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New to Objectivism - Many Businesses Don't Act in Self Interest

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Ralph
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I am almost 3/4 of the way through Atlas Shrugged, the first novel I have read by Ayn Rand. I am intrigued by her philosophy of objectivism however it leaves many unanswered questions and I hope this forum will help me to understand it better.

Characters like Hank Rearden seem to be idealized prototypes of businessmen, in my life I have worked for 9 corporations and never met someone even close to him.

One of the issues I have is with the assertion that businesses will rationally act in their own self interest. I worked at a bank and watched thousands of junk loans being processed, nobody cared because they were going to be securitized and the bank earned a hefty fee income. Sure, many of these people are out of work now but they earned such fantastic sums that the wiser ones are now happily retired. In Atlas Shrugged products and services made by those who follow objectivism are invariably wonderful and of the highest quality and integrity. In my experience most manufacturers don't operate under this principle but try to get by with the least quality possible and worry about the consequences later. I guess since most people want junk, that is what they get. Planned obsolescence is rampant and everything is practically disposable, all geared towards a nation of consumers instead of producers.

Atlas Shrugged seems to suggest that objectivism only works in isolation and I tend to agree. Hypothetically let us suppose we have two countries and one runs on pure objectivist principles, the other is a diluted form of it. The pure one does well but is outpaced by the second scientifically and technologically because the second taxes it's citizens for government research and development on the scale that the private sector doesn't have the wherewithal or inclination to do. You may disagree but just accept the proposition for the sake of argument. My understanding is that Rand's principles cannot be compromised even if it meant that as a nation we would be second rate, is that correct?

If a business were to buy all the roads leading to a city and the people running it were short sighted they could easily starve the city through toll hikes, enrich themselves then take the money and do this again somewhere else. Not rational but again the principle of making a quick buck which few seem able to resist.

Appreciate your comments and insights, I have a lot to learn.

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Question: have you gotten to John Galt's speech yet? It's been a while since I have read AS so I can't remember if it is at the 3/4 point or past that. That speech may help answer a lot of these questions you're asking in regards to business. For one, your example regarding junk loans doesn't work because those loans are backed by the government. When government gets involved in business, it releases business from feeling the need to act in their own self-interest. Why worry if a loan is profitable if taxpayers take the biggest hit if it's not? When business is left to its own devices, it HAS to operate in its own self-interest to survive; they desire to earn profit and must act in a way to do so. (BY the way, I would highly suggest reading up on Adam Smith's writing, if you have not yet done so). When government gets involved, that profit-motive is no longer what drives the action of business: they don't have to worry about profit if someone else foots the bill for their mistakes. Read Galt's speech and that will be a start for you.

I can't work with your example of a business buying up all the roads to a city and launching some kind of war of attrition to make a quick buck because it would not happen in a free market. In a free market, there is competition: competition which prevents one company from becoming "all powerful." Monopolies, contrary to what we're taught in school, cannot happen in a free market. Monopolies only happen when businesses accrue "unnatural" protections that are sanctioned and guarded by the guns of the government. Also, do you think rational people - or even unrational people for that matter- would just keep going "oh well" and forking over more and more money to drive on a road? At some point they would rebel... much like the American colonists rebeled against the taxes they didn't approve of. But even if this situation did occur in a free market (which, again, is impossible), if the roads were overtaken by some corrupt crazy businessman, you can bet your bottom that someone wold come along with an invention to get you around it... such as some sort of hovercraft, or a massive growth in companies offering helicopter and small commuter plane rides. Could that corrupt business start shooting them down? I suppose, but then we're talking about a war and are no longer talking just business.

But make no mistake: Atlas Shrugged in no way suggests that objectivism works in isolation. Objectivism stresses philosophical integration and the elimination of contradictions. To have it only work in isolation would mean that you are using different philosophies subjectively, to meet the different needs of different moments. If your doing that, you are not philosophically integrated and thus are rife with contradictions. John Galt will help introduce you to that :P

Edited by 4reason
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Hypothetically let us suppose we have two countries and one runs on pure objectivist principles, the other is a diluted form of it. The pure one does well but is outpaced by the second scientifically and technologically because the second taxes it's citizens for government research and development on the scale that the private sector doesn't have the wherewithal or inclination to do. You may disagree but just accept the proposition for the sake of argument. My understanding is that Rand's principles cannot be compromised even if it meant that as a nation we would be second rate, is that correct?

How does the second gov't use its science and technology and keep it secret at the same time? If it doesn't keep it secret, it in no way outpaces the first which will also use the same knowledge. If it does keep secrets, what use is it?

Anyway, one of the themes of the book is that in the long run, the second gov't is not compatible with a technological and industrial society. So your hypothetical wouldn't work.

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I am almost 3/4 of the way through Atlas Shrugged, the first novel I have read by Ayn Rand. I am intrigued by her philosophy of objectivism however it leaves many unanswered questions and I hope this forum will help me to understand it better.

Like everyone says, finish it! :D

Characters like Hank Rearden seem to be idealized prototypes of businessmen, in my life I have worked for 9 corporations and never met someone even close to him.

Yah, they're definitely rare, but they do exist, eg Ken Iverson, John Allison, and T J Rodgers. Unfortunately, they're vastly outnumbered by Boyle and Mowen types.

One of the issues I have is with the assertion that businesses will rationally act in their own self interest.

No, that's not what Objectivism says. Objectivism recognises that rationality is a choice, and that there are consequences to choices. What's being said is that in a truly free world (which we do NOT have today) the rational are the ones most likely to rise to the top in any profession, while in a less than free world the irrational are shielded from the bad consequences of their poor choices by dint of support at the expense of the more rational, who are often directly penalised for being the more successful. As freedom becomes ever more curtailed in key areas then the irrationality is ever more protected and the attendant attitudes institutionalised. If we change the culture in key spots and get back our freedoms then things will start becoming more predominantly rational, and the Galt-types will prosper rather than be strangled at birth.

Planned obsolescence is rampant and everything is practically disposable, all geared towards a nation of consumers instead of producers.

Planned obsolescence, in its allegedly dastardly variant at least, is a myth. It doesn't stand up to rational enquiry, and is a slur aimed at businesses because of their concern to serve customers as they actually are rather than get all in-loco-parentis about customer attitudes.

Atlas Shrugged seems to suggest that objectivism only works in isolation and I tend to agree.

No, that's wrong. If there's the need for isolation then that is only because another power is, for the moment, physically much stronger and would overrun an Objectivist society before the former finally collapsed in a heap and the latter had a chance to grow strong enough to hold its own. Once an Objectivist society did grow to the point of being able to beat the snot out of such pricks should they try it on then there's no longer need for isolation.

Objectivism is also saying that following it is the means for the society that does so to gain the requisite power - both in terms of physical strength and morale - very quickly indeed.

Hypothetically let us suppose we have two countries and one runs on pure objectivist principles, the other is a diluted form of it. The pure one does well but is outpaced by the second scientifically and technologically because the second taxes it's citizens for government research and development on the scale that the private sector doesn't have the wherewithal or inclination to do. You may disagree but just accept the proposition for the sake of argument.

The "just accept for the sake" is totally unacceptable. It's the same flaw made by those who think that the Prisoner's Dilemma has much value to offer in looking at what is really rational to do. The problem lies right in the assertion that what you've said will actually come about.

Objectivism, by contrast, would show that what you've posited wont come about, and that evidence to say that it does is missing out key points. For instance, we Down Under have a real-life version of the State Science Institute, called the Commonwealth Serum and Industrial Research Organisation, and which has a much superior track record than Stadler's SSI. There's MUCH MUCH more at issue than just what the government does as contrasted with what it should be doing; the culture of a nation that allows such a government to act is also at issue in its own right. What pointing to an organisation like the CSIRO does is overlook the kind of culture that set the context for the formation of it: Australian businesses are (or at least had been for a loooooong time) notorious for giving R&D short-shrift, and Australian businesses are historically crap at following through with the marketing of products using Australian inventions. For that reason, amongst others like it, there is public support for the CSIRO (plus other things like 150% tax rebates on R&D expenses as a sweetener). The widespread adoption of Objectivism would fix the business attitudes and obviate the 'need' for the CSIRO (and the taxes that generate opportunity for tax-rebates).

In more practical terms, you state that there's a scale that people and businesses can't match. Where, pray-tell, does government get the resources from if the people and businesses themselves don't have the said resources? Please don't get Saganesquely superior in regards to what regular people choose to spend their own money on, it's not pretty.

My understanding is that Rand's principles cannot be compromised even if it meant that as a nation we would be second rate, is that correct?

No. Everything lies in the fact that the 'diluted' one violates moral principles - principles that are derived from the best use of reason to look at what is most practical over the whole view of consideration possible. Morality has no purpose but to guide one to achieve the greatest practicality, and is obtained solely with that aim in mind. Thus violation of properly-identified principles is courting disaster - that is why they should not be compromised, not out of any high-falutin sense of someone's notion of propriety being offended. They should not be violated precisely because such violation leads one to being second rate or worse.

If a business were to buy all the roads leading to a city and the people running it were short sighted they could easily starve the city through toll hikes

In a free country, the moment that someone looked as though they were going to try that on then others would spot an opportunity to make out like bandits while keeping the supply lines open, by turning their existing non-roadway property over to tollroads and undercut the attempted monopolist. IMSM, the 19th century is littered with the corpses of businesses that tried to corner the market in some product or other. One of the most famous that comes to mind was someone who tried it with cotton and got busted big time in the market.

There are also other ways of making money at the expense of the would-be monopolist - but which are made illegal by the current law. For example, one could short-sell the stock in such a monopolist (or buy derivatives etc), then announce plans to undercut him big time, and make out like a bandit on the stock exchange (or the OTC issuer). BUT, current securities law makes that seriously illegal. One key point to take away from this issue is that Objectivism stresses integration, and what may make or break some alleged evil may lie at quite a distance from it.

Appreciate your comments and insights, I have a lot to learn.

NP.

JJM

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Businesses do act in their self interest. In your example of a bank, the bank made those junk loans and securitized them because it was in the business's self interest to do so because of perverse government incentives via Fannie Mae, Freddie Mac, Sallie Mae, Ginnie Mae, the Federal Reserve, the Community Reinvestment Act and its various revisions, the SEC boosting false confidence, a government approved credit-rating oligopoly, etc. Now, do most businesses or individuals act in their own self interest as Ayn Rand would have them? No, because many of them are just out for a profit, even if that profit is because of government's meddling in the economy.

If the government stepped back, then people would work towards their real self interest.

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Monopolies, contrary to what we're taught in school, cannot happen in a free market.

Sure they can. It's just that non-coercive monopolies don't work the way coercive ones do--they retain monopoly status by being good enough at what they do that it's not worth it to compete with them. This situation can go on for years if the company stays on the ball and their market is narrow enough. Look at Intel--until AMD came along they were pretty much *the* CPU manufacturer.

It's also worthwhile to note that BUSINESSES don't have self-interest unless the entire business consists of one person. The individuals who work for the business should (and mostly, do) act in their individual self-interest. Sometimes it really is in their self interest to do things that aren't in the business's "interest" like, say, sell out. The business, in that case, has ceased to exist, but the people who owned the business are much better off.

You can't really even formulate what would be in a business's self-interest apart from the individuals who make it up. This is just another form of collectivism, really. Instead, it is the self-interests of all the individuals involve that make business a worthwhile enterprise, because it is a setup whereby *everyone* can profit, each to the extent of their ability.

Edited by JMeganSnow
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Sure they can. It's just that non-coercive monopolies don't work the way coercive ones do

I don't think "non-coercive monopoly" is a valid concept. Or at least it is only valid if you specify an exact delineation of the product the company is supposed to have a monopoly of. For example, "Microsoft is a monopoly supplier of the Windows operating system" would be a valid and true statement, while "Microsoft is a monopoly supplier of operating systems" would be a valid but false statement. Simply saying "Microsoft is a monopoly," however, does not make sense. Every producer is a monopoly supplier of his own specific products.

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I would like to suggest that you read Virtue of Selfishness as soon as possible. In hindsight, I wish I would have read it prior to Atlas Shrugged, or any of Rand's other works for that matter.

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