Wage Mastery

Avatar

Christopher Carr

Christopher Carr does stuff and writes about stuff.

Related Post Roulette

411 Responses

  1. Avatar BlaiseP
    Ignored
    says:

    There is an entirely cynical justification for the increasing pay differential: the increasing role of the stock price as a guide to success.

    When companies were measured in other ways: sound balance sheets, product quality, their ability to attract and retain talent, customer satisfaction, brand loyalty and other such considerations, CEOs were motivated to invest in the future of the firm. Employees were, in those days, thought to be the brains and muscles of the outfit: they did the good work, they earned a good living — they were, after all “company men” (not many women back then but still…) and there was still some affinity between executives who provided strategy and the employees who provided the tactics.

    I can’t put my finger on exactly when this transformation began: your chart could be interpreted in several ways. One thing seems certain: when the stock price matters more than the balance sheet, when the Mitt Romneys can seize a company, load it up with debt and kill it for profit, aided and abetted by these corporate boards of directors, it will only get worse.Report

    • Avatar Marchmaine in reply to BlaiseP
      Ignored
      says:

      I agree; I would much rather see the executives in my industry paid a 100x salary (if that is their proportional worth) with zero stock (other than that which they might buy, or own by virtue of the founding).

      My industry is high-tech, and I’ve witnessed the worst possible executive decisions driven solely by quarterly sales… in a company that nets 10% annual profit on $1B sales with $500M in the bank.

      I certainly understand the theory behind tying to stock-price, I’m just no longer convinced it benefits the shareholders, the employees, or the company itself.Report

      • Avatar BlaiseP in reply to Marchmaine
        Ignored
        says:

        I have this previously said elsewhere: if workers had some representation on the boards of directors, the equations of power would be profoundly different. At present, the workers are only seen as overhead on the balance sheets.

        After several years of consulting for a Japanese firm, I found out my invoices were being applied to capital, as if I was creating a fixed asset. True, I was just converting their old software and writing lots of new stuff — but I was also training their engineers and in-house talent. They treated it as if Knowledge Transfer were a Thing, not merely so much overhead against a run of robots. Came as quite a surprise to me.

        I’ve been watching as American firms slow or stop their investments in pure research. IBM still does, to its credit. Microsoft says it does, but I’ve yet to see any fundamental breakthroughs from Microsoft Research. This is most clearly exposed in their title tag: “Turning ideas into reality.” No. Pure research goes in search of better ideas. The engineers will then turn those ideas into reality.Report

        • Avatar The Cardiff Kook (Roger) in reply to BlaiseP
          Ignored
          says:

          I’ve read all the arguments about how CEO pay may be appropriate:
          1. That it is an efficient winner gets the brass ring game among the executives hierarchy.
          2. That it is like a superstar game where the finest individuals in the world compete for a few coveted super star slots.
          3. That CEO pay is nowhere near as outrageous as other superstar games like entertainment or sports.
          4. Where part of the pay is itself PR for the company (our leadership is so good he is worth x million).
          5. And that the CEO pay is totally irrelevant when it comes to corporate expenses — way below the stationary budget.
          6. I am also aware of the dangers of messing with market signals, especially when driven by opportunistic politicians seeking their own power by pretending to be against power.

          All that said. I still think there is something dysfunctional in the institutions of corporate pay. I think the boards have too much crony nepotism. You see boards made up of CEOs and ex CEOs all with the secret brother handshake.

          I am not sure what needs to be done, or how important it is to solve (not very though), but CEO pay needs to be revised as a part of the more important topic of proper corporate governance. I recommend suggested best practices be discussed and experimented with. I see no reason to expect current corporate governance is the apex of human cultural progress, and much reason to expect that we can discover improvements if we go about it the right way.Report

          • Avatar BlaiseP in reply to The Cardiff Kook (Roger)
            Ignored
            says:

            The answer is perfectly obvious: when the Executive Suite is so detached from the rest of the corporation that a guy wearing a toolbelt can’t walk in off the factory floor with a problem, something is dead wrong. That’s pretty much everywhere.Report

          • Avatar zic in reply to The Cardiff Kook (Roger)
            Ignored
            says:

            CEO pay needs to be revised as a part of the more important topic of proper corporate governance. I recommend suggested best practices be discussed and experimented with. I see no reason to expect current corporate governance is the apex of human cultural progress, and much reason to expect that we can discover improvements if we go about it the right way.

            I agree.

            I think there’s some breakdown in linking value of a company to stock price that’s creating some of these negative feedback loops, as well, and the incentives are for short-term stock value, not building long-term value of the company.

            I wonder if anyone knows of a study comparing publicly-traded CEO pay with privately held CEO pay? Are such comparisons even possible?Report

            • Avatar BlaiseP in reply to zic
              Ignored
              says:

              Sure

              Employing public and private firm CEO pay data made available through mandated SEC disclosures over the period 1999 to 2008, we first show that after controlling for firm and CEO characteristics, public firm CEOs are paid modestly more than private firm CEOs, with a pay premium of about 20%, and that public firm CEOs are given more on-going equity incentives. We then show that this public firm pay premium becomes economically small after adjusting for the risk premium associated with equity-based pay, or after accounting for differences in liquidity, dividend income, and CEO turnover between public and private firms. Finally, we show that both public and private firm CEO annual compensation is positively and significantly related to firm accounting performance, and that the pay-performance link is much stronger in public firms. Taken together, we conclude that U.S. public firm CEOs are paid efficiently.

              Which also demonstrates why publicly traded firms are guided by stock price and not by balance sheet fundamentals.Report

              • Avatar zic in reply to BlaiseP
                Ignored
                says:

                From the get-go this is suspect.

                Employing public and private firm CEO pay data made available through mandated SEC disclosures over the period 1999 to 2008,

                Private firms, with a few exceptions such as private investment funds, are not required to file SEC reports.

                So I don’t know what they’ve based their data on, but if it’s what’s in SEC filings, they’re comparing the run-of-the-mill CEO of a public company to hedge funds, etc.Report

              • Avatar BlaiseP in reply to zic
                Ignored
                says:

                From SEC:

                Corporate Reporting

                Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC’s EDGAR database.

                It’s hard to get to any size as a privately-held corporation without some sort of basis in securities and therefore, appearing in EDGAR. The SEC does allow private firms to do Reg D offerings but those are tricky. At some point, it’s just easier to do an IPO.Report

              • Avatar zic in reply to BlaiseP
                Ignored
                says:

                I think the 500 owners leaves a lot of large companies out of this, BlaiseP.Report

              • Avatar BlaiseP in reply to zic
                Ignored
                says:

                I don’t find any of this suspect. It does encompass the larger firms, which would have to file an S1. It’s extremely difficult to shop your corporate debt around on an Reg D and nobody over a certain size can avoid the problem. If you’re large enough to need the services of a real CEO and not Joe Public doing a Delaware C corp off LegalZoom, you’re large enough to appear in EDGAR.

                Private firms pay their CEOs more because they don’t offer equity options. They’re private, after all. But a publicly traded firm will always offer the equity option because they need to get the share price up and that’s why they’re hiring this gunslinger.Report

              • Avatar zic in reply to zic
                Ignored
                says:

                Perhaps. Most of the companies I reported on with defense contracts suggest otherwise; but these still small compared large multinational corporations. From what I’ve see, the 500-investor limit generally forces a company to go public; and there’s a lot of effort to keep that from happening; it’s one of the pieces of leverage early-on investors have for a better exit from later investors. And it’s one of the reasons private firms don’t offer equity options; that’s what happened to Facebook; too many shareholders.Report

              • Avatar BlaiseP in reply to zic
                Ignored
                says:

                Well, you did ask — and this was as good a response as I could summon up. My initial point was this: CEO pay is increasingly driven by jacking up the stock price by any means, or, as with Bain Capital, looting perfectly good companies on behalf of the new stockholders whose only power arises from their ability to borrow the money to purchase the shares to do so.

                None of this is illegal. Some CEOs come in and whip these firms into good shape, some are just predatory maniacs. Chris asks:

                And what is the significant criterion that determines whether we should or should not take seriously attempts to legislate the wages that a private company can pay its employees?

                Who are “we” in this context? “We” aren’t shareholders. “We” aren’t the board of directors or the employees or the beneficiaries of what these firms do. The “We” in these situations are the people who fly the flag of each of these firms and everyone who gets a pay check from the Corporate Payroll accounts, from the lowliest employee to the people who own the stock and mostly the boards of directors, who ought to be taking direction from more than the Bain Capitals of the world.

                If workers were on the boards, there would be considerably more realism in corporate governance and the workers wouldn’t mind paying a CEO great money if he was the guy who also brought home the bacon to them and saved them from the corporate pirates of Bain Capital. Maybe they’d even install the wisest worker as CEO. Now that might be an interesting proposition.Report

          • Avatar Barry in reply to The Cardiff Kook (Roger)
            Ignored
            says:

            “That CEO pay is nowhere near as outrageous as other superstar games like entertainment or sports.”

            I’d say that there’s a big difference. Sports and entertainment are far close to a fair and free market system than CEO pay. If an athlete is paid a huge chunk of money, it’s because his agent and the owner’s agent negotiated it. If a CEO is paid a huge chunk of money, it’s probably by a board of directors who were appointed by that CEO, and some of whom are CEO’s of companies where the first CEO sits on their board.Report

  2. Avatar LeeEsq
    Ignored
    says:

    I don’t think that many liberals and progressives are against high CEO pay per se. Most liberals and progressives in this country want to temper and regulate capitalism rather than eliminate it and replace it with an alternative economic system. What gets to liberals and progressives about high CEO pay is that we feel that a lot of it is at the expense of the salaries and wages of more ordinary employees and that much of is it underserved in that CEOs seem to find ways of rewarding themselves with high pay and benefits even in the company they work for is doing very badly. The objection isn’t so much the level of pay but whats being done for the pay and the perceived costs of the pay.

    I don’t think that most liberals and progressives would call for a cap on CEO pay. Thats much farther to the left than they want and also what could realistically be passed by Congress. If you listen to the complaints, its also not what bothers liberals. What bothers us is the ratio of pay between the CEO and the wages of an ordinary employee rather than how much the CEO is making.Report

    • Avatar LWA in reply to LeeEsq
      Ignored
      says:

      “I don’t think that most liberals and progressives would call for a cap on CEO pay. ”

      I hear a challenge.

      I would start by asserting that wealth and political power are directly correlated; the more wealth you have, the more influence and political power you have.

      It is entirely reasonable in my view, that wealth inequality at some point subverts the workings of the republic, becoming a direct threat to the liberty of those without wealth.

      Where is that point, and what mechanism could be used to counter it? I don’t know, but I believe there is an ethical framework for limiting wealth.Report

      • Avatar LeeEsq in reply to LWA
        Ignored
        says:

        True. You could argue that a CEO salary cap could cover the same functions as the income tax and estates taxes were created for, preventing the creation of aristocracy of wealth and political influence. The problem with creating a salary cap, as opposed to the income and estates taxes, is that how do you determine what should be the maximum pay and who should cap laws apply to. Is a person who makes a fortune for a lucrative cosmetic surgery practice less problematic than CEO and therefore entitled to a larger salary or should the salary gap apply universally?Report

      • Avatar Murali in reply to LWA
        Ignored
        says:

        I would start by asserting that wealth and political power are directly correlated; the more wealth you have, the more influence and political power you have.

        The correlation between wealth and power is not as straightforward as that. The same wealth differential can yield very different power differentials in different systems. Constitutional limitations on government power limits the extent to which wealth can buy power because it limits the availability of power.

        On the other hand, a formal requirement that presidents have previously been in some executive control over more than $50 million works to give the wealthy more power.Report

        • Avatar LeeEsq in reply to Murali
          Ignored
          says:

          Based on American history, the idea that Constitutional limitations on government power limits the political power of the wealthy is highly debatable. During the Gilded Age, the wealthy were able to use government power to enrich themselves further, the land grants to railroad companies etc., and curb any attempts of workers to unionize and strike. The Federal government acted as strike breaker on numerous occasions during the 19th century, most famously during the Pullman Strike in Chicago. The constitutional limits of government power mainly frustrated the attempts of Middle Class reformers and workers to pass the laws they wanted, laws that would protect their rights and limit the power of the wealthy.Report

          • Avatar Murali in reply to LeeEsq
            Ignored
            says:

            All that means is that existing provisions did not effectively limit the power of the rich to take control of government. If you were to instead to place a constitutional provision that created a wall between business and state, it may reduce the interference that either could place on the other.Report

            • Avatar Barry in reply to Murali
              Ignored
              says:

              “If you were to instead to place a constitutional provision that created a wall between business and state, it may reduce the interference that either could place on the other.”

              No, because the wealthy would use their Unicorn Flying Cavalry to go over that wall 🙂

              The point is that in a time in the USA when the federal government was far weaker than it is now, the wealthy were able to use that power to their advantage, to increase that power when it helped them, and to still keep the obstacles in the path of people they opposed. A prime example would be that the 14th Amendment was used in the most openly dishonest method possible to protect corporate interests, while not using it to protect people. For a century.Report

              • Avatar The Cardiff Kook (Roger) in reply to Barry
                Ignored
                says:

                Your argument seems to imply that the problem was weak government back then so the solution is strong government now.

                An alternative take on it was that what we had then was abuse within a smaller scope government. We now have different abuses within a much larger scope of government.Report

              • Avatar Kim in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                yiyiyi. One man hiding cash in his refridgerator is not systemic slavery in the Islands. I’m not convinced that the Democrats aren’t (at the moment) doing better at preventing systemic abuses of power that entrench themselves.Report

        • Avatar Kim in reply to Murali
          Ignored
          says:

          General Electric has a knowledge monopoly that is relatively independent of governmental structures.

          Please try again. (note: no, it’s not an actual monopoly. but they are one of the big players in the knowledge market).Report

      • Avatar Kim in reply to LWA
        Ignored
        says:

        Yes, yes there is. But the man like Carnegie, who grew up on the factory floor? He’s not the guy to watch out for. The vast rightwing conspiracy wasn’t run by someone who did a jot of work in his life.

        Not needing to strive, to get better, not ever having to worry breeds psychopaths like the Kochs, willing to bring a state to the brink of civil war in order to make a bit of petty cash (and that’s what they do in public view!).

        Just have a hefty enough estate tax. And a fair tax on ceos and entrepreneurs. They’re the folks good at bilking the middle class out of money, they can afford a bit shaved off the top.

        The problem is NOT wealth inequality. It’s the inability for people to rise in the system, and the wealthiest people turning into “risk-avoidant” folks.

        Entrepreneurs don’t bother trying to rig the political system (much). They just make a new company. Earn more money. Job well done.Report

  3. Avatar Marchmaine
    Ignored
    says:

    I think you can package the concept better than “capping pay.” No one likes the idea that their pay might be capped; moreover it exposes one to the specter of socialism needlessly.

    Another way to argue the matter would be to emphasize that businesses are collective corporate enterprises and that the success of the enterprise depends upon the good work of all employees; therefore, Executive pay should be pegged proportionally to the average wage earner’s pay. Successful businesses will elevate the wages of all employees, less successful not so much. What exactly is proportional will depend upon the sector and what constitutes an average wage for their industry.

    It is effectively capping, of course, but it is capping via a cultural norm and allowing for profitable enterprises to increase CEO pay, but dampening the acceleration by forcing increases to carry the weight of all employees. This is something Liberal CEO’s could unilaterally do… presumably increasing the quality of workers they could recruit and increasing the competitive position of their project at the expense of executive pay. Once done, by virtue of the way executive compensation committees work, “conservative” Executive pay would decrease over time. As a traditionalist, I and mine would much rather see wealth shared justly at creation so that redistribution is more broadly sustainable and (hopefully) needed less.

    Argued thus, you would be able to gain conservative support (excluding the conservatives you were never going to convince anyway), and force opponents to justify an infinite expansion model vs. the common sense model you propose.

    Now, whether the new normal starts at 300x, I couldn’t say. But, capping by fiat… no chance.Report

    • Avatar Brandon Berg in reply to Marchmaine
      Ignored
      says:

      Another way to argue the matter would be to emphasize that businesses are collective corporate enterprises and that the success of the enterprise depends upon the good work of all employees

      This really isn’t true in general. Take Wal-Mart, for example. It succeeds despite a rather unexceptional workforce, presumably because of good management.

      Businesses don’t generally succeed or fail because they’re randomly blessed or cursed with particularly good or bad employees. Insofar as some businesses have better employees than others, it’s usually because management has made a conscious choice to spend the money to hire and retain better employees. But that’s not the only legitimate business model. Less desirable employees need jobs, too, and management that can get productivity out of them is no less important or valuable than management that can make good use of good workers.

      Blaming management for the low wages of low-skill workers is like blaming teachers for the poor outcomes of low-IQ students.

      As a traditionalist, I and mine would much rather see wealth shared justly at creation so that redistribution is more broadly sustainable and (hopefully) needed less.

      By “justly,” you mean according to some arbitrary formula that emotionally appeals to you? How is that more just than supply and demand?Report

      • Avatar BlaiseP in reply to Brandon Berg
        Ignored
        says:

        Walmart’s in a commodity space, it doesn’t invent anything. It doesn’t even innovate. Where it faces real competition, as in Germany, it doesn’t win. Walmart succeeds, not by better management but by squeezing its suppliers and employees.

        Walmart has no brand loyalty: Walmart is utterly dependent on the name brands it can stock. Many of those Name Brands won’t do business with Walmart any more.Report

        • Avatar The Cardiff Kook (Roger) in reply to BlaiseP
          Ignored
          says:

          This assumes of course that supplier management is not creative.Report

          • Avatar BlaiseP in reply to The Cardiff Kook (Roger)
            Ignored
            says:

            It’s not an assumption. It’s a fact. Walmart saw Sears Roebuck putting all its registers on a single image LAN and modelled their supply chain on it. Sears, a corporation which always snatched defeat from the jaws of victory, sold that infrastructure back to IBM, and never quite figured out what to do with Prodigy. IBM tried again, helping to create NSFNet, another precursor to the Internet.

            Sears had been an early backer of EDI. Now Walmart defines EDI: the Walmart EDI transactions have become the de-facto standards.

            No, Walmart didn’t innovate. It copied.Report

            • Avatar Christopher Carr in reply to BlaiseP
              Ignored
              says:

              Picking and choosing winners to put one’s resources behind is a form of innovation.Report

              • Avatar BlaiseP in reply to Christopher Carr
                Ignored
                says:

                Heh. Walmart never put a dime into any of its suppliers. You go to Bentonville, they’ll sit you in a nasty little cubicle and tell you how many widgets you need to produce and even give you a schedule of ever-diminishing margins for those widgets. That is not picking winners. It’s plucking chickens.Report

              • Avatar Rod Engelsman in reply to BlaiseP
                Ignored
                says:

                Several years ago I picked up a load of stainless steel store fixtures from a small outfit in Kansas. While the truck was being loaded I struck up a conversation with the owner.

                He told me that they had just emerged from BK from a deal where Wal-Mart just arbitrarily decided not to pay them for about a million dollars worth of fixtures. No reason given, just F*** O**, and they didn’t have the resources to fight them in court.

                That’s their core business model. FYIGM at its finest.Report

              • Avatar Stillwater in reply to Rod Engelsman
                Ignored
                says:

                That might be the case now that Walmart has radically disproportionate leverage. But that could not have been the model employed by Uncle Sam when the company didn’t have the leverage.

                I’m not apologizing for Walmart here. Or praising it. But what the firm does now needs to be distinguished from what the firm did on the way up.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                The model employed by Sam Walton was completely obvious and he used it from the very beginning. He only entered the commodity space, that is to say, the tail end of the marketing cycle, where money is made on volume: I do hope I don’t have to go through all that with you.

                At the tail end, where your product has created a market for itself, you can drag things out a while, erecting barriers to entry if it can, some legal, some not.

                You might face a copycat, say. If so, it can use brand loyalty with sponsorships and advertising where the up ‘n comer is just a store brand — and you’ll never see ads for that stuff. You’ve already got production lines, sales and distribution, vendor relationships, the copycat only has a me-too approach. You’ll never see an ad for Equate Shaving Cream and I’ll go on buying Barbasol.

                It might compete on quality. That was Standard Oil’s approach on its way up: improperly refined kerosene for lamps would sometimes explode, so Standard Oil put out ads with a woman lighting a lamp in her drapery-festooned home. That’s the best way to escape the Commodity Trap, improve your product and thus your margins.

                But once you’re in the Commodity Phase, you’re liable to become a victim of your own success. If you take the Big Order, for a Little Margin, you’re fucked. Your proverbial Lunch is being Eaten by your Customer.

                For someone who’s neither praising nor apologizing for Walmart, you do seem to ask questions with awfully obvious answers, straight out of Marketing 101.

                Walmart’s ability to screw its suppliers begins by forming a contract one price and so many units then arbitrarily reneges, changes its position, now you can sue Walmart, see how far that gets you. It fucks its suppliers because it can. Once you’re in the Walmart fold, they will briskly tell you how you’re going to outsource your product and even give you the paperwork to do it. That’s ruthlessness.

                Woolworth did his deals directly with the supplier, cutting out middlemen. He was able to move a lot of product and everyone made money. Not Walmart. Walmart’s business model is absolutely dependent on crushing the life out of its suppliers.Report

              • Avatar Kim in reply to Stillwater
                Ignored
                says:

                Sam Walton would have fainted dead away at the company his descendants have created. Then he’d have dismantled the bugger.Report

              • Avatar Stillwater in reply to Rod Engelsman
                Ignored
                says:

                Rod, nice gravatar. Just saw that. Greatest album/cover ever.Report

              • Avatar Rod Engelsman in reply to Stillwater
                Ignored
                says:

                Fortieth Anniversary of the release of DSoTM. Check out some cool artwork.Report

          • Avatar Stillwater in reply to The Cardiff Kook (Roger)
            Ignored
            says:

            That’s a good point Roger. From everything I’ve read on the topic (which isn’t all that much, to be honest) Walmart was indeed an innovator in that area. Their model was the blueprint for lots of other big box stores.Report

            • Avatar BlaiseP in reply to Stillwater
              Ignored
              says:

              Having watched the rise of Walmart and the fall of Sears, it’s perfectly obvious Walmart didn’t innovate its way to success. The model for the commodity oriented Big Box store had been around since Woolworth. Sears and Montgomery Ward would eat their lunch with mail order business. Eventually Walmart ate what was left of Woolworth’s after the maniacs who ran Woolworth’s had pounded that corporation to a bloody pulp.

              Walmart invented nothing. It was just a tougher competitor. Where Woolworth’s had pioneered the direct buy and the open shopping concept, Walmart used its increasingly large shadow to crush its own suppliers. If that’s innovation, I’ll grant you that much. That was new.Report

              • Avatar Stillwater in reply to BlaiseP
                Ignored
                says:

                I’m not sure about that Blaise. Walmart records record profits (well, in the form of the wealth of the Sam’s heirs, anyway) because the firm does something that other firms weren’t doing previously. Mail order isn’t really relevant. And the suggestion that Walmart’s success reduces to better decision-making, or perhaps more ruthless decision-making, just begs the question. I mean, at some really narrow, microscopic level of analysis, not one ever invented, or innovated, anything. At the macro level, tho, it happens frequently enough that we’re justified in saying that some people/firms actually do.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                C’mon. I shouldn’t have even been as nice as to give you the crushing-the-supplier stipulation. Rockefeller was crushing his suppliers’ margins and his own workers. Fisk and Carnegie did it with their suppliers and their workers. All that was invented in the Gilded Age.

                There’s nothing new in retail. Slavery became wildly profitable with the advent of the cotton gin and the sugar mill, to the point where it was profitable to work a slave to death. Most of retail’s fundamentals go back into antiquity. It’s a ruthless industry, especially soft goods. Little children are chained to carpet looms in Iran and Afghanistan. Soft goods pioneered the sweatshop and the sewing machine made it worse. With every single technological innovation, retailers have found a way to use it to squeeze every dime out of their producers and suppliers. At no point will a retailer willingly raise prices, once he’s in a commodity space. He will always default to screwing his suppliers and his workers.Report

              • Avatar Stillwater in reply to BlaiseP
                Ignored
                says:

                There’s nothing new in retail.

                Then how did Walmart become so dominant?

                Walmart’s managers are just smarter than everyone else?Report

              • Avatar Patrick Cahalan in reply to Stillwater
                Ignored
                says:

                A while back, a friend of mine worked for Nestle. He pointed out that Wal-Mart bought a very, very significant portion of Nestle products.

                And Wal-Mart routinely violated the terms of payment. And generally Nestle salespersons let them get away with it, effectively allowing Wal-Mart net (competitors + N days for fairly large N) terms.

                When you’re talking that level of volume, you’re effectively charging all of your other customers more than Wal-Mart, even correcting for volume differences.

                Being the 900 lb gorilla means you get Soviet Russia rules, while everyone else plays by somewhat more normal vendor/supplier relations.Report

              • Avatar Jim Heffman in reply to Stillwater
                Ignored
                says:

                ” Wal-Mart bought a very, very significant portion of Nestle products.

                And Wal-Mart routinely violated the terms of payment.”

                And in the healthcare conversation, we call this “payment negotiaton” and consider the cost reductions that result from it a vital part of being able to pay for healthcare.Report

              • Avatar Kim in reply to Stillwater
                Ignored
                says:

                They got to be so dominant by stealing other people’s ideas (like Just in time.– but taht’s Dwyer’s shtick and I’m not going to tread on it).

                Logistics, in other words.Report

              • Avatar zic in reply to Stillwater
                Ignored
                says:

                I think the difference is customer service, Still.

                You go buy a tool at Sears, at least a Sears-branded Craftsmen, and they’ll replace it forever if it breaks. A big part of their model was standing behind their products.

                Go buy a tool a Wal-Mart, and it breaks first time out of the box, and sure, they’ll replace it, and their supplier will cover it. But they don’t stand behind it, so the tool can be ever-more poorly made. Wal-Mart innovated by convincing cheaper prices/declining quality could beat out quality as part of the brand.Report

              • Avatar Stillwater in reply to zic
                Ignored
                says:

                So, the reason they’re so successful is they played a shell-game and duped millions of people? Repeatedly? Consistently? Over-and-overly? Really?Report

              • Avatar zic in reply to Stillwater
                Ignored
                says:

                Don’t be obtuse; you asked what their major innovation was, and offered one; it actually harkens back to the WoolWorth’s model, but with greater control over the supply chain.

                Successful would be a host of things; the expansion of the notion of everything under one roof, supporting new stores with low prices until they’ve driven local competition out of the local market, limiting hours so that employees cannot qualify for health insurance. A big one, as BlaiseP has pointed out, is squeezing suppliers; start them off on a smaller contract just big enough to eat all their capacity so they have to drop other customers, and then squeeze them because they fear losing their only customer.Report

              • Avatar Stillwater in reply to Stillwater
                Ignored
                says:

                Don’t be obtuse

                I didn’t think I was. I still don’t.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                So, the reason they’re so successful is they played a shell-game and duped millions of people?

                No, the reason they’re so successful is because they play a strong-arm game.

                Repeatedly? Consistently? Over-and-overly?

                I am having to make this point, repeatedly and overly and overly.

                Really?

                I’m afraid so. Walmart screws its workers and its suppliers. Yes it does.Report

              • Avatar Stillwater in reply to Stillwater
                Ignored
                says:

                Blaise, in order to screw you suppliers repeatedly, you have to have leverage over them. You seem to be arguing that at every point in the history of Walmart they had leverage over their suppliers and used that leverage to screw them over. I don’t see how such a firm ever gets off the ground, myself.

                Maybe I’m wrong about all this. For example, I know that currently Walmart screws over suppliers on a regular basis. And they steal competitors intellectual property. And they purchase life insurance policies on employees likely to die. And they take advantage of government safety nets to pay people below market wages. And all sorts of wonderful stuff.

                What I don’t know is that the only reason the firm rose to dominate certain retail sectors is because the have always screwed over their suppliers. I just don’t see that, to be honest. I don’t know how such a company could even get off the ground.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                Vlasic Gallon Pickle Jar. Walmart is now powerful enough to screw up capitalism.Report

              • Avatar Kim in reply to Stillwater
                Ignored
                says:

                The other reason they’re so successful is americans can’t afford the good stuff anymore.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                Okay, so is there any sane reason for anyone to buy, say, a hand-made high quality trashcan?

                Walmart suceeds because it sells the crap that we buy for the least amount of money. Period. Whether some of its methods along the way to its current position of prominence were unscruppulous or whether its present methods continue to be unscrupulous does not alone account for its continued dominance of the cheap crap market.

                Walmart sells crap for the cheapest, which is why it continues to sell us our cheap crap.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                You’ve already stipulated to Walmart’s unscrupulousness, the ball is in your court to provide other reasons for Walmart’s continued dominance. As varies the size of a given competitor, so varies its pricing power.

                Other competitors are undercutting Walmart in the crap commodity market: Dollar Tree is just one. They appear like a fungus, taking up residence in dead strip malls. They take advantage of real estate speculators.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                Does Dollar Tree ship to my house in two days for free?Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                Heh. Here’s a dollar store delivery service: hauling their recalled goods from the store to the dump. You wouldn’t believe how often they get caught out selling dangerous stuff. Even Walmart won’t touch that stuff, strictly on a liability basis.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                That sounds like even more reason to shop at Walmart.Report

            • Avatar George Turner in reply to Stillwater
              Ignored
              says:

              Don’t forget that a big part of Walmart’s success was in not putting Walmarts in cities, just small towns where they could wipe out all the less organized and efficient mom and pop retailers. That early growth in a huge niche gave Walmart the size and buying power to take on other major competitors.Report

              • Avatar Jim Heffman in reply to George Turner
                Ignored
                says:

                It’s not like the mom-and-pop retailers were all that good. They were playing the same bottom-feeding game that Wal-Mart was; they just couldn’t play as well because they weren’t as big.

                What Wal-Mart has shown us is that, all along, the cheap stuff subsidized the good stuff. The customers came in to look at the good stuff, but found its price tag too high and bought the cheap stuff (which was marked-up to the point where it gave you *more* profit than the good stuff.)Report

        • Avatar Kim in reply to BlaiseP
          Ignored
          says:

          Really, Blaise, it’s like you’ve never heard of Just in time…Report

      • Avatar LWA in reply to Brandon Berg
        Ignored
        says:

        Brandon, are you defining “Just” as whatever outcome happens?

        Or any outcome that happens, so long as it can be said to be produced by the marketplace?

        If the outcome is the result of a mixture of market forces, governmental regulation, union pressure, and consumer action, is that outcome “Just”?

        How would you define a “Just” ordering of wealth? That isn’t arbitrary or emotionally appealing, of course.Report

        • Avatar Brandon Berg in reply to LWA
          Ignored
          says:

          I’m skeptical of the idea that there’s any such thing as a just ordering of wealth, or that we should be aiming for one. Justice isn’t a real thing. It’s just subjective judgments.

          Nor do I think that we should be aiming for a “just” ordering of wealth. The virtue of the market price system is not that it’s “just,” but that it sets up incentives properly. If you have a rare, valuable skill, you can command a high price for that. This gives people an incentive to acquire that skill and put it to use. A low wage indicates that a job has low marginal productivity, and encourages people in those jobs to acquire more valuable skills and use them to get higher paying jobs.Report

          • Avatar LWA in reply to Brandon Berg
            Ignored
            says:

            Is there even any such thing as “Just”?

            How would you arrive at such a conclusion as categorizing an outcome as either “Just” or “Unjust”?Report

          • Avatar Stillwater in reply to Brandon Berg
            Ignored
            says:

            Justice isn’t a real thing.

            Then how do you justify any of the arguments you make against government takings and taxes and so on? Somewhere in this thread you say that we ought to abolish Medicare and Medicaid. On what grounds?Report

            • Avatar The Cardiff Kook (Roger) in reply to Stillwater
              Ignored
              says:

              I would say justice and fairness can be applied to human action. To apply it to natural phenomena is a distortion of the term.

              Markets and hurricanes cannot be unjust. A judge can be. My mom can be. An official can be.Report

              • Avatar Mike Schilling in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Markets are groups of people following certain rules (or not following them). Nothing else. Comparing them to natural phenomena is just … odd. Like saying an individual can be just or unjust but a nation or a mob can’t.Report

              • Avatar The Cardiff Kook (Roger) in reply to Mike Schilling
                Ignored
                says:

                Good push back, Mike. I sort of agree with caveats. I will take a stab at those in the AMReport

              • Avatar Dave in reply to Mike Schilling
                Ignored
                says:

                Exactly.

                If it’s human action that drives markets, then we must look at those actions and evaluate markets on those considerations. That means staying completely away from abstract discussions about “the market” or treating it as some act of nature. It also means focusing on specific kinds of markets.

                It’s all well and good to discuss consumer finance and whether or not, for example, payday lenders that serve lower-income communities should earn an appropriate risk-adjusted profit for the services they offer. However, what does it to for either of us if you are discussing this market and you are pointing out the multitude of problems that exist in these markets?

                If you and I ever discuss something like predatory lending and usury laws, I would much rather provide you with my opinions based on what I see in the consumer finance markets than simply assert that I don’t think it’s a good idea for government to set prices. Even if I believe that, it’s not a guideline for me, not rigid ideology.

                That’s my general approach to any kind of market.Report

              • Avatar Stillwater in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                I mean this question seriously: do you think markets are akin to hurricanes in that they’re a force of nature? A natural phenomenon which can be described independently of human intentions, concerns or desires?Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                Do you think humans (and human action) are outside nature?Report

              • Avatar Stillwater in reply to Christopher Carr
                Ignored
                says:

                If “hurricanes” is paradigmatic of nature, then yes.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                Where do you draw the line then? red tides? disease epidemics, flocks of birds?Report

              • Avatar Stillwater in reply to Stillwater
                Ignored
                says:

                Events that aren’t agent driven?Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                Does a bird not “decide” to follow another bird? What about Chimpanzees?Report

              • Avatar Stillwater in reply to Stillwater
                Ignored
                says:

                Don’t trees decide to grow towards the light?

                Humans are no different than trees!Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                You don’t think there’s a natural order above human action at the level of markets?

                What about morality then? Do you find it ridiculous to discuss morality as though it were natural phenomena?Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                Neither markets nor ethics are natural constructs. Every time I hear that word “natural” these days, I smell an indefensible axiom in the woodpile, some article of faith, usually misplaced.

                Markets serve us by separating winners from losers. They break down all the time, market actors cheat every chance they get — the cheating only defined by the market rules.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                Your explanation only makes sense if we’re all assuming that natural = good, which I don’t think anyone is saying here. Death and disease are both natural, and very few people would describe both as good all the time (that is not to say that death and disease are not sometimes “good”).

                The point, really, of the notion that markets are natural, is that by stepping outside ourselves and trying to view the actions of the collective as essentially similar to the collective actions of termites or flocks of birds or any other “natural” system really, is that we can get beyond the “my values are this, so we should do this” discussion that often occurs and at least consider the important caveat that the system itself is fragile and our interference in it may not (probably will not) do exactly what we intend to do. Or it will do something else that we definitely don’t want it to do. Understanding markets as a system with properties analogous to known biological systems helps instill some of the humility necessary to avoid compounding policy mistakes.

                There has been a lot of highly-regarded work on this in fact – an entire intellectual tradition even – that includes economists like Elinor Ostrom and Friedrich Hayek, as well as biologists like Brian Skyrms and John Maynard Smith. The field of evolutionary game theory exists solely to analyze the economy through the methods of evolutionary biology.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                I’ve been round the block on both Elinor Ostrom and Friedrich Hayek. It’s sorta like the Bible and the people who interpret it, Christopher: Gandhi once said I like your Christ, I do not like your Christians. Your Christians are so unlike your Christ.

                Elinor Ostrom’s point was completely contrary to what the Libertarians have made of her. Her point was completely obvious: let the people who face the problem solve the problem. I’ve brought up the example of the Inappropriate Well Drilling Effort before. Didn’t seem to make any impact on anyone, but it’s a classic Ostrom problem. Neither the State nor the Market could solve this problem but the old chiefs who understand how it would upset the Grazing Land commons, they can solve it. But that solution was not the result of collective action: it was the result of collective memory embodied in a tough old autocratic chief acting on behalf of his people and their cattle.

                Markets are not natural. They are completely artificial constructs, as artificial as the rules of cricket or football. Such rules are established and modified, based on bad outcomes arising from what those rules permitted. There are no markets in nature. Animals don’t denominate their transactions in money. Let the Silk Road prove my point: without stable governments to keep its caravanserais safe, it died. It was never natural. The Ottomans tried to get it going again — and it worked for a while. But the Europeans understood they could no longer rely on the Silk Road and went to sea in search of other routes to the Orient.

                Hayek: again, would that Libertarians read him more carefully. One of the core tenets of Hayek’s eonomics is a “natural” interest rate. Interest on what? Money, that’s what. Hayek never reached the conclusion that Money is how Power is denominated.

                Hayek, like the aforementioned Jesus of Nazareth — and Marx — was an honest man. Nobody will gainsay his description of the problem. But his conclusions, more importantly, the conclusions of his followers, were not congruent with reality and it’s only gotten worse as his followers grow ever more doctrinaire. Hayek won his Nobel Prize for those descriptions, not for his conclusions.

                History has passed Hayek by: he’s one of those interesting figures like Tycho Brahe, whose data would lead Copernicus in the right direction. But Brahe was an astrologer: he used that data to compose horoscopes. Again, great human being, important scientist — wretched conclusions.Report

              • Avatar Michael Drew in reply to Stillwater
                Ignored
                says:

                CC,

                What is not natural if all of human action is? Do we have any is/is-not distinction, and therefore a word worth using, left if it is?Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                No, Michael Drew. We don’t.

                It would serve us to recognize that we are not distinct from Nature and that we obey its rules.Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                Elinor Ostrom’s point was completely contrary to what the Libertarians have made of her.

                What have libertarians made of her?

                I ask that honestly. I don’t know what (other) libertarians make of her.
                (FWIW, I wouldn’t classify her as a libertarian, although I’d say her work is libertarian friendly.)Report

              • Avatar Michael Drew in reply to Stillwater
                Ignored
                says:

                If everything is nature (and I agree it is), at some point it becomes silly to talk about nature’s rules. There’s too much difference in nature to meaningfully say all of it follows the same (or even any one set of) rules. Obviously, we can insist that physics is physics everywhere. But you can’t get economics from physics. And it may be less of a stretch to think that you can get economics from biology, but you still have to describe the particular rules. It doesn’t all just follow from “It’s all Nature, so it all follows from Natures Rules.” Which rules? Are they really rules? How do they apply here?Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                @James: There’s this

                Q: What’s your stance on privatization and property rights?

                Ostrom: I don’t equate them. So, and in the Nobel speech I state this very clearly, at an earlier juncture we thought that property rights meant one right and only one right: the right to sell. That was what I learned in graduate school, and that was the dominant thinking. As we were doing massive analysis of what people were doing out there in the field, we found many people who did not have the right to sell but had managed well. Many groups are able—if they can have management and decide who is in and who is out—to do very well, even if they can’t sell. They still have property rights.

                Q: And how would that relate to your position on privatization of common resources?

                Ostrom: In some places, privatization has worked well. I’m not anti-it. I’m anti-it as a panacea.

                Q: Libertarians have tried to co-opt your work by saying it shows the unsuitability of large-scale, top-down economic arrangements.

                Ostrom: A question is: How do we change some of our governance arrangements so that we can have more trust? We must have a court system, and that court system needs to be reliable and trustworthy. The important thing about large-scale is the court system. For example, you would not have civil rights for people of black origin in the United States but for a federal court system and also the courage of Martin Luther King and others—people who had the courage to challenge, and a legal system where, at least in some places, the right to challenge was legitimate.

                We have a colleague working in Liberia. You had thugs recruiting young kids until recently. Having a legal system that does not allow thugs to capture kids, torment them, and make them use weapons is very important. Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                Obviously, we can insist that physics is physics everywhere. But you can’t get economics from physics. And it may be less of a stretch to think that you can get economics from biology, but you still have to describe the particular rules.

                Unfortunately, economists are more astrologers than astrophysicists. Hell, we can’t even get them to agree on what the word “Capital” means.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                As for such an instance, there’s this from Paul Dragos Aligica at Mercatus, which afaict is a Libertarian idea shop.Report

              • Avatar Kim in reply to Stillwater
                Ignored
                says:

                Mike,
                but you can get economics from video games.
                … also physics.Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                Hmmm, when Ostrom talks about courts and the rule of law, she’s not saying anything libertarians don’t generally like. In fact libertarians get criticized for placing too much reliance on legal rules like trespass and nuisance as a counter-method to command-and-control regulation. And notice that when asked about the large scale, she says “the important thing” at the large scale is courts, the legal system–she’s limiting her praise of the large scale to a functioning legal system, and thereby excluding other top-level arrangements. Not that she was opposed to all of them, but she was extremely skeptical. (I remember in her seminar, not long after 9/11, when someone asked her about the plan to nationalize airport security–she very bluntly said it was dumb.)

                As to top-down economic arrangements, large-scale social planning, she definitely was against it in the great majority of cases. In her seminars she talked repeatedly about resource management institutions that had evolved over generations at the local level, and the damage done when governments intervened with top-down management systems.

                As to property rights and privatization, her statement in that interview is precisely what she repeatedly argued in her books, seminars, and public talks. It works sometimes, so we shouldn’t have a knee-jerk reaction against it, but it’s not always the solution, so we shouldn’t have a knee-jerk reaction in favor of it, either. On that point she does differ with a lot of libertarians, but I don’t know that libertarians have actually interpreted her any differently. If they’re interpreting her to be avidly pro-privatization, they’ve clearly misread her.

                But if they’ve interpreted her, as the interviewer suggests, as a skeptic of top-down regulation, that’s certainly not “completely contrary” to her views. As he and her co-authors note in the The Drama of the Commons,

                “Scholars familiar with the qualitative case study literature in Africa, Latin America, Asia and the United States were beginning to point out that the policy reforms that transformed resources from governance as common property by local communities into state governance were actually making things worse for the resource as well as for the users.” (p.13)

                And in Governing the Commons she critiques both the “Leviathan as the only way” (top-down) and “privatization as the only way” policy prescriptions, and proposes “An alternative solution” (but explicitly stated to not be the “only” way), that is based on local management and enforcement by stakeholders.

                There may be some way in which libertarians have interpreted her in a way “completely contrary” to her actual views, but this would not be it, unless they in fact pose privatization as the only alternative to top-down, and argue that as her position.Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                Blaise,

                Yes, Mercatus is a libertarian organization. What does Aligicia get “completely contrary”? It all looks pretty correct to me, and he correctly notes at the end that “Ostrom’s study of governance is not only a source of inspiration, it is also a challenge to libertarians.”

                I’m afraid I’m really not seeing the problem, so far at least.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                MD,

                What you’re talking about there is really the entire goal of all of human thought. I’m afraid I don’t have many significant answers for such a broad question.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                BP, what libertarians do you know who want to get rid of the Courts? From my perspective, “old”, crucial institutions like the Courts are valued more by libertarians than by those who think some arcane policy patch can solve our problems.Report

              • Avatar Michael Drew in reply to Stillwater
                Ignored
                says:

                That’s perfectly fair, CC, but I’d just want to say that my point is that your argument around humans (& therefore economy) in/out of nature is similarly broad, so the work you’re trying to get it to do has similar problems with overbroadness. It’s just the same issue, in fact.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                “On that point she does differ with a lot of libertarians, but I don’t know that libertarians have actually interpreted her any differently. If they’re interpreting her to be avidly pro-privatization, they’ve clearly misread her.”

                JH,

                I’m actually strongly opposed to privatization in most instances for largely “libertarian” reasons: the whole advantage the market mechanism supplies has to do with the fact that it develops in response to consumer demand. If something is privatized, necessarily, the only reason it exists in the first place is either because it was created by fiat or at some point in time it was deemed incapable of existing by itself in a private capacity. Selling such an institution to the highest bidder is more often than not anathema to libertarianism.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                @James: is it an intellectual dodge for me to observe you’re not a terribly Orthodox Libertarian? At least I’ve prised the portcullis up far enough for you to give me the courts.

                But from whence arises law? Representation, we should hope, consensus, the hashing-out of ideas at every level. Lycurgus snarls at the advocates of democracy in the city: “Go thou,” said he, “and first establish democracy in thy household.” .

                You want good law? It might be best made from the bottom up. But that’s not the way it’s enforced. All rise, says the bailiff.Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                Blaise,
                I know I’m not terribly orthodox (except about hockey–only the original 6 teams are acceptable), but my libertarianish views are not at issue here. What’s at issue is whether libertarians badly misinterpret Ostrom, perhaps using her for intellectual cover for arguments they make that she wouldn’t have.

                I don’t think that’s impossible (nor, though it would disappoint and upset me, do I think it’s necessarily even improbable, people being as they are). I only say that I don’t know of any, and I’d like to see evidence. What’s been presented so far is not evidence of libertarians using her ideas in any way contrary to her own views, much less completely contrary.

                Show me an example of where it’s actually happening, and I’ll be happy to condemn it.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                By challenging the state-centered paradigms in political science and developing an entire research program based on self-governance, the Ostroms have made a critical contribution to libertarian ideas in the social sciences.

                So, whoever wrote that…. The Ostroms did no such thing. They never advocated self-governance, as the quote from Ostrom herself reveals. Sorry, they just didn’t.Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                The Ostroms did no such thing. They never advocated self-governance, as the quote from Ostrom herself reveals. Sorry, they just didn’t.

                You must not have been in the seminars I was in then, because I have heard both Lin and Vincent advocate self-governance. I really have no idea where you are getting your information from.

                You might also look at this article on “Self-Governance and Forest Resources,” by Lin Ostrom.

                Ostrom didn’t argue that self-governance was the solution for each and every case, but to say she never advocated it is to demonstrate a fundamental lack of understanding about her.

                I know we’ve gone round and round on this before, but I must say to you–the person who is always trumpeting his personal experience–that I knew Ostrom personally. She invited me–in-person–to apply for a post-doc at her research institute; I attended her fall and spring seminars; she attended my research talks; she published my dissertation in one of her books; we talked personally, both formally and informally; my wife worked for her and helped the institute in developing their on-line digital library of the commons. Elinor Ostrom was a friend of ours (one of three professor I’ve had who I count as friends).

                In her books, in her seminars, and in direct talks with me, Elinor Ostrom advocated the values of self-governance, while not shying away from noting its limitations. In fact a good portion of her career was dedicated to defining precisely the conditions under which self-governance could thrive and be an effective solution to commons problems.

                You are not talking to someone who just read one of her books in a seminar taught by someone else. And I tell you, sir, Ostrom strongly advocated self-governance.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                Have it your way, James. You still haven’t answered Ostrom’s own response to the question of what the Libertarians made of her argument. Perhaps from your vast experience in her company, you can gainsay these bits, which I feel I must again quote for your benefit:

                Q: And how would that relate to your position on privatization of common resources?

                Ostrom: In some places, privatization has worked well. I’m not anti-it. I’m anti-it as a panacea.

                Q: Libertarians have tried to co-opt your work by saying it shows the unsuitability of large-scale, top-down economic arrangements.

                Ostrom: A question is: How do we change some of our governance arrangements so that we can have more trust? We must have a court system, and that court system needs to be reliable and trustworthy.

                Elinor Ostrom you ain’t.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                BP, would you be contented if we all agreed that sometimes LINOs call “privatization” what is really selling some undervalued public asset to their friends so they can make money?

                Why are you insisting on continuing to equate privatization with self-governance?Report

              • Avatar Mark Thompson in reply to Stillwater
                Ignored
                says:

                Honestly, Blaise, I’ve got no idea what you’re trying to get James to acknowledge, and even less idea why it matters. You’ve provided an example of how you think libertarians misunderstand Ostrom’s work, and James has explained in detail why he finds your example unconvincing. He’s also made clear that if libertarians are reading Ostrom in the way you suggest, they are wrong, and has acknowledged that Ostrom herself was not a libertarian, though some of her work can be reasonably used to support some (though by no means all or even most) claims of libertarians.

                To the extent you are insisting that Ostrom’s views were different from what James believes them to be – and while you seem to be saying so, I’ve yet to see you specify how James’ understadning of her views is incorrect- I think you have to at least acknowledge that James has a better idea what Ostrom’s views actually were than anyone on this site, and probably more than all but a handful of people on the planet.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                No such compromise is possible. If the word Libertarian is to mean anything at all, it is based upon the axioms of voluntary association and individual liberty.

                It’s like nailing Jell-O to a wall. Just how much of Bookchin’s argument about the Free Municipality are you willing to walk past? Or Walter Block’s kangaroo courts for the Statists? Or all that deregulatory idiocy from various and sundry, or the unscientific nonsense denying global warming from Cato? Live in your own private Idaho: the Libertarians need to come to grips with what Governance means and give us a definition. From thence you can work on Self-Governance based upon that definition, so we’re all on the same wavelength and compose an algebra for what might follow.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                I am perfectly capable of reading Ostrom for myself. There is a difference between self-determination, which Ostrom did advocate, a position I hold myself — within the constructs of existing systems — and self-governance by Libertarian principles.

                The growing theoretical consensus does not lead to a conclusion that most users utilising common-pool resources will undertake self-governed regulation. Many settings exist where the theoretical expectation should be the opposite. Users will overuse the forest unless efforts are made to change one or more of the variables affecting perceived costs or benefits. Given the number of variables that affect these costs and benefits, many points of external intervention can enhance or reduce the probability of users’ agreeing upon and following rules that generate higher social returns. But both social scientists and policy makers have a lot to learn about how these variables interact in field settings and even how to measure them so as to increase the empirical legitimacy of the growing theoretical consensus. Many aspects of the macroinstitutional structure surrounding a particular setting affect the perceived costs and benefits. Thus, external authorities can be effective in enhancing the likelihood and performance of self-governing institutions. Their actions can also seriously impede these developments as well….

                Ostrom has specifically laid out the case against self-governance. She has merely pointed to the obvious, as I laid out in my statement about how the Libertarians got it backwards. I don’t deny the need for a Government of the People. The current extinction of rhinoceroses and elephants will only be solved by a top-down force which can shoot poachers.Report

              • Avatar Mark Thompson in reply to Stillwater
                Ignored
                says:

                1. I’m not saying not to have your own reading of her work. I’m saying to keep in mind that James is no neophyte here and has an understanding of Ostrom’s work that has little to do with ideological affinity.

                2. There may well be a difference between self-determination and governance by libertarian principles. But James has repeatedly acknowledged this, and has gone so far as to say that libertarians who think Ostrom’s work proves libertarianism as correct, full stop, are completely wrong. What else do you want out of him?

                3. But by the same token, none of that means that some of Ostrom’s work can’t be used in support of some specific libertarian proposals. There’s no reason there can’t be overlap.

                4. In all honesty, it seems like you’re saying that, because Ostrom was not herself a libertarian and rejected libertarianism on some issues, none of her work may be used honestly in support of any libertarian inclination. This is no different from the opposite.

                Ultimately, though, I’m just having a hard time understanding where you’re trying to go with this, and why it matters.Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                I did answer that, Blaise. I’m sorry you didn’t read the response.

                And, yes, I will have it my way. Look at her bibliography and see how many times the phrases self-governing or self-governance appear. Look at this press release about renaming the research institute in honor of her and Vincent, and note that “The central themes of its research include self-governance, democratic reform and collective action in the context of sustainability” (emphasis added).

                No one could spend any serious amount of time around Lin Ostrom, or around the Workshop, or actively read her publications, without becoming aware of the central role of self-governance in her world view. So at the risk of coming off as too boastful and self-congratulatory, I just cannot allow such a serious misrepresentation of what she stood for stand unchallenged and uncorrected.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                I’m perplexed, myself. I made my point clear enough. Christopher brought Ostrom up in the context of markets vis-à-vis biological systems, along with Hayek and others. I was having a polite enough discussion, going on about how markets are rules-based and if they evolve, they do so on the basis of how actual human games evolve, dispensing with the biological analogies.

                And lo, Hanley comes in ask what Libertarians have said of Ostrom. Too polite to point him in the direction of Carr himself, who was trying to buttress his argument by the mention of that august social scientist, I dug about and found a few references.

                It’s all fun until someone gets their eye poked out. And here it comes: she’s limiting her praise of the large scale to a functioning legal system, and thereby excluding other top-level arrangements.

                I know Ostrom well enough to know she didn’t exclude other top-level arrangements, that in fact the Libertarians did have it backwards. And I quoted her to that effect. Ostrom isn’t a Chinese buffet for the dilettante political scientist and I’ve quoted her entirely too often for this little exercise in futility. As with Hayek, the Libertarians like exactly half of everything their philosophers propose, disposing of the rest.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                BP,

                Don’t feel you’ve “dispensed” of my argument that markets are like biological systems.

                The point still stands. I can send you a link to a course syllabus if you like.

                Know also that in “dispensing” with my analogy, you’ve also “dispensed” with much of what we “know” about the origin of life: the idea of an RNA world is based on game theory, which itself derives deductively from microeconomic observances.Report

              • Avatar Michael Drew in reply to Stillwater
                Ignored
                says:

                I’d be interested in that syllabus, CC, and I’d also be interested to know if the course instructor, if she goes into affirmative argumentation at all, makes claims about human economics “following rules” derived from biology or just says things about deriving insights, identifying tendencies, etc.Report

              • Avatar BlaiseP in reply to Stillwater
                Ignored
                says:

                James, I have already addressed this by saying I’ve been round the block on both Elinor Ostrom and Friedrich Hayek. It’s sorta like the Bible and the people who interpret it, Christopher: Gandhi once said I like your Christ, I do not like your Christians. Your Christians are so unlike your Christ.

                I will stick to what Elinor Ostrom actually wrote, as I confine myself to what Gandhi and Jesus actually said, not what their acolytes have made of them. You are entirely within your right to say you knew Elinor Ostrom. That does count for something. But I will reach my own conclusions, based on what she wrote and what I’ve quoted here. Ostrom is a huge problem for the Libertarians yet they continue to cling to the parts they like. It’s a problem you acknowledge.

                I do not believe you are arguing dishonestly. But I simply cannot proceed farther until we arrive at some consensus on what’s implied by Self-Governance. That, I think, is the essence of our disagreement.Report

              • Avatar Christopher Carr in reply to Stillwater
                Ignored
                says:

                BP,

                Could you elaborate with an example?Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                The growing theoretical consensus does not lead to a conclusion that most users utilising common-pool resources will undertake self-governed regulation. Many settings exist where the theoretical expectation should be the opposite. Users will overuse the forest unless efforts are made to change one or more of the variables affecting perceived costs or benefits. Given the number of variables that affect these costs and benefits, many points of external intervention can enhance or reduce the probability of users’ agreeing upon and following rules that generate higher social returns. But both social scientists and policy makers have a lot to learn about how these variables interact in field settings and even how to measure them so as to increase the empirical legitimacy of the growing theoretical consensus. Many aspects of the macroinstitutional structure surrounding a particular setting affect the perceived costs and benefits. Thus, external authorities can be effective in enhancing the likelihood and performance of self-governing institutions. Their actions can also seriously impede these developments as well….

                [BP] Ostrom has specifically laid out the case against self-governance.

                No, that is not a case against self-governance. That is a poor reading, one abstracted from the entirety of what it came from. She’s talking about the theoretical consensus that has developed among political scientists, economists, and public policy folks that mostly stems from Garret Hardin’s defining “Tragedy of the Commons” essay. It is those people who argue that self-governance is not possible. But Ostrom spent most of her career working against that consensus, as noted in the Nobel Prize announcement itself.

                Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.

                Get that? “better than predicted by standard theories,” i.e., the theoretical consensus. She “challenged the conventional wisdom.” You, sir, are repeating the conventional wisdom–it seems like common sense to you, as it does to so many other people. But Ostrom and her research colleagues have rebutted that conventional wisdom. So when you say she did not advocate self-government, you are arguing the conventional wisdom in direct contrast to her challenge of that conventional wisdom. You are the one making a point “completely contrary” to what Ostrom argued.

                Please allow me to quote her directly, at length.
                From Governing the Commons, pp. 182-183:

                If this study does nothing more than shatter the convictions of many policy analysts that the only way to solve CPR (common pool resource) problems is for external authorities to impose full private property rights or centralized regulation, it will have accomplished one major purpose….What is needed is further theoretical development that can help identify variables that must be included in any effort to explain and predict when appropriators using smaller-scale CPRs are more likely to self-organize and effectively govern their their own CPRs, and when they are more likely to fail.

                “Shattering convictions” of the conventional wisdom that either privatization or centralized regulation is necessary, and understanding the conditions in which self-governance can be effective and when it cannot.

                From The Commons in the New Millenium, p. 337:

                Research regarding CPRs appears to give two different answers to the pertinent question of survival of such resources in the new millenium. One the one hand, multiple studies tell the same old stories. Central governments initiate the dismantling of local, well-functioning and self-governing systems, leading to governance failure at the coarser scale. The introduction of private property and market economy leads to the deterioration of common-pool resources and communities. … On the other hand, a most interesting line of research paints an alternative picture, that of sustainable management of natural resources, over centuries and years, despite such restructuring on the macro level.

                Self-governance often works. Sometimes it works despite changes in higher levels of governmental structure and policy, and sometimes it is overborne by those changes, often (although not always) resulting in worse outcomes than produced by self-governance.

                From Rules, Games, and Common-Pool Resources, p. 328:

                Our analysis of successful self-organized CPR institutions makes us optimistic about human capacities to overcome the “social dilemmas” they face.

                From “Design Principles in Long-Enduring Irrigation Systems” in Polycentric Governance and Development (edited by M. McGinnis), p. 84:

                Slogans, such as “privatization may mask important underlying principles rather than providing useful guides for reform….On the other hand, authorizing the suppliers and users of irrigation water to have more voice in the design of theri own systems…is a feasible reform within the broad institutional frame of many countries. If those involved are authorized to devise their own rules and are encouraged to learn about how others have successfully overcome difficult design problems, we can expect that many of those who are most motivated will find solutions to the highly salient problems that they face.

                Note that she doesn’t think central governments are all bad; she frequently argues that they can play an important helping role by providing technical expertise and other resources that assist locals in self-governance. But–given certain conditions for CPRs–she is more optimistic about self-governance that is supported by centralized governments than she is about direct central government management and regulation. Among those crucial conditions are size (the larger the CPR, the harder self-governance is, because of difficulties in communication and trust among stakeholders), clearly defined boundaries of the CPR, and capacity to monitor stakeholders’ use, to detect and punish cheaters (which can, but does not require, central government sanctioning–sometimes public disapproval is all that’s necessary, and sometimes, as in the case of collective irrigation systems where there is the ability of other users to divert water away from the cheater’s fields, individuals can effectively apply the sanctions).

                So there’s really no solid basis for a claim that she opposed self-governance, and much documentary evidence for her interest in and support of self-governance. She traveled the world advising local groups and national governments on the value of self-governance. But she also did not see it as a panacea, applicable to all situations, and she worked diligently to discover the conditions that made it more or less likely to be an effective solution, so that it could be applied when appropriate, but not relied upon when it was not appropriate.

                For anyone who’s read this far, let me say one final thing. This is not about arguing with Blaise nearly so much as it is about making sure anyone who’s waded through this leaves this conversation with an appropriate understanding of Lin Ostrom’s work, and its meaning. Burt posted about heroes at NaPP the other day, and I responded that I don’t do heroes. But Lin Ostrom…well, I damn near have hero worship for her. And I think her work is hugely important, because I consider myself an environmentalist, so I want it promulgated correctly.Report

              • Avatar Stillwater in reply to Stillwater
                Ignored
                says:

                James, I can’t speak for everyone who might be reading this trainwreck of a subthread of course, but I’ll say this: nothing Blaise has said has given a false impression of anything Olstrom was saying or arguing.Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                “Dilettante political scientist,” eh? So in the end you once again resort to insults over arguments, and your choice of words does far more injustice to yourself than it does to me.Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                Stillwater,

                Blaise has said Ostrom did not advocate self-governance. That is a false impression of what Ostrom wrote, as I believe I have demonstrated. If you believe that he is correct that she did not advocate self-governance, then I am sorrowful that at least one person has been led to a badly erroneous understanding of her life’s work.Report

              • Avatar Stillwater in reply to Stillwater
                Ignored
                says:

                Read that comment as if it came from the other direction.

                I’m agreeing with you, James.Report

              • Avatar Michael Drew in reply to Stillwater
                Ignored
                says:

                CC,

                Thanks!Report

              • Avatar James Hanley in reply to Stillwater
                Ignored
                says:

                Stillwater,
                Oh, ok. Sorry about that, and thanks.

                I know I go on a bit on this topic, but it’s as though someone argued that Einstein rejected relativity, or Adam Smith thought we only got our bread through the baker’s benevolence. Or as though someone tried to claim that the first weekend of the NCAA tournament wasn’t the greatest 4 days in sports.Report

              • Avatar Mike Schilling in reply to Christopher Carr
                Ignored
                says:

                The Kook (sorry, but what are we supposed to call you this days, commenter who used to be known as Roger? 🙂 ) distinguished between human action and natural phenomena. Markets consist of actions taken by humans.Report

              • Avatar The Cardiff Kook (Roger) in reply to Mike Schilling
                Ignored
                says:

                Kook, or The Kook are fine. I am trying to retire the use of my real name on the Internet for various reasons.

                Let me start over on fairness and justice. From scratch. Totally.

                I think that each of us has opinions on whether the rules of the game are fair or not. I do not believe that fairness or justice are metaphysical absolutes that emerged in the Big Bang. Fairness is the name for our evolved ability to judge whether we are treating each other in an unbiased, consistent and reliable way. It is a useful human perspective ability.

                Although we share a common evolved heritage and thus share a sense of fairness, it is a fairly plastic sense and can differ in details between individuals. It is possible that what you see as fair or just is not the same as what Brandon sees. Thus it is a real thing, but is subjective in terms of it being defined somewhat differently by individual. The topic is further complicated because we can differ how we emphasize procedural fairness and fairness in outcome.

                Fairness and justice can be considered subjective ideals. Perfectly fair systems may be practically out of our reach, but each of us can choose more or less fair systems. However, we may disagree on which system is more fair or just*. One may have procedural fairness, another may lead to fair outcomes, and these two do not always align.

                Markets are institutional systems which operate on certain rules. It is therefore possible for someone to view the institution as fair or just or unfair and unjust.

                My suggestion to deal with this is to allow people to choose the rules they operate under. If a group of people want to volunteer to operate under different rules then they should do so with those that agree with them. I understand the conflicts this runs into. Again my suggestion is an ideal, and one which we are probably at best centuries away from achieving.

                * I understand that justice and fairness are not the same thing but am choosing not to “go there.”Report

              • Avatar Christopher Carr in reply to Christopher Carr
                Ignored
                says:

                “Elinor Ostrom’s point was completely contrary to what the Libertarians have made of her. Her point was completely obvious: let the people who face the problem solve the problem.”

                Letting the people who face the problem solve the problem is probably the core ideal of libertarianism.

                What you’re talking against is market fundamentalism, something different. I agree with your analysis of Hayek to some extent, but I think you’re having trouble separating Hayek’s politcal views from his economic ones, and given the fact that he wrote at a time when aggressive promotion of capitalism seemed more important than it does now, I want to say this is uncharitable, but I’ll stop short of that, since I disagree with Hayek in the same fashion as you do.Report

              • Avatar Christopher Carr in reply to Christopher Carr
                Ignored
                says:

                This was in response to BlaiseP above. For some reason it showed up here.Report

              • Avatar BlaiseP in reply to Christopher Carr
                Ignored
                says:

                Oh, okay… yeah, exactly, I just hate people who either condemn or praise Hayek in his entirety. He’s far too complex for either simplistic judgement. Hayek arose in opposition to Keynes, well that’s my parsing of those times — and to this day, we have all these idiot acolytes arguing over the conclusions both reached — completely ignoring the context of those times.Report

              • Avatar Mike Schilling in reply to Christopher Carr
                Ignored
                says:

                Letting the people who face the problem solve the problem is probably the core ideal of libertarianism

                This is not the first time I’ve thought that John Brown should be considered a libertarian.Report

              • Avatar Christopher Carr in reply to Christopher Carr
                Ignored
                says:

                Sure, John Brown could be considered a libertarian.

                His violence may have even been justified.Report

              • Avatar BlaiseP in reply to Christopher Carr
                Ignored
                says:

                I wonder if John Brown’s violence was justifiable. Once you go to violence, you’ve abandoned reason. And you’d better win. Which isn’t to say John Brown wasn’t on the side of the angels, it’s just that God marches with the bigger battalions.Report

            • Avatar Brandon Berg in reply to Stillwater
              Ignored
              says:

              Well, mostly I was giving Zic a hard time for her silly assertion that government subsidy of medical care is a subsidy to soda manufacturers, rather than to the individuals who get the medical care. If it’s really corporate welfare, surely we can all agree that it should be abolished, right?

              In general, though, I oppose redistribution because it’s anti-growth. It takes resources that could be devoted to investment and shifts them to consumption. Some kinds are worse than others, of course. For example, I think that subsidization of prescription drugs is relatively benign, because most of the per-unit cost of patented drugs goes to the patent holder, and thus increases the returns to developing new drugs, and does so proportionally to market demand. Research funding tends to be relatively benign as well, though there’s always the danger near-certainty that priorities will be set politically rather than according to actual usefulness.Report

              • Avatar Brandon Berg in reply to Brandon Berg
                Ignored
                says:

                “danger” above was supposed to be struck out. Apparently <s> is the wrong tag. <del>, maybe?Report

              • Avatar LWA in reply to Brandon Berg
                Ignored
                says:

                But ultimately, you have this vision of what constitutes a just ordering of society; one where individual liberties are protected, I’m assuming.

                Is that more or less arbitrary, and emotionally appealing, than the religious argument about human dignity and the essential equality of all people?

                In your argument, as with Roger’s below, it seems like there is this assertion that the most efficient allocation of resources via pricing is somehow the highest goal, the most desired outcome.

                Is market efficiency the goal, regardless of all other considerations? Or should the market be nothing more than a mechanism we use when it suits us, and override when it doesn’t?Report

              • Avatar BlaiseP in reply to Brandon Berg
                Ignored
                says:

                You’re getting warmer. Just not all the way to capitalism yet. Capitalism is about everyone makin’ enough money to buy all this wonderful stuff. See, if you want to sell all these wonderful things, you have to make sure people have the money to buy them.

                But like I said, you’re freeing yourself this feudalism mode, that’s a good sign. We don’t want some Lord of the Manor handing out freebies to his serfs, just giving them things. The next step is to let the serf or the wage slave manage his own affairs and make some real money — that way, he can buy stuff.

                But while we continue to say low wages only reflect marginal utility, we’re still stuck in the feudal model, where lords don’t have to pay serfs. If mopping a floor is necessary, why do some people get all hostile when it’s pointed out the mopper needs to eat and ought to be paid enough to buy his food?Report

              • Avatar zic in reply to Brandon Berg
                Ignored
                says:

                You asserted I said that, I corrected you. I know you read my correction because you responded. tsk.Report

              • Avatar BlaiseP in reply to zic
                Ignored
                says:

                Heh. What he doesn’t seem to grasp is how any sort of subsidy warps the redistributive power of capitalism. Of course society needs a safety net: beggars are bad for business and history shows they become ugly mobs, given half a chance.

                These Banana Republicans, all upset about redistribution, I’m not convinced they’re really capitalists. For all their praise of it, they don’t understand how it really works, Zic. The power of capitalism is almost beyond reckoning, it’s the greatest force for good ever invented. There’s absolutely no excuse for extreme poverty or privation anywhere in the world. Granted, there won’t be much equality, capitalism does reward risk-takers. But it’s as Marx said, all those years ago:

                A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut. The little house now makes it clear that its inmate has no social position at all to maintain, or but a very insignificant one; and however high it may shoot up in the course of civilization, if the neighboring palace rises in equal or even in greater measure, the occupant of the relatively little house will always find himself more uncomfortable, more dissatisfied, more cramped within his four walls.

                It’s one thing to complain about such whining and apparent injustice when everyone has a house and a pot with which to throw piss out the window. It’s another to complain about a system which could, if it were given half a chance, give everyone a house.Report

              • Avatar Brandon Berg in reply to zic
                Ignored
                says:

                Your corrected version was essentially the same fallacy as the original version, so I just kind of shrugged and moved on. Even if you’re complaining about subsidizing medical care of soda-drinking diabetics through your insurance premiums instead of through taxes, you’re still subsidizing the soda-drinking diabetics, not the soda manufacturers.

                Of course, there’s a solution to this problem: Allow insurance companies to charge actuarially appropriate premiums.Report

              • Avatar BlaiseP in reply to Brandon Berg
                Ignored
                says:

                Heh. Actuarially appropriate. On a life pool of five employees. Try that line on someone who doesn’t know how actuaries compute premiums.Report

              • Avatar Patrick Cahalan in reply to BlaiseP
                Ignored
                says:

                Being unable to charge actuarially appropriate rates is one of the standard market failures of insurance. Insurers lack perfect information. They are always going to be charging actuarially inappropriate rates.Report

              • Avatar BlaiseP in reply to BlaiseP
                Ignored
                says:

                It’s wilful blindness, a cheap trick. Insurers do have the data. They jealously guard it as trade secrets. They have millions of lives in their own pools. They do know the probabilities. They just won’t apply them to each insurer/insured.

                A few semesters of statistics and some exposure to actuarial will cure all such delusions. Not only do the insurers know, they will lie to your face and tell you they can’t figure it out. Anyone capable of running a Poisson Distribution knows these insurance companies are purposely hiding data from the insured in the calculation of insurance rates, a fact I find highly annoying when told the solution is to allow insurance companies to charge “actuarially appropriate” premiums. People who say such things should be frogmarched into an actual Re-Education Camp and only discharged when they can successfully run a Poisson Experiment.Report

              • Avatar The Cardiff Kook (Roger) in reply to BlaiseP
                Ignored
                says:

                “Being unable to charge actuarially appropriate rates is one of the standard market failures of insurance.”

                Of course insurers lack perfect information — perfect information would require omniscience. I am not sure why you are calling this a market failure though.Report

              • Avatar BlaiseP in reply to BlaiseP
                Ignored
                says:

                Erm, no, Roger. Mathematics, especially statistics and probability, says otherwise.Report

              • Avatar The Cardiff Kook (Roger) in reply to BlaiseP
                Ignored
                says:

                I wish I had known that back when I was directly responsible for the design and implementation of rates countrywide for ten different lines of insurance.

                I should have just demanded that my teams of actuaries whip out their perfect information with probabilities applied down to the level of the individual and make an endless stream of perfect filings.Report

              • Avatar BlaiseP in reply to BlaiseP
                Ignored
                says:

                Mirabile dictu. Given two life pools, one with fifty and one with fifty thousand, what explains the difference in premiums, Roger? I’ll give you one comment to give me a coherent answer.Report

              • Avatar The Cardiff Kook (Roger) in reply to BlaiseP
                Ignored
                says:

                You’ll need to first tell me which of the two has perfect information.Report

              • Avatar BlaiseP in reply to BlaiseP
                Ignored
                says:

                You had your one comment. You couldn’t answer the question, as asked. You really don’t know how to compute a Poisson distribution, do you, Roger?Report

              • Avatar The Cardiff Kook (Roger) in reply to BlaiseP
                Ignored
                says:

                I have absolutely no idea how to compute a poisson distribution. I have never done it in my life.

                So you are arguing that the ability to compute poisson distributions provides the ability to have perfect actuarial insights on expected pure premiums down to an individual level?

                Please enlighten me.Report

              • Avatar Kim in reply to BlaiseP
                Ignored
                says:

                Roger,
                Okay, so what the hell did you do in insurance?
                I grok what blaise did, he wrote models.
                I get models, I’ve done ’em myself (not much insurancewise, granted).

                Hell, I know what a poisson distribution is, and how to approx one.Report

              • Avatar BlaiseP in reply to BlaiseP
                Ignored
                says:

                Don’t you dream of lecturing me about Perfect Information or telling me about your Insurance Industry experience again, Roger. Ever.

                Now here’s the reason a large life pool premium costs less than a small life pool: as varies the pool of lives, so converges the sample average with expected value. You don’t need perfect information. You just need lots of good sample data.

                With auto insurance, we have external datasets to consider. That’s why girls get cheaper auto insurance than boys of the same age and married men lower than single men. It’s also why you don’t get auto insurance through your employer.

                But with health insurance, no such public datasets exist. They’re all privately held, the crown jewels of that industry.

                The health insurers pretend they don’t have hundreds of thousands of insured to consider in their life pool. They grin at the employer and say, “life pool of five, not enough convergence and therefore we can’t compute the odds of your employees getting sick. And if one does get sick, we’re going to jack your rates up accordingly.”

                Which is pure statistical bullshit. They already know the odds based on their entire pool of lives, across all their insured. They’d have even more convergence if their datasets were pooled. But we can’t force them into it, as we can with Department of Motor Vehicles data.Report

              • Avatar The Cardiff Kook in reply to BlaiseP
                Ignored
                says:

                My early career I was responsible for underwriting, usually for a state or group of states. Later I became responsible for price and underwriting. This involved teams of people, some of which were actuaries.

                Then I moved to marketing and led innovation and product development. We designed new products and features, tested them with consumers and then implemented them.Report

              • Avatar cfpete in reply to Brandon Berg
                Ignored
                says:

                “It’s wilful blindness, a cheap trick. Insurers do have the data. They jealously guard it as trade secrets. They have millions of lives in their own pools. They do know the probabilities. They just won’t apply them to each insurer/insured.”

                So insurers could charge actuarially appropriate “higher” rates but they choose not to out of the goodness of their hearts?
                They have the data, they know how much to charge, but they willfully lose money in deference to the common good.

                That is your argument?
                Oh, and everyone else simply doesn’t have the mastery of statistics possessed by Blaise. Are you now a licensed actuary as well? Is there anything on which you are not an expert? Can you provide a list of courses we can all take to become as omniscient as yourself?
                Maybe you are a god, and we should just stop wasting our time and anoint you “dear leader” of the world so that you can deliver us all to blaisetopia!Report

              • Avatar BlaiseP in reply to cfpete
                Ignored
                says:

                Yes, in point of fact. My stuff lies at the heart of Blue Cross / Blue Shield’s underwriting policy. Also GE Capital. Also USDA’s loan system. Also options pricing for Daiwa Capital Markets.

                My first recommended text is Probability and Random Processes by Grimmett. You little blowhard, just take a seat and get your temper under control.Report

              • Avatar cfpete in reply to cfpete
                Ignored
                says:

                Yes, What? You are a licensed actuary, you are a god?
                You have not answered the question. Why do these insurers charge less than the actuarially appropriate rate?

                Why does BC/BS charge less than the actuarially appropriate rate when they have employed an Adonis, a genius, a god like yourself?

                Was it the evil bureaucrats that lead you to design software that undervalued the cost of those insured?

                I can actually buy that.
                I can see how your “everyone except me is a f*cking idiot” strategy could backfire.Report

              • Avatar Jaybird in reply to cfpete
                Ignored
                says:

                Ray, when someone asks you if you’re a god, you say “YES!”Report

              • Avatar BlaiseP in reply to cfpete
                Ignored
                says:

                Run along now, Pete, my boy. All I do is AI and modelling.

                Now I’ll tell you a little story about BCBS of North Carolina. They had a contract with the state employees’ union, large life pool. Now there’s a difference between a non-profit and a not-for-profit. If BCBS were able to convert to a for-profit entity, they could break their contract with the state employees’ union they could turn around and pick up those same insured at four to five times the premium per life. North Carolina got wind of that and shut down that little scam before it got started.

                I am growing increasingly tired of your stupid questions. Matter o’ fact, I’m getting tired of all the stupid questions I’m being asked on this subject. You need to purchase Grimmett on Probability and work through it, you innumerate jackass, before you ask another question on this subject.Report

              • Avatar Dave in reply to cfpete
                Ignored
                says:

                The pissing content can end before I start deleting posts, right?Report

              • Avatar cfpete in reply to cfpete
                Ignored
                says:

                Dave,
                You can delete all of my comments if you desire.
                I have been reading this blog since the original Canadian, I believe his name is Scott, posted here.

                I have no need for echo chambers and “arrogant pricks.”
                That about sums up what is left.Report

              • Avatar Dave in reply to cfpete
                Ignored
                says:

                You can delete all of my comments if you desire.

                There’s no need so long as the parties involved back off. There’s been too much BS here lately, but I’d rather not see commenters have to take matters into their own hands.

                I have been reading this blog since the original Canadian, I believe his name is Scott, posted here.

                Scott Payne was one of the originals here. Great guy. I miss him.

                I have no need for echo chambers and “arrogant pricks.”
                That about sums up what is left.

                Me neither, but I still think this community is beyond that. In my experience, active enforcement of the commenting policy goes a long way to getting people in line, especially when I’m the one doing it. 😉Report

            • Avatar Barry in reply to Stillwater
              Ignored
              says:

              Brandon: ” Justice isn’t a real thing.”

              Stillwater: “Then how do you justify any of the arguments you make against government takings and taxes and so on? Somewhere in this thread you say that we ought to abolish Medicare and Medicaid. On what grounds?”

              I’m waiting for a reply; I’m afraid that when a reply comes it’ll be some variation on ‘that’s different!’ or ‘governments are less efficient than the free market’, which suffers from two different assumptions.Report

          • Avatar Kim in reply to Brandon Berg
            Ignored
            says:

            you should read more adam smith then. If the smart cannot rise, then the society ossifies — and dies. Perhaps its not a moral, but it’s certainly an ethic!Report

      • Avatar Marchmaine in reply to Brandon Berg
        Ignored
        says:

        BB, I can only assume that you are defining management down to include what I would call a mere employee… when I use the term Managerial Class, I’m talking about the officers of the company that comprise the bulk of the Executive team. If you think that a company like Walmart does what it does because the Executive team wills something and it magically happens around the globe, then I’m shocked. So yes, Walmart does depend upon the good work of its employees to do what it does.Report

      • Avatar Kim in reply to Brandon Berg
        Ignored
        says:

        Walmart succeeds by being thieves.Report

    • Avatar KatherineMW in reply to Marchmaine
      Ignored
      says:

      I love this idea. Don’t put an absolute ceiling on pay, just say that the highest-paid person in a business can’t make more than, say, 100x the pay of the lowest-paid person. That still enables some pretty extraordinary levels of pay ($2 million for a top executive if the lowest-level workers are paying minimum wage), but it reduces the split between them.

      And I also suspect it would keep businesses rather smaller than is currently the norm, which is a plus – more small and midsized businesses means more competition, rather than a couple of huge companies dominating a market, and it also means more variety and choice for consumers.Report

  4. Avatar Stillwater
    Ignored
    says:

    I don’t think there is a moral argument for limiting CEO pay directly. I do think that certain restrictions which would indirectly constrain it can be justified (at least in principle). One is your example above: insurance companies. If government has the right (for whatever reason!) to mandate floors on loss ratios, that would indirectly constrain CEO pay rates. The argument wrt insurance companies, however, isn’t ad hoc. Presumably, it’s justified by compelling evidence, clearly specified goals social goals, etc.

    An argument in favor of regulating firms that receive special benefits (like protective tariffs) or subsidies, or who are entrenched in profitable public-private partnerships, is based on the idea that simply because those companies generate profits derived from favorable government policy treatment, government has a right to dictate the internal decision-making of those firms. I don’t think that’s a good argument, myself. But it’s different than an argument justifying regulating medical loss rations in health insurers. It begins with the premise that a sufficient condition for government regulation is that those firms derive profits from governmental policy, whereas the justification for regulating private health insurers is the provision of a public good.Report

  5. Avatar PJR
    Ignored
    says:

    Couldn’t Congress instruct the IRS regarding their “reasonableness test” for evaluating deductions of employee compensation as business expenses? Legislate that total compensation above a half-million dollars (to a full-time employee, and pro-rated for others) is to be judged as unreasonable and disallowed as deductible expenses. Inflation-adjusted, of course. If businesses want to compensate individuals at excessive levels, that’s okay, but let it come out of their post-tax profits rather than be subsidized (a form of “tax expenditure” imho).Report

    • Avatar Brandon Berg in reply to PJR
      Ignored
      says:

      They did just that back in 1993, although they set that deductibility cap at $1 million. That’s part of what led to executives being paid with stock options rather than cash.

      That said, the idea that removing this cap would constitute a subsidy is just plain wrong. Employee wages are in generally fully deductible because wages are expenses, and expenses aren’t profits. If you pay an employee $100,000, that’s a $100,000 expense for the firm. The firm no longer has the money, and as such it can’t reasonably be considered profit. Capping the deductibility of salaries doesn’t close a loophole—it imposes a huge penalty on wages above the cap, as they’re taxed once as corporate income (even though the firm doesn’t actually keep the money), and then again as the executive’s personal income.Report

      • Avatar PJR in reply to Brandon Berg
        Ignored
        says:

        A deductibility cap on compensation is more than a deductibility cap on wages, of course. The reasonableness test already must be applied to claims to deduct a business expense, so I’m only suggesting the Congress mandate a rule–a cap–regarding this test as applied to employee compensation levels. Unreasonable expenses are not deductible by law today–for tax purposes, these are profits that have been spent, not expenses, and they are taxed as profits. Compensation packages deemed unreasonable are taxable as profits. The IRS is very generous when defining reasonableness, but they do use it and follow the law. Agree?

        I agree that the result would be a very high marginal tax rate (LBJ-like) on compensation paid/received above a deductibility cap. It’s a way to discourage businesses from paying very high compensation levels (rather than outlawing them as suggested by this posting).

        As for my remark about subsidies and tax expenditures, sorry, it’s my way of conveying a common guy’s perception that tax deductions by businesses for executive perks and unnecessary spending are okay to politicians and economists, whereas any tax deduction for a laborer is up for discussion if not elimination.Report

        • Avatar Brandon Berg in reply to PJR
          Ignored
          says:

          There are good reasons for the reasonable test, none of which apply to cash or equity compensation. The reasonableness test is needed to prevent straight-up tax loopholes, where personal consumption is fraudulently written off a business expense and thus never taxed at all. For example, you could knock $50,000 off an executive’s salary, and in exchange buy a house with a $60,000/year mortgage and let him live in it, then write off the mortgage as a business expense. You don’t pay taxes on it because it’s a “business expense,” and he doesn’t pay taxes on it because it’s not his house. So that’s $60,000 that nobody pays taxes on. Hence the reasonableness test.

          None of this applies to cash or equity compensation, though, because whatever money the firm deducts as compensation shows up on the executive’s tax return as personal income. A cap on deductibility of wage expenses is just double taxation.

          The cap passed in 1993 exempts qualified performance bonuses, defined here.Report

      • Avatar PJR in reply to Brandon Berg
        Ignored
        says:

        Oh, you mentioned a deductibility cap passed in 1993 — did loopholes make it ineffective, or did businesses simply decide to pay all those taxes?Report

  6. Avatar Matty
    Ignored
    says:

    Rather than an outside body setting maximum pay maybe what is needed is to reinvigorate the idea that shareholders are the employers of directors and get to decide what to pay them. Instead of a remuneration committee composed of other business leaders setting the pay and letting shareholders approve it, possibly after a lot has already been paid, you have to stand up at the AGM and say “How much do you think I’m worth?”Report

    • Avatar LeeEsq in reply to Matty
      Ignored
      says:

      Wouldn’t this require that stock-ownership be much more individualized rather than through mutual funds or corporate ownership of stocks through holding companies. Wouldn’t this also require that the CEO and other members of the Board can’t own stock in their own corporation to avoid a conflict of interest?Report

      • Avatar Brandon Berg in reply to LeeEsq
        Ignored
        says:

        Fund managers are managing money on behalf of their clients. Since they’re usually paid a performance bonus, they have an incentive to make sure that the money they manage is put to good use. Individual investors usually have jobs to go to, and very few have enough invested in any one company to make it worthwhile to attend shareholder meetings. My suspicion is that more institutional investment means more shareholder oversight, rather than less.Report

    • Avatar Fnord in reply to Matty
      Ignored
      says:

      You’re certainly correct that executive pay figures are a symptom, not the disease.Report

  7. Avatar The Cardiff Kook (Roger)
    Ignored
    says:

    “But what if that company is one of those we will be required to purchase health insurance from? Or what if that company is one that has or continues to directly benefit from government subsidies…Do we have the right to restrict CEO pay then….? If we do not have that right, then why don’t we have it? If we do have that right, where does that right end?”

    Forgive my editing, but I wanted to address this great discussion point head on. As I wrote above, I too think something is amiss with CEO pay. But I want to clarify that I totally reject the “right to set wages” argument.

    The reason is that the argument against setting wages or prices isnt a matter of do we have the right. It is a matter of do we have the knowledge. And the answer is no. I have no idea what the right wage is, and neither does anyone else. Setting minimum and maximum wages and prices is folly twice over. First it assumes someone knows the proper price, and is smarter than the market. But complex adaptive systems can and often are smarter than anyone. Indeed if the market is truly free (an assumption I do not share) then any wage other than the one set by supply and demand is likely wrong.

    Second prices and wages and profits are not just outcomes, they are also signals within the system. Any time you interfere with these signals you disrupt that markets ability to solve the problem of allocating resources efficiently.

    Putting two and two together. I believe CEO pay should be addressed by experimenting with ways to improve corporate governance. This may lead to lower pay. Or not. My guess is it would. This is a decentralized process that does not suffer from the conceit of the annointed.Report

    • Avatar zic in reply to The Cardiff Kook (Roger)
      Ignored
      says:

      This is a decentralized process that does not suffer from the conceit of the annointed.

      I’m not sure this is true. Boards of Directors are often comprised of the annointed.Report

    • Avatar BlaiseP in reply to The Cardiff Kook (Roger)
      Ignored
      says:

      The current framework gives the workers no input into the corporations for which they work. How do you propose to change that fact?Report

      • Avatar The Cardiff Kook (Roger) in reply to BlaiseP
        Ignored
        says:

        I don’t have any ideas. Do I have to solve everything around here?

        Seriously though, I agree with experimentation with better board structure and management. I will leave the details of that experimentation to others. I just encourage it.

        Bravo experimentation with better corporate governance!Report

        • Avatar BlaiseP in reply to The Cardiff Kook (Roger)
          Ignored
          says:

          The better board structure you’re looking for is one with a worker or two on it. Saves time and trouble, eliminates management-workforce friction and therefore the Satanic Unions you guys hate so much. It works in Germany. Their economy is strong, the strongest in Europe. Japan, you can’t tell the workers from management, their workers do go into the corporate suites and make noises. Everyone’s on the same team. They’re all out to make money. If the firm isn’t making money, everyone has to take a pay cut, some folks might have to go. If the corporation is doing well, hey, the workers made those products, they get raises. Or maybe the corporation could invest in its own future. Now there’s a thought.

          Does that sound even remotely reasonable to you?Report

          • Avatar The Cardiff Kook (Roger) in reply to BlaiseP
            Ignored
            says:

            YesReport

            • Avatar BlaiseP in reply to The Cardiff Kook (Roger)
              Ignored
              says:

              And when all’s said and done, if the CEO turns out to be a champion for his workers, he damned well deserves every penny he’s paid. Believe you me, workers can and will exhibit loyalty to anyone who proves he or she is worthy of that loyalty. Doesn’t take much, really.

              All this statist talk about putting a cap on CEO pay disgusts me: it’s just so much revanchist swill, straight out of the Communist cookbook. I’ve said at turns “for the poor to rise in the world, the rich may have to become astronomically wealthy” If the world was run according to my lights, nobody would have to live in poverty: nations would invest in their own people, cut down all these obstacles to progress.

              And the first obstacle I’d tear down would be the wall dividing the bourgeois from the proles. In a capitalist society, if they get pay checks from the same firm, they ought to act like they’re on the same team. Other nations manage this and for all our “innovation” we still act like it’s the Gilded Age. We haven’t evolved.

              Tell you why the Capitalists of his day hated Marx so much: Marx understood capitalism rather better than they did. In an era of instant communications, fresh salad in plastic bags, sushi in Des Moines, Iowa, don’t tell me we can’t eliminate the inefficiencies which bedevil management and workers alike. If we don’t get back on track here, the USA will turn — hell, IS turning — into a Banana Republic.Report

              • Avatar Citizen in reply to BlaiseP
                Ignored
                says:

                It’s fairly easy to include workers in management/CEO discussions. How to get management to actually turn the ears on is a completely different problem.
                To have managers actually wade ankle high in the weeds to be less disconnected with the clockworks of the company is yet another. Its much akin to herding cats across a river.

                Good managers/engineers are as rare as hens teeth in this country.Report

              • Avatar BlaiseP in reply to Citizen
                Ignored
                says:

                I disagree. I repeat myself in saying any such discussions revolve around mandate and power. The executives are ultimately responsible to the boards of directors. Unless worker representatives appear at that level, it’s as you say “how to get management to turn the ears on is a completely different problem.”

                It’s like the old guy trying to sell a mule to the preacher. Old guy says, “All you have to do is whisper in his ear and he’ll take you anywhere.” The preacher climbs on, whispers in the mule’s ear “Take me to First Baptist Church.”

                Mule sits there, won’t do anything. The old guy picks up a length of two-by-four, fetches the mule a whack in the side of its head, mule staggers around a bit. “Try it again” says the old guy.

                Preacher whispers “Take me to First Baptist Church”. The mule’s ears stand straight up, mule starts galloping down the road toward First Baptist, preacher hanging on for dear life.

                The old guy yells after the preacher, heading down the road “Just remember, you have to get his attention, first!”Report

  8. Avatar Rod Engelsman
    Ignored
    says:

    Notice I’m not asking if we should put a cap on CEO pay: I’m asking if there are any legitimate ethical frameworks out there where capping CEO pay is even theoretically justified. Are there any legitimate ethical frameworks where we as a society – or even just a simple majority of us – can decide that a private company can pay its CEO only up to a certain quantity of ducats?

    Corporations are not individuals. They’re not natural persons naturally entitled to rights. They are a kind of virtual machine created by governments through the force of law. To be sure, they’re owned by individuals, but they take their form and operate under rules established by the governing authority that enables their existence.

    If by some bizarre turn of events, the State of Delaware were to cease to exist tomorrow morning, all the thousands upon thousands of corporations chartered in that state would also effectively cease to exist since the governing authority that authorizes their existence no longer exists. (In real-life situations there’s always a “new boss” to take over from the “old boss” so this doesn’t actually happen.)

    So in my mind, there’s no more ethical concern over a State taxing or regulating corporations than there is in my compelling my TV set to display a particular channel. After all, you’re not limiting the right of the CEO, a natural person, to earn more money–after all, he can get a second job like the rest of us; you’re limiting the ability of the Corporation, an artificial person existing as a construct of law, to pay more than an amount certain.

    None of that speaks to whether it’s a good idea, just whether it’s ethically justifiable. Deontologists need not apply.Report

  9. Avatar James K
    Ignored
    says:

    I believe intervening in the price system by directly capping pay is a terrible idea. I also feel the same way about minimum wages. The price mechanism is incredibly complicated, and little good can come from messing with it.Report

    • Avatar Rod Engelsman in reply to James K
      Ignored
      says:

      I find this attitude curious. Do you apply this principle to other areas of life?

      “The human body is incredibly complicated, and little good can come from messing with it. Therefore, I eschew all medical science.”

      or…

      “Botany is incredibly complicated, and little good can come from messing with it. Therefore, I reject all products of modern agriculture.”

      I strongly suspect you don’t (obviously, you’re cool with physics, or you couldn’t communicate over this medium), so I’m genuinely curious why libertarians insist upon segregating our social interactions, including the economic sphere, into this ghetto of non-interference, where we’re not supposed to utilize our powers of rationality to improve upon the natural state of affairs.

      I mean… sure economics is complex. Lots of moving parts and feedback loops, and intervention over here can produce unexpected, and perhaps undesirable, effects over there. But none of that is particularly unique to that field of human endeavors. Drugs save lives, but they can also have side effects. That doesn’t mean you don’t go to the doctor if you’re sick, right?

      Is it a religious thing, like the Amish? Or is it just a kind of fatalism?Report

      • Avatar Jaybird in reply to Rod Engelsman
        Ignored
        says:

        I think it’s watching what happened the last three or four dozen times folks tried meddling.Report

        • Avatar Rod Engelsman in reply to Jaybird
          Ignored
          says:

          But you don’t really believe that, do you, Jaybird? Historically, coercion is a pretty darn natural feature of human interaction. As is murder, assault, rape, theft, slavery, etc. I assume you’re fine with using force to counter-act those innate impulses in the interests of creating a more peaceful and prosperous society, right?

          Even something as foundational as property rights is a major modification of the natural order of things, which is more along the lines of might makes right.Report

          • Avatar Stillwater in reply to Rod Engelsman
            Ignored
            says:

            Even something as foundational as property rights is a major modification of the natural order of things, which is more along the lines of might makes right.

            Wow. Well said. Really well said. I mean, that’s exactly right. This sentence slices in a lot of different directions, all of which cut across the idea that government is *the* problem wrt liberty.Report

          • Avatar Jaybird in reply to Rod Engelsman
            Ignored
            says:

            Sure. But when murder, assault, rape, theft, slavery, etc is government policy… then what?

            There are a lot of examples that we could give of these things being policy and it’s not a coincidence that their bodycounts dwarf the bodycounts of “crime”. Even “good” governments like our own incarcerate millions and millions and create new and downright insane forms of injustice not only for those incarcerated but for those formerly incarcerated.

            I mean, seriously, if I were to write a short story about how the criminal justice system worked in the US, it’d read like dystopian fiction.

            As such, holding the leaps and bounds we’ve made to get to exactly where we are doesn’t strike me as human progress as much as making me wonder if we’ve learned anything at all except many of us resent those who are not grateful.Report

            • Avatar Rod Engelsman in reply to Jaybird
              Ignored
              says:

              If you’re allergic to violence there’s never been a time in human history better to live in than the present. From an essay, A HISTORY OF VIOLENCE by Steven Pinker:

              In sixteenth-century Paris, a popular form of entertainment was cat-burning, in which a cat was hoisted in a sling on a stage and slowly lowered into a fire. According to historian Norman Davies, “[T]he spectators, including kings and queens, shrieked with laughter as the animals, howling with pain, were singed, roasted, and finally carbonized.” Today, such sadism would be unthinkable in most of the world. This change in sensibilities is just one example of perhaps the most important and most underappreciated trend in the human saga: Violence has been in decline over long stretches of history, and today we are probably living in the most peaceful moment of our species’ time on earth.

              It’s hard for me to pick out just a few relevant quotes from the essay, but across all time scales, all species of violence committed by all actors, private and state, has declined steadily from our pre-state ancestors.

              Seriously, dude, read the essay and get back to me. Overall, modern governance is a force for good, despite the shortcomings we both acknowledge.Report

              • Avatar Jaybird in reply to Rod Engelsman
                Ignored
                says:

                Well, there were a handful of things that happened last century, though. There are even some interesting numbers attached.Report

              • Avatar Rod Engelsman in reply to Jaybird
                Ignored
                says:

                Indeed. From the essay I linked:

                At the widest-angle view, one can see a whopping difference across the millennia that separate us from our pre-state ancestors. Contra leftist anthropologists who celebrate the noble savage, quantitative body-counts—such as the proportion of prehistoric skeletons with axemarks and embedded arrowheads or the proportion of men in a contemporary foraging tribe who die at the hands of other men—suggest that pre-state societies were far more violent than our own. It is true that raids and battles killed a tiny percentage of the numbers that die in modern warfare. But, in tribal violence, the clashes are more frequent, the percentage of men in the population who fight is greater, and the rates of death per battle are higher. According to anthropologists like Lawrence Keeley, Stephen LeBlanc, Phillip Walker, and Bruce Knauft, these factors combine to yield population-wide rates of death in tribal warfare that dwarf those of modern times. If the wars of the twentieth century had killed the same proportion of the population that die in the wars of a typical tribal society, there would have been two billion deaths, not 100 million.

                Interesting, huh?Report

              • Avatar Christopher Carr in reply to Rod Engelsman
                Ignored
                says:

                Have you ever seen this documentary, Rod?

                Report

              • Avatar Rod Engelsman in reply to Christopher Carr
                Ignored
                says:

                Interesting. And it proves… what, exactly?Report

              • Avatar Christopher Carr in reply to Christopher Carr
                Ignored
                says:

                I’m not arguing right now. Just engaging in pleasant conversation.

                It’s an interesting documentary. We watched it on the first day of the first film class I took in college.Report

              • Avatar Jaybird in reply to Rod Engelsman
                Ignored
                says:

                “A typical tribal society” is one of those baselines that I don’t know gets us to where we want to go when we look at that 100 million.Report

              • Avatar Jaybird in reply to Jaybird
                Ignored
                says:

                I mean, here’s part of the essay (which I read because it was not too long):

                Meanwhile, according to political scientist Barbara Harff, between 1989 and 2005 the number of campaigns of mass killing of civilians decreased by 90 percent.

                What happened in 1989? Why begin the count there?

                Is the answer related to a certain kind of government?Report

              • Avatar Christopher Carr in reply to Jaybird
                Ignored
                says:

                WIR:BIWNTL?Report

              • Avatar Mike Schilling in reply to Jaybird
                Ignored
                says:

                The only thing I can think of that ended in 1989 was the Soviet war in Afghanistan, which did indeed result in way too many civilian deaths. And 2005 was when the civilian death rate in Iraq began to spiral out of control.Report

              • Avatar Rod Engelsman in reply to Jaybird
                Ignored
                says:

                What happened in 1989? Why begin the count there?

                You have a real talent for being disingenuous when you get on a roll, don’t you?

                Zooming in by a further power of ten exposes yet another reduction. After the cold war, every part of the world saw a steep drop-off in state-based conflicts, and those that do occur are more likely to end in negotiated settlements rather than being fought to the bitter end. Meanwhile, according to political scientist Barbara Harff, between 1989 and 2005 the number of campaigns of mass killing of civilians decreased by 90 percent.

                And that passage was a continuation of a riff on the fractal nature of the reduction in violence, starting at the scale of millennia, then centuries, then decades, and finally the most recent history.

                You should be more charitable to those that don’t read, given how much better your arguments work against the uninformed.Report

              • Avatar Jaybird in reply to Jaybird
                Ignored
                says:

                Rod, it seems to me that “after the end of the cold war” is a minor handwave there. I mean, I could argue that there was a degree of central planning that was abandoned and then, when this degree of central planning was abandoned, peace broke out.

                It wasn’t a case of our technocrats finally learning how to run things.

                It was a case of technocrats finally stopping to try to run things.Report

              • Avatar Stillwater in reply to Jaybird
                Ignored
                says:

                I could argue that there was a degree of central planning that was abandoned and then, when this degree of central planning was abandoned, peace broke out.

                Sure. That’s called “a dispute”. You have one view, Rod has another, the two views are inconsistent. What settles the matter? Well, one thing that doesn’t settle it is merely asserting that you *could* make the argument. You need to actually make it. And that’s where things get dicey, it seems to me. If your view is that the state is the *primary* cause of violence deaths and more specifically that reductions in the exercise of state power over time is the primary cause of lower death rates per capita, then you’re led to some paradoxical conclusions given Pinkers data.Report

              • Avatar The Cardiff Kook (Roger) in reply to Jaybird
                Ignored
                says:

                There is a lot of people talking past each other on this violence subthread. Here are my summary notes of Pinker’s 700 plus page argument explaining why violence is at the lowest level ever…

                Reasons:
                1) the rise of literacy and the ability to experience other people’s viewpoints
                2) interdependency and the extended networks of market economies and massive telecommunications.
                3). Monopoly of coercion in state is aimed at using coercion only to suppress coercion.  This changes the payoff of exploitation and violence and replaces amplifying feedback loops of revenge and status displays
                4) intelligence and the Flynn effect and the correlation with planning for the long term and repressing impulsiveness. 
                5). Enlightenment philosophy and emphasis on rational utilitarianism. 

                I think he missed a few or under emphasized a few things such the role of property rights and common law at reducing destructive squabbles. That said, there is nothing in his book which disputes classical liberalism, and lots which reinforces it. It could be used a an argument against anarchy, but to my knowledge we have no anarchists here.

                One final point. Pinker’s book was my first intro to Fiske’s ideas of a hierarchy of cognitive ways of relating. The apex of which is called Market Pricing view of relationships which is sometimes defined as thinking like an economist or a libertarian. Over time, there is the possibility for cognitive and cultural advance to more sophisticated ways of viewing relationships. Fiske may be wrong, but I suggest everyone be familiar with his arguments.Report

              • Avatar Christopher Carr in reply to Rod Engelsman
                Ignored
                says:

                This begs the question.Report

              • Avatar Rod Engelsman in reply to Christopher Carr
                Ignored
                says:

                Read the fucking essay. What do you want me to do? Violate copyright law? I linked for a reason.Report

              • Avatar The Cardiff Kook (Roger) in reply to Rod Engelsman
                Ignored
                says:

                It is a great book. Highly recommended.Report

              • Avatar Christopher Carr in reply to Rod Engelsman
                Ignored
                says:

                Great, it still begs the question by assuming that the peaceful changes stem from the government and not from something else – say technology or cultural development.Report

              • Avatar The Cardiff Kook (Roger) in reply to Christopher Carr
                Ignored
                says:

                He covers all those issues in the book. It basically supports the value in having a centralized monopoly on the use of force. He also makes a strong case for markets and inclusive institutional arrangements.Report

              • Avatar Christopher Carr in reply to Christopher Carr
                Ignored
                says:

                I agree with him entirely then. And I wrote several months ago too that Hobbes and libertarianism are not only compatible but should go together.Report

              • Avatar Rod Engelsman in reply to Christopher Carr
                Ignored
                says:

                Has it ever occurred to you that government is a cultural development? Maybe that it’s also a technology as well?Report

              • Avatar Christopher Carr in reply to Christopher Carr
                Ignored
                says:

                It certainly has occurred to me that as our society grows larger and more complex, we’ll need to find new ways to maintain overall order and organization.

                And I realize that everything is interconnected, but I’m just not sure that having a strong, powerful centralized states is more instrumental to that than say, the Internet. Or entertainment – i.e mass conveyance of new, peaceful cultural norms – that don’t necessarily depend on government for their existence.Report

              • Avatar Kim in reply to Christopher Carr
                Ignored
                says:

                Chris,
                you’d rather propaganda than government?
                lolwhutReport

              • Avatar Christopher Carr in reply to Christopher Carr
                Ignored
                says:

                Read the whole thread.Report

        • Avatar Morat20 in reply to Jaybird
          Ignored
          says:

          You mean you’re idealogically opposed to the Fed changing interest rates? To the Pure Food and Drug Act? (After all, it tells economic actors what they are and aren’t allowed to do)

          We — humans — have meddled in the economy since, well, it started. We just use finer tools these days — less of wage freezes and price settings and outright nationalization, and more of interest rates and regulations and whatnot.

          As for CEO’s — they’re not worth what they’re paid, that’s pretty obvious. I’m sure one o two might be mega rock-starts of business, but well — upper management (and that runs all the way to the board) doesn’t seem to be any ‘smarter’ than the production folks, at any company I’ve ever worked at, from big to small. Same distribution of genuises and idiots.

          I admit, I couldn’t do their job — not much for schmoozing and deal-making and tedious negotiations. But they couldn’t do mine either. But I don’t get paid tens of millions even as my decisions drive the company down the crapper.Report

          • Avatar Jaybird in reply to Morat20
            Ignored
            says:

            You mean you’re idealogically opposed to the Fed changing interest rates? To the Pure Food and Drug Act?

            I’m opposed to the Fed keeping them artificially low. I think that, in a few years, you’ll find out that you should have opposed the Fed keeping them as low as they did, as long as they did. As for the Pure Food and Drug Act, I think that we could have quite a conversation about the utility of the FDA.

            Perhaps this is just one of those things where I keep looking at stuff like (do you really want me to list a half-dozen Supreme Court cases?) and you’re asking me if I hate the Supreme Court.

            Given the number of times that the wrong thing had been done in the name of doing something, I think that doing nothing is usually a better course of action in a huge amount of cases and holding up the potential best case scenario as counter-argument strikes me as less persuasive than actual realized worst (or very very bad) case scenarios.Report

            • Avatar Stillwater in reply to Jaybird
              Ignored
              says:

              a half-dozen Supreme Court cases

              Out of how many? 10,000? (I really don’t know. Teh Google was unhelpful in determining a number.) So, six wrong decisions out of let’s just say 10,000 is why you reject government? A .0006 likelihood?Report

              • Avatar Jaybird in reply to Stillwater
                Ignored
                says:

                I think that those cases provide a good reason to be skeptical of the institutions being so much more awesome than nothing.

                How many court cases would it take to make up for Plessy?

                Does Brown v. the Board of Education get us there? Loving v. Virginia?

                I’m willing to bet that if you show me 10 “This was an *AWESOME* decision on the part of the Supreme Court” cases, 8 of them will be overturning a previous one that is probably still haunting us on one level or another.Report

              • Avatar Morat20 in reply to Jaybird
                Ignored
                says:

                Um, we’ve SEEN nothing. You know what nothing looks like?

                Well, without the Fed — inflation/deflation cycles, rampant boom/busts (leading to Depressions, not recessions). Complete banking and economic collapse.

                See, here’s the thing — there’s a reason the FDA exists. Why the Fed came about. Why we started making those regulations. And while you can sit there and say “I’m not sure it’s better than nothing” I can only assume it’s because you haven’t actually thought about what “nothing” is.

                It’s historical, is what it is. You can look it up. That’s what your “nothing” gets us — contaminated food, depressions, currency runs, bank runs….

                Government regulation didn’t arise in a vacuum. I understand some people find it..idealogically convienent to assume all government regulation comes from villianious bureacrats and politicians increasing their fiefdom — but you and I both know that’s not the case.Report

              • Avatar Jaybird in reply to Morat20
                Ignored
                says:

                Well, without the Fed — inflation/deflation cycles, rampant boom/busts (leading to Depressions, not recessions). Complete banking and economic collapse.

                Keep watching.

                (Though I honestly suspect that what’s going to happen in Europe will be blamed on the Austrians rather than on the Keynesians.)Report

              • Avatar Shazbot5 in reply to Jaybird
                Ignored
                says:

                You and Kim should get internet-married, because your comments are equally likely to be crazy red herrings thrown out after expressing suppport, sometimes implicitly, for pretty much indefensible positions,

                I’d love to see you two bicker about something. I can only imagine…

                Kim: You didn’t let the cat out.

                JayBird: But what is a cat, really?

                Kim: I have a friend who uses poisoned tipped knives to let the cat out. So I don’t see why you can’.

                JayBird: Did the liberal let the cat out when he was supposed to?

                Kim: Liberatarians like you are 63% more likely to be composed of cheese and shards of the Dark Crystal.

                JayBird: Isn’t it hypocritical to criticize the libertarians for not letting the cat out, given that liberal cheeses never get critcized? And how do we define “cheese.”Report

              • Avatar Jaybird in reply to Jaybird
                Ignored
                says:

                My position isn’t indefensible. As I said, you guys get to hold up the theoretical best case scenario as evidence that we should do what you want and you get to dismiss my “this is something that actually happened!” evidence as being an insufficient defense. Indeed, my positions even become “indefensible” in the face of the glorious future you have centrally planned.

                So when I point out stuff like Buck v. Bell or Plessy v. Ferguson or Dred Scott or Wickard or Warren v. District of Columbia and say “you guys are far, far too much in love with the idea of The Right People Making The Right Decisions”, the comeback is always “so you’d get rid of the FDA? You’d get rid of the Supreme Court???”

                And even pointing out stuff like current major failures of the FDA (false positives, false negatives), the question always comes “so you’d rather we go back to the 1930’s???”

                Additionally: if you want to insult me, insult me. Please don’t insult other folks on the site in order to better insult me. Thanks.Report

              • Nob Akimoto Nob Akimoto in reply to Jaybird
                Ignored
                says:

                Europe? The monetarists probably, with their obsession on inflation targeting.

                On the original topic: So if doing nothing is preferable in “most cases” to doing something, what are cases where doing something is preferable?

                Let’s note that some of the examples you brought up (re: Buck v. Bell, Plessy, Dred Scot) are at least examples where doing nothing was the solution arrived at when faced with a potential injustice. It was people deciding that when faced with whether the federal government should intervene viz things being done by state governments, the answers were “nah, they know better.”Report

              • Avatar Jaybird in reply to Jaybird
                Ignored
                says:

                Eh. When asked to pick between the rights of the individual and the state having the power to wield over individuals as it will, the SCotUS tends to take the latter. There are a handful of exceptions… Roe is a big one. Citizens United is another (remember: that was a case about the government censoring a PPV movie).

                It’s about the exercise of authority and upholding it. Hell, even Lawrence said that the state could pass and enforce these laws so long as the laws didn’t discriminate.

                The government shouldn’t have half of the authority it claims.Report

              • Nob Akimoto Nob Akimoto in reply to Jaybird
                Ignored
                says:

                I think you’re shifting goal posts here by saying that. It’s one thing to say that doing nothing in the case of a problem is a preferable solution. It’s another to argue that cases of actually doing nothing by one entity (federal government) is tantamount to claiming authority by a nebulous “government” in the abstract. That’s a different argument.

                I think that public choice theory essentially negates the notion that there’s some nebulous, monolithic entity called “government”. There’s an odd tendency among people opposed to “government” to on one hand suggest and place the problems of state and local jurisdictions onto the federal government, and on the other simultaneously argue that localism is somehow a panacea to the problem of government centralization and authority.

                It seems to me that the history of regional governments, particularly in the US show that central authority is one of the few things that can effectively curtail abuses of citizenry that arise from localism. Everything from the Jacksonian rejection of central banking and specie circulars to slavery and Jim Crow to sodomy laws are all at root, ills that come from devolution.Report

              • Avatar The Cardiff Kook (Roger) in reply to Jaybird
                Ignored
                says:

                Nob,

                The rationale for distributing powers between levels of government is obvious and one which I am sure you are well aware of. Your examples are great but lop sided — presenting only half the situation.

                Part of the rationale for most governance being local is that it allows experimentation and variety rather than a single solution. For example, some states started without slavery, some with. Some had Jim Crow laws and some didn’t. Some have Open Shop laws and some don’t. In some cases, the proven success of those states cemented the argument for forcefully overriding the aberrant states.

                Another way to say it is that you can’t assume that if we did things ONE way, that it would be the right way, and that as conditions changed it would stay right. We could have started and stayed slavery for example.

                This isn’t anti government or devolutionary. It is specifically designed to make governance more adaptive and better at experimentation and learning.Report

              • Avatar BlaiseP in reply to Jaybird
                Ignored
                says:

                Erm… no. The entire country was safe for slavery at its founding. Even provides for how to count them in the census. They weren’t equal.

                What is this “proven success” business? That’s just not going to work. The proven successes were at Vicksburg and Gettysburg and Atlanta and Columbia and Appomattox Courthouse. Because we weren’t willing to address slavery as a nation, we were obliged to run a few interesting experiments, all right. Battlefield surgeons had plenty of test subjects. Believe me, battlefield medicine improved. So did mortuary science.

                What is it with this “Experiment” line of argument about? Ever read about Lincoln’s House Divided Speech? We ran the experiment, the slavery proponents bullied the Framers in 1789, they bullied them right up to the 13th Amendment, they bullied the nation right through the Civil Rights Era and I’ll be damned if that little turd Antonin Scalia isn’t still making noises on this subject.

                No. Our government is not a Fifty-State Experiment. Your solution isn’t even an framework for an experiment. It is a framework for anarchy, a political solution with surprising appeal to some well-intentioned people. There are also people who keep alligators and cuddly Burmese pythons in their homes. They, too, are running little experiments. If snakes and alligators do not change their natures, slavery and sweatshops don’t change their natures either.

                Unless, of course, you want us to “adapt” to slavery and sweatshops again.Report

              • Avatar The Cardiff Kook (Roger) in reply to Jaybird
                Ignored
                says:

                Blaise,

                It may be best if we don’t have this discussion. I have noticed a past pattern that you and I are unable to see eye to eye on the process of what Jared Diamond calls “intermediate fragmentation.”. For the first year or so, I took it as a challenge to improve my ability to explain my views. However, none of these ended well. Indeed most ended with one of us calling the other names and accusing the other of things they never said.

                I am going to assume this exchange will end similarly.Report

              • Avatar BlaiseP in reply to Jaybird
                Ignored
                says:

                It seems to me, when you encounter a framework where you don’t want to acknowledge the track record of history, you resort to this Experiment line of rhetoric.

                Examine what I’ve said about putting workers on boards of directors — once again, you want some Experiment — when the experiment has been run and a workable solution has been found. You complain that I’m demanding a solution from you.

                I don’t have any ideas. Do I have to solve everything around here?

                It’s true, you don’t have any ideas. But you do have lots of questions. You just don’t like the answers you get. You like the idea of hitting the Reset Button, assuming we could re-run the experiment and get different results in each of the fifty states. Science doesn’t work that way. We know the universe obeys the same rules everywhere. There are no exceptions. Nothing is going to make sweatshops any better in 200 years than they were 200 years ago.Report

              • Avatar The Cardiff Kook (Roger) in reply to Jaybird
                Ignored
                says:

                Exactly.Report

              • Avatar The Cardiff Kook (Roger) in reply to Jaybird
                Ignored
                says:

                I will be glad to discuss this with anyone else, of course. In fact I would love to.Report

              • Avatar BlaiseP in reply to Jaybird
                Ignored
                says:

                Heh, heh. Once again, if Roger doesn’t like my answers, maybe asking someone else will result in the answers he likes.Report

              • Avatar Stillwater in reply to Jaybird
                Ignored
                says:

                The government shouldn’t have half of the authority it claims.

                On what view of “shouldn’t”? On what view of “claims”?Report

              • Avatar The Cardiff Kook (Roger) in reply to Jaybird
                Ignored
                says:

                Well, I guess you could choose to come to that conclusion. Connecting it to the discussion on justice and fairness, an alternative explanation is that I do not believe you play fair. It may not be your answers I reject, but your methods and the constructiveness of the process.

                Food for thought….Report

              • Avatar Jaybird in reply to Jaybird
                Ignored
                says:

                Well, to use the distinctions made between Bowers v. Hardwick and Lawrence v. Texas, I’d say that the argument that the government has the jurisdiction to tell two people that they shouldn’t engage in a beej is a government claiming a certain amount of authority and jurisdiction.

                That is: it has both the authority and the jurisdiction to tell two persons, in a locked house, that they cannot legally engage in some light head bobbery.

                Bowers v. Hardwick argued that, yes, these laws are totally appropriate. Lawrence didn’t argue “these laws are totally inappropriate”. Lawrence instead argued “you can’t pass laws saying two guys can’t do this. You have to pass laws saying two *PERSONS* can’t do this.”

                So when you ask “On what view of “shouldn’t”? On what view of “claims”?”, I find myself taken aback. It seems that the burden of proof needs to be that the government *SHOULD* have jurisdiction over fellatio between two people. As to your second question, given that the majority of arguments I’ve seen defending Lawrence is some variant of “it’s not like the government is going to enforce this law anyway” which seems to be a tacit admission that the law is claiming jurisdiction that it has no stomach to enforce (though, for some reason, Lawrence stood in the dock anyway).Report

              • Avatar BlaiseP in reply to Jaybird
                Ignored
                says:

                It is my answers you reject, Roger. When I start in demolishing your assertions, using the battering ram created by those answers, then you get annoyed. Then you vent at me, as if denying your assertions is somehow a personal affront? It’s called argumentum ad temperantiam. No, I’m not going to compromise on my conclusions any more than my facts. I have to do my homework. Now you do yours.Report

              • Avatar The Cardiff Kook (Roger) in reply to Jaybird
                Ignored
                says:

                Or maybe I am just afraid you are going to “whack me where it really hurts.”

                https://ordinary-times.com/blog/2013/03/noah-smith-trolls-working-class/#comment-505013Report

              • Avatar Mike Schilling in reply to Jaybird
                Ignored
                says:

                Which “the government”? In neither case is the central government oppressing people. Once again, Bowers said “none of our business”, where Lawrence went further and said “at least you can’t single that group out”. And in the latter case, the principled, constitutional argument, I’ve often been told by distrusters of centralized power, was Thomas’s dissent that it’s a bad law but it’s still none of our business.Report

              • Avatar Kim in reply to Jaybird
                Ignored
                says:

                shazbot5,
                What you call “indefensible position”… other people know as real life.Report

              • Avatar Mike Schilling in reply to Jaybird
                Ignored
                says:

                Plessy wasn’t the central government making things worse; it was the central government refusing to use its power to make things better. Likewise, Dred Scott wasn’t the central government creating slavery or even inventing the obligation for free states to return escaped slaves; it was the central government refusing to resolve the contradictions of half-slave and half-free by imposing any additional (let me say it again: additional) restrictions on slavery. None of Brown, Loving, Gideon, Miranda, Griswold, Brady overturn decisions where previous courts had destroyed existing protections. Liberals get accused of loving the federal government too much. To the extent that’s true, it’s because we recall what state governments do when allowed to.Report

      • Avatar zic in reply to Rod Engelsman
        Ignored
        says:

        Maybe it’s like the virus rodents get that makes them love cats?

        +1 response, Rod.Report

      • Avatar Stillwater in reply to Rod Engelsman
        Ignored
        says:

        Is it a religious thing, like the Amish? Or is it just a kind of fatalism?

        Yes.Report

      • Avatar The Cardiff Kook (Roger) in reply to Rod Engelsman
        Ignored
        says:

        Yeager answers your question here… (wages are a type of price)

        https://mises.org/journals/rae/pdf/rae7_2_5.pdf

        “Let us review what economic calculation means and what functions prices perform….

        Ultimately, additional units of any product cost foregoing other products or benefits that might have been chosen instead. Technology and the scarcity of resources pose the need to choose among alterna- tive patterns of production as rival and practically unlimited desires compete for those resources. The other side of the same coin is choosing how to allocate scarce resources among different lines of production.

        How might a definite plot of city land be used most advanta- geously-as a wheat field, a parking lot, a site for a swimming pool or hotel or office or apartment building, or what? By the logic of the price system, this resource goes under the control of whoever will pay the most. In bidding for its use, business firms estimate how much it can contribute, however indirectly, to producing goods and services that consumers want and will pay for. How much value it can contribute depends not only on physical facts of production but also on the selling price of each of the possible final products, and this price depends in turn partly on opportunities to produce the product in other ways. Wheat grown on cheaper land elsewhere would keep anyone who wanted to use city land to grow wheat from affording to bid highest for it. Not only natural resources but also capital, labor, and entrepreneurial ability thus move into lines of production where they contribute most to satisfying consumer needs and wants, satis- factions being measured by what consumers will pay for them.

        Another example concerns public transporation in a particular city. Should it be supplied by buses burning gasoline, by electric streetcars, in some different way, or not at all? The economically efficient answer depends on more than technology and the physical availability of inputs. It depends also on substitutabilities and complementarities among inputs, on alternative uses of those inputs, and on consumers’ subjective appraisals of various amounts of the various outputs of those alternative uses, as well as on appraisals of various amounts of various kinds of public and private transportation. The economically efficient answer even to the relatively simply question of local transportation depends, in short, on unimaginably wide ranges of information conveyed, in abbreviated form, by prices.

        Ideally, in a competitive economy,the price of each product meas- ures not only how consumers appraise it at the margin but also what the total is of the prices of the additional resources necessary to supply an additional unit of it. These prices, in turn, measure what those resources contribute at the margin to values of output in their various uses (AS ultimately appraised by consumers) and so measure the values other outputs sacrificed by not using the resources for them instead. Prices therefore tell the consumer how much worth of other things must be forgone to supply him with each particular product. With necessary alternatives brought to his attention in this way, each consumer ideally leaves no opportunity unexploited to increase his expected total satisfaction by diverting any dollar from one pui-chase to another. In this sense consumers choose the pattern of production and resource-use that they prefer. Ideally, their bidding sees to it that no unit of a resource goes to satisfy a less intense effective demand to the denial of a more intense one.

        Economic calculation takes physical relations into account, and far more besides. It takes into account the available quantities of various resources and possibilities of expanding them, the technol- ogy of input-output relations, and the physical complimentarities and substitutabilities of various resources in various lines of production. But it also takes into account the subjectively per- ceived unpleasantnqsses and amenities of different kinds of work, changes in the perceived disutilities of work and in the utilities of goods and services as their amounts increase, and complementarities and substitutabilities of various goods and services perceived by consumers. Ideally, the result of successful economic calculation- which, to repeat, takes all sorts of subjective as well as physical considerations into account-is a state of affairs in which no further rearrangement of patterns of production and resource use could achieve an increase of value to consumers from any particular good at the mere cost of a lesser sacrifice of value from some other good.”

        That is the long answer. Short answer is that interfering with prices makes the feedback mechanism of resource allocation less efficient. It usually does more harm than good.Report

        • Avatar Rod Engelsman in reply to The Cardiff Kook (Roger)
          Ignored
          says:

          TL:DR

          I hope you didn’t waste a lot of time digging that up. I know this may come as a shock to you, but I actually am fairly well schooled in economic theory, at least at the primary level that passage appears to come from based on a quick scan.

          Also, I’m not advocating a cap on CEO wages. I’m just not convinced that the current crop of CEOs are a hundred times as effective as the CEOs that were running companies back when I was a kid (’60s). But if you’re convinced that what we’re seeing now is just the result of natural economic forces pricing executive labor, then that’s the conclusion you’re forced into.Report

          • Avatar Jaybird in reply to Rod Engelsman
            Ignored
            says:

            TL:DR

            This is one of those responses that strikes me completely differently than you probably intended it to be read.Report

            • Avatar Rod Engelsman in reply to Jaybird
              Ignored
              says:

              Too Long; Didn’t Read

              It’s just tedious the way libertarians always assume that anyone that disagrees with them about matters of economics is just uninformed. You’re about 40-yr old, right? That means I was studying Econ in college when you were in grade school. My professor for the Money and Banking course tried to talk me into switching majors from Engineering. Probably should have listened to him.Report

              • Avatar Jaybird in reply to Rod Engelsman
                Ignored
                says:

                No, I knew a girl in one of my classes and we went on a date and, in discussion, she pointed out that she didn’t read much.

                She seemed to communicate this with a tone that was less than apologetic. Like, she wasn’t saying “man, I’ve been studying so hard that I haven’t been reading”. She was communicating that there were people that read and people that didn’t, and she was one of the latter, dangit.

                Her signal was received differently than she intended to send it in that case as well.Report

              • Avatar Stillwater in reply to Jaybird
                Ignored
                says:

                Nothing like letting a single event determine all your future behavior. One trial taste aversion FTW!Report

              • Avatar Jaybird in reply to Stillwater
                Ignored
                says:

                Maybe I should have more respect for people who use “I didn’t read that!” as an argument. I’ll try to do that in the future and we can see how that works out.Report

              • Avatar Rod Engelsman in reply to Jaybird
                Ignored
                says:

                See my comment to Roger below.

                I’m just tired of reading the same shit over and over based on the assumption that the only possible way I could disagree with your position is if I don’t understand it. There’s a heavy strain of narcissism in libertopia.Report

              • Avatar Jaybird in reply to Jaybird
                Ignored
                says:

                There’s a heavy strain of narcissism in libertopia.

                We’re not the ones saying “seriously, I’d be a good tsar!”Report

              • Avatar BlaiseP in reply to Jaybird
                Ignored
                says:

                Heh. But more than a few of you are quite willing to bow the knee to financial autocrats, far more capriciously despotic than any jumped-up generalissimo could even contemplate.Report

              • Avatar Christopher Carr in reply to Rod Engelsman
                Ignored
                says:

                “It’s just tedious the way libertarians always assume that anyone that disagrees with them about matters of economics is just uninformed.”

                I think everybody does that – not just “the others”.Report

              • Avatar Mike Schilling in reply to Christopher Carr
                Ignored
                says:

                There are people who have treat economics as a religion, people who treat is as an exact science, and people who treat it as a social science, that is, a useful set of generalizations well short of truth. The first two can quickly get tedious.Report

              • Avatar The Cardiff Kook (Roger) in reply to Rod Engelsman
                Ignored
                says:

                Rod,
                You started the discussion with your comment on what’s the big deal about messing with complex systems. I assumed you were serious and gave a serious answer. In addition several others joined in and accused faith in prices as being a religion. Fair enough.

                This answers the objection for those interested in a serious discussion.

                Sorry if the answer is too long. You can easily skim it for highlights.Report

              • Avatar Rod Engelsman in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                I’m always interested in a serious discussion with you. And to show that seriousness I went ahead and read the passage. And… it’s nothing I haven’t known since my first course in Macroeconomic theory–probably ’79, maybe ’80–I forget exactly now, but I believe it would have been my sophomore year.

                If you would read my posts a bit more carefully you would note that I did NOT advocate arbitrary income caps. And for that matter I’m not a huge fan of minimum wages either. Or taxes. Or regulation as normally conceived.

                But I also don’t understand this seeming obsession some have with the idea that the outcome of a free-market pricing and allocation mechanism is “right” or “correct” in some cosmic sense. Or that economic efficiency, apparently defined tautologically as the outcome of the free-market pricing mechanism, is a primary moral value.Report

              • Avatar The Cardiff Kook (Roger) in reply to Rod Engelsman
                Ignored
                says:

                Rod,
                It’s all good,

                I think it is an interesting discussion. I think you asked an intelligent and subtle question, which requires a real discussion, not the frequent one liner snarking that passes for discussion with some.

                You original question was why an economist (James) would recommend not interfering with the pricing mechanism. You pointed out that we obviously are comfortable messing with other complex systems, and then you asked if it was some type of religious faith.

                I read your statement to be an argument for rational interference in the setting of prices and wages, or at least consideration for interference. I see now it is more subtle.

                Here you are clarifying that your objection is over a seeming obsession that the price is right or correct in some cosmic sense… That we are treating it as a primary moral value.

                Again I think this is an awesome question. My too lengthy prior response clarified in detail that what the pricing mechanism does is allow us to discover the way to arrange the unimaginably complex relationships between resources and efforts to deliver consumer value. It works like an algorithm at ordering market affairs. You clarify that you know this and agree.

                Of course you are also right that efficiency of resource allocation is not the only value humans can have. I agree 100%. Thus the argument shifts to one of whether it is wise to sacrifice efficient resource allocation for other values.

                That is a great topic. I will just add the lives and prosperity and futures of seven billion people an all our descendents depends upon the efficiency of this algorithm. If we choose to override the system, we can, but we will not be able to judge how much less effective we make the system.

                I would say we should be very careful, deliberate and cautious before destroying one type of good for another. And my experience is that most of those that do argue for minimum wages, wage caps, profit caps and such do so with complete ignorance of the algorithm which they are hobbling.

                Others feel free to join in…Report

              • Avatar LWA in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                This is what I was aiming at above- that there are things that most societies place value on that are more valuable than market efficiency.

                I can’t even think of a society or culture which doesn’t have as its foundational premise, a list of things that are considered sacred.
                The human body, family structure, order and peace; although mostly honored in their absence, these sacred things are the ultimate goal.
                Concepts like democracy and personal liberty, are almost always just means to that end, not ends in themselves.

                When I read things by libertarians, it does seem as though individual liberty and market efficiency are somehow self-evidently good things, regardless of the outcome.Report

              • Avatar Brandon Berg in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                can’t even think of a society or culture which doesn’t have as its foundational premise, a list of things that are considered sacred.

                Sure, but a lot of those are irrational, or useful only in circumstances that no longer apply today. You understand that when it comes to certain traditional conservative values, right?Report

              • Avatar Mike Schilling in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Yeah, what could possibly be more important than getting more stuff?Report

              • Avatar LWA in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                My list of the sacred only varies slightly from the social conservatives- e.g., marriage IS in fact every bit as sacred as NOM says it is; which is why it is so important that gay people should be included in it.

                What I am trying to focus on is what is sacred to libertarians- what things are the ultimate goals and ends by which we can measure our progress?

                I sense mostly skepticism about the whole concept of sacredness; And that seems remarkably radical to me.Report

              • Avatar Brandon Berg in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Values are heterogeneous. What is sacred to another person may be unimportant, or even profane to another. It’s really not my place to tell people what they should consider sacred.

                Personally, though, I want people to live long, prosper, and mind their own business.Report

              • Avatar Shazbot5 in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                So the value claim “people should mind their own business” is not objectively true, nor in any way a fact? It is just your subjective opinion?

                The more and more I meet conservatives and libertarians, the more and more I think there is a link between moral relativism and the denial of liberalism. You would think we hippy liberals should be the relativists, but actually liberals are usually some sort of utilitarian (possibly with Kantian or contractarian leanings, too).

                Are you a moral relativist and a relativist about principles of justice Brandon?Report

              • Avatar Stillwater in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                I’ve often thought the same thing, Shaz, but I can’t quite get my head around it. It’s an itch I haven’t been able to scratch. Writing a post on this might be useful.Report

              • Avatar Brandon Berg in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                I’d say skeptic, more than relativist. Morality isn’t a real thing. There are just subjective preferences about how people would like society to operate. I should note that people’s concrete policy preferences can be objectively wrong, given their subjective preferences, if they don’t understand the effects of those policies. For example, someone may advocate draconian taxes on the rich. This is a perfectly valid policy preference if you really want to reduce the capital stock and slow growth, not so much otherwise.Report

              • Avatar Stillwater in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Morality isn’t a real thing.

                First you say justice isn’t a real thing. Now morality. I’m beginning to think don’t think you understand what these terms actually mean, Brandon.Report

              • Avatar Stillwater in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Wow. That’s not even English. But it was so close!

                Let me try that again. “I’m beginning to think you don’t understand what these terms actually mean.”

                {{Whew.}}Report

              • So the value claim “people should mind their own business” is not objectively true, nor in any way a fact? It is just your subjective opinion?

                Let me try to square that circle for you.

                I look at myself and I ask myself the question: “Do I have the right to tell Shazbot not to get a blowjob? The authority to prevent him from getting one?”

                We can hammer out the circumstances under which it would be appropriate for me to tell you when to not get one, of course… say, when you’re standing in line at Taco Bell. Or when the person in charge of working “down there” is not capable of giving meaningful consent. Sure. But let’s assume that you’re in your house, minding your own business, and, suddenly, beej city. (thumbs up!)

                Do I have the right to tell you to not get one? Well, I suppose. I have the right to tell you a lot of things, after all.

                Do I have the authority to prevent you from getting one?

                It sure seems to me that I don’t. As a matter of fact, it sure seems to me that it’s none of my freakin’ business.

                Now, I turn the tables and ask “Does Shazbot have the right to tell me to not get one?” and I come to the conclusion that, if Shazbot is asserting such, he needs to make a pretty good argument.

                Perhaps he could argue that his holy book tells him that it is bad to put other people’s no-no bits in another’s piehole. Perhaps he could argue that he has a deep and abiding personal relationship with the Architect of the universe and in conversation with this Architect, he came to the conclusion that naughty bits should exist only for throwing pollen into the wind and hoping the pollen lands on some pistil somewhere. If you know what I mean. Perhaps he would just say that he has a pretty strong intuition that people pee from there.

                We could, of course, do this all day.

                I don’t see where I would get off telling him not to do this.

                I don’t see where he gets off telling me to not.

                Now let’s make that bigger. Let’s put an X in there. If I don’t understand where I would get off telling you to not do X? I don’t see where you get off telling me to not do X. Your assertions that you have talked to The Boss notwithstanding.Report

              • Avatar Shazbot5 in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                But you didn’t respond to my specific question. The following is a normative principle (call it whatever you want: a value, a moral principle, a principle of justice, etc.):

                “Government should minimize its involvement in the affairs of individual citizens.”

                Is this principle objectively true? Is someone wrong to not agree with this claim?

                Of course, no one denies that it is factual that some actions will be better (as means) than others at bringing about goals (ends) stated in value statements. But that is beside the point. By definition, a moral relativist is someone who thinks value statements themselves are neither true nor false; they are just preferences that can’t be correct or incorrect, true or false.

                Apparently, you are a hardcore relativist about all normative claims. (Unless you think the values stated in a libertarian’s account of justice are objectively true.) If so, and if you are logically consistent, you won’t ever say libertararianism is a true theory, nor liberalism false, ever again, Rather, you will say that you and liberals have different preferences, like cat people and dog people, but there is nothing that makes your preference for libertarianism more correct than a preference for liberalism, or theocracy, or fascism, or whatever, anymore than cat people have more true beliefs than dog people.

                It’s just, like, your opinion, man.Report

              • Avatar The Cardiff Kook in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                I am going to align with the liberal/progressives on this one. Certainly we can say that morality and justice and such are subjective, meaning that they are contextual to a subject. This does not mean they are not real.

                Pain is subjective. It is also real.Report

              • Avatar Shazbot5 in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Another long and useless red herring from Jaybird.

                I take it that this is a long, roundabout, somewhat creepily obsessed with oral sex, way of Jaybird accepting that the libertarian normative claim I stated is objectively true and not just a mere opinion. Huzzah!

                So what now?

                Should I point out that we might need to accept other principles of justice, say, that government should act so as to ensure a minimum of equality of opportunity?

                What are you even arguing about and how does it have anything to do with my question for Brandon?Report

              • It’s just, like, your opinion, man.

                You’re almost there. Now understand how someone might say this to you when you tell them that they cannot marry someone who is not their skin color because God put people on different continents for a reason.

                Once you realize that someone has *EVERY* right to say this to you even though you have talked to God and everything first… then you might see that Libertarianism can be seen as pointing out that the burden of proof lies not with the person who is being told what to do but with the person doing the telling.

                I’m down with listening to your explanation about how, seriously, we, as a society, have a compelling interest in my dong and its whereabouts.

                But the argument that, no, it’s up to *ME* to explain to you, as a society, that you do not have a compelling interest in my dong and its whereabouts? That ain’t gonna fly. You’re going to have to resort to threats of violence to get me to do that.Report

              • Avatar The Cardiff Kook in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                LWA,

                I agree completely with you that there are things that we value other than market efficiency, and that these things are REAL! I agree that most of the value, though not all, of liberty is as a means to an end.

                “When I read things by libertarians, it does seem as though individual liberty and market efficiency are somehow self-evidently good things, regardless of the outcome.”

                I think you went a wee bit too far for me here. I would say they are great rules of thumb that can be overriden with strong burden of proof. Kind of like not farting in church.Report

              • Avatar Stillwater in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Rather, you will say that you and liberals have different preferences,

                Yeah, this.Report

              • Avatar Stillwater in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Jaybird, I just want to mention that the example you gave is one where libertarians and liberals broadly agree. There are others. Ones which libertarians and liberals actually disagree about.Report

              • Ones which libertarians and liberals actually disagree about.

                Sure. I’d say that the burden of proof that I have to do anything (let’s go back to X!) lies on the person telling me that I have to do X.

                This isn’t to say that I *DON’T* have to do X. Maybe I do! Let’s hash that out! But if I don’t see where I get off telling you to do X? I don’t see where you get off telling me to do X.

                You’re going to have to explain it.

                Or, I suppose, resort to threats of violence.Report

              • Avatar Rod Engelsman in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                For example, someone may advocate draconian taxes on the rich. This is a perfectly valid policy preference if you really want to reduce the capital stock and slow growth, not so much otherwise.

                Ummm… no. Or at least there’s no evidence to support that theory. From the Congressional Research Service report that was suppressed by Republican Senators:

                Advocates of lower tax rates argue that reduced rates would increase economic growth, increase saving and investment, and boost productivity (increase the economic pie).

                […]

                Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the
                1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relation
                ship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 1.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.

                Report

              • Avatar Brandon Berg in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Rod:
                For all the variation in marginal rates, federal revenues as a percentage of GDP have actually stayed within a pretty narrow range. Also, total government spending (federal + state + local) has been going up for a long time, so it’s not surprising that there’s been a corresponding secular decline in growth rates. Rates matter, but probably not as much as the total amount of money the government diverts to consumption. And low taxes don’t do much good when the government is just borrowing all the excess capital to fund excessive spending.

                There are also many other factors that affect savings and growth, such as foreign investment, demographics, regulations, inflation (which acts as a stealth tax on investment income), Fed activity, and technological innovation. With all those confounders and so few data points, I’m not sure how valid this analysis is.Report

              • Avatar Rod Engelsman in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Brandon,

                I’m sure I could poke holes and raise questions about your data and your analysis as well. Of course that would mean you would actually have to present some… you know, data and analysis.

                Sorry, your fact-free assertions simply don’t carry the epistemic weight to counter actual statistical research spanning 60 years of economic activity.Report

              • Avatar The Cardiff Kook (Roger) in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                Rod,

                There is a big difference between top tax rates and effective tax rates. Here is the actual data on effective tax rates for the wealthy….

                http://www.baldingsworld.com/2012/11/30/the-obsession-with-nominal-tax-rates-or-the-twinkie-romanticism/Report

              • Avatar Rod Engelsman in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                So now marginal analysis is declasse as well?

                Oh, well. Anything to move the propaganda along…Report

      • Avatar James K in reply to Rod Engelsman
        Ignored
        says:

        If markets were merely as complex as the human body, I’d wouldn’t be as reluctant. Plus it’s much easier to obtain data on biological reactions than economic ones. There’s no such thing as a clinical trial for economic policies.

        Also, bear in mind that I’m not talking about the whole of economics, but rather the price mechanism. That is the key moving part of the market, and since its function is to transfer and aggregate information, knowing enough to be able to replicate it’s function is very difficult. I’m familiar with the techniques used to estimate prices without markets (called Shadow Pricing). They’re not very good, and take a lot of work to use. I’m not aware of any attempt being made to do this for CEO pay, so what we’re talking about here is drugs that haven’t even been tested properly for a disease we don’t even know exists.

        So, to sum up, there are reasonable ways to intervene in an economy, but they involve working with the price mechanism, not against it.Report

        • Avatar Rod Engelsman in reply to James K
          Ignored
          says:

          So, to sum up, there are reasonable ways to intervene in an economy, but they involve working with the price mechanism, not against it.

          As a general rule, I agree with working with the means of market forces rather than trying to regulate against them to achieve social policy goals.

          I’m just not willing to totally remove, as a matter of principle, the levers of price controls from the potential suite of tools available.Report

          • Avatar Jaybird in reply to Rod Engelsman
            Ignored
            says:

            I’d like to see a system where something like the following is done.

            Someone in charge of saying such things will say “We have measured the following data points using the following methodologies and have come to the conclusion that the numbers say X, Y, and Zed. You can check our work at the following website. We submit that the following changes to the system, P and Q, will result in Xsub1, Ysub1, and Zsub1 by the following date. Since those subs are preferable, we agree that P and Q should sunset immediately if those subs are not achieved.”

            Then we make the changes.

            Then, when the date hits, we can compare X, Y, and Zed to their subs.

            Then we can sunset P and Q if it comes to that. Or say “holy cow! P and Q are awesome and we need more of them!”Report

            • Avatar Rod Engelsman in reply to Jaybird
              Ignored
              says:

              Dude, I am so totally onboard with that, since objective evidence generally supports liberal policies.Report

              • Avatar James Hanley in reply to Rod Engelsman
                Ignored
                says:

                objective evidence generally supports liberal policies.

                If you cherry pick those particular bits of data the conservatives find it convenient to ignore.Report

              • Avatar Shazbot5 in reply to James Hanley
                Ignored
                says:

                I think he means liberal policies (socialized health care, stronger gun safety and gun control, unionized public education that spends on the poor, treating drugs as a health problem not a crime, anti-pollution regulations, small bore regulations to increase safety like seatbelt, worker safety, gun control, etc.) in places like Sweden, Finland, Canada, etc. have given evidence that certain liberal policies work well.

                Things like weakening teachers unions, voucherizing education, making healthcare efficient without large-scale market interference by the state, creating equality of opportunity without massive educational subsidies to the poor to level the playing field, and lots of other libertarian and conservative leaning proposed solutions have never been proven to work on a large scale to solve our most pressing current problems: especially healthcare costs, inequality of opportunity, education, gun deaths, externalities associated with carbon pollution, etc.

                Also, at this point the evidence is all in favor of liberal leaning Keynsian economic stimulus being the right response, instead of the libertarian-freindly, Austrian, austerity which is just failing empirically.

                We can debate all of this, and I am sure you would,mbut I think that is what Is being referred to.Report

              • Avatar The Cardiff Kook in reply to Shazbot5
                Ignored
                says:

                Shazbot,

                Maybe our definitions of objective evidence are different. I don’t disagree with all your recommendations, but where I do I see a vacuum of empirical support coated with wishful thinking…

                socialized health care — yeah, the greatest failure of the 20th century amounts to strong empirical proof.  I think it would be impossible to lay out a weaker case than this.

                unionized public education —  OK I was wrong, this is an even weaker argument.  The last thirty years has seen a massive increase in spending at no increase in outcome as administrators and bureaucratic personnel have Increased over 700% while students have only increased by 96%. I read somewhere that there are 200 times more administrators at NY city public run schools compared to The catholic run schools, despite having just 4 times as many students.  

                Against voucherized education — I’ve repeatedly provided empirical data that market based education ( like that in some Nordic countries) vastly outperforms government monopoly education on every dimension.  Nobody has disputed the study. 

                Keynesian economics — I’d love to see the argument here.  Even Sweden abandoned this model.Report

              • Avatar Rod Engelsman in reply to The Cardiff Kook
                Ignored
                says:

                socialized health care — yeah, the greatest failure of the 20th century

                So the countries (developed first-world) that have socialized and universal healthcare of some sort (various models — experimentation! Yay!) all achieve better health outcomes virtually across the board for much less money. How is that not considered a success; much less “the greatest failure of the 20th century”? Sheesh… I’d hate to see what you consider a success.

                … voucherized education…

                The issue of education has a lot more moving parts than just schools, students, teachers, unions, and money. I’m convinced from reading and observations that the largest determinant of success or failure is likely that barely definable something called, “culture.”

                Take a for instance: I live in a small, rural town in western Kansas. We have a public school system that is effectively a monopoly. There are no private or religious schools–at least that I’m aware of, and I’m pretty sure I’d know about it–and school choice involves driving your kids out to a bus stop a few miles outside of town if you want to send them to a neighboring public school district instead. Unions? I’m not totally sure, but I don’t believe so. Kansas is a “No Rights for Workers” state after all.

                We have a graduation rate of something like 97%, over 80% go to college, and our students score very well on the national exams. Sounds pretty successful to me, yet according to your theory it should simply be impossible.

                Keynesian economics

                Ask Europe how that austerity economics is working out. (Hint: GB is heading into a double dipper on the old recession thingy.)Report

              • Nob Akimoto Nob Akimoto in reply to The Cardiff Kook
                Ignored
                says:

                Keynesian economics — I’d love to see the argument here. Even Sweden abandoned this model.

                I have to admit I’m baffled by this contention. What the heck do you even mean by “model”? Fiscal stimulus as a model to stimulate demand during downturns is still (and will remain for the foreseeable future) the way to handle counter-cyclical policy.

                But if you want an empirical analysis:
                http://www.lerner.udel.edu/sites/default/files/imce/economics/WorkingPapers/2011/UDWP2011-11.pdf

                Here you go.Report

              • Avatar Christopher Carr in reply to The Cardiff Kook
                Ignored
                says:

                I agree with Rod here. By self-report of beneficiaries and overall public health metrics, the countries with socialized health care have us beat.

                Education is a different animals, and it can be argued that our skiers in education are institutional failures.

                As far as Keynesian economics goes, it is almost beyond argument that Keynesian stimulus almost always achieved its goals of economic stimulus. The real problem is not that Keynesian policies fail to stimulate lagging economies: the real problem is that the corresponding reduction in spending during boom times that is supposed to happen never does. Plus, the way Keynesian policies are often implemented tends to reinforce the existing power structures that caused need for stimulus to begin with, thereby assuring that the underlying structural problem is not corrected. In a best saw scenario, Keynesian policies interfere with price signaling and cause the modal location of resources. Whether or not this is worth stimulus is something that should be more carefully considered than de facto it is. Keynes should not be used to justify crony capitalism.Report

              • Avatar Christopher Carr in reply to The Cardiff Kook
                Ignored
                says:

                Goddam iPhone.Report

              • Avatar Rod Engelsman in reply to The Cardiff Kook
                Ignored
                says:

                I agree with Rod here. By self-report of beneficiaries and overall public health metrics, the countries with socialized health care have us beat.

                Education is a different animals, and it can be argued that our skiers in education are institutional failures.

                Huh? I don’t remember much about how we did in the last winter Olympics…

                Goddam iPhone.

                Ya think? LOL Care to try again?

                As to the Keynesian stimulus model… I can’t disagree. I think it works but it’s just never really followed in it’s entirety. The best Keynesian stimulus programs are the automatic ones like unemployment insurance where the spending goes up in a recession without legislative action and the money goes where it’s needed most. And when the economy recovers and unemployment eases off the expenditures automatically retreat.

                It’s an implementation problem more than anything else and it may simply be politically impossible to do right.Report

              • Avatar Rod Engelsman in reply to The Cardiff Kook
                Ignored
                says:

                Against voucherized education — I’ve repeatedly provided empirical data that market based education ( like that in some Nordic countries) vastly outperforms government monopoly education on every dimension. Nobody has disputed the study.

                ORLY? Vouchers in Sweden: Scores Fall, Inequality Grows

                In 1992 Sweden adopted a voucher-type plan in which municipalities would provide the same funding per pupil to either public schools or independent (private) schools. There were few restrictions for independent schools, and religious or for-profit schools were eligible to participate. In 1994, choice was also extended to that of public schools where parents could choose either a public or private school. In the early years, only about 2 percent of students chose independent schools. However, since the opening of this century, independent school enrollments have expanded considerably. By 2011-12 almost a quarter of elementary and secondary students were in independent schools. Half of all students in the upper secondary schools in Stockholm were attending private schools at public expense.

                So far, so good, eh?

                On December 3, 2012, Forbes Magazine recommended for the U.S. that: “…we can learn something about when choice works by looking at Sweden’s move to vouchers.”

                Okay. Let’s do that…

                On March 11 and 12, 2013, the Royal Swedish Academy of Sciences did just that by convening a two day conference to learn what vouchers had accomplished in the last two decades. Interest in the subject had been piqued by several developments including the dramatic growth in private school enrollments and a fairly precipitous decline in Swedish performance on international tests. Results in reading, science, and mathematics had fallen at all grade levels from 1995 to the present in the international studies.[Emphasis mine.]

                Whoops….

                In addition there was evidence of increased stratification and segregation of students by socio-economic status and ethnicity over the same period. Finally, there were concerns about the reportedly substantial profits being amassed by the independent schools from public funds.

                And there you have it. The real reason so many Lib/Con types love this stuff. Money, money, money; profit, profit, profit.Report

              • Avatar James K in reply to Rod Engelsman
                Ignored
                says:

                I’m all for empiricism, but I find in practice it tends to leave the politically partisan disappointed, regardless of ideology. Just because the Republicans have gone off the deep end doesn’t mean the Democrats are good in any non-relative sense.Report

              • Avatar The Cardiff Kook (Roger) in reply to Rod Engelsman
                Ignored
                says:

                I strongly agree with Jaybird’s sunset provisions.

                As for Rod. Could you supply some meat on those bones please? Some of that much heralded empirical support?

                Please give me a list of issues where progressive liberals disagree with classical/libertarian liberals that you believe the empirical data supports the progressive liberal side. I am interested so that I can convert to the empirically supported position.Report

              • Avatar Kim in reply to The Cardiff Kook (Roger)
                Ignored
                says:

                That setting the minimum wage to cost-of-living isn’t going to cause more unemployment.

                Cited papers over on Tim’s blog.

                (which is not to say that /intelligent/ libertarians aren’t going to say “of course the liberal is right” — just that everyone around here has been repeating doctrine when the facts don’t support it.)Report

            • Avatar Kazzy in reply to Jaybird
              Ignored
              says:

              JB,

              Isn’t that a bit too black and white? Suppose P and Q fall short of achieving Xsub1, Ysub1, and Zsub1 by 1%? And given a minor tweak, they would meet the standard. Does it seem logical to completely abandon P and Q? Or should we make that tweak?

              Of course, if you consider “making the tweak” the same as “abandoning P and Q and adopting R and S which are nearly identical to P and Q” then I suppose this objection is moot.Report

              • Avatar Jaybird in reply to Kazzy
                Ignored
                says:

                I imagine it’d be a good result overall.

                It’d cut down on promises such as “if we enact this policy, we will save billions, save the lives of millions, and Michael Jackson will release a new album!”

                I mean, shit. I’d pass any policy that saved me billions, saved the lives of millions, and gave me a new Michael Jackson album.

                The problem is that when a policy does *NOT*, in fact, save me billions, save the lives of millions, nor release new Michael Jackson albums, we’re still stuck with them.

                As if they were Daylight Saving Time.

                We might actually have debates like “this policy will move unemployment from 8.2 to a much more manageable 7.9, cost the budget a mere half a billion, and Nickleback won’t release any albums that aren’t related to a Spiderman movie.”

                The people who want to keep the policy will have a reason to be honest. The people who want to oppose the policy will have a mechanism to remove it if it doesn’t deliver. And we won’t hear promises about how little something will cost and how much money how many lives it will save unless the policies will, in fact, save money or lives… which will allow everybody to say something like “it’s too costly to do this, let’s stop” or “what a bargain! Let’s double down!”Report

              • Avatar Kazzy in reply to Jaybird
                Ignored
                says:

                Oh, yes indeedy… I am in full agreement of the broader method you suggest… I would just want to leave room to give conditional partial credit.

                Far too often legislation is enacted and supported via some very strange specious reasoning… Instead of pointing to the lack of tigers as evidence that the magic rock is working, they point to the increase of tigers as evidence that more magic rocks are needed. Bleh.

                However, I would welcome a new Nickleback album.Report

              • Avatar James Hanley in reply to Kazzy
                Ignored
                says:

                Dude, we’re going to have to have a sit down and talk about your musical tastes someday.Report

  10. Avatar Kazzy
    Ignored
    says:

    “But what if that company is one of those we will be required to purchase health insurance from? Or what if that company is one that has or continues to directly benefit from government subsidies, such as big banks or agribusiness or defense contractors? What about companies that benefit indirectly from government policies such as sugar tariffs or companies within formerly government-controlled industries that have been privatized?”

    I would say yes IFF this is a precondition of the company receiving aid and one to which they agree. Otherwise, I struggle to find a means by which we can justify a maximum wage. And I struggle with a minimum wage, as well. However, I’m open to conversations on either matter. FWIW, I identify as liberal with some libertarian leanings.Report

  11. Avatar Brandon Berg
    Ignored
    says:

    Fun fact: CEO pay is roughly on par with professional athlete pay.

    I’m curious as to what they mean by “CEO pay” in the chart above. The table to which I’ve linked is a later version of the one referenced in the footnote of the chart, so maybe they mean average (mean? median?) of the biggest 350 publicly traded companies by revenue?Report

    • Avatar Rod Engelsman in reply to Brandon Berg
      Ignored
      says:

      Fun fact: CEO pay is roughly on par with professional athlete pay.

      Over a lifetime? The careers of most pro athletes are maybe five to fifteen years, depending on the sport. You’re an old man at 35. In the business world you’re just getting started. A few manage to parlay that initial flash-in-the-pan into some kind of sustainable career, but most just sort of disappear into the woodwork.

      But that’s not the biggest issue, really. In the case of athletes, if you don’t perform you don’t get paid the big bucks. At least not in the next round of salary negotiations. Similarly for entertainers; musicians have to sell records, actors have to perform in films that draw folks to the box-office. There’s a fairly direct link between pay and performance. With our current system of royalties and copyrights, creative artists can, to an extent, coast on the strength of past performance, but that star fades over time.

      In the corporate suites, on the other hand, that link between pay and performance seems more… random. Not totally, of course. But screw up a company bad enough and they activate that golden parachute clause, pay you a few million to go away, and after a grueling vacation in Europe you land somewhere else to do it again.

      You see, athletes, actors, musicians… they’re all being paid by someone else. Either by the owners of sports teams, directors of movies, or directly by fans purchasing their output. For the suits, that’s nominally the case as well, but who’s sitting on that compensation committee? Friends you play golf with? And then there’s the inter-locking Boards, with the CEO of ABC sitting on the Boards for DEF and GHI, whose CEOs in turn sit on your Board. It’s this incredibly incestuous, wink-wink, nudge-nudge, good-buddy-old-pal universe.

      In the sixties, the average American CEO got something something like 30 or 60 times the compensation of the lowest paid employee. Now that ratio is in the hundreds. Are they really that much better performing than they used to be? Really? And my understanding is that CEO pay in most of Asia and Europe is still around the ratios that we used to see here 50 years ago as well. Are American suits really ten or fifty times as effective as all those guys? Say what you will about foreign governments, there’s scant reason to suppose that to be the case.Report

      • Avatar North in reply to Rod Engelsman
        Ignored
        says:

        It is also worth noting that professional athletes, especially in Football, are nearly destroying their bodies during their short careers. In this situation high pay is pretty important; they essentially need to be able to realistically live off it for the rest of their lives.Report

        • Avatar The Cardiff Kook (Roger) in reply to North
          Ignored
          says:

          My experience is that the winner take all nature of the corporate ladder is even more personally destructive, just in a different way.Report

        • Avatar Brandon Berg in reply to North
          Ignored
          says:

          Actors, then. Compensation of top-paid actors looks a lot like compensation of top-paid CEOs.Report

          • Avatar Christopher Carr in reply to Brandon Berg
            Ignored
            says:

            But Will Smith is much more likable than Lloyd Blankfein. Haven’t you seen “Pursuit of Happiness”?Report

          • Avatar Troublesome Frog in reply to Brandon Berg
            Ignored
            says:

            I don’t think that entertainers in general are overpaid. Their job is to put butts in chairs / sell albums / sell movie tickets. That’s a pretty easy variable to measure, so it’s easier to estimate what an entertainer is “worth.” And as soon as you stop putting butts in chairs, the money dries up. Evaluating a CEO requires more variables and the signal to noise ratio is really bad.

            The real question is whether high CEO pay correlates well with future CEO performance. I know that the research has been done with athletes and actors, but I’m blanking on the references right now. The short story is that actor pay and athlete pay pretty well predicts their ability to put butts in chairs in the near future. Athlete pay corresponds relatively poorly to medium/long term future performance and very strongly to past performance. I suspect that this is also true of CEOs due to the hefty luck factor.

            By “luck” I mean that it’s very hard for good leadership alone to consistently produce outsized returns. It’s easy for bad leadership to tank a company, so that’s a good reason to pay for the cream of the crop if you can, but I doubt that the best way to find that cream is by seeking out CEOs who have produced unusually good results in the past. CEOs who look like geniuses probably aren’t.

            Then again, a coworker of mine once recommended that we randomly shred 25% of the resumes we get without reading them. Those are people with bad luck, so you wouldn’t want to hire them. Pure poison, they are.Report

      • Avatar Brandon Berg in reply to Rod Engelsman
        Ignored
        says:

        Over a lifetime?

        I’m not sure, but I wouldn’t be surprised. Most of the highest-paid CEOs don’t spend their whole adult lives in that position, either. It takes a long time to get a job like that. Athletes, on the other hand, front-load their prime earning years. It’s much better to make $20M a year from 20-30 then it is to make it from 50-60, because the former allows you to take advantage of an extra 30 years of compounding.

        In the corporate suites, on the other hand, that link between pay and performance seems more… random.

        Rather, the link between pay and outcomes. The problem is that the link between performance and outcomes is random as well. The issue here is less corruption than the fact that it’s really hard to judge executive performance. You can set objective criteria (legally, you have to in order to avoid double-taxation of compensation), but meeting them is dependent on many external factors that the executive can’t do anything about.

        In the sixties, the average American CEO got something something like 30 or 60 times the compensation of the lowest paid employee. Now that ratio is in the hundreds. Are they really that much better performing than they used to be?

        There are a couple of factors here. One is that markets have expanded, and corporations have done so correspondingly. Consequently, CEOs are more important than they used to be. It makes sense to pay more for the CEO of a $100B company than for the CEO of a $50B company. Adjusted for inflation, earnings of S&P 500 companies more than doubled between 1970 and 2000. Furthermore, there are more large corporations, and thus more demand for CEOs.

        Aother factor is that tax policy was set by a bunch of morons in the 60s and 70s, and marginal tax rates were insanely high. It made sense back then to pay executives in non-taxable perks rather than in cash, which was subject to draconian taxation.Report

        • Avatar Patrick Cahalan in reply to Brandon Berg
          Ignored
          says:

          My recollection is that professional athletes, as a class, are worse than the average public when it comes to investing, and there are very high rates of destitution among former professional athletes.

          This is not my recollection about CEOs, in spite of the actuarial advantage the athletes hold, as a group.Report

          • Avatar Brandon Berg in reply to Patrick Cahalan
            Ignored
            says:

            This is arguably an argument for why athlete pay should be a bigger political issue than CEO pay. CEOs are at least investing their money and doing some social good that way. Athletes are just wasting it. Assuming that your recollection is correct, of course. Which wouldn’t surprise me.Report

  12. Avatar Sam Pizzigati
    Ignored
    says:

    Is there any way to justify a “maximum wage”? Serious thinkers have been contemplating this question for some time. In relatively modern times, that effort began with Felix Adler, the Columbia University philosopher who founded the ethical culture movement over a century ago.

    The exploitation of workers, Adler believed, generated private fortunes that exerted a “corrupting influence” on democratic politics. To curb this, he proposed in 1880 a steeply graduated income tax — with a 100 percent top rate at the point “when a certain high and abundant sum has been reached, amply sufficient for all the comforts and true refinements of life.” 

    The New York Times gave Adler’s call ample publicity, but his notion didn’t take a specific legislative form until the first world war, when progressives demanded a 100 percent tax on all income over $100,000 to help finance the war effort. FDR would make a similar pitch for a 100 percent top marginal rate in 1942.

    In our own day, the UK political theorist, Maureen Ramsay at the University of Leeds, has done the deepest thinking on the philosophical basis for capping income. In a 2005 Contemporary Politics journal piece, she explores the world of CEO compensation to make the case for “for a maximum wage as a multiple of the minimum wage.”

    (If you have research library online access, you can find that article here:
    http://www.tandfonline.com/doi/abs/10.1080/13569770500415173)

    For folks interested in keeping tabs on maximum wage-related developments, the Institute for Policy Studies weekly I work on, Too Much, may be of interest. More here: http://toomuchonline.org/tmweekly.htmlReport

    • Avatar The Cardiff Kook (Roger) in reply to Sam Pizzigati
      Ignored
      says:

      Hi Sam,

      It requires authorization to read. Could you summarize her arguments or give us a snippet? Or is it the same as Adler’s, namely that wealth can be used to corrupt democracy and is thus best institutionally eliminated?

      Do you agree with Adler? Do you think the world would be a better place if we had followed his advice when income levels were about a tenth of what they are now and lifespans about half?Report

      • Ramsay’s wide-ranging piece covers a great deal of ground. Here’s a snippet where she discusses the Tony Blair government position that we need concern ourselves only with wealth’s absence, not concentration: “In any case, if the government believes that unlimited high pay is justified because people deserve to be rewarded for their ability, then its position is inconsistent. It recognizes that those who lack the ability to compete through no fault of their own do not deserve their disadvantage—hence the various welfare measures and the minimum wage to ensure that they do not fall as far as they would otherwise fall. To be consistent, however, the government should also recognize that some people owe their earning power to brute good luck or to contingencies for
        which they are not responsible. Just as some people do not deserve their poverty, some people may not deserve their wealth.”

        And, yes, I do agree with Adler and spell out why in a 2004 book I did. This book, unlike Ramsay’s fine piece, is now available freely online: http://www.greedandgood.org/Report

        • Avatar The Cardiff Kook (Roger) in reply to Sam Pizzigati
          Ignored
          says:

          Thanks Sam,

          My initial push back is that I would not frame market outcomes in terms of deserts, though I am aware others may.

          Profits, prices and wages reflect consumer feedback. When you forcefully modify them, you are effectively suppressing the feedback mechanism and you will achieve a less efficient ordering of economic goods. We will be less prosperous by doing so. The above discussion with Rod hits the great point that there can be other than efficiency arguments, but any effort to restrict pricing or wage freedom has to offset this headwind.

          In my terms, free market interactions reflect win/win positive sum interactions between the participants. Thus to the extent that you discourage extreme profits and wages you are effectively putting a limiting barrier in the way of these positive sum interactions. You will get less of them. This is, in general, a foolish thing to do. It harms both participants in the vain attempt to suppress wealth. It also shifts the power currency from wealth to other types of influence, most of which are more negative sum. Thus it reduces prosperity and converts power to MORE destructive and less constructive forms.

          My guess is you disagree.Report

  13. Avatar KatherineMW
    Ignored
    says:

    Why go about it this way? Wouldn’t it work just as well (and bring in more revenue) to just say that income over, say, $10 million is taxed at 90%? If one would drive businesses or their money out of the country, so would the other.

    Morally, I have no objections.Report

    • Avatar Christopher Carr in reply to KatherineMW
      Ignored
      says:

      I think my general problem with high marginal tax rates on income is that it tends to paralyze class mobility – albeit at the very highest end of the economic spectrum – by ensuring that those who already have outsized wealth will face little competition from those whose riches derive from income.

      A better way to redistribute more, if more redistribution is your goal, is to end regressive taxation while gradually shifting sources of revenue to something more like a VAT. Or leasing the commons instead of just passively observing its destruction.Report

      • Avatar KatherineMW in reply to Christopher Carr
        Ignored
        says:

        Mobility between the 0.001% and the 0.0001% isn’t really at the top of my priority list. In general sales taxes and VATs tend to be more regressive than income ones, unless you build in some major redistributive qualities in the way of tax receipts – lower-income people spend a higher proportion of their money than higher-income people, because they’ve got less to spend. If we moved the tax system from primarily-income to primarily-VAT, it would take some major work to prevent the resulting system from being deeply regressive, and I don’t trust the political system to put in that kind of work.

        Incidentally, when I say “income” I’m including capital gains in that – I think privileging income gained by investment over income gained by labour is ridiculous and immoral – so I think it would catch most of the wealthy reasonably well.Report

      • Avatar BlaiseP in reply to Christopher Carr
        Ignored
        says:

        The simplest redistribution possible is better pay for ground-level workers. Every time you give a fistful of dollars to gummint just so you can give them to someone else, it’s inefficient. Money just sticks to these Gummint Schemes, money better spent by ordinary people.Report

        • Avatar Michael Drew in reply to BlaiseP
          Ignored
          says:

          So the question is how? How?!

          (Ignore the title of that tumblr entry; just look at the gif.)Report

          • Avatar BlaiseP in reply to Michael Drew
            Ignored
            says:

            Well, Michael, it’s pretty straightforward. You pay workers a more substantial fraction of the profits.

            Tell you how this works. I started a restaurant, built it from scratch and ran it for many years. Family business. Lots of squabbles about money, who would get hired, etc. So I ran an open book operation and everyone could look at the books.

            I started by paying roughly double what anyone else in town was offering. It’s a tourist town, I wanted the best. Always compete on quality when you don’t know what you’re up against. I got a really good chef and a good maître d’ . And a good accountant. Turned most of it over to my sister in law, let her deal with the family. Many of those people are still there, 25 years later. The place makes money, enough to keep everyone very well paid and in good stock. It’s a bakery in the morning, a chalkboard menu at lunch and a jazz joint at night. Three entire sets of staff. Nobody steals. They work out their own wages with the family, hell, at this point, some of these people might as well be family.

            You always get better results when you pay people better. You can hoist up some HOW!? gif, Michael, the big question is WHY NOT!? Cheating workers, paying shit wages, it’s just bullshit. You’ll never get ahead that way. Ford paid his workers well, he did just fine.Report

            • Avatar Jaybird in reply to BlaiseP
              Ignored
              says:

              That works really well for the first company, relatively well for the second, and not well at all for the seventh. They might say something like “well, we can compete on price and since we’re hiring people who can’t be hired at one thru six, maybe we can compete on hours of operation.”Report

              • Avatar BlaiseP in reply to Jaybird
                Ignored
                says:

                This flies in the face of reason. If we paid the lower income strata better, more money would move through the system instead of ending up frozen in the glaciers of capital.Report

              • Avatar Jaybird in reply to BlaiseP
                Ignored
                says:

                I look back at the outsourcing bubble of the late 90’s and see a whole bunch of stuff: Singapore becoming a major tech power player and then, as the dollar weakened, we had to bus people in from Malaysia to do the jobs for wages that Singaporeans wouldn’t work for.

                The cream of the crop rose to the top and wouldn’t work for our wages. Heck, the milk of the crop wouldn’t work for them. We bussed people in from out of country… of course, after enough capital moved through the system to get the Singaporeans to be able to say stuff like “nah, I’m not going to work for those wages”.Report

              • Avatar BlaiseP in reply to Jaybird
                Ignored
                says:

                That’s irrelevant. Singapore’s economy was engineered with the long term benefit of its citizens in mind. That’s why it’s wealthy. It’s an expensive place to live. Took a ruthless autocrat to manage this stunt but he also engineered himself out of a job in the process, as he had engineered prosperity and education and investment into his country.

                Can’t you see the problem inherent in the buses? It would have taken no more trouble to move the factories to the workers than the workers to the factories. The resulting rise in incomes would have washed like a tsunami across the world.Report

              • Avatar Jaybird in reply to BlaiseP
                Ignored
                says:

                When the factories were built, the American Dollar was *STRONG*. There was an absolutely obscene exchange rate between the US and Singapore. Even as I watched the jobs in my department being outsourced over there, I couldn’t help but think that I understood why the company was doing what it was doing. Get support that was half as good for one tenth the price, right?

                The problem is that the cream of the crop were able to bid themselves up and when we wouldn’t pay what they were asking, they up and left. So we were stuck with the folks who were either not as good or just as good but insecure about it.

                And I suspect that that dynamic would be true any and everywhere.

                The first company to offer better wages in order to get the best people will MAKE A MINT… but by the time you’ve got healthy competition (a marketplace!), the dynamics will change.Report

              • Avatar BlaiseP in reply to BlaiseP
                Ignored
                says:

                You weren’t stuck with anyone. Your business model sucked. You weren’t able to charge enough to justify their price tag. That’s your problem.Report

              • Avatar Murali in reply to BlaiseP
                Ignored
                says:

                LKY didn’t exactly engineer himself out of a job, if he had eternal youth, he would be either PM, SM or MM forever or at least try to be. Until recently, when his health and energy have begun to flag has he fully or almost fully retired from politics.Report

              • Avatar BlaiseP in reply to BlaiseP
                Ignored
                says:

                That’s true. Yet LKY did have the good sense to get out of the way before he became a doddering old fool. For all his paternalism, I never got the sense he was a despot. His fights with the press were hilarious, seen from the outside.Report

            • Avatar Michael Drew in reply to BlaiseP
              Ignored
              says:

              Just to be clear, I was going for a little humor there, and hoped that you would take the link as and indication that I wasn’t challenging your point straight-up. The point I did want to raise, though, was not how this can work at the individual firm level – that much is clear to me. The issue is how to make it a widespread practice – to get lots and lots and lots and most businesses to adopt a higher-wage strategy. I’m clear enough that many do, and how it’s done, and I’m happy for that much.

              So you are precisely right – the question is exactly WHY NOT?, everywhere where not. You’re just flat-out right.Report

              • Avatar BlaiseP in reply to Michael Drew
                Ignored
                says:

                Oh (hands up) very well then. My sarcasm detector has a dB attenuation fader inline, currently pushed nearly to its limit, what with some folks around here just tap-dancing on my last little patient nerve.

                While workers and owners are forever at each others’ throats, viewing each other as enemies, we’re still stuck in Gilded Age thinking. In those days, workers were little more valuable than the machines they tended. And nobody had worked out how to make such enterprises work. Technology had outrun society’s ability to cope effectively.

                Both labour and management had resorted to violence. The rise of the trade unions in the USA reflects this warping of society: if the unions were forever at odds with management, no progress could be made. The old guild model had lapsed, the owners not merely owned their factories, they owned the government for all practical purposes.

                But such was not always the case. Skilled labour had always seen fit to coordinate with management. Those professions did well enough, while their skills were needed. Some professions bonded together, others played beggar-thy-neighbour. But once the problem had reached a certain size, when finance itself became a bigger player than the industries they financed, the proles came into orbit around the moneyed class and have been crushed down ever since.Report

              • Avatar Brandon Berg in reply to Michael Drew
                Ignored
                says:

                The high-wage model relies on cream-skimming. Doubling the wages of low-productivity workers doesn’t double their productivity; it just allows you to dump them and hire higher-productivity workers. But there’s only so much cream to skim. This isn’t something that can be replicated generally. The general wage level can be raised, but only through increasing the demand for labor.Report

      • Avatar Rod Engelsman in reply to Christopher Carr
        Ignored
        says:

        A better way to redistribute more, if more redistribution is your goal, is to end regressive taxation while gradually shifting sources of revenue to something more like a VAT. Or leasing the commons instead of just passively observing its destruction.

        A VAT is just a fancy, complicated sales tax, which is regressive as hell. (And not particularly popular among conservatives and libertarians where it’s been enacted, AFAICT.)

        But you’re on to something there with your second sentence. Whether you intend to or not, you’re gesturing towards Georgist taxation.Report

        • Avatar North in reply to Rod Engelsman
          Ignored
          says:

          Conservatives (and to a lesser degree Libertarians) hate VAT’s because they’re A) very effective at generating revenue for governments and B) relatively opaque to the tax payers.

          Conservatives especially prefer their taxes to be highly visible and highly galling to the tax payer.

          You’re correct, however, that VAT’s are extremely regressive.Report

        • Avatar Christopher Carr in reply to Rod Engelsman
          Ignored
          says:

          A VAT tax is not necessarily “regressive as hell” if you tweak it to be progressive – i.e. lower rates or a zero rate for “necessities” – items lower on Maslow’s pyramid – as I would if I were tax dictator. (This can also be read in response to Katherine’s post above.) What makes a tax regressive or progressive is not only what it taxes, but also (and perhaps more importantly) how it is implemented.

          As for your claim that I am gesturing towards Georgist taxation, I am fairly fond of Georgist tax schemes as I am fond of the physiocrats (I spent a lot of time studying the physiocrats as an undergrad, especially Francois Quesnay) – who antedated George by 150 years or so. I am especially fond of Georgist taxation when it comes to penalties for pollution. In this last area I believe we should be particularly aggressive with taxation.Report

          • Avatar Rod Engelsman in reply to Christopher Carr
            Ignored
            says:

            A VAT tax is not necessarily “regressive as hell” if you tweak it to be progressive – i.e. lower rates or a zero rate for “necessities” – items lower on Maslow’s pyramid – as I would if I were tax dictator.

            But doesn’t the fact that you have to tweak it just prove that the concept is regressive from the start? Does a bad policy become “good” by virtue of being modified to ameliorate the worst aspects? Or is a matter of defining what we mean by the “policy” to being with? Is “the policy” VAT, or is it “VAT with these modifications”?Report

            • Avatar Christopher Carr in reply to Rod Engelsman
              Ignored
              says:

              “But doesn’t the fact that you have to tweak it just prove that the concept is regressive from the start?”

              No it doesn’t. All policy is tweaked, especially tax policy. Look at our tax code now and imagine one that instead of taxing productivity taxes waste or excess.

              “Does a bad policy become “good” by virtue of being modified to ameliorate the worst aspects?”

              It doesn’t necessarily become “good”, but by definition it becomes “better”.

              “Or is a matter of defining what we mean by the “policy” to being with? Is “the policy” VAT, or is it “VAT with these modifications”?”

              You can call it a turkey sandwich if it solves the problems it’s designed to solve. You’ll have to elaborate here in order to convince me that there is anything of significance in this statement.Report

          • Avatar Murali in reply to Christopher Carr
            Ignored
            says:

            The problem with tweaking the VAT is that the question of what is a basic necessity and what is a non-necessity is subjective at some margin and the margin can grow thick fairly quickly. You very quickly get various companies trying to bargain and lobby for their product to be counted as a necessity. It is more efficient to have a flat VAT and just provide a kind of negative income tax to compensate for the regressiveness of the VAT.Report

            • Avatar Murali in reply to Murali
              Ignored
              says:

              To pre empt the response that governments would do the first without doing the latter, singapore, which is very reluctant to call itself a welfare state, does something like that. It issues GST rebates which are adjusted to a person’s income and living conditions (what kinds of house he lives in etc)Report

              • Avatar Rod Engelsman in reply to Murali
                Ignored
                says:

                My home state, Kansas, does much the same thing. There’s a provision in the income tax form that rebates a fixed amount per person for sales taxes paid on food purchases if your income is below a certain amount.

                But to your first point (prior post) the line between necessity and luxury is hard to draw legislatively. The State of Connecticut does, or at least used to when I lived there, exempt clothing items below $50 from sales tax. That works okay for things like shoes, trousers, and shirts. But you can’t tell me that a $49 pair of socks isn’t a luxury, or that a $300 suit for work is.Report

              • Avatar Murali in reply to Rod Engelsman
                Ignored
                says:

                I was thinking more in terms of food. Is this kind of cheese a luxury? Is meat a luxury or a necessity? Which kinds of meats are necessities? Which kinds of rice are necessities? WHat about this super high quality super fragrant basmathi rice? What about that middling quality long grained rice? Or maybe only the housebrands count. What about coffee or chocolate?

                But it extends beyond food. What about cars? In the city a car isn’t much of a necessity. In rural areas in the middle of nowhere the lack of a car pretty much makes life not worth living. One is basically cut off from any reasonably easy access to civilisation without a car.

                What about computer, internet etc. At what point do we say that a computer this fast is not a luxury but a necessity? We can point to that gaming standard set up or the $300 suit as a luxury, but there are lots of in between things which are difficult to assess.

                The rough rule of thumb I’m relying on here is that if it is too difficult for disinterested philosophers to reasonably assess, we have no hope of getting politicians who are subject to pressure by various interest groups to do so.Report

              • Avatar Kimmi in reply to Murali
                Ignored
                says:

                At the point where governmental communications come via computer, a computer is a necessity.Report

              • Avatar Kimmi in reply to Rod Engelsman
                Ignored
                says:

                PA simply exempts food. (which REALLY helps!) (not soda, naturally).
                There are some rules on what clothes get taxed, but it defaults to “taxed” not vice versa.Report

            • Avatar Christopher Carr in reply to Murali
              Ignored
              says:

              That sounds like a great idea.Report

            • Avatar Christopher Carr in reply to Murali
              Ignored
              says:

              Congressional Republicans might even bring their balls back to the playground if there is a negative tax that needs creation.Report

  14. Avatar Brandon Berg
    Ignored
    says:

    I think a lot of people talking about restricting CEO pay (not attributing this view to anyone in particular) have this fantasy that if we restrict CEO pay, the leftover money will go towards increasing the salaries of rank-and-file employees. Of course, shareholders aren’t going to pay workers more just because they can; they’ll pocket the savings as profits.Report

    • Avatar Michael Drew in reply to Brandon Berg
      Ignored
      says:

      Then raise the minimum wage too!Report

    • Avatar Rod Engelsman in reply to Brandon Berg
      Ignored
      says:

      Higher top marginal tax rates are positively correlated with better wages for workers. See the CRS report I linked to above.Report

      • Avatar Brandon Berg in reply to Rod Engelsman
        Ignored
        says:

        Again, the analysis in that report is worthless. We had really high top marginal rates, then lower ones. And we had a period of high real median wage growth followed by a plateau (if you ignore benefits). Which began in the early 70s, several years before the Reagan tax cuts. So basically we have two metrics each with one high period and one low period, and the high period of one kind of overlaps with the low period of the other. To say nothing of state and local taxes, effective tax rates, and total government spending, or the host of other confounders I mentioned above.

        I’m not “poking holes” in this analysis—it’s not substantial enough for that.

        Using the very same logic, we can see that total government spending (federal + state + local) correlates negatively with real median wage growth. Spending was higher post-1973 than pre-1973. Ta-da!Report

  15. Avatar Kolohe
    Ignored
    says:

    “Do we have the right to restrict CEO pay then, just as we can now restrict the salaries of Senators and Representatives and other emissaries of the government?”

    Negotiating the total terms of a contracted deliverable is a different thing than negotiating the employee compensation package of a specific individual (or class of employee). That said, a government can negotiate whatever terms it wants in a contract, but that’s direction the mandate flows – i.e. anybody that wants to bid on a contract has to abide by these terms, but not anyone with a contract already has to abide by these (post-facto) terms. The downsides are, of course, how slippery you want to make the slope (if a government car gasses up somewhere, is that service station franchisee or chain on the hook for anything? and will either the attendant or the govie on travel know?), and the more complex one makes the contract requirements, the more the usual suspects come in with winning bids.Report

  16. Avatar Kolohe
    Ignored
    says:

    “what are some of the ethical differences between installing a minimum wage and installing a maximum wage”

    It’s the difference between giving people SNAP EBT cards and saying (to other people) “you’ve had enough to eat, you fucking fattie”Report

  17. Avatar Brandon Berg
    Ignored
    says:

    Why does this post have so many health care tags?Report

  18. Avatar Michael Drew
    Ignored
    says:

    I think the ethical argument that these are different is fairly clear. That’s not to say it’s undeniably compelling, but I think it’s clear. The problem with low pay is that it eats up the working energies of the poor, making it more difficult for work to lift them out of poverty, and in extreme cases dooming them to extended poverty even through years or a lifetime of toil. The argument that executive pay has gotten too high relates more to being an indicator that there are structural problems with our economy, or more specifically with the business culture that has been adopted. There may be problems caused by high executive pay as well, but I don;t think they represent a problem of direct immiseration they way very low pay does.

    Basically, very low pay makes people miserable, while very high executive pay makes us nervous that there are big problems with corporate structure. I think it’s valid to think only one of those problems present a plausible case for a price floor/ceiling (though I don’t think it’s unavoidable that one has to think that; it’s just ethically plausible).Report

    • Avatar The Cardiff Kook (Roger) in reply to Michael Drew
      Ignored
      says:

      The data reveals that hours worked is negatively correlated with income. The greater problem seems to be not enough hours worked. Not too much. Significant increases in minimum wages will of course lead to less demand and thus exacerbate the problem with insufficient hours worked. Bottom tier households work 13 hours per week vs 74 for the top tier.

      http://www.thefreemanonline.org/features/working-family-gibberish/Report

      • Avatar Michael Drew in reply to The Cardiff Kook (Roger)
        Ignored
        says:

        Lowering the incentive to work by letting the price float freely lower seems likewise unlikely to increase hours worked to me.Report

        • Avatar The Cardiff Kook in reply to Michael Drew
          Ignored
          says:

          Seems to me eliminating the minimum wage would increase the hours worked. A minimum wage only works if it prohibits offering work that would otherwise be accepted below a certain rate. It makes it illegal to hire lower skilled workers at the going rate. This further cuts off the path to further skill development, abandoning them to long term skill and joblessness.

          Another way of looking at it is that it lowers demand for labor by raising the price.Report

          • Avatar Michael Drew in reply to The Cardiff Kook
            Ignored
            says:

            It’s not possible that it redirects some of what would otherwise be profits to workers? I.e., you’re saying that companies simply employ absolutely nobody (for an hour they would otherwise employ them for) at the minimum wage or slightly above that they wouldn’t if there was no minimum wage? I don’t trust axiomatic arguments for that claim. If you can’t show that empirically, my instinct and experience says that the minimum wage causes a lot of employment that would otherwise happen at $3 or $4 or $5 or so to instead happen at $7.25 – but to indeed still happen.

            Beyond that, I question the value of directing people’s efforts toward maximizing the amount of work they do that would pay less than the current minimum wage. I question whether that work develops skills likely to lead people out of poverty. I think the energies of people not employable at $7.25/hr are better directed toward programs designed to develop skills that will do that. We should pay them a basic income that can supplement what work they can find at a minimum wage, and subsidize education and training programs beyond that. Beyond that (i.e. in cases where all that has failed, for which workers would apply to participate), we should have a more comprehensive program of wage subsidies that would fill the difference between what employers are willing to pay and a fair minimum wage than we currently have in the EITC (which we should also expand).Report

          • Avatar Kim in reply to The Cardiff Kook
            Ignored
            says:

            Honestly? Have you ever been served by someone working under the minimum wage?
            I have. I’ve seen these people cleaning shit off a seat — with folks yelling at them to “hurry up.” You see, because of these people, because of that place of business, a man had just broken his back, and had involuntarily soiled himself.

            I have seen one of these monkeys hold up hundreds of paying customers, all for hitting the wrong button. And not get fired for it. (not being paid minimum wage, naturally no unions).Report

            • Avatar Kim in reply to Kim
              Ignored
              says:

              I’ve also seen these people deliberately shaking (literally) customers down for spare change, and grabbing “collectible plastic” cups out of dumpsters for their personal use.Report

      • Avatar Stillwater in reply to The Cardiff Kook (Roger)
        Ignored
        says:

        There is undoubtedly a correlation between pay rate and hours worked (whatever it might be, that’s what it is!), but is there a correlation between pay rate and incentive to work? I hear arguments appealing to this correlation all the time, and it’s used to justify all sorts of preferred or normative or descriptive stuff, all of it a big contradictory mess.

        I’ve heard people say higher pay is an incentive to work more hours (it’s a carrot!) or that it’s an incentive to work less hours (it leads to laziness!). I’ve heard people say that lower pay is an incentive to work more hours (poverty sucks!) or that it’s an incentive to work less hours (there’s no marginal utility gain in the extra time!).

        One way to reconcile all the apparent contradictions is to say there’s an ambiguity in the term “incentive”, one idealized (or model driven) and the other determined by empirical evidence and presumably based on psychological and pragmatic factors. But all too often I hear libertarians talk about tweaking incentives structures to get them *just right*, in order to motivate people to act in ways leading to certain desired outcomes, without getting clear on the actual mechanisms being tweaked. Or the type of incentive being invoked – idealized or actual.Report

        • Avatar The Cardiff Kook in reply to Stillwater
          Ignored
          says:

          “But all too often I hear libertarians talk about tweaking incentives structures to get them *just right*, in order to motivate people to act in ways leading to certain desired outcomes, without getting clear on the actual mechanisms being tweaked. Or the type of incentive being invoked – idealized or actual.”

          Could you provide more details, here?Report

          • Avatar Stillwater in reply to The Cardiff Kook
            Ignored
            says:

            Sure. Right up above you say that lowering the having a minimum wage “lowers demand for labor by raising the price.” That’s a theoretical claim, it seems to me, (one which may be true!), but insofar as it relates to incentives you’re assuming that there is no lowest wage level below which people will as a matter of fact refrain from trading their time and effort for money. That strikes me as descriptively inaccurate.Report

            • Avatar CardiffKook in reply to Stillwater
              Ignored
              says:

              Well , yeah I find it is useful to believe in supply and demand. At least absent extraordinary reasons to the contrary.

              I do believe there is a wage at which nobody will work. The effect of this for employers of course is to encourage higher wages. The system self corrects and absent institutional interference will seek full employment.Report

              • Avatar Michael Drew in reply to CardiffKook
                Ignored
                says:

                The things the markets in which really reliably follow the law of supply and demand tend not to have volition, particularly less-than-perfectly-scrutable volition (like human labor, especially as directed by the seller, which carries with it the need to direct volition to the purpose for which it is sold). Perhaps you don’t see that as an extraordinary enough reason to be openly receptive to evidence that the way the law is followed in those markets significantly departs from how it is followed in markets where that feature is not present, but in my view, extraordinary or not, it ought to be, and if it isn’t it renders your approach, as I would have it, axiomatic, or in Stillwater’s, theoretical, or another word is doctrinaire. All as opposed to empirical.Report

              • Avatar The Cardiff Kook in reply to Michael Drew
                Ignored
                says:

                Yeah, I think supply and demand work fairly well in matters involving volition. I have stated I am open to extraordinary evidence to the contrary, though, so I don’t think I am being doctrinaire. Do you?

                On the other hand, if I concocted some hypothetical exceptions to the slope of supply and demand curves that matched my political views, then I think you should be wary of dogmatism. Can we agree here as well?Report

              • Avatar The Cardiff Kook in reply to The Cardiff Kook
                Ignored
                says:

                I’m becoming Jaybird.Report

              • Avatar Jaybird in reply to The Cardiff Kook
                Ignored
                says:

                Welcome. The cheeseburger bar is yonder.

                Hallucinogen?Report

              • Avatar Michael Drew in reply to The Cardiff Kook
                Ignored
                says:

                I? You? Do you mean me?

                I’m just saying it’s one thing to say you’re open to extraordinary evidence, but being that extraordinary is in the eye of the beholder, that statement doesn’t amount to much. I’m saying the voiition thing could be a reason to back away from theoretical confidence in this area, and if you’re not willing to do that because of it, then in my view, yes you are doctrinaire. It seems to me that the necessity to live through the experience of selling one’s labor (i.e. of being the service) potentially changes the theory (it’s different to sell your labor and then have to show up day after day than it is to sell some bushels of wheat and then they’re gone and you don’t have to think about them anymore), so that you are applying a broad theory to a situation where there is theoretical reason to hesitate before applying the broad rule with confidence. If that difference doesn’t change your theoretical stance wrt to evidence – i.e if your standard is the same there as for any other suggested discrepancy from this rule where that factor is not present, then I think your are being doctrinaire.

                You’ll have to decide for yourself if I am being dogmatic.Report

              • Avatar Michael Drew in reply to Michael Drew
                Ignored
                says:

                In short, I’m saying, *I don’t know for sure* exactly what the S&D curves do at the low end of of the wage scale in particular places and industries. It’s seems to me there could be a lot of particulars that bend them in unexpected ways. I’m encouraging you to consider thinking about it as a specific case, and examine your assumptions about it in light of lots of evidence that you yourself look at before assuming they hold – and not rely on the broadest of all economic ideas to completely direct your thinking on the topic prima facie. If that’s dogmatism, then I have no problem having it said about me that I am dogmatic on this topic.Report

              • Avatar The Cardiff Kook in reply to Michael Drew
                Ignored
                says:

                So your belief is that supply and demand does not apply to wages? Or low end wages? I am open to hearing that theory, though it seems counterintuitive and somewhat conveniently rationalized.

                Are there any sources you recommend that best lay out the case for this theory? Or even that we should be skeptical of the standard economics in these cases?Report

              • Avatar trumwill mobile in reply to Michael Drew
                Ignored
                says:

                Kook, can’t it be that there is some elasticity in wages? To the point that wages can increase at least somewhat before demand falls?Report

              • Avatar Michael Drew in reply to Michael Drew
                Ignored
                says:

                Cardiff,

                I don’t have an affirmative case that it’s this way or that. Supply and demand certainly operates in the wage space. How uniflormly do they determine wages? I simply don’t know. Your approach seems to be to assume it determines them about as uniformly as they do prices of any other commodities. I’m suggesting you consider whether you want that to be your operating assumption. But I’m not making a case you have to abandon that. It’s up to you; I don’t have the empirical data at hand to show you have to, and I’m trying to get you to. This is really just a question of governing our respective theoretical assumptions. Adjust your or not as you see fit following my comments as they stand; I’m not going to do your empirical homework. It’s not that important to me whether you have your priors soundly in place or less so. That’s up to you.Report

              • Avatar Michael Drew in reply to Michael Drew
                Ignored
                says:

                …*not* trying to get you to. Just suggesting.Report

              • Avatar The Cardiff Kook in reply to Michael Drew
                Ignored
                says:

                Of course there could be. It is also possible that the clearing price for labor is above the current minimum, for some segments of workers. That doesn’t mean there is, nor does it mean that we know what it is. If someone was to reveal this number or formula I am all ears.

                Otherwise this all sounds like throwing out economics every time it gets in the reay of my master planning of the universe. That too leads to suboptimal empirical outcomes. It does feel good though…. For a while.Report

              • Avatar Turgid Jacobian in reply to Michael Drew
                Ignored
                says:

                Indeed, the “fact” that a wage floor at or near current levels creates a shortage of jobs (at or near current levels) is VERY badly established. The standard studies are only natural experiments, but they struggle to find consistent SIGNS of the effects.

                The actual fact appears to be that the “standard” economics are considerably more complicated than numb-nets application of supply/demand curves might lead you to believe.Report

              • Avatar The Cardiff Kook in reply to Michael Drew
                Ignored
                says:

                Sounds reasonable, Miichael. Thanks as always for the discussion.Report

              • Avatar Michael Drew in reply to Michael Drew
                Ignored
                says:

                Cheers, mate.Report

              • Avatar Michael Drew in reply to Michael Drew
                Ignored
                says:

                Incidentally, what’s the Cardiff connection? I have some Welsh background, or thought I did (it’s starting to look like that may be apocryphal and it’s really English), and would like to get to Wales (and the rest of the British Isles) some day.Report

              • Avatar The Cardiff Kook in reply to Michael Drew
                Ignored
                says:

                This is a name I have been using on various Internet and gaming sites. It refers to a locally famous statue in Cardiff By The Sea, a small San Diego surfing community.

                A kook, as you may know, is a derogatory term for people who pretend to or wanna be surfers. The closest definition might be “surf dork.” The surfers call the statue The Cardiff Kook because it the surfer is effeminate looking and is standing like a dork.

                Early in the morning, prior to paddling out, it has become a tradition for the locals to “enhance the Kook” artistically. They dress it up, or construct elaborate dioramas to express themselves. It has ironically become something loved by the community and local tourists, not because of the original work, but because of it serving as a canvas for artistic, personal and political expression. Imagine a Kook dressed up as a soldier with a sign protesting drone strikes or the Iraq war. The next day someone builds a dinosaur or shark theme devouring the Kook. And so on.

                Pictures tell a thousand words….

                http://www.thecardiffkook.org/blog/blog/

                Any way, I am an old fart who likes to pretend he can still surf, who prefers the reefs near the statue and finds something redeeming in the story. Hence the name.Report

              • Avatar Stillwater in reply to CardiffKook
                Ignored
                says:

                The system self corrects and absent institutional interference will seek full employment.

                Ideally. And that idealization assumes an idealized conception of individual incentives and/or discounts empirical evidence of the types of incentives that motivate people.

                I mean, look, your claim here is precisely the point I challenged earlier wrt Walmart exploiting the safety nets to pay people below subsistence wages, ie., that your defense of institutionalizing that dynamic ran counter to full employment being either a realizable or even a desireable goal. A goal which is entailed by the economic theory you accept.

                The conclusion I came to back then was that your argument was merely the expression of a preference for efficiency at the expense of your economic theory (and all it entails, eg., “full employment”). The interesting thing, tho, is that invoke a theory you are willing to reject to criticize liberals (and others), even tho liberals are doing the exact same thing (ie., prioritizing certain values in practice above the theory).

                All this reflects on the fluidity of movement between theoretical and practical terms and entailments, evidence and pragmatics, context-dependent value hierarchies, etc.

                {Too much rambling. I’ll stop there.}Report

              • Avatar The Cardiff Kook in reply to Stillwater
                Ignored
                says:

                Correct me if I am wrong, but doesn’t this amount to me saying economic efficiency is pretty clearly good all else equal?( for the reasons belabored in my accused too long comment). I certainly understand there are other human values that can trump it. I am open to good arguments.

                I could be misreading this though, so help me out if I am…Report

              • Avatar Stillwater in reply to The Cardiff Kook
                Ignored
                says:

                Ceteris paribus conditions are a dime a dozen. Liberals love ’em!Report

              • Avatar Stillwater in reply to The Cardiff Kook
                Ignored
                says:

                Maybe this will clear it up.

                You argue that all other things being equal, efficiency ought to maximized.

                You similarly argue that all other things being equal, your economic theory ought to be implemented.Report

              • Avatar Stillwater in reply to Stillwater
                Ignored
                says:

                And I should add that the above claim is an expression of an idealized model which includes all sorts of necessary normative constraints for the conclusion to follow in theory, let alone in practice.Report

              • Avatar The Cardiff Kook in reply to Stillwater
                Ignored
                says:

                To the best of my recollection, I responded to the charge that belief in the pricing mechanism amounted to a religion with a detailed answer that it leads toward “a state of affairs in which no further rearrangement of patterns of production and resource use could achieve an increase of value to consumers.” The only push back I received was that it was so self evidently true that Rod was insulted I assumed he wasn’t aware of this already.

                So yeah, I have clearly explained that there is strong utilitarian empirical support for free markets prices. Since nobody is rejecting that claim, I am assuming I made my case and all agree. If you do disagree, let me know.

                I also admitted that economic efficiency is not the only value we have. There can be reasons to over ride economic efficiency. I am open to these arguments. Is this your position?

                I also agree that models aren’t perfect, and that we should continue to evaluate how well they work. I am aware of certain classes of goods such as luxury status goods where higher prices can lead to higher demand, for example.Report

              • Avatar Stillwater in reply to The Cardiff Kook
                Ignored
                says:

                So yeah, I have clearly explained that there is strong utilitarian empirical support for free markets prices.

                No one denies that pricing is a valuable metric, or mechanism, with respect to economic analysis and determining policies that maximize total utility. What we’re denying – or at least I’m denying – is that it’s the only metric for maximizing total utility.Report

              • Avatar The Cardiff Kook in reply to The Cardiff Kook
                Ignored
                says:

                I totally agree it isn’t the only one. Which others are you suggesting?Report

              • Avatar Stillwater in reply to The Cardiff Kook
                Ignored
                says:

                Which others are you suggesting?

                Well, all the others. Any value that accords utility – which is all of them or they wouldn’t be values.

                If you’re wondering what other values/preferences would I suggest to guide policy decisions, well, that’s a different discussion. Ceteris paribus(!!) there are a bunch. But in my value rankings, the price mechanism doesn’t have trumping power. Nor does it in yours, I might add.Report

              • Avatar The Cardiff Kook in reply to The Cardiff Kook
                Ignored
                says:

                Yeah, as a rule of thumb, free prices are a good thing. We should be very cautious about disregarding this rule of thumb.

                For minimum wage I would recommend not increasing the wage because it is most likely to hurt the currently unemployed, minorities, the unskilled AND because it reduces prosperity and the engine of economic progress which the poor depend upon more than any other. Thus if people want to pursue economic redistribution, they should find more promising approaches.

                This is not religion, and my God will strike down all who disagree.Report

  19. Avatar damon
    Ignored
    says:

    “Is there any possible way to justify putting a cap on CEO pay?” No, this is an internal company issue.
    “Should we be having this conversation or even be taking it seriously?” No
    And we shouldn’t have a minimum wage either.

    That being said, Blase has some good points and CEO comp should not be about the stock price. In a rising market, even dogs can have their prices rise. Comp should be about performance. Measurable performance. The change needed is in the Board. It needs to be independent.Report

  20. Avatar BlaiseP
    Ignored
    says:

    @Christopher: let me outdent here:

    I say market rules evolve in response to defects in competition so the game can continue. Nature simply kills off the loser. Unless we propose putting bankrupts into the wood chipper, I don’t see how it works.Report

Leave a Reply

Your email address will not be published. Required fields are marked *