Supporters of capitalism are crazy, says Harvard

Supporters of capitalism are crazy, says Harvard

mises.org

Last weekend, Harvard University sponsored a conference called (I am not making this up) "The Free Market Mindset: History, Psychology, and Consequences." Its purpose was to try to figure out why, since everyone knows the current crisis amounts to a failure of the market economy, the stupid rubes continue to believe in it. The promotional literature for the conference opened with That Quotation from Alan Greenspan — the one in which he suggested that there was, after all, a "flaw" in the free market he hadn't noticed before.

(visit the link for the full news article)

I wonder if anyone at the conference asked questions like these:

*

When Greenspan flooded the economy with newly created money and brought interest rates down to destructively low levels, thereby distorting entrepreneurial calculation as well as consumers' home-purchasing decisions, was that the fault of the free market?
*

Do you think the Fed's creation of cheap credit out of thin air makes market participants more careful or less careful in how they allocate borrowed funds?
*

When Alan Greenspan bailed out Long Term Capital Management in 1998, was that a "free market" phenomenon? Do you think he thereby encouraged more or less risk taking among other major market actors?
*

The Financial Times spoke in 2000, in the wake of the dot-com boom, of an increasing concern that the so-called "Greenspan put" was injecting into the economy "a destructive tendency toward excessively risky investment supported by hopes that the Fed will help if things go bad." "All the insane dot-com investment we've seen, all this destruction of capital, all the crazy excesses of the past few years wouldn't have happened without the easy credit accommodated by the Fed," added financial consultant Michael Belkin. Did the free market cause that?
*

Do lending standards decline for no particular reason, or could this phenomenon have a teensy weensy bit to do with (a) government regulation aimed at increasing "homeownership" and (b) loose monetary policy by the Fed? (When the banks get the additional reserves the Fed creates, they naturally want to lend it out — and in order to do so, they wind up lending it to people they either have or would have rejected previously. As I show in Meltdown, the phenomenon of lax lending standards in the wake of an inflationary boom by a central bank is traceable all the way to the 19th century. There is nothing even slightly unexpected — or market-driven — about it.)

Questions like these could go on and on. Not one, you can be certain, was raised at this conference.

Now if you really wanted to sponsor an event whose purpose was to try to understand why people believe inane things that have been falsified by reality, you'd do much better to hold a conference on socialism, or on Keynes and his school. It would be fascinating to learn the psychological motivation behind the persistence of Keynesian economics, whose popular version is a nonfalsifiable, ersatz religion.

Is Japan's economy still suffering? Why, that's because Japan didn't spend enough — even though it spent so much that it became the most indebted country in the developed world.

Have people spent so much that they're now burdened with debt they can't possibly repay? Then we need more spending.

Is the economy a distorted mess after an artificial boom? Then instead of letting the economy restructure itself along sustainable lines, let's instead "stimulate" the system just as it is, with the goal of bringing about more "consumption," more "labor" employed, and higher "income," without bothering to disaggregate any of these things and deciding what kinds of labor need to go where, what kinds of consumption are sustainable and what are figments of the bubble economy, or how the capital structure needs to be reassembled in order to cater to genuine consumer demand. In fact, let's actually boast about neglecting capital theory altogether (as indeed Keynes did in a 1937 article in the Quarterly Journal of Economics).

Here's another thought: given how many Keynesian economists predicted a return to depression conditions when World War II spending came to an end, and that what we instead got was the single most robust year the private economy has ever seen, isn't it a little strange that not one of these economists went back and reexamined his premises?

No wonder why our economy is down in the dumps. Politicians listen to these people at Harvard who claim that the free market doesn't work and that believers of free market capitalism are crazy.

I am not against the free market. I believe that a strong free market can exist and that it needs checks by a powerful labor union. The labor union would check the hands of the employers and the like but the free market would allow individuals to exist freely and do market transactions without the interference of the government.

I am shocked that one of the biggest schools in the world says that people who support freedom are crazy... these people would rather see a return to market socialism or to more regulation with a central planner.

I just am outraged that a top university like Harvard would make such an ignorant statement about something they didn't understand. Who are you to question Harvard anyhow?

Okay, so I get it... we can't have a free market because people say that having a free market is crazy so they would rather a government control things?

You know we live in a crazy world when top universities are bashing the free market system that we have that's got us right to now and got us here so far...

mises.org
(visit the link for the full news article)

Come on now, do you really believe that capitalism is synonymous with freedom?
Freedom of what?
"Freedom" to buy from monopolies?
"Freedom" to watch your small business get taken over by Walmart?
"Freedom" to barely be able to buy food?

reply to post by sadisticwoman


Capitalism is the free market.

Do you really think that government is free of blame from this problem?

Government is the problem.

The fed did it.

reply to post by Frankidealist35


And since the Federal Reserve is not a government agency then the Government really had nothing to do with it by that logic.

Look Capitalism did work in the past, when the focus of the expanding economy was to help the average person live better. Now that our system has been hi-jacked are re-designed in order to serve only the wealthy it is no longer a system worth keeping.

It needs to be dismantled and rebuilt from the ground up. It can still be Capitlism so long as it is regulated for the people by the people, with their interests being the outcome, not those of the corporations.

~Keeper

reply to post by tothetenthpower

That's not the point here. The point is that the people at Harvard are saying that people who believe in free market capitalism are crazy. As we know the fed is a private agency that just has the name federal to make it seem like it's part of the government but the fed sets the interest rates and it creates credit out of thin air by purchasing treasury bonds. Capitalism has not been hijacked per say. But rules of competition have been made tougher in recent decades... now people need patent lawyer to compete and make inventions... the free market idea is not what caused all of this mess... if you believe that then you believe that socialism is a workable economic theory. My point is that people at this university are saying that we're crazy for believing in a free market... and that's just ridiculous.

Also, a regulated free market isn't a free market.

[edit on 17-3-2009 by Frankidealist35]

reply to post by Frankidealist35


You really think that without government regulation, people would be less greedy? No, they'd be paying their workers less, charging more for products, and believe me, there'd be way more, bigger monopolies.

Instead of having to look to Burma for sweatshops, they'd be right here on our streets!

[edit on 17-3-2009 by sadisticwoman]

Unfetterd capitalism is the bane of the western world - and by default, the rest of the world.

It does not create freedom, it creates oppression in the same way that feudalism does.

FYI - the current practice is not capitalism, it is more keynesian than anything...

On a slightly (and ironic) different note, why is there only one monopolies commission?

[edit on 17/3/2009 by budski]

reply to post by Frankidealist35


A regulated free market keeps the people who intend to do harm away from destroying it.

And no I think the people at Harvard are refering to our current system with it's current rules and regulations. People are crazy to think that our system works right now, because it obviously doesn't.

When we have to bail out banks to keep them running and then they send that money to European businesses to protect THEIR interests as opposed the US citizen who paid for it. Doesn't that seem wrong that they can even do that?

And I am not saying that Big Government is what we need, I think there should be little to no "government" regulated anything, however the market needs to be set up in a way that provides accountability and swift action when people take advantage.

Right now it's just a free for all.

~Keeper

reply to post by tothetenthpower


I don't think we need a regulated free market.

I just think there should be some rules... I agree that we can't have a market that has no rules... but to say that the market needs to be regulated... that's very vague...

reply to post by Frankidealist35


And who would enforce the rules, without regulators? You tell me I can't dance, but don't tell the police they have to enforce that rule, well, I'm gonna dance.

Originally posted by Frankidealist35



Okay, so I get it... we can't have a free market because people say that having a free market is crazy so they would rather a government control things?

If the market were truly as free as you wanted it to be you'd probably be breathing in Asbestos right now. And try not to touch your face after rubbing up against your lead-painted walls.

Seriously, the only thing the "free market" represents is the freedom for the rich to exploit the poor. We need some regulation, because the cheapest way is hardly the best way.

Originally posted by Frankidealist35
reply to post by tothetenthpower

 

I don't think we need a regulated free market.

I just think there should be some rules... I agree that we can't have a market that has no rules... but to say that the market needs to be regulated... that's very vague...

Wait what? This is hypocritical at best, and just plain dumb at worst.

Did you read what you just wrote?

Capitalism is extremely fragile. It requires a persistently motivated social structure, one in which families and other institutions, such as the education system, punish insufficient behavior and reward that, which is aligned with positive values. Positive behavior is defined by those institutions as thoughts and actions, which are aligned with the system's core objectives. Once core objectives are satisfied, society constructs an idea of what positive behavior is, and that in turn leads us to create normal positive values. A self-perpetuating feedback system encourages the replication of these normal positive values because strict adherence usually merits a satisfactory reward. The reward is more often that not directly related to the continued sustenance of the positive value system. Now, this same methodology can be applied to any economic system and is not strictly confined to capitalism in its present form. In fact, any psychological system can be modeled through this approach.

I think the positive value system of capitalism is socially constructed; however, it is a system which has erupted spontaneously and best reflects the nature of human conduct. Governmental interference mistakenly attempts to provide preferential solutions to select groups of society by forcibly superseding normative social objectives by imposing their own on an historically gradual construction of positive reality (one, of which is supported by history alone proves its superiority).

If people really want to replace the free market, why not relegate decision making to some sort of global cybernetic machinery? With perfect market segmentation, access to perfectly symmetrical transaction information, and the elimination of all barriers to entrance in the marketplace; profit making on behalf of individuals becomes an unsustainable endeavor. Just take a look at the common long-run equilibrium graph for perfect competition in any first year economics textbook. Unfortunately, access to all this information would would mean an assault on long-held notions of private property.

Personally, I don't agree with anti-monopoly laws. If people were more educated and instilled with positive behavior, monopolies wouldn't have the opportunity to succeed. However, realistically speaking, elevating the population to a level of competition that is compatible with the operation of a free market capitalistic society just isn't feasible. There are not enough resources available and not enough time to create this change. This has resulted in the inefficient alternative: the integration of competition and antitrust laws regarding the legality of monopolies.

It is unfortunate that we do not invest enough in education, and that our social institutions are so inflexible in providing the means of development for underprivileged individuals. I think that an in-depth dissection of new securitization and risk analysis technologies will allow for a reconciliation of this knowledge deficit. For example, imagine funding the music education of a person living in a relatively unproductive farming community in the Andes mountain range in Peru. How could you calculate your expected dividend for such an investment? If capital is smartly securitized in such a way that risk is reduced for investors, then I'm absolutely positive that funding could be appreciated for people that lack the automatic differential privilege that is granted to North Americans, for example, at the very moment of their birth.


[edit on 17-3-2009 by cognoscente]

reply to post by drwizardphd


Yes I do believe what I wrote. Do you really believe that the free market is really there for the rich to exploit the poor? Have you ever heard of profit margins? I agree that CEOs do need some check on them... but you should educate yourself on the free market and how it's got us so far. We got here because of individual people... not because of a government.

reply to post by sadisticwoman


Why, economists would enforce the rules.

Actually, there should be some oversight of the free market... but not by the government.

And we would have to check on the economists who would help oversee the market.

Originally posted by Frankidealist35
reply to post by tothetenthpower

 

That's not the point here. The point is that the people at Harvard are saying that people who believe in free market capitalism are crazy. As we know the fed is a private agency that just has the name federal to make it seem like it's part of the government but the fed sets the interest rates and it creates credit out of thin air by purchasing treasury bonds. Capitalism has not been hijacked per say. But rules of competition have been made tougher in recent decades... now people need patent lawyer to compete and make inventions... the free market idea is not what caused all of this mess... if you believe that then you believe that socialism is a workable economic theory. My point is that people at this university are saying that we're crazy for believing in a free market... and that's just ridiculous.

Also, a regulated free market isn't a free market.

[edit on 17-3-2009 by Frankidealist35]

Free markets do not work without proper regulation. It always ends up where are now with the upper class owning and hoarding almost all the resources. The big money controls the markets. The rules allow creating additional securities from thin air through shorting and such. How can anything be traded freely when counterfiets are allowed to continually be created. You can't!

You can't expect a car mechanic to be able to deal with a mortgage banker efficiently. The mortgage banker will most always have the upper hand. Folks shouldn't have to be an economist to know if they are getting a good deal or not and thats the way its stands now. What we need is fair trade rather than free trade. Shouldn't we be beyond buyer beware? why should the guy who can bull# better get a better deal on the exact same car? How can you expect them to know if the financing is fair? How can you expect them to understand the legal mumbo jumbo whne they are not a lawyer? You can't and thats why we need regulations to ensure fairness.

Our whole system sucks because it is set up for people to abuse other people. I think we are starting to take steps to get beyond this, it is truly the only thing that will save us in the long run.

Edited to ADD: Yes, Anyone who agrees with our brand of capitalism is crazy or favors exploitation.

[edit on 17-3-2009 by disgustedbyhumanity]

True capitalism would not give special privleges to large corporations. The flaws in American capitalism isn't the capitalist module, it is politicians regulating smaller business and giving advantages to big business. It's the taxation loopholes that allow corporations to write off expenses to avoid paying taxes, the larger the corporation the less tax is actually paid. Toss is monetary policy in the American capital module and inflation, special benefits to NAFTA members, and world trade organizations and you get one hell of the mess we are experiencing right now.

reply to post by Frankidealist35


Yes, people usually start a business to make money. They want to make as much money as possible. If that means exploting, underpaying their workers and overcharging for services and goods, then they'll do it.

I don't believe that economists would do anything to help us. We need lots of people to have control over all businesses, so that any corruption can be weeded out and still not harm the regulatory group.

People are corrupt and greedy, and letting them simply do what they will helps no one but the most ruthless.

[edit on 17-3-2009 by sadisticwoman]

Originally posted by Frankidealist35

 

Yes I do believe what I wrote. Do you really believe that the free market is really there for the rich to exploit the poor? Have you ever heard of profit margins? I agree that CEOs do need some check on them... but you should educate yourself on the free market and how it's got us so far. We got here because of individual people... not because of a government.

Well, the reason I pointed out the hypocrisy in your earlier post is because in the same post you said there should be no regulation, but there should be rules in place. That is exactly what regulation means.

And we have never had a truly free market in America. Since the founding of our nation there have been regulations in place, the very existence of our unified currency is a regulation on the free market.