An inconvenient Truth

[nitro]

I have read Yves Smith book "Econned", and she raises an interesting hypotheses regarding the very foundations of capitalism. Let me quote her because I cannot do better than her own words:

"...On one level, this book is about how largely unproved but widely accepted economic theories led to policies that produced the global financial crisis that began in 2007. On another level, it illustrates how ideologies establish and defend themselves even as evidence against them mounts [my emphasis].

Many of the analysis of the crisis have focused on description - how this disaster unfolded - or on the lower mechanisms that played a meaningful role in it's development...While this line of inquiry is instructive, it nevertheless misses the true driver of the calamity...

...Accordingly, the causes of the financial crisis should not be sought merely among actions of particular individuals and companies, but also among ideas [my emphasis] that made it possible.

...Yet, modern economists have, by and large, succeeded in becoming oblivious to practically every imperfection marring supposedly 'free' markets.

...In this book, I have sought to explain to the lay reader how widespread adoption of largely unproven (or in some cases, disproven but nevertheless widely used) economic theories produced the financial crisis that began in 2007. Nearly all of their flaws have been described by economists and most are well known within the discipline. Yet these problems have been dismissed as inconsequential or merely inconvenient [my emphasis]."

How is it that capitalism and in particular free-market capitalism as practiced in the United States is sold as a working system, or that it is "the best system we have compared to all the rest that have come before it" ?

Will the mounting evidence against markets always correcting themselves without any need for external influence, and that the retort that "biggest punishment is the one unleashed by the market", or "spontaneous order" or "Invisible hand" - is this idea defunct finally in the consciousness of the world?

 

[Random.Capital]

The United States does not now, nor has it ever practiced "free market capitalism".

 

[pspr]

That statement says absolutely nothing.

 

[bkveen3]

Using the United States as your evidence for why free market capitalism doesn't work is like using a cat for a demonstration on how well behaved dogs are. How people can't tell the difference between America and capitalism is beyond me. You are correct in saying that capitalism doesn't work when you remove risk and only reward greed. It's our own faults for destroying the system.

 

[Martinghoul]

She's sorta right...

It's not that the idea of capitalism itself is bad. It's just that, like many other successful ideas, it has fundamental imperfections/flaws that are easy to overlook and brush under the carpet. And that's exactly what happens...

 

[Dataa]

Quote from Random.Capital:

The United States does not now, nor has it ever practiced "free market capitalism".

while I think you are 100% correct

the problem is that now more and more it is not free market

that's the problem

why can't government leave it on the level. they keep upping their manipulation, big problem, this is what is collapsing USA power

 

[Debaser82]

Some people claim we live in a system of mercantilism and have so for many centuries now...

http://en.wikipedia.org/wiki/Mercantilism

Not so sure on the accuracy of such a statement but reading a bit about it sure rings a few bells here and there in my view.

 

[nitro]

This is the very fight that is being fought between the titans of economics, e.g.:

http://en.wikipedia.org/wiki/Free_market

What more evidence do you guys want that unregulated markets don't work?

 

[nitro]

Quote from Debaser82:

Some people claim we live in a system of mercantilism and have so for many centuries now...

http://en.wikipedia.org/wiki/Mercantilism

Not so sure on the accuracy of such a statement but reading a bit about it sure rings a few bells here and there in my view.

Read the link above this post carefully and you will see that the fight is over free unregulated markets. In particular, read the section on "Ethical justification"

 

[nitro]

Why is it that when economists do their accounting through utility and efficient allocation of resources, that the combined misery of the population is not taken into consideration? Is it that they believe that it is unquantifiable? Or is it that economics does not deal with how best to make a population happy, only in this efficient allocation of resources?

I just don't get how entire countries can be based on one keeping a blind eye to the other. It is one thing to keep your model simple and see what the results may come. It is another to believe that the model should be implemented in reality!

You can prove just about anything if you divide be zero. I claim you can prove just about anything if you remove the misery of a population from your equations. Regulation is the defense of society from flawed [economic] theories that have no business being adopted as an experiment on societies. Remove regulation from free markets, and you just allowed division by zero.