.
There are many other problems, but solving that would be a big help.
Perhaps Euan Gray would explain his “no it doesn’t” and “ideological loading” comments. What the hell is “ideological loading”?
Whether or not a monopoly situation exists depends upon the position of the observer. I’d like to hear a coherent argument against this.
It doesn’t, and I don’t say it does. What I do say it means is that the probability of the free market in a society more complex than 18th century agrarian America or Europe successfully regulating itself is minimal.
They’re legal because in both cases they provide more state revenue than the cost of correcting the problems they cause, and in the case of alcohol because it has been accepted as normal for thousands of years.
For once I agree with Verity. I’d add that the only significant difference I can see between socialised and private healthcare is one of efficiency, and even that is not so marked. Both constrain individual behaviour and both are expensive – largely private America spends significantly more per capita on healthcare than largely socialised Britain, for example.
“Monopoly” is a precise definition of a specific economic circumstance. The observer’s viewpoint is not relevant, since it is a wholly objective definition.
This is in contrast to subjective things like “right” or “fair,” where the question depends very much on the observer’s perspective. One can quite legitimately say that state provision of 90% of the education market, for example, is unfair and wrong (because this is a subjective view), but one cannot say it is a monopoly (because it does not meet the objective criteria of monpoly).
EG
Forgot about this:
Applying a subjective ideological interpretation to the accepted definition of a given term, fairly obviously. For example, classing as “monopoly” something that actually is not a monopoly because it suits the speaker’s ideological preconceptions – in this case that when the state does something it is bad, but when private interests do exactly the same thing it is good. We therefore see a great eagerness to employ the negative connotations of monopoly against the state, but simultaneously a great reluctance to even consider an analogous private sector situation as in any way monopolistic.
The uncharitable might suggest that a convenient shorthand would be “hypocrisy.”
EG
I’d want to look at the situation more closely before agreeing with you. This sounds plausible – but then I remember, for example, that cigarette companies are essentially banned from advertising, and that the tax on cigarettes in NYC just went up 300% in parallel with the smoking ban, and I wonder why big gov would shoot itself in the foot in this way.
Now South Korea, in contrast (where I lived for two years), is a sterling example of what you mean. The cigarette tax more or less pays for the high school system there, and not surprisingly cigarettes were cheaper in Korea than in any other country I’ve lived in. Non-smoking areas were simply unheard of. Sure – the Seoul subway system puts up some token signs, but the novelty of taking pictures of old men smoking underneath them in full view of the police wears off in about 20min. it’s such a common sight. So by comparison, I don’t know that this explanation applies to the US as a whole (although I would say it definitely does to North Carolina and Kentucky, which have some of the lowest cigarette taxes and also the highest rates of smoking).
As for alcohol, it would be more accurate to say that it is an established cultural tradition and that this is why. Drinking fresh milk and eating raw eggs and rare steak was also “normal” in the US until the early 1970s, but health regs more or less ensure that no one does it anymore.
Euan,
Where exactly did I draw a distinction between state and private monopolies or say, or even imply, that one was worse than the other? I merely pointed out that education is a state monopoly to many ‘customers’ – you raised education not me, so this is what I commented on. I would be equally critical of a private education monopoly, if it existed.
If you had taken the trouble to read my previous posts on this blog, you would know that I have been equally critical of private sector monopolies.
So, if you have any manners, you owe me an apology for accusing me of hypocrisy. I cannot quite believe how rude you are considering that I addressed my point to you quite politely.
You also say: “”Monopoly” is a precise definition of a specific economic circumstance. The observer’s viewpoint is not relevant, since it is a wholly objective definition.
Perhaps you would like to provide the precise definition?
One of things that modern physics teaches us is that the position of the observer is always relevant in any observation. So how do you define ‘objective’ – who is the ‘objective’ observer and how is their view more relevant than any other observer’s? Economics is no different from physics in this respect, if you have any sort of scientific viewpoint.
I agree with HJHJ on this. I would also add that a monopoly must have coercive force to compel people to use its services. It may be possible for such things to exist without being an explicitly state-run enterprise although in reality such things are unlikely to exist for very long.
Euan, instead of cooking up pompous expressions like “ideological loading”, why not rely on plain English and say that someone is biased?
I was directing that part of the remark specifically at you, but I do apologise if you took offence. It wasn’t intended.
Others do make the distinction, which is IMO wrong and self-serving. That is hypocrisy.
I already have. At 9:09 on 1 November above, I wrote:
“Monopoly is sole and exclusive control of a given thing by a single entity”
Feel free to check in any dictionary and you’ll find words to the same effect. What you will NOT find is a rider to the effect of “but only when the state does it” or “depending on your perspective.”
Economics is VERY different from physics, it is not a science and you cannot apply scientific standards to it. Applying science to economics gives you results like Marxism, and we all know how that worked out.
EG
Why?
I think you’re conflating monopoly with compulsory use, and they aren’t at all the same thing.
EG
“Why?” asks EG. A monopoly, in the perjorative sense, relates to an essential service – like providing food – that humans cannot do without. Hence if said service is held by one operator – a monpoly – then that can potentially put coercive force into the hands of said operator, unless there are laws to constrain that monopoly. A state, for example, has a monopoly on the use of violence, which is why the better states have checks and balances, constitutions, democratic elections, free medias and the like to keep them in check.
Euan, you are of course correct that economics is not a science like physics. I am not aware that anyone on this thread has claimed that. However, it is possible to draw out certain “laws” or patterns of behaviour that can be understood in a scientific sort of way. I have heard people refer to economics as the utilisation of scarce resources that have alternate uses, for example.
People also use “economic laws” or theories capable of general application all the time, such as the law of supply and demand, the law of diminishing marginal utility, and so on. Textbooks are full of them!
Euan,
The trouble is that your “precise definition” is nothing of the sort.
“Monopoly is sole and exclusive control of a given thing by a single entity”
I (“a single entity”) have sole and exclusive control of my bike (“a given thing”). Where is the monopoly here? Your description lacks any mention of the market (which is both the dictionaries to which I have just referred).
I was not aware that Marx was a scientist nor that he employed any scientific principles in prescribing Marxism. Marx may have proposed a model and we could argue that it has been disproved.
Neither did I say that Economics was not a different thing than Physics. I said that scientific principles cannot be contravened in support of an economic argument. Let’s say you justify an argument about economics on the premise that 2+2=3. This argument is wrong because 2+2 is not equal to 3. It does not matter whether you consider economics to be a science or not.
Since when? I’ve never seen any definition anywhere that says an essential service like food is a monopoly in any sense merely by virtue of being essential. Can you cite some such definition anywhere?
I’d agree, by the way, that monopoly control of something essential to life such as food is unlikely to be a good thing, whoever is doing the control.
These aren’t laws in the scientific sense of the term.
The term does not mean only economic monopoly. In any case, when applied to economics, the same condition is met – sole and exclusive control of a thing (e.g. the market for the supply of widgets) by a single entity.
He wasn’t (doctorate in philosophy), and he sort of didn’t. Marxism is scientific to the extent that it is an attempt at rational analysis of capitalism, and that it uses the rational scientific processes of observation and deduction. You can, of course, be scientific and still wrong.
The basis for Marx’s model is not “disproved,” though, since it is nothing other than perfectly normal capitalism. Where the model fails is in the flawed observation that history was all about class struggle and the flawed deduction that the working classes could not better their lot without revolution.
Be that as it may, the idea of proving or disproving economic theories is at best eccentric and at worst dangerous. You have to surround it with so many caveats, exceptions and conditions that “proof” ceases to be a meaningful concept.
That depends on a lot of things. Economics isn’t a science and much of it is guesswork and estimation. If we estimate 1.51 added to itself, and both that and the result estimated as integers, 2+2 does indeed equal 3 (1.51 + 1.51 = 3.02), but only for small values of 2. Similarly, 2+2=5 (2.4 + 2.4 = 4.8), but only for large values of 2. If you’re not sufficiently precise in your estimates, 3 = 5. So much for proof.
Economics is SO imprecise that attempting to validate or refute economic theory on any sort of scientific basis is a waste of time, although watching people try is a giggle for pragmatic cynics like me. The problem is that you cannot know with sufficient certainty what 2 actually is in the above examples, and therefore you cannot prove or disprove in any reasonable sense your theory.
Were economics sufficiently precise, which is to say could we actually obtain and process the data to sufficient accuracy, we might not only elevate economics to the status of a science but we might permit socialism because we could quite possibly have defeated the socialist calculation problem (if you subscribe to the view that the problem is one of data and not of computation). That would be interesting … if economics is sufficiently precise to disprove Marxism, then by the same token socialism is possible.
The only justification that really seems to hold for economic theory in the real world is “it seems to work well enough.” Only ideologues demand perfection, “good enough” is indeed good enough for everyone else.
EG
Can the above post really be by the same Euan Gray who claimed that “monopoly” has a precise, objective definition (and then gave a definition that I demonstrated applied equally to my ownership of a bike)?
Euan, you do not seem to understand scientific method.
While scientists would like to be able to prove or disprove everything, they know that in many cases there are too many variables to do this in practice (just like economic theory). In these cases, they do not talk about proofs, but likelihoods and probabilities derived from admittedly insufficient data.
Euan, economic laws are clearly not the same as laws of physics but economists nevertheless do try to figure out if one can derive certain principles, or see patterns of behaviour, or “laws” in economic life. There is a sort of superficial resemblance between laws of hard science and the laws one reads about in economics. Of course they are not the same. I did not say they were.
Apologies for my rather garbled remark on monopoly. For me, a monopoly becomes a problem if the entity concerned is in charge of something essential to life. You are right that this is bad regardless of whether the entity is a state or private body. In practice, such things are unlikely in the private sector, but not impossible.
You are also right on the socialist economic calculation issue. Given that different people have subjective preferences, it simply would be impossible to gather the data to put into some sort of socialist computer to get the optimum result for everyone. This also ignores innovation and entrepreurship, which cannot be modelled or boiled down to some sort of formula.
Well, yes. The use of the term monopoly is not confined to economics, and you might as well apply it to your exclusive control of your bike – you monopolise lawful access to your bike, do you not? The meaning of monopoly is plain and objective, and the meaning of economic monopoly is also plain and objective. I don’t understand your difficulty with this.
I take issue with your earlier statement that we might consider Marxism disproved. I’m not a socialist and unlike quite a number of libertarians never have been, so I have no personal agenda on this. I don’t think, though, that you can possibly apply scientific standards to economics and I don’t think you can say one economic theory or another is proved or disproved, simply because you cannot possibly obtain enough or accurate enough data.
True enough, but one needs to remember that the resemblance is only superficial. In economics, laws are really nothing more than educated (sometimes) guesses, and often enough the real world doesn’t work out the way the economic theories predict. I read somewhere that economists spend 50% of their time trying to explain why their explanations don’t work out in reality, but unfortunately I can’t recall where I read that.
Which implies, does it not, that the attempt to apply scientific method to economics to the extent one can prove or disprove a theorem is generally futile.
I don’t think you can say that the economy is too complex for socialism to work but at the same time say we have enough data and good enough analysis to prove some alternative method is valid. I think it cuts both ways on this.
EG
“Monopolise lawful access to my bike”?
Oh come on. I own my bike and you’re just being ridiculous. The definition of monopoly in any dictionary you care to look in refers to the status of the provider. My bike is a bike and once I own it, there is no provider involved.
I didn’t say that I consider Marxism to be disproved. I said that it could be argued thus. My point, which you chose to ignore, is that your argument that scientific method applied to economics gave us Marxism is nonsense. Marx came up with an untested theory, mixed it with his own political view and presented it as ‘the way things should be’. It was never a scientific theory, nor a hypothesis. But it has been pretty well demonstrated that it hasn’t worked very well, i.e. the workability of his model has been ‘disproved’ to the satisfaction of many if not most. This is all about drawing reasonable conclusions based on probability and incomplete experimental evidence. Quite simply, despite several extended ‘experiments’, no-one can point to a Marxist economy that has performed anywhere near as well as a capitalist model, so the empirical likelihood is that it’s a model that has, from a scientific point of view, huge flaws. It is also quite possible to describe, in theory, many of the reasons why this could be so. This is basic scientific method even though nobody claims any ‘proof’ has been, or could be, obtained.
None of the ones I’ve seen do this. Which dictionaries do you use? Care to cite the complete definitions?
In the case of the bike, you can say that you are the provider of the bike if anyone wants access to it. Because you completely own your bike, you are a monopoly provider of access to it, but although that’s perfectly valid and correct, it’s not a meaningful comparison to, say, provision of education services. I repeat that “monopoly” does not only mean “economic monopoly.”
Indeed, and I said “I take issue with your earlier statement that we might consider Marxism disproved,” so I’m hardly saying that you think it is disproved. Saying “we might consider that” is not the same as saying “I assert that,” now is it?
I actually said “things like Marxism.” It also gives you things like certain strands of libertarianism, which consider their economic analysis scientifically proven and deny the need to refer to real world assessment to see if it really does work.
Marx came up with an thorough analysis of the economic system working at the time, and did this in a capitalist way using as his basis the ideas of Smith, Ricardo, and so on. So far, so reasonable. However, he used this analysis against capitalism rather than in favour of it, which is the first departure. He thought that the working man could not improve his lot without seizing control of the economy. This, coupled with an erroneous view of history as being a tale of class struggle and a failure to consider that the prevailing trend of early to mid 19th century capitalism might not be permanent, is what produces the failure in his predictions.
He was wrong because it was not necessary to institute a dictatorship of the proletariat and then work towards communism as the only way to improve the lot of the workers. Interestingly enough, most things Marx saw as the desirable ends of the communist system have been peacefully achieved without resort to proletarian revolution or the need for common ownership. Today, Marx would be expelled from Marxist parties because he would be seen as nothing more than a liberal with a social conscience.
Marxism-Leninism, on the other hand, is a completely different thing, and it’s a good idea to keep them separate.
That’s not proof, though. As I said before, in economics you simply don’t have enough data and it isn’t precise enough to assert proof or refutation. I think you’re stretching the meaning of “disproved” more than a little.
From a practical point of view, not a scientific point of view.
Provided the assumptions of this theory are valid, of course. This applies to any economic theory, including libertarian ones – how do you know your assumptions are valid, how do you know you have enough data, how do you known your data is accurate enough to put the theory forward? In reality, you don’t. It’s an estimate and you need to constantly refer back to the real world to see if you were right.
You must also consider social and cultural factors which vary from country to country and even within a country. What works in America might not work in Nigeria and vice versa, for example. So you cannot have an economic “law” or even an economic theory which holds other than in very specific circumstances, so specific in fact that it renders the exercise pointless because you pretty much CANNOT come up with any general economic theory applicable everywhere. Thus my contention that a scientific approach to economics is futile.
EG
Euan, if you agree that trying to model economics on science is futile, then you will get no argument from me. But it is possible to figure out some principles that can explain why certain things happen in the way they do: such as David Ricardo’s law of comparative advantage. The law helps us to understand the fallacies of mercantilsm and current hysteria about offshoring. And so on.
Principles like this help us to get a handle on complex phenomena. As Popper once said, without theories, facts are blind.
Euan,
OED, Collins and Chambers.
Empirical evidence is frequently used by scientists.
Scientific theories always rely on assumptions.
What about citing the bit that makes the definition contingent on the status of the provider? Or don’t they actually say that after all?
… and …
I know.
But the assumptions are testable, and if they turn out to be wrong scientists have little difficulty ditching them. This doesn’t seem to work in economics, where the theoretician always seems to have some political or social agenda he is pushing and is often inclined to ignore contrary empirical evidence. Some libertarians go even further and, insanely, say there is no NEED to even consider evidence because their case is “proven.”
In most cases, scientists are not trying to push a socio-political agenda by means of their theories. Economists often are. This makes a huge difference, which I assume you can see.
EG