Or even more succinctly: financial value != value to society. Sometimes there's alignment, but very frequently there is not.
Our politicians are influence (unavoidably!) by the people who have the most time and money to spend lobbying them. Even if you reformed lobbying, this would still be the case - even if it was all just letter-writing with no money attached. Wealthy people could send way more letters than harried poor ones.
So the more you have, the more influence you get. BUT the more you have, the more you can fend for yourself, so also the less you need much of that influence! And then the government being unaligned with the needs of most people starts making a lot of sense, without even needing malicious conspiracies.
There's neither profit for businesses nor politicians in giving poor people what they need.
There appears to be a real corruption problem in the US that is distorting what politicians can do for poor people.
Successful parents and sage founders define value differently.
They don't see dollars. They see sense.
I am unsure what colloquial definition GP refers to as the counterpoint. Surely you aren't both suggesting sense and dollars are non-overlapping?
The difference is the perspective of time.
A quick buck versus a strategic investment.
e.g. What made sense to Page and Brin in 1998 - the algorithm that would become famous as Page Rank, had only a trivial market value at the time, whilst Yahoo was "worth" billions.
AKA: you vote with your wallet but some people vote 0 times, some 1, some can cast one million times - if you do the math.
A further productive update to your worldview might be "The degree of centralization of power is proportional to how far out of equilibrium a market can get." This doesn't just function at the macro level (i.e. Google/Facebook/Bezos being able to horribly misallocate capital based on their past successes). It also explains things like bad executives within a corporation: because decision-making is centralized and the results of a decision won't be seen for years, a bad executive can waste billions of dollars and thousands of man-years, but ultimately they're going to get kicked out (or the company goes bankrupt) and the organization will return to market norms. This is also one reason for the liquidity premium (and hence high compensation) for executives: since the consequences of a bad hire are so bad and so future-loaded, companies tend to be overcautious in their hiring, which means only people with excellent pedigrees are considered and they can demand a premium for it.
Also very relevant to historical China, which had this habit of centralizing extreme power with the emperor. Things would go great if you had a good emperor. But occasionally they'd make a blunder (like the cessation of the Ming treasure fleets) that profoundly altered the course of human history. The European powers had much more decentralized decision-making. When Columbus was turned down by the kings of England, France, and Portugal, he tried Spain, and the rest is history.
Would you say that the value of feeding the orphan is zero?
Would you say that the value of chasing those asymptotic improvements is enormous?
Key observation: the market notion of value is very different from what people would colloquially agree is valuable.
Economists would say this is obvious. In one sense, it is -- we've all seen it in a million (hopefully) less-extreme incarnations. However, if you were to watch these economists closely, within 60 seconds of claiming it was obvious, they would kick out an argument that fudges the distinction between the economic notion of value and, well, value (the colloquial notion of value should really need no qualifier -- I applied one above simply to highlight that it had been hijacked).
That's the bit to pay attention to: substituting the concept of "economic value" for "value." This innocent-sounding approximation is actually a trojan horse containing extreme laissez-faire assumptions. With a mere slip of the tongue, they invite you (or you invite yourself!) to assume the conclusion of any economic rationalization, cloaking whatever cockeyed scheme the markets have cooked up today in a veil of artificial legitimacy.
Anyway, the day I plugged this into my worldview and forcibly separated the concept of economic value from the concept of value, something interesting happened. I previously had two competing views of the economy:
1. Gee, it sure seems to always act as a mercenary for the rich and powerful an awful lot.
2. It is a tool for revealing, weighing, subdividing, balancing, and reconciling collective preferences, both directly and transitively.
Before I separated the notion of "economic value" from the notion of "value" in my head, I was willing to accept that perhaps the hierarchies and mercenary behavior of #1 were merely emergent properties of an optimization process that truly did maximize value per #2. (Note -- I said "value," not "economic value." Did you catch that?) I saw this as a deeply legitimizing factor for economics in general, especially because I was keenly aware of failures in the colloquial definition of value (it's really bad at transitivity, for instance).
After I separated the notion of "economic value" from the notion of "value" in my head, I realized that the weighing factor made the optimization process of #2 equivalent to the mercenary process of #1. If a few people have all the money, then "weighing collective preferences" just means doing what those people want. To the degree that's currently the case, the optimization process is a silly ruse. It's a continuum, though. If everyone has some money, everyone gets represented in the decision making. If a large group of people -- say, "the middle class" -- has all the money, their collective interests will be well represented, but those on the bottom get drowned out. "Economic value" begins to diverge from "value." If a few people have all the money, they are the only ones who decide what's (economically) valuable, preferences of everyone else be damned. "Economic value" diverges completely from "value." In short, the divergence between what's valuable and what's economically valuable is proportional to the level of inequality.
The subtle nastiness of this situation is that the system runs away. You start with market forces that truly do represent the collective will of the people but as the wealth starts to concentrate more and more, the weighing factor increasingly disregards the voices on the bottom and pays more attention to those on top. Stocks go up, jobs disappear, rent increases, wages stagnate, poverty skyrockets -- apply the weighing factor and you see that none of these are bugs. They are all features. The predictive capability of our worldview has increased.
There is hope, though. Chaos is the enemy of skewed wealth distributions, of consolidated power, and ultimately of this divergence between value & economic value. There are exponentially more ways for wealth to be mixed than for it to be concentrated, so any kind of chaos can make it happen. Capitalism is anti-fragile -- it degenerates into feudal exploitative nastiness if you leave it alone, but if you stir the pot once in a while it truly is the marvel that economists paint it to be. How to do that? Well, in the happy case the chaos comes from growth. In the sad case, it comes from violence. Here's hoping the next big upset comes soon and from growth, rather than stagnation and eventual violence.
In housing, that's zoning for single-family houses which limits affordability and provides exclusivity vs. apartments or boarding houses, except in downtown cores which aren't enough supply to really move the needle (and expensive for other reasons).
In US healthcare, it appears there is regulatory capture from insurance companies and private health care providers, both successfully ganging up on the government to minimize real competition or strict price regulation.
Without real competition for a product that consumers can't feasibly opt out of, no heavyweight market participant interested in driving the price down, that's what you get. But yeah, testing is good too. Get the government to try out 10 years of broadly available at-cost housing competition and public healthcare, then evaluate :-P
That's a difficult question to answer generally, however it's also clearly not one that markets "solve." That's easy to see with the example of addictive drugs (which the market shows can be very profitable), unless you're willing to argue there's social value in destroying many people's lives through addiction.
That's not to say that financial value and social value aren't sometimes aligned, it just that you can't assume the former implies the latter.
One little thing I find annoying is that whenever someone points out some issue with free markets, someone always seems to reply with something that amounts to "have you considered free markets?" Whatever the problem, markets are the solution, even if the problem stems from markets themselves.
The Soviet Union had serious problems, but it's a mistake to reason from that to the conclusion that markets are in some way ideal. They have their own problems, and we don't have access to an ideal system, so we have to try to deal with individual problems and make tradeoffs.
Maybe Free Markets were the best you could do with the quantitative decision-making tools available to Stalin, and maybe central planning with modern AI/ML/Operations Research techniques would be more successful than a free-market approach.
Or maybe, the Soviet Union would have done just fine if there were no United States trying to thwart it at every turn.
- Arthur Jensen (Network, 1976)
Beyond that, the Soviet economy was solidly middling as far as the world was concerned.
As troksky said "In a country where the sole employer is the State, opposition means death by slow starvation. The old principle: who does not work shall not eat, has been replaced by a new one: who does not obey shall not eat."
Who gets to decide what is allocated to whom? Giving these starting conditions it's no wonder in every single attempt at this has resulted in a death toll in the millions. Nothing the USA did from the outside forced these countries to starve, imprison and murder their own people. Why didn't this happen in the USA? Or the rest of the west? Why only in regimes that tried to control more aspects of an individuals life then ever attempted before? Most of the argument I am making is a poor rehash of "the road to serfdom".
https://www.goodreads.com/book/show/299215.The_Road_to_Serfd...
Blaming the west for the terrors of Soviet Russia is as mistaken as blaming the allies for what the Nazis did in Europe.
I’d be surprised if there aren't neo-Nazis that argue exactly that, just as modern Leninists argue that Soviet Communism might have worked out great for everyone if it wasn't for the USA.
No. That, along with the rise of Communism in Russia, the rise of Italian fascism, and...was among the indirect causes.
Beyond that, the argument of starvation is flawed, because Russia in the market system had worse famine than the USSR, and crucially, the USSR ended famine in the Russian Empire, not started it. You can argue there were unnecessary famines, and you'd be right, but saying that famine is an inevitable component of the Soviet system is wrong because there were one/two, at the beginning, and then none after.
The actual limit to Central Control assuming that the people doing the central control are willing to let consumer goods follow what people want is data and the ability to process it. In the USSR this was very low - data collection was manual and plans were updated every 5 years. The bureaucracy opposed every attempt to improve the situation as that would usurp their power. Beyond that the freedom that individuals can have as far as what to buy and which jobs to build is only limited by what others are willing to work for.
It's also not true that they attempted to control more aspects of someone's life as ever before. Feudal states had much more control than the Soviet state on their inhabitants. Some capitalist states had more control.
There are arguments to be made here. A poor rehash of a poor book written by an author who openly admitted that he started with conclusions and worked backwards from there is not one.
The reality is much more complex than market=good everything else=bad. Heck, even the Soviet weren't always opposed to markets. Their ideology didn't even explicitly oppose markets, only class distinction in production.
This is not correct. The authority is there, it's just less visible.
Market forces are extremely unequal: a small percentage of humanity, e.g. 0.1% influence 90% of the value of the housing market in all popular cities in developed countries.
No. The GGP's examples are a direct counterexample to that idea.
Being a little more general: based on past experience, I interpret general complaints about "regulatory capture" without further clarification as complaints about regulation in general and advocacy for "market solutions" as an alternative. However, a poorly regulated market will almost certainly result in a great many monopolies and businesses that convert some negative externality into private profit, which are the apotheosis of the idea that financial value != value to society.
> a poorly regulated market will almost certainly result in a great many monopolies
A market regulated in poorly thought through ways can certainly lead to monopolies. But monopolies specifically are almost entirely due to regulatory capture. Case in point internet service in the US is almost always given either a de facto monpoloy or a straight up legislated monopoly for a particular area. That's why internet service in the US sucks so much. Countless regulatory burdens on businesses are designed to favor large companies, and is one of the many regulatory reasons that companies merge so often and industries in the US are oligopolies.
And that's not to mention the actual government run monopolies like utilities and the post office. It was despicable that the post office killed Outbox and prevents people from using their own mailboxes however they want. https://smallbiztrends.com/2014/05/usps-killed-outbox-mail.h...
If the US had good representation, maybe the regulations it creates would generally benefit the consumer rather than entrenched business interests. Unfortuantely, that's not really the case today.