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Comment by ianai | Hacker News Reader

There’s an observation in environmental economics about mining for resources acting similar to a banking instrument. As more resources are devoted to a scarce resource like cobalt more mines become economically viable. Most easily seen with oil where whole fields will shut or open with the movement of the price of oil. Forget the name of it, buts it’s yet another case of economic actors reacting to market incentives.

Just remember this the next time someone says something can’t be done because of the immediate inflexibility of supply to meet demand in a market. There’s almost always a lag time between start of production and demand for it. They might be uninformed or trying to misinform.

I suspect similar will hold true for charging infrastructure, solar panels, and other grid infrastructure. Wiring up new power plugs is not fundamentally new technology. Good time to be an electrician I suspect.

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This is just cobalt and not all the other resources required for electrification. The dramatic increase in cobalt supply seems to be mostly a side effect of increased mining for other minerals that are still in greater demand (Nickel). Otherwise it wouldn't be profitable. Meanwhile battery makers have figured out how to use less cobalt since it has a specialized role.

There's still no supply for the lithium shortage (the lag time is a minimum of 7 years to open a new lithium mine) but we are waiting to see if sodium batteries will come to the rescue now.

Surely there must be a similar lag time for production of Sodium Batteries?

For Sodium Batteries maybe yes, but we already have so much of sodium chloride that we just sprinkle it on roads in winter.

This is also a great example for why capitalism is so successful. It's not perfect, but a centrally planned system would, in practice, react much more slowly and/or less accurately.

Capitalism works because it can find an alternative to the resource that is running out. Something centrally planned systems struggle with. And a big reason why centrally planned systems fail is because they are usually ruled by conservative men who cannot imagine a world without said resource. Meanwhile, a capitalist system will “creatively destroy” the old way of doing things and replace it with a new one. Ironically, people who cheer on capitalism often struggle with accepting the new way.

Markets tend to be results oriented in a way that governments tend not to be.

Of course, sometimes that result involves exploiting the shit out of workers and destroying the environment along the way, but by God they'll get the thing done if said thing makes them money.

And yet modern day would be impossible if we bulldozed all our roads, highways, and rail. That stuff needed massive government investment.

Did it need that investment? Do you believe that such infrastructure did not exist prior to government?

Who do you think funded the first railroads exactly?

Hint: if you think it was the government I suggest you start studying the railroad bubbles of the 1830s and 1840s

Interestingly, the Nordic countries (often used as examples of ideal socialism), have a high percentage of private roads. Might actually work better than the national infrastructure approach: https://devoelmoorecenter.com/2018/02/28/why-the-u-s-should-...

Also, nationalizing passenger rail travel in the US (Amtrak) seems to have led to one of the worst passenger rail services in the world.

The private roads in Sweden tend to be gravel tracks serving a handful of households. Or logging roads. Some exceptions exist with paved networks of small, suburban streets, but there the "arteries" are still typically public. And there are private railroads that connect a single industry or mine to the public network.

If you are on a paved road, wide enough for two cars to meet, it is almost certainly public.

I wish it was more commonly understood that capitalism's success lies precisely in the fact that it's a decentralized, self-regulating system robust against the failure of individual nodes, and has very little to do with the "capital" part of it, which if anything appears to drive wealth inequality more than anything else.

In fact failure of individual nodes is almost required, just as the slowest antelope needs to feed the lions so that the antelopes as a whole become faster.

This is basically what Hayek is all about.

Do you recommend any particular work of his?

Hayek is the goat

Isn't that market-based finance?

It appears that can be entirely divorced from capitalism.

Just because we have demand driven resource exploitation doesn't mean that all of the profit has to be provided to a small over-class.

Indeed, wouldn't it create a greater ability to follow demand if the wealth were evenly distributed?

(We might ask if making the human race into the perfect resource-exploiting parasite is going to work well for us long term, but that is a very obvious limitation that diverges from the current discussion.)

The reason that markets work is that people can expect to profit from them. There is no separating "people have different wealths" from functioning markets.

You can limit how much different people's wealth is without preventing markets from working.

The more you limit it, the less well the markets work.

If you limit it too little the market stops working too, because cleptocracies form.

Any examples?

Not true

People don’t need the incentive or billions to make markers work. 99% of the population will never make more then a couple million and are well motivated to participate.

They'd work just as well if the expected rates of profit were lower, due to profit taxes.

Money is invested because people with money chase yield, if yields are positive, but lower across the board, that money would still be making the exact same investments.

I don't want to sound like an extremist here: reasonable capital gains taxes are on net good.

But it's certainly not the case that people make the "exact same" investments with or without taxes, especially of course as taxes get higher. Money will shift out of investment to consumption as expected profits decrease, or indeed out of the tax regime to other areas or to black markets.

that's absolutely not a problem, quite the opposite.

the goal is to have investments that serve broad interests. instead of investing in better yachts, supercars, jets, etc.

instead of investing into Amazon to dropship fake shit for quick bucks our economic surplus ought to go into developing better actually useful appliances, tools, technologies

for example, instead of OralB and Philips bamboozling us with sonic this and that with smart AI toothbrush marketing we ought to actually figure out dental care.

okay, sure, higher taxes on the wealthy doesn't guarantee more conscious consumerism, but might at least give it a chance.

I'm afraid that in fact the kind of consumption encouraged by high cap gains taxes are things like yachts, supercars, and jets (which are not investments).

I think those are more about inequality and greed. They have so many resources they’re exhausting any and all passing interest. Bees seem to have solved this with graduating highly productive bees into a bohemian class. They spend their time doing oddball stuff and inform the hive of new opportunities missed.

Sounds like you’ll be angling for the position of Commissar of Which Things are OK to Innovate.

> reasonable capital gains taxes are on net good

Except on the middle class. All capital gains do to middle class workers is ensure they stay middle class

I’d agree that the won’t made exactly the same investments, but I’d argue that on average they’ll make better ones.

The riskier an investment is, the higher the return must be to justify the investment. Lowering returns across the board means nobody is going to invest in long shots.

Okay, and... so what? Other than complete lack of sustainability and distribution, humanity has been capable of providing the necessities for every human on earth for a long time now. What use is there in long shot startups that could possibly triumph giving people unalienable access to necessities and free time?

What else are they going to invest in? Sure things that return net-negative after inflation?

They're going to invest in less risky things.

Real estate.

Yea, the stumble is usually at the step of gaining control of the whole board or keeping money in the chunk of the board you control.

So if 1000 people profit, that's not motivation, but if 1 person profits that is? Do companies with more shareholders seek profit less than single-owner entities? It seems the contrary that when founder-owned companies become more widely owned they become far more profit led.

What's important is that people who make good investment decisions make more money than the people who make poor or no investment decisions.

That is required for capital markets to work.

How much does $100 motivate you? How about $100,000

How about $5 spread over 1 million people? How about $5 million?

The initial distribution of shares doesn't really matter, wealth will concentrate anyway.

Not if the system itself is actively redistributive (such as via a basic income)

The more you redistribute the more you remove the incentive to produce value.

That's also true the less you redistribute at the extremes. The sweet spot is somewhere in the middle. I frankly don't believe that created value is close to accurately rewarded in modern society.

The problem is that markets also stop functioning when wealth inequality passes a threshold and becomes too severe.

The reason that markets work is because participants have "skin in the game", and losing money would hurt them, so they want to avoid losing money, so they try to make good decisions, and those that don't lose their money and are disempowered in the process. But once you reach a state where you're so wealthy that money no longer matters, you are able to distort the market at will, making it irrational (and thus inefficient) and destroying its ability to efficiently allocate scarce resources.

I wish more people understood this. You don't need to go full communism and make everyone's wealth equal, but if you want markets to work you do still need to make sure that the wealthiest are not so wealthy that they won't suffer from making poor financial decisions.

Even the wealthiest man in the world is a few hands of poker away from poverty.

> I wish more people understood this.

Please provide a case history.

>all of the profit has to be provided to a small over-class

It’s not, and it is a fiction to say it is.

Capital wealth is a representation of total risk adjusted future expected returns subject to a discount rate.

But we don’t advertise human capital this way; the excess future labor returns adjusted for some basic cost of living.

But they are the same thing: future profits.

If advertised this way, relative wealth would look vastly different.

Love this comment, I'm listening to wealth of Nations audiobook and this is a main point that jumps out.

He uses the phrase "perfect liberty" to describe the ideal version of a market and also understands this will never be equally applied or possible with all markets.

It's an amazing piece of work and I'm really enjoying the audio book as it reads more like a lecture and is very pleasant to listen too.

Indeed concentration of wealth/capital constitutes the very same centralisation of power that planned economies have.

True, but in capitalist systems anyone is free to start a new business without the government’s approval.

Airbnb’s founders sold parody cereal to hustle up the money to keep their business afloat.

Wealth inequality is the overhead cost of running capitalism. It isn't a very large cost given the cost of all alternative systems we have tried, especially since regulations can greatly reduce the wealth inequality without losing the benefits of capitalism.

Unless you have a UBI or negative income tax.

You're always going to have inequality regardless of what social system you apply to redistribute wealth.

See North Korea, Cuba, Soviet Union, and China as examples.

With the exception of China those example countries have either rich or poor people. There is no middle class.

At least in capitalist driven societies like western nations there can be a middle class that lives relatively well off and cheap options of consumption that also allow poor to have the basics in life.

The Soviet Union hasn't existed for nearly 32 years. That's practically a third of a century. It's not a good example country for today.

And while capitalism has increased inequality, by quite a lot, it also elevated the poor in the process. Living standards are better across the board.

You have to credit it with its achievements if you’re going to point out its faults.

A world where the Nazis won might have less inequality after they succeeded in killing everyone without blonde hair and blue eyes. But more likely they would have gone on to look like a brutal dictatorship with very few among the top class living lives remotely similar to what we know today. I doubt they would have had a Moores Law let alone chip manufacturing. We do know the Soviets bankrupted themselves and did have greater inequality than the capitalist system they were competing against while benefiting from its existence. China of course benefitting similarly to modernizing with the modern worlds free market thriving outside its borders. Heck, that tale is a victory story of capitalism over communism as the CCP very much had to capitulate and allow the market to function in increasing scope over time, reluctantly.

If we’re talking about which economic system would have greater inequality than we have to take the thought experiment out much farther than your initial quip. There certainly is inequality in the modern free market. It’s certainly far better and equitable than any system tried before or “on offer” in WWII. That war seeing the victor rebuilding the losers over several decades instead of rubbing sand in their wounds as every war saw in the last to that point. Modern day Japan and Germany.

>thought experiment

If economics is to be treated as a legitimate science, it needs to move away from thought-based theory into evidence-based testing.

Like the ever ongoing empirical work being published in peer reviewed journals? Those two words were taken so far out of context it’s hard to think you’re being charitable.

Sorry if it came across that way. My point is that empirical work would make a stronger case than a hypothetical thought experiment. (Although the social sciences have been hit harder by the replication crises than others, so they may also warrant some skepticism)

Is central planning the only alternative to capitalist decentralized systems? How could you have some other decentralized system without capital?

Without capital? What does that even mean?

"Capital" is just a proxy word for resources.

How can you develop anything without resources?

As others are noting, "capital" in this context refers not just to resources, but to a particular pattern of distributing risk & reward among those who supply capital, labor and IP to some human venture. Given that the people doing these 3 things frequently do not overlap, the way in "capital" is preferentially treated when it comes to risk & reward makes it preferable for there to be a term to describe not just the resources, but that whole phenomenon.

What you're describing is the modern definition, but Marxists use the word to refer to what we would call capitalism: https://en.m.wikipedia.org/wiki/Capital_(Marxism)#:~:text=Ca....

That’s not what it means within a sentence that uses it in terms of "capitalism"

Distributism, mutualism, anarcho-socialism, etc. are less capitalized models but retail decentralization.

The question is, how likely is it that those can exist without something more centrally organized showing up to fill the power-vacuum?

Quite! These solutions exist almost everywhere for all time. Look at Little Free Libraries, Mastodon, Open Source, it's everywhere.

That's not capitalism you're talking about then. Capitalism has everything to do with capital.

I think it's short sighted to picture a 'centrally' planned economy as the only alternative to capitalism. I'm not an expert, but if you read Marx directly, he didn't say much about the structure of what proletarian ownership would look like. I think it's safe to say market structures.m can coexist with democratic ownership of the economy: see unions, coops, etc.

I would say also that managerial incentives can co-exist with democratic ownership of the economy, and that this could ensure some level of creative destruction.

“democratic ownership of the economy” cute way of saying socialism. But if people in the democracy don’t want to own the economy then it’s not democratic.

Same critique of so-called “Democratic socialism”. If it’s socialism, it’s not democracy.

Coops, yes, but those are essentially groups of independent producers, while unions are much more in keeping with Marxism. To the point, I haven't seen any actual examples of modern unions that are anything but a drag on production. Perhaps you can mention one?

Unions, in principle, are market-oriented. Nothing inherently non-market about people banding together to increase negotiating leverage.

Obviously in practice there are often regulations concerning unions, but that's true of basically every part of a market too.

Yes Unions are def market oriented. They Want To Make Money.

More money for the business = more money for their members.

For example in British Columbia where a relic of alcohol prohibition remains in that the government manages liquor distribution and still has some (unionized!) liquor stores, the union agitated to have those liquor stores open on the weekends. The government initially wasn't interested! Union members though wanted more hours and more money and to sell more liquor.

One counterpoint: Unions tend to have vastly better safety records. It’s hard for individual workers to remain productive when they are injured.

Capitalism is not the same thing as a market economy. You can have a market economy where businesses are incentivized to innovate and create business plans that fit an effective niche without separating ownership from labor.

And although there are clear examples where market economies are nimble, there are also clear examples where market economies are fragile or don't actually produce outcomes that are best for customers or society. A health insurance company that puts most of its innovation effort into finding creative ways to refuse to pay out to its customers while obfuscating this outcome is a natural thing in a market economy.

> A health insurance company that puts most of its innovation effort into finding creative ways to refuse to pay out to its customers while obfuscating this outcome is a natural thing in a market economy.

Health insurance companies in the US are more or less run by the regulators these days. Obamacare has seen to that, driving out of Washington state all health care providers for self-employed people but one.

I have all my other insurance with one company. Their premiums are higher than average. But the times I needed them, they were there with the money and even legal help. They're worth the higher premiums. It's the free market at work.

But we've got decades of data from health insurance before Obamacare. It isn't like things were peachy before that.

Health insurance diverged from free markets back in the 1940s when health care got tied to your job due to the way it was taxed.

That's still a market economy rather than a command economy.

If you want, I can point at gazillions of other industries where markets have led to obviously suboptimal outcomes. Command economies have major problems and may be worse in almost all circumstances but "markets make everything good" is just observably false.

I thought the way that health insurance got tied to employment was through government incentives for employers to do so? E.g. not being taxed when provided as a benefit

That's still a market. Employers choose among many different insurance options. Employees choose employers in part because of benefits.

The government distortion of the market via tax policy made it much harder to select health insurance providers based on their merits. Noting this makes it inaccurate to assign blame for such failing on the free market.

Government distortion doesn't make it a command economy.

Whatever you want to call it, the thing that we have and the thing that libertarians want observably produces shit outcomes in a number of domains. If I can't blame the free market, I can blame the political advocates who claim to want a free market for the specific outcomes of their policies.

> I can point at gazillions of other industries where markets have led to obviously suboptimal outcomes

Please do.

Digital advertising is a fun one. Creating the markets for information birthed surveillance capitalism.

> Digital advertising

> obviously suboptimal outcomes

I find targeted ads obviously superior to generic ones. And "surveillance capitalism" is so far just a derogatory term for which I am still waiting to see any actual, real-world downsides.

Unlike, say, "surveillance state" which is a horrifying nightmare I had the bad luck to experience.

>react much more slowly and/or less accurately.

I’m not making an anti-capitalist point, but I don’t know how well that point holds because it seems like the same case can be made for the other side.

For example, the financial markets were slow to react to information in 2006-2007 until we had already driven off the cliff. Some would say the same about climate change etc.

It seems to me that a hybrid system is actually the best as balancing that risk.

Regulation. You want regulation. And some social safety nets like social security, health care. Etc.

Edit-also the reason you don’t immediately think of the word “regulation” is for the last 40+ years anyone suggesting regulation has been ran from public life as a communist or nazi. But regulation absolutely is just applying the usual legal system to the market to make sure the market stays within acceptable and safe bounds.

I agree, but “regulation” is also the trope used to say the govt hinders/slows down business. I don’t think applying the brakes is always a bad thing. For example, I want regulation to temper the attitude of “moving fast and breaking things” in safety critical code.

Market driven economies react to incentives. Regulation is one way to influence those incentives, but it’s usually slow moving (hard to put in place, hard to change or remove)

A lot of the incentives in the us market are very short term in nature, especially in publicly held companies. It seems like this leads to companies following hype cycles right off of cliffs even when it’s not hard to see problems.

If you think our housing bubble in the capitalist west was crazy.. wait until you read about the ongoing one in central planned China...

That’s my point. The same effect exists in both systems so it doesn’t make a very strong argument against one or the other.

GP is making a point about the relative scale of the problem in one vs the other, not that the problem doesn't exist in both.

It’s hard to be worse than wrecking the world economy until central planning had to bail them out.

Capitalism have no universally agreed on definition but by many definitions, certainly any Marxist one, modern China is very much a capitalist society.

Would this cobalt stuff have reacted more quickly without the subsidies?

The reason solar power was growing so fast last 2 decades was mostly EU and German central planning. Not to say that central planning is better in general, but reaction speed isn't inherently better in capitalism. One common problem is capitalism getting stuck in chicken and egg dillema - central planning had advantage there. Granularity of adjustment is the main advantage of capitalism. And some kind of hybrid is the most efficient.

It's almost like we need a hybrid model. Some things centrally planned and some things left more free.

They may have gotten the ball rolling around 2009, but today the EU accounts for only a small portion of solar installs. In 2022, the EU was about 15% of the global solar new installations.

Now, in wind, Europe is still leading.

Subsidies don't really count as central planning. It's a way to nudge market participants in a certain direction but they still have autonomy.

I don't really care about labels, but if you credit capitalism for cobalt mining increase achieved in states with hybrid economies because the part that helped was free market in spirit - then you should also credit central planning when the situation is reversed.

Central planning is not the only alternative to capitalism

Could you list some?

anarcho syndicalism. or for further historic reference see graeber & wengrow's dawn of humanity on other alternatives relevant today.

The market communism varieties orbiting around mutualism and other market socialism variants.

contemporary US "capitalism:"

1. preferential treatment for providers of capital to ventures when it comes to risk & reward (compared to provision of labor or IP)

2. minimal/reduced central planning (aka "free market")

3. regulatory and cultural environment favoring entrepeneurialism i.e. low barriers to starting new ventures/exploring new ideas.

There's no inherent reason that we need to retain all 3 of these, and quite a lot of us would like to keep #2 & #3 and drop or substantially modify #1.

Let the market itself decide. If "providers of capital" do not fund promising new ventures, they will gradually cease to be providers of capital, and simultaneously new "providers of capital" will sense a good opportunity and step up. That's the foundation of capitalism, and detecting these opportunities is the heart of being an entrepreneur.

Don't agree. Being an entrepeneur can be (and often is) about making a living, not a killing. Most small to medium size businesses in the USA just about get by, they make payroll, covers costs and not much more. Their existence is good for society, but isn't much of an opportunity for substantial returns on capital investment.

Also, #1 isn't about whether capital is required or provided - it is nearly always necessary. The question is about the distribution of risk & reward between the providers of capital, labor and IP. When capital has outsize economic and political power, it's not suprising that it also arranges for itself a political, economic and cultural environment in which it reaps more of the rewards than the providers of labor or IP.

There are plenty of valuable markets that wouldn’t exist without central planning. Aerospace (and it’s offshoots) are particularly strong examples. The only groups that were large enough to bear the risk to foster such nascent industries were large govts.

Yes. No central planner had to be convinced or bribed to let cobalt be mined. Just capitalism doing its thing.

I might be missing sarcasm, but Glencore is a corrupt company operating in corrupt countries. They bribe officials and have decent fines to pay as a result of their practices when setting up cobalt and copper mines.

https://www.bbc.com/news/business-63858295.amp

No sarcasm. It’s easy to poke holes in the thing. The holes are largely a reflection that it’s not been regulated. There’ve been attempts and even successful regulation in certain markets across time, but the current economy has warts. Teddy Roosevelt comes to mind as an upswell of regulation. I think it wasn’t until 1938 or 1939 that someone actually went to prison for the 1929 crash. Then much of the bank reforms introduced following 1929 were repealed. Buybacks were illegal used as part of them. Etc

The current push to onshore production actually feels a little regulatory. It’s a system that does need some “light” steering from time to time.

(I could go on that if a company publishes ads they’re operating market power that should be countered. The reason to the counter is market power means the supply side isn’t producing the market clearing amount of product and instead of selling what they produce there is always waste. But this particular point in time is very anti-progress.)

... which is valid for every single similar multinational corporation, if you don't hear it in the news it just means they are a bit better in hiding it. In another news, water is wet. It literally doesn't matter what resources you pick and 3rd world country location, its the same story for last 70 years at least.

That's not what this thread discusses, and OP didn't need to be sarcastic. I've lived in centrally planned economy, and it was a failure on every single meaningful level, just like any other centrally planned economy. There were frequent shortages of basic items, some stuff like exotic fruits were literally impossible for common people to buy, or it took 3 hours of standing in the queue. I think some of the western spoiled kids argumenting for some form of communism would be a bit smarter if they actually grew up in systems they push so hard for (of course this time the pipe dream would actually work because XYZ, but these things keep failing because of basic nature of people, good luck fixing that).

Its just like if people generally needed to fear the failure a bit, and society needs to let some people fail in order for the rest to thrive now and in the future. Remove this thread, and next generation will be significantly weaker.

Corruption is a very relevant topic if you consider stability to be a necessary aspect of economies.

Yes, there will be some corruption in practically any large economy. But certain ay promote more or less, and there is always a tipping point where the economy becomes less stable due to excess corruption.

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