GDP and Engineering Layoffs

Posted by: Peter Coy on October 29

Posting for Michael, who’s traveling:

If you care about R&D, product design, worker training, or any of that other good stuff, you might want to look at my new cover story. I’ll be adding to this over the weekend.

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Reader Comments

Ajay

October 29, 2009 09:48 PM

Wow, when the chief economist at Businessweek is capable of writing a sentence like "if U.S.-based companies are doing their research and product development overseas and their production there as well, it's tough to see how ordinary workers in the U.S. will gain," it's easy to see why this magazine was recently sold off for almost nothing, around $5 million, or around $15k per employee as one article estimated. The ordinary worker gains because they can buy goods for cheaper, it's that simple. It makes perfect sense for companies to cut back on R&D right now as they're struggling simply to stay profitable. Why shouldn't educated workers lose their jobs when they fail to deliver? Using the tiny amount of VC money as a proxy for tech or intellectual spending is just silly. As for training, the unemployed can pay for it themselves, it doesn't necessarily cost much and none of them are starving on the streets. Besides, what alternative do they have, simply keep applying for the same type of job they got fired from in the hopes that something will finally materialize? As for measuring GDP statistics properly, you proceed from the fallacy that the govt needs highly aggregated statistics to properly manage the economy, when the truth is that such aggregate statistics have always been highly misleading and a big part of the reason why such govt action always fails miserably, adding much more waste rather than helping. It's clear such half-baked analysis- the recent cover story on the "lost generation" of young professionals was similiarly ridiculous- is why Bloomberg is about to gut this magazine when they take over in a couple months.

CompEng

October 29, 2009 11:25 PM

Ajay,
when your basic premise is that government ought not to manage the economy, why use all those other words? :)

Joe

October 29, 2009 11:25 PM

To Ajay,

Well, any country outsourcing its R&D overseas will lose edge in the long run and will face disastrous consequences. It starts with people not going for science or engineering degrees, schools losing income and support and talents migrating somewhere else. so in the long run, you will not have people in US afford buying these cheap products from China and India.

cm

October 30, 2009 12:06 AM

CompEng: He must point out at least 3 times that somebody is a moron and that some position is silly or ridiculous, without just saying it 3 times in a row.

Ajay

October 30, 2009 01:28 AM

CompEng, I made several points about several disparate issues brought up in Mike's article. If you only care about the normative issue of govt management, feel free to skim the rest, some of us think about other issues too.

Joe, how many people in the US work in R&D or science and engineering? I suggest you actually look at the numbers before making such silly claims. The US specialized in manufacturing and R&D but now has to diversify, because the rest of the world is catching up in those sectors. Rather than assuming it's the natural state of the US to always do more in those sectors, you'd be better served finding what services would best capture the talents of those in the US. I suggest that it's unlikely to be R&D, more likely the often more important issues of technology commercialization and finance.

Cm, funny how you see the word moron where it was never used. ;) Perhaps you'd prefer if I repeated myself 3 times but I find that most people prefer 3 times the evidence of stupidity, rather than the same evidence repeated 3 times. :)

Moe

October 30, 2009 01:32 AM

To Ajay,

Yeah, then where does the money to buy the cheaper goods come from without jobs? Can't believe how you think.

Hal

October 30, 2009 02:57 AM

To Ajay,
Your fellow commenters are failing the Turing test.

karlo

October 30, 2009 07:59 AM

I agree with Business Week regarding the R&D going over sees and American workers do not benefit. Certainly, not in the long term. Who cares if goods are cheaper when the American family has no income because jobs are not in the U.S? So to you Michael and Peter, you just don't get it.

MJ

October 30, 2009 09:04 AM

“It makes perfect sense for companies to cut back on R&D right now as they're struggling simply to stay profitable.”

But this might even make a verse situation for the company. The reason is that if the company survive the crisis then it won’t be competitive with those companies who didn’t cut down on R&D.

doug

October 30, 2009 11:03 AM

Ajay,

Klash

October 30, 2009 11:29 AM

Mostly people who aren't Engineers or in R&D don't realize how much companies have invested in their employees. When cos layoff an engineer or scientist they are writing off a large investment they made in that person. When and if there is a recovery, these same cos will have to reinvest heavily in hiring and training new employees (even ones who have years of experience at other cos) and it could take a year or three before these new hires produce any meaningful revenues. Shareholders will get some relief now at the expense of their long term returns. But maybe I'm being naive in assuming anybody cares about the longterm?

Jose Luis

November 5, 2009 11:31 AM

Could anyone tell me where to find the percentage of the GDP that the countries invest on Engineering?
Thanks a lot.

Khürt Williams

November 22, 2009 08:47 AM

I don't think Ajay has any friends in engineering.

CompEng

November 22, 2009 09:56 PM

Ajay,

Most of your comments are in fact completely derivative from a fully pro-market, anarchist libertarian stance. The only one I count that isn't (leaving out asides such as the price of BusinessWeek's sale) is "Using the tiny amount of VC money as a proxy for tech or intellectual spending is just silly". Not that I mind. Spend your time as you wish.

It's just that sometimes I wonder what motivates you to write and research as much as you do when you seem to have your mind pretty well made up about how things work.

Hal

November 22, 2009 10:42 PM

Hal,

I'm impressed. You apparently know the name Alan Turing.

Ajay

November 22, 2009 11:10 PM

Khurt, considering I'm an engineer and practically everyone I know is an engineer or programmer, you would be wrong. However, unlike most narrow-minded people, I'm not interested in furthering my particular guild at the expense of everybody else, I'm interested in having better products for all consumers.

CompEng, if I use the best philosophy out there, anarcho-capitalism, to help me figure out the world, I don't see what your problem is or why you feel the need to even bring it up, when you have no point to make beyond that. As for toeing that party line, I don't much care whether you notice or know the points where I disagree with that small faction. What matters is that they're mostly right, far more than any other group, and if you disagree with them much more than I do, you're probably mostly wrong. :) As for why I write about this stuff, it should be obvious, to get these ideas out there, plus it helps to converse about this stuff to help form my opinion.

CompEng

November 23, 2009 12:14 AM

Ajay,

I guess that's a fair response. It did seem that you could have made your point more elegantly with fewer statements, although that would have been making more demands of your audience.

If I was an atheist, didn't care about anyone else too much, and was completely confident in my ability to take care of myself, come what may, then I'd probably subscribe to anarcho-capitalism myself. It's simple and elegant. It's also true that philosophy is less burdened by the requirement to make the story fit some desired outcome than most. In many ways, that's a great advantage. It's also not a philosophy that asks a lot of one personally. I just don't find that view of the universe emotionally satisfying. It pretty much gives up on what I consider to be the concept of "good" as some goal that ought to be reached for, so I'm looking for a view I could actually live with.

Ajay

November 23, 2009 04:39 AM

CompEng, considering all the disparate points I raised, I think it was a triumph that I was able to make them all so compactly. I realize that to you it all boils down to the single issue of less govt, but I can't help that you don't care about those separate issues, such as companies ditching R&D spending during a recession making sense. I don't see what atheism, not caring about others, or being extremely self-reliant have to do with subscribing to anarcho-capitalism, as some of its most fervent subscribers are religious, believe that markets are a great way to interact with others, and simply use private mechanisms like insurance rather than hoping some govt body will swing to their rescue someday. I don't see how you reconcile the extreme self-reliance you seem to think anarcho-capitalism requires with your view that it doesn't "ask a lot of one personally." The reason you don't find it emotionally satisfying is either because you don't know what a real conception would look like or have been hoodwinked into some notion of the "greater good" that power-hungry politicians like Obama are always offering, while really stealing ever more from the populace and impoverishing them with lower growth. The fundamental difference between the libertarian or anarcho-capitalist who focuses on liberty is that they would like everybody to choose their "good" for themselves rather than having it imposed on them by people like you, whether by forcing everyone to buy health "insurance" like the current reform or by imposing manufacturing quotas because of mad global climate theories, that the recent email discoveries have further underlined to be the cooked up nonsense they always were.

CompEng

November 23, 2009 11:42 AM

Ajay,

You made your statements compactly. They just seemed to be obvious, and therefore redundant, to me. But again, I probably wasn't your audience. Don't take that as a criticism: your perspective is largely self-consistent and works for you, which is more than most people ever achieve.

"The reason you don't find it emotionally satisfying is either because you don't know what a real conception would look like or have been hoodwinked into some notion of the "greater good" that power-hungry politicians like Obama are always offering, while really stealing ever more from the populace and impoverishing them with lower growth.". I'd say it's the latter, although I certainly wouldn't take my morality from politicians. Don't get me wrong: I think capitalism is a fine tool for understanding reality. But it's not true in the sense the mathematics is "true". It's closer to to being true in the way that Newton's 3 laws are true: they describe reality under certain conditions.

Imagine you and I are shipwrecked on an island, claim it, and divide its ownership in two. Suppose then a third person is shipwrecked on the island. Would we have the right, if we wished, to kick him off of our island for trespassing, even if he had no where to go? Or perhaps we could lease him the right to live on the island if he'll spend all his spare time gathering coconuts? Is that really fair? What do we do if the new entry refuses to leave?
Ownership is just a contract among a group of people, and does not exist where there is no contract. All of capitalism is based on the idea that the contracts people make with each other are good and fair enough to build a society upon. Often, that assumption just isn't true. Often, ownership, and capitalism, is just a matter of who got there first. It's not a strong enough pillar upon which to base all power within a society, and no, competition does not solve all the problems.

"The fundamental difference between the libertarian or anarcho-capitalist who focuses on liberty is that they would like everybody to choose their "good" for themselves rather than having it imposed on them by people like you". This is the aspect of libertarianism I have the greatest respect for. This is why I favor a relatively small government, and I certainly would not presume to legislate another's beliefs. But I don't think anarcho-capitalism, in particular, lends enough credence to the cases where no good contract can be reached among different people, and what happens then. What happens if those idiots on the island decide not to make any arrangement with the newcomer? Do they just kill each other? Or is there some more basic morality that ought to dictate their behavior that supersedes the basic concept of ownership?

And yes, the more I think about the current healthcare reform, the more I realize what a disaster it's going to be.

Ajay

November 24, 2009 02:58 AM

CompEng, I'd be happy if all my statements were in fact obvious to you but having corresponded with you before, I'm certain they weren't. :) As for being redundant, you continue to claim some magical foundation to the disparate issues I raised, that neither I nor anyone else can see. As for why you don't find that view satisfying, I'd guess it's a mix of my two proposed reasons, as I doubt you have a real conception of what anarchocapitalism would look like. Just as the word democracy is applied to everything from the current, corrupt Russian system to the mob rule of ancient Greece, there are many varying conceptions of anarchocapitalism and I think you're probably thinking of some other variation than I am. In what sense is mathematics "true"? Mathematics is merely a logical system derived from observations of reality, just like Newtonian physics. I think your entire notion of truth is clouded if you're making such distinctions between mathematics and physics. As for your notion that certain pre-existing conditions are key, that's meaningless if you don't say what those conditions are, beyond your artifical example of shipwrecked sailors on an island.

As for your example, it's extremely flawed as an analogy to life because almost nobody today makes a living by finding new land or material resources. In reality, the main quality that has always mattered the most is your internal development, to what extent you hone your mental processes to best grapple with the complexity of the world around you. All the world's richest people started off with almost nothing and gained huge wealth by dint of their personal qualities of intelligence and hard work. The few who inherited their wealth never hang onto it, I wonder why. ;) However, to answer your island questions, nobody has a right to anything. You and I could try to kick the new guy off our island but I suspect we would find it extremely hard to do so. Rather than wasting our time fighting with the guy, we're much more likely to work together. That's because enforcement of such mad ideas as kicking the guy off or leasing land to him has a cost and in that situation, the cost is exorbitant (Hint: this should remind you of regulation ;) ). I suppose you can think of all ownership as a contract, I think of it as starting as an agreed upon way to avoid conflict, that often takes the shape of a contract. I don't see why those mutually agreed to contracts aren't the best way to build a society, particularly since ownership through getting there first is largely irrelevant. Most ownership is based on assiduous hard work and diligence and that's precisely why it's the best pillar to base all power within a society on. And yes, competition solves all problems.

Anarchocapitalism doesn't claim to get rid of violence, it merely provides much better ways to deal with it. Us idiots on the island might all decide to kill each other, just as some gang in LA or Bosnia is trying to kill some rival right now, despite their local govt. Your hypothetical is not very useful as you seem to be arguing either for a government to step in or "basic morality" that would impose itself in some other yet to be named way, both entirely alien to shipwrecked people on an island. I see no need for either, simply a pragmatic notion that the best way to survive and thrive is to work together, without some outside "authority" imposing its mad notions of the "greater good" on all of us. However, I should note that it doesn't bother me if others want to live a highly regulated life, they're free to move to California or Norway or some such socialist paradise. Yet somehow, they seem to keep trying to impose their crazy ideas on the rest of us, for example by recreating the disaster that mandated health insurance was in Massachusetts by now forcing it on the rest of the country. Funny how the "greater good" always requires ceding power to those chumps in Congress who are always strangely incompetent at everything they do.

CompEng

November 24, 2009 01:12 PM

Ajay,

All I meant was that your positions seemed obvious based on previous discussions. My agreement with them is a another matter. But it's really not a point worth arguing.

"I think you're probably thinking of some other variation than I am."
Quite possibly. But then, you keep trying to identify support for any form of government with current US democracy: a form of government specifically designed to be ineffective so that it would be less threatening to the populace.

"I think your entire notion of truth is clouded if you're making such distinctions between mathematics and physics".
No, I'm aware of the fallacy of my analogy, but I can;t find a truly good one, apropos as my point is that applied knowledge is by nature specific, not to be universally applied.

"As for your notion that certain pre-existing conditions are key, that's meaningless if you don't say what those conditions are."
That's an incredibly difficult question to answer. It's beyond me to answer that question comprehensively: I have to take it in bits and pieces.

"As for your example, it's extremely flawed as an analogy to life because almost nobody today makes a living by finding new land or material resources."
It's a fine analogy, given that one of the requirements was that it be simple enough for the unimaginative to understand. It could be extended to take into account things like capital accumulation and intellectual property. It also ties nicely into ideas such as immigration and the global integration of the emerging world.

As far as internal development goes, you're right. If you're brilliant, healthy, willing to work hard, and brought up right, you'll do fine under any circumstances. How do you want to deal with the other 95+% of humanity?

"The few who inherited their wealth never hang onto it".
As an aside, that's not really true unless you're simply measuring the elite of financial elite. DuPonts and Rockefellers, generations after there wealth was built, still have no need to work a day of their lives.

"Most ownership is based on assiduous hard work and diligence and that's precisely why it's the best pillar to base all power within a society on"
The mostly true. To the extent that's true, and ethical behavior is enforced, I have no problem with that. But there are important exceptions.

"Your hypothetical is not very useful as you seem to be arguing either for a government to step in or "basic morality" that would impose itself in some other yet to be named way... I see no need for either, simply a pragmatic notion that the best way to survive and thrive is to work together".
You asked where atheism came into it, and this is a good example. Without some notion of God, I would agree with you entirely on these statements. However, if I believe more is asked of human beings than that, then more is required to make it happen. I would argue that it's immoral to bind people to a moral code against their will, but those that accept a moral code should bind themselves to it, with the help of an institution.

Anarcho-captialism doesn't prevent that, but a mystical belief in things like the power of the market (and the lack of any other "good") is often used as a justification for doing stupid things, as excessive greed tends to lead, psychologically, to a short-term perspective. That's why so many a$$-holes are libertarians and conservatives: it gives them justification to believe that whatever they have, they deserve, and no further consideration of the world around them is warranted.

Ajay

November 24, 2009 06:24 PM

CompEng, I don't recall talking about other forms of govt before but the critique stands for them all: by monopolizing certain services, whether waste removal or legal courts, they are inevitably lazy and do the job badly because they usually disallow competition. I'd in fact argue that US representative democracy is more effective than any other govt as it gives the majority of people mostly what they want, however stupid that may be. Your island example is largely irrelevant because other possibly analogous factors like intellectual property and immigration are largely irrelevant. It's not just the lucky few that are extraordinarily brilliant, healthy, and diligent that do fine: you do well in proportion to however much you cultivate those qualities, even if it's a small fraction of those who do it the most. Asserting that those qualities only matter for those who develop them the most is beyond silly. Of course, you also pay the price for how much your family and society develop those qualities: if you grow up in a backwards socialist country like India or China, you have less to work with around you despite your own qualities.

As for inherited wealth, the DuPonts and Rockefellers have a fraction of the share of total wealth that their forebears earned. If they've managed to maintain a third or less of what their ancestors earned, good for them for bucking the trend a little but it's mostly an artifact of how extraordinarily successful their grandparents were. Almost nobody else started with that large an inheritance or managed to even preserve whatever they started with. As for them not needing to work, as if I care that a few families somewhere don't need to work? That's the luxury that the great intelligence and diligence of their forebears provides, trying to invoke envy or jealousy of that wealth is a transparent tactic to pass idiotic laws, similar to how the recent focus on the income distribution is no doubt helping to buoy the current idiotic medical reform. If there are important exceptions to why hard work isn't the best pillar to base societal power on, you would no doubt name them but you don't.

Religion requires government to help bind them to a moral code? What nonsense. If they want to congregate, nothing's stopping them from using churches and the like. The only reason to invoke govt is to do precisely what you claim is immoral, to impose their moral code on others by force. The power of the market is only a mystical belief to those who oppose it and who willfully ignore centuries of evidence of the great efficacy of markets in order to advance their own idiotic pet theories. Yes, there are free marketers who take their claims in support of markets too far- whether those who say the only responsibility a corporation has is to its shareholders and their profits or those who advocate the stronger forms of the efficient market hypotheses- but given the much greater exaggeration and lack of reason of their anti-market opponents, it's understandable why they make that mistake. Your jump from free markets to excessive greed is extremely quick, I could point to the much more common rent-seeking of the alternative, government. I'd much prefer assholes were conservative/libertarian if that means they're unlikely to run around doing stupid things like the limousine liberals, who give money blindly to corrupt third-world govts that then proceed to use that money to hold their populace down. At least the libertarian assholes aren't running around doing further damage to the world around them, in a deluded attempt to assuage their guilt at being successful. Ultimately, there are as many asshole liberals as any other stripe, no large group can keep them out. ;)

CompEng

November 24, 2009 07:38 PM

Ajay,

"Religion requires government to help bind them to a moral code?"
I can see how you might have mistaken what I was saying for this, but no, that's the opposite of what I want. No, it's more that the true libertarians I've met (Ayn Rand followers, mostly) avoid religion like the plague because they think anything that could inflict a feeling of guilt upon them is an unmitigated evil. For them, greed *is* the purpose, and that's specifically what I'm trying to avoid.

I'm intrigued to hear you suggest otherwise for your particular flavor of philosophy.

Quickly, my aside on Rockefellers and whatnot wasn't an effort to stoke envy: it was a reflex to an incorrect assertion.

"If there are important exceptions to why hard work isn't the best pillar to base societal power on, you would no doubt name them but you don't."
No, I meant that there are important exceptions to ownership or wealth deriving from hard work. There are a lot of examples on Wall Street and in Sales and Marketing departments among others. Hard work, morally applied, is a fine basis for a society.


"Yes, there are free marketers who take their claims in support of markets too far-"
I'm surprised to hear you say so. Perhaps I've misjudged you.


I've got to go... I'll leave the rest be for now. You've strayed a bit from where I was going, though.

CompEng

November 25, 2009 05:37 PM

Ajay,

One addition:
"Asserting that those qualities only matter for those who develop them the most is beyond silly. "

Absolutely. Maintaining that capitalism only works for the best is laughable, but what I'm trying to do is set up a much more difficult metric: what works best for everyone? That's less clear. Capitalism is certainly a leader, but I can't believe there's any system that can't be improved upon, capitalism included.

Ajay

November 29, 2009 10:21 PM

CompEng, I see, so I was mistaken when you said "a moral code should bind themselves to it, with the help of an institution," in response to my comment that govt is unnecessary? I was so "mistaken" that you then change the subject to Ayn Rand without explanation. As for libertarians/Randians, nobody asserts greed as the purpose, you need to actually examine their thinking rather than simply basing your characterization on some 80s movie that attempts to tar people with such stupidity. Randians are actually unremittingly moralistic, following her example. They are simply atheists and do not derive their morality from some sky god, that part of their thinking is actually refreshingly clear. As for the Rockefellers, considering they lost most of the inflation-adjusted net worth that their ancestor amassed, you haven't corrected anything. Wall Street and sales/marketing people are some of the hardest-working around, what you don't like is what they do. Ultimately, what determines wealth is the scarcity and utility of your skills: hard work is an important factor in developing those skills but intelligence and diligence and other native qualities can be more important. As for the free marketers who go too far, it is possible to overstate the case for anything. What matters is that the free marketers are mostly right and the socialists are mostly wrong. As for what system works best for everyone, it's clearly free markets, precisely because they're always improving themselves. Free markets allow entrepreneurs to come up with new ideas and change the system much more easily than any other system, which is why the US, with freer markets than most anywhere else, is also one of the richest countries in the world, where even the "poor" are considered "rich" in most other countries.

CompEng

November 30, 2009 12:55 AM

Ajay,

"CompEng, I see, so I was mistaken when you said "a moral code should bind themselves to it, with the help of an institution," in response to my comment that govt is unnecessary?"
Pretty much, except I was responding responding to the latter part of your sentence, '"basic morality" that would impose itself in some other yet to be named way'. "An institution" did not refer specifically to government: it was meant to refer a church or some other non-profit organization. I went on to explain that capitalism doesn't prohbit that, but that faith in other things does tend to displace the possibility. I admitted that was probably an unclear statement.
But did you think I was trying to weasel my way out of a previous statement? I'm generally ok with saying that what I wrote didn't reflect my understanding or even "Oops, I was wrong".


"Wall Street and sales/marketing people are some of the hardest-working around, what you don't like is what they do"
You're right. And I have plenty enough examples from media and whistle-blowers without turning to Hollywood. Bankers and investment bankers perform essential functions (spreading capital and setting asset prices), but the incentives in that world tend to discourage cooperation and integrity, which can transform markets into casinos. The most important distinctions in my mind are that in a casino, nobody beats the house, and that a casino provides a net loss of wealth, simply redistributed. But what really burns me are those that, for lack of integrity, fail at their function but cling to both ridiculous pride and ridiculous wealth.

"As for the Rockefellers, considering they lost most of the inflation-adjusted net worth that their ancestor amassed, you haven't corrected anything."
The original statement, "The few who inherited their wealth never hang onto it".
My original take was that you meant that people who inherit wealth invariably lose most of it. If that were true, then no family could hold on to sizable wealth after generations of splitting inheritances among multiple children, taxed at every generation: my examples were sufficient for that interpretation. But there are also plenty of examples of people that inherit some wealth and combine it with natural talent and hard work to build more. In Hollywood, Kate Hudson will probably do as well as Goldie Hawn, and her parents' wealth and contacts certainly played a role. If you want a better business example, go with a family like Heinz or Herr (or even Sam Walton's wife). If you're setting the goalposts at the very wealthy generating more wealth over multiple generations than their ancestors, I have no ready examples outside of foreign royalty. But it's crazy I should even have to go through this process, since the argument isn't whether inheritance *usually* works out. I haven't seen you admit fault in anything, even when the fault is only making a ridiculously general assertion.


"As for libertarians/Randians, nobody asserts greed as the purpose, [etc.]"
John Gault would disagree with you. Objectivism may bound greed with integrity, but rational satisfaction of whatever the ego desires is at the root of the philosophy. Objectivists try to avoid what most people would term excessive greed: risking more than a prize is worth because not having more is unacceptable. But greed is their purpose, however they dress it. I have respect for many of the points of Objectivism, especially its alignment with honesty, integrity, and rationality, but my point stands.
I brought up Ayn Rand, because, as I've said before, most of the libertarians I know able to actually define and defend their positions carefully do subscribe to Ayn Rand's philosophies. I understand Objectivism much better than you think.

Followers of Ayn Rand may not worship some sky god, but poke into the fundamental nature of wealth or the ego, and you're bound to get some irrational responses from most of them. Ayn Rand was a humanist, and the implicit premise of her work was the sacredness of the well-tended psyche (the mind and ego).

"What matters is that the free marketers are mostly right and the socialists are mostly wrong"
I agree, but I can't leave it there. Most of socialism is wishful thinking or worse. And a good bit of socialism is simply dressed up robbery. But the premise behind socialism is that people can be fair even if life isn't, and I have sympathy for that premise.

"As for what system works best for everyone, it's clearly free markets, precisely because they're always improving themselves."
I agree that although they are not perfect, free markets the best we know as a general system. I add this a quote from Milton Friedman: "Freedom is not the natural state of mankind. It is a rare and wonderful achievement". Freedom has to be fought for and tended. That's what government is supposed to be for. It has outgrown its charter.

As far as as free markets always improving themselves, what you constantly see in free societies are people trading away that freedom for ease or security. Does that really make the case that free markets as currently understood solve all problems better than any possible alternative? Freedom is an important part of the answer, but it's not the whole answer.

Ajay

November 30, 2009 04:47 AM

CompEng, As I've said before, you often make vague statements that you later have to correct or that one has to dig the meaning out of. The problem with Wall Street is that it has combined two functions, one useful, the other useless. It allocates capital, as you say, but it also encourages investors to gamble, to make more fees off the turnover. When the gambling exceeds the investing, the stock market inevitably crashes and the speculators are swept out. The system is self-correcting but there are probably structural changes that would lead to better results, that entrepreneurs are free to implement. I don't know who you think hung on to ridiculous wealth despite failing, for example the Bear Stearns chief was a billionaire and lost most of it. Even if you fault him completely for their mistakes this decade, he lost the half a billion or so he was worth in 2000, that he had earned over decades long before the recent mistakes that scuttled the company. You're burning over largely imagined unfairness.

As for the Rockefellers or whoever, obviously a few marginally less incompetent kids manage to hang on to a third or less of their parents' wealth. Most lose most of it, which backs up what I said about their not being able to hang onto it. For every Kate Hudson, there are a hundred stars' kids who go nowhere, the preponderance of evidence is against you. As for foreign royalty, Madoff bilked a lot of foreign nobles out of their money, that's what happens to inherited wealth and the credulous kids who inherit it. If the argument isn't whether inheritance usually works out, what is it? You claimed that ownership is often about who got there first, I pointed out that inheritance almost never works out. I see nothing to admit fault about, just because you start splitting hairs about the word "never," which is almost always used to mean "almost never" because it gets redundant to preface everything with the word almost. If you don't understand that simple fact of communication, not much I can do about it.

I suggest that you don't really understand objectivism if you believe greed is their purpose. Just because you think your brand of "altruism" is better doesn't mean that those who stress self-interest more than you are greedy. Rand to me is a minor cult, that happens to be right on several points but is too caught up in a rights-based philosopy otherwise. Of course they can be irrational, they're human. ;) The premise behind charity is that people can be fair even if life isn't, the premise behind socialism is to hold the govt tax gun to everyone else's head and force them to pay up for your pet projects, that are invariably a waste of time. I disagree that govt is supposed to be for fighting freedom, it only rarely has championed that cause and is more usually about crushing it, which is why there's no need for govt. Yes, people often delude themselves about the benefits of govt and trade their freedom away for nothing: how is that an indictment of free markets? People make stupid decisions regardless of their institutions, all free markets make them do is pay the price for those decisions so that they learn and don't repeat those mistakes. We will not have a housing bubble again anytime soon, mostly because people now understand that housing prices don't rise for no reason.

Freedom is the base of everything else, without freedom not much else is possible. However, as I've said, I have no problem with people choosing to live in North Korea or San Francisco, the problem is that they then try to force the rest of us into their idiotic fantasies, such as with the current medical reform or global warming nonsense. Their moronic justification is often that the rest of the world is doing it, the modern day equivalent of "Everybody else is jumping off the bridge..." ;)

CompEng

November 30, 2009 10:03 AM

Ajay,

"CompEng, As I've said before, you often make vague statements that you later have to correct or that one has to dig the meaning out of."
Sadly true, but I man up. I don't weasel out.

"If you don't understand that simple fact of communication, not much I can do about it."
You've given ample evidence that while you're capable of bullying your way through an argument. But if you think you're a good communicator, I suggest you examine that carefully.

"I suggest that you don't really understand Objectivism if you believe greed is their purpose."
If you don't accept this, then I must believe you're haggling over the definition of greed.

I feel no need to defend the rest, either because I find myself in agreement with you, or I see no path worth the effort to illuminating my view on the topic.

CompEng

November 30, 2009 02:29 PM

Ajay,

I will amend my statement on Objectivism being about greed: it's about the individual pursuing whatever he wants, which is not necessarily money. I still account that as a type of greed, but I suppose most people would have used a different word, like selfishness.

Ajay

November 30, 2009 09:39 PM

CompEng, I'd prefer if you put more thought into what you wrote, rather than having to clarify your intentions later. If by bullying through an argument, you mean making points that are well-thought out and backed by plenty of evidence, yes, that's me. :) As for being a good communicator, I'm a GREAT communicator because I understand the finer points of the topics under discussion and can make them clear using simple language. As for greed, you remind me of a communist who says all the capitalists who don't live on a commune like him are greedy. No, they simply have different priorities than he does and do not usually have an overriding lust for wealth, that we can all agree to characterize as greed. Similarly, the Objectivists simply refuse to apologize for pursuing material wealth, but they do not sanction an overriding lust for material wealth, greed, as desirable. Simply because you do not agree with their clear-headed lack of guilt about and their approval of the pursuit of material wealth, or anybody else who believes that more than you do, does not mean they're about greed or selfishness. You simply believe in something more altruistic than they do, likely foolishly if you then try to rope govt into accomplishing your ends.

CompEng

December 1, 2009 01:33 AM

Ajay,

In the future, I'll try to only write when I actually have time to do so properly.

However crisp your writing skills, I have noticed that you often don't spend enough time thinking about the meaning and motivation of the writing of others, unless deliberate mis-characterization of their statements is a debating tactic? And I note this consistently, not simply in your discussions with me. I tire of your making my statements into polarized caricatures before I lose my cool. ;)

Value judgments aside, is there much of a semantic difference between selfishness and rational self-interest?

Ajay

December 1, 2009 10:10 PM

CompEng, funny that you now criticize me because I can't ascertain exactly what you're trying to say with your vague non sequiturs. I simply assume that you're trying to make a point rather than irrelevantly blustering, as you now claim your church/institution argument was (churches will always be around in a free market so your point was at best irrelevant). Hilarious that you now claim I've confused others' points too and how characteristic that you cannot dredge up a single example of the supposed mischaracterization: the reason is because nobody else writes so many vague wishy-washy statements as you. I realize that you understand much of the arguments for free markets but then moderate them, unnecessarily and likely only to get back in step with most of the dumb masses around you. I suggest you actually reason about these issues and follow your logic where it leads, rather than sitting on the fence because you don't want to stray too far from the unthinking herd. As for selfishness vs rational self-interest, the former is usually applied to people who only think of themselves whereas the latter is what most people actually are, rationally following their interests while accounting for the interests of those around them in the best they can. The fact that you're unaware of this distinction perhaps signifies how much you've been brainwashed by power-hungry socialist ideologues like Obama, who con people into thinking they're being more altruistic by giving them more power, such as with the current mandated medical insurance schemes, which the dundering politicians then proceed to use to milk the system and block progress. Medicine is about to radically change in the coming years and trust me, none of it will come from the govt: most of the time they're stupidly pushing in the opposite direction.

CompEng

December 3, 2009 01:39 PM

Ajay,

"funny that you now criticize me because I can't ascertain exactly what you're trying to say with your vague non sequiturs."
Since I can be vague when working through concepts, I don't expect those always to be understood. But in the instances in question, I meant exactly what I said, and I'm sorry if it was too tangential to the discussion at hand.

"Hilarious that you now claim I've confused others' points too and how characteristic that you cannot dredge up a single example of the supposed mischaracterization"
Honestly, I tend to internalize the points and forget the examples. I remember in something like 1/3rd of cases where you attacked someone for being an idiot you were attacking a position no one was taking or ascribing what I felt to be an incorrect motivation. History indicates I'm not going to convince you on this, so I'm not going to make a real effort. I am hoping you'll take at your listening skills on your own and come to your own conclusions.

". I realize that you understand much of the arguments for free markets but then moderate them, unnecessarily and likely only to get back in step with most of the dumb masses around you."
I am concerned with understanding the positions of the people around me. I am much less concerned about whether I am in agreement with others. I moderate my positions because I feel a model of reality that does not comprehend the observations of others is incomplete. But I don't feel my understanding of reality has to serve the values of others or make them happy. I'm concerned with the truth. Capitalism works fine as an economic system and the concept of liberty ought to dominate attempts at government regulation. But if you believe that people owe it to each other to be decent to each other, that leaves a big gap in terms of social interaction that churches and charities currently don't fill. I feel that's related and important, even if governments attempts to fill that space (through welfare, ethical and other legislation) currently are wrong. The topic is tangential, and I'm sorry if my references to it have been confusing.

"As for selfishness vs rational self-interest, the former is usually applied to people who only think of themselves whereas the latter is what most people actually are, rationally following their interests while accounting for the interests of those around them in the best they can."
Right, so the difference isn't in motivation or philosophy: in either case, whatever makes you happy and works in the real world is considered good. The difference is that the selfish person is less aware of the world around them, a characteristic of personality or mental capability. In other words, subscribing to a philosophy of rational self-interest or selfishness is the equivalent for a large class of people. I don't demonize those people, but I do in fact prefer a more altruistic outlook.

"The fact that you're unaware of this distinction perhaps signifies how much you've been brainwashed by power-hungry socialist ideologues like Obama"
I do not get my morality from politicians.

Ajay

December 6, 2009 08:23 PM

CompEng, No need to apologize for making tangential points, but surely you can see how it led to my conclusion given the context? As for misreading what others wrote, I think you're externalizing what has essentially been a problem only with you- I don't see others protesting cuz I attacked a strawman instead of their real position- and that's only because you're often vague in what you're saying, likely because you're so concerned with straddling the fence that what ends up coming out is mush. Also, I have never called anybody an idiot, I called certain statements idiotic. Even the smartest people have many idiotic views, as you no doubt know. I suggest you up your reading comprehension or logic skills if you're unaware of this distinction. There is no need to moderate your position to accomodate others' views if they haven't put much thought or observation into their position. There is a significant minority of people who believe the earth is flat, one can disregard them because they clearly have not considered the evidence. This is broadly generalizable to many popularly held views, mass popularity is a weak test of truth. As for trying to make others happy, I certainly think you do that, like when you talk about liberty to me and then take the opposite tack with some teacher in another thread.

What big gap in social interaction do markets, churches, and charities not fill?And as you say, even if there's a gap, govt attempts at filling it have been mostly worse than the problem. As for the difference between a selfish person and one who's rationally self-interested, it's not merely a matter of degree, though that's a big part of it. You ascribe a reason for their selfishness, a lack of self-awareness, but it could be they are aware of that but simply ignore it. What matters is action, not motives, and selfishness implies an overwhelming drive solely for one's own goals that is far in excess of rational self-interest, I don't see how you find any equivalence there at all. Like I said before, the two are only equivalent to the communist who thinks all self-interest is bad and can somehow be wished away. As for your more altruistic outlook, you're welcome to have your own views and live the way you like. However, when you cast your lot with people who then try to force those views on everybody else, such as with the current medical reform that forces everyone to get health "insurance" or with income taxes that are invariably wasted on the govt project du jour, your "altruism" has consequences for far more people and mostly for the worse. You may not get your morality from politicians but they certainly seem to dovetail nicely sometimes. ;)

CompEng

December 9, 2009 12:28 PM

Ajay,

", I think you're externalizing what has essentially been a problem only with you"
Possibly, but I don't think so.

"Also, I have never called anybody an idiot, I called certain statements idiotic"
I'll grant you that. Mind you, the distinction between calling people idiots or only their statements is seldom used, simply because so few people are capable of taking criticism constructively, especially when acerbically worded.

". As for trying to make others happy, I certainly think you do that,"
I do: I try to emphasize similarities in positions during discussions and focus on a limited number of points of disagreement. I think that's ok as long as I don't lie and keep arguments separate from internal judgments. Perhaps I subconsciously moderate philosophy, but I try very hard not to "moderate" facts!

"What big gap in social interaction do markets, churches, and charities not fill?"
Maybe the greater problem is that government has taken responsibility for needs it fulfills poorly, and therefore private alternatives are weak?

"You ascribe a reason for their selfishness, a lack of self-awareness, but it could be they are aware of that but simply ignore it."
I'll try another angle. Some people naturally care about others. Some people don't. A philosophy promoting rational self-interest could be adopted by both groups of people. The first group would see their philosophy as justifying selfishness as rational behavior. The second would see it as common sense: rational means should be used to serve oneself and others. The philosophy of rational self-interest itself makes no differentiation as to which is preferable.

"Like I said before, the two are only equivalent to the communist who thinks all self-interest is bad and can somehow be wished away."
Not so. There are a variety of distinct philosophies that ask humans to moderate their own immediate self-interest in service of state, humanity, god, others, or merely a more long-term state of well-being.


"However, when you cast your lot with people who then try to force those views on everybody else... your "altruism" has consequences for far more people"
This is why I spend so much time thinking about the consequences of my philosophy. I think that if you don't ascribe value to something, you're not likely to get it. On the other hand, if you attempt to coerce people into acting against their own interests, you will certainly get perverse results. Capitalism as an economic framework is good because people can act in their own interest and still do good. However, the commonly associated philosophy that whatever is in one's own interest is good is more dangerous.

"You may not get your morality from politicians but they certainly seem to dovetail nicely sometimes."
If I'm lucky. I've got a lot of Judeo-Christian baggage that they often share. My frustration is that politicians think that they can legislate a particular outcome that seems laudable on the surface without regard to means or consequences which are often harmful or immoral.

Ajay

December 12, 2009 10:11 PM

CompEng, if it weren't just you complaining about being misunderstood, you'd be able to offer up some pretense of an example but as usual, you can't. As for calling out idiotic statements, I think that when someone makes an idiotic pronouncement, it's best to label it for what it is. Whether they can take it or not is up to them, perhaps they wouldn't spout such nonsense if more people called them on it. I realize that many people, such as you, avoid using any sharp words or criticism because you just want to get along: that's what leads to such idiotic ideas flourishing. As for moderating your philosophy, my point is that it's a confused mishmash because you make contradictory statements to appear to agree with whoever you're speaking, something Bill Clinton was accused of doing in 1992. As for rational self-interest, any philosophy can be abused by those who use its name while straying from its tenets, just as those who want to reform medical care today to give coverage to more people make the whole medical system much worse for everyone in the process. Rational self-interest acknowledges that, whatever fantasy world you and other altruists would like to live in, self-interest is the prime motivator for practically everyone. That fact is accepted and the many benefits of it are explained, with the caution that one can always go too far with a good thing, just as one can't eat chocolate all day long. What does the fact that there are many philosophies that ask for moderation of your self-interest have to do with your and the communist's lumping anyone and everyone who doesn't agree with you as selfish? Far worse than any philosophy "commonly associated" with capitalism is the actual socialist philosophy that espouses taxing everyone with a real job to pay fat salaries to politicians and teachers, so they can do less and less every year while getting paid more and more.

LAO

December 14, 2009 12:17 PM

Ajay & Compeng, I commend you both for engaging in meaningful dialogue from somewhat polar sides. Ajay, you've shown yourself not to be the one-dimensional individual that you initially appeared and you are graciously more open than many a person with a similar outlook. Compeng, I have to admire your continual seeking and moral compass honing in the face of a barrage of inferred and tangential and semantic attacks. Excuse my voyeurism, but I will sorely miss the next chapter of this conversation if it fails to transpire or occurs outside my view.

It's brazen of me to butt in, but here's my take on the current state of the discussion and a direction that would be very interesting. It seems that both are motivated by self-interest but Compeng's is expressed in terms of the society at large and over the long term, while Ajay's is more immediate and personal, reflecting a confidence that nothing more is required of anyone to keep him and his from being smashed by the potentially unconscionable self-interest of others.

Ajay appears to be someone who won't be happy until all government is dismantled, to such an extreme as to seem almost treasonous. Compeng bristles at the notion that the commons that U.S. democracy has fashioned to-date and continues to fashion have anything worrisome in common with socialism or communism.

As for me (not that I think anyone cares), I think that if revolution or collapse enabled the purity that Ajay longs for, then Americans would slowly but surely reinvent exactly what we have now -- a bloody awful and cumbersome way of allowing the majority some dignity and hope of reward for their striving, tempered with constraint upon those capable parties whose tendency to exploit the less capable knows no bounds. History shows that such tendencies persist, and though Ajay would probably argue that they will be naturally constrained by anarcho-capitalist behavior, I would argue that seeking a means of limiting the abuse that precedes that possibility is what caused democracy to emerge in the first place. Please don't get hung up on the confusing of economic systems with styles of government, because they are already royally confused in most people's minds for good reason. Consider China -- every day that we go to the mall, we transfer a little more American wealth to a communist regime, pretending that this cannot eventually empower them to impose communism on the world because we want to believe that capitalism enables democratic style freedom; I personally doubt it.

CompEng

December 17, 2009 10:18 AM

LAO,

Sorry to disappoint. I'd been waiting until I had time to pore through old posts to find some constructive examples of strawman tactics, but I'm having trouble generating the time or energy sufficient to perform the task properly. I may have to let the conversation peter out.

I'd like to address one point, though:
"Compeng bristles at the notion that the commons that U.S. democracy has fashioned to-date and continues to fashion have anything worrisome in common with socialism or communism."
I don't think that's quite right. US society has quite a number of socialistic elements that range, in my mind, from potentially constructive to dangerous. I'm starting to lean towards putting America's approach to healthcare in the latter category as I listen to what's actually being proposed. Since we appear to have no capacity to determine when care should be given, and since doctors and nurses I speak to believe Medicare is already responsible for the death of competent primary care physicians (with the rot quickly spreading to coronary and other disciplines), I think we're at a point where a pure free market approach would still do more good than any proposed approach. But in terms of things like climate or pollution management, I'd have to say that the free market's ability to address such things is a joke, so we need to focus on making government more capable of addressing the issue properly.

", I think that if revolution or collapse enabled the purity that Ajay longs for, then Americans would slowly but surely reinvent exactly what we have now"
Quite likely. There are other ways things could work, but the mindshare isn't there. If we tore down government, all we could guarantee is that the vacuum of power and responsibility would be filled eventually by someone, likely another government.

"pretending that this cannot eventually empower them to impose communism on the world because we want to believe that capitalism enables democratic style freedom;"
The communism of today and the communism of even a decade ago in China are not the same creatures. China has gone from Communism to Fascism. The evolution there will be interesting to watch, but I think Fascism and corporate-driven conformity are much more likely products from China than Communism.

LAO

December 17, 2009 04:16 PM

Compeng, Thanks for your points.

"...healthcare..." Reform proposals morph so quickly that I'm barely able to form an opinion, except that I find the current system untenable, bordering on extortion, abusive to medical providers and consumers and businesses alike. I can grasp your unease, but I must have misread you. I can't fathom what a freer market would look like -- your money or your life, I think. If I had confidence that environmental, food, drug and any number of other regulations and enforcement would make a leap forward to reduce arbitrary pressures on health, I might feel differently. Who among us, for instance, could have anticipated that name brand toys would be painted with lead paint, and why shouldn't any toxic impact be born somewhat by the society that allowed it to happen, since the perpetrators apparently are not to be held fully responsible?

"...communism..." That's a very cogent observation.

CompEng

December 18, 2009 10:04 AM

LAO,

"I can't fathom what a freer market would look like -- your money or your life, I think"
I imagine things like people paying a much more reasonable price directly to the doctor without long lines and 3 people in the office just to handle referrals and insurance payments. Instead I imagine more physician's assistants involved in triaging and handling mundane items like sore throats and prescribing antibiotics for infections. I imagine being able to schedule physician's time in 15, 30, or 45 minute increments if you think you need it and not having to worry about how insurance will handle things. I imagine working out with your doctor which tests you want to pay for and insurance not being involved. I imagine tort reform, subsidized HSA's largely replacing insurance for anything non-catastrophic, and basically prices going down and health care approached with something approaching sanity because decisions are not made by insurance companies or the government. I imagine the AMA getting a lot weaker and the number of medical schools and the ability to get Medicare to pay no longer being a bottleneck for get medical care.

The potential downside is that the rich will always get better care than the poor, but you have that already. At least the level of choice should go up and the prices should go down dramatically.


"Who among us, for instance, could have anticipated that name brand toys would be painted with lead paint, and why shouldn't any toxic impact be born somewhat by the society that allowed it to happen, since the perpetrators apparently are not to be held fully responsible?"
The ability to sue for such things is vital to the ability of a market to avoid them. Mattel should be out of business if they can't hold their Chinese subcontractors to a reasonable standard. Here's one point where I strongly disagree with Ajay. You need a government to set the rules of the road and to back them up with enforcement, even if the enforcement is through civil suits. I do think the rules of the road should be as simple and non-intrusive as you can possibly get away with.

LAO

December 18, 2009 02:41 PM

compeng, Health care -- I think I see your vision. Large businesses have the power now to set the wheels in motion -- offer each employee the option of 1) HSA, catastrophic insurance, and the balance saved by the company is passed 100% as taxable income to the employee, or 2) keep the expensive, inclusive, cumbersome insurance that is still often forced upon corporate employees today. I can think of nothing to stop them from doing it, but they don't. I have often pondered why there seems to be some hidden funny business. My employer in 2000 claimed that the cost of insuring (then 100% subsidized, no deductible) was $1,800/employee; now they are less outspoken but imply that the total cost of coverage is $22,000 for families, $16,000 for individuals, even though nearly every charge is supposedly reduced by annual provider negotiations and the deductible has grown quite high. It is very suspicious to me, but if true, imagine taking control of your own health care and earning an extra $10,000 or so for having done so. There is something going on that requires some external forcing, but I don't have the insider insight to identify the action. The small business situation is horrible and designed to impede success -- why an insurance group should equal the size of the business is beyond me -- it would be so easy for negotiating power inside major corporations to fold in local suppliers and non-competes. Medicare: it pays the price of pre-65 health and insurance abuse and the NIH doesn't see it as their problem. Something nefarious is at play, in my opinion, but I don't have the answers, and tend to weasle out by saying that any reform is better than no reform.

Law suits: I chose the lead paint example because I cannot imagine a realistic way that having a lead coated toy slipped into a child's life by an uninformed but well meaning individual or organization will trigger a winnable lawsuit when somebody finally figures out that the kid's problems are lead related. Even eagerness on the part of the toy company to take full responsibility would not provide a means of identifying every potential victim.

CompEng

December 20, 2009 10:22 AM

LAO,

"... and tend to weasle out by saying that any reform is better than no reform."
That's kind of where I started, but I think the most critical elements are transparency, accountability, and most importantly, a forcing function for making the hard choices: we can't have all the health care we want. We can't pay for it. That's why I'm leaning towards a market solution here: all the things most desperately required are things that moving towards a freer market could provide.

"Even eagerness on the part of the toy company to take full responsibility would not provide a means of identifying every potential victim."
I don't think that's a viable goal: IO don't think we can get there from here. The best we can do is provide a deterrent so that companies try as hard as possible to avoid such problems, and the bad actors get burned... wherever they are.

LAO

December 21, 2009 03:02 PM

Compeng,

Maybe we're onto something here, or maybe you're simply triggering a forgotten way of thinking about markets for me. I have the impression that, to a free market enthusiast, regulation = not free, end of story. You grant the need for a forcing function that sounds suspiciously like regulation or government manipulation and then call the result a freer market.

It helps me to restate the problem as this: In the health care arena (and perhaps in other arenas as well, like toy manufacture), the consumer side of the market is currently denied important elements of a free market, like transparency and accountability (and many times, access to any competing alternative at all). If that is addressed, then a better result is likely for consumers, and if the debate could be couched clearly in those terms, then perhaps some meaningful progress could be possible.

Health care is a somewhat dicey place to seek this freer market, because waiting to see if your neighbors die as a result of using hospital x or go broke insuring through company y is not exactly the same as seeing that tools from company z usually break if you actually use them. Neither is it realistic to imagine that provider duplication in a region for the sake of competition is going to happen or last very long if it does. Even so, since all I want is to manage risk, I remain stunned that I cannot demand yesterday's technologies and the continuation of the last area non-profit hospital at a savings, but instead feel forced to choose between something horrendously expensive that I never need and something (or nothing) that is an essentially unknowable gamble.

The health of the nation's economy and populace ought to be worthy goals, yet these seem almost lost in the dialogue. It is always possible that merely shaking up the system will inspire a new outlook that invites real progress toward something better, but I hope that it doesn't take a generation.

Anyway, thanks for refreshing my arsenal of points for discussion with steadfast free marketers.

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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