The Economist reviews Michael Moore's new film
economist.com
economist.com
Capitalism is the most effective way known of getting people to do what it gets them to do. However you have no control of what that is.
Therefore if you want to have clean water supplies, universal education, national defense, police, unproductive people not starving in the streets, etc then you need to divert some resources away from capitalism. This is the justification for taxation and government.
The justification for Michael Moore's point of view is that he wants to see those things happen, and capitalism doesn't do that very well.
However be very careful about using government to try to direct capitalism to meet your goals. Because well-meaning interventions regularly fail spectacularly due to unintended consequences. One of which is that any influential group that is regulated by government will try (and eventually usually succeeds) in getting control over their regulators.
It's this reasoning that allows them to put the entire blame for the current crisis on capitalism in spite of the fact that it's the governments and central banks of the world who inflated the credit bubble by providing easy money for so many years.
Yes, but they're doing that to profit - capitalism at its most pure :)
Or at least if not "profit", it was certainly a means for them to make profit.
Consider. We get Sally to take out a large mortgage on her home. The person issuing the mortgage takes the mortgage, sells it to an investment bank, and makes an immediate profit. At the investment bank they take those loans (small investments with considerable risk), bundle them into a deal, and slice and dice off several (rated) safe tranches that they sell for a profit. The purchasers of said debt get to take money that wasn't making interest and put it into something that makes money, resulting in an immediate profit on the books.
All of those companies along the way record profits, and pay generous bonuses to the people who did those things. Those bonuses are a profit to the individual that is kept whether or not the organization runs into future problems. Which creates perverse incentives. There were many individuals who realized that they were doing something unsustainable. But if you don't do it, you'd lose your cushy job, while if you do it you make nice bonuses. From their point of view the possible eventual failure of Lehman etc were externalities and they were motivated by their current bonuses.
Furthermore back in the neighborhood, Sally didn't sit on her money. Instead she spent it. The various businesses she spent money at get to record profits on those sales, which in turn goes to hiring people, paying healthcare premiums, etc.
None of that would happen if Sally didn't take out that mortgage.
In short what has happened is that the taking on the debt results in causing money to circulate. As money circulates, multiple people record profits. This is well understand, and is why standard macro-economic theory says that money is effectively created when debt is taken on. And, on the whole, this is a good thing.
The problem, of course, is that just as money gets created by the taking on of debts, money gets destroyed when debts are abandoned. And when people take on debts they can't afford, they do get abandoned. Which is the current problem we are dealing with right now.
> Therefore if you want to have clean water supplies, universal education, national defense, police, unproductive people not starving in the streets, etc then you need to divert some resources away from capitalism.
Capitalism - free enterprise - handles all of those pretty well except national defense and maybe policing. Charities are part of capitalism. Infrastructure's not so bad for government to build. In wealthy countries, charities vastly outperform government in alms and welfare because it doesn't create power structures that people try to hijack and lobby.
As for government in education, it corrupts education completely. Look at the standard American middle school and high school curriculum - very little of practically important things (scheduling, personal finance, establishing habits, interpersonal skills, critical thinking, problem solving), and a lot of nonsense. They teach algebra fairly well in American high school and almost nothing else. I can't believe that any educator would be in favor of government-run education: It sinks to a very low level, teachers are handcuffed by bureaucrats and public opinion in their teaching methods, honest perspectives on history, ethics, and civics become impossible to learn, bad teachers don't get fired, good teachers with non-traditional backgrounds don't get hired... like, government doing a lot of stuff is a relatively new idea, and it's a nice idea, but it usually doesn't work so well in practice.
I grant that well-run charities are much more efficient than government. However not nearly enough money is voluntarily donated to charity to realistically address the problems that exist. Based on http://www.givingusa.org/press_releases/releases/20080622.ht... we collectively donate about $300 billion per year. That's about $1000 per year per person.
But to bring up one example, about 1% of the population gets schizophrenia, and about a third of those we do not have effective treatment for. In a country with 300 million people that's about a million people with an untreatable mental illness that is very expensive to deal with. At a minimum that would take 10-20% of the total available for charity for a cause most people haven't even heard of. Once you take out all of the money donated to causes donators care about - such as museums, cancer research, third world poverty, and a million splinter causes (such as the Electronic Freedom Foundation), there simply isn't enough left to address a lot of very real and expensive needs.
Moving on let's look at your claims about education. I won't disagree with any of your criticisms. I've said the same and worse before. However I'm aware of one fact that you are probably not. Which is that, after controlling for parent's socioeconomic status, students who go to public schools in the USA do better on tests measuring their academic performance than students who go to private schools. (If you don't control for the large correlation with parent's socioeconomic status, public schools come out worse.) So as bad as the public option is, the private one seems to be worse!
Not to mention that the big problem the public option solves is delivering education to those who are poor enough to not afford it for themselves. Not doing that would limit how much of an educated workforce was available in the future, to the detriment of everyone.
But why does private education deliver a worse product? Part of the problem is that parents aren't as good of judges of the quality of their children's education as they think they are. So private schools are incented to do things that make parents think they are doing a good job at the cost of actually doing a good job.
Incidentally education isn't the greatest illustration of the problem. Public health provides much better ones. For instance patrons of a restaurant are not in a position to judge whether sanitary procedures are being followed in the kitchen. Residents are unable to judge how good the water they receive is. Which is why public health was one of the first areas where economists came to understand why the invisible hand of the market didn't do a good job of provisioning the need.
That's the best description of what's wrong with education I heard in a loong time. Just, congratulations.
When a business's profit is proportional to the well being of the mass, then capitalism is great.
Problem arise when profit is proportional the degradation of the public health, the number of wars being waged, and the amount of people being imprisoned.
Then of course we have to "regulate" it.
Some may say capitalism is "in-efficient" when it's regulated. I completely agree, in the sense that any algorithm is in-efficient when there is more over heard.
It may be easier to think of the task of improving the state of the world as a global optimization problem in computation. Experienced computer scientists will tell you that the hardest part of an optimization problem is defining exactly what is to be optimized - Think fitness measure in a genetic algorithm.
This make sense. We can make an algorithm as efficient as possible, but if we are optimizing the wrong thing then all the work are pointless.
As complex as the world is, I can't bring myself to believe that profit alone is enough as the fitness measure. That's why people have proposed adding other measures such as carbon emission credit to be traded in a capitalistic algorithm. (Maybe we should even add more measures such as health and education credit.)
Some may call this "regulating" capitalism. I personally think it's just redefining the fitness function, which is a very sensible thing to do in terms of computation.
If the industry got paid for making people healthier, we would be much healthier.
They are currently paid for treatments performed, based on price.
Thus they optimize for lots of expensive treatments.
There is a correlation between lots of expensive treatments and health, but not a direct one. The only direct result is higher spending on health care.
If we paid for outcome, healthcare would undoubtedly be cheaper, and probably better as well.
It's quite hard. Yes, true health care should be preventive, but this also means money is paid before any health problem occurs. Yet the general public are reactionary consumers. Why would they pay when they are still healthy?
Perhaps you have a better suggestion.
What an incredibly simplistic analysis! 'Analysis' is too strong of a word; this is mere polemic. It is clearly not the case that government completely corrupts education. It is further untrue that any of the consequences described can be attributed entirely to the fact that government runs public education.
The parent merely asserts that government 'corrupts' education and then lists a bunch of alleged educational maladies. Many of these maladies are clearly due to the fact that schools are institutions and that they serve pluralistic communities. The point about bureaucracy is especially vacuous. Can we even imagine a school or school district, public or private, without imagining an attendant bureaucracy? Another poster mentioned Marx; is it lost on the parent that Marx talks about, iirc, alienation due to private bureaucracies as well as government ones?
The real causes of problems in education will not turn out to be so simple as 'government.' The real problems will turn out to hinge partly on the peculiar aspects of government bureaucracies vs. private bureaucracies for sure, but will also stem from economic issues like poverty and hunger, social and socio-economic issues like the amount of time parents spend away from home working, and cultural issues like the value placed on education and civic responsibility by contemporary culture, and many other possibly irremediable causes.
Finally, the form of the original 'argument' offered is this: There is an overly simple problem, it has an overly simple cause, and the solution is simply to remove that cause. The truth is that both the causes and effects of real-world situations are both more complex and more intractable than that. That any adult should fall for such a blatant oversimplification is perhaps a clearer indicator of the trouble with current corporatist culture than the addled mind of Michael Moore could ever conceive.
Probably not above a certain minimum size (of school), but we can easily imagine a smaller bureaucracy.
If you abolished the LAUSD or NY's and made school districts for every area with 10,000 ± x students you could replace the vast majority of the bureaucracy with volunteer labour, otherwise known as busybody parents.
Seriously, what is the point of having these administrators? Record keeping and quality control are the only thingsd that come to mind. Parents have pretty good incentives to monitor quality if they have a chance of actually getting something done by making a stink, which becomes harder and harder the bigger a school district becomes.
Someone explain the point of school districts above size x to me please. I don't see any obvious economies of scale above the levels where you have enough kids you can hire your own ful time child psychologist, and I think 10,000 people per would be well above that, and smaller than the size where people's first response to crap schools would be to think about private schools, and second would be to think about moving.
This only works when parents have the available free time and resources to replace these administrators with their free time. The problem with this is that parents with available free time and the motivation to donate to their child's school is very unevenly distributed. You are also going to end up duplicating a lot of administration bureaucracy across these smaller districts and losing a lot of efficiencies that can be gained from centralization. Centralization has its own costs, but sometimes these costs are not as large as the cost of a lot of duplicated effort.
Point of comparison based on actual statistics from Detroit 20 years ago. (See http://www.mackinac.org/article.aspx?ID=6014 for a citation.) Administrative overhead for the Detroit public school system: nearly 40%. Administrative overhead for parochial schools run by the Catholic Church: 0.7%. Key difference? The parochial school system is bottom up, whenever possible responsibility is pushed down to the individual school. By contrast Detroit's schools centralize responsibility with the district, and over time that grew into an ever expanding bureaucracy.
Admittedly not an entirely fair comparison. However decentralization sure looks good.
By contrast the figure I saw quoted a couple of decades ago ago is that New York City had more school administrators than France, and New York State had more than the whole European Union. (Looking around, http://www.mackinac.org/article.aspx?ID=6014 was from 1991 and cited the source as William Brock.) If you consider that France has 3x the population of New York State, clearly some bureaucracies are worse than others.
The question is what provides the best results (and, for that matter, how to define "best").
Go see the movie if you want; you will be entertained. There isn't much to discuss here though. Yes, Moore is a hypocrite. Yes, capitalism is the best thing we have. It's still healthy to raise awareness of some of the worst excesses of capitalism.
Tomorrow - the Catholic News review of Dan Brown's latest.
who CARES what the guys net worth is? Why does it matter? Can not a successful film maker speak for those who are in the down and outs? Just because his films are good, does that make him less worthy to call out the greedy bankers? Who are you, Sean Hannity?!
"Oh, ho, ho, irony! Oh, no, no, we don't get that here. See, uh, people ski topless here while smoking dope, so irony's not really a, a high priority. We haven't had any irony here since about, uh, '83, when I was the only practitioner of it. And I stopped because I was tired of being stared at. "
While it's OK to decry greed, it isn't OK to build an economic system based on the idea that people aren't greedy. They are. There are billions of year of history behind the greed of humanity, and I'm not exaggerating. If you build an economic system based on something that is, fundamentally, not human, you will get bad results.
That's where other systems tend to fall down, and why for all the "failures" of capitalism, the worst off in a modern capitalistic society is better than all but the best off in almost any other society.
I'm willing to listen to other economic systems that also acknowledge greed. I recommend the book "Accelerando" for a half-decent exploration of the question of whether there is something better once you have pervasive computerization. But the solution to the problem of greed isn't trying to build a system based on the belief that there is some way to make people not greedy.
Greed is not capitalism's fault. Greed is, ultimately, traceable back to the fact that for every live form that survive to reproduce, there are thousands that don't. Greed may look odd in the incredibly, utterly strange place we currently find ourselves in where we have more resources than we know what to do with, but this is the strangeness, not greed.
I'm pretty skeptical of every other system I've ever seen, including socialism and communism, because they are basically built on the idea that we'll take control away from the greedy, shortsighted people and give it to the enlightened, ungreedy ones who will run things better. There is of course the (perfectly correct) argument that the information flow of such a system can't be made to work with the tools we have, but there is also the even-more-fundamental problem that the "enlightened, ungreedy" class of people doesn't exist. There are only people claiming to be the enlightened, ungreedy class. Until you can build a non-capitalist system that isn't based on this fundamental failure, it's not going to do well.
(That said, I'm only a little-l libertarian and I acknowledge that the government does have a place. I'm talking economic system here, not whole society system. Just as capitalism harnesses greed, instead of denying it, a government should harness capitalism, instead of denying it.)
When an electrical engineer designs a circuit he accounts, as best he can, for the behavior of electrons. He would never design something that assumed electrons would behave in an unrealistic way.
To me, individual greed in people is as intrinsic and predictable as a negative charge on an electron. Capitalism is designed w/ an honest look at the way humans actually behave rather than the way we wished they behaved.
In theory, democracy should exploit the same effects as unregulated or lightly-regulated capitalism: politicians act in their self-interest (pursuing power, prestige, etc.) but in order to do so must provide tangible benefits to voters in order to keep getting elected.
In reality, of course, politicians run all sorts of schemes on the side to their own personal benefit, but to the detriment of the larger body of voters. In much the same way, executives run all sorts of schemes on the side to their own personal benefit, but to the detriment of the larger body of shareholders in their company (the analogue of the voters).
Yet in the politician's case this is heralded as a failure of government, and little additional discussion takes place (since the presumption before the fact was that government must always fail); in the executive's case all manner of arguments are advanced to try to explain that it is not a failure of capitalism (since the presumption before the fact was that capitalism must never fail).
In a very real sense, then, this turns into the fallacy of begging the question: capitalism does not fail because it is postulated that capitalism does not fail, and government fails because it is postulated that government fails.
Big government is slow to react to feedback. It is sluggish, it is structurally not generally rewarded for reacting to feedback (itself a critical form of feedback), and in the case of something like the US, the government has damn near been able to legislate the negative feedback away because it was so unbelievably large and powerful. Consequently, it is low on competence. (On the flip side, a democracy works better than most systems because it has more feedback than most other governing systems.)
Most importantly of all, the "death penalty" is hard to apply to a government, which really bounds the degree of negative feedback it can receive.
A large company can look like that, too, except that the corporate death penalty (total liquidating bankruptcy) actually still can be applied, bounding the ability of the company to fail. (Barring government intervention.) On the other hand, it is possible to run even a very large company in such a way that it is always reacting to feedback and staying on top of things. It's a delicate operation, but it can be done.
Additionally, from the consumer side, as long as no monopoly has formed, you can choose a new company with very low friction, providing further feedback to the companies in question. Choosing a new government ranges from "very hard" to "impossible", especially on an instantaneous basis.
I think there are fundamental differences between government and even very large businesses, because as I like to say, a large enough quantitative change is a qualitative change. But it is true that it is all on a continuum and large enough companies can be in a failure state for a long time before it all catches up to them.
But yes, absolutely, companies can be abusive failures too. One of the critical platforms of my "little-l" libertarianism is that monopoly-busting is a valid act of government, and the primary reason is that having a monopoly is one of the easiest ways for a company to break the feedback loop, by preventing its customers from being able to offer negative feedback to the company by leaving. Since this equally applies to the federal government, I'm a proponent for "State's Rights" and spinning as much power as possible to as small a jurisdiction as possible, because they can react to feedback more quickly, where the largest organization in the world (the Federal Government) just can't.
I've left feedback ill-defined, as I've never completely worked it out yet, but one thing I'd point out is that I don't mean walking up and telling someone they are doing a bad job, I mean like "taking your business elsewhere" or "suing them", that is, actual consequences of import, not just words.
(Also, in my first paragraph, I highlight the word "competent". I did not say "good"; a well-run capitalist company or well-run government can competently execute very evil or bad things if organized properly. Stopping that is an entirely different topic.)
(One of many valid ways of looking at our current financial problems is the way the Fed has continuously chosen to not react to the feedback that our entitlement programs are not sustainable. The reason we are all sitting here looking depressed is that we all know for a fact that it will continue to push back dealing with the negative feedback of the entitlement programs, and indeed, as wonderful as full health care or capping our pollution may be, it's only whistling into the dark about the real source of the negative feedback (in a nutshell appropriate to this post, too much spending) and actually reacting in the wrong direction. We all know it will continue to put off dealing with the inevitable for as long as possible, and we may yet discover that this form of government just isn't feasible because it's too easy for it to just keep deferring negative feedback until it's no longer possible to survive it all. Only the Federal Government, with its capability to literally print money, has even the theoretical potential to get in this deep. Even state governments the size of medium-sized countries have to deal with the negative feedback head-on; for all the trouble California is having, it is at least having to deal with the issues whether it likes it or not. Our Federal government, since it doesn't like it, isn't, and for creating this feedback-immune monstrosity, we shall all pay. And once you start looking at it like this, you see just how many of the solutions being proposed address the root problem: 0.
Another angle is to notice that all these commitments that are killing us are all expressed in feedback-proof form; WE WILL spend X.Y Billion on Z. We do not stop to ask if we even have X.Y Billion, or if conditions have changed, or if the desirability of Z has changed, or the feasibility of Z has changed. WE WILL provide XYZ health coverage when you retire in 25 years, regardless of the contents of the intervening 25 years. If you can see why you could never build a concurrent program on a primitive like that, you can begin to see why there's no chance in hell to build a sane government spending program on such a primitive either. It's all "bang-and-pray" control.)
For me, with this basic distinction, everything fell into place. Also it assumes that it is not necessarily people who are prone to be greedy, but that the community rules makes them behave in specific patterns that hardly come as a surprise, once you see the benefit structure.
Also it assumes that it is not necessarily people who are prone to be greedy, but that the community rules makes them behave in specific patterns that hardly come as a surprise, once you see the benefit structure.
Motives which are at work are rather: hunger, thirst, curiosity, love, desire for attention, pain, fear. Probably others. Simple ones, but not that simple as just greed.
In my experience there is no limit to how strongly small children put their wants and desires first. Therefore they are, by definition, "greedy". There is no malice in this. There is no awareness of consequences for others. But any adult who acted in the same way would be considered incredibly greedy.
There are the kids which cling to this one toy car which is suddenly in very high regard among two friends, but there are also those which give it willingly away, once the other child starts crying or only looking very sadly. Compassion over greed. I see that quite often.
So I don't think one can say that in the infant (as a "pure" human, which has not been moderated by social norms) you can see that "humans are greedy." And even less so that holds for adults.
Therefore in a properly configured Capitalist system, the "greedier" people are, the better off society is as a whole. I am fully aware that the Western economies are not correctly configured - but they're the least-worst in the world by any reasonable measure (such as, percentage of the population that starved this year).
Other systems treat greed as much as a virtue or more, but provide much more harmful ways to satisfy such greed.