The Not So Invisible Hand

[esfreerider]

nothing you said actually disagrees with the principal of the "invisible hand" but you did disagree with its name and say its not magic. nobody actually believes its magic. the invisible hand WORKS just because its far more complicated then its traditional analogy doesnt mean that it doesnt work all it means is that it can be very hard to see when when things dont travel in a straight line or by themselfs

[zsylvana]

Pro-marketeers may ask,is equality and generosity sustainable in the context of the world market?The irrefutable answer is Yes!For many years,the Scandinavian countries have also been at the very top of the Global Competitiveness Reports by World Economic Forum at Davos. Denmark,was ranked third in global competitiveness in 2008,and Sweden fourth in 2007-08.Britain under New Labour)had slipped from second in 2007 to ninth in 2008 The Global Competitiveness Report 2007-08 World Economic Forum

[zsylvana]

"The evidence that unequal societies inflict great damage on the lives and health of their citizens is clear.Why does it matter and what can be done?"Asks Göran Therborn professor of sociology at Cambridge University.Editor, Inequal.ities of the World:New Theoretical Frameworks,Multiple Empirical Approaches Verso,2006).

"There are at least three quite different kinds of inequality,and they are all destructive of human lives and of human societies.The first is inequality of health and death"

[whippoorwillss]

I like to use the traffic anology. let the drivers(people) and the cars(businesses) go where they want and do what they want. that is "what they want" is up to them. but, with in a frame work of laws. Laws that are enforced by roving police that are blanced with a court. sounds familer right? If one driver pushes anothe car off the road or another car passes another driver by using a side walk he/she or it gets put in jail and has a day in court were in justice is renderd.

[j0hnwi11iams]

But this analogy doesn't hold because many of the laws involving traffic are PROACTIVE. We prevent cars from speeding. We prevent them from running red lights. In the world of business without regulation we only know something went wrong after there has been damage. Your analogy is in fact a brilliant example of why we need regulation.

[whippoorwillss]

if cars were prevented from speeding then why do people get speeding tickets? and same with running red lights..cars are not prevented from running lights. if you are prevented from doing something thats PROACTIVE..seeing that we get tickets for doing these things we in fact were not pervented from said act. where in...the ticket/day in traffic court is REACTIVE. you can not prevent greed, terrorism or farts with out absolute control of everybodys ass.

[j0hnwi11iams]

We do not prevent ALL cars from speeding, we prevent most cars from speeding. The point is not so much to prevent speeding, but to prevent accidents, especially those where an irresponsible driver hurts others. The same holds for drunk driving.

[LastTrueLiberal]

Cite one example of a company that has ever escaped fair market price without being licensed a monopoly by government. No? Didn't think so.

[j0hnwi11iams]

That depends on whether you mean "free" market price or "fair" market price. How about Enron gouging the electricity market in California?

[LastTrueLiberal]

Free market price is fair market price. The only way to escape fair market price, the market price of a good relative to the cost of the resources and labor necessary to produce it, is to receive government assistance. Enron is not an example. Energy is one of the most heavily regulated industries in the United States. It is called a "natural monopoly" and is licensed as such by the state. Enron has nothing at all to do with a failure of the "free market." It's a failure of regulation.

[j0hnwi11iams]

Excuse me, but the electricity market in California was deregulated thanks to the lobbying efforts of Ken Lay and others like him. If you are talking about the consumer agent, they exact same problem would have occurred unless you expect people to monitor their electricity prices every minute. There are underlying requirements for stability in the market that were clearly not being met. The "free" market allowed Enron to manipulate the price of energy. It is that simple.

[LastTrueLiberal]

Enron was NOT an example of a failure of the mythological "free market" that supposedly exists somewhere on earth. First of all, note that there has been extensive government intervention in every market since the 19th century. What we have now is called a "mixed economy." In CEO Dwayne Andreas words, "There is not one grain of anything in the world that is sold in the free market. Not one. The only place you see a free market is in the speeches of politicians."

[j0hnwi11iams]

That is a purist at work. Because the market is not COMPLETELY free we can't blame ANY of the problems on the freedom of markets. We HAVE seen free markets, before they were called markets: Feudalism, Monarchies, Slavery. The "mixed" economy got that way to address specific problems. What most economists don't get about economics is that it is a game. It is a closed game with finite resources with winners and losers.

[LastTrueLiberal]

Enron would not have existed if not for government regulation. That's the bottom line. It came into existance banking on subsidies, various industry regulations, and the Kyoto Protocol to pass. That's how it planned to make a profit. If the Kyoto Protocol had passed, Enron would still be in business. It has nothing at all to do with the free market. Absolutely nothing.

[j0hnwi11iams]

Most people think the economy is some kind of steady state, that's what they teach in school: supply and demand. It is not steady state, it is a game constantly going from middle game to end game.

[LastTrueLiberal]

"We HAVE seen free markets, before they were called markets: Feudalism, Monarchies, Slavery."

These are all class based systems created by government force. A free market is a market absent of government force. Even you must understand that equating feudalism with a free market is unfair.

[LastTrueLiberal]

Secondly, addressing the Enron situation in particularly. Enron was one of the most active corporate lobbiers of its day. It lobbied extensively for heavy regulation and price controls on power grids. It lobbied extensively for the passage of the Kyoto Protocol, despite it not passing. It lobbied for, and received, billions of dollars of federal subsidies under the Clinton administration.

[j0hnwi11iams]

What does that have to do with the fact that Enron established a spot exchange for electricity within their corporate headquarters? They had a mechanism where they could alter the supply faster than demand could react. They manipulated that market by colluding with generators to synchronize taking generators offline. Electricity consumers depend on a certain level of price stability so they don't have to check the price of electricity every 5 minutes.

[LastTrueLiberal]

They manipulated the market by lobbying for price fixing, subsidies, and other government regulations. To call it a failure of the free market is to totally ignore the role of government in the economy.

[j0hnwi11iams]

What are you talking about? They lobbied for deregulation. They lobbied for FERC to turn a blind eye to the whole thing. They created a spot market and drove it to instability.

[LastTrueLiberal]

Enron was banking on the Kyoto Protocol passing, which would have further subsidized the company and allowed it to trade greenhouse gas emission permits. That's it. Enron came into existance banking on the Kyoto Protocol to pass. It didn't. Enron tanked. Furthermore, the SEC was SUPPOSED to conduct a thorough review of Enron's financial statements. The bureaucracy failed to regulate.

[j0hnwi11iams]

Enron tanked because they sold stock based on some scheme where they were going to set up a spot exchange for bandwidth. They had advertising EVERYWHERE. The problem was they had no bandwidth to buy. It was all a scheme that drove up stock prices at a huge expense in marketing. They disguised all of this through improper accounting. Enron was convinced they could make a spot market out of anything.

[LastTrueLiberal]

"The "mixed" economy got that way to address specific problems."

No. Behind every single piece of economic regulation, starting with the interstate commerce commission in the 19th century, there are corporate lobbyists behind the scenes pushing for it. Every single piece of economic regulation is designed to benefit a minority at the expense of everyone else. These extreme concentrations of wealth are not a natural product of the "free market."

[j0hnwi11iams]

Are you forgetting the new deal? The ICC you mention was put in place in response to monopoly abuse by railroads. Either they could have that regulation or they could nationalize the rails in some way to promote competitive service. A good reason for having nationalized transportation infrastructure.

[LastTrueLiberal]

Read economist Kevin Carson if you would like an understanding of what a genuine free market would look like.

[j0hnwi11iams]

Utopia?

[MomSaysImCool]

Good stuff!

[Terilien]

Thank you for pointing out the existence of market failures.

[machaeroguy]

I have a few friends who started riding motorcycles since gas skyrocketed.

[j0hnwi11iams]

The key word being "few". I ride a bike occasionally. I don't use it for commuting however.

[machaeroguy]

Right on. Amazingly enough, these guys are fellow coworkers/electricians who visit sites to tweak conduit they've already laid. But yeah, on the initial visits, they had to use trucks to deliver the raw wire. No way around that unfortunately.

[j0hnwi11iams]

Think about my wife's hands while you put the gun to your head.

[miasma1616]

Your hands not so invisible is it? I mean, it is the only action you get since your wife's hands are on me. Loser.