Free Market Fundamentalist Ideology is based on a Logical Fallacy.

Discussion in 'Economics & Trade' started by Kyklos, Jul 8, 2018.

  1. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    WHY IS ONE COUNTRY SO MUCH RICHER THAN THE OTHER?

    Because since a long, long time humans have needed governments. Why?

    Because in the evolution of mankind, we banded together into geographies (all speaking the same language in that geography) for self-protection. Which evolved, with much fighting and many deaths, into Kingdoms. (Both Greece and Rome tried a bit of "democracy", but it did not work all that well.)

    Why have these governments regulated? Because otherwise people would not understand the rules by which they could live and work peacefully. So, they needed governments that made the rules. First in kingdoms, then eventually in countries that voted their leaders into power.

    We are still evolving the mechanisms by which the countries function - but, above all, is the necessity that human-beings in them need to eat and house themselves daily. We came to call that an "economy" the purpose of which was to have Demand & Supply furnish the means by which we live.

    Not much has changed, actually. People are born and bind themselves together to prosper in a common economic entity, which must be governed - and the mechanisms necessary to do so are pretty much the same. But economic outcomes in each country are not all similar. Why such social- and economic-individualism develops in each country is still a bit of a mystery - some countries are much better at it than others because the people decide to observe the rules they establish and thus they evolve together similarly.

    Those that don't tend to dysfunction economically. Compare two countries like Japan and India - both of which have somewhat similar population numbers but these populations live within very different geographic constraints. Why is one country so poor and the other so much richer?

    I'll bet the reason is not so much geographic as it is cultural.

    So what is or are the cultural differences that influence a country's economic outcome? If I knew the answer I'd write a book about it. But I don't.

    PS: The US is proud to be such a great country geographically "from sea to shiny sea". India has almost the same landmass as the US, but not the same economic outcomes. So, there are other factors that decide them economically ...






     
  2. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    Without regulations of some kind, the abyss awaits any collection of people. People need "order in their lives", and regulations do that. Of course, regulations also bring dangerous hegemony - as did Communism.

    Government leadership must change regularly in order for different perspectives to run-the-show. And as long as a people are dedicated consciously to that change of political representation at any level of governance (local, state, national) then we, as a people, wont go off-track terribly.

    Changing personalities at-the-helm of government allows us to address problems that really go very wrong ...
     
    Last edited: Nov 24, 2020
  3. originalthoughts

    originalthoughts Member

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    I tried to find your answer to my question in your long winded response, but didn’t see it. Did you actually answer the question?
     
  4. originalthoughts

    originalthoughts Member

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    What abyss awaits?
     
  5. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    Why do you think all those people from the Central and South America are WALKING up to the American border and trying to enter?

    They live in some of the poorest countries on this planet with wholly incompetent political systems ... !
     
  6. Kyklos

    Kyklos Well-Known Member Donor

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    The Austrian ideologues would not accept such policies today. Indeed, their faith in cosmic forces that would keep the price of bread at a beneficial level for humankind is as idealistic as any of Hegel’s teleological theories of Absolute Spirit guiding world History. One should always be suspicious of economic metaphysical theories like “self-regulating markets” that are not falsifiable. Fred Block wrote in a preface of Polanyi’s work on Neo-Liberalism:
    Hayekians only see one evil-- regulative government. George Orwell wrote a critical review of Hayek's book "The Road to Serfdom."
    The Hobbesian state is meant to protect the common interest, and freedom from the conflicting private interests of destructive economic competitive struggles of civil society otherwise society becomes an armed camp.

    Libertarian ideology abstracts a part from the whole to represent the totality of human existence. Specifically, Neo-Liberalism that represents this “self-regulating” market ideology reifies—turns it into an isolated external object--human productive processes and elevates it as the sole characteristic of human behavior.

    By the act of static conceptual abstraction a particular single property of the object, in this case the human, is ripped out of context circumscribing any greater significance. The natural human being is distorted by classification, “the act of rationally objectifying” that views human being as “individuals” absent from a greater community and history. All human motivation is reduced to a search for money and profit. Human beings become a contractualist wealth-accumulating machine only seeking power over others: she is the individualistic Hobbesian possessive accumulator of wealth so that in the process they create a rational object of an otherwise natural human process.

    Hayekian libertarianism and the other Austrian school variations distort the human face and falsify human history.
    Free-Market ideology manufactures a biased conception of human motivation and society to promote the ends-means goals of an industrial society based on instrumental reason.
    We have to examine human processes in their greater historical context to truly understand human Life fully—to recover human experience and not accept a false ideological characterization. When Libertarianism proclaims humans a merely Hobbesian wealth accumulating contractualist machines they are not only describing a false philosophical anthropology, but they are also prescribing a set of behavioral goals for society. The description of human behavior as egoistic advantage seeking self-interest is tautologically self-fulfilling by enforcing the very ethical values that were supposed to be unchanging laws of biologically naturalism—that the economically strong rule.

    ...and here is another reason, How Free Market Ideology Killed hundreds in American Airline Industry.
     
    Last edited: Nov 24, 2020
  7. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I agree with you, but you will have to explain exactly how the Fallacy of Composition is relevant to specific economic issues.

    I'll you've really shown in your opening post is how supporters of Lassie faire capitalism could be wrong, not how they are wrong.

    You've indicated how the main argument could have some serious holes, but showing that is not the same thing as showing that an entire position based on that argument is wrong.

    You can't just claim "Fallacy of Composition" and claim the entire position of someone else is wrong.

    If I can give you a ridiculous analogy to illustrate the point, it would kind of be like if I had a position that killing large groups of people is wrong because killing one person is wrong. You then claim "Fallacy of Composition", which indeed could be true. But that does not mean you are automatically right. We shouldn't hold my logic as completely worthless just because you pointed out a way that it might not be correct.
    You would have to much more specifically explain how the Fallacy of Composition would apply in this case.
     
    Last edited: Nov 25, 2020
  8. originalthoughts

    originalthoughts Member

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    You said without regulation the abyss awaits. Then you point to the central and South Americans who are fleeing to come to America...

    What’s your point? Did lack of regulation cause them to flee their country? No. You seem to talk a lot without answering a simple question.
     
  9. originalthoughts

    originalthoughts Member

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    So, why are government regulations needed?
     
  10. Kyklos

    Kyklos Well-Known Member Donor

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    Hayek and Keynes' debate on the Self-Regulating Market Equilibrium Paradigm
    Initially both Hayek and Keynes believed that an economy has a natural state of equilibrium at full employment. Even after dis-equilibrium in production and consumption, it was believed by classical economists that an economy would automatically reestablish a balance of equilibrium between employment, production, and consumption. However, Keynes was the first to question the notion of full employment equilibrium assumed by all classical Marshallian economists. British author Nicholas Wapshott has an excellent historical record in his book, Keynes Hayek: The Clash that Defined Modern Economics, (2011) about the debates between Keynes and Hayek that is well worth reading. Wapshott examines the market equilibrium theory and its failure to explain the American Great Depression of the 1930s.
    Keynes had seen in 1923 unemployment at 11.4 percent, or 1.1 million out of work. Even in 1929 Britain’s unemployment rate continued to 1.34 million, or one in ten workers jobless for more than eight years. His experience had shown him that unemployment could be persistent.
    Keynes observed, “The more troublesome the times, the worse does a laissez-faire system work.” (Ibid., p. 32). Keynes learned from classical economist Alfred Marshall the classical concept of Say’s Law of markets, savings, and investment. John Kenneth Galbraith explains Say’s Law that was first presented in 1803 as the following:
    In denying Say’s law, Keynes was risking being categorized as a crackpot, but his observation of Britain’s decade long chronic unemployment convinced him that a new understanding of market business cycles was needed.
    Hayek’s first argument for Laissez-faire quietism is that markets are fundamentally unknowable making any state government corrective action damaging, or counter productive. His second ideological justification for Lassie-faire is that any interruption of this self-correcting mechanism seeking a natural balance between production and consumption will delay the market’s eventual full employment equilibrium. After reexamination, Hayek finally recognized that Keynes was right instead. Hayek changed his mind and gave up his belief in the classical market equilibrium paradigm making this the first time he contradicted a central doctrine of the Classical and Austrian economic schools of thought.
     
    Last edited: Nov 25, 2020
  11. Kyklos

    Kyklos Well-Known Member Donor

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    One formulation by Supply-Siders' maxim is “Supply creates its own demand.” Supply-Siders, like Jude Wanniski for example, have been trying to rehabilitate this economic doctrine for years. This belief that supply creates its own demand has historically been attributed to French economist John-Baptiste Say (1767-1832). I found an essay by Wanniski dating back to the 70s in which he attacks Paul Krugman, John Kenneth Galbraith and Keynes for “killing” the notion that “Supply creates its own demand.” Wanniski wrote, “Keynes had to kill Say's Law, which he restated as ‘Supply creates its own demand,’ in order to formulate his own law, that ‘Demand creates its own supply,’ which justifies the idea of taxing those who are not consuming fast enough and giving it to those who will.(Jude Wanniski, Say’s Law of Markets).”

    The formulation “Supply creates its own demand” is not found in any of Say’s writing. John Maynard Keynes formulated this summation of Say’s principles based on the understanding of Neo-Classical economists and literature of the time. Keynes wrote,
    Keynes’ summation is taken from reading earlier interpretations of Say’s work by John Stuart Mill, and his father, James Stuart Mill who was a personal friend of economist David Ricardo.
    The elder James Mill is thought to be the first to formulate the notion supply creates its own demand when he wrote, "production of commodities creates, and is the one and universal cause which creates a market for the commodities produced (James Mill, Commerce Defended (1808 ), Chapter VI: Consumption)."

    The sources of Say’s law formulation is important since some critics claim Keynes merely constructed a straw man of Say’s law in order to attack its validity. However, Keynes was consistent with the conventional understanding of Say’s principles by respected economists of his era.

    Say’s principles as interpreted by Mills, Ricardo, and Keynes postulates that commodity production creates demand. One’s own acts of production generate income to demand goods and services from others; thus, wealth is created by production and not by consumer demand. There could by no demand without supply under this interpretation. Keynes denied in his famous economic treatise, “The General Theory of Employment, Interest and Money” (1936) that supply creates its own demand. We will review Keynes’ arguments against Say later.

    The caller misstated Say’s law, but his argument is consistent with supply-side talking points. The term “demand” is often used ambiguously in these conversations because of its different meanings as “desire,” or “spending.” The common use is understood as psychological desire, or want for some commodity. Commodities are things produced for the sole purpose of selling for a profit. However, psychological desire alone does not create economic demand, the commodities must be actually purchased with money to create “effective demand.” Producers can create psychological desire for a commodity through advertisements, but the consumer must turn that desire into actual spending to create effective demand. Say’s law is primarily concerned with this second meaning of demand as actual spending.

    There are essential biological needs which drive effective demand; but there is also desire for emulation that is not true need, nor essential. Emulative desires are aimed at luxury commodities, for example, that signify fashion, feelings of rivalry, popular culture, and status. Whereas biological needs are relatively finite, emulative desires are potentially unlimited. The consumer products industries spend billions of dollars to stimulate emulative desire creating a dependency effect for artificial needs; otherwise, these non-essential products will go unsold.

    Human need is not market need. Capitalism is concerned with generating money profit, not jobs per se, by the process of converting money (M) into capital commodities for production (C), then into money profit (M+M). The capitalist transaction sequence is M > C > M +M. Consumers seek to sell their labor as a commodity (C) for money wages (M) in order to purchase consumer commodities (C). The consumer economic transaction sequence is C > M > C. So in the iPhone example, the daughter’s first act is to search for labor market demand so she can sell her labor to earn wages and create effective demand by actual spending.

    The Supply-Siders setup the following argument form to claim supply creates its own demand:
    1. All production creates its own demand.
    2. All commodities are produced.
    3. Therefore, some commodities are in demand.
    This particular argument form of Say’s law commits the fallacy of existential instantiation. This fallacy is committed as in the example argument “All trespassers will be arrested; therefore, a trespasser is arrested.The fallacy is inferring from “all” to “some” as a conclusion. The class of “All trespassers” may be an empty class, but the conclusion states erroneously there is at least one member in that class. The second premise “All commodities are produced” is often not stated explicitly, but the same fallacy can be committed using premise one alone. In other words, “demand” (meaning effective demand) can be an empty class. “Production” and “”produced” are only grammatically different, but have the same meaning in our context. This version of Say’s argument fails because production is necessary for effective demand, but not sufficient. Supply-Siders are confusing necessary and sufficient conditions.

    Another method of critiquing the maxim “Production creates its own demand” is to replace it with a set of logically equivalent statements having the same truth-values and determine if they are in fact true or false. Below is the maxim written in symbolic logic notation, and then written in natural language, followed by the name of the logical rule of equivalence applied to the numbered equivalent proposition.
    1. P ⊃ D “Production creates its own demand.”
    2. ~D ⊃ ~P “If there is no demand, then there is no production.” Transposition, 1
    3. ~P v D “Either there is no production, or there is demand.” Implication, 1
    4. ~(P * ~D) “It is false there is both production and no demand.” DeMorgan, 3
    P = production
    D= demand
    ~ = negation
    v = either, or
    * = and
    ->= If, then

    All the statements from 1 to 4 have equivalent truth-values and can replace one another: if any one of the equivalent statements is true, then all are true. If any of the statements is false, then all are false. Statement 4 reads, “It is false there is both production and no demand” and was deduced from statement 3 using DeMorgan’s theorem of logical equivalency.

    Is statement 4, “It is false there is both production and no demand” true or false? Isn’t recessionary spirals and depressions precisely the situation of producing while there is no effective demand resulting in oversupply and unsold goods? In other words, can there be a simultaneous condition of both commodity production and lack of demand symbolized by (P * ~D)?

    The negation of (P* ~D) is ~ (P *~D).

    If (P * ~D) is true, then its negation ~(P * ~D) must be false and all the other equivalent statements are also false including “Production creates its own demand.”

    Both Say and John S. Mill admit that there can be market dis-equilibrium, “a derangement of markets,” between supply and demand by the hoarding of money, i.e., an imbalance of the money supply that is reflected as a imbalance in the supply and demand cycle. Nonetheless, John S. Mill and Say admit that the role money plays in the production cycle means production alone is not sufficient to create its own demand.
    Admitting the possibility of lack of demand and oversupply contradicts the maxim of “Supply creates its own demand” because both Say and James S. Mill had argued at other times that a condition of oversupply could not happen. Say’s law rests on two other principles called Says Identity and Says Equality:
    Mills and Say mostly viewed money as a veil over the supply and demand cycle having no causal effect in itself. However, in Capitalism money is treated as a commodity in itself and is subject to the same market forces of supply and demand as any other commodity so that money can be in surplus or shortage impacting effective demand.
    Because of these contradictions in Say’s and Mills views on production gluts, imbalances of money flow, and failures of effective demand, Keynes rejected Mill’s formulation of Say’s law.
     
    Last edited: Nov 29, 2020
  12. originalthoughts

    originalthoughts Member

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    Did u answer why government regulations are needed?
     
  13. Kyklos

    Kyklos Well-Known Member Donor

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    The Regulating State and the Market Place

    Free Market Libertarians claim vast metaphysical powers for the collectivist abstraction called, “The Market.”

    Anthropologist David Graeber discovered in his historical research of cultures that markets and currencies do not spontaneously exist, but are brought into existence as a side effect of emerging States. Government is always a dynamic component active within markets, “despite the dogged liberal assumption—again, coming from Smith’s legacy—that the existence of states and markets are somehow opposed, the historical record implies that exactly the opposite is the case. Stateless societies tend also to be without markets.”(Graeber, David, Debt: The First 5,000 Years, Kindle Loc: 1014-1016.).

    Who regulates is the key question and this is why Hayek’s “Road To Serfdom” is flawed. Keynes criticized “The Road to Serfdom” for confusing economic policies with the deeper source of totalitarianism since any social mechanism can be utilized for immoral ends such as markets whether planned, or less regulated if a community chooses oppression over liberty. Hayek believed there are situations in which government market intervention is justified as in the case for social welfare programs. Hayek contradictorily argues that government intervention is bad by definition and then offered exceptions. ​

    Self-Regulating Market ideology assumes what economist Steven Keens calls, “Dynamic stochastic macroeconomic equilibrium models” that ”describe the behavior of the economy as a whole by analyzing the interaction of many microeconomic decisions.” DSGE models assume that markets will always self correct to equilibrium and these equilibriums can be mathematically calculated. Macroeconomic mathematical models builds on a number of assumptions not consistent with the way markets actually function. One such assumption is the first welfare theorem also known as the financial market efficiency hypothesis—that markets cannot be improved by market interventions. There are many other a priori logically consistent market model assumptions: that markets are rational, markets seek full employment equilibrium; that markets have a single equilibra; there are unbounded (having unlimited knowledge) rational agents always seeking maximum utility; competitive markets are frictionless; no single agent is large enough to influence prices; and the rational expectations hypothesis which assumes that all agents are free to make trades contingent on any future observable event and are not systemically wrong in their predictions. Although economist John Maynard Keynes led the way in modern statistical analysis of market behavior, he always had a healthy skepticism toward such methodological tools so as not to let logico-mathematical models dictate how markets ought to function rather than describe how markets behaved in their totality.
    Self-Regulating market advocates present an over simplification of how the markets are actually regulated. They often use as examples for their arguments commodity prices and wage prices and skip over the other more complicated areas of international finance that need government regulation which a ‘Self-regulating free market’ could not possible address. Economist Karl Polanyi wrote in 1944 how international trade and money need government regulation. An unregulated economy is truly a square circle.
     
  14. originalthoughts

    originalthoughts Member

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    Why do we need government regulations? It’s a simple question, why do you refuse to answer it?
     
  15. Kyklos

    Kyklos Well-Known Member Donor

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    The Slaughter House Efficiency of Free-Market Libertarianism

    Libertarian market doctrine claims that unregulated market economies “efficiently” allocates scarce resources.There are at least four counter-arguments to this doctrine.

    First, there are natural monopolies like police, fire, phone, and power utilities that are best regulated by government to prevent private monopolies from exploiting consumers with high prices. It is inefficiency to have multiple proprietary phone and power lines running into every home from each vendor so these industries are inherently monopolistic. This is the problem currently with cable and wireless Internet services provided by a few telecom companies charging high service prices with slow speeds. Susan Crawford describes the inefficient internet service in her book, “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.

    Secondly, private industries “externalize” true production costs to society at large. Corporate speak is able to hide behind the morally neutral science of economics to override all other concerns of social duty by using a value-free objective scientific language that ignores history, morality, and society. Corporate language only acknowledges profit maximization, business efficiency, and practices externalization of costs that transfers proprietary corporate costs to other spheres of society to bear. We have witnessed production cost externalization with the Gulf of Mexico BP Deepwater Horizon 5 million gallon oil spill in 2010, the Dustbowl disaster during the 1930 because of farming practices, and hydrolytic fracturing for oil and natural gas that results in polluted ground water.

    Thirdly, the belief that industrial production and consumer demand are all directed out of need of material scarcity is an assumption of the Ricardian economic model. In the documentary “The Age of Uncertainty,” Galbraith does challenge the assumptions of high level of production in his 1958 book, “The Affluent Society.” In those days production was measured in Gross National Product (GNP).
    Galbraith challenges the conventional wisdom of economic orthodoxy in the widely accepted doctrine of consumer demand—Ricardo’s theory of consumer demand as production for security.
    In the same book Galbraith’s counter arguments highlight the market force of corporate advertisement in the directing the “needs” of high-level production of consumer goods. In other words, much production involves the creation of false consumer needs. There is massive waste of resources in the multi-bullion dollar advertising industry of Madison Avenue for privately produced goods and services while public services go wanting.
    He defines this relationship between wants and production as,“...the dependence effect means that it grows out of the process of production itself” (Ibid., p.126)."

    Galbraith brings to the uncritical and tautological concept that a high GNP is good by asking the question of the quality of life as measured against the quantity consumer goods production, “In technical terms, it can no longer be assumed that welfare is greater at an all-round higher level of want production than at a lower one. It may be the same (Ibid., p.127). "

    This bias toward the production of private goods and services assumes yet another free market doctrine: the belief in the “sovereign consumer” that drives market demand. Consumer sovereignty is an important example of a free-market doctrine that has status equal to natural law. Consumer sovereignty doctrine claims that products purchased freely by individuals transmit demand signals through a vast self-regulating market system to inform producers which commodities to produce and sell. Individual consumer choice can change production priorities so that a free self-regulating market always reflects consumer preferences enabling industry to efficiently provide those products desired by consumers. Essential to this function is that demand originates unidirectionally from individual consumers to producers of industrial goods. Economist John Kenneth Galbraith named this orthodox view of consumer instruction from individual, to market, to producer as the “Accepted Sequence” in his book, “New Industrial State,” (Mentor, 1972, page 194). Neo-Liberals and Libertarians praise this consumer demand function as free market capitalism’s greatest achievement for modern humankind. Consumer sovereignty is a staple of Neo-Classical economic textbooks as in the examples below:
    Anywhere praises of free market capitalism are sung, faith in this religion of consumer sovereignty can be found. But is this the way markets determine production changes for consumer goods, or is consumer sovereignty a convenient myth that conceals how production is actually guided? Looking at real life, one will find heresies everywhere that contradict this accepted sequence of market instruction from consumer to producer. In fact, consumer demand authority more often originates in the opposite direction from producers of consumer goods to individual consumers: producer sovereignty is more likely to guide production changes than individual citizen choices! There is ample evidence for this contradictory view of producer sovereignty.

    There are many of products not chosen by the individual consumer. Military weapons systems are not selected by individual choice. Space stations and space vehicles are not on many person’s shopping lists, nor are football stadiums, nuclear power station models, and large super sonic passenger transport airplanes. Yet, all of these products together make up a large portion of industrial production capacity that never hear of consumer desires, or conform to their will. In some cases, the consumer citizen gets delivery of advance fighter jets, submarines, football mega-stadiums, and nuclear power stations regardless of their preferences. In these situations the accepted sequence of consumer instruction is reversed.

    Nuclear power is a good case in point. In Japan 79.6 percent of the people polled by Japan Association for Public Opinion Research favored phasing out of nuclear power reactors in Japan. However, in spite of consumer preferences the Ohio nuclear reactor is restarted amid protests of 200,000 Japanese consumers. It appears the state police have to enforce free market preferences for nuclear power with truncheons.

    Another demonstration of producer sovereignty is resistance by agricultural biotechnology companies like Monsanto that spend millions to prevent labeling of genetically modified foods. Controlling production firms often exercise power in extra-market producer persuasion—or force of law--to manage consumer demand and behavior to protect producer investments. Producers impose their will on consumers so that market economies are no longer directed by sovereign consumers, but rather consumer choice is managed by a planned market economy of autonomous market makers. Henry Ford is reported to have said, ‘If I’d asked people what they wanted, they would have asked for a faster horse’. A managed market by producers is necessary, from their point of view, to protect expensive technological product development, and massive investment in product advertisement.
    ...continuing below to post #166.
     
    Last edited: Dec 2, 2020
  16. Kyklos

    Kyklos Well-Known Member Donor

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    ...continuing from post # 165.

    Producer organizations spend billions of dollars to manage consumer tastes and behavior in extra-market advertisement to direct consumer-purchasing patterns. Large corporations that make up half of producers devote large resources to demand management of consumer wants in advertisement, price control, and even government support that includes force of law, intimate domain property seizure, and zoning authority. In reality, consumers are not independent individuals, but rather act as passive agents responding to advanced psychological marketing techniques designed to steer demand more compatible with corporate market interests than with human needs that improve quality of life.

    Consumer sovereignty is a”...conservatively useful myth that conceals the reality.” (Ibid., p. 78). Belief in consumer sovereignty mythology effectively shuts down debate about larger issues concerning what products industry should produce, and what limits should be placed on such industrial production. The real power of ideological frames is in how they limit the scope of inquiry by forming consistent logical assumptions of how markets function, and citizens behave in society. If consumer sovereignty is the frame through which markets are viewed—that markets reflect individual autonomous choices of consumer wants which in turn direct production capacity—then any criticism of what social purpose productive industrial capacity is to be devoted is nugatory since market production is by definition expressive of what consumers want. Defenders of consumer sovereignty equivocate on the propositional meaning of "The free market reflects consumer choices!" by initially proclaiming it as a statement of fact, but actually presenting this proposition as a definition of the market, and then switching back to its factual meaning when convenient. By this circular equivocation, they can argue consumer sovereignty ad infinitum. This same circular equivocation technique is used to argue, “Government is inefficient.” To argue these larger questions of consumer market production is to argue against oneself since markets simply produce what we instruct it to produce. And this circular relationship between consumer wants and consumer goods is rationalized as successful by predetermined standards of scientific soundness and economic efficiency.

    If the doctrine of consumer sovereignty were true, there would not be any conflict between consumer wants and consumer industry products. This is clearly not the case. To argue that independent consumer choices of consumer goods translate into an aggregate market that also embodies those same preferential choices is therefore also free is to commit the fallacy of composition. Even if a consumer desires cheap electric power, it does not mean they also want contaminated food, water, and air. Consumer choices are filtered through corporations--highly planned productive organizations--that manage demand to restrict choice and independence. Those consequences of production that are undesirable to consumers are not recognized as part of market processes a priori. Instead market success is measure in corporate metrics needs of profit, market share, quantity output, cost efficiency, and accumulated capital. In this ideological formula corporate profits are identical with consumer perceived needs and desires.

    Corporate advertising propaganda does not hesitate to identify a consumer product with sexual virility, intelligence, popularity, success, and existential purpose. We should not hesitate to ask these larger questions of economic purpose, societal standards, production limits, and our quality of life in an affluent society.

    Lastly, Free-market efficiency assumes perfect knowledge of the consumer. George Shackle’s book, “Epistemics and Economics: A Critique of Economic Doctrines,” contributes to this critique of free market economics by questioning the so called “rational choice” of economic agents. First, there is the problem of what is “rational.” Secondly there are real life limitations of human knowledge that impacts the rational choices of individuals. Here again we see flaws in an economic theory that postulations a mythical economic agent in a pre-Lapsarian market model free of imperfections: a frictionless world of supply and demand, omniscient agents, reasonable consumers, predictable behavior, tamable mathematical risk, free economic actors, and competitive markets of pure equilibrium. Economic mathematical formulas could perfectly predict the future if only humans were mechanical automatons that lived in a static world without time. Heraclitus told us the cosmos is not static, but exists in a dynamic river of time.
     
    Last edited: Dec 2, 2020
  17. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I'm just going to point out that investors in the stock market don't have a right to artificially stabilized markets.

    How about this: Investors and companies who want a stabilized market should be required to invest in a separate stock market, where they will have to pay additional taxes, but the government will also play a special role in that market to "stabilize" it and keep investors solvent.

    The truth is that no one would do that, because every investor would know that the cost of special taxes would outweigh any benefit from government stabilization.
     
    Last edited: Dec 2, 2020
  18. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Maybe you can explain to us how government intervening in the stock market is an example of the Fallacy of Composition, and we can discuss that.

    But I don't have high hopes.
     
  19. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    How about a Libertarian Party that just hands out a little bit of free money to everyone (as well as maintaining current welfare levels) ?

    A little bit of free money given out to everyone would still probably be a much better use of that money than excessive regulations, mandates intervening on the free market, and huge amounts of taxpayer money blown on "initiatives" in the economy trying to help of change things.

    Neoliberals waste huge amounts of money with their government economic intervention. What they do is even worse than trickle down, when it comes to wanting to help the poor.
     
    Last edited: Dec 2, 2020
  20. Kyklos

    Kyklos Well-Known Member Donor

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    These topics concerning economic theories such as free-market equilibrium, market efficiency, the demand homunculus, and consumer sovereignty compose only a part of the American propaganda model that goes far beyond economics.

    Noam Chomsky gives a short lecture on the history of American propaganda and how the "Lying Elites" steer the ship of state exclusively in the direction of money interests to the detriment of everyone. Particularly interesting is at 6:35 minutes where Chomsky reviews American sociological propaganda post-WWII.

    The God That Failed Transition and Controlling the Public Mind | Noam Chomsky
     
  21. Kyklos

    Kyklos Well-Known Member Donor

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    Noam Chomsky gives a short talk on fake Libertarianism and the nature of predatory capitalism. Traditional Libertarianism has always been leftist for being opposed to the master-servant relation.
    Noam Chomsky on Predatory Capitalism
     
  22. Kyklos

    Kyklos Well-Known Member Donor

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    In regard to the "market efficiency hypothesis," Noam Chomsky gives this short lecture on the concept of market efficiency to justify privatization of the commons.
    Noam Chomsky/ Market efficiency and privatization
     
  23. Kyklos

    Kyklos Well-Known Member Donor

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    The subject of "keeping up with the Jones" (emulation) is an important concept in market theory and sociological propaganda to influence people's beliefs and behavior. Emulation is associated with the themes of "human alienation," "the Having mode of being," social control, market manipulation, and the criticism of commodities defined as products produced for the sole purposing of selling for exchange value (a price). See the short video lecture below by Dr. Noam Chomsky on "advertising."
     
  24. Kyklos

    Kyklos Well-Known Member Donor

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    Keynesian Economics and Friedman's Monetarism

    Today’s economic model is Friedman’s Monetarism, which was unsuccessful in creating aggregate demand in the 1930s, in the United States, and Europe.

    John Maynard Keynes saw the politicians’ contradictory willingness to spend for war, but cautious for spending to reduce unemployment. The use of capital in both war and peace involved the same economic principles of production and consumption. Governments have always fought foreign wars and engaged in massive deficit spending for armaments so Keynes asked why not use the same economic principles constructively to fight domestic unemployment and depression. Keynes wrote,
    Keynes explained that capital expenditures for war, or to reduce unemployment function according to the same neutral universal economic laws regardless of whether the ends are constructive or destructive. Keynes famously wrote about a parable of buried glass bottles of banknotes. Remember, this is a thought experiment, a parable of an economic model to make a point about what we call today the “business cycle.”
    One could call it a “make work” project, but that misses the point entirely. One section of this quote by Keynes, “It would, indeed, be more sensible to build houses and the like...” is often left out by Laissez-faire apologists to render Keynes’ statement absurd. All free societies must make the political distinction between existing economic principles and specific national policies. These economic principles can be applied to any set of policies depending on the moral, or immoral, aims of a given community. Keynes clearly pointed this out; historically these universal economic principles have been enthusiastically directed toward war.

    Monetarist Milton Friedman has a parallel parable to Keynes’ buried bottled banknotes famously call “helicopter money.” Friedman sarcastically suggested "dropping money out of a helicopter.",[46] in order to avoid dealing with money injection mechanisms and other factors that would overcomplicate his models.”

    And Keynes was not original on this point concerning the economic principle of created, or stimulated, aggregate demand. Keynes read and knew a vast amount of economic history. His famous bottle and treasury note parable sounds very much like a modified version of another parable by the little know English radical, Thomas Spence (July 2, 1750 – September 8, 1814) exemplifying the same insight over a century earlier describing the business cycle of investment, production, employment, and demand as Say’s Law formulated in 1803. Keynes rejected Say’s Law (specifically it's self-correcting tendency to equilibrium) for reasons I will not get into here. Thomas Spence wrote in 1807,
    Again, Spence was not advocating actually blowing glass bubbles and breaking them to stimulate the economy—this was merely a parable of an economic model, like Adam Smith’s Bartering Savage, or the Robinson Caruso self-employed Economic Man, or Joseph Townsend’s island of Juan Fernandez populated only by goats and dogs (Polanyi, Karl, The Great Transformation: The Political and Economic Origins of Our Time , pp. 117-118, Beacon Press. Kindle Edition). Rather, Spence was, much like the economist Jean-Baptiste Say, trying to identify these economic principles of wealth creation in a cycle of investment, production, employment, and consumption.
     
    Last edited: Dec 7, 2020
  25. originalthoughts

    originalthoughts Member

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    Why do we need government regulations on the economy?
     

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