The myth of the free market?

[Toro]

Yes Mikey

Markets

Karl Marx explained that capitalism would make the rich richer and the poor poorer. If someone was to gain, someone else had to lose in the free market. The middle class would become proletarians, and the proletarians would starve. What an unlucky time to make such a prediction. The industrial revolution gave freedom to innovate, produce and trade, and created wealth on an enormous scale. It reached the working class, since technology made them more productive, and more valuable to employers. Their incomes shot through the roof.

What happened was that the proletarians became middle class, and the middle class began to live like the upper class. And the most liberal country, England , led the way. According to the trends of mankind until then, it would take 2 000 years to double the average income. In the mid-19th century, the British did it in 30 years. When Marx died in 1883, the average Englishman was three times richer than he was when Marx was born in 1818.

The poor in Western societies today live longer lives, with better access to goods and technologies, and with bigger opportunities than the kings in Marx’ days.

Ok, said Marx’s evil apprentice Lenin. We might have been wrong about that. But the working class in the West could only become richer because they are bribed by the capitalists. Someone else would have to pay the price for that bribe – the poor countries. Lenin meant that imperialism was the next natural step of capitalism, whereby poor countries had to give up their work and resources to feed the West.

The problem with this argument is that all continents became wealthier, albeit at different speeds. Sure, the average Western European or American is 19 times richer than in 1820, but a Latin American is 9 times richer, an Asian 6 times richer, and an African about 3 times richer. So from whom was the wealth stolen? The only way to save this zero-sum theory would be to find the wreckage of some incredibly advanced spacecraft that we emptied 200 years ago. But not even that would save the theory. Because we would still have to explain from whom the aliens had stolen their resources.

It is correct that colonialism often was a crime, and in some instances led to horrible acts. But globalisation in the last decades shows that the existence of wealthy, capitalist countries facilitates development for poor countries if they participate in a free and voluntary exchange of ideas and goods. Globalisation means that technologies that it took wealthy nations billions of dollars and generations to develop can be used straight away in poorer countries. They can sell to wealthier markets and borrow capital for investments. If you work for an American company in a low-income country, you receive about 8 times the average income in that country. Not because multinational companies are more generous, but because they are globalised, and bring machines and management that raise the productivity of the workers, and consequently also their wages.

Therefore, opportunities for a poor country with open, market-friendly institutions increase as the rest of the world becomes more developed. It took England 60 years to double its income from 1780. 100 years later, Sweden did the same in just 40 years. Another 100 years later, countries like Taiwan , South Korea , China and Vietnam did it in no more than 10 years.

During the 1990s, poor countries with about 3 billion inhabitants have integrated into the global economy, and they have also seen their annual growth rates increase to almost 5 percent per capita. It means that average income doubles in less than 15 years. Compare this to the much slower growth in rich countries, and the negative growth in developing countries where 1 billion people live. These countries, especially in sub-Saharan Africa , are the least liberal, the least capitalist and the least globalised. It seems Lenin had it upside down – poor countries that are connected with the capitalist countries with trade and investment grow faster than those countries, those that don’t become poorer. ...

Let’s have a short look at the statistics to see the greatest untold story ever. The proportion in absolute poverty in developing countries has been reduced from 40 to 21 percent since 1981. Almost 400 million people have left poverty – the biggest poverty reduction in mankind’s history. In the last 30 years chronic hunger has been halved, and so has the extent of child labour. Since 1950 illiteracy has been reduced from 70 to 23 percent and infant mortality has been reduced by two-thirds. ...

Just 200 years ago ... By our standards even the richest countries were extremely poor. The average chance of surviving your first year was less than the chance of surviving to retirement today.

http://www.cis.org.au/Events/JBL/JBL05.htm

 

[BitWhys]

That article would be a lot more worthwhile if it differentiated the means of production from the means of distribution.

 

[TomG]

...On complaints that my argument leads to similar conclusions on physical property: the difference between abstract objects and physical objects is exclusivity. Only one person may have possession of a physical object at once and it is natural law, not government law, which gives me the right to defend myself from forceful theft of my possessions.

On complaints that no free market has ever existed and so my definition is absurd: this is nothing more than a failed reductio ad absurdum. A free market is a theoretical model which leads to strong predictions about market efficiency, it is not meant to be an empirical model.

Just curious:

I think that normally theoretical models that lead to strong predictions are derived from operational level theory, and operational level theory is derived from general theory. If the operational theory is called ‘free market theory’, what is the general theory called? Where might accounts of strong predictions of market efficiencies made from the theoretical model of free markets be found?

Does ‘market efficiency’ have a metric, and if so, where might the measurement model that links the metric to the theoretical model be described? What are the measurement instruments and where are their properties described? If a metric does not exist, then how is efficiency known, or more importantly how are changes in efficiency detected? I’m wondering if ‘market efficiency’ is a property or quality of some object that is capable of measurement. It seems more like a concept that is derivative from various more concrete behaviours than a property. Why wouldn't the imdependent properties of objects be predicted rather than a derivative concept?

I guess I recognize that part of what is called western science is heuristic rather than directly empirical, and heuristic things often lead to empirical things. However, I think of western science as inherently empirical, and at some point heuristic formulations are discarded in favour of empirical ones. I am trying to fill in some gaps that seem to be present along this path that seems to lead from a heuristic free market theory to empirical predictions of market efficiency. I think the eventual scientific goal is to support a general theory by predictions of behaviour that are derived from the theory. I wondering how predictions of market efficiency does that.

If ‘market efficiency’ lacks a metric, I am having some trouble grasping the idea of a scientific prediction that is not empirical, and I’m wondering how such a prediction might be described. However, if the strong predictions mentioned are empirical, then I’m wondering where the rest of the empirical framework might be found. It should be somewhere or else how could the fundamental rigorous, robust, reproducible etc. questions be asked?

I included the paragraph that mentioned natural law in the quote (which in the context of a science thread would be funny except for the irony) as a way of allowing for post-Newtonian stochastic formulations, which I don’t believe have altered the basic requirements of the empirical epistemology of western science. As far as I know, the scientific method remains in place and properties of rigor, robustness and reproducibility still arbitrate what qualifies as scientific knowledge. I imagine that a prediction still must specify both what will happen and when it will happen.

My questions, of course are rhetorical. It would be enough to indicate that decent answers exist. I am mostly interested in the epistemology, and I likely couldn’t/wouldn’t read the technical scholarly articles which would contain the answers anyway.

 

[MikeyDB]

Ah yes free markets...

Field workers harvesting coffee purchased by the major coffee companies around the world earn .50 per day....

Free-Markets

I just don't understand why America and Canada are up to their asses in distant conflcts...

Oh yeah...."Free Markets"

 

[MikeyDB]

"The US is preparing a massive series of arms sales to the Middle East according to a senior White House defence official. The move, which is expected to be announced tomorrow, is widely seen as an attempt to counter Iran's growing influence in the region. The deals with a number of Persian Gulf nations, including Saudi Arabia, could be worth at least 20 billion dollars."


http://euronews.net/index.php?page=info&article=435452&lng=1

Once there’s a sufficient build-up of arms and WMDs…..well what else can America do but protect itself????

Free Trade!

 

[MikeyDB]

An adolescent juvenile society ruled by "Free Markets" that continues to spread weapons and destruction around the world.

Would America..home of the "Free Market" have any problem with China or Russia arming nations to the teeth?

Wouldn't it be far more likely that we'd hear the ancient American chant of ...."The Red Menace...The Red Menace....The Red Menace...."

When America sells missiles planes bombs biological weaponry and killing machines of all descriptions to anyone with the coin to spend....why ...that's FREE ENTERPRISE....

When anyone else does it.....it's the RED MENACE....the RED MENACE....the RED MENACE....

The families of dead American service people will be dancing with glee that the American FREE ENTERPRISE is doing so well...

And America's "ENEMIES" will be sending in their cheques and bank drafts to Carlyle Group and Raytheon and dozens of other war-profiteering American corporations while America stirs the world into action.....to combat another enemy...just like Saddam Hussein (who America armed) and happily send off its people to fill all those body-bags that a FREE MARKET needs to keep billionaires happy....

 

[iARTthere4iam]

So this is an idea that struck me while in a conversation with my brother. It is not my intention to challenge the idea that the free market is the ideal market, I simply want to point out a simple fact:

There are no free markets in Canada.

That I am aware of at least. What I mean by a free market is a market which is free from control on the supply. The supply in a free market is allowed to grow to meet the demand so long as there is finance for it. A monopoly can never be considered a free market since they completely control the price and the supply and will always attempt to maximize profits, not having information about any sense of social utility in producing more at a loss of profit.

That then is all you need to see the truth: patent laws create de facto monopolies in the technology industry, copyright laws do the same in the entertainment industry and trademarks together with the placebo effect eliminate free markets elsewhere.
The very aim of patent and copyright law is to give corporations monopolies so that they can exploit control over their product to maximize their profit for a period of time and gain a fair return on their investment. The aim is to destroy the free market.
The idea of the free market economy is that it forces corporations to compete to produce the same product.

Our patent, copyright, trademark, breeder and grower laws all create distinguished products with single producers. These producers do not need to compete in a free market so long as their products are distinguished or alone in the market. This happens for every product you can buy from a company in Canada. So, we do not live in a free market economy.

Lets assume that you are in the market for a vehicle. You would look at all the vehicle makes and models and would choose the one that fit your need and your budget. Lets say that that vehicle is the Toyota Camry. Now, by your definition, you would say that you were not operating in the free market because the only maker of the Camry is Toyota! You have skipped past the whole range of other cars, trucks and assorted other vehicles and have made a decision to buy a particular product. That is the very nature of freedom. Of course the vehicle maker only makes a certain amount of each vehicle each year. The point is they make the vehicles and you are "free" to buy it or not. You do not have some "right" to own it, but it is a freedom.

If you want to buy a stradivarius violin would you accept a flimsy chipboard replica or would you demand that it be an actual stradivarius? There is a limited supply of real violins made by Stradivarius therefore the market in them is limited not by a monopolistic company or government but by reality, history, and the output of suitable violins bearing his name made during his lifetime.

 

[iARTthere4iam]

So this is an idea that struck me while in a conversation with my brother. It is not my intention to challenge the idea that the free market is the ideal market, I simply want to point out a simple fact:

There are no free markets in Canada.

That I am aware of at least. What I mean by a free market is a market which is free from control on the supply. The supply in a free market is allowed to grow to meet the demand so long as there is finance for it. A monopoly can never be considered a free market since they completely control the price and the supply and will always attempt to maximize profits, not having information about any sense of social utility in producing more at a loss of profit.

That then is all you need to see the truth: patent laws create de facto monopolies in the technology industry, copyright laws do the same in the entertainment industry and trademarks together with the placebo effect eliminate free markets elsewhere.
The very aim of patent and copyright law is to give corporations monopolies so that they can exploit control over their product to maximize their profit for a period of time and gain a fair return on their investment. The aim is to destroy the free market.
The idea of the free market economy is that it forces corporations to compete to produce the same product.

Our patent, copyright, trademark, breeder and grower laws all create distinguished products with single producers. These producers do not need to compete in a free market so long as their products are distinguished or alone in the market. This happens for every product you can buy from a company in Canada. So, we do not live in a free market economy.

Lets assume that you are in the market for a vehicle. You would look at all the vehicle makes and models and would choose the one that fit your need and your budget. Lets say that that vehicle is the Toyota Camry. Now, by your definition, you would say that you were not operating in the free market because the only maker of the Camry is Toyota! You have skipped past the whole range of other cars, trucks and assorted other vehicles and have made a decision to buy a particular product. That is the very nature of freedom. Of course the vehicle maker only makes a certain amount of each vehicle each year. The point is they make the vehicles and you are "free" to buy it or not. You do not have some "right" to own it, but it is a freedom.

If you want to buy a stradivarius violin would you accept a flimsy chipboard replica or would you demand that it be an actual stradivarius? There is a limited supply of real violins made by Stradivarius therefore the market in them is limited not by a monopolistic company or government but by reality, history, and the output of suitable violins bearing his name made during his lifetime.
You could certainly buy a

 

[iARTthere4iam]

So this is an idea that struck me while in a conversation with my brother. It is not my intention to challenge the idea that the free market is the ideal market, I simply want to point out a simple fact:

There are no free markets in Canada.

That I am aware of at least. What I mean by a free market is a market which is free from control on the supply. The supply in a free market is allowed to grow to meet the demand so long as there is finance for it. A monopoly can never be considered a free market since they completely control the price and the supply and will always attempt to maximize profits, not having information about any sense of social utility in producing more at a loss of profit.

That then is all you need to see the truth: patent laws create de facto monopolies in the technology industry, copyright laws do the same in the entertainment industry and trademarks together with the placebo effect eliminate free markets elsewhere.
The very aim of patent and copyright law is to give corporations monopolies so that they can exploit control over their product to maximize their profit for a period of time and gain a fair return on their investment. The aim is to destroy the free market.
The idea of the free market economy is that it forces corporations to compete to produce the same product.

Our patent, copyright, trademark, breeder and grower laws all create distinguished products with single producers. These producers do not need to compete in a free market so long as their products are distinguished or alone in the market. This happens for every product you can buy from a company in Canada. So, we do not live in a free market economy.

Lets assume that you are in the market for a vehicle. You would look at all the vehicle makes and models and would choose the one that fit your need and your budget. Lets say that that vehicle is the Toyota Camry. Now, by your definition, you would say that you were not operating in the free market because the only maker of the Camry is Toyota! You have skipped past the whole range of other cars, trucks and assorted other vehicles and have made a decision to buy a particular product. That is the very nature of freedom. Of course the vehicle maker only makes a certain amount of each vehicle each year. The point is they make the vehicles and you are "free" to buy it or not. You do not have some "right" to own it, but it is a freedom.

If you want to buy a stradivarius violin would you accept a flimsy chipboard replica or would you demand that it be an actual stradivarius? There is a limited supply of real violins made by Stradivarius therefore the market in them is limited not by a monopolistic company or government but by reality, history, and the output of suitable violins bearing his name made during his lifetime.
You could certainly buy a violin by a different maker and you could get a very good instrument too, but you do not have a right to own any particular one.