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Tuesday, July 11, 2023
Wealth & Poverty
If you are interested about the socio-economics of inequality in the USA, and have 20 hours to spend, I would recommend watching the 14 video-long course of Prof. Robert Reich at UC Berkeley, which is available on YouTube. At the very least it gives you a glimpse back in time, when left-wing politics were about economic fairness and were argued with data instead of moral outrage. Data can show a lot of unexpected truths, for example the fact that Berkeley is a football club in which some teaching goes on occasionally (the head football coach earns 5 times as much as the highest paid professor).
But most importantly, following data over time shows how there is no such thing as a completely "free market". The market is always depending on laws and regulations, and if you'd remove all of those laws, the market would collapse, because for example there would be nothing to force people to respect contracts. The economy only works because there is a framework that guarantees certain rights for everybody involved. And by tweaking those rights, you could fix a lot of what is wrong with the global economic situation and eliminate poverty.
- posted by Tobold @ 7:57 AM Permanent Link
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Tobold: "[...] the head football coach earns 5 times as much as the highest paid professor [...]"
While this might be true (I haven't watched the videos (yet)), it's not much more than a smoke screen. How many football coaches does Berkeley have and how many professors?
From quick googling there is one head coach clocking in at 3 million.
Obviously there must be more than one coach for the team not just one. Let's say there are 10, 20, 30 all clocking in at the same rate. So our upper bound sits at 30x3 = 90 million for the team of coaches.
According to [1] there are 848 professors each clocking in at 293k (220k per 9 months) totalling 248 million - so about 2.7 times what the coach team earns.
Even the 25 of no academic rank earn 2.7 million combined.
The site also has a table that shows the numbers for national and Californian average for faculty compensation and how Berkely is ahead by 100k more than doubling the other two.
"[...] The market is always depending on laws and regulations, and if you'd remove all of those laws, the market would collapse, because for example there would be nothing to force people to respect contracts. [...]"
Sorry but no. That's the bible argument. If you agree something with a friend or neighbour or someone else, you don't draw up a contract, do you? And you don't run after getting your part of the bargain because "neenah-neenah there is no contract!".
People in general would respect contracts because that is in our nature. Naturally will the white market follow laws and regulations because there are repercussions for not doing so and no company would willingly engage in those.
The main issue with removing courts and basic rights would be that there would be no arbiter to judge the more complex cases that need in depth sorting.
And yes, that is the framework that makes it work. But that does not mean that aren't more rules and bureaucracy than necessary.
A lot of what is wrong stems in parts from legislation curtailing the market or giving certain existing actors more powers and thus undermining the self-correcting power of the market.
[1] https://www.univstats.com/salary/university-of-california-berkeley/faculty/
While this might be true (I haven't watched the videos (yet)), it's not much more than a smoke screen. How many football coaches does Berkeley have and how many professors?
From quick googling there is one head coach clocking in at 3 million.
Obviously there must be more than one coach for the team not just one. Let's say there are 10, 20, 30 all clocking in at the same rate. So our upper bound sits at 30x3 = 90 million for the team of coaches.
According to [1] there are 848 professors each clocking in at 293k (220k per 9 months) totalling 248 million - so about 2.7 times what the coach team earns.
Even the 25 of no academic rank earn 2.7 million combined.
The site also has a table that shows the numbers for national and Californian average for faculty compensation and how Berkely is ahead by 100k more than doubling the other two.
"[...] The market is always depending on laws and regulations, and if you'd remove all of those laws, the market would collapse, because for example there would be nothing to force people to respect contracts. [...]"
Sorry but no. That's the bible argument. If you agree something with a friend or neighbour or someone else, you don't draw up a contract, do you? And you don't run after getting your part of the bargain because "neenah-neenah there is no contract!".
People in general would respect contracts because that is in our nature. Naturally will the white market follow laws and regulations because there are repercussions for not doing so and no company would willingly engage in those.
The main issue with removing courts and basic rights would be that there would be no arbiter to judge the more complex cases that need in depth sorting.
And yes, that is the framework that makes it work. But that does not mean that aren't more rules and bureaucracy than necessary.
A lot of what is wrong stems in parts from legislation curtailing the market or giving certain existing actors more powers and thus undermining the self-correcting power of the market.
[1] https://www.univstats.com/salary/university-of-california-berkeley/faculty/
"A lot of what is wrong stems in parts from legislation curtailing the market or giving certain existing actors more powers and thus undermining the self-correcting power of the market."
The 'self correcting power of the market' has only been demonstrated in some really simple economic model, and has been proven wrong in some real case - monopoly is the most common exemple of a stable state on a part of the economy that is not maximizing the Economic growth. There a full field of research demonstrating that asymetry of information can lead to suboptimal economy without legislation.
You could also argue that regulation is part of the self-correcting power of the market.
You can also argue that maximising growth may not be the best target we should aim at ( reducing poverty, awarding merit, overall happiness, sustainability... there are a lot of other good candidate that does not fully match with maximising growth.)
China is the biggest winner in the last decades, and is clearly not a free market.
I am not saying that all legislation 'curtailing the market' are good, but it as as dumb as blind belief in the 'self-correcting power of the market'. As nearly always, the solution is far more nuanced and complex, explaining the whole field of economy, and the very different situation between countries. Each regulation should be studied in its specific context, to see if it is beneficial or detrimental. And if it is obviously detrimental, why have we not been able to remove it.
The 'self correcting power of the market' has only been demonstrated in some really simple economic model, and has been proven wrong in some real case - monopoly is the most common exemple of a stable state on a part of the economy that is not maximizing the Economic growth. There a full field of research demonstrating that asymetry of information can lead to suboptimal economy without legislation.
You could also argue that regulation is part of the self-correcting power of the market.
You can also argue that maximising growth may not be the best target we should aim at ( reducing poverty, awarding merit, overall happiness, sustainability... there are a lot of other good candidate that does not fully match with maximising growth.)
China is the biggest winner in the last decades, and is clearly not a free market.
I am not saying that all legislation 'curtailing the market' are good, but it as as dumb as blind belief in the 'self-correcting power of the market'. As nearly always, the solution is far more nuanced and complex, explaining the whole field of economy, and the very different situation between countries. Each regulation should be studied in its specific context, to see if it is beneficial or detrimental. And if it is obviously detrimental, why have we not been able to remove it.
Thanks for recommending the course - this is something that I always find interesting. I don't want to comment on something that I haven't watched in it's entirety, but I do plan on giving this a shot.
Is there anyone on the left or right besides maybe a minority of Liberterians that truly believe the free market actually means absolutely no regulations?
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