Notices

View Poll Results: Do you lean more towards..

Voters
12. You may not vote on this poll
  • ..Keynes - a regulated market economy

    5 41.67%
  • ..Friedman - a completely free market economy

    2 16.67%
  • Can't choose, they both make sense

    2 16.67%
  • Neither of them make sense

    3 25.00%
  • Don't know

    0 0%
Results 1 to 19 of 19

Thread: The Keynes vs Friedman debate: regulation or free choice?

  1. #1 The Keynes vs Friedman debate: regulation or free choice? 
    Forum Professor Pendragon's Avatar
    Join Date
    Jan 2005
    Location
    Nederland
    Posts
    1,085
    I made this post on a different forum, but maybe it can give rise to an interesting debate here. What I do is basically compare Keynesian economic analysis with that of Friedman. The big question is whether some regulation of the economy can be beneficial or even necessary (Keynes), or whether every reduction of free choice is one too many (Friedman).

    Feel free to correct any claim or analysis I make.

    I think the differences between Keynes and Friedman stem from different answers to the following questions:

    1) Can an economy get in such a nosedive that it wouldn't recover by itself in the short-run?

    In the long-run every problem can be solved, but as Keynes famously said: in the long-run we're all dead :P If market forces are so slow that an entire generation suffers from poverty all their life then that's simply not good enough. So the disagreement is whether the economy can get out of its trouble by itself in the short run.

    Keynes argued from the example of the Great Depression in much of the western world in the late 1920s, 1930s. It took several years for most affected economies to recover, and this recovery often coincided with increased government intervention (the New Deal in the US, job creation based on borrowed/printed money in Germany, etc). Some economies (like the Dutch economy) never really recovered before WW2 changed the whole situation. So Keynes concluded basically that the Great Depression was such a downward spiral that it needed government intervention to be solved (reduced trust in the economy > less consumption spending > less sales and profits for firms so workers are fired > less income because of increased unemployment > even less consumption spending because of reduced incomes > even less profits, even more workers fired > etc etc).

    Friedman would argue that an economy can in fact get out of trouble by itself in the short run if market forces are allowed to operate freely. Every step in the downward spiral has a feedback mechanism (more unemployment means lower wages, so workers become cheaper to hire and firms don't need to fire more workers; less consumption spending means lower prices, so people are induced to spend more again). In a free market these feedback mechanisms can work very fast, maybe fast enough to stop the downward spiral altogether. But if government regulations prevent the feedback from occuring at all (fixed wages, fixed prices, ban on trade) then the spiral only speeds up and the nosedive accelerates.

    Friedman would probably also argue that problems like the Great Depression started because market forces weren't allowed to function in the first place. For example fixed exchange rates and trade protectionism probably made the Great Depression a lot worse than it would've been if free trade and money flow was allowed. And perhaps governments created a 'bubble' of spending and borrowing (and hence inflation and distorted price signals to the market) that was bound to burst at some point. A free market wouldn't have allowed the bubble to grow to such proportions.

    2) Does government intervention in the economy do more harm than good?

    Keynes argued that governments can smooth the rough edges of capitalism, by cooling down an overheated economy (by fighting inflation with a higher interest rate) and firing up an economy during recession (by spending more money, creating a positive cycle of more firm profits, more employment, more consumption, even more profits/employment/consumption etc).

    Friedman would argue that whatever benefit a government intervention may have, it results in a net loss to the economy. When a government tries to spend more to stimulate a slow economy it takes away people's freedom to spend their own money, and instead decides what to buy for them. People nearly always know better what they want and need than a government official, so the more free choice the better. When governments intervene in the economy they distort price signals (for example a price cap on house rents makes firms think that houses are in lower demand then they actually are). Price signals are the lifeblood of the economy. They're the only way firms, workers and consumers get information on what best to buy and sell.


    Reply With Quote  
     

  2.  
     

  3. #2 Re: The Keynes vs Friedman debate: regulation or free choice 
    Suspended
    Join Date
    Apr 2007
    Location
    Pennsylvania
    Posts
    8,822
    Quote Originally Posted by Pendragon
    The big question is whether some regulation of the economy can be beneficial or even necessary (Keynes), or whether every reduction of free choice is one too many (Friedman).
    Is this an accurate characterization of Friedman's views? It seems rather extreme.


    Reply With Quote  
     

  4. #3 Re: The Keynes vs Friedman debate: regulation or free choice 
    Forum Professor sunshinewarrior's Avatar
    Join Date
    Sep 2007
    Location
    London
    Posts
    1,526
    Quote Originally Posted by Harold14370
    Quote Originally Posted by Pendragon
    The big question is whether some regulation of the economy can be beneficial or even necessary (Keynes), or whether every reduction of free choice is one too many (Friedman).
    Is this an accurate characterization of Friedman's views? It seems rather extreme.
    Is it? I don't know enough about Friedman's thinking to know, but I suppose it seems to be how he's usually characterised. If that's unfair then it might be important - all my Libertarian friends argue as though this is an exact statement of monetarism etc.
    Reply With Quote  
     

  5. #4  
    Forum Professor Pendragon's Avatar
    Join Date
    Jan 2005
    Location
    Nederland
    Posts
    1,085
    I phrased it a bit sharply, Friedman did accept some government intervention but less than even most liberals would accept (liberal as in classical liberal, which I guess in the US comes closer to republican). So his position was probably somewhere between liberal and libertarian.

    Some quotes from wikipedia:

    On the Great Depression:
    Friedman rejected the use of fiscal policy as a tool of demand management; and he held that the government's role in the guidance of the economy should be severely restricted. Friedman wrote extensively on the Great Depression, which he called the Great Contraction, arguing that it had been caused by an ordinary financial shock whose duration and seriousness were greatly increased by the subsequent contraction of the money supply caused by the misguided policies of the directors of the Federal Reserve.
    On the Fed:
    Friedman was in favor of abolishing the Federal Reserve System and replacing it with a mechanical system in nature that would keep the quantity of money going up at a steady rate, issued directly by the government and cutting back on fractional reserve banking powers for the banks.
    Turning the Fed into a mechanical system means that the government can't use it to influence the economy. The Fed mainly controls interest rates, to fight inflation with higher interest rates and fire up a slack economy with lower interest rates. In Friedman's view this regulation does more harm than good and should be abolished.

    On public goods:
    Friedman was supportive of the state provision of some public goods that the market is not seen as being able to provide. However, he saw the scope of such goods as being minimal, and argued that many of the services performed by government could be performed better by the private sector. Above all, if some public goods are provided by the state, he believed that they should not be a legal monopoly where private competition is prohibited.
    So Friedman did support some government intervention to supply things like education and health care, but at a minimal level and never as a government monopoly (private education and health care institutions should be allowed to compete with public ones). I'd interpret this as for example supporting public schools and clinics in remote areas that can't be supplied profitably (too expensive to build a school in the middle of nowhere with very few 'customers'). But the moment a private firm would want to build those schools and clinics anyway (maybe they found a way to do it profitably, or they do it as an image booster) then they're free to do so and perhaps even outcompete the public school.
    Reply With Quote  
     

  6. #5  
    Forum Professor
    Join Date
    Oct 2006
    Posts
    1,595
    With out trying to complicate anything, the economies of the depression were bad and no doubt if WWII had not been fought, the effects would have lasted well into the 50's...BUT, there was a substantial underground economy which worked quite well for a good many people, then and back in history. The barter system, the trading of goods or service for other goods or service. With all US government efforts through work programs or assistance, really did very little, other than building US infrastructure, which exist today. Unemployment held steady in the 30's up to and including 1940 at around 20%. By 1942 it had dropped to under 2% where it was until 1946, then only 3%...

    Government traditionally is NOT efficient. By another name its called productivity, which anything the US government touches is the least productive, whether it be actual labor (US today about 4 million including 1 million active armed forces) or by stimulation with contracts or influx of money or credit. This in part, the cause for the said problems of today, with the massive military contracts and use of manpower for those business and there suppliers, since 2001.

    The Federal Reserve System, has been justifiably under fire for its assistance in the housing/financial crisis of today, as well. Fed rates to the financial banking industry of 1-2% for years, in a thriving economy, could only result in a bubble. The very minor recession of 2000-2001, with the 9/11 minor FINANCIAL problem did not and historically has never showed a need for such drastic reactions, should never have been that low or for that long.

    Government can influence the economy and often has, but in the tax structures of the total governments involved. Most increases or cuts have been to the individual, which directly effect the money flow of the investing and purchasing power of the individual and business community.
    I might add, States and local government have been increasing tax debt on the public/ business since the tax cuts of 2003. This another reason for the said housing problems, along with cost of commodities, neither of which has been considered while those low fed rates were going on. What were doing now in dropping back those rates, will not solve the problem, but rather put it off for a short period. This subject to the investors, which have been the least effected (tax rates on profits) which could hold up the over all economy (which is still not that bad) until expansion (which is happening) catches up to the mistakes.

    Guess this goes along with Friedman, with qualifications....
    Reply With Quote  
     

  7. #6  
    Forum Cosmic Wizard icewendigo's Avatar
    Join Date
    Jun 2006
    Posts
    2,148
    1- Economic indicators
    One of my stats teacher had this anecdote, 'if you have two buckets of water which on average are of a nice temperature would you put your feet in them? Well if one is freezing and the other is boiling you're in for a painful surprise'. I would add that if you tell people about how nice the temperature is on average it could even be considered misleading or deception even if true "go right ahead the average temperature is perfect".

    This applies to economic indicators often used by the clergy of modern times, economists (and pundits).

    EX: Whats better, 1% unemployment in a country(or period) where the average worker slaves in a sweatshop 7 days a week for penies without safety considerations, without access to health care or education for himself of his kids, or 15% unemployment in a country in which the average worker's living conditions when unemployed are far better than the previous country(or period) but are without comparasion when employed; great working conditions, vacations, standard of living, universal health care, pension, benefits, education, etc.

    The same goes with growth, productivity etc, "but who actually benefits?" If the sweatshop workers now work 14h a day for a dime instead of 10h a day for a quarter, it would be hailed as great progress on paper even if most of the productivity gains are hoarded by the factory owner, so again its worthless if you ignore whats important, Quality of life.


    imo, Friedman's gospel is excellent if you want to foster the rise of a banana republic, a fascist state or a plutocracy (or a popular revolution)
    Reply With Quote  
     

  8. #7  
    Forum Professor Pendragon's Avatar
    Join Date
    Jan 2005
    Location
    Nederland
    Posts
    1,085
    Quote Originally Posted by jackson33
    The Federal Reserve System, has been justifiably under fire for its assistance in the housing/financial crisis of today, as well. Fed rates to the financial banking industry of 1-2% for years, in a thriving economy, could only result in a bubble. The very minor recession of 2000-2001, with the 9/11 minor FINANCIAL problem did not and historically has never showed a need for such drastic reactions, should never have been that low or for that long.
    Yea, I guess the problem is that governments simply can't predict the future. After a decade of high growth rates the 2000-2001 recession (or rather stagnation) may have seemed a serious issue that had to be dealt with. But with hindsight we see that it was nothing compared to the housing and credit problems that face the US today. A high interest rate is like a scarce resource, you can lower it a couple times but at some point you reach zero and the tool is blunted. Using this scarce resource to solve a small issue while you may need it later for a much more serious problem is bad policy. But without being able to predict the future you can't tell whether any specific recession warrants a lowering of the interest rate.

    So I think it makes sense that Friedman advocates a mechanical interest rate, which can't be used actively to influence the economy. I'm sure the Fed has good intentions, but in an uncertain world it can be very risky to use such powerful instruments as the interest rate.

    Quote Originally Posted by icewendigo
    EX: Whats better, 1% unemployment in a country(or period) where the average worker slaves in a sweatshop 7 days a week for penies without safety considerations, without access to health care or education for himself of his kids, or 15% unemployment in a country in which the average worker's living conditions when unemployed are far better than the previous country(or period) but are without comparasion when employed; great working conditions, vacations, standard of living, universal health care, pension, benefits, education, etc.
    Your question is a moral one, but the debate between Keynes and Friedman is not moral. It's a common mistake to think of economics as a science that answers moral questions. It doesn't, that's what philosophy and politics are for. Keynes and Friedman only disagree on which system works best, which set of interventions (or no interventions at all) creates the biggest pie. The question of how to share that pie is not economics.

    You could rephrase your question by asking: what situation is more favourable for economic growth on the long run: low unemployment coupled with a low wage rate, or higher unemployment and a higher wage rate. This coincides with the question of whether there should be a fixed wage rate (or fixed minimum wage rate), or freely floating wage rates.
    Friedman would clearly argue for a freely floating wage rate: when demand for labour decreases firms should be able to lower wages. Wages are prices, so by distorting wages you take away the economy's basic source of information. Workers and firms will be less able to communicate to eachother what they want and what they can offer, resulting in mismatch and a deadweight loss.
    From a Keynesian point of you one could argue that if wages can't suddenly drop at the start of a recession, people's consumption power wont suddenly drop either and the recession is alleviated. But that doesn't work, firms will just fire more people, or if that's not allowed (strict hiring/firing rules) then more firms will go belly up and people end up unemployed anyway. A poorly paid worker still has more buying power than an unemployed worker, so it seems most efficient to just keep as many people as possible at work (at the cost of lower wages).

    A Keynesian would probably argue to allow wages to float freely, but to repair the buying power of the most poorly paid workers by taxing the most wealthy ones. Very rich people spend only a small proportion of their income, while very poor people often spend every dollar/euro they have (not spending it would mean not having a meal; for a very rich person not spending that dollar doesn't make a noticable difference). So by redistributing income from the highest to the lowest end of the scale the total buying power of the economy is increased. But again this is not done through the wage level but through taxation.

    Quote Originally Posted by icewendigo
    imo, Friedman's gospel is excellent if you want to foster the rise of a banana republic, a fascist state or a plutocracy (or a popular revolution)
    So I hope you see that this remark is not warranted. No economist has the goal of creating inequality or whatever else you mention, the goal is to let the economy produce as much 'stuff' as possible. The question of whether or not to repair inequality is one for politicians (economists can advice them on ways to do this in the least wasteful ways, for example to use taxation instead of fixed wage levels or trade barriers).
    Reply With Quote  
     

  9. #8  
    Forum Cosmic Wizard icewendigo's Avatar
    Join Date
    Jun 2006
    Posts
    2,148
    "is more favourable for economic growth"
    thats the point, growth for whom? Who benefits? You say 'oh thats a moral question its not for economists to...' bullcrap! Its the fantasy land gospel thats used to push for corrupt policies and justify morally bankrupt practices. 'oh sorry, where not raking in billions out of your pockets and spewing toxic waste down the water table to make a buck, were just following market, look that economist preacher will tell you its for the economy and your own good'

    "No economist has the goal of creating inequality"
    apparently you havent heard of the IMF/World Bank racketteers or read "confessions of an economic hitman", it is the job of economist to swindle 3rd world countries with studies made by "experts" so they can benefit by borrowing from predatory loan sharks money that will go directly in the pockets of crony accomplices to build infrastructure that they will own and use to milk the population so their ressources and money can be vaccuumed by wallstreet while the people being plundered pay back at interest the money used to finance their own screwing, and by their inability to pay back are swindled into forfitting their sovereignty. Bravo. :?

    Some economist are evil bastards that know they are pushing bullshit, but I agree that many economists and most Friedman Apostles are clueless and live in a vaccuum-sealed sanitized theoretical schoolbook fantasy world. A world in which power, social, criminal, moral and political influence has no effect on the economy , as if you can pretend to model cannonball trajectories without considering gravity yet keep a straight face.

    In real life, corporations use their influence to tilt the playing field beyond what theory suggests. In theory a poor person faced with a local monopoly corner store jacking the price of sugar can save for months buy a plane ticket to brasil and buy a pound of sugar from there , but in reality mondaine practical reasons allow monopoly and oligarchies to exist in a freemarket environment:
    Ive worked for a store that methodically lowered its prices with the objective of bankrupting a competitor which it achieved and then jacked the prices and used the proceeds to see to the arrival of a replacement competitor, which was owned by the same owner(a fact no one in the area knew), then prices were high and people had the 'freedom to choose' which store would rip them off (still without knowing they were ripped off because they dont have time to calculate inlfation and monetary exchange). With 2 stores already 'competing' its unlikely any real competitor will risk going there, so you have a defacto monopoly in the merry land of the free market where people have the 'freedom to choose' and competition assures prices are low and houses are made of candycanes and streets are paved with gold.

    And competing tabbaco companies would not collude to make sure their clients didnt know they were sold poisonous products, why no they are competitors, and people in the 50s had the freedom to choose if they smoked or not basing their choice on information (and advertizing) provided by the manufacturer, afterall its not like there can be conflicts of interest in our economic models, and we all know that since people have wanted for years to have GM Food labeled, GM food labeling as been a reality in the US since 1995 because according to theory the people wanted it so if the industry(and Monsanto) didnt provide a new white knight corporation comes and makes it happen and that why Fantasyfoods has cornered the market

    Isnt the Subprime Loan racket is in the news? scroudrels have made billions in racketeering and people in the US and around the world are going to pay for it up front with bailouts and throught the economic crap it has created!(of course the tv news are careful not to mention spitzer's newspaper article revealing that states that wanted to prevent the racketeering binge were stopped by the Bush administration through its minions at the Office of the Comptroller of the Currency which probably invoked the magical soothing properties of the free market theory as a rational to allow fraud on a nation wide scale.)

    Reply With Quote  
     

  10. #9  
    Forum Professor
    Join Date
    Oct 2006
    Posts
    1,595
    ice; In short, you have a problem with Free Market Capitalism. Participation is the secret and everyone knows that secret. You cannot simply excuse those that did not, do not or will never take part, as the victims of that game.

    Continuing the theme 'personal responsibility', there are a good many things in a life, that are destructive to that life. How could you blame the source of that destruction, simply because they produce the means for a perceived end, when according to the society it is not classified ILLEGAL.
    Tobacco products, may in fact be bad for a person. I don't agree, feeling pleasurable experiences are going to be achieved regardless, relaxing or chemical means non withstanding. Eating, Movies, TV, Computer, even reading can be harmful if moderation, not a theme.

    As for economic systems socialism, assume your solution to equalizing the achievers to the level of those who will not, have not or could never achieve anything, are the results of government controls. The end results what you see as banana republics.
    Reply With Quote  
     

  11. #10  
    Forum Professor Pendragon's Avatar
    Join Date
    Jan 2005
    Location
    Nederland
    Posts
    1,085
    Icewendigo.. your rant is uncalled for and offtopic.

    I ask you two things:
    - read all previous posts in this thread thoroughly
    - read the following explanation of the topic of this thread

    I don't blame you for mixing up moral and positive questions (questions on how things actually work, not on how they should work to produce a morally desirable outcome). This mistake is common and the difference is sometimes hard to see. But if you keep making offtopic posts after the following explanation then you force me (or a different mod) to move your posts to a new thread.

    Economics is about causality: how do people behave to satisfy their needs and why; and what is the result of this behaviour. In this thread the topic is limited to two theories (and perhaps intermediate ones) that discuss how governments should behave in their interaction with the economy in order to produce as much stuff as possible.

    Relevant questions are:
    - does the economy produce more 'stuff' if the government tries to increase consumption during a recession?
    - does the economy produce more stuff if prices, wages and exchange rates are determined by market forces rather than by government planning?
    - does the economy produce more stuff if governments regulate prices and production quantities of markets that are natural monopolies (markets that for practical reasons end up as a monopoly, like the provision of power grids), or if the government even takes over such markets and bars private firms from competing in them?

    In your rant you mention monopoly formation several times as if it were a moral question like inequality. Economists are very aware that some markets are bound to end up as monopolies, and that monopolists dont have incentives to give consumers what they want and / or need. This is a positive question, it relates directly to the question "how can we make the economy produce most 'stuff'?". Keynes and Friedman both have an opinion on this question, which was already described shortly in the previous posts before you wrote your rant.

    I'm happy to discuss with you whether it's morally desirable for the government to redistribute income to reduce inequality, but not here but in the Politics or Philosophy section (inequality is also a central topic in Social Science, but there it's again a positive question: why do some societies try to create equality while others don't?).
    I'm also happy to discuss what the least wasteful way to redistribute income is (for example taxation versus price control), but in a different thread in Economics.

    So again I don't hold it against you that you mixed up moral and positive questions, but I do hope you see the distinction now. Feel free to ask about it if anything is unclear or missing.
    Reply With Quote  
     

  12. #11  
    Forum Professor
    Join Date
    Oct 2006
    Posts
    1,595
    Pendragon; For starters, business runs in cycles, out of necessity. People /business simply doesn't (can't) buy all the products or services on a consistent enough time line, to maintain an equal level for steady performance or to prevent GDP from going minus for short periods. Its going to happen and must happen to prevent deflation, the real problem for any capitalist society. (am sure you know, but some may not) Deflation is when to many goods or service exist for consumption, forcing competition to lower prices, even if below cost to produce them. The said current economic boom goes back to the early 80's, has continued to today, with three major cycle bottoms. 1988-89 Saving/loan problems, 2000-01 Tech bubble and the current based on the Housing/Financial problems. I don't like retrospects, but the Tech Boom, actually was an example when growth solved a problem (Saving/loan bailout) and the tech bubble, which was by far the most costly and 9/11 were corrected by the housing boom and massive military spending, already addressed. Think you can see where my concerns are now. At some point there won't be anything to bail out the bail out entity (Government), which will have to get money someplace, meaning dramatically higher taxes.

    When thinking in world business activity, where most large business operates; International GDP is 65 Trillion US$, EU and the US about 14T each. In any given DAY, the worlds markets (equities/commodities/futures) can easily trade in the trillions. Market influence is tremendous to the security of the economy, those GDP's are not government and those all those governments operate on about 20% of the GDP's, about 13-14 T US$. This tells me government can only USE business by increasing/decreasing interest rates, money supply to TRY to control that very large machine (The Economies).
    Reply With Quote  
     

  13. #12  
    Forum Cosmic Wizard icewendigo's Avatar
    Join Date
    Jun 2006
    Posts
    2,148
    "does the economy produce more stuff if governments regulate prices and production quantities"
    Ok then, heres yet another example

    A type of Fish has been fished to near extinction(for fishing purposes), that is, all fisherman individually had a short term increased profit by fishing as much as possible regardless of wether the fish stock could sustain this porduction and when all fisherman did it, they effectively destroyed the fishstock(no longer enough for commercial fishing) and thereby destroyed their own livelyhood. So regulations to limit the amount of fish caugh so that the total amount can be replenished by nature allows the economy to produce more stuff(fish in this case)

    This example does not apply accross the board, but thats how life is, whats good in some cases (car on the road) is NOT good in all cases (car on a lake), but theres something that should be realized, that individual interest are not necessarily whats best for society or even the individual himself(long term)

    so here a case where regulations allows an economy to produce more stuff :wink:
    Reply With Quote  
     

  14. #13  
    Forum Professor Pendragon's Avatar
    Join Date
    Jan 2005
    Location
    Nederland
    Posts
    1,085
    Quote Originally Posted by icewendigo
    "does the economy produce more stuff if governments regulate prices and production quantities"
    Ok then, heres yet another example

    A type of Fish has been fished to near extinction(for fishing purposes), that is, all fisherman individually had a short term increased profit by fishing as much as possible regardless of wether the fish stock could sustain this porduction and when all fisherman did it, they effectively destroyed the fishstock(no longer enough for commercial fishing) and thereby destroyed their own livelyhood. So regulations to limit the amount of fish caugh so that the total amount can be replenished by nature allows the economy to produce more stuff(fish in this case)

    This example does not apply accross the board, but thats how life is, whats good in some cases (car on the road) is NOT good in all cases (car on a lake), but theres something that should be realized, that individual interest are not necessarily whats best for society or even the individual himself(long term)

    so here a case where regulations allows an economy to produce more stuff :wink:
    Agreed, and the nice thing is that Friedman and Keynes both agree with you as well :wink:

    This is a classic example of the 'tragedy of the commons': when something is a finite resource (it runs out of you use it) or a slowly renewable resource (it runs out of you overuse it, with limited use it can last forever; like fish, fertile soil, etc) and it doesn't have a clear owner then nobody has an incentive to protect it from bad use. Everyone rushes to claim as much fish as possible before everyone else does it, everyone tries to hunt as many animals before people have together driven the stock into extinction, etc.

    These examples are a crucial element of every introduction to economics book or course, and even the most orthodox free-market thinker acknowledges that these situations are problematic. In fact, it's people like Friedman who advocate most strongly against allowing these situations from occuring. They claim that if finite resources were divided among private owners instead of communal ownership they'd have owners who have an incentive to protect them and manage them in a durable way. Divide the fishpond over 10 private owners and each will make sure his part of the fishstock is kept at a healthy size, if he overfishes then that's his own loss so he'll prevent that.

    Friedman would continue this line of reasoning to actually reduce the role of government. In a way public health care is a finite resource as well: if everyone pays his fair share and doesn't make costs that aren't necessary then it's a sustainable system. But because the costs are spread (public healthcare is in a way 'publicly owned') people have an incentive to overuse it, to overfish. Friedman would argue that privatizing healthcare avoids this problem, it presents everyone with the costs he himself makes so abusing the healthcare system is your own loss. Which healthy person would occupy a hospital bed if he has to pay the hundreds of bucks per day himself? Lots of people would do it if it doesn't cost them anything.
    Reply With Quote  
     

  15. #14  
    Forum Professor sunshinewarrior's Avatar
    Join Date
    Sep 2007
    Location
    London
    Posts
    1,526
    My own feeling is that Keynesian economics will be hard pressed to claim greater productivity than a fully free market. But, of course, if the criterion we are using here for judgment is productivity then we might also need to consider the claims of the command economy in a totalitarian regime: which managed to make the Egyptian pyramids some 5000 years before the market economy replicated them in Vegas.
    Reply With Quote  
     

  16. #15  
    Forum Cosmic Wizard icewendigo's Avatar
    Join Date
    Jun 2006
    Posts
    2,148
    "They claim that if finite resources were divided among private owners"
    This would not change anything unless you had gigantic ocean nets preventing fish from migrating, and in that case why would one entity be given the right to "own" the area/fish more than other people?
    And this assumes the owners, lets say corporate, give a crap about the long term, which corporations have shown time and again that they dont always do, ravage the forest for all its worth then layoff the workers and bail out of the devastated land with millions. I have worked for a company whose president sabbotaged the company, the canibalization make it look better on paper just long enough for he owners to pass the buck to others selling it for a big buck and then it when down. Enron is another example where immense short term profit for those at the top leads a company to crash and burn at the expense of the workers and the public. :?

    The Darth Friedman's take on Health Care also doesnt hold water. The US HC is much more costly than other Western Universal Health Care system per capita and doesnt even cover everyone. The thing people fail to see when they have free-market-everything-for-a-buck blinders is that the free health care that covers everyone is more likely to prevent or catch problems early when a cure can be cheap and prevent extremely costly complications from even occuring. Also, and this is important, capitalism Feeds on problems and captive markets, like drug pushers, theres no incentive to 'prevent' diseases that are gold mines, cancer is a multi-billion dollar industry, if you found a cure for cancer you'd probably get 5 bullets in the head(unless they could sell it for an extortionneering exorbitant price) . Free flu vaccines might save society billions in lost productivity, but would cost billions to the disease industry that rely on selling comfort syrup etc. (This applies to fossil fuels sabotaging cleaner and selfsustaining alternatives, they want you to be addicted and depend on them to get a fix.) So free market allows you to produce more stuff like syrup, cough drops, placebos, pills the fix the symptoms without adressing the cause, but does not produce more health (even if more health allows society as a whole to be more productive). My bet is stemcell cures will be found in SKorea, because US/EU drug companies would loose billions each time a permanent cure makes their millions of pill addicts condemned to take one each day to live able to break free of their addiction and be healthy.
    Reply With Quote  
     

  17. #16  
    Time Lord
    Join Date
    Mar 2007
    Posts
    8,046
    I see the two as different tools. Micro and Macro.


    The free market handles micro really really well. Government control handles the Macro better, where efficiency really isn't as important as choosing the right general direction.

    In the depression we found that individual farmers didn't have a good enough view of the big picture to be able to coordinate who was going to be grow what, so the prices of their goods would hold up. On the other hand, government is often blind to what's going on in an individual farmer's farm.

    Rather than argue which one we should get rid of, it's better to simply use the right tool in the right situation. Don't let the screw driver tell the wrench that it's entirely worthless just because it can't turn screws. Or vice versa.
    Reply With Quote  
     

  18. #17 globalization and markets 
    Forum Freshman
    Join Date
    Jun 2008
    Location
    Poland
    Posts
    38
    In our new globalized economy with predominantly private companies and efficient markets you may say that the era when people need governements to steer the economy is over because there are instruments like incentives in taxes e.g in preventing gloabal warming the governments really do not act but impose (EU) CO2 pollution caps and set up market for them where they are traded and maybe this is new way instead of states putting money in to work out problems.
    Reply With Quote  
     

  19. #18  
    Forum Isotope Bunbury's Avatar
    Join Date
    Sep 2007
    Location
    Colorado
    Posts
    2,590
    the era when people need governements to steer the economy is over because there are instruments like incentives in taxes
    Tax incentives are one of the tools governments use to steer the economy. It is not a free market if you are rewarded by the government for doing A and penalized for doing B.
    Reply With Quote  
     

  20. #19  
    Forum Isotope Bunbury's Avatar
    Join Date
    Sep 2007
    Location
    Colorado
    Posts
    2,590
    According to this writer both Keynes and Friedman are failures. What could be the third alternative that this writer seems to be proposing, but not defining?

    http://www.guardian.co.uk/commentisf...nomics-economy

    The need now is for clever regulation, on a global scale. In the EU, there is an equal need for much stronger political institutions to complement the central bank. But the greatest need of all is for a new theory of the mixed economy, framed for the global marketplace of today, as the now-defunct Keynesian system was framed for the national post-war economies.
    How would this "clever regulation" differ from what Keynes proposed? Is the Keynesian system defunct or resurgent?
    Reply With Quote  
     

Bookmarks
Bookmarks
Posting Permissions
  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •