Democracy and the invisible hand
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  1. #1
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    Democracy and the invisible hand

    The big argument for free markets is that everyone pursuing his own selfish interest in the market produces the best result for everyone.

    Does democracy work the same way? Lots of people complain that the proliferation of special interests, of both voters and politicians pursuing their own interests instead of putting the nation's interests first, is a bad thing?

    But is this like arguing that Walmart and Bain Capital should focus on charity rather than profit? Maybe all these special interests act in politics just as personal greed does in economic markets to assure the best possible outcome.

    Does the invisible hand work similarly in the political world as it does in the economic world? Why or why not?
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    Quote Originally Posted by Fredke View Post
    everyone pursuing his own selfish interest in the market produces the best result for everyone.
    mmmm that's not the way I understood it.

    "individual ambition benefits society" is not the same as "best result for everyone".

    There are winners and losers in a free market.
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    Quote Originally Posted by Fredke View Post

    Does democracy work the same way? Lots of people complain that the proliferation of special interests, of both voters and politicians pursuing their own interests instead of putting the nation's interests first, is a bad thing.
    I generally agree with the direction I think you're heading. To wit: we vote with our wallets, with our feet, with voting levers, etc. And, "enlightened self interest" is the right mindset.
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    least bad?

    Democracy is not necessarily about "putting the nation's interests first." It's about having some kind of governing system that is the least objectionable compared to other systems. It's about majority rule, with some protections for the minority.

    Same thing with economic systems. I think the idea is that free markets generally work out better in the long run, compared to other systems. There will be fluctuations and winners and losers along the way, but on whole there just isn't a better way of doing things.

    I think both systems are primarily about providing a perception of what is fair, so that people will be motivated to participate and at least acquiesce in the results.




    Quote Originally Posted by Fredke View Post
    The big argument for free markets is that everyone pursuing his own selfish interest in the market produces the best result for everyone.

    Does democracy work the same way? Lots of people complain that the proliferation of special interests, of both voters and politicians pursuing their own interests instead of putting the nation's interests first, is a bad thing?

    But is this like arguing that Walmart and Bain Capital should focus on charity rather than profit? Maybe all these special interests act in politics just as personal greed does in economic markets to assure the best possible outcome.

    Does the invisible hand work similarly in the political world as it does in the economic world? Why or why not?
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  5. #5
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    Quote Originally Posted by Creakyknees View Post
    "individual ambition benefits society" is not the same as "best result for everyone".
    I said it badly. Best result for everyone taken together, not for each individual. You're right that there are winners and losers, but the idea is that on the whole the group is better off with free markets.
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    Quote Originally Posted by Fredke View Post
    The big argument for free markets is that everyone pursuing his own selfish interest in the market produces the best result for everyone.

    Does democracy work the same way? Lots of people complain that the proliferation of special interests, of both voters and politicians pursuing their own interests instead of putting the nation's interests first, is a bad thing?

    But is this like arguing that Walmart and Bain Capital should focus on charity rather than profit? Maybe all these special interests act in politics just as personal greed does in economic markets to assure the best possible outcome.

    Does the invisible hand work similarly in the political world as it does in the economic world? Why or why not?
    In a market economy people work to improve their individual prosperity (it's not really greed) which leads to the best outcome for society as a whole. The problem with a Republic is that people can vote themselves money by voting for certain candidates. There is motivation to improve prosperity but not through the generation of wealth but by transferring wealth from others. Tytler said that democracy works until people figure out that they can vote themselves money. And politicians most always ignore Hazlitt's "One Economic Lesson" by focussing on the short term benefits of small groups and not the long term effects on the entire population. And that's how the pols get votes. And why a system of checks and balances plus the rule of law is so necessary.

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    that's probably not a Tytler quote. might as well attribute it to Reagan. I found a nutty libertarian (Loren somethingorother) who attributed it to Tytler, a few years back, but it wasn't that solid. Reagan is remembered for popularizing it and nobody knows who Tytler is.


    the argument would carry more weight if the folks--who supposedly would benefit from this redistribution--actually voted regularly.

    and the idea that there's a 50% "tipping point"--whereby that 50% somehow collectively "realizes" they're part of the 50% and at the 50%--is even more outlandish.


    anyways. I realize both of these are popular talking points on the wingmedia right. many of these only work in one-way mediums like TV or radio (where people can't reply or ask questions).

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    Quote Originally Posted by Fredke View Post
    The big argument for free markets is that everyone pursuing his own selfish interest in the market produces the best result for everyone.

    Does democracy work the same way? Lots of people complain that the proliferation of special interests, of both voters and politicians pursuing their own interests instead of putting the nation's interests first, is a bad thing?

    But is this like arguing that Walmart and Bain Capital should focus on charity rather than profit? Maybe all these special interests act in politics just as personal greed does in economic markets to assure the best possible outcome.

    Does the invisible hand work similarly in the political world as it does in the economic world? Why or why not?
    Problem is how many voters really understand what the issues are?

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    Quote Originally Posted by bricoleur View Post
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    that's probably not a Tytler quote. might as well attribute it to Reagan. I found a nutty libertarian (Loren somethingorother) who attributed it to Tytler, a few years back, but it wasn't that solid. Reagan is remembered for popularizing it and nobody knows who Tytler is.


    the argument would carry more weight if the folks--who supposedly would benefit from this redistribution--actually voted regularly.

    and the idea that there's a 50% "tipping point"--whereby that 50% somehow collectively "realizes" they're part of the 50% and at the 50%--is even more outlandish.


    anyways. I realize both of these are popular talking points on the wingmedia right. many of these only work in one-way mediums like TV or radio (where people can't reply or ask questions).
    http://en.m.wikipedia.org/wiki/Alexa...tler#section_2

    It is fairly well known in libertarian circles. Whether he said it or not well ask old ed.

    ;)

    But it is true. That is why we need a republic not a democracy. A government of laws. With restraints.

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    The thing that is missing in your observation of interests is time. Looking out for ones own short term best interest is what makes bank robbery attractive. Long term interests are served by the greed associated with doing the right thing for clients / customers so they will repeat and will tell their friends. This approach makes for good relationships and the ability to sleep well at night.

    Political careers are a little different. The people politicians claim to serve can sometimes be blinded by ideology to the point that they succumb to a ends-justifies-the-means mentality. They will accept corruption in the service and delivery of their free lunch.
    Quote Originally Posted by Fredke View Post
    The big argument for free markets is that everyone pursuing his own selfish interest in the market produces the best result for everyone.

    Does democracy work the same way? Lots of people complain that the proliferation of special interests, of both voters and politicians pursuing their own interests instead of putting the nation's interests first, is a bad thing?

    But is this like arguing that Walmart and Bain Capital should focus on charity rather than profit? Maybe all these special interests act in politics just as personal greed does in economic markets to assure the best possible outcome.

    Does the invisible hand work similarly in the political world as it does in the economic world? Why or why not?

  11. #11
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    Quote Originally Posted by SwiftSolo View Post
    The thing that is missing in your observation of interests is time. Looking out for ones own short term best interest is what makes bank robbery attractive.
    A lot of people say the same thing about markets. A lot of businesses do things that are profitable in the short term, but blow up in the long term because by the time the sh*t hits the fan, the CEO and other top management will have collected their bonuses and moved on to other jobs.
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    Quote Originally Posted by Fredke View Post
    A lot of people say the same thing about markets. A lot of businesses do things that are profitable in the short term, but blow up in the long term because by the time the sh*t hits the fan, the CEO and other top management will have collected their bonuses and moved on to other jobs.
    Have not heard of many governments paying in restricted stock units or government options like companies do.

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    Quote Originally Posted by NJBiker72 View Post
    Have not heard of many governments paying in restricted stock units or government options like companies do.
    They're called "dollars." Just as shares and options become worth less in a poorly run company, a badly run nation's currency can lose its value.
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    Quote Originally Posted by Fredke View Post
    A lot of people say the same thing about markets. A lot of businesses do things that are profitable in the short term, but blow up in the long term because by the time the sh*t hits the fan, the CEO and other top management will have collected their bonuses and moved on to other jobs.
    We agree that market investors often lack the ambition to ensure that they invest in companies with CEO's who have been given incentives that protect long term interests. Some investors only care about the short term and some are too lazy to use due diligence.

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    Quote Originally Posted by Fredke View Post
    They're called "dollars." Just as shares and options become worth less in a poorly run company, a badly run nation's currency can lose its value.
    Way too far down the road. Plus that is offset by the book deal.

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    Quote Originally Posted by SwiftSolo View Post
    We agree that market investors often lack the ambition to ensure that they invest in companies with CEO's who have been given incentives that protect long term interests. Some investors only care about the short term and some are too lazy to use due diligence.
    Exactly. Voters and investors have similar limitations.

    So it's interesting to ask how markets and democracies compare at using the wisdom of crowds to overcome the shortcomings of individual voters and investors.
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    Quote Originally Posted by Fredke View Post
    Exactly. Voters and investors have similar limitations.

    So it's interesting to ask how markets and democracies compare at using the wisdom of crowds to overcome the shortcomings of individual voters and investors.
    Crowds are not known for their wisdom and are always intellectually inferior to isolated individuals. They can however serve both evil and noble purposes. (Just getting into "The Crowd" by Gustave Le Bon). But that's another thread.

    Milton Friedman came up with a concept he called the "reverse invisible hand." Smith's invisible hand you've covered. Friedman's reversal states that people who intend to serve only the public interest are instead led by a "reverse invisible hand" into serving private interests which was no part of their original intention. Crony capitalism is an example of this. In an effort to improve the general prosperity resources are directed into specific and private enterprise.

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    Quote Originally Posted by bricoleur View Post
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    that's probably not a Tytler quote. might as well attribute it to Reagan. I found a nutty libertarian (Loren somethingorother) who attributed it to Tytler, a few years back, but it wasn't that solid. Reagan is remembered for popularizing it and nobody knows who Tytler is.


    the argument would carry more weight if the folks--who supposedly would benefit from this redistribution--actually voted regularly.

    and the idea that there's a 50% "tipping point"--whereby that 50% somehow collectively "realizes" they're part of the 50% and at the 50%--is even more outlandish.


    anyways. I realize both of these are popular talking points on the wingmedia right. many of these only work in one-way mediums like TV or radio (where people can't reply or ask questions).
    You don't think that any proposal to increase tax rates on the ~ 50% who don't currently pay any federal income taxes (like going back to the Clinton rates, all of them) would not be used by those in opposition to enccouage a "get out to vote" campaign and solicit votes ?? They would hit that from every angle - war on poverty, war on "race," war on women, war on lifestyle, ....

    Look what Obama did with the simple "hope and change" mantra.

  19. #19
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    Quote Originally Posted by AM999 View Post
    Crowds are not known for their wisdom and are always intellectually inferior to isolated individuals.
    Dunno, I've seen some pretty stupid individuals.
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    Quote Originally Posted by Fixed View Post
    Dunno, I've seen some pretty stupid individuals.
    Excellent Point if you get my drift.

  21. #21
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    Good point..

    Quote Originally Posted by AM999 View Post
    ...Friedman's reversal states that people who intend to serve only the public interest are instead led by a "reverse invisible hand" into serving private interests which was no part of their original intention. Crony capitalism is an example of this. In an effort to improve the general prosperity resources are directed into specific and private enterprise.
    Adding to that, if money, "allocation of resources," is the measure in political ambition, the wealthiest 1% have won hands down. They have accumulated almost all the wealth generated by the labor and dedication of the lower 99%, decimating the middle class, and forcing government to intervene, on credit, and throwing the nation into horrendous debt.

    This transfer of wealth is by design, not chance, worked out in the political institutions of America, whether on a small scale, crony capitalism, or a large scale, Repub ideology of low taxes on the wealthy, no regulations of business or finance, privatization of public services, and ultimately eliminating government.

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    Quote Originally Posted by Fredrico View Post
    Adding to that, if money, "allocation of resources," is the measure in political ambition, the wealthiest 1% have won hands down. They have accumulated almost all the wealth generated by the labor and dedication of the lower 99%, decimating the middle class, and forcing government to intervene, on credit, and throwing the nation into horrendous debt.

    This transfer of wealth is by design, not chance, worked out in the political institutions of America, whether on a small scale, crony capitalism, or a large scale, Repub ideology of low taxes on the wealthy, no regulations of business or finance, privatization of public services, and ultimately eliminating government.
    That's total BS. The share of wealth held by the top 1% has ranged between 20 - 25% in the last 70 years and has ranged between 20 - 23% in the last 40 years. Currently it is ~ 22%. At the start of the 20th century the top 1% held ~ 40% of the nations wealth.

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    Quote Originally Posted by Fredrico View Post
    Repub ideology of low taxes on the wealthy, no regulations of business or finance, privatization of public services, and ultimately eliminating government.

    Need a whiff of fresh air mate?

    It's the dems who have been largely responsible for taking 47% of the population off the federal income tax roles entirely. We are talking about no federal income tax--not low federal income tax.

    Please do give us an example of any republicans who are suggesting "no regulations of business or finance". Maybe you'd follow that up with a list of those republicans who ultimately want to eliminate government.

    It is surprising how spewed pablum finds a way to attach itself to some folks. Consider that Rachel Madcow may not be the best source of credible information.

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    Quote Originally Posted by SwiftSolo
    ...

    It is surprising how spewed pablum finds a way to attach itself to some folks. Consider that Rachel Madcow may not be the best source of credible information.


    yargle bargle pablum drool teat spew producers incentive eff-oficy arrggghhhh.



    (I agree with you on Maddow, though!)
    .

  25. #25
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    Quote Originally Posted by AM999 View Post
    That's total BS. The share of wealth held by the top 1% has ranged between 20 - 25% in the last 70 years and has ranged between 20 - 23% in the last 40 years. Currently it is ~ 22%. At the start of the 20th century the top 1% held ~ 40% of the nations wealth.
    https://www.motherjones.com/files/outofbalance.jpg

    The lower graph is what Americans would like. The middle graph is what American suspect is true. The upper graph is what the actual reality is.

    NPR says your figures are for income, not total wealth. But even so, you're figures are astounding and prove my point.

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