15 Oct 09
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Originally posted by sh76Think you got a bit off topic there.
You make a good case from the union point of view. However, the other side of the coin is that the unions have to be realistic. You talk of this enormous pie (profits) and how all the workers want is a fair slice of the pie. Fine, but what about the converse? What about when there's no pie left because the company's doing badly? The unions still want pie, but t uted the good idea and there's no reason he shouldn't reap the rewards.
I was pointing out to the OP that his comment about "generous" benefits to public sector workers was false.
His comment meant he was comparing what "they" get with what "we" get instead of analyzing public sector benefits on their own merit.
Just because you get 10 sick days and I get 3 sick days, it doesn't mean that your employer is more generous, it just means that my employer is an ass and i'm too weak to stand up and demand fair treatment.
An argument based on envy is no argument at all
15 Oct 09
Originally posted by uzlessYou're right. Also a generous vacation benefit could be offset by a less generous salary (common for public sector).
Think you got a bit off topic there.
I was pointing out to the OP that his comment about "generous" benefits to public sector workers was false.
His comment meant he was comparing what "they" get with what "we" get instead of analyzing public sector benefits on their own merit.
Just because you get 10 sick days and I get 3 sick days, it doesn't mean ...[text shortened]... means that my employer is an ass and i'm too weak to stand up and demand fair treatment.
15 Oct 09
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Originally posted by telerion
I have a moment this evening to respond a bit. I want to say that I strongly agree with sh on this point about entrepreneurs. This could be considered a response to Rob's post about greatly increased profit sharing with workers in that other thread.
I think it is telling that when Rob or others propose this sort of thing they always see it as a great b uch this as giving out vested positions when what they really want is a handout.
I think it is telling that when Rob or others propose this sort of thing they always see it as a great boon for workers. This is not at all apparent. The overwhelming majority of entrepreneurs (or capitalists) fail. Can you imagine telling a waitress at a new restaurant, "We're going to invest 90% of your wages (including tips) back into the business. If our restaurant succeeds we'll pay back your wages plus a large bonus. If it fails, we'll keep the money. Better luck next time.". Is this really the sort of thing that these guys advocate? Of course, it isn't.
Of course it isn't. What loonie could live on only 10% of their wages? Most people have bills to pay and can't wait for the potential windfall months or years down the road in order to get paid. This example is ridiculous.
The problem with their thinking is that they only take into account the successes and then argue that the capitalist isn't doing much. Sure it doesn't look so important to be the capitalist when things work. If you take into account the very large risk of failure, you see that the firm is already giving the workers a cut. It's a guaranteed payout succeed or fail. If you think of that, suddenly their position doesn't seem so unfair.
What risk? Unless the entrepreneur is putting up his own cash there is little risk to him other than the time he's put into. Most of these startups get grant money, a loan, or investors. The risk is taken from these people, not the entrepreneur. It's not like the entrepreneur doesn't pay himself a wage. He's doing fine and as long as he's set up his company as a corporation, he isn't personally on the hook to pay the bills should the company fail. The suppliers take the hit, not him.
What these guys want is for workers to have all of the upside and none of the downside. They hold none of the risk but get a large fraction of the reward.
Try telling that to workers of a plant that goes bankrupt and they find out that the pension they were counting on doesn't have enough money in it.
As an aside I'll point out that that is a recipe for greater unemployment because fewer people will want to be the entrepreneur under this scheme. But let's not get distracted with that. What Rob and others are really saying has nothing to do with workers being invested in the firm. They just want laborers to be paid more, end of story. Well, if that's the case why not argue for increased labor subsidies or increased after-tax transfers or eliminating labor taxes? In fact, I bet that they aren't even talking about all laborers. Are they really lobbying for the six and seven-figure earning workers? Or is this about the middle-income lower blue collar guys? In that case, why not subsidize them and reduce low income tax brackets? I think it's just muddled policy to couch this as giving out vested positions when what they really want is a handout.
No, what they want is recognition that without the worker, the company doesn't exist and nobody makes money. They want a fair share. They don't need handouts from the gov. All they need is a proportionate amount of compensation for the value they create.
What a capitalist will argue is that the worker is NOT entitled to proportional compensation because the worker can easily be replaced by someone willing to work for a cheaper salary. It's the classic zero sum game argument and it's why we see most of our jobs replaced by workers willing to be paid pennies for their work...
The availabiity of a large labour supply..every capitalists wet dream! And we're going through it right now. Just keep your eye on that gap between the rich and the poor....
15 Oct 09
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Of course it isn't. What loonie could live on only 10% of their wages? Most people have bills to pay and can't wait for the potential windfall months or years down the road in order to get paid. This example is ridiculous.
Okay then. If the business fails, then they have to pay back most of their wages. The point is you want them to earn a higher wage but sell it as a return on investment. Where is the downside for the worker when things fail? Sure they are out of a job, but then so is everybody in the organization. The worker isn't taking on any more risk.
What risk? Unless the entrepreneur is putting up his own cash there is little risk to him other than the time he's put into. Most of these startups get grant money, a loan, or investors. The risk is taken from these people, not the entrepreneur. It's not like the entrepreneur doesn't pay himself a wage. He's doing fine and as long as he's set up his company as a corporation, he isn't personally on the hook to pay the bills should the company fail. The suppliers take the hit, not him.
WHAT RISK? I've know a lot of entrepreneurs. I have relatives and friends that are. That take on a lot of risk. Most of them put up a substantial fraction of money (plus foregone net wages elsewhere). It's not like most of these people get funding from venture capitalists or public investment. While some may get some grants, that's still a small fraction generally of their capital costs. You make it sound like entrepreneurship is the easiest thing in the world. Do no work. Get paid bank. If that's what you're saying then you are totally wrong. If it is such an easy, riskless endeavor, why do the vast majority fail?
Try telling that to workers of a plant that goes bankrupt and they find out that the pension they were counting on doesn't have enough money in it.
So this is about blue collar workers. Okay. Here you've given an example of a worker that gets some risky compensation that augments his usual salary as a benefit of working for a successful company. Is this the sort of thing you guys want to include in more worker compensation packages? Remember most entrepreneurial activities fail. Again, I think you guys just want to pay blue collar workers more money.
No, what they want is recognition that without the worker, the company doesn't exist and nobody makes money.
That's true, but the same can be said of the capitalist. Without him these laborers have to find work elsewhere.
They want a fair share. They don't need handouts from the gov. All they need is a proportionate amount of compensation for the value they create.
And what's that fair share? Is it fair that an equally capable worker sits home without a job even though he'd be willing to do just as good a job (or better) for less? If you don't use the negotiated wage as a measure of "value" then what do you use? Are you going to set prices as a central planner?
It's the classic zero sum game argument and it's why we see most of our jobs replaced by workers willing to be paid pennies for their work...
Classic zero-sum game argument? Explain. It seems that you don't value these other workers who are willing to do the work. I also think that at least in the US, you're exaggerating being paid pennies. But you're idea basically involves you (or some central planner) picking who gets to work and how much they get paid.
The availabiity of a large labour supply..every capitalists wet dream! And we're going through it right now. Just keep your eye on that gap between the rich and the poor....
Funny you say that. I've looked into this issue over the last 100 years! Income inequality and the business cycle is one of my major research interests. At least in the US, income inequality tends to decline during market downturns.
15 Oct 09
Originally posted by twhiteheadLOL, true, it also causes tax-evasion. However, the forces are not always obvious, as when a company choses not to invest in a country because their results are taxed less heavily elsewhere or when over a decade it turns out that the high taxes did deter some people form continuing an enterprises and instead liquidated or changed or cashed out, or people chose to work in the public sector instead for less income and more free time, etc.
I would like to challenge this particular point.
Does anyone here agree with the claim that higher taxes reduce the incentive to earn income? I personally find it hard to believe. I have lived in two countries, one with much higher taxes than the other, but have not noticed much change in my incentive to earn income. Higher taxes do tend to provide incentive to dodge taxes.
Less obvious, but very real forces that accumulate their impact over time.
15 Oct 09
Originally posted by KazetNagorraI've read about basic game theory before, including prisoner's dilemma, and brushed up on some further details just now, such as nash equilibrium in which known the other's moves allows analysis for an optimal outcome, and I still believe that there is much room for experimentation with additional forms of market forces in current public-sector spheres. Free-rider problems and such are some reasons for public goods, sure. However, politics tends to misallocate resources from optimal outcomes because policy is often influenced by the affected interest groups and not always efficiently done or efficiently redistributed where that is the intent.
I think the main point libertarians don't (or refuse to) understand is that there are some things which the free market simply cannot provide. There is no way a free market can provide police coverage, for example, except for a system of mandatory insurance with some kind of "security firm" (but then, what is the difference with taxation for a national ...[text shortened]... such as education and health care - you would do well to read up on the prisoner's dilemma.
Enron, a failed energy company, is a risk, since crooks, mistakes, and price fluctuations exist. They exist in the public sector too.
The UK rail was apparently something that may have required greater investments and more time to show more of the long-run effects of a private enterprise's efficiencies, but since the politicians decided not to fund it and to instead send it to the non-profit sector, we will not get to see the experiment run its course.
I do allow for some public goods having a place, but not where they end up running even 50% of GDP budge deficits.
Look at the debt of the US and Japan, is there no obvious room for greater libertarianism and less government involvement in much of the world?
Look at how much the Scandinavians pay in taxes. How much are they sacrificing from their earnings to the public sector... a LOT!
If you consider income lost to taxes, the losses are staggering.
15 Oct 09
Originally posted by PalynkaI am surprised by the cordial response, I incorrectly thought you'd give a more attacking response, this one is at least fair. Not that I completely agree though...
I think the main criticism with most libertarians that I have, is that they usually are inconsistent in their arguments. I also disagree with some of their predictions (regarding efficiency), but this is something that can only be answered empirically and, in my view, can only be determined case by case. So let's start by discussing consistency.
Let me tr ...[text shortened]... ot if these costs are present, but if they are serving a purpose that outweighs them or not.
exceptions do not disprove a general rule. There are costs associated with general intervention, and like you said, there may be a cost-benefit judgement to make. However, in practical everyday government spending, the costs and inefficiencies and distortions and over-spending tend to be more apparent.
Example, retirement benefits, beneficial for growth, or a drag on growth?
On the other hand, investing in the education of the youth helps growth. On the other hand public employee salaries an benefits, helpful or hurtful? Have you seen the public school systems in the US?
One of my criticisms of wasteful levels of government spending is their drag on growth which taxes an extensive number of future generations that would have benefitted (or been further hurt) from differences in compounding interest.
You can find a million things that are each worth some government waste, but as the growing size of government and costs in many countries shows, a rapidly increasing number cannot be afforded in perpetuity.
15 Oct 09
Originally posted by MelanerpesThose two things are both important, but I disagree that cutting taxes or shrinking government makes them worse. Usually, if you cut government spending, you reduce government costs and reduce the government deficit.
the focus here appears to be on two things
1. the need for much more fiscal discipline - to get the deficits and debt under control
2. the large amounts the WFA (waster-fraud-abuse) that always seem to infect any system of government.
But general efforts to just "make government smaller" or "cut taxes" don't really address these problems, and they ...[text shortened]... t ends up spending a lot more money for the same amount of stuff over the next 10-20 years.
Usually, if you return most or all of the savings from cuts in government spending by cutting taxes, then the individuals tend to put the money towards less WFA and towards more productive endeavors (not to even get into the greater freedom and rights and choices).
As Greenspan said about the Bush tax cuts, they could be postiive, if the cuts were paid for with concurrent reductions in government spending.
That's one problem with politics, you win if you keep people happy, and you make more people happy by giving them more of their money back and by giving them more things, not necessarily by long-run policy improvements.
Tax cuts are not the problem where government deficits are huge and spending is in the billions or trillions.
Is that government spending billions on productive spending, or not so much?
Usually government is spending it on a pet project or on keeping expensive entitlement programs going. I'm talking about such things as social security at the same age 65 when life expectancies have dramatically risen since the original social security program was started, for example. It drains huge amounts of government resources. That's just one example.
Social security taxes are hefty too, but we're basically telling healthier elderly people, don't worry, you won't have to be productive any more, we'll treat you like people your age were treated 70 years ago which is to say like you're as sickly as people were back then at that age and like life had little more time to run...
Not politically popular, but true, government is misallocating resources to discourage productive lives.
15 Oct 09
Originally posted by MelanerpesI agree that government isn't always and everywhere necessarily evil, but I do believe that power corrupts and that absolute power corrupts absolutely.
I agree with the libertarians' mission in that there should always be an ongoing effort to find ways of governing in ways that are less costly and less intrusive. But I disagree with them when they start claiming that government is evil in of itself.
I see a parallel with someone running a business (in an industry with lots of competition). They are al ...[text shortened]... id of as much WFA as possible - and they are often eager to cut prices to remain competitive.
Your parallel hits on the eerie truth that governments are like a business but that doesn't have to seek to add value through innovating, doesn't have to stay in business by earning its own income but by ordering others to pay it more, that doesn't have to cut WFA as much as possible and are not as eager to cut spending.... scary sort of business, I think.
15 Oct 09
Originally posted by eljefejesusI have no doubt that the level of taxation has an effect on a countries competitiveness internationally, it may have an effect on a businesses profitability or overall success, but those were not the claim at all.
LOL, true, it also causes tax-evasion. However, the forces are not always obvious, as when a company choses not to invest in a country because their results are taxed less heavily elsewhere or when over a decade it turns out that the high taxes did deter some people form continuing an enterprises and instead liquidated or changed or cashed out, or peopl ...[text shortened]... re free time, etc.
Less obvious, but very real forces that accumulate their impact over time.
You said:
Reduced government red tape and political spending would go a good way towards freeing up resources for the taxpayers and maintain the incentives to earn income.
Your only support of that claim so far is to claim that taxes increase business stress causing people to choose a safer career for a lower income. I find it hard to believe that that is a particularly strong effect.
15 Oct 09
Originally posted by sh76Thanks for the thorough response, not sure I can get to all of these today, but I'll give it a go.
Okay, fair enough. Let's go. 🙂
[i][b]My position is that there are only a limited number of ways that government with any reliability tends to not spend enough and that is usually on very specific things (i.e. investments in education and incentives for intellecutal property innovations), whereas most governments of the world would do well to move much of t ...[text shortened]... s was entirely necessary, but I can understand why you felt it necessary. 😉
Anti-trust laws I agree with too, just to increase competition and competitiveness by it's enforcement and even (to a lesser extent) by the very threat of its enforcement.
That is a small slice of most government spending and involvement.
The private health insurance system may require some small supervision, but not a massive bureaucracy. I still believe that the market-based health system in the US produces great amounts of innovations in part by virtue of its very market-oriented nature. As the current health reforms show, public involvement will likely involve increasing costs (not the promised-decreases), increased deficits (not the paid-for promises), and for waste, inefficiencies, etc.
Helping the poor I am all for, and in a similar way as you suggest which is to not make them dependent. I am for enabling the poor through education and an efficient labor market and a favorable business climate that can provide and create well-paying jobs for many people. People should not have to live with family on average as long as they do in Europe and the unemployment rate should not be in the double digits except during terrible recessions like the current one... it has long been more commonly seen in much of Europe to see such high unemployment as we're not seeing in the US.
As for red tape and spending, 0 is not the answer (state of nature/war anyone?) but certainly current levels in even successful economies like the US, Japan, and in most of Europe are even higher than need be. There are even more obvious examples in poor countries. The NASA and CERN spending you mentioned are certainly productive, but they are more of an exception than the rule. NASA now has a much leaner budget, and that's not a bad thing if the savings keep America solvent. However, most spending goes to Social Security, Medicare, education and the military, not towards NASA and CERN. There can be many good investments, but I maintain that they are currently a tiny smidgeon of government spending.
As for spending on a balanced budget (or pay-go), basically I agree. I would add a counter-cyclical component to it where most years produce savings that can be tapped during recessions. Otherwise, you end up creating a big of a pro-cyclical spending policy that doesn't mitigate recessions.
Government retirement programs / pensions tend to be hard to fund during bulges like the baby-boom and during increasing retirement ages. It's politically difficult to reform retirement benefits too. That's a problem with government benefits, they are hard to reform if it affects too many people. I would disagree with a proposal that keep the current system. Perhaps at most a government match and tax-free accounts be expanded to encourage private savings? I don't know about forcing people, to some extent people have to be allowed to fail to and to reap what they sow, for the good of society and future generations too, and to some extent its an incentive for people to be wise, productive, and to save and invest.
On many points we agree, but clearly a different as well. Good debate and points to continue debating over time.
As for defensiveness, what can I say, Palynka can be critical! lol, all part of debating, what can i say, the challenge to defend one's point is fun expecially in the midst of disagreements!
A pelasure debating with all of you, additional responses from me may have to wait.
15 Oct 09
Originally posted by telerionOkay, a brief response since this would be the fourth of the original challenges.
To keep things brief, I will first say that my position is very much in line with Pal's post. Government's role in an economy should be examined on a case by case basis. Most of us here (on this thread, certainly not the site in general) understand that there are cases where a market absent government intervention is particularly unlikely to deliver socia ...[text shortened]... rest of the day and evening and the next day. It may be a while before I respond again.
I have to continue to raise the point that in the real world government spending in most countries is so high and excessive as to stand to benefit greatly from reductions and movements back towards non-involvement (libertarian). This is especially true of social security where reductions are long overdue.
Most of us with some economics backgrounds can agree that markets are generally best for allocation and efficiency purposes.
I think all 4 so far tend to focus on the extremes of libertarian philosophy without focusing on the real-world politics of today in which most countries find themselves under stacks of law-books governing them and growing numbers of laws, under debt and interest payments and growing, under pension and retirements obligations and growing, under growing government involvement in healthcare and resulting debt...
So, to keep things simple too, one cannot help it if the real world could stand to benefit from being influenced by libertarian philosophies. The efficiencies to be gained are implied by economic theory and by the great amounts of debt, waste, and interest that will affect future generations and crowd out private investments.
Suffice it to say, you're all wrong.
😀
Okay, another good debate point, now I've fulfilled the obligation I created by the original challenge.
More responses later.
15 Oct 09
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Originally posted by eljefejesusYou should take Palynka's criticism to heart and think more thoroughly about where government intervention is necessary and where it is not. You say that "markets are usually best", admit that "sometimes government intervention is necessary" but do not elaborate on what makes government intervention necessary in those cases. If you have some kind of general idea about why government necessary is necessary in some cases, when markets are successful, and when markets fail, then you can get some consistent idea about socio-economic policy.
Okay, a brief response since this would be the fourth of the original challenges.
I have to continue to raise the point that in the real world government spending in most countries is so high and excessive as to stand to benefit greatly from reductions and movements back towards non-involvement (libertarian). This is especially true of social securi ow I've fulfilled the obligation I created by the original challenge.
More responses later.