> Problem number two is that the economic system does not create incentives to produce the products or technology that generate the most utility. The economic system produces the incentive to create products where the entrepreneur can capture as much of the consumer surplus/utility created as possible.
This captures all that is wrong with most of current startups and VCs in two sentences.
I have the impression that some 2/3 of the investments are being poured into yet another social product with advertising business model. I see little money being thrown at harder problems, and literally zero at art.
I think the proportion of VC funded companies that are doing an advertising bases social product is a bit exaggerated. I'd say the majority of funding is for paid subscription based SaaS web apps and software, stuff that manages some part of the enterprise, analytics, advertising optimization, security, backups, data management, etc. etc. See, for instance, one first tier venture firm's portfolio - http://www.generalcatalyst.com/companies
However, the point remains that few VC funded companies are attacking the areas that have the most potential for raising quality of life. I do not blame the VC firms for this - they are doing the economically smart thing. Software has a much greater potential for generating the high profits of natural monopoly with relatively low capital investment costs. Cleantech simply does not provide the same returns.
In reality, the solution may be more Solyndras. Maybe we need some public institution - government or philanthropic - to grant loans at a 2 to 1 match for equity investment in companies that are tackling socially useful problems. Many of these companies will fail. But the knowledge, know how, and personal experience generated will create the base for the next round of companies, or the round of companies after that, to create products that change the world. But currently it is not rational for VC's to play the long game, because there is little chance than any particular company they invest in will capture the value created by new innovations. Since much the result of the product will end up as consumer surplus/public surplus, it makes sense that the public contribute to the initial funding if the public wants the investment to happen.
The fundamental fallacy in this article is to assume that risk management and avoidance of risk is unproductive, unhealthy and inherently worthless.
But it's not. The financial markets direct energy towards new ideas, old enterprises and value storage. To do that, they have to allocate investment and risk.
Good risk management (or at least moderately well done) generates the best growth for the least risk. Bad risk management can be seen in several countries' stagnating GDP curves.
Nature does this too, by the way. Imagine an ant colony: It grows exponentially, because the more ants are in that colony, the more food they bring in and the more larvae can be raised. But the super organism has to make decisions, with surprisingly intelligent mechanisms, how many of the current ants to risk for food foraging, how many to hold in reserve, how many larvae to raise etc. If they do it right, they grow exponentially, but if they for example risk half of their workers on a single day and loose them to a rain fall or predator, they falter.
I don't think the article makes this assumption. I'd say the general thesis presented in the article is in this sentence:
"Wall Street hedge funds rarely make their fortunes by placing sound long term bets about the proper allocation of resources. "
Now, there's a lot of wiggle room in the word "rarely." I think that everyone would agree that there is some rent-seeking behavior on wall street, and everyone would agree that the banking sector plays a critical role in the economy (moving money from where it is to where it is needed, and managing risk). So the real disagreement is about the ratio.
This article seems to imply that only a quarter of wall street's activities produce economic value. That's very low, lower than I've read anywhere. However, Paul Woolley at the LSE estimates that the financial sector would be a "third to a half" of its size (see link below), though, if it were limited to the wealth-producing activities. It's a controversial statement, of course, but he's hardly alone in this estimate.
For anyone interested in this topic, I'd recommend starting with a New Yorker article titled "what good is wall street?"
Wow, that's a hell of a preamble just to bitch about Facebook.
Facebook emerged in a competitive market and was successful because it was visionary and was extremely well executed. I think that they deserve the success that they've had, and you will have to do some more convincing to show me the 'rent' that they are extracting from me.
Now if you were to ask me whether I think a closed proprietary corporate system is the ideal identity provider for the internet, I would say no. But I expect something better and more open to emerge within the next few years.
The fact remains that the internet sector is fiercely competitive and open, and America's internet sector is the envy of the world, and plenty of well managed countries have been so far unable to come close to matching it. Lumping Facebook and Google in with the financial and regulated monopolies does a disservice to your argument.
Do you use Facebook because it's the best social network product, or do you use it because all your friends are using it? Can you imagine someone coming along and writing a better Facebook? One with stronger privacy controls, better UI, etc? Why hasn't anyone done it? Maybe it's because everyone uses Facebook?
The article's point on this is sound: Facebook makes a ton of money because it operates in an industry where the network effect gives it a natural monopoly. A competitor doesn't just need to build a better product, but they have to overcome the tremendous advantage of Facebook's network.
As the article points out, there is no money in competitive markets. In a competitive market, once Facebook proved the concept, it would've been flooded with clones offering the service at lower prices (less advertising). There is certainly nothing about the Facebook product itself that isn't easily copied.
You have it precisely backwards. It is "visionary and extremely well executed" because it got a crazy amount of investment before it became popular. Some rich people in the Valley thought it provided some social value (not to us, but to them). It became good after a ton of money was poured into it. It didn't get a ton of money because it was good....
A thought occurs to me- the standard historical approach to natural monopolies that people have generally been happy with is government involvement, ala power plants. Would it be insane for the government to get involved with social networking?
Would ISPs and/or cellular service be a good example of what happens when government does not get involved? I don't follow that stuff too closely, but I think both have in fact been de-regulated?
ISPs and cell service are exactly what happens when government gets involved. Power plants are actually less regulated.
Cell service is compeltely broken because the government "sold" radio frequency spectrum. They sold all of it. Now there is none left to sell or distribute. And now a few concentrated companies own the rights (another government construct) to broadcast on their frequencies. So there is a rigged, no competition market, because you can't erect cell towers and broadcast on any frequency anymore (at least those viable for cell service) because someone owns that frequency band.
ISPs, again, are poor government intervention - almost all of the ground wires were laid under government subsidy upwards of a hundred years ago for some phone channels, so all the current private owners of coax / phone lines almost exclusively got them from government that already laid them, and rarely ever lays them themselves (and when they do, they do slight extensions to already established backbone, they aren't laying it themselves).
In addition, these private providers will contract with local governments to provide exclusive service, and will bribe the town council to block competition from laying their own lines (or heavens forbid, the township itself own the fucking wires running under their streets). As a result, you can't lay your own cable / fiber / phone lines (unless you are Google and have billions of political pressure) and even if you could, you are at an insurrmountable competitive disadvantage because not only does your competition already have all their wire laid decades ago, they can readily drop their prices to run you out of the market because they have barely any overhead in providing your service. They are making hand over fist profit off of consistent customers that are paying year on end. And then, there is inertia, and market manipulation by the established players, to make "average joes" not consider switching providers.
On the other end of the spectrum, it is federally regulated that power companies need to be contractable, in that you can select the company you get "power" from, even though the actual power lines are carrying juice from a thousand plants at any one time, and a lot of peoples homes are feeding back into the system. It is also regulation that enables average joes to set up their own solar panels / wind turbine / generator and get reimbursed any power they feed back into the system - if power companies could do whatever they wanted, they would prevent their customers from setting up their own power backup since it hurts their profits.
In the end, it is not very complex I think - even though the examples can be - if you stifle the ability for new players to enter a market, easily, and compete with the established ones (be it through insurmountable subsidized initial investment to enter the market, actual law book regulation preventing it, or rigged business code favoring the monopoly) you direly hurt the economy by creating artificial monopolies.
Even if the monopolies do "reasonably" well (NASA, for example, basically prevented private space investment because for 30 years it was hugely funded by taxpayers to own the sector, AT&T owned phone service for 60 years by government mandate, etc) markets with only one player (don't even look further than personal computing or the Linux world - there was barely any innovation in GCC until Clang came along to provide competition, or how Firefox had to get a lot faster when Chrome became a real competitor). Competition drives innovation, and in any situation where you facilitate a one man market, you will starve innovation and improvement just by only having one force in the market, even if they have good intentions.
Competition is essential to progress. It is the fuel that produces a huge amount of improvement in every field and business. So if a government is going to craft any law, it should be to make new competition easier to found and enter a market with, not harder. The electric grid regulation makes it easier to enter the market (even if the individual power sources are heavily regulated / zoned / mandated, and the status of a player against a power company only exists for consumers to power co, not business to power co, etc - there is a lot of regulatory cruft behind the respectable outer cover) and as a result promotes competition and better prices for the consumer (the ability to "shop" your power company in a state is a huge reason US power costs are so much lower than elsewhere in the world).
It is why almost all the innovation right now is in web / computers. It is barely regulated, extremely easy to enter the market, and as a result a disproportionate amount of ideas go into it (even when other fields cry for innovation, like medicine, agriculture, telecom, etc) because the market is free and as a result it is healthy.
The problem with the standard approach to monopolies is that in the long term the corporation ends up having power over government, while popular power is disorganized and diffuse. See Government's End by Jonathan Rauch or read about the Problem of Collection Action by Mancur Olson.
My current thinking is that the best route would be to alter corporate charters to give consumers voting power as the company increased in market share. So if a company had 70% market share, there might be a consumer elected board that had the power to veto anti-competitive acquisitions, changes to the terms of service, changes to privacy policies, revocation of open access, etc. If you have Congress trying to regulate the company, the company will end up controlling Congress. But an elected consumers board should have a better shot at representing the interests of the customers of that company.
A quote comes to mind ... Capitalism is the greatest system we know of for creating weath. It is also one of the worst systems for distributing weath.
It seems we are coming to the point where automation has significantly reduced the need for labor in producing basic commodities. It is particularly challenging when one has to advise college bound students as to what subjects offer a rewarding career. The essay speaks highly of the wages in the medical profession ... I think that part of the essay was misinformed. I don't know any medical professional who is not independently weathy and can get by on their salaries. They have massive loans to pay and if they have their own practice, they have to deal with TONS of crap .. insurance, marketing, and so on.
> Capitalism is the greatest system we know of for creating weath. It is also one of the worst systems for distributing weath.
This is an oxymoron. "Wealth" is just stuff. Loaves of bread. Cars. iPhones. TV shows. If you create stuff but just keep it in your warehouse, it's going to go moldy and you're going to lose money. You have to distribute it to make money.
Money itself is of no value. You can't eat dollars, and mine don't sing or dance to entertain me. I suppose you could burn them for heat, if you have actual paper dollars :-)
I sometimes wonder if the state of many MDs finances isn't the result of their own egos rather than any larger failing of "the system".
Most of my friends who became MDs gave almost zero thought to what they were paying for school. They also took on huge amounts of credit card debt while in school trying to live like doctors before they were doctors. Being in a half-decent pre-med or med school entitled them to ridiculous credit card offers. In their minds they were all "roughing it" by driving their parents' hand-me-down Volvos, but in reality they all had new clothes and expensive computers.
When it comes to school, most of them never looked at how much someone graduating from institution X will earn vs. the cost. They all simply wanted to go to Penn or Harvard or Hopkins. If offered a full-ride at a second or third tier institution, but no ride at a top tier school, they all took the no ride option (with one exception, and he's a very well paid anesthesiologist who came out with very modest debt).
Can I tell you how many times I've looked at what school my personal physician went to? Zero.
I think this article nails a lot of key points, and it is really spot on. The sad thing is not many people are going to read it because it is a lot of true words.
I don't think the economic culture of the US bred global business, though. I think the trivialization of the distance did. Glottalization meant that it would be much cheaper for a US based company to enter a fledgling market (say, McDonalds) and reestablish themselves as the market force in that area, since it has a much cheaper barrier to entry than building an entire enterprise from the ground up. The economies of scale grow faster as you approach ludicrously global scale, because you can really streamline all aspects of your business.
There isn't really a correlation with global business and competition, either - I'd say global business is only possible when corruption enables rent seeking business (which has no competition and is rigged to the market dominator) OR when there is real competition, and the global business is so successful because of the economies of scale and significantly lower market entry barriers to new regions than a brand new business.
So you could have either. We have, sadly, a lot of the first, but the second can happen to.
And global business (with competition) is good. It means the competition and economies of scale drive profits to zero, and maximize the benefit to the consumer.
The problem with global business is that when our markets and economics are global but our politics and emotions are local, those super companies have significantly more influence than a tiny group of people in an isolated pocket economy artificially cut off by an imaginary line on a map. The global business that truly connect the world extract their clout from the entirety of the species, while a countries politics gets its validation from its people.
And no country has a population, GDP, productivity, or workforce, competitive with the global one. Of course they will be corrupted by global business. Their resources are much more limited and restricted, because our politics and cultures are outdated in the face of a modern economy.
But this is just one piece of a giant puzzle. Individually, the problems are obvious, stupid, an simple, and often the work of the greedy and corrupt rent seekers. But there are millennias worth of built up greed to lead us to where we are today with the rigged system we work with, and the individual parts complement each other and support one another to maintain the whole broken game. The problem isn't fixing one part, it is figuring out how to remove the tumors before they kill the host, and there are millions of small tumors that add up to a large cancer. And as you chip at the fringes of one, the rest keep on poisoning the system, and they all have to be somehow dealt with.
Rent seeking can't and won't last. You don't need to go very far - just read http://reason.com/archives/2013/04/14/the-end-of-power on the frontpage today (the comments suck however - they basically try to deny the fact that for humanity as a species, the last century has been the best ever)
The basic idea stands - too many people have more comfort, want too many things, and are harder to control - and now more than ever.
The solution to rent seeking is basic capitalism, as in the use of reason.
Ayn Rand style capitalists do worry about the letter and the spirit of the laws and of a contract, because they know it is in their best interest. They are not into rent seeking because they know the end results.
She said that beautifully : "I am not primarily an advocate of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows."
Ayn Rand theory and work can be seen as one implementation of John Rawl theory of justice. He added a 2nd part about equality, but he also deconstructed the opposition between freedom and equality.
Basically, you only need a good premise, then you can work on it. The premise here is reason.
The only real "competition" could be from a belief not based on reason, such as racism or a kind of religious fondamentalism - but not any kind as explained by John Rawls, just the kind incompatible with democracy. I'll put islamism in that bag (the basic idea of stoning to death women who had sexual relation outside of marriage in this day and age is not very palatable to me).
Anyway, the remedy is the same for both diseases - science (and the occasional readings of libertarian books)
>Rent seeking can't and won't last [because] too many people have more comfort, want too many things, and are harder to control - and now more than ever.
That's a rather pie-in-the-sky argument. People pursue rent-seeking because it gives them comfort, material goods, and freedom. The businessman who lobbies for monopolistic benefits, the politician who takes his campaign contributions, the copywriter who creates attack ads: they all follow egotistic interests. Wild, unregulated, snake-oil-and-corporate-trusts capitalism is no solution to these problems.
Maybe I'm just thick as a board tonight, but while you wrote a lot, you don't really seem to have explained "the solution to rent seeking" as you see it. Can you expound?
| I'll put islamism in that bag (the basic idea
| of stoning to death women who had sexual relation
| outside of marriage in this day and age is not
| very palatable to me).
It's my understanding that rules like that (e.g. stoning) are not in the Qur'an, but are 'old' rules thought up by different sects of Islam.
1. This is like decrying Christianity as a cult because of David Koresh. Or getting angry at all Christians because the Catholic church tried to cover up the whole paedophile priest thing.
2. Even people that are part of these sects don't necessarily follow all of the rules. E.g. I've known Jewish people that ate ham.
"She said that beautifully : "I am not primarily an advocate of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows."
Such a shame she let faulty premises and emotion cloud her writing and her philosophy then really.
>> (the comments suck however - they basically try to deny the fact that for humanity as a species, the last century has been the best ever)
Part of me says that the added stresses from never being happy, always want more, do rain on that parade. Maybe being "a dumb peasant" somewhere with a full stomach but otherwise no larger goals is best.
>> The basic idea stands - too many people have more comfort, want too many things, and are harder to control - and now than ever.
Yeah but they are not organized, at least not in USA. Those making bank are kicking back to the politicians that decide what system /laws us suckers have to follow. The greatest investment ever is in the political process, a million dollar donation can easily yield billions.
I think he missed one of the most obvious rent-seeking behaviors - fees. And reducing price transparency in general
Whether you are flying across the country, visiting the doctor, or trying to get Internet installed at your house, a large portion of the actual cost will probably be hidden from you. The travel industry, in particular, lives and dies by how well it hides the true cost from you.
Finding ways to make people pay more for the same things is a large and ever growing component of the economy that is fundamentally non-productive.
I think one of most severe abuses is renting apartments to workers.
You buy apartments and charge people significant part of their earnings for the privilege of having a roof over their heads.
Why is that bad?
As an owner you don't live there yourself so you only have an incentive to keep the place in shape good enough to be rented. Which is usually pretty low.
The worst part is that if you can't find the people to occupy your apartment your costs are pretty low (you don't have a profit but that's not the same as money being drained from your account). So you can buy and hold apartment for years at very low cost. This creates artificial scarcity (in addition to actual scarcity) of places to live that keeps the prices up.
I think progressive property tax would enliven real estate trade. Prices would drop and more ordinary people could afford to buy one on credit instead of renting. This could save working people a lot of money so they can actually start their lives instead of slaving on their first job with just enough money to pay the rent.
Tax should be constructed in such way that holding even large apartment, or even two or three would pose no burden or almost no burden, but you might be better of selling your fifth apartment even at 50% below market price than holding it for a year.
Selling your property involves paying a 5% cut to the agent, buying a property involves paying 5% in fees as points, closing costs, inspections, legal fees, etc. I would hate to do that every year or two as I moved between employers, but being able to rent an apartment anywhere in the world means I can go where there is demand for my skills.
The reason why people spend 65% of their after-tax income on rent is because people are willing to spend 65% of their after-tax income on rent. Supply and demand is a bitch, and when you fuck with it, you create massive distortions that end up enriching a small minority at the expense of everyone else (for an example, see anyone paying $600/mo for a nice 2 bedroom rent-controlled apartment in Manhattan).
And I like the idea behind a progressive property tax, but it would never, ever, ever become law in the US. Not while there is a single breath of life in any lobbyist or congressman.
[+] [-] hcarvalhoalves|13 years ago|reply
This captures all that is wrong with most of current startups and VCs in two sentences.
I have the impression that some 2/3 of the investments are being poured into yet another social product with advertising business model. I see little money being thrown at harder problems, and literally zero at art.
[+] [-] bokonist|13 years ago|reply
I think the proportion of VC funded companies that are doing an advertising bases social product is a bit exaggerated. I'd say the majority of funding is for paid subscription based SaaS web apps and software, stuff that manages some part of the enterprise, analytics, advertising optimization, security, backups, data management, etc. etc. See, for instance, one first tier venture firm's portfolio - http://www.generalcatalyst.com/companies
However, the point remains that few VC funded companies are attacking the areas that have the most potential for raising quality of life. I do not blame the VC firms for this - they are doing the economically smart thing. Software has a much greater potential for generating the high profits of natural monopoly with relatively low capital investment costs. Cleantech simply does not provide the same returns.
In reality, the solution may be more Solyndras. Maybe we need some public institution - government or philanthropic - to grant loans at a 2 to 1 match for equity investment in companies that are tackling socially useful problems. Many of these companies will fail. But the knowledge, know how, and personal experience generated will create the base for the next round of companies, or the round of companies after that, to create products that change the world. But currently it is not rational for VC's to play the long game, because there is little chance than any particular company they invest in will capture the value created by new innovations. Since much the result of the product will end up as consumer surplus/public surplus, it makes sense that the public contribute to the initial funding if the public wants the investment to happen.
[+] [-] bayesianhorse|13 years ago|reply
But it's not. The financial markets direct energy towards new ideas, old enterprises and value storage. To do that, they have to allocate investment and risk.
Good risk management (or at least moderately well done) generates the best growth for the least risk. Bad risk management can be seen in several countries' stagnating GDP curves.
Nature does this too, by the way. Imagine an ant colony: It grows exponentially, because the more ants are in that colony, the more food they bring in and the more larvae can be raised. But the super organism has to make decisions, with surprisingly intelligent mechanisms, how many of the current ants to risk for food foraging, how many to hold in reserve, how many larvae to raise etc. If they do it right, they grow exponentially, but if they for example risk half of their workers on a single day and loose them to a rain fall or predator, they falter.
[+] [-] geebee|13 years ago|reply
"Wall Street hedge funds rarely make their fortunes by placing sound long term bets about the proper allocation of resources. "
Now, there's a lot of wiggle room in the word "rarely." I think that everyone would agree that there is some rent-seeking behavior on wall street, and everyone would agree that the banking sector plays a critical role in the economy (moving money from where it is to where it is needed, and managing risk). So the real disagreement is about the ratio.
This article seems to imply that only a quarter of wall street's activities produce economic value. That's very low, lower than I've read anywhere. However, Paul Woolley at the LSE estimates that the financial sector would be a "third to a half" of its size (see link below), though, if it were limited to the wealth-producing activities. It's a controversial statement, of course, but he's hardly alone in this estimate.
For anyone interested in this topic, I'd recommend starting with a New Yorker article titled "what good is wall street?"
http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_...
And follow the links to the researchers listed to read more about the details that are not included in the New Yorker article.
[+] [-] koalaman|13 years ago|reply
Facebook emerged in a competitive market and was successful because it was visionary and was extremely well executed. I think that they deserve the success that they've had, and you will have to do some more convincing to show me the 'rent' that they are extracting from me.
Now if you were to ask me whether I think a closed proprietary corporate system is the ideal identity provider for the internet, I would say no. But I expect something better and more open to emerge within the next few years.
The fact remains that the internet sector is fiercely competitive and open, and America's internet sector is the envy of the world, and plenty of well managed countries have been so far unable to come close to matching it. Lumping Facebook and Google in with the financial and regulated monopolies does a disservice to your argument.
[+] [-] rayiner|13 years ago|reply
The article's point on this is sound: Facebook makes a ton of money because it operates in an industry where the network effect gives it a natural monopoly. A competitor doesn't just need to build a better product, but they have to overcome the tremendous advantage of Facebook's network.
As the article points out, there is no money in competitive markets. In a competitive market, once Facebook proved the concept, it would've been flooded with clones offering the service at lower prices (less advertising). There is certainly nothing about the Facebook product itself that isn't easily copied.
[+] [-] mempko|13 years ago|reply
[+] [-] sliverstorm|13 years ago|reply
Would ISPs and/or cellular service be a good example of what happens when government does not get involved? I don't follow that stuff too closely, but I think both have in fact been de-regulated?
[+] [-] zanny|13 years ago|reply
Cell service is compeltely broken because the government "sold" radio frequency spectrum. They sold all of it. Now there is none left to sell or distribute. And now a few concentrated companies own the rights (another government construct) to broadcast on their frequencies. So there is a rigged, no competition market, because you can't erect cell towers and broadcast on any frequency anymore (at least those viable for cell service) because someone owns that frequency band.
ISPs, again, are poor government intervention - almost all of the ground wires were laid under government subsidy upwards of a hundred years ago for some phone channels, so all the current private owners of coax / phone lines almost exclusively got them from government that already laid them, and rarely ever lays them themselves (and when they do, they do slight extensions to already established backbone, they aren't laying it themselves).
In addition, these private providers will contract with local governments to provide exclusive service, and will bribe the town council to block competition from laying their own lines (or heavens forbid, the township itself own the fucking wires running under their streets). As a result, you can't lay your own cable / fiber / phone lines (unless you are Google and have billions of political pressure) and even if you could, you are at an insurrmountable competitive disadvantage because not only does your competition already have all their wire laid decades ago, they can readily drop their prices to run you out of the market because they have barely any overhead in providing your service. They are making hand over fist profit off of consistent customers that are paying year on end. And then, there is inertia, and market manipulation by the established players, to make "average joes" not consider switching providers.
On the other end of the spectrum, it is federally regulated that power companies need to be contractable, in that you can select the company you get "power" from, even though the actual power lines are carrying juice from a thousand plants at any one time, and a lot of peoples homes are feeding back into the system. It is also regulation that enables average joes to set up their own solar panels / wind turbine / generator and get reimbursed any power they feed back into the system - if power companies could do whatever they wanted, they would prevent their customers from setting up their own power backup since it hurts their profits.
In the end, it is not very complex I think - even though the examples can be - if you stifle the ability for new players to enter a market, easily, and compete with the established ones (be it through insurmountable subsidized initial investment to enter the market, actual law book regulation preventing it, or rigged business code favoring the monopoly) you direly hurt the economy by creating artificial monopolies.
Even if the monopolies do "reasonably" well (NASA, for example, basically prevented private space investment because for 30 years it was hugely funded by taxpayers to own the sector, AT&T owned phone service for 60 years by government mandate, etc) markets with only one player (don't even look further than personal computing or the Linux world - there was barely any innovation in GCC until Clang came along to provide competition, or how Firefox had to get a lot faster when Chrome became a real competitor). Competition drives innovation, and in any situation where you facilitate a one man market, you will starve innovation and improvement just by only having one force in the market, even if they have good intentions.
Competition is essential to progress. It is the fuel that produces a huge amount of improvement in every field and business. So if a government is going to craft any law, it should be to make new competition easier to found and enter a market with, not harder. The electric grid regulation makes it easier to enter the market (even if the individual power sources are heavily regulated / zoned / mandated, and the status of a player against a power company only exists for consumers to power co, not business to power co, etc - there is a lot of regulatory cruft behind the respectable outer cover) and as a result promotes competition and better prices for the consumer (the ability to "shop" your power company in a state is a huge reason US power costs are so much lower than elsewhere in the world).
It is why almost all the innovation right now is in web / computers. It is barely regulated, extremely easy to enter the market, and as a result a disproportionate amount of ideas go into it (even when other fields cry for innovation, like medicine, agriculture, telecom, etc) because the market is free and as a result it is healthy.
[+] [-] bokonist|13 years ago|reply
My current thinking is that the best route would be to alter corporate charters to give consumers voting power as the company increased in market share. So if a company had 70% market share, there might be a consumer elected board that had the power to veto anti-competitive acquisitions, changes to the terms of service, changes to privacy policies, revocation of open access, etc. If you have Congress trying to regulate the company, the company will end up controlling Congress. But an elected consumers board should have a better shot at representing the interests of the customers of that company.
[+] [-] acchow|13 years ago|reply
I believe these three are one and the same.
[+] [-] zanny|13 years ago|reply
[+] [-] throwaway1979|13 years ago|reply
It seems we are coming to the point where automation has significantly reduced the need for labor in producing basic commodities. It is particularly challenging when one has to advise college bound students as to what subjects offer a rewarding career. The essay speaks highly of the wages in the medical profession ... I think that part of the essay was misinformed. I don't know any medical professional who is not independently weathy and can get by on their salaries. They have massive loans to pay and if they have their own practice, they have to deal with TONS of crap .. insurance, marketing, and so on.
[+] [-] wyqueshocec|13 years ago|reply
This is an oxymoron. "Wealth" is just stuff. Loaves of bread. Cars. iPhones. TV shows. If you create stuff but just keep it in your warehouse, it's going to go moldy and you're going to lose money. You have to distribute it to make money.
Money itself is of no value. You can't eat dollars, and mine don't sing or dance to entertain me. I suppose you could burn them for heat, if you have actual paper dollars :-)
[+] [-] numbsafari|13 years ago|reply
Most of my friends who became MDs gave almost zero thought to what they were paying for school. They also took on huge amounts of credit card debt while in school trying to live like doctors before they were doctors. Being in a half-decent pre-med or med school entitled them to ridiculous credit card offers. In their minds they were all "roughing it" by driving their parents' hand-me-down Volvos, but in reality they all had new clothes and expensive computers.
When it comes to school, most of them never looked at how much someone graduating from institution X will earn vs. the cost. They all simply wanted to go to Penn or Harvard or Hopkins. If offered a full-ride at a second or third tier institution, but no ride at a top tier school, they all took the no ride option (with one exception, and he's a very well paid anesthesiologist who came out with very modest debt).
Can I tell you how many times I've looked at what school my personal physician went to? Zero.
[+] [-] zanny|13 years ago|reply
I don't think the economic culture of the US bred global business, though. I think the trivialization of the distance did. Glottalization meant that it would be much cheaper for a US based company to enter a fledgling market (say, McDonalds) and reestablish themselves as the market force in that area, since it has a much cheaper barrier to entry than building an entire enterprise from the ground up. The economies of scale grow faster as you approach ludicrously global scale, because you can really streamline all aspects of your business.
There isn't really a correlation with global business and competition, either - I'd say global business is only possible when corruption enables rent seeking business (which has no competition and is rigged to the market dominator) OR when there is real competition, and the global business is so successful because of the economies of scale and significantly lower market entry barriers to new regions than a brand new business.
So you could have either. We have, sadly, a lot of the first, but the second can happen to.
And global business (with competition) is good. It means the competition and economies of scale drive profits to zero, and maximize the benefit to the consumer.
The problem with global business is that when our markets and economics are global but our politics and emotions are local, those super companies have significantly more influence than a tiny group of people in an isolated pocket economy artificially cut off by an imaginary line on a map. The global business that truly connect the world extract their clout from the entirety of the species, while a countries politics gets its validation from its people.
And no country has a population, GDP, productivity, or workforce, competitive with the global one. Of course they will be corrupted by global business. Their resources are much more limited and restricted, because our politics and cultures are outdated in the face of a modern economy.
But this is just one piece of a giant puzzle. Individually, the problems are obvious, stupid, an simple, and often the work of the greedy and corrupt rent seekers. But there are millennias worth of built up greed to lead us to where we are today with the rigged system we work with, and the individual parts complement each other and support one another to maintain the whole broken game. The problem isn't fixing one part, it is figuring out how to remove the tumors before they kill the host, and there are millions of small tumors that add up to a large cancer. And as you chip at the fringes of one, the rest keep on poisoning the system, and they all have to be somehow dealt with.
[+] [-] HNLogInShit|13 years ago|reply
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[+] [-] jchrisa|13 years ago|reply
PDF http://www.sok.bz/web/media/video/AfterFuture.pdf
Or give money to the publisher and I hope the author: http://www.akpress.org/afterthefuture.html
Spoiler alert - let's forget communism, quit our jobs, and work toward Autonomy.
[+] [-] hcarvalhoalves|13 years ago|reply
http://vimeo.com/25367464
Good ideas here.
[+] [-] guylhem|13 years ago|reply
The basic idea stands - too many people have more comfort, want too many things, and are harder to control - and now more than ever.
The solution to rent seeking is basic capitalism, as in the use of reason.
Ayn Rand style capitalists do worry about the letter and the spirit of the laws and of a contract, because they know it is in their best interest. They are not into rent seeking because they know the end results.
She said that beautifully : "I am not primarily an advocate of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows."
Ayn Rand theory and work can be seen as one implementation of John Rawl theory of justice. He added a 2nd part about equality, but he also deconstructed the opposition between freedom and equality.
Basically, you only need a good premise, then you can work on it. The premise here is reason.
The only real "competition" could be from a belief not based on reason, such as racism or a kind of religious fondamentalism - but not any kind as explained by John Rawls, just the kind incompatible with democracy. I'll put islamism in that bag (the basic idea of stoning to death women who had sexual relation outside of marriage in this day and age is not very palatable to me).
Anyway, the remedy is the same for both diseases - science (and the occasional readings of libertarian books)
If you have ideological problems with Ayn Rand, read at least about John Rawls veil of ignorance on http://en.wikipedia.org/wiki/A_Theory_of_Justice
[+] [-] zeteo|13 years ago|reply
That's a rather pie-in-the-sky argument. People pursue rent-seeking because it gives them comfort, material goods, and freedom. The businessman who lobbies for monopolistic benefits, the politician who takes his campaign contributions, the copywriter who creates attack ads: they all follow egotistic interests. Wild, unregulated, snake-oil-and-corporate-trusts capitalism is no solution to these problems.
[+] [-] sliverstorm|13 years ago|reply
[+] [-] pyre|13 years ago|reply
1. This is like decrying Christianity as a cult because of David Koresh. Or getting angry at all Christians because the Catholic church tried to cover up the whole paedophile priest thing.
2. Even people that are part of these sects don't necessarily follow all of the rules. E.g. I've known Jewish people that ate ham.
[+] [-] yarrel|13 years ago|reply
And Tolkein-style hobbits have hairy feet.
[+] [-] Nursie|13 years ago|reply
Such a shame she let faulty premises and emotion cloud her writing and her philosophy then really.
[+] [-] OGinparadise|13 years ago|reply
Part of me says that the added stresses from never being happy, always want more, do rain on that parade. Maybe being "a dumb peasant" somewhere with a full stomach but otherwise no larger goals is best.
>> The basic idea stands - too many people have more comfort, want too many things, and are harder to control - and now than ever.
Yeah but they are not organized, at least not in USA. Those making bank are kicking back to the politicians that decide what system /laws us suckers have to follow. The greatest investment ever is in the political process, a million dollar donation can easily yield billions.
[+] [-] JimboOmega|13 years ago|reply
Whether you are flying across the country, visiting the doctor, or trying to get Internet installed at your house, a large portion of the actual cost will probably be hidden from you. The travel industry, in particular, lives and dies by how well it hides the true cost from you.
Finding ways to make people pay more for the same things is a large and ever growing component of the economy that is fundamentally non-productive.
[+] [-] scotty79|13 years ago|reply
You buy apartments and charge people significant part of their earnings for the privilege of having a roof over their heads.
Why is that bad?
As an owner you don't live there yourself so you only have an incentive to keep the place in shape good enough to be rented. Which is usually pretty low.
The worst part is that if you can't find the people to occupy your apartment your costs are pretty low (you don't have a profit but that's not the same as money being drained from your account). So you can buy and hold apartment for years at very low cost. This creates artificial scarcity (in addition to actual scarcity) of places to live that keeps the prices up.
I think progressive property tax would enliven real estate trade. Prices would drop and more ordinary people could afford to buy one on credit instead of renting. This could save working people a lot of money so they can actually start their lives instead of slaving on their first job with just enough money to pay the rent.
Tax should be constructed in such way that holding even large apartment, or even two or three would pose no burden or almost no burden, but you might be better of selling your fifth apartment even at 50% below market price than holding it for a year.
[+] [-] tempaccount9473|13 years ago|reply
The reason why people spend 65% of their after-tax income on rent is because people are willing to spend 65% of their after-tax income on rent. Supply and demand is a bitch, and when you fuck with it, you create massive distortions that end up enriching a small minority at the expense of everyone else (for an example, see anyone paying $600/mo for a nice 2 bedroom rent-controlled apartment in Manhattan).
And I like the idea behind a progressive property tax, but it would never, ever, ever become law in the US. Not while there is a single breath of life in any lobbyist or congressman.
[+] [-] unknown|13 years ago|reply
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