Newbie questions

Miscellaneous Newbies
1

I am new to the site and Austian economics. So I have a few stupid questions (and will have more later I’m sure).

My main question right now I guess is how much government control should there be in business, if any?

Would business competition smooth out the tendency towards greed and slothfulness? Or do we need some regulations? I think we would need some few, very basic, regulations but let capitalism work on it’s own for the most part.

One of my favorite authors has always been Ayn Rand (We The Living is great). In Atlas Shrugged she made a good case for capatilist progressing society and the bleeding hearts ruining everything trying to make it ‘fair’. As much as I agree with with her in theory I don’t think I have as much faith in human nature as she seemd to.

For her model to work you need capitalists who run a company well, gives the workers a livable wage, and produce a good product. You need labor who doesn’t demand outrageous wages, does an honest days work. You would also need well informed consumers.

Unfortunately we seem to have corporations run by greed not profit (I think some would strip mine their grandmothers grave for the silver in her hair). Workers that are only concerned with a big paycheck and when is the next coffee break. Add in the idiotic consumers and we get a mess.

Or am I just jaded?

2

My main question right now I guess is how much government control should there be in business, if any?

I would say that the main stream of self-proclaimed Austrians and their compatriots favour zero or virtually zero interference in the market by the state. Many would like to abolish the state altogether, at least the democratic nation state (IE, the Empire of the US) as we know it.

Would business competition smooth out the tendency towards greed and slothfulness?

I can’t see there is any inherent tendency towards ‘slothfulness’ in business that isn’t common to people in general, what’s more, competition selects against lazy people. Beyond that - anyone who has a problem with ‘greed’, it seems to me, is just banging their heads against the wall. Greed isn’t just a fact of human nature, it’s a fact of all purposeful behaviour.

3

Define “greed”. Why else would business exist if not for profit? Why else would worker work if not for a paycheck? If neither breaks any laws or contracts each is free to pursue as much profit and as high a paycheck as the market would bear, respectively. Not too complicated really.

Z.

4

This question is outside the scope of Austrian Economics (AE). AE wouldn’t recommend any government policy, instead, it would explain how a government policy would affect or has affected the economy.

What would those regulations be?

If you have don’t have much faith in human nature, how could you have faith in government, which is composed of humans?

The profit and loss would weed out the inefficient companies, and companies that don’t produce what the customers want. What is a livable wage? How is that determined? Who has the right to determine it? Who has the right to enforce? Labor can demand what ever it wants, but the capitalist doesn’t have to give it to them. Why do we need well-informed consumers? How is that determined?

The government has created many distortions in the market.

5

First of all, welcome!

In regards to licensing, why should I not have the option to trade with whomever I please? In regards to “regulations”, first of all, how do we know the money being spent on meeting regulations is the best use of the money (e.g. bumpers on cars cost $1,000 per bumper, what could that money be spent on instead)? Second of all, the market already has the means to reprimand businesses. Businesses that do not put out good products, go out of business. Also, customers always have civil courts to resolve any disputes they may have with a business. Third, how do you, as a government official, know what the penalty should be for a business? The current system is rigged to be the same penalty, no matter the size of the business. This means big businesses can weather them much better than a small business can. Lastly, and most importantly, why should someone be punished for a victimless crime?

6

Government that governs least governs best, one that governs zero is best of all. There is no optimal amount of government other than none. Government can not do anything without first robbing someone else. So there is always at a minimum a loss for government to get a cut, then there is a waste of resources on projects not devoted to satisfying consumer needs and desires. When government grows the losses and wastes build. Think how much waste there would be in a perfectly run health care system.

I suggest that you read the writings of Mises available on this website dealing with socialism and how it is doomed to fail.

Also you mentioned Any Rand, when asked what political system she recommended she responded: Laissez Faire Capitalism. The reason was that this is the only system of social organization where the buyers are not coerced into purchase of things they do not want. Therefore all transactions are efficient, that is without dead weight loss.

7

Sorry, I meant slothfulness in lazy assed workers looking for an easy buck. My mistake.

To me greed is the guys that will bleed you dry just for an extra nickel. Which is why I used the example of strip mining their grandmothers grave for the silver in her hair. People complain about the evil, monopolistic, Bill Gates. I see a great American success story. He started with nothing, in an emerging market. He seems to have done well for himself.

I have nothing against profit. Why else would you run a business? But we have too many people that are just in it for what they can grab. Look at the shape we are in today. A lot of it was businesses loaning money to people who didn’t qualify, and buyers over spending. But then again part of it was also the bleeding hearts saying that everyone ‘deserves’ a giant house and a Hummer. A lot of my coworkers bought the giant $300K McMansions and I bought a $50K 950 Sq. Ft. house. Guess which of us still has a house? I make the same as they do and I know I could not afford a house like that. And I wouldn’t expect anyone to loan me that kind of money. Heck I’m 45 and and only have about $2000 on my visa… that’s downright unAmerican!

I have been in the air conditioning field for years. We have some companies that do a very good job, take good care of their customers, their workers, and make good money for themselves. We also have a lot of companies that provide shoddy service to the customers, cheat their workers, and file bankruptcy every few years. Then reopen and do it again. They can make more money than the honest company.

That is why I’m asking if you think getting the government out of business more would help let the system work itself out (like by not having the convenient bankruptcy getting you out of warranties and paying retirement that your workers paid into).

I was against the massive bailout because as far as I’m concerned the banks, insurance, and car companies (and others) made poor business decisions, consumers made poor purchasing decisions, that is free enterprise. Gamble and win/gamble and fail. Let the system falter and we should get a stronger system when it works itself out.

But I can see the need for some regulations. You shouldn’t have to tell people not to dump toxic sludge in the river but unfortunately you do. I work for the public school now and we bought an old soap factory for our maintenace shop. There is a large section of the property that has been contaminated by wastes, a couple of the buildings are unusable. When our plumbers were removing some sinks the were bathed in mercury from the drains. Gallons of mercury. Seems the soap company had been pouring it down the drains for years. Straight into our river.

That is why I’m wondering what level of regulations, if any, does the Austrian school recommend.

BTW I took a quiz on this site and out of 25 questions I got 3 Keynes, 7 Chicago, and 15 Austrian answers. That seems pretty moderate to me. Not too bad for a rookie.

8

You think regulations keep people from dumping waste?

So how did regulations stop them from dumping?

I am wondering why you think regulations work?

9

Welcome, Tukaram. You’ll find that many (certainly not all) denizens of these forums are former minarchists who transitioned into anarchocapitalists. Many of us who are anarchocapitalists, in fact, started out with beliefs similar to yours. When we confronted our base assumptions using the excellent resources available here, we found that we often attributed negative factors to “business” or “human nature” which were actually indirectly caused by the state.

For instance:

  • Laziness, excessive risk-taking, and anti-social behavior can’t flourish for very long without statist subsidization. When people and businesses are fully exposed to the consequences of their behavior, they have a strong incentive to act in a pro-social manner.

  • Strong property rights are a simple solution to issues of pollution and other “tragedies of the commons”. If the power to seek legal retribution for property violations is widely diffused through an entity we call the state, there is little incentive for potential polluters to be cautious.

10

Very good. I’ve never seen that regulations made a whole lot of difference. If you have any kind of rule, it serves no purpose if it is not enforced (speed limits work well?) or enforceable (pot?). Which is partly why I wondered how Mises felt about them in real world applications.

I was reading about licensing florist in Louisiana (??) and I found this: The Institute (Institute for Justice) wants a U.S. District Court to declare the licensing law unconstitutional, and to uphold the plaintiffs’ “right to economic liberty—the right to earn an honest living free from excessive government regulation.” The Institute for Justice is a libertarian law firm. They say “free from excessive government regulations” By saying excessive I would assume that they say some regulations are ok? What is acceptable, what is excessive, are any acceptable? Or should we be regulating the government more? (They do seem to be getting a bit big and bossy.) Government, like fire, is a great servant but a terrible master.

Luckily I just got ‘Where Keynes Went Wrong’ in the mail today and can start reading! (Where Keynes Went Wrong, Liberty & Property, and 33 Questions About American History. Just to get started)

11

People who refer to themselves as “Libertarians” range from full statists with little regard for liberty to syndicalists, so it’s unfortunately difficult to really describe the “libertarian” position on any given issue. That’s why you’ll note that many libertarians use appellations like “agorist”, “anarchocapitalist”, “voluntarist”, etc. for purposes of clarity. As someone coming from an AnCap perspective, I would say any regulation created/enforced by a monopoly government is inherently immoral and unacceptable. Government is indeed a great servant but terrible master, which is why governing should never be a role played by a state.

Mises was a minarchist, and saw a just role for a monopoly government in the realm of law and security only, a “night watchman” state. Rothbard, who many feel was next in the lineage of lead intellectuals of Austrian Economics, built upon Mises’ ideas and took them to what could be considered the logical anarchist conclusion.

The books you mentioned are a great beginning. It might also be helpful for you to check out http://mises.org/etexts/longanarchism.pdf for a selection of responses to thoughts which may arise as you consider these things.

12

You will learn in time that the state is not only not necessary its involvement is uneconomical and harmful. It’s involvement is also un-ethical from a moral standpoint.

As for greed. Check this out.

Watch all six episodes.

We need greedy people, they make the world wealthier, not just themselves.

13

Welcome Tukaram. I like the way you write.

Correct me if I’m wrong, but I read “bleeding someone dry” as charging too much, or in other words, charging too high a price. If a price is high, that is an indication that the good or service offered is in high demand relative to its supply, which in turn means that the good or service is deemed to be of great benefit by people in society. High prices stimulate additional supply as producers swoop in to provide more of the good or service which is deemed to be of great benefit.

What people in a large society deem to be of great benefit and to what extent they do so is a hugely complicated set of information. Price signals are the only effective means of humans to figure out how to best serve one another. EVERY restriction on the ability of producers to charge what they think will be most profitable mutes this system of price signals and impoverishes society.

More on this from Ludwig von Mises:

Says the reformer on the other hand: The entrepreneur is rugged and selfish when, taking advantage of the state of the market, he asks a price so high that poor people are excluded from purchasing the merchandise. But what should the “good” entrepreneur do? Should he give away the merchandise free of charge? If he charges any price, however low, there will always be people who cannot buy at all or not so much as they would buy if the price were still lower. What group of those eager to buy is the entrepreneur free to exclude from getting the merchandise?

There is no need to deal at this point of our investigation with the consequences resulting from any deviation from the height of prices as determined on an unhampered market. If the seller avoids underbidding his less efficient competitor, a part at least of his supply remains unsold. If the seller offers the merchandise at a price lower than that determined on an unhampered market, the supply available is insufficient to enable all those ready to expend this lower price to get what they are asking for. We will analyze later these as well as other consequences of any deviation from the market prices.*17 What we must recognize even at this point is that one cannot content oneself simply by telling the entrepreneur that he should not let himself be guided by the state of the market. It is imperative to tell him how far he must go in asking and paying prices. If it is no longer profit-seeking that directs the entrepreneurs’ actions and determines what they produce and in what quantities, if the entrepreneurs are no longer bound by the instrumentality of the profit motive to serve the consumers to the best of their abilities, it is necessary to give them definite instructions. One cannot avoid guiding their conduct by specified orders and prohibitions, precisely such decrees as are the mark of government interference with business. Any attempt to render such interference superfluous by attributing primacy to the voice of conscience, to charity and brotherly love, is vain. (From Human Action, Chapter 27)

Could you specify what qualifies a for-profit endeavor as condemnable “grabbing”?

Improvident lending, and over-spending, like all improvident economic practices, is a self-penalizing vice. Government intervention will only hamper the self-penalizing nature of the practices, which is to say it will create moral hazard.

I couldn’t agree more!

Again, there we see the self-penalizing nature of improvident economic practices.

Yes, definitely!

Exactly!

The only “regulation” we need to solve all these “tragedies of the commons” is clear and distinct private ownership of all means of production, and strict enforcement of property rights.

14

Thanks for all the great replies. With the videos, book recommendations, and pages linked I have some catching up to do!

It seems to me we’re all pretty close to the same page, but some of the confusion comes from not knowing the lingua franca. (At least I don’t think I’ve broken any taboos yet… but the day is still young)

15

The greed report was very good. I know you are not supposed to read comments on youtube but I accidentally saw one (or twenty…)

Here is the best (worst?) one I saw:

“If you create a job, you give yourself an opportunity to exploit someone…”

Priceless.

16

Yea thats Marxian. You see that crap on Youtube all the time.

At any rate one of the most important things to pull from the videos is a condition where profit on occasion is mearly a by-product to newly generated wealth. Had that person not been driven to succeed in the first place new wealth would never have been brought into existence. And economically speaking, as new wealth comes into existence generally speaking more people are wealthier. The more there is for everyone the wealthier we are.

Profit is simply a consequence of the action of generating new wealth. It is a means to an economic end.

17

Just to add a couple of things…

Profit and greed cannot be separated. People want their businesses to profit because they are greedy. Don’t let the rhetoric of the current administration bias you against greed. Think about it objectively. It’s a part of human nature. It’s also not inherently bad. Adam Smith talked about the “invisible hand” of the market, that allocates resources really well and allows economic and social progress, even though people are all acting in their own self interest.

And as far as lazy workers, you’re ignoring the other side of the coin. While workers all want to do as little work as possible to be paid, employers also want to pay workers as little as they can get away with for as much work as they can wring out of them. What happens then is that a happy medium is found. The workers work enough to make the money they want, and employers pay enough to buy the work that they want. The only time that this is interrupted is when the government intervenes.

And about faith in human nature, I don’t think that libertarians are guilty of having too much. If we did, would we object to being ruled by others? If I thought humans were perfect, why should I object to being ruled by them? It’s the very fact that I don’t trust others (bureaucrats, regulators, politicians, voters) that makes me oppose their rule over me. The only person that I trust to rule my life is myself, and the world would be a lot better off if the busy-bodies and social engineers in government would stop attempting to do it for me.

Talk about being jaded, it’s the people who bow down to the state in servile acquiescence that are utopian.

Oh, and welcome to the site! [:D]

18

It doesn’t take much faith to expect people will tend to act in their own self interest. It takes a tremendous faith to think people, like politicians, either want, or are capable of, acting in YOUR best interest.

You mistakenly see freedom as an unstable state. Capitalists who don’t run a company well will be displaced by those who do. Companies that don’t pay an acceptable (“livable” is not always a worker’s goal) wage, will be unable to buy labor. Companies that don’t produce a good product will be unable to sell it. Labor that demands unacceptable wages will be unable to sell their services, and those who are unable to perform an acceptable day’s work will be displaced by those who do. And the anticipation of all these substitutions is incentive enough for all parties involved to not deteriorate as you describe.

Nobody knows better than a consumer how that consumer ranks his values–he IS the most informed. And there is no better mechanism than the market to provide people with specialists to consult for all manner of things.

It is only coercive intervention that prevents a greater value from displacing a lesser, because such displacements are the very motive for voluntary transactions. The state of affairs you describe is only a result of interference with voluntary trade–whether by criminals, mobs, or the state. And even with those elements ever present, and with states in particular wielding enormous power, the long term historical trend has been for greater individual autonomy. That is testament to the stability of freedom. If the past is any indication, the future will continue to be pocked with wars and mass slaughter, but along an overall trend of individual freedom the likes of which history has never seen.

Be jaded for your lifetime maybe, but not for humanity’s future.

19

The government should make sure that no particular business gains an unfair advantage/monopoly over any other business. Sadly, the mega corporations that grew up around this banking system are using government to ensure that maintain their advantage or monopolies.

20

There is no such thing as a market monopoly. It’s a myth. There are only compulsory monopoly’s.

The government should not do anything. Doing so imply’s the act of violence.

Tom go join another forum. Tired of correcting falsehoods.