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Thread: How high-income economy system could exist?

  1. #1 How high-income economy system could exist? 
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    Last edited by Stanley514; September 6th, 2017 at 11:34 PM.
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    Figures published by the Spectrem Group suggest there are 8.6 million households in the U.S. with a total net worth (minus principal residence) of $1 million or more.

    Also a projected annual household income of $260,000 would put a family into the top 4% bracket of annual earnings for American families according to the figures from the Wall Street Journals income calculator.

    So this I think tell's that it's pretty unrealistic to think of figures of all family members earning $65,000 a year as the 'norm'. Also what I think we have to consider here is that people's expenses can rack up pretty fast. I mean you have all your basic bills to consider, then things like holidays every, new cars, kids college fees, insurances, new computers, stereo's, tv's etc..., then buying a house or appartment to live in, entertainment and hobbies, unexpected expenses and probarbly a hundred different other things. So really what this means is although on the surface that $65,000 might sound like a reasonable amount of money if you could just bank it every year, the realities are that more often than not than, your money just doesn't stretch as far as you might think, or hope.

    For many people that don't have household incomes anywhere near the $260,000 mark the situation can be that they are really ending up spending most of the money they do have just to maintain a reasonable lifestyle and standard of living, and saving can prove difficult. Also we do see quite alot of Europeans are renting property, especially apartments. They haven't all quite gotten into the property owning habit and even if they did many would struggle to be able to afford to buy their own properties, the criteria for mortgages has traditionally been much tougher in many European countries than say that of the US or UK in the past.

    Even within households that do have very good annual incomes what we can see is that only a relatively small percentage of them ever use their money in such a way as to enable their descendants to be rich enough to have the choice over whether or not they do choose to work.

    To a large extent we have got a two tier society of those who, in many cases have been fortunate enough to have inherited some money or have well paying jobs and those that have neither. With, for the most part, the ones who have neither making up the majority of the population. So what this signifies is that it is really very unlikely we will ever get to a state where people won't go and take up a job as policeman, because there will always be people that need and want such a salary.

    But just to go back to your title, "How high-income economy system could exist?", It is a product of consumerism, the more people consume the more is produced thus the more money is generated and thus the more money people have to spend on an ever increasing number of products. What is now but becoming more clear though is the limited lifespan for consumerism based economics, as we all start to think about, and to notice the planets dwindling resources and the enviromental considerations.


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    For the most part those in America and Europe are wealthy compared to billions of people outside of America and Europe. It is all fixing to shift though due to debt and the fact that the rest of the world will stop taking their money soon enough.. Most Americans and Europeans will have to start honestly working for their food, water, goods, services, products, etc... It is just a matter of time before American's and European's will not be able to print, type or click money into existence that people will take, and they will not be able to drop enough bombs or prop up enough regimes to force and/or trap billions into doing all the hard work for a little shelter and a little bit of food so American's and European's can live extremely wealthy compared to them.
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    Last edited by Stanley514; September 6th, 2017 at 11:35 PM.
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    Quote Originally Posted by Stanley514 View Post
    For many people that don't have household incomes anywhere near the $260,000 mark the situation can be that they are really ending up spending most of the money they do have just to maintain a reasonable lifestyle and standard of living, and saving can prove difficult.
    Wondering, how stupid most of people are.Instead saving millions during their lifespan and still having very decent lifestile on other millions they earn, tens of persents of population spend money nobody know for what and as result have no savings.They just stupidly miss opportunity to become multimillionare business owners at the end of their career and make their ancestors live in luxury and never think about hard work.By the way wasn`t it an old good joke: ``if everyone will become rich then who will ultimately remain to work?``
    Another my wondering is how under free market economy in developed countries free market of real estate could exist?
    There is such impression that proposition of houses for sale is probably greater than demand for it.But if so many people
    have so large incomes and do not know where to invest all those money and land is most obvious object for investment.
    But since all the land is already in somebodies property and transfered by inheritance and lot of people want to purchase
    land, unavoidably and very soon we should find no land or houses for a sale.The land can`t muliply.You would not be able to purchase land or house.The same paradoxes would probably happen to the stock market.There would not be stock for a sale unless those stocks are super risky.
    All resources are finite, some more than others, and demand cannot continually grow indefinitely. Because resources are finite, when demand exceed supply those at the bottom, those with less, get removed from owning or obtaining those supplies until a surplus is reached.

    Right now, in the US, the demand and supply of a lot of things are starting to effect the middle class due to government over creation of money/theft of their wealth and regulations. They are becoming poorer because of it. They are slowly but surely being removed from owning or obtaining the amount of supplies and supplies they once were able to own and obtain.
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    You have some really interesting insights (about real estate and its barriers) but there are numerous others. The nature of our economies make them quite vulnerable to many points.

    Economy starts the day with a certain amount of money (M). Then these money are used in a market (labour market) place to buy labour power (L). It also buys other means of production(MP) (raw materials, machinery, energy, etc). Then, under given technological circumstances these commodities are combined under the control of the investor/businessman. The outcome is the commodities (a house, a product, a service, etc). Then selling occurs. The selling must be the money plus a surplus money (profit). This surplus money(value) has been "created" within the production (workers, scientists, etc combine machinery, technology, etc to create a higher value product).
    This process takes a certain time and some payments etc are available due to the existence of finance (therefore debt is created in this process to make repayments available).
    In the end of the day, investors take the surplus money and reinvest it again and again and that's where growth occurs. This process describes I think the flow of a modern economy.
    This can be formed as:

    (1) M----> (2) [L+ MP] --(production)--> (3) Commodities --- (4) (selling)--> M+ Surplus--> M'... (and again and again)

    This system can be very vulnerable with many crisis points around:

    1) Are there enough M to start? If there's not enough capital to start with then growth may stop at the very early point (no an issue for a developed country)
    2) Are there enough cheap workers/employees? If there are very well organised workers with unions and syndicates then it may occurs a Labour Supply crisis since the price of labour power (wages) may be too high.
    2) Again at 2, are there enough raw materials, appropriate technology etc? Environment is always an issue and a crisis point may occur here as well. Is it easy to reach these materials? An oil crisis can always occur unless you have the appropriate technology to replace it in order to produce energy.
    3) That's the point you're referring to. Is there enough space for commodities? (real estate can not been expanded for ever)
    4) Is there efficient demand to buy all these products? Is the banking system healthy to contribute with its tools? (credit money, exchange checks, money supply, etc)

    And things can become more complicated:
    By fixing a problem you may cause a new problem somewhere else. For example, you may fix (2) buy paying low wages but then a problem in (4) may occur since there won't be enough demand to buy certain commodities. You may fix this temporarily buy providing financial aid (credit) but then again you may create another problem of household debt.
    Take another example, global crisis of 2008. Inter-banking failure has been treated by governments. They provided huge amounts of money to rescue them and they succeeded. Then a new problem arose. Government deficits. They tried to fix them through austerity, then another problem arose, slow growth rates (or even worse, negative growth rates), etc.

    On top of all these obstacles there are long term trends that may be difficult to overcome as well. For example, it is well known that the rate of capital returns (the rate of profit) is falling constantly for many decades (despite the counterbalancing forces who raise it temporarily). This may cause lack of investments, etc.

    This system has been worked worldwide and is still working. Of course, this process is not smooth at all. Local or even global crises occur periodically followed up by successful/failed tries to recover. Existence of these kind of economies depends on their ability to adapt to new circumstances.

    Talking about a High-income economy, well US is not exactly that case. Sure, US is a really wealthy economy but real wages have been stagnant from 70s. To put it simply, even though economy and productivity was growing, wages didn't grow to the same extent. You grab a point though. Real estate growth has limits both from demand and supply.
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    Quote Originally Posted by Stanley514 View Post
    Then, to the present moment the total ammount of money they earned
    suppose to be (2X40X65.000 = 5.200.000 (parents) + 2X20X65.000 = 2.600.000 (children))= 7.800.000
    7 millions and 800 thousands! Quite unbeliavable number.
    It's just a number. If all people make that then everything will get more expensive (laws of supply and demand.) When a gallon of milk costs $100 and an average house costs $10 million, then a lifetime salary of $7 million isn't much.

    if average family consisting of 4 persons could earn 5 million 200 thousand dollars during 40 years lifespan, where all those money could go?
    Into real estate, and entertainment, and gasoline, and food etc.

    Well, if they would be able to save at least 1/2 of those money, then they would be able to open
    a few million dollar busines and never more care about hard work of policemen.
    Some would be able to do that. But if everyone tried a lot of things would change:

    1) It would be become next to impossible to open "a few million dollar businesses." The market for those businesses would be saturated.
    2) Overall prices would soar. If everyone could afford a fancy sportscar, then the prices of fancy sportscars would rise until only a few could afford them (i.e. until supply equaled demand.)

    if economy would work like this, then in a foreseable time frame there would no people who want to
    work policemen, and tens of persents of population would be millionaires who have luxary lifestile and drink coffee
    on golden paved balconies.
    1) There are plenty of millionaires out there still working hard, and who cannot afford to "drink coffee on golden paved balconies."
    2) As mentioned before, due to inflation, millions won't always mean that much.

    If we assume second possibility, that they do not purchase their million dollar business, then
    in what exacly values they would be able to invest all those money? Definitely, people cannot eat or drink so much,
    that they would spend millions on it.
    Sure they can. Look at all the people who win million dollar lotteries, only to find themselves penniless and miserable in a few years.

    For $5.200.000 you could purchase at least 10 average price houses in U.S.
    If everyone had that much money then the prices of housing would rise until your typical family could barely afford one - then it would stabilize again.



    As I know, in Germany majority of population now lives in appartments and only minority have their own houses.
    Agreed, although that's more cultural than economic.

    It means purchasing of real estate would be impossible. Because 95% of land/appartments is transfered by inheritance and there is almost no place to build a new property. Free land is limited. Then, such high salaries would be just impossible. People would have no values to invest in, and hyperinflation would start. And entire model would be unsustainable. If you have some explanation ... I would be glad to know.
    You are looking at two extremes. The reality is between those two extremes. Real estate only rises until a lot of people can't afford it - then it drops to a more sustainable level.
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    Quote Originally Posted by Stanley514 View Post
    Usually, it is customary to call so-called "Western" economic model a "consumption society",
    and believe that under modern historical conditions it's principally possible to create economic
    society (based on capitalism), in which majority of population and middle class could receve very
    decent salaries and there could be a lot of rich people. And it is claimed there is lot of countries which
    aready acheived something like this. Nonetheless, I have some serious questions on how such system is
    possible at all. For example. Take an American policmen as an example of typical average income person.
    According to some data I found, an average sallary of police officer in U.S. is 65.000 $ a year.Lets say we have
    family consisting of 4 persons - two parent and two children, and everyone of them is working as polismen.
    To become a police officer you do not need to study too long, lets say that everyone start to work at age of 20 and
    retire at age of 60.Then, when parrents will reach retirement age (60 years), children will reach 40 years old.
    Lets say, parents gave them birth at age of 20.Then, to the present moment the total ammount of money they earned
    suppose to be (2X40X65.000 = 5.200.000 (parents) + 2X20X65.000 = 2.600.000 (children))= 7.800.000
    7 millions and 800 thousands! Quite unbeliavable number. If we take in account that they have to pay taxes,
    and taxes will consume 1/3 of their total incomes, then we still have 5.200.000 $.The question is: if average
    family consisting of 4 persons could earn 5 million 200 thousand dollars during 40 years lifespan, where all those
    money could go?
    You can only count the two parents. The children will leave when they're 20, and form their own households and have their own children.

    So if we start with 2 parents (20 years old), and 2 children (0 years old), then 20 years later, you've got 2 grand parents (40 years old), 2 parents (formerly children, now 20 years old), and 2 grand kids (0 years old.) By the 40 year mark, it's 2 great grand parents (60 years old), 2 grand parents (40 years old), 2 parents (formerly grand children, now 20 years old) , and 2 great grand children (0 years old).

    That's 8 people. Collectively they've worked 120 years. (40 each for the great grand parents, 20 each for the grand parents, 0 each for the 20 year old parents.)

    So the numbers are correct of 7.800.000 gross, and 5.200.000 after taxes I guess, but it's divided 8 ways, not 4 ways.

    Well, if they would be able to save at least 1/2 of those money, then they would be able to open
    a few million dollar busines and never more care about hard work of policemen. And there is still possibility of inheritance
    from their ancestors (who also were modest policemen), which would multiply their capitals on few more millions.
    Owning a business that small would be a full time job. A 2.600.000 dollar business is hardly a megacorporation. That's like owning *maybe* two McDonald's restaurants.


    In one word: if economy would work like this, then in a foreseable time frame there would no people who want to
    work policemen, and tens of persents of population would be millionaires who have luxary lifestile and drink coffee
    on golden paved balconies. If we assume second possibility, that they do not purchase their million dollar business, then
    in what exacly values they would be able to invest all those money? Definitely, people cannot eat or drink so much,
    that they would spend millions on it. For $5.200.000 you could purchase at least 10 average price houses in U.S.
    But I have doubts it could be a houses. First of all, nobody needs so many uninhabitable houses . Family from 4 people
    do not need more than 1 house. Children under 18 typically can`t live alone without their parents. As I know, in Germany majority of
    population now lives in appartments and only minority have their own houses. The problem is - density of population.
    Majority of population cannot afford even one house. And appartments they have are most likely transfered by inheritance. It means purchasing of real estate would be impossible. Because 95% of land/appartments is transfered by inheritance and there is almost no place to build a new property. Free land is limited. Then, such high salaries would be just impossible. People would have no values to invest in, and hyperinflation would start. And entire model would be unsustainable. If you have some explanation ... I would be glad to know.
    There are 2 problems :

    1) - Local inflation.

    If too many people are all buying something that has a maximum number, then the price simply goes up.

    However if they're buying manufactured stuff like cars, which can increase in number, then the price may remain the same. That's why "consumer economy" allows people to be rich. But they can only be rich by way of owning manufactured goods. They can't all be rich by way of owning land.

    2) - Foolishness.

    Once people become rich they start spending the money foolishly, on things like sports cars or family vacations to exotic places.

    It's ironic, but the economy actually depends on people being foolish. If society ever reaches a point where too few people are foolish, then the paradoxes you've pointed out would cause it to crash.
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    I find household approach rather problematic. 2.000.000$, 1$, 50.000$ are just numbers. Even if we simplify a lot the paradigm by assuming inflation=0% at all times, these numbers can tell us only few things. What really matters is the composition of national income. Which % is consumption, which % is investment, which % is taxes, etc. We also should know which % of national income is wages, which % is profits, which % is interests, etc.

    Also, do not forget that this 7.800.000$ gross that you estimate, is a lifetime income. It's one thing to earn this income all at once at begging and other to receive a stable % of your total income each month. Your saving % will change, your money deposit will change, your investment opportunities will change, demand deposits will change, interest rate will be different, etc
    I insist, buy talking about an average household, we're getting into the fallacy of composition. We should start from the aggregate size and stick there.
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    Holy shit.

    We started with nothing.

    We worked our asses off.

    We are now successful.

    Get over it.
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    But doesn't it seem to you that "foolishness" of the Middle class started to exceed all believable measures? It is also strange that after 200 years of capitalism and 60 years of modern economic model even in one of the richest country (United States) number of millionaires constitute only 1% of population.
    "A breakdown of the figures relating to population shows that 1.5 per cent of US adults were millionaires last year, and one per cent in neighbouring Canada." A record-breaking number of millionaires in the world - Telegraph
    I would hardly believe that income inequality is caused by any kind of "foolishness". It seems too me waaaay more logical (and scientific) to claim that vast income inequality is caused mostly by tax policy.
    Tax policy and economic inequality in the United States - Wikipedia, the free encyclopedia (the article contains some highly controversial points)
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    Last edited by Stanley514; September 6th, 2017 at 11:36 PM.
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    What is so great about purchasing power parity? If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve. That seems like a recipe for stagnation.
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    Quote Originally Posted by Harold14370 View Post
    What is so great about purchasing power parity? If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve. That seems like a recipe for stagnation.
    Your post reminded me of this video:

    Wealth Inequality in America - YouTube

    The most interesting point is that when US had a more equal distribution, growth was more stable.
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by Harold14370 View Post
    What is so great about purchasing power parity? If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve. That seems like a recipe for stagnation.
    Your post reminded me of this video:

    Wealth Inequality in America - YouTube

    The most interesting point is that when US had a more equal distribution, growth was more stable.
    There is a lot of zero sum thinking that went into the video. Where did it say the growth was more stable?

    Quote Originally Posted by Stanley514
    As I know, inheritance usually is not counted for personal achievement.
    The inheritance was earned by the person who left it in his will. If he couldn't leave it in his will, he might have retired early and youd have lost his productivity.
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    Quote Originally Posted by Harold14370 View Post
    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by Harold14370 View Post
    What is so great about purchasing power parity? If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve. That seems like a recipe for stagnation.
    Your post reminded me of this video:

    Wealth Inequality in America - YouTube

    The most interesting point is that when US had a more equal distribution, growth was more stable.
    There is a lot of zero sum thinking that went into the video. Where did it say the growth was more stable?

    Quote Originally Posted by Stanley514
    As I know, inheritance usually is not counted for personal achievement.
    The inheritance was earned by the person who left it in his will. If he couldn't leave it in his will, he might have retired early and youd have lost his productivity.
    There's zero sum thinking indeed and for good reason. If we have a look at US tax policy we will find that high incomes have been eased enough for certain decades. Supposedly, that would lead to intense growth since savings would grow up and therefore investments would follow. But something went quite differently.
    The comment about growth and inequality is mine. You can verify this by checking here:
    United States GDP Growth Rate | Actual Data | Forecasts | Calendar
    check from 1947 to 1970 and from 70's to 10's. There's actually a huge literature arguing that since 70's inequalities have risen while growth had serious drawbacks.
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    Quote Originally Posted by Harold14370 View Post
    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by Harold14370 View Post
    What is so great about purchasing power parity? If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve. That seems like a recipe for stagnation.
    Your post reminded me of this video:

    Wealth Inequality in America - YouTube

    The most interesting point is that when US had a more equal distribution, growth was more stable.
    There is a lot of zero sum thinking that went into the video. Where did it say the growth was more stable?
    I hate bleeding heart vids, but also this "not zero sum" argument doesn't refute it. A flat income distribution would smash the economy to dust, but that doesn't mean "the more skewed the better", either. It's true that income distribution affects total GDP, but skewing it doesn't always increase GDP.

    If the only thing that gets even a smidgeon of reward is skillful investment, or extremely technical tasks that require a PhD, then what incentive does a person without a PhD have to work harder? They know for a *fact* they will never go more than a few inches further forward than they've gone. That means you either have to be super man, or be totally unnoticed. How is that supposed to motivate people?


    The "foolishness" I was mentioning earlier steers consumption toward areas where the demand can be met. The economy can't produce vast amounts of real estate, or valuable works of art, or.... other stuff the super wealthy people will want to buy. So that kind of demand doesn't tap into its productive potential, causing factories to sit unused. (Causing a recession.)
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    Quote Originally Posted by Stanley514 View Post
    Your post reminded me of this video:
    Wealth Inequality in America - YouTube
    The most interesting point is that when US had a more equal distribution, growth was more stable.
    I lost in guesses whom exactly they mean as a "CEO" in this video, is it some new code-word for business owners and capitalists?
    Chief Executive Officer/ Managing Director/ Executive Director, are synonyms. The term doesn't refer to capitalists. CEOs are (trained & experienced) managers responsible for leadership, high level decision making, etc.

    Capitalists may be at the board of directors even though this is not mandatory.
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    Quote Originally Posted by kojax View Post
    Quote Originally Posted by Harold14370 View Post
    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by Harold14370 View Post
    What is so great about purchasing power parity? If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve. That seems like a recipe for stagnation.
    Your post reminded me of this video:

    Wealth Inequality in America - YouTube

    The most interesting point is that when US had a more equal distribution, growth was more stable.
    There is a lot of zero sum thinking that went into the video. Where did it say the growth was more stable?
    I hate bleeding heart vids, but also this "not zero sum" argument doesn't refute it. A flat income distribution would smash the economy to dust, but that doesn't mean "the more skewed the better", either. It's true that income distribution affects total GDP, but skewing it doesn't always increase GDP.

    If the only thing that gets even a smidgeon of reward is skillful investment, or extremely technical tasks that require a PhD, then what incentive does a person without a PhD have to work harder? They know for a *fact* they will never go more than a few inches further forward than they've gone. That means you either have to be super man, or be totally unnoticed. How is that supposed to motivate people?


    The "foolishness" I was mentioning earlier steers consumption toward areas where the demand can be met. The economy can't produce vast amounts of real estate, or valuable works of art, or.... other stuff the super wealthy people will want to buy. So that kind of demand doesn't tap into its productive potential, causing factories to sit unused. (Causing a recession.)
    Do you hint that the existence of fancy-goods industry leads to a some kind of underconsumption?

    Yes, It's true that income distribution affects GDP growth. Or at least, you may have some kind of jobless recovery/growth just as happened at 80s, 00s or even right know.
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    Quote Originally Posted by Stanley514 View Post
    Chief Executive Officer/ Managing Director/ Executive Director, are synonyms. The term doesn't refer to capitalists. CEOs are (trained & experienced) managers responsible for leadership, high level decision making, etc.

    Capitalists may be at the board of directors even though this is not mandatory.
    So, they are trying to claim that the richest by far people in U.S. who consume lion share of all wealth are trained and experience professionals known as CEO and not business owners? I wonder how business owners tolerate such a situation...
    CEOs are not owners. They may possess some shares and stocks but technically they are not the investors thus, they are not capitalists. They are "just" experienced employees at the (very) top of the pyramid. Their fee is technically a "wage", plus various bonuses. Of course someone may argue that their wages are enormous (and of course there are) and they don't deserve it (of course they don't), etc. The CEO actually is hired and paid by the capitalist.

    You could say that if capitalist class is at the top and workers are at the bottom then CEOs/managers,etc are just under the top.

    Well, they tolerate this situation since their incomes are much higher than CEOs and usually, CEOs are in many cases family friends, successful sons and daughters with MBAs from Harvard, etc.
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    The owners are not always richer than the CEO, exactly. With a corporation, everyone who owns stock is a part owner. So there could be thousands of owners who each own just a very small part of the company. Collectively, all the stock holders would be richer than the CEO if you gathered them together, but any individual stock holder is likely to be poorer than him.

    Also most of the highest paid CEO's are not MBA (Master of Business Administration). The highest paid CEO's actually have degrees in a field related to whatever their company does. For example, one of the CEO's that has been in charge of Intel had his PhD in metallurgy (probably related to making microprocessors with thinner and thinner wires.)

    Also these CEO's don't keep their jobs for very long. After they've made their millions, most of them retire within just a few years of getting promoted to CEO.
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by Harold14370 View Post
    What is so great about purchasing power parity? If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve. That seems like a recipe for stagnation.
    Your post reminded me of this video:

    Wealth Inequality in America - YouTube

    The most interesting point is that when US had a more equal distribution, growth was more stable.
    What Wasn't Said in "Wealth Inequality In America" - YouTube

    just for reference.
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    We are a business owners, but we have no CEO's!! OOPS
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    Quote Originally Posted by kojax View Post
    The owners are not always richer than the CEO, exactly. With a corporation, everyone who owns stock is a part owner. So there could be thousands of owners who each own just a very small part of the company. Collectively, all the stock holders would be richer than the CEO if you gathered them together, but any individual stock holder is likely to be poorer than him.

    Also most of the highest paid CEO's are not MBA (Master of Business Administration). The highest paid CEO's actually have degrees in a field related to whatever their company does. For example, one of the CEO's that has been in charge of Intel had his PhD in metallurgy (probably related to making microprocessors with thinner and thinner wires.)

    Also these CEO's don't keep their jobs for very long. After they've made their millions, most of them retire within just a few years of getting promoted to CEO.

    I was expecting this answer. It's one thing to own some stocks as a mean of savings and completely different to act as an owner/ capitalist. The first case actually occurs since finance capital expanded it's activities and "invade" in lower incomes, providing an alternative to classic deposits.

    My opinion is that people who own a tiny tiny share of stocks can not been considered as real owners. I may spend all my savings to buy Microsoft stocks but still I would have 0 influence on how the company operates. I just deposit my money somewhere and I expect an "interest" (dividend on this case). That doesn't make me a capitalist not even an investor. I am still an employee and my main income comes from my wage.

    Yeah, literally CEOs may have studied everything related to their company activities.


    We are a business owners, but we have no CEO's!! OOPS
    If you were a huge corporation owner you would have many CEOs. Small businesses don't need CEOs since everything can be kept under control by the owners.
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    Quote Originally Posted by Stanley514 View Post
    If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve.
    As I know, inheritance usually is not counted for personal achievement.
    If only it really was this way. It's the American ideal for certain. Unfortunately where and to whom you are born counts and is more predictive of individual achievement in American than in many other nations. Among the middle class and higher it's probably not a huge problem. For those raised in American poverty though, it's an incredible uphill climb with systemic and deep institutional obstacles that are insurmountable for most.
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    Quote Originally Posted by Lynx_Fox View Post
    Quote Originally Posted by Stanley514 View Post
    If everybody made the same and had the same lifestyle, there wouldn't be any incentive to achieve.
    As I know, inheritance usually is not counted for personal achievement.
    If only it really was this way. It's the American ideal for certain. Unfortunately where and to whom you are born counts and is more predictive of individual achievement in American than in many other nations. Among the middle class and higher it's probably not a huge problem. For those raised in American poverty though, it's an incredible uphill climb with systemic and deep institutional obstacles that are insurmountable for most.
    Evidence? Grants prefer to give money to poorer people, and you can live on grant money if you go to a tech school and have a part-time job. There were even people in my class that had full time jobs and kids.
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    Quote Originally Posted by TheUnknowable View Post
    Evidence? Grants prefer to give money to poorer people, and you can live on grant money if you go to a tech school and have a part-time job. There were even people in my class that had full time jobs and kids.
    It goes much much deeper than that. First is just about every study shows upward mobility more difficult in the US compared to other modern nations....I'll just put up the wiki since it is pretty well referenced: Social mobility - Wikipedia, the free encyclopediaNow for just some of the reasons from my educational training with a bit of perspective having come from poverty:
    Prenatal healthcare is often unavailable for poor women--meaning they make bad choices and offspring are born with unnecessary complications and lifelong mental and physical disabilities. In many states there's no formal mechanism to get professional eyes on preschool children to identify developmental problems and often few resources to address them--the result is children arrive at five or six years old, sometimes with developmental problems that could have been prevented or mitigated if caught earlier, but now are often past the point of full treatment. This is one of the reasons why mental ability test consistently show lower performance for lower social economic groups (and far too often mischaracterized and wrapped in racial tones). To be blunt, the lack of appropriate support structures for the poor results in lower intelligence children with lower achievement potential when they become adults.

    Once school age, there's contributing problems. For example, in most states local revenue still drives the school budgets; poor communities have less money for education and end up with worse teachers, less teaching materials and less suitable buildings, and less flexible education than rich communities. (in Europe if Germany where I lived is a good example all schools get roughly the same per student regardless of community). All this adds to the lower performance and lower potential for those children later in life.

    This is more complex but there's interactions and consequences between impoverished culture and our often unforgiving legal system. For example, a size able number of our youths will get themselves into trouble at some point, and often many times end up being a felon for a non-violent act at either the State or Federal level. If they end up in prison there's an emphasize on punishment (despite the fact that it doesn't work very well) rather than teaching them a better path or treatment if it's addiction that got them into the bad place. Once out, they are labeled with a lifelong stigma that only encourages more poverty because they can't get a good job, or vote even if twenty years later they mature into strong moral character and the most upstanding citizen.

    Adding to all this is the deep level of disenfranchisement of many poor from government. They grow up unwillingness to turn to the cops when they should. An anti-higher education subculture because it's seen as part of the oppression. It's not uncommon that no teacher shows that kid how to find the grant money--because of low pay they often aren't the best of teachers to start with and because of the environment are often happy just to get through the day. (there are exceptions of course!)

    Two short anecdotes:
    Two smart kids start high school doing very well...both Grade A students and sons of non high school graduating alcoholic commercial fisherman (as many are). Both live in tiny homes with one B&W TV, unreliable wells and one aged work truck that's kept alive by brute force maintenance and bloody knuckles.

    Boy 1 is pushed by his mom who's a nurse and lives in a house of books. His dad is an alcoholic commercial fisherman. He watches a close friend nearly kill himself after the school punishes him rather than offer counsel for his broken home and blames the school administration. He's also bored and decides to drop out to follow in his dad's footsteps as a Maine fisherman.

    Boy 2 had no mom, and probably no close role model. He spend time training pigeons to do tricks and helping his dad mend gear. He also came to hate the school for the same incident. In addition he hated the cops for chasing another friend into a seawall at full speed and blames them for the loss of this friend. He got hammered one night on his dad's booze, stole a car from a brother of the cop who'd chased his dead friend and went joy riding. He crashed, got thrown out (no one wore seat belt back than) and discovered by that same cop nearly dead of exposure and a broken rib in a ditch a hundred feet from the car. He was convicted of thievery, some other charges and put away for a year.

    By happenstance a local college professor has befriended Boy 1's family. When he heard boy 1 had nearly died on a fishing boat decided to risk his friendship, have a heart to heart with the boy about opportunities and potential to achieve much better than his dad and offering his connections to get him a probationary semester in college. Nearly 35 years later, after two college degrees, time as a published scientist and a successful Army career you know boy 1 as Lynx_Fox.

    Boy 2, now a felon, worked on the worse and most dangerous boats for a couple years until the fishing industry collapsed a couple years later. Unable to find work he descended into alcoholism and became a ward of the government and making a little money on the side running a lawn mower junk yard off his front lawn. The last I heard of him he was locked up for exposing himself and begging the judge to lock him away in the local jail for 30 days to get him through the worst of last winter's snows (3 hots and cot is better than freezing to death). I don't know if Scott ever had kids...I just imagine what a poor shot at life they'd have.

    Lastly American media has blinders to the worst parts of American problems this being one of them. Frequently problems don't get in the media's attention until they hit the white middle class. A mass shooting in a suburban Denver school gets attention, while the half a dozen mass shootings that preceded it didn't because they happen in predominantly poor minority schools. (yes it's going back a while but illustrates the point and a fixture of the media that hasn't changed). A missing white child grabs the national headlines while hundreds of missing minority kids can't even get to the 2nd page of the local newspaper.

    Sorry for the rant, but Americas problem with poverty go a hell of a lot deeper than how we structure college grants--something even the liberal media in the US can't get its head around probably because most of them didn't' grow up in poverty, and the conservative media would rather just ignore it out of willful ignorance.
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    Quote Originally Posted by Lynx_Fox View Post
    Quote Originally Posted by TheUnknowable View Post
    Evidence? Grants prefer to give money to poorer people, and you can live on grant money if you go to a tech school and have a part-time job. There were even people in my class that had full time jobs and kids.
    It goes much much deeper than that. First is just about every study shows upward mobility more difficult in the US compared to other modern nations....I'll just put up the wiki since it is pretty well referenced: Social mobility - Wikipedia, the free encyclopediaNow for just some of the reasons from my educational training with a bit of perspective having come from poverty:
    Prenatal healthcare is often unavailable for poor women--meaning they make bad choices and offspring are born with unnecessary complications and lifelong mental and physical disabilities. In many states there's no formal mechanism to get professional eyes on preschool children to identify developmental problems and often few resources to address them--the result is children arrive at five or six years old, sometimes with developmental problems that could have been prevented or mitigated if caught earlier, but now are often past the point of full treatment. This is one of the reasons why mental ability test consistently show lower performance for lower social economic groups (and far too often mischaracterized and wrapped in racial tones). To be blunt, the lack of appropriate support structures for the poor results in lower intelligence children with lower achievement potential when they become adults.

    Once school age, there's contributing problems. For example, in most states local revenue still drives the school budgets; poor communities have less money for education and end up with worse teachers, less teaching materials and less suitable buildings, and less flexible education than rich communities. (in Europe if Germany where I lived is a good example all schools get roughly the same per student regardless of community). All this adds to the lower performance and lower potential for those children later in life.

    This is more complex but there's interactions and consequences between impoverished culture and our often unforgiving legal system. For example, a size able number of our youths will get themselves into trouble at some point, and often many times end up being a felon for a non-violent act at either the State or Federal level. If they end up in prison there's an emphasize on punishment (despite the fact that it doesn't work very well) rather than teaching them a better path or treatment if it's addiction that got them into the bad place. Once out, they are labeled with a lifelong stigma that only encourages more poverty because they can't get a good job, or vote even if twenty years later they mature into strong moral character and the most upstanding citizen.

    Adding to all this is the deep level of disenfranchisement of many poor from government. They grow up unwillingness to turn to the cops when they should. An anti-higher education subculture because it's seen as part of the oppression. It's not uncommon that no teacher shows that kid how to find the grant money--because of low pay they often aren't the best of teachers to start with and because of the environment are often happy just to get through the day. (there are exceptions of course!)

    Two short anecdotes:
    Two smart kids start high school doing very well...both Grade A students and sons of non high school graduating alcoholic commercial fisherman (as many are). Both live in tiny homes with one B&W TV, unreliable wells and one aged work truck that's kept alive by brute force maintenance and bloody knuckles.

    Boy 1 is pushed by his mom who's a nurse and lives in a house of books. His dad is an alcoholic commercial fisherman. He watches a close friend nearly kill himself after the school punishes him rather than offer counsel for his broken home and blames the school administration. He's also bored and decides to drop out to follow in his dad's footsteps as a Maine fisherman.

    Boy 2 had no mom, and probably no close role model. He spend time training pigeons to do tricks and helping his dad mend gear. He also came to hate the school for the same incident. In addition he hated the cops for chasing another friend into a seawall at full speed and blames them for the loss of this friend. He got hammered one night on his dad's booze, stole a car from a brother of the cop who'd chased his dead friend and went joy riding. He crashed, got thrown out (no one wore seat belt back than) and discovered by that same cop nearly dead of exposure and a broken rib in a ditch a hundred feet from the car. He was convicted of thievery, some other charges and put away for a year.

    By happenstance a local college professor has befriended Boy 1's family. When he heard boy 1 had nearly died on a fishing boat decided to risk his friendship, have a heart to heart with the boy about opportunities and potential to achieve much better than his dad and offering his connections to get him a probationary semester in college. Nearly 35 years later, after two college degrees, time as a published scientist and a successful Army career you know boy 1 as Lynx_Fox.

    Boy 2, now a felon, worked on the worse and most dangerous boats for a couple years until the fishing industry collapsed a couple years later. Unable to find work he descended into alcoholism and became a ward of the government and making a little money on the side running a lawn mower junk yard off his front lawn. The last I heard of him he was locked up for exposing himself and begging the judge to lock him away in the local jail for 30 days to get him through the worst of last winter's snows (3 hots and cot is better than freezing to death). I don't know if Scott ever had kids...I just imagine what a poor shot at life they'd have.

    Lastly American media has blinders to the worst parts of American problems this being one of them. Frequently problems don't get in the media's attention until they hit the white middle class. A mass shooting in a suburban Denver school gets attention, while the half a dozen mass shootings that preceded it didn't because they happen in predominantly poor minority schools. (yes it's going back a while but illustrates the point and a fixture of the media that hasn't changed). A missing white child grabs the national headlines while hundreds of missing minority kids can't even get to the 2nd page of the local newspaper.

    Sorry for the rant, but Americas problem with poverty go a hell of a lot deeper than how we structure college grants--something even the liberal media in the US can't get its head around probably because most of them didn't' grow up in poverty, and the conservative media would rather just ignore it out of willful ignorance.
    1) How much of the developmental problems are the result of poverty (poor nutrition, lack of medical care, etc.)? Don't count things that there are government problems to help them with, as the help is available if they wanted to use it. This includes EBT (food stamps), WIC, medicaid and other programs.
    Also, it doesn't factor in the disproportionate number of childeren poorer women have. • Birth rate by family income in the U.S. 2010 | Statistic , and the fact that teen birth rates among the lower income people are much higher than the higher income people. Wellesley Economist Finds Income Inequality Drives Teen Birth Rate | WBUR How many of these problems would be fixed if they DIDN'T have kids as early, or had fewer? You are claiming that low income is causing health and developmental problems in childeren. I think it's more a function of the mother (and perhaps father) having little time to spend with more childeren. Both of my sisters' children were above the average curve because they spent more time with their kids. I would also propose that perhaps some of the poorer people were raised by worse-than-average parents, and are therefore worse-than-average parents.
    2) 1 had several role models, 2 had none. This is the the reason for the differences between them, not economic differences. Role models don't have to be parents. In your case, you had a professor as a role model. It also isn't the fault of the police or the justice system. Sometimes people make stupid choices that effect the rest of their lives. You alluded to people learning and growing, but it seems your friend hasn't, or else he wouldn't be exposing himself to people. He hasn't got another job, even years later. I know its difficult in this economy, I'm even trying to find one currently, but it doesn't seem he's trying. Their may have been few differences between you when you were teenagers, but now, you are two very different people. This is partly because of his criminal record, but it's likely much more because of his lack of drive. (and don't get me started on how being a "ward of the government" disincentives people)
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    We were both high school drop outs but I had a mom who provided me at least a glimpse of education and was lucky enough to have a connection. Otherwise I could have easily switched places with Scott, made that one mistake and been the severe alcoholic underachiever he's become. I got lucky...he didn't. As a society neither of us had a good chance at a successful life. Only two out a couple dozen from my fishing town even went to college. Not all were failures of course, some went into the military, others started small businesses--but most of them are nearly a poor today as their parents were--they were for the most part unable to climb despite working their asses off until their bodies gave out and there forced from the work force sometimes for things that could be fixed if only they had more money. That's the story from an impoverished rural Maine town, but its typical of many from dirt poor rural communities around the nation. And their problems were often much less than some of our inner city poor areas continuously torn by violence and generations of abuse and oppression.

    Yes, they are on average worse at parenting that's some of point--they lack good role models, access to good counseling and health care, often times they have their own developmental problems and don't have the means to provide a balanced and enriched home where kids thrive. That's why their kids grow up less intelligent and underachieve. But while it might be tempting to blame poor people for being poor, or having too many kids or all the rest, it's not helpful in the least.

    Upward social mobility is about bridging that gap so their children can live to their full potential. We don't start helping perspective mothers early enough; we don't teach mothers to be better parents, or offer enough help for them to resolve their often profound problems; we don't identify many developmental problem in children early enough to make the best difference and we don't structure our schools resourcing to get the same access to good teachers and materials as children from wealthier places; we spend more effort punishing adolescents and young adults rather than reform them or treating them and stigmatize them for life for a single, oftentimes victimless crimes.

    The cold hard fact is many other nations are fixing problems instead of blame and built those stronger bridges allowing young people to break free of their poverty--they are closer to the American dream than Americans--and that's a damn shame.
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    Is the criminal justice system broken? yes. More emphasis should be put on reform rather than punishment, and most victimless crimes shouldn't require a jail sentence.

    Is it everyone else's responsibility to fix your problems or help you raise your kids? No. Yes, the kids should be helped, but it isn't the government's job to fix problems, it's up to individuals to do that. Doing all you want for everyone that's poor would bankrupt this country even faster than Obamacare is already going to bankrupt it, and it would raise taxes to the point where the economy would be ruined. If you want to help the poor, do it. If I had the time or money to do it, I'd probably help people too, but I don't even have a job (other than a bit of temp work for my parents every once in a while). Just don't use the police to hold a gun to my head and make me pay for bloated special-interest pork bills put on the table by corrupt bureaucrats. That's why we've got the problems in the first place. If the government didn't continually ruin everything good about this country through 2000 page bills we can't even read until we've passed it then there would be plenty of jobs and opportunities. Charities tend to not work too good when the crap economy makes them lose their donors, though.
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    Quote Originally Posted by TheUnknowable View Post
    Is the criminal justice system broken? yes. More emphasis should be put on reform rather than punishment, and most victimless crimes shouldn't require a jail sentence.

    Is it everyone else's responsibility to fix your problems or help you raise your kids? No. Yes, the kids should be helped, but it isn't the government's job to fix problems, it's up to individuals to do that. Doing all you want for everyone that's poor would bankrupt this country even faster than Obamacare is already going to bankrupt it, and it would raise taxes to the point where the economy would be ruined. If you want to help the poor, do it. If I had the time or money to do it, I'd probably help people too, but I don't even have a job (other than a bit of temp work for my parents every once in a while). Just don't use the police to hold a gun to my head and make me pay for bloated special-interest pork bills put on the table by corrupt bureaucrats. That's why we've got the problems in the first place. If the government didn't continually ruin everything good about this country through 2000 page bills we can't even read until we've passed it then there would be plenty of jobs and opportunities. Charities tend to not work too good when the crap economy makes them lose their donors, though.
    Again, individual approach ruins my day. As I have argued before, individualism is by no means a good tool to look at the events. Poor people are not just individuals, they form a separate social class with certain characteristics. If I say that "let the individual whales fix their extinction problem" I will be mad. Yet, we are still thinking like that when it comes to society. Of course, poor people, unemployed, etc are not whales, but I think you get my point. Do they have the power (considering the current historical period) to affect their lives? They have the chance to cooperate and contest for their interests, no question about that, but it's not that simple.

    No offense but, all this nonsense about bankruptcy and taxes is just that, nonsense. (We should discuss about deficits and debt in another topic though)
    Why do you believe that you need enormous amounts of capital in order to help these people? As it is noted above, a CEO earns in 1 hour more than an average worker earns in a month.
    Also, OK I accept that raising taxes over a certain extend may reduce the effective demand (because consumption and investment are reduced) so much that the economy may start to flat (not even bother mentioning the "ghost" of inflation). But, this point is far far far away from the current taxes and is completely possible to raise them a lot (especially for super high incomes and profits) without holding back the demand. The main (if not only) reason they don't do that is because they just don't want to.
    Also, keep in mind that real wages had been stagnant for a long time even though productivity of labour was increasing constantly.
    ( http://upload.wikimedia.org/wikipedi...real_wages.jpg )
    You can fix that by many ways (even by not altering taxation system at all).
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by TheUnknowable View Post
    Is the criminal justice system broken? yes. More emphasis should be put on reform rather than punishment, and most victimless crimes shouldn't require a jail sentence.

    Is it everyone else's responsibility to fix your problems or help you raise your kids? No. Yes, the kids should be helped, but it isn't the government's job to fix problems, it's up to individuals to do that. Doing all you want for everyone that's poor would bankrupt this country even faster than Obamacare is already going to bankrupt it, and it would raise taxes to the point where the economy would be ruined. If you want to help the poor, do it. If I had the time or money to do it, I'd probably help people too, but I don't even have a job (other than a bit of temp work for my parents every once in a while). Just don't use the police to hold a gun to my head and make me pay for bloated special-interest pork bills put on the table by corrupt bureaucrats. That's why we've got the problems in the first place. If the government didn't continually ruin everything good about this country through 2000 page bills we can't even read until we've passed it then there would be plenty of jobs and opportunities. Charities tend to not work too good when the crap economy makes them lose their donors, though.
    Again, individual approach ruins my day. As I have argued before, individualism is by no means a good tool to look at the events. Poor people are not just individuals, they form a separate social class with certain characteristics. If I say that "let the individual whales fix their extinction problem" I will be mad. Yet, we are still thinking like that when it comes to society. Of course, poor people, unemployed, etc are not whales, but I think you get my point. Do they have the power (considering the current historical period) to affect their lives? They have the chance to cooperate and contest for their interests, no question about that, but it's not that simple.

    No offense but, all this nonsense about bankruptcy and taxes is just that, nonsense. (We should discuss about deficits and debt in another topic though)
    Why do you believe that you need enormous amounts of capital in order to help these people? As it is noted above, a CEO earns in 1 hour more than an average worker earns in a month.
    Also, OK I accept that raising taxes over a certain extend may reduce the effective demand (because consumption and investment are reduced) so much that the economy may start to flat (not even bother mentioning the "ghost" of inflation). But, this point is far far far away from the current taxes and is completely possible to raise them a lot (especially for super high incomes and profits) without holding back the demand. The main (if not only) reason they don't do that is because they just don't want to.
    Also, keep in mind that real wages had been stagnant for a long time even though productivity of labour was increasing constantly.
    ( http://upload.wikimedia.org/wikipedi...real_wages.jpg )
    You can fix that by many ways (even by not altering taxation system at all).
    1) Whales aren't sentient beings (that we know of). Asking them to fix their problems would be ridiculous. Not to mention that extinction is being caused by others hurting them. Not so with the poor. Your "argument" is little more than a strawman.
    2) Companies are already moving out of the country because we have the highest business taxes of any nation, not to mention high regulations, and now Obamacare jacking up the cost of healthcare on every full time employee (except congress and a few of the president's friends). Money gets invested all of the time, but more could always help. What do you think will happen when these rich people will do when you increase their taxes even further.
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    Quote Originally Posted by TheUnknowable View Post
    1) Whales aren't sentient beings (that we know of). Asking them to fix their problems would be ridiculous. Not to mention that extinction is being caused by others hurting them. Not so with the poor. Your "argument" is little more than a strawman.
    2) Companies are already moving out of the country because we have the highest business taxes of any nation, not to mention high regulations, and now Obamacare jacking up the cost of healthcare on every full time employee (except congress and a few of the president's friends). Money gets invested all of the time, but more could always help. What do you think will happen when these rich people will do when you increase their taxes even further.

    1) A little more than a straw man? Well, that's a compliment!
    Do you think that there's no any kind of exploitation responsible for poverty? Unemployment and low wages are variables strictly related to poverty. How can the poor and unemployed affect them? It's not always a "win-win" game. ( http://www.correntewire.com/files/pr...vity-wages.jpg )
    Do you suggest that we should leave working class to handle with it?


    2) Company's decision making is a very complex procedure. Actually, companies take into account many variables before moving. More importantly:

    a) Profitability (High returns of invested capital)
    b) Substructure
    c) Suppliers
    d) Highly qualified employers (human capital)
    e) Rich internal market/ high incomes
    f) Technological metropolis (eg NY, etc)
    g) Research (connection with univs, etc)
    h) Healthy banking system
    etc

    Do you really believe that eg Apple will ever leave US in order to go to Mongolia or Spain just because (supposedly) they have lower taxes there? It may open some factories abroad but certain (the most important, eg research) operations will remain here.

    Taxation is an issue, but not as much much as you may think. Take also into consideration that the state actually "returns" a great % of taxes to corporations by providing certain privileges, assisting in research, etc.

    Also, US does not have the highest business taxes in the world. In contrary, high incomes and profits are protected more than the average. Please provide references to such controversial statements.
    Do you even know which countries have the lower (corporate) taxes in the world?

    1) Bahamas 0%
    2) Estonia 0%
    3) Singapore 0%-17%
    4) Albania 10%
    5) Bulgaria 10%
    6) Cyprus 10%
    7) Gibraltar 10%
    8) FYROM 10%
    9) Paraguay 10%
    10) Qatar 0%-10%

    I can't see any success story here. Hell, not even 1 developed country.
    ...................
    21) USA 15%-39% (federal) + 0%-12% (states) (to an average of 18%)

    You may think it's impossible but, US used to have even 50% corporate tax with no problem at all.
    (http://upload.wikimedia.org/wikipedi...47-2011_v2.jpg )

    Countries with higher corporate taxes?

    Sweden 22%
    UK 24%
    Finland 24,5%
    China 25%
    Netherlands 25%
    Norway 28%
    Germany 28,9%
    Australia 30%
    France 33.33%
    Japan 38%

    More evidence? Sure:

    Total tax rate (% of commercial profits) in Brazil? 69% (Which has considerable rapid growth: http://www.tutor2u.net/blog/files/brazil_real_gdp.jpg )
    Total tax rate in US? 46%
    Total tax rate in Zambia? 15%

    The strawman is confused.

    US economy has indeed several problems. The biggest one though is not taxation, is profitability. Indeed, rate of profit has been falling for a long long time (not only in the US but in many developed countries as well). I consider this more as a cause for recession than the supposedly high taxes.
    ( http://capitalvolume2.files.wordpres...mara.png?w=500 )
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    1) Is there exploitation contributing to poverty? probably. Most of it by the government. How about we get rid of the exploitation (ie, fix the problem) instead of giving money to the people affected by it, people not affected by it, people who have nothing to do with it, and everyone else that fits into a group (ie, the bandaid approach). Why take money from every business who could be exploiting them (bandaid) and not from the ones who are actually exploiting them (fix).
    Would you go to a school and fine every larger, muscular kid and give the money to the geeks since sometimes large, muscular kids bully geeks? All that would do is help the bullies, as they are the only ones that get their money back.
    In the same way, taxing all companies to help the poor is helping the ones doing the exploiting and is actually encouraging them to exploit people more. It would also encourage others to start exploiting people.
    2) My point was that they are already disincentivized to keep business here. Some businesses even refuse to bring much of their money back into the country because of the taxes.
    No, Apple would move to a third world country, because their product requires higher-level technology to be assembled. But how about Canada? Canada Cuts Corporate Tax Rate to 15%, Lowest Overall Rate in G-7 | Tax Foundation Not really a big down side there for them.
    What about the other countries that don't require a lot of tech, like car parts manufacturers, woodworking factories, higher-end clothing factories, etc?
    Also, do you have any Idea what a 50% rate would do to costs?
    Lets say a car parts place can make carborators for $100. They send it in bulk quantities to company 2 who puts them in individual boxes, double the price, and send them to a car parts website. The web site doubles them to sell them to the consumers.

    At 0%, the end price would be $400. At Canada's 15% rate, it would be $608.35. At your sated "average" of 18%, it would be $657.21. At the suggested 50%, it would be an outrageous $1350.
    In this new economy, where people can't get jobs, the government has to give them money, etc, where will this new poverty line be? How will the people who have jobs pay for things?
    Last edited by TheUnknowable; September 25th, 2013 at 07:12 PM.
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    Quote Originally Posted by TheUnknowable View Post
    1) Is there exploitation contributing to poverty? probably. Most of it by the government. How about we get rid of the exploitation (ie, fix the problem) instead of giving money to the people affected by it, people not affected by it, people who have nothing to do with it, and everyone else that fits into a group (ie, the bandaid approach). Why take money from every business who could be exploiting them (bandaid) and not from the ones who are actually exploiting them (fix).
    Would you go to a school and fine every larger, muscular kid and give the money to the geeks since sometimes large, muscular kids bully geeks? All that would do is help the bullies, as they are the only ones that get their money back.
    In the same way, taxing all companies to help the poor is helping the ones doing the exploiting and is actually encouraging them to exploit people more. It would also encourage others to start exploiting people.
    Why do you believe that state is bad and you should get rid of it? Taxes is not a black whole.

    Do you believe that full employment would occur if taxes were 0%? Economies tend to create and produce unemployment and imbalances (and inequality of course). There is nothing immoral to that, it just happens. Where does this faith to markets come from, I don't get it.

    Also, please do not ignore the facts. Graphs I've posted show that there's massive exploitation of labour. Wages are stagnant while productivity of labour increases. For decades. This is not related with any kind of exploitation by the government, unless I miss such an important economic law.

    Taxing all companies to help the poor means that marginal consumption increases; that leads to a greater effective demand and therefore, GDP rises. For Bill Gates, 100$ more means nothing. An unemployed would spend them all that money to consume goods and that would increase output immediately.

    But how about Canada?
    My very personal opinion is that Apple will go nowhere and for good reason. The biggest market is US, they have extended connections in US with suppliers, univ depts, etc, and they know that (among others) their sales within the country would collapse if consumers would realize that apple abandon its country. Also, we tend to ignore the patriots feeling that even top rich owners may feel.
    Plus, governments have many other efficient tools (the so called carrots and stick) in order to keep businesses within the country even if there's a tendency of leaving.

    Also, do you have any Idea what a 50% rate would do to costs?
    Lets say a car parts place can make carborators for $100. They send it in bulk quantities to company 2 who puts them in individual boxes, double the price, and send them to a car parts website. The web site doubles them to sell them to the consumers.

    At 0%, the end price would be $400. At Canada's 15% rate, it would be $608.35. At your sated "average" of 18%, it would be $657.21. At the suggested 50%, it would be an outrageous $1350.
    In this new economy, where people can't get jobs, the government has to give them money, etc, where will this new poverty line be? How will the people who have jobs pay for things?
    It's not that simple. A raise in tax does not affect directly proportional the price. In many cases, may not affect it at all. It affects in an extent (not directly proportional as well) the profitability.
    Price is determined in the short term by elasticity of demand, market condition (monopolistic or not) and distribution networks and in the long term by technical conditions of production. Taxes only affect the prices in the short term and indirectly.
    I do not expect nor agree to increase the tax in 1 night from 15% to 50% but if we ignore propaganda for a second, we will realize that USA used to have such high taxes alongside very high GDP growth.

    I can see where you're coming from but real facts and statistics oppose your argument.

    Tax cuts efficiency is highly questionable by the facts:

    http://www.truthfulpolitics.com/imag...wth-canada.jpg

    http://upload.wikimedia.org/wikipedi..._Top_10%25.jpg

    http://www.asymptosis.com/wp-content...8834-800wi.jpg
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by TheUnknowable View Post
    1) Is there exploitation contributing to poverty? probably. Most of it by the government. How about we get rid of the exploitation (ie, fix the problem) instead of giving money to the people affected by it, people not affected by it, people who have nothing to do with it, and everyone else that fits into a group (ie, the bandaid approach). Why take money from every business who could be exploiting them (bandaid) and not from the ones who are actually exploiting them (fix).
    Would you go to a school and fine every larger, muscular kid and give the money to the geeks since sometimes large, muscular kids bully geeks? All that would do is help the bullies, as they are the only ones that get their money back.
    In the same way, taxing all companies to help the poor is helping the ones doing the exploiting and is actually encouraging them to exploit people more. It would also encourage others to start exploiting people.
    Why do you believe that state is bad and you should get rid of it? Taxes is not a black whole.

    Do you believe that full employment would occur if taxes were 0%? Economies tend to create and produce unemployment and imbalances (and inequality of course). There is nothing immoral to that, it just happens. Where does this faith to markets come from, I don't get it.

    Also, please do not ignore the facts. Graphs I've posted show that there's massive exploitation of labour. Wages are stagnant while productivity of labour increases. For decades. This is not related with any kind of exploitation by the government, unless I miss such an important economic law.

    Taxing all companies to help the poor means that marginal consumption increases; that leads to a greater effective demand and therefore, GDP rises. For Bill Gates, 100$ more means nothing. An unemployed would spend them all that money to consume goods and that would increase output immediately.

    But how about Canada?
    My very personal opinion is that Apple will go nowhere and for good reason. The biggest market is US, they have extended connections in US with suppliers, univ depts, etc, and they know that (among others) their sales within the country would collapse if consumers would realize that apple abandon its country. Also, we tend to ignore the patriots feeling that even top rich owners may feel.
    Plus, governments have many other efficient tools (the so called carrots and stick) in order to keep businesses within the country even if there's a tendency of leaving.

    Also, do you have any Idea what a 50% rate would do to costs?
    Lets say a car parts place can make carborators for $100. They send it in bulk quantities to company 2 who puts them in individual boxes, double the price, and send them to a car parts website. The web site doubles them to sell them to the consumers.

    At 0%, the end price would be $400. At Canada's 15% rate, it would be $608.35. At your sated "average" of 18%, it would be $657.21. At the suggested 50%, it would be an outrageous $1350.
    In this new economy, where people can't get jobs, the government has to give them money, etc, where will this new poverty line be? How will the people who have jobs pay for things?
    It's not that simple. A raise in tax does not affect directly proportional the price. In many cases, may not affect it at all. It affects in an extent (not directly proportional as well) the profitability.
    Price is determined in the short term by elasticity of demand, market condition (monopolistic or not) and distribution networks and in the long term by technical conditions of production. Taxes only affect the prices in the short term and indirectly.
    I do not expect nor agree to increase the tax in 1 night from 15% to 50% but if we ignore propaganda for a second, we will realize that USA used to have such high taxes alongside very high GDP growth.

    I can see where you're coming from but real facts and statistics oppose your argument.

    Tax cuts efficiency is highly questionable by the facts:

    http://www.truthfulpolitics.com/imag...wth-canada.jpg

    http://upload.wikimedia.org/wikipedi..._Top_10%25.jpg

    http://www.asymptosis.com/wp-content...8834-800wi.jpg
    1) Governments tend to become more corrupt the larger they become. In a government as large as the US's, there's a lot of corruption. Can the government get things done? yes. But in most cases it is so inefficient at doing it that we would be far better off letting people do things for themselves. There are few things we actually NEED government for. The rest is, at least, less efficient than if individuals did it.
    And taxes, by "virtue" of the fact that they are forced on us by the government at gun point, are little more that theft.
    2) thank you for pointing out another way the government can abuse its power to make businesses do what it wants. Many industries have their own special "carrot" that the bigger, more powerful government uses to control them.
    3) True, the decrease in demand will lead to a decrease in cost to keep sales. In this case, they would probably increase their profit margin to keep demand up, so they would make less, which would lead to a decrease in tax revenue, which will make it appear that you should increase taxes, ad infinatum. Or you could decrease taxes, let the supply and demand stabilize at a higher $ amount and lower % tax rate, and make just as much or more.
    Higher tax rate doesn't mean increased tax revenue, especially in a bad economy.
    Increasing Tax Rates Does Not Necessarily Lead to Higher Income Tax Receipts
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    1) Governments tend to become more corrupt the larger they become. In a government as large as the US's, there's a lot of corruption

    (Chuckles) you are either very lucky, haven't living in a small town where relationship counts more than rules, or been around the world much to smaller nations. Respect for the Rule of law is one of the most important reasons why the US has been the largest economy since the 1870s (yes I wrote 1870). Blood, tribal relationships and alliances, and good-old-boy networking, criminal strong arming tend to be much stronger forces in smaller governments including small town American than larger ones--even more so in places without freedoms of the media.


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    1) Governments tend to become more corrupt the larger they become. In a government as large as the US's, there's a lot of corruption. Can the government get things done? yes. But in most cases it is so inefficient at doing it that we would be far better off letting people do things for themselves. There are few things we actually NEED government for. The rest is, at least, less efficient than if individuals did it.
    And taxes, by "virtue" of the fact that they are forced on us by the government at gun point, are little more that theft.
    2) thank you for pointing out another way the government can abuse its power to make businesses do what it wants. Many industries have their own special "carrot" that the bigger, more powerful government uses to control them.
    3) True, the decrease in demand will lead to a decrease in cost to keep sales. In this case, they would probably increase their profit margin to keep demand up, so they would make less, which would lead to a decrease in tax revenue, which will make it appear that you should increase taxes, ad infinatum. Or you could decrease taxes, let the supply and demand stabilize at a higher $ amount and lower % tax rate, and make just as much or more.
    I can not stress out how much I disagree.

    Please, have a look at "dead presidents" (they are not all presidents of course) at US Dollars:

    1$ --> Jeorge Washington
    10$ --> Alexander Hamilton

    They both protected certain US industries by using carrot and stick. Hamilton was very well known for his "industry in its infancy" approach and his carrots and sticks. Washington even rejected to wear clothes not made in US.

    5$ --> Lincoln Abraham

    During his time, US had the highest duty rates in their history. Lincoln was a keen supporter of protectionism in trade.

    100$ --> Benjamin Franklin

    Also, a supporter of protectionism, he even supporter "social dumping" as a carrot- and stick- at the same time.

    50$ --> Ulysses Simposon Grant

    A keen supporter of protectionism, at least until US would benefit from it and grow up. He's vision was to implement protectionism and relevant approaches for a century in order to help US industries, then switch to free trade to compete with the rest of the world.

    20$ --> Andrew Jackson

    During his time, duty rates were close to 40%. He opposed FED in many cases, etc.

    If they were alive, the vast majority of Americans would think that they were socialists.

    US governments for 100 years (1830-1940) imposed protectionism and intervention.
    Even at 1950-1970 they financed the 56% of Research and Development (aircraft construction, semiconductors, biotechnology)

    Only after 1970 till 2008 governments followed the neoliberal agenda.

    You may think that economic science affected this decision since new findings followed up but this is largely not the case. The decision was completely political oriented.

    According to your argument, governments allover the world should let the financial system collapse. But, it's true that their interception stabilized the system (even if the cost -aka deficits- is conveyed to the mass social classes).

    Do you believe that large corporations are not corrupted?

    Why do you think that "individuals" thus, "markets" are more efficient than anything else? Real estate bouble means nothing to you?

    The greatest scientific achievement based on individualism is the perfect competition model, which has serious fallacies.
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    Quote Originally Posted by Lynx_Fox View Post
    This is one of the reasons why mental ability test consistently show lower performance for lower social economic groups (and far too often mischaracterized and wrapped in racial tones). To be blunt, the lack of appropriate support structures for the poor results in lower intelligence children with lower achievement potential when they become adults.
    There's one major problem with the "IQ tests are culturally biased" argument: Asia. If IQ tests are culturally biased in favor of Western culture, and Asian people on average score considerably higher than Western people...... Then that would mean they're not only smarter on average than Western people, but they are so much smarter that they can achieve those scores *in spite of* the cultural bias.

    That would mean they're super geniuses in all reality, over there. You'd think that their economies would be prospering a little bit more.

    Adding to all this is the deep level of disenfranchisement of many poor from government. They grow up unwillingness to turn to the cops when they should. An anti-higher education subculture because it's seen as part of the oppression. It's not uncommon that no teacher shows that kid how to find the grant money--because of low pay they often aren't the best of teachers to start with and because of the environment are often happy just to get through the day. (there are exceptions of course!)
    What's wrong with expecting people to be "self made"? Of course some people will be lucky and get so much help that they make it in life even if they don't try at it. But I don't see how we could practically hope to build a society where everybody can succeed without trying.

    It's almost like people think that a child isn't even a human being yet. That nothing a child does, says, or chooses, can be considered to be a demonstration of their own inner worth. A kid who wants to go far in life should read the biographies of great men, then try to emulate what they see. They shouldn't need a human role model in their life. It's silly to demand that.

    If a person can't make up their own mind. If they need the people around them to tell them who they are. .. Then they're rolling the dice on where they'll end up, what influences will find them, instead of what influences they will seek out for themselves. If you allow yourself to be blown freely by the wind, then you've no basis to complain about where the wind sends you. If you direct your own self development, then it's all up to you.


    Two short anecdotes:
    Two smart kids start high school doing very well...both Grade A students and sons of non high school graduating alcoholic commercial fisherman (as many are). Both live in tiny homes with one B&W TV, unreliable wells and one aged work truck that's kept alive by brute force maintenance and bloody knuckles.

    Boy 1 is pushed by his mom who's a nurse and lives in a house of books. His dad is an alcoholic commercial fisherman. He watches a close friend nearly kill himself after the school punishes him rather than offer counsel for his broken home and blames the school administration. He's also bored and decides to drop out to follow in his dad's footsteps as a Maine fisherman.
    And is it the school's fault that the boy can't look past what happened to his friend?

    What does this boy want for himself? Is he happy living in squalor, or does he want to become great in life? Why doesn't he decide that for himself instead of letting the school decide it?

    (And it seems the boy did ultimately decide.)


    Boy 2 had no mom, and probably no close role model. He spend time training pigeons to do tricks and helping his dad mend gear. He also came to hate the school for the same incident. In addition he hated the cops for chasing another friend into a seawall at full speed and blames them for the loss of this friend. He got hammered one night on his dad's booze, stole a car from a brother of the cop who'd chased his dead friend and went joy riding. He crashed, got thrown out (no one wore seat belt back than) and discovered by that same cop nearly dead of exposure and a broken rib in a ditch a hundred feet from the car. He was convicted of thievery, some other charges and put away for a year.
    Sounds like the boy didn't know how to plan a very good revenge. Too bad for him.

    Maybe he should have been more patient, more calculating, and (contrary to the teachings of many religions) more hateful. Hatred could have made a man out of him. Luke warm self pity, made a felon out of him instead.

    It's better to have a direction, even a bad one, than flounder about.



    Sorry for the rant, but Americas problem with poverty go a hell of a lot deeper than how we structure college grants--something even the liberal media in the US can't get its head around probably because most of them didn't' grow up in poverty, and the conservative media would rather just ignore it out of willful ignorance.
    The truth that's likely always going to bother you, but which I'm sure you've already heard, is the saying "The good get out". That's the reality of America's rat infested poverty holes. Some of the best people in society come out of them, but only those who "got out".

    That's what meritocracy looks like in practice.

    Over time, the least meritocratic-ly valid individuals will gather into communities that are overwhelmingly composed of their kind. When a person is born there who isn't pathetic like they are, they stand out like a sore thumb. That can be good and bad. You can call it "luck" that an academic befriended you. But you know, it's also possible that he chose you, because he could see your potential.

    The real problem, and most frustrating for a person who "gets out" is a kind of "survivor's guilt". Everything that ever went right for you seems like an unfair advantage..... but you'll tend to forget the things that went right for the others around you. They may also have had advantages you didn't.

    Your real unfair advantage is the most obvious one: that you were made of tougher mettle.
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    Quote Originally Posted by kojax View Post
    There's one major problem with the "IQ tests are culturally biased" argument:
    Never made that argument. Cultural is not the same as socio-economic status. My point is lower socio-economic people do in fact have lower intelligence due to a range of things including poor habits by their mothers, poor nutrition by both mother and child, poor pre-natal and childhood health care, lack of enriched homes, lack of early intervention into developmental problems and lower quality teachers in their neighborhoods. Most of these cannot be fixed by communities with few resources.


    What's wrong with expecting people to be "self made"?
    Nothing, and I never inferred that there was.

    Of course some people will be lucky and get so much help that they make it in life even if they don't try at it. But I don't see how we could practically hope to build a society where everybody can succeed without trying.
    I don't either. But obviously the low social mobility in the US out of the lower social economic classes points to it being far more difficult than other groups...and some of those for reasons I already mentioned such as grossly uneven distribution of school resources because they are in many states still funded by local governments. And a lot more Americans should be concerned about the growing income inequality because history shows it's directly related to social instability--all too often the "peasants" storm the Bastille.
    It's almost like people think that a child isn't even a human being yet. That nothing a child does, says, or chooses, can be considered to be a demonstration of their own inner worth. A kid who wants to go far in life should read the biographies of great men, then try to emulate what they see. They shouldn't need a human role model in their life. It's silly to demand that.
    One of the sillier things I've read in these forums.




    If a person can't make up their own mind.
    The poor often have very few choices.


    And is it the school's fault that the boy can't look past what happened to his friend?
    Perception often counts more than reality. Interestingly the principal in that same high school was replaced a couple years later. The new Principal turned the school upside down and insisted on and implemented student voice programs that dramatically improved graduation rates, test performance and a range of student satisfaction surveys that he started the first months he took over. He was lucky in a way because his ideas were timed to a huge influx of local money during the booming Clinton years (amplified along the New England touristy coast) which allowed hiring better teachers, more counselors, a new annex and other improvement alongside the student voice programs. Today it's a top school...but it's hard to compare or recognize that community now that the roads are paved, central heat in most homes and fresh paint instead of roofing paper or rotted cedar shingles on roofs and walls, and new car instead of a rusty work truck.

    What does this boy want for himself? Is he happy living in squalor, or does he want to become great in life?
    Great in life was a owning a large fishing boat. I had very few other role models to follow other than a few abstract people I'd read about in my mother's classic book collection and the eccentric professor who'd step into my life at the exact right moment.

    Boy 2 had no mom..
    Sounds like the boy didn't know how to plan a very good revenge. Too bad for him. Maybe he should have been more patient, more calculating, and (contrary to the teachings of many religions) more hateful. Hatred could have made a man out of him. Luke warm self pity, made a felon out of him instead.
    The incident was an act of anger and frustration from a community that in his mind didn't give too craps about its children. I get it because I completely agreed with him at the time. Teenagers aren't rational people and their judgement centers of their brains aren't even fully developed yet.

    The truth that's likely always going to bother you, but which I'm sure you've already heard, is the saying "The good get out". That's the reality of America's rat infested poverty holes. Some of the best people in society come out of them, but only those who "got out".
    Nice hand wave, the reality is most of good people in poverty work their ass off and still can't get out. While few of my peers are in the same sad shape as Scott, his case was tragic because he be considered a gifted kid today and his went from crap to crappier. Very few of the others made it out either...not because they were lazy...most worked their butts off...but because they didn't get lucky, have the right dreams or had something bad happened to them (such as a sick wife) that they couldn't handle with their meager resources.

    And no we don't have meritocracy in the US. Some of the best people are embedded in those poor communities with few options.


    Your real unfair advantage is the most obvious one: that you were made of tougher mettle.
    I'm a wimp compared to many that stayed.

    most frustrating for a person who "gets out" is a kind of "survivor's guilt".

    Hmm...this resonated with me and you are probably right in some respect. I don't doubt that mostly what motivates me to teach in a poor rural town somewhere is to make amends for my luck and getting out--a survivor as you put it. But does it really matter...if I can garnish enough trust, and convince and confer few dreams to even one kid to get to their full potential...it all will be worth it. Children do need role models, I hope I can be a half respectable one.
    Last edited by Lynx_Fox; September 28th, 2013 at 03:05 AM.
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    Quote Originally Posted by Lynx_Fox View Post
    1) Governments tend to become more corrupt the larger they become. In a government as large as the US's, there's a lot of corruption

    (Chuckles) you are either very lucky, haven't living in a small town where relationship counts more than rules, or been around the world much to smaller nations. Respect for the Rule of law is one of the most important reasons why the US has been the largest economy since the 1870s (yes I wrote 1870). Blood, tribal relationships and alliances, and good-old-boy networking, criminal strong arming tend to be much stronger forces in smaller governments including small town American than larger ones--even more so in places without freedoms of the media.


    I live in a small town. The size of the government isn't in the land area it controls or in the population it controls, but in the scope of its power. I also didn't imply the opposite, that small government lack corruption, just that it's easier to grow corrupt in a large government because there are more ways to abuse your power, and it is easier to get away with because people can't keep track of you.
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    Quote Originally Posted by Achilleas View Post
    1) Governments tend to become more corrupt the larger they become. In a government as large as the US's, there's a lot of corruption. Can the government get things done? yes. But in most cases it is so inefficient at doing it that we would be far better off letting people do things for themselves. There are few things we actually NEED government for. The rest is, at least, less efficient than if individuals did it.
    And taxes, by "virtue" of the fact that they are forced on us by the government at gun point, are little more that theft.
    2) thank you for pointing out another way the government can abuse its power to make businesses do what it wants. Many industries have their own special "carrot" that the bigger, more powerful government uses to control them.
    3) True, the decrease in demand will lead to a decrease in cost to keep sales. In this case, they would probably increase their profit margin to keep demand up, so they would make less, which would lead to a decrease in tax revenue, which will make it appear that you should increase taxes, ad infinatum. Or you could decrease taxes, let the supply and demand stabilize at a higher $ amount and lower % tax rate, and make just as much or more.
    I can not stress out how much I disagree.

    Please, have a look at "dead presidents" (they are not all presidents of course) at US Dollars:

    1$ --> Jeorge Washington
    10$ --> Alexander Hamilton

    They both protected certain US industries by using carrot and stick. Hamilton was very well known for his "industry in its infancy" approach and his carrots and sticks. Washington even rejected to wear clothes not made in US.

    5$ --> Lincoln Abraham

    During his time, US had the highest duty rates in their history. Lincoln was a keen supporter of protectionism in trade.

    100$ --> Benjamin Franklin

    Also, a supporter of protectionism, he even supporter "social dumping" as a carrot- and stick- at the same time.

    50$ --> Ulysses Simposon Grant

    A keen supporter of protectionism, at least until US would benefit from it and grow up. He's vision was to implement protectionism and relevant approaches for a century in order to help US industries, then switch to free trade to compete with the rest of the world.

    20$ --> Andrew Jackson

    During his time, duty rates were close to 40%. He opposed FED in many cases, etc.

    If they were alive, the vast majority of Americans would think that they were socialists.

    US governments for 100 years (1830-1940) imposed protectionism and intervention.
    Even at 1950-1970 they financed the 56% of Research and Development (aircraft construction, semiconductors, biotechnology)

    Only after 1970 till 2008 governments followed the neoliberal agenda.

    You may think that economic science affected this decision since new findings followed up but this is largely not the case. The decision was completely political oriented.

    According to your argument, governments allover the world should let the financial system collapse. But, it's true that their interception stabilized the system (even if the cost -aka deficits- is conveyed to the mass social classes).

    Do you believe that large corporations are not corrupted?

    Why do you think that "individuals" thus, "markets" are more efficient than anything else? Real estate bouble means nothing to you?

    The greatest scientific achievement based on individualism is the perfect competition model, which has serious fallacies.
    The fact that you use the real estate bubble as an example, a situation created by the government creating artificially low interest rates and loaning money to very-high-risk people, as an example of how "the market" doesn't work just shows how little you understand about the way the economy works.
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    Quote Originally Posted by TheUnknowable View Post
    I live in a small town. The size of the government isn't in the land area it controls or in the population it controls, but in the scope of its power. I also didn't imply the opposite, that small government lack corruption, just that it's easier to grow corrupt in a large government because there are more ways to abuse your power, and it is easier to get away with because people can't keep track of you.
    I've lived most of my life in small towns as well...some are robust and run by honest people....on the other hand some are cesspools of corruption where the judge and cops are family related exploit that relationship, or the building inspector is related to a developer and looks the other way when standards aren't met, authorities routinely ignore laws because "that's not how it's been done around here," severe prejudice and xenophobia towards outsiders while overlooking law breaking by locals and other flagrant nepotism. I love small towns, and will retire in a rural one, but I'm very much aware of their problems.

    To no surprise this topic has been studied. The first shows that the more representative/democratic the government the lower the corruption as it gets larger. A study on the relationship between corruption and government size: the role of democracy - Munich Personal RePEc Archive
    The 2nd looks at corruption from several different angles internationally and reaches the same conclusions--fractured government...aka small governments tend to be more corrupt. http://aysps.gsu.edu/isp/images/ispwp1210.pdf
    Last edited by Lynx_Fox; September 28th, 2013 at 09:51 PM.
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    Quote Originally Posted by TheUnknowable View Post
    The fact that you use the real estate bubble as an example, a situation created by the government creating artificially low interest rates and loaning money to very-high-risk people, as an example of how "the market" doesn't work just shows how little you understand about the way the economy works.
    The market has been having such bubbles since economies existed. The first bubble (with resulting economic crash after it popped) happened in 1637. Speculative bubbles are a characteristic of free market economies.
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    Quote Originally Posted by billvon View Post
    Quote Originally Posted by TheUnknowable View Post
    The fact that you use the real estate bubble as an example, a situation created by the government creating artificially low interest rates and loaning money to very-high-risk people, as an example of how "the market" doesn't work just shows how little you understand about the way the economy works.
    The market has been having such bubbles since economies existed. The first bubble (with resulting economic crash after it popped) happened in 1637. Speculative bubbles are a characteristic of free market economies.
    The "Bubbles" will continue.
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    Quote Originally Posted by billvon View Post
    Quote Originally Posted by TheUnknowable View Post
    The fact that you use the real estate bubble as an example, a situation created by the government creating artificially low interest rates and loaning money to very-high-risk people, as an example of how "the market" doesn't work just shows how little you understand about the way the economy works.
    The market has been having such bubbles since economies existed. The first bubble (with resulting economic crash after it popped) happened in 1637. Speculative bubbles are a characteristic of free market economies.
    True. Imbalances, disequilibrium boubles, unemployment and recessions are not "accidents" nor a symptom. Economy just tends to create these phenomena alongside growth.

    TheUnknowable, banks loaned money to high risk people, not governments. Anyway, 2008 recession should be discussed in another thread.
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    Quote Originally Posted by Lynx_Fox View Post
    Quote Originally Posted by TheUnknowable View Post
    I live in a small town. The size of the government isn't in the land area it controls or in the population it controls, but in the scope of its power. I also didn't imply the opposite, that small government lack corruption, just that it's easier to grow corrupt in a large government because there are more ways to abuse your power, and it is easier to get away with because people can't keep track of you.
    I've lived most of my life in small towns as well...some are robust and run by honest people....on the other hand some are cesspools of corruption where the judge and cops are family related exploit that relationship, or the building inspector is related to a developer and looks the other way when standards aren't met, authorities routinely ignore laws because "that's not how it's been done around here," severe prejudice and xenophobia towards outsiders while overlooking law breaking by locals and other flagrant nepotism. I love small towns, and will retire in a rural one, but I'm very much aware of their problems.

    To no surprise this topic has been studied. The first shows that the more representative/democratic the government the lower the corruption as it gets larger. A study on the relationship between corruption and government size: the role of democracy - Munich Personal RePEc Archive
    The 2nd looks at corruption from several different angles internationally and reaches the same conclusions--fractured government...aka small governments tend to be more corrupt. http://aysps.gsu.edu/isp/images/ispwp1210.pdf
    "less fragmented municipal government structures are associated with more honest (less corrupt) behavior by government officials. "

    This just shows that having them interconnected and more accountable keeps them honest, which actually supports my statements. It doesn't mean that if you give the government greater power, they will be less corrupt, just that if you build more check and balances, more accountability in, then they are less corrupt. Don't know how that translates into "small governments are more corrupt", though, unless you think "small" means that there are no checks and balances.
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by billvon View Post
    Quote Originally Posted by TheUnknowable View Post
    The fact that you use the real estate bubble as an example, a situation created by the government creating artificially low interest rates and loaning money to very-high-risk people, as an example of how "the market" doesn't work just shows how little you understand about the way the economy works.
    The market has been having such bubbles since economies existed. The first bubble (with resulting economic crash after it popped) happened in 1637. Speculative bubbles are a characteristic of free market economies.
    True. Imbalances, disequilibrium boubles, unemployment and recessions are not "accidents" nor a symptom. Economy just tends to create these phenomena alongside growth.

    TheUnknowable, banks loaned money to high risk people, not governments. Anyway, 2008 recession should be discussed in another thread.
    Fannie mae and freddie mac are government programs. The banks merely operated within the rules and tried to continue to earn a profit.
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    Unknowable, Live in denial if you want, the study specifically addresses small governments, which can either be relatively isolated such as my fishing town in Maine, or a part of a larger one given autonomy, such as many suburbs. Watch your own town. It's quite likely some of the corruption is even in plain view with locals, out of familiarity, getting preferred treatment to others.

    Your inference, and assumption, that larger governments are more corrupt that small ones doesn't not stand up; it depends on the degree of representation and freedom of the press--in the US, where representation and freedom of the press are both active, large government is usually is the least corrupt forms. You are trying to build arguments around a false premise.
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    Quote Originally Posted by TheUnknowable View Post
    The banks merely operated within the rules and tried to continue to earn a profit.
    Very true - and that's the definition of capitalism in a nutshell. That's also the behavior that drives bubbles - the desire to earn a profit.
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    Quote Originally Posted by Lynx_Fox View Post

    Of course some people will be lucky and get so much help that they make it in life even if they don't try at it. But I don't see how we could practically hope to build a society where everybody can succeed without trying.
    I don't either. But obviously the low social mobility in the US out of the lower social economic classes points to it being far more difficult than other groups...and some of those for reasons I already mentioned such as grossly uneven distribution of school resources because they are in many states still funded by local governments. And a lot more Americans should be concerned about the growing income inequality because history shows it's directly related to social instability--all too often the "peasants" storm the Bastille.



    We should worry about the growing income inequality, but I think the problem is more than just education . Society needs a certain amount of unskilled labor. The problem is right now, we're using illegal immigrants and "free trade" to force a low unskilled wage. This causes three problems:

    1) - The unskilled wage is so low that nobody born in the USA sees any future for them self in unskilled wage work. "Nobody wants to do it" (But really they'd have to be very foolish, or desperate, to want to.)

    Consequence: We become so dependent on immigrants and "free trade" that we are at the mercy of those things.

    2) - The low unskilled wage causes people who really shouldn't be academics to become academics, just so as not to have to be poor their whole life.

    Consequence : A dumbing down of America. Education becomes structured around making sure the dumbest kid can make it, when really the dumbest kid shouldn't be making it. He/she should be becoming a trades person of some kind. You would not believe how many people I'm met in construction or trucking who can't do high school math. But they're good tradespeople. They perform good work. They just won't get paid much for it now.

    3) - The low unskilled wage makes it impossible to attend college without a government handout and/or wealthy parents.

    Consequence: Big government.


    If we raised unskilled wages and imposed tariffs, then cheap manufactured crap would cost more. That's pretty much all we'd lose. Pundits will argue that the economy would collapse, but that's true whenever you restructure an economy. It always collapses a bit at first.



    It's almost like people think that a child isn't even a human being yet. That nothing a child does, says, or chooses, can be considered to be a demonstration of their own inner worth. A kid who wants to go far in life should read the biographies of great men, then try to emulate what they see. They shouldn't need a human role model in their life. It's silly to demand that.
    One of the sillier things I've read in these forums.
    I didn't have any role models. Or at least I didn't choose any. My role model was myself. If I chose any role models at all, they were TV action heroes. When I was 5, I decided to stop crying whenever I got hurt, because I saw on Dukes of Hazzard that Bo Duke broke his arm and didn't cry.

    However, I'm slightly autistic, so maybe I just don't relate to people well enough to choose them as role models.

    If a person can't make up their own mind.
    The poor often have very few choices.
    Have you seen how many Mexicans cross the USA's border every year with nothing but the shirt on their back, and then work their way into some kind of a life?

    I call Bullocks on anyone that tells me a genuine economic barrier is impeding them.


    And is it the school's fault that the boy can't look past what happened to his friend?
    Perception often counts more than reality.... [/quote]

    Yeah. Perception of poverty may keep people from achieving even if the reality is different from the perception.

    Once people accept that it's a lie that they can't go forward, they have more options available to them. There are lots of cities in the USA where you can show up with nothing, and easily make something of yourself. You'll have no social connections at first, and well....... I guess there's the matter of buying a bus ticket.
    If you can't afford the bus ticket then I guess you're screwed.



    Boy 2 had no mom..
    Sounds like the boy didn't know how to plan a very good revenge. Too bad for him. Maybe he should have been more patient, more calculating, and (contrary to the teachings of many religions) more hateful. Hatred could have made a man out of him. Luke warm self pity, made a felon out of him instead.
    The incident was an act of anger and frustration from a community that in his mind didn't give too craps about its children. I get it because I completely agreed with him at the time. Teenagers aren't rational people and their judgement centers of their brains aren't even fully developed yet.
    That's just .... too many bollocks excuses.

    First of all: the community doesn't have any duty to give two craps about anyone. That's just false entitlement. There is no "right to have your community care about you".

    Second of all: One could argue that the judgement center of the brain never completely develops at all in some people. Shall we just give those people a free pass? Use the "MRI scan defense" in court?




    The truth that's likely always going to bother you, but which I'm sure you've already heard, is the saying "The good get out". That's the reality of America's rat infested poverty holes. Some of the best people in society come out of them, but only those who "got out".
    Nice hand wave, the reality is most of good people in poverty work their ass off and still can't get out. While few of my peers are in the same sad shape as Scott, his case was tragic because he be considered a gifted kid today and his went from crap to crappier. Very few of the others made it out either...not because they were lazy...most worked their butts off...but because they didn't get lucky, have the right dreams or had something bad happened to them (such as a sick wife) that they couldn't handle with their meager resources.

    And no we don't have meritocracy in the US. Some of the best people are embedded in those poor communities with few options.
    We do have a meritocracy. It's just not the one you're thinking. "Hard work" meritocracy only leads to failure. You can't give an "A for effort". In the institutions where we do that, things have been moving backwards.

    What needs to be rewarded is guts and creativity. It takes guts to buy a bus ticket and go off to a big city where you don't know anybody. It's takes both guts and creativity to think up a business plan that will give you an edge in a crowded market, then stake your credit (and any savings you may have) on the gamble that your nice plan will turn out to be half as good as you hope it is.

    Bill Gates didn't succeed because he was a hard worker. Neither did those two guys from Google. I'm sure they were hard workers also, but that isn't why they were so successful. They were successful because they tried something nobody else had thought of doing, and they implemented it well enough so investors could see its potential.



    Your real unfair advantage is the most obvious one: that you were made of tougher mettle.
    I'm a wimp compared to many that stayed.
    The fact you are humble about it only adds to my point about being chosen more on merit and less on luck.


    most frustrating for a person who "gets out" is a kind of "survivor's guilt".

    Hmm...this resonated with me and you are probably right in some respect. I don't doubt that mostly what motivates me to teach in a poor rural town somewhere is to make amends for my luck and getting out--a survivor as you put it. But does it really matter...if I can garnish enough trust, and convince and confer few dreams to even one kid to get to their full potential...it all will be worth it. Children do need role models, I hope I can be a half respectable one.
    I certainly won't tell you not to pay it forward. This professor friend seems to have made a good investment in you.

    Now look at it the other way: how many professors just like him invest in kids that aren't worth the trouble, get burned at seeing their effort go unappreciated, and then never bother again?
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    Quote Originally Posted by kojax View Post
    Bill Gates didn't succeed because he was a hard worker.
    Just going to ping this one for a while because I hear many people put him up as an example. Bill isn't' the sort of poor person I'm talking about. In fact he was born with a silver spoon in his mouth, his dad being one of more successful lawyers in Seattle, his mother a board of directors for United Way, living in one of the best neighborhood, and going to private preparatory school most of his childhood. He also probably has a 160+ IQ. If not for his businesses success he's probably be known as a mathematician for some of the minimum path algorithms he came up with. I actually think Mr. Gates is a wonderful person, but he's not an example of overcoming obstacles. I'd also add, even with his giftedness, and what we know about the problems of upward social mobility in America, he would have more likely than not failed if he'd been raised in poverty.

    Don't know about the founders of Google, though a few minute search show them as poor examples in the context of rising from poverty. Larry Page's dad with a Ph.D. and considering one of the key innovators for computer science. Gergey Brin is closer being from an immigrant family, but not one in poverty as his father was a professor of mathematics soon after they arrived to the US. Suggest that Bill Clinton is a much better example of rising from poverty--and even in he case, he's no normal or average person because he obviously lucky enough to be born with excellent intelligence.
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    Quote Originally Posted by TheUnknowable View Post
    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by billvon View Post
    Quote Originally Posted by TheUnknowable View Post
    The fact that you use the real estate bubble as an example, a situation created by the government creating artificially low interest rates and loaning money to very-high-risk people, as an example of how "the market" doesn't work just shows how little you understand about the way the economy works.
    The market has been having such bubbles since economies existed. The first bubble (with resulting economic crash after it popped) happened in 1637. Speculative bubbles are a characteristic of free market economies.
    True. Imbalances, disequilibrium boubles, unemployment and recessions are not "accidents" nor a symptom. Economy just tends to create these phenomena alongside growth.

    TheUnknowable, banks loaned money to high risk people, not governments. Anyway, 2008 recession should be discussed in another thread.
    Fannie mae and freddie mac are government programs. The banks merely operated within the rules and tried to continue to earn a profit.
    Financial markets where (and still are) one of the most deregulated, hence, free markets in the world. The whole deregulation took place under the pressure of financial institutions and banks. To blame the government for something that big financial corporations and the process of accumulation of capital are responsible for, is unscientific.
    And it oes even further, since even the traditional industrial capital was pressing for financial deregulation since many of its activities became self financed (GM is a great example).

    Of course the whole financial frame is shaped by the government (alongside financial corporations) but don't forget that financial, industrial, etc. corporations finance election tours etc therefore they have several expectations. One of them, may be deregulation.

    Crisis possibility as an organic phenomenon seems to be taboo for many people but, we should at least examine any data and indication that prove it.

    I really sympathize neoliberals for their arguments. They have some really sophisticated econometric models etc. but, since the reality proves them wrong in daily basis (from deregulated markets to austerity), I can do no more than to abandon them.
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by TheUnknowable View Post
    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by billvon View Post
    Quote Originally Posted by TheUnknowable View Post
    The fact that you use the real estate bubble as an example, a situation created by the government creating artificially low interest rates and loaning money to very-high-risk people, as an example of how "the market" doesn't work just shows how little you understand about the way the economy works.
    The market has been having such bubbles since economies existed. The first bubble (with resulting economic crash after it popped) happened in 1637. Speculative bubbles are a characteristic of free market economies.
    True. Imbalances, disequilibrium boubles, unemployment and recessions are not "accidents" nor a symptom. Economy just tends to create these phenomena alongside growth.

    TheUnknowable, banks loaned money to high risk people, not governments. Anyway, 2008 recession should be discussed in another thread.
    Fannie mae and freddie mac are government programs. The banks merely operated within the rules and tried to continue to earn a profit.
    Financial markets where (and still are) one of the most deregulated, hence, free markets in the world. The whole deregulation took place under the pressure of financial institutions and banks. To blame the government for something that big financial corporations and the process of accumulation of capital are responsible for, is unscientific.
    And it oes even further, since even the traditional industrial capital was pressing for financial deregulation since many of its activities became self financed (GM is a great example).

    Of course the whole financial frame is shaped by the government (alongside financial corporations) but don't forget that financial, industrial, etc. corporations finance election tours etc therefore they have several expectations. One of them, may be deregulation.

    Crisis possibility as an organic phenomenon seems to be taboo for many people but, we should at least examine any data and indication that prove it.

    I really sympathize neoliberals for their arguments. They have some really sophisticated econometric models etc. but, since the reality proves them wrong in daily basis (from deregulated markets to austerity), I can do no more than to abandon them.
    Mahalo for an interesting take on the subject.
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    Quote Originally Posted by Achilleas View Post
    I really sympathize neoliberals for their arguments. They have some really sophisticated econometric models etc. but, since the reality proves them wrong in daily basis (from deregulated markets to austerity), I can do no more than to abandon them.
    Haven't heard this term before. What's a "neoliberal?"
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    Quote Originally Posted by billvon View Post
    Quote Originally Posted by Achilleas View Post
    I really sympathize neoliberals for their arguments. They have some really sophisticated econometric models etc. but, since the reality proves them wrong in daily basis (from deregulated markets to austerity), I can do no more than to abandon them.
    Haven't heard this term before. What's a "neoliberal?"
    Neoliberalism - Wikipedia, the free encyclopedia
    Washington Consensus - Wikipedia, the free encyclopedia

    The main concept is their belief that free markets and less state is the best route for welfare. Neoliberalism can be defined as the sum of the most popular economic policies of the last 30 years.

    Neoliberal economic policy suggestions can be described by the so called "Washington Consensus" (a term created by John Williamson) and refer to the policy recommendations by IMF, World Bank, Washington and the US Treasury Department.
    The main concept is their belief in free markets efficiency alongside their abhorrence to any kind of regulation (especially for labour market).

    The main proposals are:

    1. Fiscal discipline, with avoidance of large fiscal deficits relative to GDP;
    2. Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, healthcare and infrastructure investments.
    3. Tax reform, broadening the tax base and adopting moderate marginal tax rates;
    4. Interest rates that are market determined and positive (but moderate) in real terms;
    5. Competitive exchange rates
    6. Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs
    7. Liberalization of inward direct foreign investment
    8. Privatization of state enterprises;
    9. Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions
    10. Legal security for property rights.

      It is the main framework under which developed and developing countries operated the last 30 years. It is heavily violated in the recent crisis since states intervened (by providing large subsidies and large deficits as a result) to save the bankrupted financial institutions.
      (A useful finding is that deficits is a result of crisis, not its causation)

      You can sum up to 3 core principles:
      1) Austerity
      2) Deregulation
      3) Privatisation
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    Quote Originally Posted by Lynx_Fox View Post
    Quote Originally Posted by kojax View Post
    Bill Gates didn't succeed because he was a hard worker.
    Just going to ping this one for a while because I hear many people put him up as an example. Bill isn't' the sort of poor person I'm talking about. In fact he was born with a silver spoon in his mouth, his dad being one of more successful lawyers in Seattle, his mother a board of directors for United Way, living in one of the best neighborhood, and going to private preparatory school most of his childhood. He also probably has a 160+ IQ. If not for his businesses success he's probably be known as a mathematician for some of the minimum path algorithms he came up with. I actually think Mr. Gates is a wonderful person, but he's not an example of overcoming obstacles. I'd also add, even with his giftedness, and what we know about the problems of upward social mobility in America, he would have more likely than not failed if he'd been raised in poverty.

    Don't know about the founders of Google, though a few minute search show them as poor examples in the context of rising from poverty. Larry Page's dad with a Ph.D. and considering one of the key innovators for computer science. Gergey Brin is closer being from an immigrant family, but not one in poverty as his father was a professor of mathematics soon after they arrived to the US.
    Good points.

    Though he's not a millionaire, I know my own father started out extremely poor, the youngest of 10 kids on a farm in Montana. He makes a six figure income now, because he got into computer programming right when the industry was taking off, got recruited by Nike to write their first warehouse software (he doesn't work for them now, though).

    He's very humble about his accomplishments. What little I know if them comes from just a few conversations.

    Suggest that Bill Clinton is a much better example of rising from poverty--and even in he case, he's no normal or average person because he obviously lucky enough to be born with excellent intelligence.
    Being born with excellent intelligence shouldn't be considered "luck", at least not in the sense of an unfair outcome. It may be a matter of luck, but it's repeating luck. If you were once born that way, then for the rest of your life you will always be that way (barring a serious head injury, or stroke or something.) Other kinds of luck, like having wealthy parents, is luck that can change very easily.

    The other reason is because there is no practical way to repair the inequality. IQ can't be transferred. It is forever bound to the one upon which it was first bestowed. The only way to remove it is to destroy it. And that would be a waste, because it can do good for more people than just that person if the person chooses to use it for good purposes.

    It would be foolish to neglect smart children just because they're seen as already being well off. Better to encourage that child to look with affection upon their peers, and if they choose to do so, then to empower them as much as possible so they can do as much good as possible.
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    You make good points and lucky was probably not the right word.


    Quote Originally Posted by kojax View Post
    The other reason is because there is no practical way to repair the inequality. IQ can't be transferred. It is forever bound to the one upon which it was first bestowed. The only way to remove it is to destroy it. And that would be a waste, because it can do good for more people than just that person if the person chooses to use it for good purposes.
    While IQ cannot be transferred, it is not immutable either. Unfortunately the effects of poverty not only lower the averages, they reduce the upper ranges as well. A child born in poverty, is far more likely to have some obstacle that actually reduces his IQ potential.

    There should be no handwaving about there being no practical ways to repair the inequalities. Some of the ways referring to education have been outlined here. Other nations have figured out how to close that gap much better than the US--and their nation's children and their future are better off for it.

    It would be foolish to neglect smart children just because they're seen as already being well off. Better to encourage that child to look with affection upon their peers, and if they choose to do so, then to empower them as much as possible so they can do as much good as possible.
    Agreed. We also in some ways ignore smart poor kids in the US as well...there is no Federal help for gifted children nor are there for most States. Evidence shows most of them do ok anyhow--but we loose some of them to boredom, social aggression problems or other interest not good for our society.
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    Quote Originally Posted by Achilleas View Post
    Quote Originally Posted by billvon View Post
    Quote Originally Posted by Achilleas View Post
    I really sympathize neoliberals for their arguments. They have some really sophisticated econometric models etc. but, since the reality proves them wrong in daily basis (from deregulated markets to austerity), I can do no more than to abandon them.
    Haven't heard this term before. What's a "neoliberal?"
    Neoliberalism - Wikipedia, the free encyclopedia
    Washington Consensus - Wikipedia, the free encyclopedia

    The main concept is their belief that free markets and less state is the best route for welfare. Neoliberalism can be defined as the sum of the most popular economic policies of the last 30 years.

    Neoliberal economic policy suggestions can be described by the so called "Washington Consensus" (a term created by John Williamson) and refer to the policy recommendations by IMF, World Bank, Washington and the US Treasury Department.
    The main concept is their belief in free markets efficiency alongside their abhorrence to any kind of regulation (especially for labour market).

    The main proposals are:

    1. Fiscal discipline, with avoidance of large fiscal deficits relative to GDP;
    2. Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, healthcare and infrastructure investments.
    3. Tax reform, broadening the tax base and adopting moderate marginal tax rates;
    4. Interest rates that are market determined and positive (but moderate) in real terms;
    5. Competitive exchange rates
    6. Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs
    7. Liberalization of inward direct foreign investment
    8. Privatization of state enterprises;
    9. Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions
    10. Legal security for property rights.

      It is the main framework under which developed and developing countries operated the last 30 years. It is heavily violated in the recent crisis since states intervened (by providing large subsidies and large deficits as a result) to save the bankrupted financial institutions.
      (A useful finding is that deficits is a result of crisis, not its causation)

      You can sum up to 3 core principles:
      1) Austerity
      2) Deregulation
      3) Privatisation
    You've summed that up very well, I just wonder if people will still be so quick to jump down the deregulation route in the wake of financial crisis, clearly if ever there was demonstration for a need for strong financial rules in play to counter irresponsibility and ensure stability across the entire economic spectrum then the banking collapse and resultant financial meltdown was it in droves.
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    You've summed that up very well, I just wonder if people will still be so quick to jump down the deregulation route in the wake of financial crisis, clearly if ever there was demonstration for a need for strong financial rules in play to counter irresponsibility and ensure stability across the entire economic spectrum then the banking collapse and resultant financial meltdown was it in droves.
    As far as I understand, it wasn't irresponsibility nor lust the causes of the global crisis. US economy for several reasons the last 40 years used to grow by building houses and feeling them with things. Financial markets just provided the framework under which maximum accumulation of capital was possible. Deregulation (and neoliberalism) was the inadequate answer to the long term problems that US still facing. Thus, the whole bubble thing just transposed the crisis moment by a few years (decades). No doubt there should be financial rules (especially in investment banks) but to the best of my knowledge that wouldn't eliminate large global crises.
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    Quote Originally Posted by Achilleas View Post
    You've summed that up very well, I just wonder if people will still be so quick to jump down the deregulation route in the wake of financial crisis, clearly if ever there was demonstration for a need for strong financial rules in play to counter irresponsibility and ensure stability across the entire economic spectrum then the banking collapse and resultant financial meltdown was it in droves.
    As far as I understand, it wasn't irresponsibility nor lust the causes of the global crisis. US economy for several reasons the last 40 years used to grow by building houses and feeling them with things. Financial markets just provided the framework under which maximum accumulation of capital was possible. Deregulation (and neoliberalism) was the inadequate answer to the long term problems that US still facing. Thus, the whole bubble thing just transposed the crisis moment by a few years (decades). No doubt there should be financial rules (especially in investment banks) but to the best of my knowledge that wouldn't eliminate large global crises.
    Hey there,

    you're right in saying that regulation would not eliminate large global crises, but it would greatly, greatly reduce the posibility of a large financial crises. Considering that the U.S. has the largest and arguably the most significant financial sector in the world, any regulation of that industry would and should be welcomed as a path to avoiding catastrophic economic crises.

    The most recent financial crises technically has its roots in the U.S. with less significant events occurring in SE Asia.
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    Quote Originally Posted by Eighty88 View Post
    Quote Originally Posted by Achilleas View Post
    You've summed that up very well, I just wonder if people will still be so quick to jump down the deregulation route in the wake of financial crisis, clearly if ever there was demonstration for a need for strong financial rules in play to counter irresponsibility and ensure stability across the entire economic spectrum then the banking collapse and resultant financial meltdown was it in droves.
    As far as I understand, it wasn't irresponsibility nor lust the causes of the global crisis. US economy for several reasons the last 40 years used to grow by building houses and feeling them with things. Financial markets just provided the framework under which maximum accumulation of capital was possible. Deregulation (and neoliberalism) was the inadequate answer to the long term problems that US still facing. Thus, the whole bubble thing just transposed the crisis moment by a few years (decades). No doubt there should be financial rules (especially in investment banks) but to the best of my knowledge that wouldn't eliminate large global crises.
    Hey there,

    you're right in saying that regulation would not eliminate large global crises, but it would greatly, greatly reduce the posibility of a large financial crises. Considering that the U.S. has the largest and arguably the most significant financial sector in the world, any regulation of that industry would and should be welcomed as a path to avoiding catastrophic economic crises.

    The most recent financial crises technically has its roots in the U.S. with less significant events occurring in SE Asia.

    Well I think the lack of suitable enforcement of just basic simple lending principles was before the crash a global problem, certainly it wasn't at all solely limited to the US markets, it certainly did, as you've pointed out, because of the size of the American financial sector have a massive impact of on the rest of the world. Also that toxic debt was being sold directly from America to other financial institutions around the world had a serious effect on helping the whole house of cards come tumbling down all across the globe.

    Most economists can explain how ecomonic cycles work in pushing up housing prices, but what should have been a cycle that like many of the previous ones ended naturally after running out of steam was artificially, and extremely unsustainably, inflated much higher and much longer by pushing people into debt that were clearly incapable of servicing such a debt burden. If proper regulation was in place then we should have never seen such loan to income ratios or the introduction of 125% mortgages ever coming into play. The whole system was being driven greed and an ability pass off risk to companies and institutions who both didn't understand the risk or were simply unware of it. But this was all going on in the private sector yes, but right under the noses of the regulators who seemed to have collective brain freeze over understanding the fact that lending money to people who can't afford to repay it is a bad idea! Or that property cannot keep increasing in value, as you come to the point where there just isn't enough money in existence to pay for it, thus a crash becomes inevitable.

    Yes it's true that proper regulation alone cannot and will not solve all the world's financial problems, but after seeing the devastating effect the financial crash had right across the board, from people going bankrupt or losing their homes to pensions and investments being slashed you have to say that if this all could have been avoided then surely a stronger regime of financial regulation is fair compromise for doing so.
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    Quote Originally Posted by Ascended View Post


    Well I think the lack of suitable enforcement of just basic simple lending principles was before the crash a global problem, certainly it wasn't at all solely limited to the US markets, it certainly did, as you've pointed out, because of the size of the American financial sector have a massive impact of on the rest of the world. Also that toxic debt was being sold directly from America to other financial institutions around the world had a serious effect on helping the whole house of cards come tumbling down all across the globe.

    Most economists can explain how ecomonic cycles work in pushing up housing prices, but what should have been a cycle that like many of the previous ones ended naturally after running out of steam was artificially, and extremely unsustainably, inflated much higher and much longer by pushing people into debt that were clearly incapable of servicing such a debt burden. If proper regulation was in place then we should have never seen such loan to income ratios or the introduction of 125% mortgages ever coming into play. The whole system was being driven greed and an ability pass off risk to companies and institutions who both didn't understand the risk or were simply unware of it. But this was all going on in the private sector yes, but right under the noses of the regulators who seemed to have collective brain freeze over understanding the fact that lending money to people who can't afford to repay it is a bad idea! Or that property cannot keep increasing in value, as you come to the point where there just isn't enough money in existence to pay for it, thus a crash becomes inevitable.

    Yes it's true that proper regulation alone cannot and will not solve all the world's financial problems, but after seeing the devastating effect the financial crash had right across the board, from people going bankrupt or losing their homes to pensions and investments being slashed you have to say that if this all could have been avoided then surely a stronger regime of financial regulation is fair compromise for doing so.
    That's the funny thing about the crisis. The fraud and amount of over-leveraging by banks was pretty clear. What happened was that we had a combination of a few things:
    1) Deregulation, initially thanks to Mr. Reagan
    2) Increasing wealth, power, and influence of the financial sector both in/on the U.S. government.. i.e. corruption
    3) Thanks to deregulation and the power to reverse all previous safety nets in place, the financial sector was free to create financial products at will with little to no understanding of how they impacted the markets and economy as a whole.

    Without becoming too technical, government regulatory agencies like the SEC and OCC among the various agencies in charge of enforcing regulation, did not have adequate staffing and did not even have clear rules on what to regulate. Different agencies regulate different products, in different locations. Some agencies regulate the same products in the same areas but cannot both examine and regulate the same products at the same bank, so banks are allowed to choose who they want to regulate which products. Even then, the federal government over the last two decades has all but stripped the enforcing power and ability of the these agencies to do their job.

    Many other products and toxic assets are not transparent. Agencies still are not sure how to classify derivatives and subsequently how to enforce regulation against a market that is very clearly over-leveraged. Combine that all with deregulation-happy politicians and were left with an entire sector running around like a five year old in a candy shop! There is nothing they cannot do/don't want to do! Reagan, Bush Sr., Clinton, Bush Jr, and now Obama have all contributed to deregulatory nature of Wall-Street.

    For more proof just look at the continuation of QE.
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    I disagree with the statement that the current crisis is a financial crisis. There's a whole world of explanations out there:
    Human frailty (delusions, greed, instincts for mastery)
    institutional failure (deregulation)
    obsession with the false theories (hayek, freedman, belief in the efficiency of markets vs keynes and minsky)
    cultural origins (especially in Europe with the so called PIGS, anglosaxon diseases etc, or Latin Americans were praying for a nemesis equal to an IMF program)
    failure of policy (too much regulation out there, markets can't "breathe", more freedman is necessary, wrong regulation options, etc)

    There's a certain truth in (almost) all of these theories but, none of these explain satisfactory the tendency and the duration of the crisis. Also and even more important, all of these explanations fail to critically examine the systemic risk (and that's what british academy said to the Queen when she asked "how come you didn't see it coming").
    In other words, these theories (regulation approach included) fail to examine the internal contradictions of capital accumulation.

    As far as I understand, the whole story of the current "financial" crisis starts at 1970s:
    US economy was entering a long wave of relatively slow growth, the rate of profit was low and kept falling (especially compared to 50s- 60s), there was excessive power of labour, stagflation, etc.
    The already mentioned neoliberal agenda was the answer. Deregulation, offshoring, reagan& thatcher, etc. Labour share of income reduced, wages have been remained stagnant even though productivity was rising, etc
    By mid 80s the problem was the excessive power of capital. Wage repressions etc led to lack of effective demand. The answer one more time was credit economy and financialisation. That's when housing bubble begins to rise and households to dive into debt.
    By 90s financial profits (thanks to financial innovation/deregulation) were growing like crazy while manufacturing/commercial rates of profit were falling rapidly once more.
    Roaring 00s was just the prelude. There are researchers who were waiting for a crisis in 2004/5, it happened 3 years later. This protraction could be explained by the vast amounts of fictitious capital or by a dynamic chaotic system behavior. In any case, these guys were and still are a minority within the economic departments and their voices rarely scratch the media surface.

    A short and simplified story but, that's how I would describe the current crisis and for good reason (there are very strong empirical indications to prove it). It's not a mere institutional failure crisis but a structural one. If I had to suggest a theoretical framework I would look into Kondratiev wave and tendency of the rate of profit to fall. Sure, deregulation determined the form of the crisis and the crisis point (and to some extent its intensity). It also determined some symptoms of the crisis (eg huge state deficits to rescue the hypertrophic financial sector). But even if we suppose that financial markets were regulated properly, I can hardly imagine how would we avoid the crash.
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    the kind of lifestyle developing country middle class families have is totally different from developed countries middle class families have.
    Earning 1000$ to 1500$ per month is considered to be big income in these countries.
    A kid from age 5 to 20 is given a pocket money of 10$ per month is huge, compared to pocket money of 100 - 200 $ in usa
    Actually , 25$ is what developing nation's government spend on each kids daily need.

    And good natural hygienic food and enough comfortable shelter can be obtained for a kid in africa too for just 50$ per month.
    (3 time meal , 2 time supper , shelter , and daily need)
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    Quote Originally Posted by Achilleas View Post
    I disagree with the statement that the current crisis is a financial crisis. There's a whole world of explanations out there:
    Human frailty (delusions, greed, instincts for mastery)
    institutional failure (deregulation)
    obsession with the false theories (hayek, freedman, belief in the efficiency of markets vs keynes and minsky)
    cultural origins (especially in Europe with the so called PIGS, anglosaxon diseases etc, or Latin Americans were praying for a nemesis equal to an IMF program)
    failure of policy (too much regulation out there, markets can't "breathe", more freedman is necessary, wrong regulation options, etc)

    There's a certain truth in (almost) all of these theories but, none of these explain satisfactory the tendency and the duration of the crisis. Also and even more important, all of these explanations fail to critically examine the systemic risk (and that's what british academy said to the Queen when she asked "how come you didn't see it coming").
    In other words, these theories (regulation approach included) fail to examine the internal contradictions of capital accumulation.

    As far as I understand, the whole story of the current "financial" crisis starts at 1970s:
    US economy was entering a long wave of relatively slow growth, the rate of profit was low and kept falling (especially compared to 50s- 60s), there was excessive power of labour, stagflation, etc.
    The already mentioned neoliberal agenda was the answer. Deregulation, offshoring, reagan& thatcher, etc. Labour share of income reduced, wages have been remained stagnant even though productivity was rising, etc
    By mid 80s the problem was the excessive power of capital. Wage repressions etc led to lack of effective demand. The answer one more time was credit economy and financialisation. That's when housing bubble begins to rise and households to dive into debt.
    By 90s financial profits (thanks to financial innovation/deregulation) were growing like crazy while manufacturing/commercial rates of profit were falling rapidly once more.
    Roaring 00s was just the prelude. There are researchers who were waiting for a crisis in 2004/5, it happened 3 years later. This protraction could be explained by the vast amounts of fictitious capital or by a dynamic chaotic system behavior. In any case, these guys were and still are a minority within the economic departments and their voices rarely scratch the media surface.

    A short and simplified story but, that's how I would describe the current crisis and for good reason (there are very strong empirical indications to prove it). It's not a mere institutional failure crisis but a structural one. If I had to suggest a theoretical framework I would look into Kondratiev wave and tendency of the rate of profit to fall. Sure, deregulation determined the form of the crisis and the crisis point (and to some extent its intensity). It also determined some symptoms of the crisis (eg huge state deficits to rescue the hypertrophic financial sector). But even if we suppose that financial markets were regulated properly, I can hardly imagine how would we avoid the crash.
    Very good points!

    Deregulation--->toxic assets--->crash.

    I would like to discuss your last statement regarding regulation because I believe we could have and always can prevent a large scale crisis like the one we had in 08. Imagine if derivatives, the financial product that Warren Buffet famously described as "Weapons of Mass Destruction", were never allowed to have been created in the first place. A product, that in 1970 didn't really exist, but in 2010 the estimated floating product is well over $40 trillion bare minimum! That's right... bare minimum! That is among the lowest ball park estimate of their estimated value! Nobody know's exactly how much is floating out there in the form of credit as no one knows how to classify them hence there is no legal obligation to record, track, or even capitalize it. In terms of capital there is less than $100 billion, probably close to $30-60 billion. Again, no one is sure exactly but that is what they estimate. And that is the derivatives market alone! We still have gaps in the accounting rules of numbers of other toxic assets, specifically swaps.

    Anyways, if we had the proper regulation there never would have been a crisis because mortgage lenders would have been regulated i.e. not cheating people into and then out of homes. So we never would have had a housing bubble (the initial and main cause for the collapse of 08). Meaning we would have steady interest rates, manageable inflation, and a healthy economy. Speculation wouldn't exist, meaning the commodities markets would be stable leading to greatly reduced costs in such commodities as food, gasoline, and energy. Goldman Sachs, Citi, JpMorgan, BoA, etc. Would be greatly diminished in size and market power, if they existed at all. Trans-state banking gone! Money would flow to manufacturing and jobs, without the meddling of corrupt politicians leading to a stronger government who would have greater opportunity to look after the people and continue to enable the creation of jobs, wealth, and happy families.

    The opportunities are really endless!


    Cheers!
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    Very good points!

    Deregulation--->toxic assets--->crash.

    I would like to discuss your last statement regarding regulation because I believe we could have and always can prevent a large scale crisis like the one we had in 08. Imagine if derivatives, the financial product that Warren Buffet famously described as "Weapons of Mass Destruction", were never allowed to have been created in the first place. A product, that in 1970 didn't really exist, but in 2010 the estimated floating product is well over $40 trillion bare minimum! That's right... bare minimum! That is among the lowest ball park estimate of their estimated value! Nobody know's exactly how much is floating out there in the form of credit as no one knows how to classify them hence there is no legal obligation to record, track, or even capitalize it. In terms of capital there is less than $100 billion, probably close to $30-60 billion. Again, no one is sure exactly but that is what they estimate. And that is the derivatives market alone! We still have gaps in the accounting rules of numbers of other toxic assets, specifically swaps.

    Anyways, if we had the proper regulation there never would have been a crisis because mortgage lenders would have been regulated i.e. not cheating people into and then out of homes. So we never would have had a housing bubble (the initial and main cause for the collapse of 08). Meaning we would have steady interest rates, manageable inflation, and a healthy economy. Speculation wouldn't exist, meaning the commodities markets would be stable leading to greatly reduced costs in such commodities as food, gasoline, and energy. Goldman Sachs, Citi, JpMorgan, BoA, etc. Would be greatly diminished in size and market power, if they existed at all. Trans-state banking gone! Money would flow to manufacturing and jobs, without the meddling of corrupt politicians leading to a stronger government who would have greater opportunity to look after the people and continue to enable the creation of jobs, wealth, and happy families.

    The opportunities are really endless!


    Cheers!
    I agree 100%.

    I just point out the limits of regulation approach. There are serious indications that the global economy is entering the downward phase of a K-wave (and taking into consideration that the last upward phase was rather anemic) so we may argue that a crisis event was -more or less- inevitable. Of course ,under a different institutional framework (regulation, better economic research, etc) it could have been much better for the majority of people who lost their incomes and homes (probably the crisis would have come much earlier and with less intensity in the financial sector). or under a worse framework (eg monetarist/liberal approaches) the disaster could have been similar to the great depression.

    There's strong correlation between profitability and growth. It is a fact that accumulated capitals the last 30 years did not reinvested at large in manufacturing or similar sectors and the low profitability is the key mechanism behind this.--> Boubles occur when there's not enough investing incentives (and of course under the mechanisms of given institutions). To keep things simple let's argue that profitability is depended by 1) productivity growth and 2) large scale innovations (alongside intensification of production, wages, capital capacity utilization & time of rotation, etc). Both of the first 2 variables do not seem to be at their best (especially compared to the past; heavy engineering, railways, automobile production VS...... dot.com economy? Not even a joke). Thus, someone can argue that crash and recession will naturally occur. As far as I understand, financial crises are at some point, a symptom of systemic economic crises.
    Of course, financial/money circuit are to an extent, autonomous. Thus, even ghou regulation can eliminate crises that occur solely within financial circuit, it can hardly do anything in a systemic economic crisis.
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    Quote Originally Posted by Achilleas View Post


    Cheers!
    I agree 100%.

    I just point out the limits of regulation approach. There are serious indications that the global economy is entering the downward phase of a K-wave (and taking into consideration that the last upward phase was rather anemic) so we may argue that a crisis event was -more or less- inevitable. Of course ,under a different institutional framework (regulation, better economic research, etc) it could have been much better for the majority of people who lost their incomes and homes (probably the crisis would have come much earlier and with less intensity in the financial sector). or under a worse framework (eg monetarist/liberal approaches) the disaster could have been similar to the great depression.

    There's strong correlation between profitability and growth. It is a fact that accumulated capitals the last 30 years did not reinvested at large in manufacturing or similar sectors and the low profitability is the key mechanism behind this.--> Boubles occur when there's not enough investing incentives (and of course under the mechanisms of given institutions). To keep things simple let's argue that profitability is depended by 1) productivity growth and 2) large scale innovations (alongside intensification of production, wages, capital capacity utilization & time of rotation, etc). Both of the first 2 variables do not seem to be at their best (especially compared to the past; heavy engineering, railways, automobile production VS...... dot.com economy? Not even a joke). Thus, someone can argue that crash and recession will naturally occur. As far as I understand, financial crises are at some point, a symptom of systemic economic crises.
    Of course, financial/money circuit are to an extent, autonomous. Thus, even ghou regulation can eliminate crises that occur solely within financial circuit, it can hardly do anything in a systemic economic crisis.[/QUOTE]

    Good post but I couldn't help but think of Alan Greenspan when you mentioned crashes and recessions. He tested before a congressional committee that crashes and recessions were cyclical under normal market conditions. It turns out they were under Friedman-esque/Chicago school economics. Something Friedman himself didn't believe. Profitability is dependent on a number of things, not just productivity growth and large-scale innovation. There are also several ways to measure profitability in companies. Companies will decide how they want to state profitability on their financial statements depending on the company, industry, taxes, nation the company is operated out of, etc.

    Also, remember the law of diminishing marginal returns? Diminishing returns - Wikipedia, the free encyclopedia
    Eventually, investing into labor and other kinds of capital becomes becomes less and less attractive as the return on your investment becomes marginally lower the more you invest in it.

    You make an interesting point on bubbles but it's not quite right. Bubbles happen occur due to mismanagement i.e. when a company is over-leveraged. Let's say I'm a bank and you deposit $100 into a savings account with me. The FDIC requires me to hold on to 10% of that in case of an emergency, so now I have $90 that I can play with. Because I'm a bank I'm going to loan out that $90 to another bank or institution and I will charge them interest on that. That is what caused the controversy surrounding the "Too Big Too Fail" motto. Except, instead of savings banks, it was investment banking institutions, and rather than savings being the cause, it was toxic securities and loans like CIVS and other debt obligations.

    What is remarkable given the events that have taken place over the past five years is the lack of government oversight! Every mainstay institutional bank is running a marathon of debt and under-capitalization.

    That's what happens with Chicago-style economics!
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    Good post but I couldn't help but think of Alan Greenspan when you mentioned crashes and recessions. He tested before a congressional committee that crashes and recessions were cyclical under normal market conditions. It turns out they were under Friedman-esque/Chicago school economics. Something Friedman himself didn't believe. Profitability is dependent on a number of things, not just productivity growth and large-scale innovation. There are also several ways to measure profitability in companies. Companies will decide how they want to state profitability on their financial statements depending on the company, industry, taxes, nation the company is operated out of, etc.

    Also, remember the law of diminishing marginal returns? Diminishing returns - Wikipedia, the free encyclopedia
    Eventually, investing into labor and other kinds of capital becomes becomes less and less attractive as the return on your investment becomes marginally lower the more you invest in it.

    You make an interesting point on bubbles but it's not quite right. Bubbles happen occur due to mismanagement i.e. when a company is over-leveraged. Let's say I'm a bank and you deposit $100 into a savings account with me. The FDIC requires me to hold on to 10% of that in case of an emergency, so now I have $90 that I can play with. Because I'm a bank I'm going to loan out that $90 to another bank or institution and I will charge them interest on that. That is what caused the controversy surrounding the "Too Big Too Fail" motto. Except, instead of savings banks, it was investment banking institutions, and rather than savings being the cause, it was toxic securities and loans like CIVS and other debt obligations.

    What is remarkable given the events that have taken place over the past five years is the lack of government oversight! Every mainstay institutional bank is running a marathon of debt and under-capitalization.

    That's what happens with Chicago-style economics!
    Interesting points.

    First things first, when Alan Greenspan refers to cyclical recessions he has on his mind a RBC model at best; (stochastic) exogenous shocks create temporarily imbalances (mostly through the supply side) etc. These cycles has nothing to do with real world economies; I was talking about endogenous long term cyclical movements caused by the internal mechanisms of the economy. The whole concept of long term waves, is statistically verified, the problem is which theory explains these movements and there's a really interesting literature about that.

    Profitability can be written as:

    r = s/C, where s = total surplus value, C = the value of capital advanced, r= rate of profit;

    To keep things simple, I'll avoid maths but it can been shown that r(t), (where t=time) has its limit at 0, when t tends to infinity. (for a recent theoretical proof, eg Falling Rate of Profit and Overaccumulation in Marx and Keynes - Munich Personal RePEc Archive )

    Statistically, you can estimate profitability by using many indicators; you can use the above r (which is a marxist variant), you can use net profit rates, ROP (EC adjustments or NFA), ROA, ROIC( NIBCL & cash) etc. Quite interestingly, all(?)/major indicators can show the falling trend:

    (for a quick view, a few interesting charts)

    http://www.isj.org.uk/images/115/115harpro2.jpg
    http://www.workersliberty.org/system/files/graph1.png
    http://thepopularfront.files.wordpre...-of-profit.png
    http://thenextrecession.files.wordpr...1/image014.png
    http://thenextrecession.files.wordpr...1/image001.jpg
    http://img.scoop.co.nz/stories/image...307b69d76.jpeg


    As far as it concerns profitability, it is actually depended by "s" and "C" (s & C are depended by many other variables as well, some already mentioned). Investment decisions is another topic but, it can be assumed (since investments and profitability are strongly correlated) that Investments are positively related to rate of profit:
    I=I(r), I'(r)>0, even though neither I(r) , nor dI/dt are linear functions. (forward looking investors, uncertainty, taxation and other variables that affect decisions can be described best by chaotic movements).

    I'm trying to forget the law of diminishing returns since I am not a marginalist (kidding, but I get your point). Law of diminishing returns is a different thing than the tendency of the rate of profit to fall. The first law is a "natural" one since a production function is assumed (even though it doesn't exist necessarily; at least as a cobb-douglas function). Profitability in neoclassical economics is not well defined and there are several "black holes" and inconsistencies at microeconomic/capital theory. The second law is an economical one, since it measures values, not physical output. Rate of profit may fall while we assume constant returns to scale as well.

    There are many mechanisms through which we can describe bubbles, indeed. Ponzi schemes, extended fictitious capital, etc. I wasn't referring to a specific mechanism, I was just pointing out under which trends, the creation of huge bubbles is more likely to happen. Of course, institutions, legislation etc may have a more direct impact on the creation of a bubble. I agree with your argument. After all, monetary/financial phenomena can be so chaotic and autonomous in short term, that bubbles can be produced just like that. The very recent (fake) nobel prize in shiller is relative. (alongside other theories from fractals to other irrational/0 intelligence behaviors)
    As far as it concerns the housing bubble though, I do believe that it is closely related with the way US capitalism was functioning for more that 30 years, it wasn't just a financial phenomenon, but it had roots to the very core of the economic system.

    That's what happens with Chicago-style economics!
    Hah, I'd like to agree but I won't. We tend to believe that there's no regulation & state intervention. That's kinda wrong. There are tons of regulation. The problem is the way they are regulated. Also, even though the reaction was not the best one, (US) state was not obsessed with too much austerity. We never experienced (fortunately) hardcore shicago style economics (with exceptions like Chile's pinochet). I'd say that this is the end of the neoliberalist period. ( btw "Chicago style economics" were forgotten for more than 200 years and they should be forgotten again really soon)
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    Quote Originally Posted by Achilleas View Post
    Good post but I couldn't help but think of Alan Greenspan when you mentioned crashes and recessions. He tested before a congressional committee that crashes and recessions were cyclical under normal market conditions. It turns out they were under Friedman-esque/Chicago school economics. Something Friedman himself didn't believe. Profitability is dependent on a number of things, not just productivity growth and large-scale innovation. There are also several ways to measure profitability in companies. Companies will decide how they want to state profitability on their financial statements depending on the company, industry, taxes, nation the company is operated out of, etc.

    Also, remember the law of diminishing marginal returns? Diminishing returns - Wikipedia, the free encyclopedia
    Eventually, investing into labor and other kinds of capital becomes becomes less and less attractive as the return on your investment becomes marginally lower the more you invest in it.

    You make an interesting point on bubbles but it's not quite right. Bubbles happen occur due to mismanagement i.e. when a company is over-leveraged. Let's say I'm a bank and you deposit $100 into a savings account with me. The FDIC requires me to hold on to 10% of that in case of an emergency, so now I have $90 that I can play with. Because I'm a bank I'm going to loan out that $90 to another bank or institution and I will charge them interest on that. That is what caused the controversy surrounding the "Too Big Too Fail" motto. Except, instead of savings banks, it was investment banking institutions, and rather than savings being the cause, it was toxic securities and loans like CIVS and other debt obligations.

    What is remarkable given the events that have taken place over the past five years is the lack of government oversight! Every mainstay institutional bank is running a marathon of debt and under-capitalization.

    That's what happens with Chicago-style economics!
    Interesting points.

    First things first, when Alan Greenspan refers to cyclical recessions he has on his mind a RBC model at best; (stochastic) exogenous shocks create temporarily imbalances (mostly through the supply side) etc. These cycles has nothing to do with real world economies; I was talking about endogenous long term cyclical movements caused by the internal mechanisms of the economy. The whole concept of long term waves, is statistically verified, the problem is which theory explains these movements and there's a really interesting literature about that.

    Profitability can be written as:

    r = s/C, where s = total surplus value, C = the value of capital advanced, r= rate of profit;

    To keep things simple, I'll avoid maths but it can been shown that r(t), (where t=time) has its limit at 0, when t tends to infinity. (for a recent theoretical proof, eg Falling Rate of Profit and Overaccumulation in Marx and Keynes - Munich Personal RePEc Archive )

    Statistically, you can estimate profitability by using many indicators; you can use the above r (which is a marxist variant), you can use net profit rates, ROP (EC adjustments or NFA), ROA, ROIC( NIBCL & cash) etc. Quite interestingly, all(?)/major indicators can show the falling trend:

    (for a quick view, a few interesting charts)

    http://www.isj.org.uk/images/115/115harpro2.jpg
    http://www.workersliberty.org/system/files/graph1.png
    http://thepopularfront.files.wordpre...-of-profit.png
    http://thenextrecession.files.wordpr...1/image014.png
    http://thenextrecession.files.wordpr...1/image001.jpg
    http://img.scoop.co.nz/stories/image...307b69d76.jpeg


    As far as it concerns profitability, it is actually depended by "s" and "C" (s & C are depended by many other variables as well, some already mentioned). Investment decisions is another topic but, it can be assumed (since investments and profitability are strongly correlated) that Investments are positively related to rate of profit:
    I=I(r), I'(r)>0, even though neither I(r) , nor dI/dt are linear functions. (forward looking investors, uncertainty, taxation and other variables that affect decisions can be described best by chaotic movements).

    I'm trying to forget the law of diminishing returns since I am not a marginalist (kidding, but I get your point). Law of diminishing returns is a different thing than the tendency of the rate of profit to fall. The first law is a "natural" one since a production function is assumed (even though it doesn't exist necessarily; at least as a cobb-douglas function). Profitability in neoclassical economics is not well defined and there are several "black holes" and inconsistencies at microeconomic/capital theory. The second law is an economical one, since it measures values, not physical output. Rate of profit may fall while we assume constant returns to scale as well.

    There are many mechanisms through which we can describe bubbles, indeed. Ponzi schemes, extended fictitious capital, etc. I wasn't referring to a specific mechanism, I was just pointing out under which trends, the creation of huge bubbles is more likely to happen. Of course, institutions, legislation etc may have a more direct impact on the creation of a bubble. I agree with your argument. After all, monetary/financial phenomena can be so chaotic and autonomous in short term, that bubbles can be produced just like that. The very recent (fake) nobel prize in shiller is relative. (alongside other theories from fractals to other irrational/0 intelligence behaviors)
    As far as it concerns the housing bubble though, I do believe that it is closely related with the way US capitalism was functioning for more that 30 years, it wasn't just a financial phenomenon, but it had roots to the very core of the economic system.

    That's what happens with Chicago-style economics!
    Hah, I'd like to agree but I won't. We tend to believe that there's no regulation & state intervention. That's kinda wrong. There are tons of regulation. The problem is the way they are regulated. Also, even though the reaction was not the best one, (US) state was not obsessed with too much austerity. We never experienced (fortunately) hardcore shicago style economics (with exceptions like Chile's pinochet). I'd say that this is the end of the neoliberalist period. ( btw "Chicago style economics" were forgotten for more than 200 years and they should be forgotten again really soon)
    Great post!

    Everything made wonderful sense but now I am curious as to what you think the problem is with our economic system? You seem to have a good grasp of the big picture so I'm confused as to why you think it has something to do with our economic system.

    The only area I disagree with you on is in regard to regulation. There are a lot of regulatory agencies but hardly anyone is doing any regulating and in addition the regulatory laws and provisions we had thirty years ago are all but gone. For example the Riegle-Neal Act of 94 and the Gramm-Leach-Bliley of 99 which pretty much killed Glass-Steagall and reversed interstate banking restrictions and destroyed the dividing wall between savings and investment banks.

    The housing does indeed have everything to do with the way capitalism was functioning. Deregulation which gained steam under the Reagan administration is largely to blame and that course just continued administration after administration.

    What is wrong with regulation? The whole reason we are in this mess is because of deregulation, which created its own multiplier effect on the economy and rippled out towards the rest of the world.

    Again, very informative reply.


    Cheers!
    [Analyst/Engineer/Independent]

    "SPEAK SOFTLY AND CARRY A BIG STICK"
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    Quote Originally Posted by Stanley514 View Post
    When I look at Employment by major industry sector statistic for U.S., this list seems unbelievable to me. For example, they state that U.S. government employs more people then work in manufacturing (and it doesn't include federal govt. employees). Service providers employ more than 6 times of people than manufacturing and this service providers do NOT include such industries as: 1) Retail and Wholesale trade which employ many more people than manufacturing. 2)
    Professional and business services which employs almost as much 3) Health care and social assistance 4) Leisure and hospitality; each of them employs approximately as much as 80% from those who work in manufacturing and many more. Financial activities employ more than 5% of population. Employment by major industry sector Sorry but what is really necessary amount of people who suppose to work in such industries? For example: how often an average American deals with bank cashier or worker, and how long on average it takes for a bank cashier to serve a client? Currently Americans use ATM's and credit cards more often than deal with alive bank cashier. But even if an average person goes to see alive bank cashier once a month and it takes 10 minutes to serve on average, than 1 bank teller could serve 10560 clients and you need only 0.01% of population working as bank tellers. What is exactly leisure and hospitality services or "professional and business services" and who exactly in such a huge numbers work there and what are they doing? I always though that most of added value is created in manufacturing and it is manufacturing which defines wealth of country. People spend more money on manufacturing goods than on services. How then such system could work that manufacturing creates most of added value and employs only 10% of population? And huge majority create little added value and still have pristine life and salaries which are often higher than those of manufacturing workers? What taxes manufacturing companies suppose to pay, and how huge govt. expendetures suppose to be in order for such system to exist? U.S. is claimed as system with moderate or even low corporate taxes. But it makes such system even more impossible. How money redistribution happens? Services require much less investments and high skills than manufacturing. Do you think that such country as Brazil or Mexico has lack of some services? It is manufacturing which defines wealth of nation in my understanding.
    Hey there Stanley,

    I believe you have a lot of research and reading to do unless someone else wants to provide answer to every question you have made. I will however say that historically manufacturing did define growth and the health of a nation. However due to a number of reasons the U.S. the most important of which is labor-export, the U.S. is slowly shifting towards a services economy. One of the reasons for it is due to our financial sector and in the words of Robert Reich "supercapitalism".
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    Quote Originally Posted by Stanley514 View Post
    When I look at Employment by major industry sector statistic for U.S., this list seems unbelievable to me. For example, they state that U.S. government employs more people then work in manufacturing (and it doesn't include federal govt. employees). Service providers employ more than 6 times of people than manufacturing and this service providers do NOT include such industries as: 1) Retail and Wholesale trade which employ many more people than manufacturing. 2)
    Professional and business services which employs almost as much 3) Health care and social assistance 4) Leisure and hospitality; each of them employs approximately as much as 80% from those who work in manufacturing and many more. Financial activities employ more than 5% of population. Employment by major industry sector Sorry but what is really necessary amount of people who suppose to work in such industries? For example: how often an average American deals with bank cashier or worker, and how long on average it takes for a bank cashier to serve a client? Currently Americans use ATM's and credit cards more often than deal with alive bank cashier. But even if an average person goes to see alive bank cashier once a month and it takes 10 minutes to serve on average, than 1 bank teller could serve 10560 clients and you need only 0.01% of population working as bank tellers. What is exactly leisure and hospitality services or "professional and business services" and who exactly in such a huge numbers work there and what are they doing? I always though that most of added value is created in manufacturing and it is manufacturing which defines wealth of country. People spend more money on manufacturing goods than on services. How then such system could work that manufacturing creates most of added value and employs only 10% of population? And huge majority create little added value and still have pristine life and salaries which are often higher than those of manufacturing workers? What taxes manufacturing companies suppose to pay, and how huge govt. expendetures suppose to be in order for such system to exist? U.S. is claimed as system with moderate or even low corporate taxes. But it makes such system even more impossible. How money redistribution happens? Services require much less investments and high skills than manufacturing. Do you think that such country as Brazil or Mexico has lack of some services? It is manufacturing which defines wealth of nation in my understanding.
    What is exactly leisure and hospitality services
    Hotels, Resorts.

    The rest I'll leave to others.
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    Great post!

    Everything made wonderful sense but now I am curious as to what you think the problem is with our economic system? You seem to have a good grasp of the big picture so I'm confused as to why you think it has something to do with our economic system.

    The only area I disagree with you on is in regard to regulation. There are a lot of regulatory agencies but hardly anyone is doing any regulating and in addition the regulatory laws and provisions we had thirty years ago are all but gone. For example the Riegle-Neal Act of 94 and the Gramm-Leach-Bliley of 99 which pretty much killed Glass-Steagall and reversed interstate banking restrictions and destroyed the dividing wall between savings and investment banks.

    The housing does indeed have everything to do with the way capitalism was functioning. Deregulation which gained steam under the Reagan administration is largely to blame and that course just continued administration after administration.

    What is wrong with regulation? The whole reason we are in this mess is because of deregulation, which created its own multiplier effect on the economy and rippled out towards the rest of the world.

    Again, very informative reply.


    Cheers!
    One of the fundamental problems is that capitalism is crisis prone. Thus, unemployment and inequalities* are organic components of the system (to some extent) . Furthermore, the system recovers when profitability rises and that can happen by certain ways- usually through depreciation (that creates unemployment) and by rising the surplus rate (by reducing the real wages) and that's not a positive process for the majority of us.

    *(which can occur in sunny days as well/jobless recoveries are well known; we are in a jobless recovery right know actually)

    Another fundamental problem could be the power that money gives to certain people from certain social classes. (of course that's true for almost each economic system but, only within capitalism money becomes an internal vital component of the economic system). The so called "parties of the wall street" is a procuratorial example. Each one controls congress and political parties in numerous ways and the same thing occurs in the whole world. Therefore, wen a situation is not a "win-win" then someone looses and usually, we loose. Deregulation and banking protection can be explained by that among others.

    But the biggest problem I would mention is... growth. Capitalism is about constant, 3-5% compound growth for ever. As far as I understand this can not go on forever. We can see that happening right now, it's not a coincidence that the last 30 years so vast amounts of capital has been invested in derivatives, derivatives of derivatives, insurance of derivatives of derivatives, financial markets, etc instead of production. Of course this is not the main problem of the underdeveloped/undeveloped/developing countries. But for the heart of the system- and by that I mean the richest countries in the world- I think that this compound growth is not possible. Think of the most volatile and important variable of the system- investments. There are limits. Think of the resources, the geographical space, environmental issues, the above discussion about profitability, etc. I believe that productive capabilities are more than enough to satisfy the vast majority of social needs therefore a system that still focuses on compound growth may gradually loose its effectiveness. Historically, it was a very successful system since the production has followed exponential growth but we should start to think of any alternatives that can gradually replace it.

    For example, I would suggest to focus on a zero growth- positive development model. All these interesting things about "human capital" etc can become relevant. Distribution of wealth, more free time for human development, more freedom, democracy and diversity, etc may be things that we should consider.


    Stanley514 you make a great point, we should really discuss about what is productive and unproductive labour (shouldn't it be in another thread?)
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    I'm afraid that such type of hypothetical model will sound quite dangerous to proponents of capitalism. Because it is often claimed that capitalism has faster growth rates than any kind of socialism, regardless if it's true or not.
    I intentionally didn't mention socialism because I don't know if the name is appropriate. I just believe that there's no need for more growth in some countries (job generating process could be achieved by other means) mostly because after a turning point, it creates more negative than positive effects.

    Of course capitalism is a very successful system in terms of growth rates. This is absolutely true. Quite interestingly, for USSR (according to some CIA reviews) it is said that have reached even 25% growth rates, unfortunately I can't find the relative papers to verify this info. For China and India more research has been done. They actually used models like "Feldman-Mahalanobis" (with the so called "5 year plans") quite successfully with high and stable growth rates for decades. (Feldman-Mahalanobis Model )

    That's why I avoided to mention any kind of socialism or any similar political term. I didn't have on my mind a Feldman model nor a similar growth model. I would really like to find out if a zero growth model is sustainable and under which conditions (eg feudalism was a zero growth model but obviously I don't have such a thing on my mind). It may be impossible even though I'm not convinced yet.
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    Quote Originally Posted by Achilleas View Post

    One of the fundamental problems is that capitalism is crisis prone. Thus, unemployment and inequalities* are organic components of the system (to some extent) . Furthermore, the system recovers when profitability rises and that can happen by certain ways- usually through depreciation (that creates unemployment) and by rising the surplus rate (by reducing the real wages) and that's not a positive process for the majority of us.

    *(which can occur in sunny days as well/jobless recoveries are well known; we are in a jobless recovery right know actually)

    Another fundamental problem could be the power that money gives to certain people from certain social classes. (of course that's true for almost each economic system but, only within capitalism money becomes an internal vital component of the economic system). The so called "parties of the wall street" is a procuratorial example. Each one controls congress and political parties in numerous ways and the same thing occurs in the whole world. Therefore, wen a situation is not a "win-win" then someone looses and usually, we loose. Deregulation and banking protection can be explained by that among others.

    But the biggest problem I would mention is... growth. Capitalism is about constant, 3-5% compound growth for ever. As far as I understand this can not go on forever. We can see that happening right now, it's not a coincidence that the last 30 years so vast amounts of capital has been invested in derivatives, derivatives of derivatives, insurance of derivatives of derivatives, financial markets, etc instead of production. Of course this is not the main problem of the underdeveloped/undeveloped/developing countries. But for the heart of the system- and by that I mean the richest countries in the world- I think that this compound growth is not possible. Think of the most volatile and important variable of the system- investments. There are limits. Think of the resources, the geographical space, environmental issues, the above discussion about profitability, etc. I believe that productive capabilities are more than enough to satisfy the vast majority of social needs therefore a system that still focuses on compound growth may gradually loose its effectiveness. Historically, it was a very successful system since the production has followed exponential growth but we should start to think of any alternatives that can gradually replace it.

    For example, I would suggest to focus on a zero growth- positive development model. All these interesting things about "human capital" etc can become relevant. Distribution of wealth, more free time for human development, more freedom, democracy and diversity, etc may be things that we should consider.


    Stanley514 you make a great point, we should really discuss about what is productive and unproductive labour (shouldn't it be in another thread?)
    Correct me if I'm wrong but it sounds like you're against capitalism and for something akin to a planned-economy, almost Marxism.

    Capitalism is generally crisis prone when there is either too much government or too little. There is a fine point of balance.

    What would the benefits be of a zero-growth-positive development model in terms of labor? Would higher education still be relevant?


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    Correct me if I'm wrong but it sounds like you're against capitalism and for something akin to a planned-economy, almost Marxism.

    Capitalism is generally crisis prone when there is either too much government or too little. There is a fine point of balance.

    What would the benefits be of a zero-growth-positive development model in terms of labor? Would higher education still be relevant?
    I'm definitely against capitalism; I don't blame all the existed markets though, they are a necessity and there always must be space for them. I also believe that some short of planned economy can function even within capitalism and it does since states finance R&D, have trade policy, carrots and sticks, etc. Of course there are more radically planed economies (China and india for example) with rather impressive growth rates. Planning can function within or without capitalism. It can not replace all markets though. I would say that each country should have some strategic goals (eg high tech agricultural sector, tourism, petrochemical processing sector or whatever) and to some extend should organise and plan its whole function to achieve these goals. You can't (and never should try to) plan music industry or grocery markets but it can work in large scale investments and in crucial and strategic sectors.

    Marxism...? Hm, a short of. Marxism is a school of economic thought. Marx's main work is about capitalism, not socialism. As far as it concerns ussr, china, cuba, etc well, that's not the Marxism I'm talking about. This societies have failed in many ways therefore we should critique them as much as we critique western societies or even more.
    I think I like the forces of social change. I can not say many things about that, I'm not a philosopher nor a sociologist, I'm just trying to think out of the box. I could propose very few characteristics like democracy, diversity, decentralized bottom-up decision-making, and this kind of staff. If we were back at 1700 I would be a capitalism-lover, for sure. As a system, it had been rather creative for centuries but I believe that there is a limit. I don't think that capitalism at its current state is as productivr and creative as it used to be, at least at the heart of the system. Sure, there are very ingenious and useful thoughts about how to manage and solve its inefficiencies etc (especially by post- Keynesians, behavioral finance theorists, etc) but its extreme point in terms of usefulness occurs as long as they remain within the given framework.

    Of course there can be a balance. How stable though? Chaotic dynamics could teach us a lot about non linear behavior. You may think that economy is ok, that you've found the equilibrium and then you're at a disequilibrium, destabilizing, crisis prone economy, again.

    I actually believe that in a zero growth model education can shine. Social inequalities are reproduced to some extend through the educational system. In a more equal society, educational systems could function better, letting people to maximize their abilities and skills. To give an example, think of all the sciences that are not "merchantable". Sociology, history, some economic disciplines (eg economic history/cleometrics or political economy), some disciplines of geography (eg paleogeography) etc. They tend to be extinguished by many "market-friendly" universities. Or another example, I do like crisis theories and cleometrics but I'll probably work as an accountan, since cleometricians are not useful for the vast majority of corporations.

    I definitely don't have any clear answer. Do you believe that a better regulated capitalism, more ethical etc provides the optimal economic system?
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    Quote Originally Posted by Achilleas View Post
    Correct me if I'm wrong but it sounds like you're against capitalism and for something akin to a planned-economy, almost Marxism.

    Capitalism is generally crisis prone when there is either too much government or too little. There is a fine point of balance.

    What would the benefits be of a zero-growth-positive development model in terms of labor? Would higher education still be relevant?
    I'm definitely against capitalism; I don't blame all the existed markets though, they are a necessity and there always must be space for them. I also believe that some short of planned economy can function even within capitalism and it does since states finance R&D, have trade policy, carrots and sticks, etc. Of course there are more radically planed economies (China and india for example) with rather impressive growth rates. Planning can function within or without capitalism. It can not replace all markets though. I would say that each country should have some strategic goals (eg high tech agricultural sector, tourism, petrochemical processing sector or whatever) and to some extend should organise and plan its whole function to achieve these goals. You can't (and never should try to) plan music industry or grocery markets but it can work in large scale investments and in crucial and strategic sectors.

    Marxism...? Hm, a short of. Marxism is a school of economic thought. Marx's main work is about capitalism, not socialism. As far as it concerns ussr, china, cuba, etc well, that's not the Marxism I'm talking about. This societies have failed in many ways therefore we should critique them as much as we critique western societies or even more.
    I think I like the forces of social change. I can not say many things about that, I'm not a philosopher nor a sociologist, I'm just trying to think out of the box. I could propose very few characteristics like democracy, diversity, decentralized bottom-up decision-making, and this kind of staff. If we were back at 1700 I would be a capitalism-lover, for sure. As a system, it had been rather creative for centuries but I believe that there is a limit. I don't think that capitalism at its current state is as productivr and creative as it used to be, at least at the heart of the system. Sure, there are very ingenious and useful thoughts about how to manage and solve its inefficiencies etc (especially by post- Keynesians, behavioral finance theorists, etc) but its extreme point in terms of usefulness occurs as long as they remain within the given framework.

    Of course there can be a balance. How stable though? Chaotic dynamics could teach us a lot about non linear behavior. You may think that economy is ok, that you've found the equilibrium and then you're at a disequilibrium, destabilizing, crisis prone economy, again.

    I actually believe that in a zero growth model education can shine. Social inequalities are reproduced to some extend through the educational system. In a more equal society, educational systems could function better, letting people to maximize their abilities and skills. To give an example, think of all the sciences that are not "merchantable". Sociology, history, some economic disciplines (eg economic history/cleometrics or political economy), some disciplines of geography (eg paleogeography) etc. They tend to be extinguished by many "market-friendly" universities. Or another example, I do like crisis theories and cleometrics but I'll probably work as an accountan, since cleometricians are not useful for the vast majority of corporations.

    I definitely don't have any clear answer. Do you believe that a better regulated capitalism, more ethical etc provides the optimal economic system?
    I am against any economic model that is not consistent with the principles of capitalism. I say this because capitalism is the only proven and successful economic model in the history of man. A problem with a planned-economy, like communism, is the far-fetched ideology that goes against reality. If everyone earns the same amount of money given any job then the less likely it is that anyone will want to innovate, create, start a business, etc. It's pretty much the destruction of corporate business as well. The computer you're using is the result of capitalism and, unless you live in North Korea, it can be argued that you and everything about you is the result of capitalism in some direct or indirect way.

    Universities don't necessarily cater to any one field or another. Some happen to have a larger emphasis on others depending on a number of factors but your last paragraph isn't quite right. How do you figure universities cater to the more "merchantable' fields? For example sociology isn't in as much demand as computer science because of supply and demand. That is the beauty of capitalism: the quest to equilibrium. If you have any other economic system you run into huge swings of surpluses and deficits in both the financial and labor side of the equation.

    To answer your last question: I do believe in having a regulated capitalism. Not full-on socialism, but a free-market whose invisible hand is a healthy amount of regulation that does not quench market sustainability.


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    I am against any economic model that is not consistent with the principles of capitalism. I say this because capitalism is the only proven and successful economic model in the history of man. A problem with a planned-economy, like communism, is the far-fetched ideology that goes against reality. If everyone earns the same amount of money given any job then the less likely it is that anyone will want to innovate, create, start a business, etc. It's pretty much the destruction of corporate business as well. The computer you're using is the result of capitalism and, unless you live in North Korea, it can be argued that you and everything about you is the result of capitalism in some direct or indirect way.

    Universities don't necessarily cater to any one field or another. Some happen to have a larger emphasis on others depending on a number of factors but your last paragraph isn't quite right. How do you figure universities cater to the more "merchantable' fields? For example sociology isn't in as much demand as computer science because of supply and demand. That is the beauty of capitalism: the quest to equilibrium. If you have any other economic system you run into huge swings of surpluses and deficits in both the financial and labor side of the equation.

    To answer your last question: I do believe in having a regulated capitalism. Not full-on socialism, but a free-market whose invisible hand is a healthy amount of regulation that does not quench market sustainability.
    What we consider as reality was science fiction 500 years ago. For example, a representative Fief from feudalism would understood nothing about capitalist "rational" behavior. He would think of capitalism as "evil" that disrupts Christianity and natural order. Today this argument would be nonsense. People are "trained" to react and believe certain things.

    I do agree with you that self-interest motives can greatly enhance someones creativity and abilities, no doubt. There are many reasons the old kind of communism has failed but I have my doubts that its failure is caused by the "rejection" of reality. We should criticize its disfunctionality and learn as many things as we learn by capitalist crises.
    That is my point actually, you can't plan everything and you can't plan at all in a hyper-centralised system. You need decentralized, bottom-up systems, etc. On the other hand you can't let everything function under the so called "invisible hand". Quite interestingly, the invisible hand can function under each system as well and it's a shame that liberals claim the exclusives of the term.

    I'm not trying to excuse or justify ussr and authoritarian systems or anything, I just don't understand why there's only one optimal way to organise the society. Actually, I think that capitalism is far from "optimal" system since it's vulnerable in crisis events, unemployment and inequalities as I tried to prove. By the way, socialism is not about equal incomes. Income distribution follows its patterns in each system. To claim that wealth should be distributed perfectly equally is madness; current inequalities though is madness too.

    I'm willing to see the capitalism you describe, a well regulated, ethical capitalism. We're on the same side here.

    So, we should make a poll. Which socioeconomic system do you suggest? :P
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    Quote Originally Posted by Achilleas View Post
    I am against any economic model that is not consistent with the principles of capitalism. I say this because capitalism is the only proven and successful economic model in the history of man. A problem with a planned-economy, like communism, is the far-fetched ideology that goes against reality. If everyone earns the same amount of money given any job then the less likely it is that anyone will want to innovate, create, start a business, etc. It's pretty much the destruction of corporate business as well. The computer you're using is the result of capitalism and, unless you live in North Korea, it can be argued that you and everything about you is the result of capitalism in some direct or indirect way.

    Universities don't necessarily cater to any one field or another. Some happen to have a larger emphasis on others depending on a number of factors but your last paragraph isn't quite right. How do you figure universities cater to the more "merchantable' fields? For example sociology isn't in as much demand as computer science because of supply and demand. That is the beauty of capitalism: the quest to equilibrium. If you have any other economic system you run into huge swings of surpluses and deficits in both the financial and labor side of the equation.

    To answer your last question: I do believe in having a regulated capitalism. Not full-on socialism, but a free-market whose invisible hand is a healthy amount of regulation that does not quench market sustainability.
    What we consider as reality was science fiction 500 years ago. For example, a representative Fief from feudalism would understood nothing about capitalist "rational" behavior. He would think of capitalism as "evil" that disrupts Christianity and natural order. Today this argument would be nonsense. People are "trained" to react and believe certain things.

    I do agree with you that self-interest motives can greatly enhance someones creativity and abilities, no doubt. There are many reasons the old kind of communism has failed but I have my doubts that its failure is caused by the "rejection" of reality. We should criticize its disfunctionality and learn as many things as we learn by capitalist crises.
    That is my point actually, you can't plan everything and you can't plan at all in a hyper-centralised system. You need decentralized, bottom-up systems, etc. On the other hand you can't let everything function under the so called "invisible hand". Quite interestingly, the invisible hand can function under each system as well and it's a shame that liberals claim the exclusives of the term.

    I'm not trying to excuse or justify ussr and authoritarian systems or anything, I just don't understand why there's only one optimal way to organise the society. Actually, I think that capitalism is far from "optimal" system since it's vulnerable in crisis events, unemployment and inequalities as I tried to prove. By the way, socialism is not about equal incomes. Income distribution follows its patterns in each system. To claim that wealth should be distributed perfectly equally is madness; current inequalities though is madness too.

    I'm willing to see the capitalism you describe, a well regulated, ethical capitalism. We're on the same side here.

    So, we should make a poll. Which socioeconomic system do you suggest? :P
    There may be more than way optimal way to organize society with regard to economic growth however thus far one has not originated and capitalism is on top. Socialism is not a good way to go. The government would essentially own everything and history has proven that when government runs things, efficiency falls, innovation crumbles, and chaos ensues. One of the main reasons why is because of a lack of competition; competition drives innovation. If you and I are running lemonade stands and selling equal amount of lemonade for the same price but no one is buying from me and instead, are flocking to you, I'm going to get curious as to why that is. Maybe you have flashier signs, you're better looking, or perhaps you lemonade is better than mine! Now I will research and innovate to find a recipe that is better than yours so I can attract more customers. This doesn't exist in a socialist economy. If we were in a socialist country we could only sell X amount of lemonade and such and such cost not due to market forces like supply and demand, but rather because society dictates we can only sell so much at such a price. This is one reason why Fannie and Freddie are hated upon by major banks and lenders (one of the few issues I agree with them on). Fannie and Freddie have the backing of the government which gives them an unfair advantage. Yeah it's great for them but bad for everyone else. Currently and historically in the U.S. we have a mix of a capitalist/socialist society where government creates rules and regulations for which business must adhere to but are still free to sell whatever they want at whatever price they want.

    I'm not sure what your definition of "optimal" is but if you find one that works better than capitalism let Krugman, Reich, and the rest of us know!
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    Quote Originally Posted by Stanley514 View Post
    The computer you're using is the result of capitalism and, unless you live in North Korea, it can be argued that you and everything about you is the result of capitalism in some direct or indirect way.
    Do all capitalist countries invented and produce computers? What was invented in post-communist countries or in more then 1 billion India? And "everything around" is a bit exaggeration. The only major fields that emerged in the last 70 years is only microelectronics and computers. For an average person it means "only" Internet, computer games and wireless communication. That's good but still not too much to tell about total revolution in life standards. Personally, I would prefer to live in a country with almost guarantied employment, no unemployment, economic democracy, pristine job and pristine salary and give up computer games and wireless communication. I think the number of inventions that happened in the last decades is rather not to high. And if development of computers will lead to establishing of the Matrix and somebody will keep me there involuntarily then it as bad at all. But in any case it would be slavery system already and not a capitalism. Capitalism is back to slavery system?
    Not all capitalist countries produce the same thing nor do they offer the same services, that is the brilliance of capitalism. For example, here in the U.S. we have the capability to produce planes of any kind and any size. From 747's to little Cubs. However, there is niche of medium-sized jets like Lear that are produced in Brazil because of a trade-off advantage. It's actually cheaper for them to be built there as opposed to here. They also purchase large planes from us because it's more economical to do so, not because they can't. --that said they also have a growing aerospace industry.

    There are thousands of fields comprising hundreds of millions if not billions of devices, gadgets, parts, science, and knowledge that have been the result of capitalism in one way or another. One reason why is due to competition, which drives innovation and in turn increases growth.

    Also, your ideal is currently unrealistic by every metric, even under capitalism. Let's say you are the president of the U.S., how are you going to create a system where everyone has a pristine job, no unemployment, guaranteed employment, democracy, and all those things you say? If it were possible don't you think it would have been done by now? Who is going to clean the bathrooms? That's not a pristine job! Who is going to mine the ore that is used in cars, computers, and thousands of other industries? That isn't a pristine job either! The fact is, if it were possible it would have been done by now!


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    Quote Originally Posted by Stanley514 View Post
    The only major fields that emerged in the last 70 years is only microelectronics and computers.
    I'm not sure if you are joking or not. Molecular biology? Genetic engineering? Forensics? International aviation? Aerospace technologies? Polymer chemistry? Did you forget about these?

    For an average person it means "only" Internet, computer games and wireless communication. That's good but still not too much to tell about total revolution in life standards.
    Or:
    ubiquitous communication
    antibiotics
    chemotherapy
    commercial aviation
    ubiquitous access to vehicles

    Those all seem to affect people a lot.

    Personally, I would prefer to live in a country with almost guarantied employment, no unemployment, economic democracy, pristine job and pristine salary and give up computer games and wireless communication.
    What's a "pristine salary?" Exactly what you need to live on and not a penny more?
    What's "economic democracy?" A system where the government forced companies to do what people wanted?
    And why would you have to give up cellphones to achieve any of that?

    I think the number of inventions that happened in the last decades is rather not to high.
    Still not sure if you're joking. Especially since you are posting on an Internet site.

    And if development of computers will lead to establishing of the Matrix and somebody will keep me there involuntarily then it as bad at all. But in any case it would be slavery system already and not a capitalism. Capitalism is back to slavery system?
    I don't think you have to worry about the world becoming The Matrix.
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    Quote Originally Posted by Eighty88 View Post
    Quote Originally Posted by Achilleas View Post
    Correct me if I'm wrong but it sounds like you're against capitalism and for something akin to a planned-economy, almost Marxism.

    Capitalism is generally crisis prone when there is either too much government or too little. There is a fine point of balance.

    What would the benefits be of a zero-growth-positive development model in terms of labor? Would higher education still be relevant?
    I'm definitely against capitalism; I don't blame all the existed markets though, they are a necessity and there always must be space for them. I also believe that some short of planned economy can function even within capitalism and it does since states finance R&D, have trade policy, carrots and sticks, etc. Of course there are more radically planed economies (China and india for example) with rather impressive growth rates. Planning can function within or without capitalism. It can not replace all markets though. I would say that each country should have some strategic goals (eg high tech agricultural sector, tourism, petrochemical processing sector or whatever) and to some extend should organise and plan its whole function to achieve these goals. You can't (and never should try to) plan music industry or grocery markets but it can work in large scale investments and in crucial and strategic sectors.

    Marxism...? Hm, a short of. Marxism is a school of economic thought. Marx's main work is about capitalism, not socialism. As far as it concerns ussr, china, cuba, etc well, that's not the Marxism I'm talking about. This societies have failed in many ways therefore we should critique them as much as we critique western societies or even more.
    I think I like the forces of social change. I can not say many things about that, I'm not a philosopher nor a sociologist, I'm just trying to think out of the box. I could propose very few characteristics like democracy, diversity, decentralized bottom-up decision-making, and this kind of staff. If we were back at 1700 I would be a capitalism-lover, for sure. As a system, it had been rather creative for centuries but I believe that there is a limit. I don't think that capitalism at its current state is as productivr and creative as it used to be, at least at the heart of the system. Sure, there are very ingenious and useful thoughts about how to manage and solve its inefficiencies etc (especially by post- Keynesians, behavioral finance theorists, etc) but its extreme point in terms of usefulness occurs as long as they remain within the given framework.

    Of course there can be a balance. How stable though? Chaotic dynamics could teach us a lot about non linear behavior. You may think that economy is ok, that you've found the equilibrium and then you're at a disequilibrium, destabilizing, crisis prone economy, again.

    I actually believe that in a zero growth model education can shine. Social inequalities are reproduced to some extend through the educational system. In a more equal society, educational systems could function better, letting people to maximize their abilities and skills. To give an example, think of all the sciences that are not "merchantable". Sociology, history, some economic disciplines (eg economic history/cleometrics or political economy), some disciplines of geography (eg paleogeography) etc. They tend to be extinguished by many "market-friendly" universities. Or another example, I do like crisis theories and cleometrics but I'll probably work as an accountan, since cleometricians are not useful for the vast majority of corporations.

    I definitely don't have any clear answer. Do you believe that a better regulated capitalism, more ethical etc provides the optimal economic system?
    I am against any economic model that is not consistent with the principles of capitalism. I say this because capitalism is the only proven and successful economic model in the history of man. A problem with a planned-economy, like communism, is the far-fetched ideology that goes against reality. If everyone earns the same amount of money given any job then the less likely it is that anyone will want to innovate, create, start a business, etc. It's pretty much the destruction of corporate business as well. The computer you're using is the result of capitalism and, unless you live in North Korea, it can be argued that you and everything about you is the result of capitalism in some direct or indirect way.

    Universities don't necessarily cater to any one field or another. Some happen to have a larger emphasis on others depending on a number of factors but your last paragraph isn't quite right. How do you figure universities cater to the more "merchantable' fields? For example sociology isn't in as much demand as computer science because of supply and demand. That is the beauty of capitalism: the quest to equilibrium. If you have any other economic system you run into huge swings of surpluses and deficits in both the financial and labor side of the equation.

    To answer your last question: I do believe in having a regulated capitalism. Not full-on socialism, but a free-market whose invisible hand is a healthy amount of regulation that does not quench market sustainability.


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    My mother lived under that. My entire family in Europe lived under that. Capitalism ROCKS!
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    Quote Originally Posted by Eighty88 View Post
    To answer your last question: I do believe in having a regulated capitalism. Not full-on socialism, but a free-market whose invisible hand is a healthy amount of regulation that does not quench market sustainability.Cheers!
    While our religious views couldn't be further apart...our economic ones are nearly identical. Cheers to you!
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    So, I guess we are the minority here :P

    We all live in capitalist countries and is more than normal to buy goods produced under these circumstances. How could I ever use a computer or any other good produced in a system that doesn't even exist? (exception, I have an old uusr clock from my granda but, that's not the system I'm talking about)

    There are thousands of fields comprising hundreds of millions if not billions of devices, gadgets, parts, science, and knowledge that have been the result of capitalism in one way or another. One reason why is due to competition, which drives innovation and in turn increases growth.
    You said the magic word. Competition. That's what makes capitalism go round. More than 70% of this thread is about competition. Through competition production is increased, innovations are discovered, productivity grows, etc. But, at the same time through competition are generated unemployment, bubbles, inequalities, profitability slows down and real wages are falling. That's a contradiction, isn't it? And that should be my conclusion. These phenomena are the two sides of the same coin. Someone can focus on the one side or the other but under capitalism I can't see a way to eliminate the negative phenomena. Is that a problem? For some people, maybe not. For others, it is. It's a matter of understanding, personal interests and preferences, etc.
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    Quote Originally Posted by Achilleas View Post
    So, I guess we are the minority here :P

    We all live in capitalist countries and is more than normal to buy goods produced under these circumstances. How could I ever use a computer or any other good produced in a system that doesn't even exist? (exception, I have an old uusr clock from my granda but, that's not the system I'm talking about)

    There are thousands of fields comprising hundreds of millions if not billions of devices, gadgets, parts, science, and knowledge that have been the result of capitalism in one way or another. One reason why is due to competition, which drives innovation and in turn increases growth.
    You said the magic word. Competition. That's what makes capitalism go round. More than 70% of this thread is about competition. Through competition production is increased, innovations are discovered, productivity grows, etc. But, at the same time through competition are generated unemployment, bubbles, inequalities, profitability slows down and real wages are falling. That's a contradiction, isn't it? And that should be my conclusion. These phenomena are the two sides of the same coin. Someone can focus on the one side or the other but under capitalism I can't see a way to eliminate the negative phenomena. Is that a problem? For some people, maybe not. For others, it is. It's a matter of understanding, personal interests and preferences, etc.
    Can you provide any facts to back that claim up? Specifically that competition generates unemployment bubbles, slows down profitability, and leads to a decline in real-wages. The rest of what you've said is quite frankly speculation.

    I will say that there is no such thing as a "perfect" model, only that some models work better than others and some economic ideologies are more fortified against economic downturns than others. The USSR was a perfect example of why communism doesn't work; The U.S. has historically had the best representation of a capitalist society operating within a free-market economy guided by an invisible hand to date. Things are different right now than they have been historically which is sad but we still have a pretty good idea about what works and what doesn't.



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