Is "corporate collusion" acceptable in LFC?

[daniel]

How would a truly laissez-faire system prevent corporate collusion? Couldn't businessmen agree to scrap health and safety and pensions etc? Is corporate collusion acceptable?

[Groovenstein]

How would a truly laissez-faire system prevent corporate collusion? Couldn't businessmen agree to scrap health and safety and pensions etc? Is corporate collusion acceptable?

If you're asking whether companies could agree between themselves not to offer certain working conditions to potential employees, the answer is yes. Why would it be otherwise?

For existing employees, scrapping pensions and any other employee benefits would be covered by the contract and by fraud principles.

Workplace health and safety would be covered by the contract and by tort principles. If there was a dangerous condition at the workplace, you would ask the same questions--e.g., was the company negligent? did the worker assume the risk?--you would ask in any other tort case.

[EC]

How would a truly laissez-faire system prevent corporate collusion?

Please define collusion.

Couldn't businessmen agree to scrap health and safety and pensions etc?

Absolutely. Why not? Can't the potential employees decide for themselves whether or not to accept a job knowing it doesn't have these "perks" in advance?

Is corporate collusion acceptable?

If by "collusion" you mean companies working together when they deem it in their self-interest, why not? Isn't the purpose of a corporation to make as much profit for it shareholders it possibly can?

[DavidOdden]

How would a truly laissez-faire system prevent corporate collusion? Couldn't businessmen agree to scrap health and safety and pensions etc? Is corporate collusion acceptable?

You mean the situation where all the employers in the nation band together in secret and vow to not offer employees health insurance as part of the employment package? That would be unwise, because such an agreement probably wouldn't be enforceable; so it would give one person a significant market advantage in the search for top-notch employees if they were to offer employee benefits. It would be bad business policy to allow a competitor such an advantage, and would eventually lead to the collapse of the collusory agreement.

[daniel]

Dosen't such as price-fixing not allow the market to function? Secondly what if manufacturers collude & agree to make poor quality products, which need to be repaired & replaced faster, and high-quality alternatives are extremely hard to find. Collusion prevents any large competitor from offering high-quality alternatives---the loser is the consumer. (This has become normal in America; it is most noticeable with clothes---"they don't make 'em like they used to"---but actually, almost no product of any kind lasts more than a few years.)

On the employment side, employers could easily collude to deny labor any choices. If no one offers benefits, workplace protection, or even decent wages, then workers can't insist on them. And employers would soon see it's "in their interests" for hungry employees to accept $0.75 an hour because they have no choice.

PS this is not my personal view, rather im playing devil's advocate

[DavidOdden]

Dosen't such as  price-fixing not allow the market to function?

No, because a competitor who lowers his prices just a bit will suddenly gain a huge market advantage, and will attract many customers (increasing profits). On my way to work, I drive by an intersection with 3 gas stations, and it is amazing how rapidly they respond to price lowering -- and ho low they will go. Right now, gas at those stations is 10-20 cents a gallon lower than elsewhere in the city. It's interesting to see who blinks first, as the price dips below $1.85.

Secondly what if  manufacturers collude & agree to make poor quality products, which need to be repaired & replaced faster, and high-quality alternatives are extremely hard to find.

Again, given unrestricted markets, you can't force all competitors to produce crappy products. Somebody is going to produce a better product and the word will get out, and the business will all go to them. I haven't noticed any problem with clothing being of poor quality.

The point is that in a free market, collusion to produce crappy products, crappy working conditions, or high prices is doomed to failure. If you can get a governmentally enforced monopoly where competition is prohibited, you can get away with collusion since there really is no choice other than to remain unemployed or to not buy the product. It's really hard to prevent competition -- just look at the PC market. Any collusion to produce something "undesirable" is going to be thwarted by the next smart guy who comes along and says "Hey, if I offer these guys benefits, I'll get better workers who will actually stick with the job". How can you stop this smart guy -- the only effective way that has ever been found to suppress competition is the initiation of force by the government.

[y_feldblum]

The final answers to all such arguments are found to be found in two places: in the philosophical Objectivist principles that rational men have no conflicts of interest and that reality always punishes the irrational; and in good economics texts such as Reisman's Capitalism. The economics texts explain the detail, the mechanics, and the practical operation of the philosophical principles.

Moreover, an indication where you are going wrong methodologically with such questions can be found in the introduction to Hazlitt's Economics in One Lesson.

[AisA]

(This has become normal in America; it is most noticeable with clothes---"they don't make 'em like they used to"---but actually, almost no product of any kind lasts more than a few years.)

Indeed, you cannot compare the quality, durability and reliability of modern appliances and products to those made, say, 50 years ago -- because those made 50 years ago were, for the most part, grossly inferior!

Televisions, automobiles, telephones, refrigerators, computers, central heat, air conditioning, washing machines, dishwashers, microwave ovens, clothes dryers, hair dryers, VCRs, DVD players, cameras, airplanes, boats, highways, hot water heaters, synthetic fabrics, pantyhose, calculators, carpet, radial tires -- I could make an almost endless list of products that either did not exist at all 50 years ago or were substantially inferior in design, capabilities, quality, durability and reliability.

[daniel]

What if (for instance) Coke, Pepsi and Snapple control all the cold soft-drink shipping into New York City? What if they've worked out exclusive contracts with shippers & thus barred entry into the market---and then they collude to fix prices? How could a competitor (let alone a small local one) ever have a chance?

Or looks at the example of telecommunications. How is a small business ever going to offer cellular service? There's a limit to the technology, and meaningful competition does not exist. This is the wave of the future ... all you need next is Corporatist politicians, like the mayor of New York, signing exclusive contracts with various multinationals, and forget it, competition is dead.

What's going on in the world of computers IS interesting, and it stands out as something approaching how Capitalism is supposed to work (except that government-funded institutions provided the R&D and pioneered the technology with tax dollars). But that's because (1) it's a new industry and not completely tameable yet for exploitation purposes, (2) we in the West don't really manufacture computer hardware, and the manufacture of software isn't actual labor, it's service-sector work or professional work. (Of course wages are high: we're consumers; our place in the world economy right now is to buy things.)

Is it not the case that in the absence of labor unions, Capitalism has always tended toward bad working conditions, and in the absence of real competition, toward poor products?

[DavidOdden]

What if (for instance) Coke, Pepsi and Snapple control all the cold soft-drink shipping into New York City? What if they've worked out exclusive contracts with shippers & thus barred entry into the market---and then they collude to fix prices? How could a competitor (let alone a small local one) ever have a chance?

That's a virtual no-brainer. This can't be a problem, since there is no limit on the number of shippers into New York. For a place the size of NYC this is really a non-issue; there are thousands of actual shipping companies and millions of potential competitors. So let's take a smaller place, like Mattawa, WA, where the chances of competition are smaller. First, Don and Arnie can easily open up a competing shipping business; second, there's no law that keeps people from simply going to Royal City or Kittitas to get their soft drinks, if they are not happy with the local supply and prices. You're accepting the arbitrary "what if" scenarios of the socialists, without thinking about how this could ever happen.

[AisA]

What if (for instance) Coke, Pepsi and Snapple control all the cold soft-drink shipping into New York City? What if they've worked out exclusive contracts with shippers & thus barred entry into the market---and then they collude to fix prices? How could a competitor (let alone a small local one) ever have a chance?

Why on earth would any profit-seeking shipping company agree to forego future business and shun future customers?

And as David pointed out, even if they did, what would stop a new shipping company from entering the business?

As a rule, businesses are always seeking additional customers. Look at the millions spent on advertising. Why advertise, except to attract new customers?Businesses are focused on growth, not stagnation.

Or looks at the example of telecommunications. How is a small business ever going to offer cellular service? There's a limit to the technology, and meaningful competition does not exist.

Every day I see dozens of television adds from cellular customers trying to lure me away from my current supplier. Why does this not constitute "meaningful competition"?

If there is no meaningful competition, why has the cost of cell phone service plummeted in the last 10 years? Why have so many new features been added?

If there is no meaningful competition, why can I go into a supermarket and buy a pre-paid cell phone without a contractual service period?

Do you think cell phone companies are doing all of this out of the goodness of their heart? No, they are doing it to stay competitive, to keep the other suppliers from taking their customers.

This is the wave of the future ... all you need next is Corporatist politicians, like the mayor of New York, signing exclusive contracts with various multinationals, and forget it, competition is dead.

Under capitalism, no government official has the power to exclude competition or limit suppliers in a given area. Do you understand that?

It is only under one or another varieties of statism -- such as fascism, socialism, communism, or a "mixed economy" like we have in the U. S. -- where government officials have the legal power to use force to control businesses.

What's going on in the world of computers IS interesting, and it stands out as something approaching how Capitalism is supposed to work (except that government-funded institutions provided the R&D and pioneered the technology with tax dollars). But that's because (1) it's a new industry and not completely tameable yet for exploitation purposes, (2) we in the West don't really manufacture computer hardware, and the manufacture of software isn't actual labor, it's service-sector work or professional work. (Of course wages are high: we're consumers; our place in the world economy right now is to buy things.)

Are we to understand that you believe the computer industry is the only industry with "meaningful competition"?

Please stop what you are doing and go to your local Home Depot and Kroger (or whatever supermarket is near you). Count the number of brands of products that exist for any one type of item. Count the number of items that have only one supplier and then report back here.

I'll be waiting. I challenge you to find a single item with only one supplier. What you will find instead is numerous suppliers for virtually every product you can imagine. Do you not understand that all of those suppliers are in competition with one another? And if one of them finds a way to lower his price or improve his quality, the others will have to follow suit or lose market share and suffer lower profits?

Is it not the case that in the absence of labor unions, Capitalism has always tended toward bad working conditions, and in the absence of real competition, toward poor products?

No, it is not the case. Union membership has declined steadily from a high of about 30% of the workforce in the 1930s to about 12% now. At the same time, real wages and working conditions and the standard of living in the U.S. have improved drastically. Now, what does that tell you?

[daniel]

Hi, thanks for your reply, i put your comments to a friend and he gave the following replies. What do you think?

Why on earth would any profit-seeking shipping company agree to forego future business and shun future customers?

And as David pointed out, even if they did, what would stop a new shipping company from entering the business?

As a rule, businesses are always seeking additional customers.  Look at the millions spent on advertising.  Why advertise, except to attract new customers?Businesses are focused on growth, not stagnation.

That's not the way it works. There's finite space in densely populated cities. New shippers can't get in because they need contracts with retailers, and those retailers already have contracts. Small retailers can't get in if chain stores lease all the property. What's happening now is, corporations are driving non-corporate competition out of cities by simply multiplying & taking up all the space.

Every day I see dozens of television adds from cellular customers trying to lure me away from my current supplier.  Why does this not constitute "meaningful competition"?

It's not meaningful because they don't offer significantly different rates or quality of service. (Granted that in a given area, Verizon may have better connectivity than AT&T, or vice versa, but that's a crapshoot. Anyway, it has to do with my point: that the airwaves are finite. Somebody owns the good connections, end of story: no competition.) Your "dozens of ads" are all from the same 5 or 6 massively funded corporations; there's no competition from small businesses (& no possibility of it).

If there is no meaningful competition, why has the cost of cell phone service plummeted in the last 10 years?  Why have so many new features been added?

If there is no meaningful competition, why can I go into a supermarket and buy a pre-paid cell phone without a contractual service period?Do you think cell phone companies are doing all of this out of the goodness of their heart?  No, they are doing it to stay competitive, to keep the other suppliers from taking their customers.

If calling-card use becomes at all widespread, it will disappear: the wireless providers will buy it up & raise the rates to where it's not practical anymore. Watch it happen.

You're asking me why mobile service costs have plummeted? The technology is much cheaper, which is what happens, the connective infrastructure has by now been built, and the business model is to get everyone "wired." The period we're in right now is the "get 'em to accept the death of pay phones" period. Soon they'll take away all the pay phones---they're fudging up reasons for doing so already---and we'll HAVE to all get sell phones. Then rates will go up like mad.

Under capitalism, no government official has the power to exclude competition or limit suppliers in a given area.   Do you understand that?  It is only under one or another varieties of statism -- such as fascism, socialism, communism, or a "mixed economy" like we have in the U. S. -- where government officials have the legal power to use force to control businesses.

Yeah, right, this is the problem with Ayn Rand. Her system actually depends on the Lords of Capitalism being a bunch of highly ethical people. And this is NEVER the case. Her dream was Rearden staying awake all night in his chem lab, but the reality was Dale Carnegie swizzling martinis in Europe (while his Pinkerton men were bumping off steelworkers in Pittsburgh). The leaders of industry have NEVER been moral, or above scratching the backs of politicians. And do I need to point out that politicians aren't ethical either? But today, corporations are far more wealthy and powerful than ever before; it's a hazardous time.

Are we to understand that you believe the computer industry is the only industry with "meaningful competition"?  Please stop what you are doing and go to your local Home Depot and Kroger (or whatever supermarket is near you).  Count the number of brands of products that exist for any one type of item.  Count the number of items that have only one supplier and then report back here.

This supermarket situation is changing so rapidly I can hardly keep up. A few years ago I would have agreed with you. But there are fewer options every month! If you can't see that the trend today is the disappearance of consumer options, just wait a little while: you will.

No, it is not the case. In the USA for example union membership has declined steadily from a high of about 30% of the workforce in the 1930s to about 12% now. At the same time, real wages and working conditions and the standard of living in the U.S. have improved drastically. What does that tell you?

Please post figures showing that "real wages and working conditions and the standard of living in the U.S. have improved drastically." What I've read over and over is that real wages for middle-class Americans peaked around 1970, and have been in rough decline ever since.

Unions were how we got decent working conditions, and their gains are being eroded right now in America.

Edited July 2, 2005 by softwareNerd

[DavidOdden]

Hi, thanks for your reply, i put your comments to a friend and he gave the follwoing replies. What do you think?

I don't know if the guy is totally hopeless, but he definitely needs to actually read some of Rand's writings on the topic. Capitalism: The Unknown Ideal is just made for him, and if you've got a few bucks and he's a friend worth trying to reach, I'd suggest giving his a nice birthday or 4th of July present. None of what he says is factually true, and his mind is obviously closed. Good luck with him.

[Zeus44]

A very succinct article on why corporate collusion cannot work in a free market can be found in Rand's Capitalism: The Unknown Ideal. It is called "Common Fallacies About Capitalism," written by Nathaniel Branden.

[nimble]

How would a truly laissez-faire system prevent corporate collusion?

A truly laissez-faire system wouldn't need to, and wouldn't want to.

Couldn't businessmen agree to scrap health and safety and pensions etc? Is corporate collusion acceptable?

In any cartel, there is always incentives for those involved in the cartel to make agreements outside the cartel. So market forces would actually provide incentives for those in the cartel to "outcompete" their buddies in the cartel and provide health care or whatever it is that you are worried about.

This works much the same as labor unions. Anyone in the labor union if it goes on stirke or whatnot has market incentives to search for work outside of the labor union, because they can get jobs that they would have never had, staying with the union. And possibly keep more pay without paying labor union dues.

[AisA]

Note: Since the quote function can only be used 10 times in a post, I have used italics versus bold to identify the first two sets of comments below.

Hi, thanks for your reply, i put your comments to a friend and he gave the follwoing replies. What do you think?

Why on earth would any profit-seeking shipping company agree to forego future business and shun future customers?

And as David pointed out, even if they did, what would stop a new shipping company from entering the business?

As a rule, businesses are always seeking additional customers. Look at the millions spent on advertising. Why advertise, except to attract new customers?Businesses are focused on growth, not stagnation.

That's not the way it works. There's finite space in densely populated cities. New shippers can't get in because they need contracts with retailers, and those retailers already have contracts. Small retailers can't get in if chain stores lease all the property. What's happening now is, corporations are driving non-corporate competition out of cities by simply multiplying & taking up all the space.

So, he would have us believe that there are so many different shippers in cities that they have taken up all the physical space -- yet there is no meaningful competition. That makes no sense and is self-contradictory.

Notice he ignores or evades the fact that advertising proves that companies are looking for more customers, not agreeing to shun them.

Notice his argumentative technique: He makes an assertion -- namely, that companies collude to prevent competition -- then switches to another assertion -- that there are so many companies there is no space for newcomers, and that prevents competition. And he offers no support for either assertion. He will continue to do this with any evidence you present: he'll simply switch to another assertion.

Every day I see dozens of television adds from cellular customers trying to lure me away from my current supplier. Why does this not constitute "meaningful competition"?

It's not meaningful because they don't offer significantly different rates or quality of service.

Competition insures that when one company finds a way to lower its prices or improve its services, others must follow or go out of business. A similarity in price and service is proof that the market is competitive -- otherwise they would all raise their prices right now. But they are not, are they?

(Granted that in a given area, Verizon may have better connectivity than AT&T, or vice versa, but that's a crapshoot. Anyway, it has to do with my point: that the airwaves are finite. Somebody owns the good connections, end of story: no competition.)

Unsupported assertion. There are, in fact, an unlimited number of possible frequencies, and given the advance of technology, we will have access to more and more in the future. Had someone suggested, 30 years ago, that millions of people could talk over radio waves simultaneously without interference -- like we now do with cell phones -- people like this guy would say, 'No way, end of story."

Your "dozens of ads" are all from the same 5 or 6 massively funded corporations; there's no competition from small businesses (& no possibility of it).

Notice how he has arbitrarily defined competition so that 5 or 6 companies are not competitors unless "small business" is included. Notice also how evades the real point: that advertising proves that these 5 or 6 companies are seeking to take business from one another -- and that is called competition, not collusion.

If there is no meaningful competition, why has the cost of cell phone service plummeted in the last 10 years?  Why have so many new features been added?

If there is no meaningful competition, why can I go into a supermarket and buy a pre-paid cell phone without a contractual service period?Do you think cell phone companies are doing all of this out of the goodness of their heart?  No, they are doing it to stay competitive, to keep the other suppliers from taking their customers.

If calling-card use becomes at all widespread, it will disappear: the wireless providers will buy it up & raise the rates to where it's not practical anymore. Watch it happen.

Newsflash: calling card usage is already widespread -- you can buy them at convenience stores all over America -- and it is increasing, not going down.

You're asking me why mobile service costs have plummeted? The technology is much cheaper, which is what happens, the connective infrastructure has by now been built, and the business model is to get everyone "wired."

But if there were no competition, how and why did the technology get cheaper?

And if there were no competition, the effect of cheaper and cheaper technology would be increasing profits, not decreasing prices.

And if there were no competition, why did anyone beyond the first company get into this market? Why is there not just one company?

The period we're in right now is the "get 'em to accept the death of pay phones" period. Soon they'll take away all the pay phones---they're fudging up reasons for doing so already---and we'll HAVE to all get sell phones. Then rates will go up like mad.

But for this scenario to be true, it would mean that pay phones are holding down cell phone rates. And this would mean that pay phones are in competition with cell phones – real, honest-to-god meaningful competition -- you know, the thing he says doesn't exist for cell phones!

This is just one example of how he contradicts himself. It is also a reminder that businesses face not only direct competition from other suppliers of the same product, they also face indirect competition from alternative products.

Under capitalism, no government official has the power to exclude competition or limit suppliers in a given area.   Do you understand that?  It is only under one or another varieties of statism -- such as fascism, socialism, communism, or a "mixed economy" like we have in the U. S. -- where government officials have the legal power to use force to control businesses.

Yeah, right, this is the problem with Ayn Rand. Her system actually depends on the Lords of Capitalism being a bunch of highly ethical people. And this is NEVER the case.

Another newsflash: It doesn’t matter how unethical businessmen are.  If government does not have the power to hand out favors, it will do you no good to bribe them.

. Her dream was Reardon staying awake all night in his chem lab, but the reality was Dale Carnegie swizzling martinis in Europe (while his Pinkerton men were bumping off steelworkers in Pittsburgh). The leaders of industry have NEVER been moral, or above scratching the backs of politicians. And do I need to point out that politicians aren't ethical either? But today, corporations are far more wealthy and powerful than ever before; it's a hazardous time.

Aside from the fact that this is nothing but cheap, hate-filled smear, the fact remains that if government does not have the power to interfere in the economy, it won’t matter how many politicians backs are scratched.

You are wasting your time with this guy. He is heavily invested in all the Marxist/unionist/collectivist mythology and is not open to reason. His smears against the leaders of industry -- the very people that make our lives easier -- disqualifies him from any serious intellectual discourse.

Are we to understand that you believe the computer industry is the only industry with "meaningful competition"?  Please stop what you are doing and go to your local Home Depot and Kroger (or whatever supermarket is near you).  Count the number of brands of products that exist for any one type of item.  Count the number of items that have only one supplier and then report back here.

This supermarket situation is changing so rapidly I can hardly keep up. A few years ago I would have agreed with you. But there are fewer options every month! If you can't see that the trend today is the disappearance of consumer options, just wait a little while: you will.

There are fewer options every month? Observe that when reality does not coincide with his claims, he simply shifts his claims to the future.

No, it is not the case. In the USA for example union membership has declined steadily from a high of about 30% of the workforce in the 1930s to about 12% now. At the same time, real wages and working conditions and the standard of living in the U.S. have improved drastically. What does that tell you?

Please post figures showing that "real wages and working conditions and the standard of living in the U.S. have improved drastically." What I've read over and over is that real wages for middle-class Americans peaked around 1970, and have been in rough decline ever since.

Anyone who doesn’t grasp how much things have improved since the 1930’s is delusional. A partial list of the things most Americans have today that most did not have in the 1930s would include: automobiles, radios, televisions, air conditioning, central heat, central air conditioning, VCRs, DVD players, cable or satellite reception, antibiotics, blood pressure medicine, insulin, pain killers, birth control pills, disposable diapers, vast array of cheap foods, fast food outlets, vitamin enriched bread, year-round fresh fruits and vegetables, digital cameras, disposable cameras, airline travel, microwave ovens, refrigerators, coffee makers, 20 years greater life spans, synthetic fabrics, power tools of all sorts – well, you get the idea.

Find someone who was alive in the 1930s and ask them how life today compares.

Unions were how we got decent working conditions, and their gains are being eroded right now in America.

Why should we believe this? Because he says so? This is just more unsupported assertion -- and just plain false. The 40 hour work week, two weeks paid vacation, time-and-a-half for overtime, medical insurance benefits – all were developed and introduced without unions.

Look at the list of products above and tell me how many of them were developed and introduced by businessmen -- and how many were developed by a union.

Any additional exchanges with this individual is a waste of your time. He doesn't deserve it.

[Cole]

Dosen't such as  price-fixing not allow the market to function?

Price fixing does make the market significantly less efficient and unresponsive. However, coercive monopolies are not possible without the help of government (therefore, a non-laissez-faire economy). In order to have a large enough share of an industry to allow for price fixing, a company would need to prohibit new entry into the field by would-be competitors. Ultimately, this can only be accomplished by initiating force. For a monopoly to attempt to close entry by making deals with the suppliers of the factors of production in that specific field would require these suppliers to act against their rational self-interest. Purposefully and contractually limiting the number of potential buyers will never benefit a company's bottom line.

If a company were able to hold a monopoly and set prices independent of market forces, then it would (ironically) be creating incentive for increased competition and therefore the end of its monopoly. If it were to raise prices beyond what the natural equilibrium price would be in a competitive field, then this would cause new suppliers to flood the industry. These new suppliers, too, would be able to charge above-equilibrium prices- until it became flooded with enough competition to destory the monopoly and regain market-based pricing.

Secondly what if  manufacturers collude & agree to make poor quality products, which need to be repaired & replaced faster, and high-quality alternatives are extremely hard to find. Collusion prevents any large competitor from offering high-quality alternatives---the loser is the consumer. (This has become normal in America; it is most noticeable with clothes---"they don't make 'em like they used to"---but actually, almost no product of any kind lasts more than a few years.)

There was an article from the Mises Institute on this subject not too long ago. I wish I could find the link.

The article proved that products these days are, indeed, "not made like they used to be." However, it showed that this was not some form of aggression towards consumers by greedy corporations. Rather, it was a natural response to consumer demand. As people become more wealthy (as they are today), they prefer more disposable goods. They'd rather buy new things than own the same product for years. It's a good thing that this demand is being met.

On the employment side, employers could easily collude to deny labor any choices. If no one offers benefits, workplace protection, or even decent wages, then workers can't insist on them. And employers would soon see it's "in their interests" for hungry employees to accept $0.75 an hour because they have no choice.

Understand that employers compete for quality employees. Any employer is free to charge $0.75 an hour for unskilled workers. However, every other employer competing for the same labor market now has an incentive to charge $0.80 an hour (or offer more benefits, workplace protection, etc.)- so he can get the first pick among the pool.

[softwareNerd]

Price fixing does make the market significantly less efficient and unresponsive.

What do you mean by "efficiency" and "responsiveness"?

[Cole]

Prices are the mechanism by which the market responds to the forces of supply and demand. The price system is how resources are allocated in a capitalist economy (as opposed to central planning). When prices are set by forces other than supply and demand then the market is not as effective at allocating resources.

Economically, socialism fails because of its inability to properly determine prices.

[y_feldblum]

Allocating resources has nothing to do with the study of economics, and nothing to do with efficiency, fundamentally. Economics studies the production of wealth in a division-of-labor society, and thus efficiency is a measure of the scale of production.

Economically, socialism fails because it divorces end from means - because one cannot act towards an end by the means one is permitted, nor is one permitted an end to achieve by the means one has available. Thus, no action is possible - certainly not the production of wealth.

Price controls have the same effect as socialism on an economy because they divorce measurement from measure. Thus, the means one knows about to achieve some end does not actually achieve that end, preventing the achievement of ends by the means available.

[Cole]

Allocating resources has nothing to do with the study of economics, and nothing to do with efficiency, fundamentally. Economics studies the production of wealth in a division-of-labor society, and thus efficiency is a measure of the scale of production.

It's fine that you think that "allocating resources has nothing to do with the study of economics," but understand that this contradicts what seems to be the exclusively-accepted definition among economists in the world. This type of unfamilar assertion requires more explanation.

Your definition ("Economics studies the production of wealth in a division-of-labor society...") is too limited. Economics not only studies production, but also distribution and consumption. In its most abstracted form, it is the study of how humans make decisions about how to allocate scarce resources.

The Soviet Union had large-scale production. Would the Soviet Union, by your standard, qualify as an "efficient" economy? Or would it also be required to take into account what was being produced, how it was being produced, and for whom?

Economically, socialism fails because it divorces end from means - because one cannot act towards an end by the means one is permitted, nor is one permitted an end to achieve by the means one has available. Thus, no action is possible - certainly not the production of wealth.

Price controls have the same effect as socialism on an economy because they divorce measurement from measure. Thus, the means one knows about to achieve some end does not actually achieve that end, preventing the achievement of ends by the means available.

I'm having trouble understanding what your claim is here. Can you perhaps re-phrase your position using economic terms?

Edited July 5, 2005 by Cole

[dougclayton]

Unions were how we got decent working conditions, and their gains are being eroded right now in America.

I double this will have any effect on "daniel's friend," but if he is so opposed to "corporate collusion," why are unions acceptable (even good)? They are nothing more than "collusions" of workers raising the price of their labor over what it would otherwise be.

[AisA]

I double this will have any effect on "daniel's friend," but if he is so opposed to "corporate collusion," why are unions acceptable (even good)?  They are nothing more than "collusions" of workers raising the price of their labor over what it would otherwise be.

Doug, daniel's friend would say that collusions of workers are fine if that is what it takes to get "decent wages and working conditions". And he will always define a "decent wage" as a wage which is significantly above what would occur in a free market. Therefor, he argues, unions are required to get a decent wage, and if that involves initiating the use of force against the owners of a business, he is fine with that as well.

His argument is that the moment a businessman offers employment, he surrenders the right to decide what terms and conditions of employment he will or will not accept -- and the moment a worker accepts employment, he acquires the right to unilaterally dictate the terms and conditions of employment -- using force and violence as necessary to get what he wants. And this includes the right to accept an offer of employment at one wage, to get one's foot in the door, and then resort to force and violence to get a higher wage.

In my experience, union advocates endorse this position without pause.

I once told a union advocate that if it is okay for the workers to use force to get what they want, it should be okay for management to do the same thing. His reply was, "Go ahead and try. We got you outnumbered."

[dougclayton]

Doug, daniel's friend would say that collusions of workers are fine if that is what it takes to get "decent wages and working conditions".  And he will always define a "decent wage" as a wage which is significantly above what would occur in a free market.  Therefor, he argues, unions are required to get a decent wage, and if that involves initiating the use of force against the owners of a business, he is fine with that as well.

I agree with your dismal expectation, but forcing someone to put the imbalance in such terms is still beneficial. While it's not too blatant an evasion for the die-hard, it might make the immorality clear for those on the fence.

PS: With all the proof-reading I did, you'd think I would have realized I misspelled "doubt" as "double" in the original post. Oops.