On Theories of Economics and Redistribution

Excerpts from a conversation about the nature of economics and the redistribution of wealth. My responses are the unquoted…

For brevity, I’m condensing a lot of the below.

I like to categorize government actions in an otherwise lassez-unfaire market into two types: TAXation and INTERVENtion. A little bit of both is necessary for optimization of economic systems.

One reason TAXation is important because many programs are more efficiently run by the government than by private enterprises. For example: highways. If it were run by private enterprises (which it strangely is in China), you would need to stop in the middle of a freeway to pay tolls, pathing would be inefficient, and there would be many odd dead ends. I think we can all agree that taxes are necessary to create this value. Yet, there are many programs that should be nationally organized (one such example, national controlled drug prescription database) that hasn’t been able to. Many times it is due to the fearmongering libel (thrown by many within the curent GOP) proclaiming such programs as “Big Government.”

How did we ever figure out how to build complicated things like the internet, software, protocols, etc. without the government telling us what to do the whole time? Also, wow, no, there does not need to be a national controlled drug prescription database. There is no point in centralizing personal medial information like that except to make insurance companies richer and to make some government bureaucrat careers. “Lassez-unfaire,” I like that though, that’s cute.

The internet was an invention by DARPA, in fact very many technologies are based on military discoveries during the Cold War. GPS for the public was only made possible by military research in satellites. Computers too were invented to calculate artillery firing tables.

The free market is not very good at conducting high-risk research. People with money are generally risk averse, imagine pitching the idea of the first satellite to investors back in the 20th century. (You want the rocket to go up until we can’t see it anymore?)

The military on the other hand is also risk averse, but from a different angle. The risk is that the enemy may get the upper hand, that’s certainly what America felt when the Soviets launched Sputnik.

There is a reason it’s called the Sputnik Crisis, because no sole private firm could handle the huge cost a space program would need.
https://en.wikipedia.org/wiki/Sputnik_crisis

People like Elon Musk may be the face of private space programs, but all of his progress is on the shoulders of American NASA engineers decades earlier.

That’s is not to say that the free market didn’t do it’s fair share of innovation. If the government continued to run the internet, then we would still be posting on BBS.

ARPANET was created by DARPA, but the internet as we know it was developed over time by researchers and eventually for commercial applications. But electronic telecommunication necessary for ARPANET was invented by people like Marconi, Morse, Bell, etc. There is no reason GPS couldn’t have been developed outside of military research, that just happens to be a good catalyst. And the concept of computers was an invention by Babbage. ENIAC was the first general purpose electronic computer developed to calculate ballistics tables, but their development would have happened anyway, perhaps on a different timeline, regardless of WW2.

People with money are not risk averse. Unless they were born rich, they likely had to take lots of high risk to get where they are. They can afford to take big risks. Investors would have put up big money if they had the vision that they could deliver television signals to people or sell other services with satellites. Because it didn’t happen doesn’t mean it wouldn’t have- it just wasn’t on anyone’s radar at the time. Anyway Government taking big risks is not ideal anymore- they do it for private interests anyway but the public bears the consequence of failure.

Also that link says people referred to it as a crisis because they were worried that the Soviets were more technologically advanced, not that there weren’t any private firms to build rocket parts.

Government allocates the funding and determines priorities for everyone, but innovation comes from individuals. And all of the programs and services that government delivers relies heavily on firms that have nonsensical margins because of subsidies and private contractors that make tons of money from government spending.

Government was a fine social technology when communication was low bandwidth and high latency. Then, centralizing everything made sense. But now it is increasingly obsolete and should be rolled back.

Another reason TAXation is important is because it redistributes wealth to the poor, disabled, out of luck, and (unfortunately) lazy. This is where the controversy SHOULD start. How much does the middle-upper and upper class value certain luxuries over the well-being of many others? I believe Sanders does understand that at a certain point taxes effectively puts a cap on the economy; he just heavily values education and equal opportunity for all. Accusing somebody for wanting higher taxes of ignorance of economics is very ignorant in itself.

INTERVENtion, the second type of government action on the economy, is often overlooked. Free markets sound wonderful, but without government intervention, insidious hazards will be allowed to run its course.

Without government intervention, money and power naturally falls into the hands of entreprenuers. This is good, as these people can create more value for society with their resources. However, when left unhindered, you can get monopolies, banks “too large to fail” and corporations like Walmart. With such power, these entities can create puppets of politicians, enabling them to use the government to stack the deck in their own favor and effectively designing a veneer trickle down economy while the resources actually trickle up.

Let’s take a glimpse of what this means for us.
1. many politicians are bought out.
2. Many of the elite upper class in this nation stash their money in offshore accounts, evading taxes and sapping resources out of the american economy.
3. Budding entrepreneurs are forced to find a rare niche or to play the tax evasion game in order to complete.
4. With so much money held outside of the system, many small businesses falter. Many are forced to work for bad corporations such as walmart, recieving mininum wage. Don’t like walmart? Tough luck, you can’t afford to go elsewhere as they have the cheapest goods (due to tax evasion, and sending american jobs overseas).
5. Banks too large to fail create bubbles for self-gain. Bubbles pop and the government is forced to bail them out (with tax money). Who foot the bill for those taxes? yeah, the middle/upper class. Who’s suffering from the greed of the banks? the middle/upper and lower class. A side note, I’d like to point out that some people got VERY rich off of the bubble and its collapse in 2008. No jail time either.

It is through taxation that wealth is taken from people so that the government can pick winners and losers in society via very dubious and exploitable politics. And when they give that money away to the “winners,” those people use it to buy products from and guarantee revenue to the very companies that we blame for needing to take that wealth and redistribute it in the first place. So what is gained except a further opportunity to concentrate wealth with the owners of the means of production??

And it is through market intervention that government actually enables wealth to trickle up because in the name of “protecting the economy” (i.e. making asset prices predictable and monotonically upward moving as much as possible, even if it means debauching the currency and destroying savers), they guarantee that there are always buyers of those assets so that people with wealth can cash out and leave the public holding the bag when assets don’t produce and turn out worthless. With their market intervention, they move the risk away from big market players and market makers, and place it squarely with the people who can afford it the least- the very public that the government is supposedly trying to protect. So what is gained except yet another opportunity to concentrate wealth upward?

Socialism is just a euphemism for the State Capitalism scam. It thrives on class warfare and takes capital concentrated with elite private individuals and gives the power to use it to elite public officials that are supposedly accountable to us but never truly are because they don’t actually have to be- it’s a monopoly, there is no alternative. What is gained?

Hey, good points. Though in the third paragraph you more appropriately defined “fascist capitalism” than “socialism”.

They’re kinda opposites

“This designation applies to economies regardless of the political aims of the state, even if the state is nominally socialist.”
https://en.m.wikipedia.org/wiki/State_capitalism

My understanding of socialism is an economic system where wealth is distributed evenly. Taking taxes from the middle class and using it to bail out the big banks does not seem like socialism or social democratic at all. That’s fascist state capitalism

One of the most important points that democratic socialist thinkers are trying to make is that multi-national corporations have now replaced democratic governments as the most powerful entities on the planet. A look at some of the details that have come on the TPP are a good example of this. This constitutes a major shift in our social systems, and is not consistent with free market principles.

I partially agree with you, but I think its not government that is obsolete, but the need for rulers; elite families that control the balance of power. The idea that we will always have “haves” and “have nots” is a notion that we should not accept as fact. There is no evidence to support that inequality is helpful to society as a whole that I know of.

So what I am saying is that “socialist” principles are not inconsistent with fee-market “libertarian” ideals. Actually I think quite the opposite. Consider this in the simplest of libertarian examples: your freedom to swing your fist ends where the next persons face begins. That is because in a truly libertarian environment, everyone’s rights are equally important to everyone else’s. In the current model of capitalism that we operate under, this is not the case.

I have to stop drinking red bulls at 9pm. actually fuck it, maybe 9pm is obsolete!

Elite families always control the balance of power. How does socialism fix that? How does it get rid of rulers? How do you force equality? To do that you have to know what makes all people happy and that you won’t make a mistake when you take something away from someone to give it to someone else to make things more equitable. And what sociopath wouldn’t want the power to decide who gets what and what is fair?

As pointed out earlier, there’s a vital distinction between socialism and democratic socialism.

In your original post 17 hours ago, you point out that power and wealth is becoming very concentrated. In addition, government’s interventions has further exacerbated the wealth difference. Then, you attributed this type of government action to socialism.

My response was that this type of intervention is exactly the opposite of what a social democrat economy would do. Rather, your descriptions better describe a fascist capitalistic state.

The essence of democratic socialism is a free market controlled and operated by small businesses, startups, and individuals innovating. Monopolies, big banks, corporations growing too powerful are all broken down by government intervention before they become too big to fail.

Fascist capitalism is a free market controlled and operated by a few, large, powerful businesses. Small businesses are present, but growth is difficult due to the large businesses recieivng government intervention. Most innovation and business structures are controlled by these large entities.

Either my definition of these two systems are wrong, or that we’ve all been brainwashed to scapegoat “socialism.” I’m most definitely against socialism, but time and time again people describe fascist capitalism and label it “socialism.” Know the real enemy

It’s like healthcare- a noble doctor’s job is to work to bring themselves minimal business. Likewise, a noble government should work to create situations where it is needed less and less. If it doesn’t do that, then it is working against the ultimate interest of the people like an evil doctor keeping people sick for job security and a rich lifestyle.

If the goal of social democracy is to forcefully prevent an entity from growing to powerful, that implies that it must be the most powerful entity above all others- so the opportunists that ruin things have only one target to corrupt. If that power is spread across many entities with no monopoly domination, then those opportunists need to infect every one separately which is orders of magnitude harder.

Good point on the analogy. I never considered that the government’s purpose is to gradually minimize its need. In that case, high taxes is very bad because on top of capping the economy, the welfare it provides leads to a dependent people.

Adding onto your doctor analogy. In an ideal world, once in health, we will stay healthy. however, this is not the case. Invariably, we will develop health problems (many of which are incurable), thus a doctor will always be needed.

Likewise, the government will always be needed. In times of safety, security and prosperity, it becomes easy to see how the government still limits us, and not what it is doing for us. Without central authority, what is the law? Who has the jurisdiction to punish murderers, thieves, rapists, etc? What would determine value without a consistent, central currency? If the new USA is invaded, would each individual body have its own militia? If groups dispute, would we have small scale intra-America clashes? and a thousand similar questions.

Lastly, although the government puts a cap on prosperity, it also provides a safety net on how low things can go. Just look at Iraq and countless other historical examples.

Regarding your point on the hazards of having central governing body too powerful, that “the opportunists that ruin things have only one target to corrupt”, our founding fathers had the foresight to recognize this. They designed a system where, as you want it, “power is spread across many entities” – the system of checks and balances between the judicial, legislative and executive branch. Nobody from any single branch has the power to usurp the system. The strength of this system is that it is supported by the voters. HOWEVER, its strength becomes its weakness if the voting population becomes ignorant, misinformed, or nonparticipating. Wealthy, powerful men in this country recognize this, and by buying out certain politicians and manipulating the voting population in the above manners, they are gradually undermining the system of checks and balances. Over time, these men will functionally become oligarchs.

The problem is that what I describe is CURRENTLY happening. I believe the congress and certain members of the supreme court are in cohorts with these oligarchs, I believe only by participating more can you and I route them out, before they take root. We can start by electing a clean president, and then voting for a cooperative congress. Sanders is clean. That’s why I’m voting for him.

it was only through your responses yesterday that I’ve become clear of what you are advocating. Let me get this straight: ideally, there will be no central governing body at all. The new system would consist of several thousands to millions of cohesive units all cooperating and communicating with each other in a horizontal (i.e. equal) network (meshnet?). Ownership will not belong to a handful of powerful individuals and will be brought back to the people. Responsibilities previously of the state would also be brought back to the people and PRIVATIZED, including but not limited to: currency, law, punishment, policing. Also, I’m assuming you want this new system to be peaceful and productive. Is this an accurate description? Could you add and/or correct some parts?

Yes, we will develop health problems and maybe have an incurable disease, but any given individual doesn’t always need a doctor even if others might.

Regarding central authority and what the law is, consider the fact that from the point of view of the entire globe, we don’t have a “central authority.” We have regional authorities which we know as nation states who’s jurisdictions change depending on the political situation they exist in. Different nation states have different approaches to punishment- but in general the ability to inflict punitive measures is claimed by any body that can successfully achieve legitimation by the people that would exist under its jurisdiction. Now, people under a certain jurisdiction may see “central authority” as the leadership of that body, but it doesn’t have to be problematic if its scope is limited in size and the involvement in individuals’ affairs. What I advocate essentially amounts to thousands of sovereign states, perhaps even with overlapping jurisdictions, instead of under 200 with one hegemonic state.

As far as what would determine value- that’s easy, we all already determine what is valuable to ourselves every day by deciding what to spend our time and resources on. And mediums of exchange are not hard to create. There is no need for a central authority to have a monopoly issuing one. The only thing a fiat currency provides is a lever by which the economic behavior of people can be manipulated without having to make markets and normal price discovery illegal and without having to resort to direct coercion.

As far as military- yes, to stave off a coordinated attack, a coordinated response is needed. But alliances come and go all the time depending on political realities. If groups dispute, it’s the same as any geopolitical dispute- it doesn’t necessarily have to devolve into war, though it may.

As far as safety nets, there are plenty of promises made, but governments can’t actually physically put a safety net on how low things can go for everybody. It’s like FDIC insurance on your bank account- they promise to make you whole no matter what as an account holder at a bank as long as your deposits are under $250,000. Yet- in a financial calamity where many banks lose depositor money, there simply isn’t enough money in the pool to cover everyone. They are basically promising things and betting that the worst case never happens- which would be ok if they were up front about such edge cases. But in government they never are because it’s politically unpalatable. I do agree though, a safety net is needed- but an honest one. Not one with outsized promises for political points and funding from class warfare based taxation and currency debasement.

“And mediums of exchange are not hard to create.’ hmm like bitcoin. tech over gov’t

My current understanding is that you want thousands to tens of thousands of small, self-sufficient bodies universally working together. Historically, similar situations were tumultuous and short-lived. However with the advent of new technologies, dynamics may have shifted in a way that this system may actually function well. Every responsibility of the current gov’t may be replaced with a more effective one. All this I feel like may be within the realm of possibility, but a very important (rhetorical) question is: How much would human nature screw this system up, even with a strong, impartial technological safety net?

On another note, how would things transition from now to then, from a few large powerful bodies to several smaller ones? We must first surmount the most powerful forces that will resist this change. I feel a good first step is to break up the corporations and banks into smaller pieces (this is top of Bernie’s agenda).

Lastly, have you tried googling and finding a one to two word definition of your proposed organizational/economic system? (what I mean is, terminology like facist capitalism, democratic socialism, feudalism, anarchist communism) What do you think would be the most accurate description?

Sure, perhaps like bitcoin. But even more primitively, like scrip. Anyone with a horde of resources and the ability to protect it while also demonstrating that it exists can issue scrip to be used for redemption of a portion of those resources by the issuer. The side effect is that the value of the scrip is a function of the redeemable resources- therefore people may consider trading it for goods without redemption as long as the person on the other side of the trade still has the option to cash in the scrip to the issuer. Counterfeit is obviously a problem but there are low and high tech methods to fight that.

In the case of bitcoin, it is obviously not redeemable because there isn’t an issuer and there is no underlying asset that its value is pinned to. However, the value of bitcoin comes from the decentralized leger and the ability to transfer arbitrary amounts of it without facing capital controls.

Human nature is always going to throw a wrench in the works, and that’s exactly why the future is trending toward this kind of system. The benefit is similar to what is offered by internet protocols- routes are constantly being updated depending on network conditions, so if damage is detected in one part then all other nodes on the network can avoid disruption by routing around it. The interesting part is that this reorganization is happening on its own without any push from any one political bloc or ideological union. Big institutions are collapsing under their own weight because they are simply not sustainable. But instead of chaos, this new way of organizing resources and information is taking its place. I do think Bernie has some good rhetoric going but the political theater of the election process seems pretty low brow and irrelevant at this point.

I have tried finding a catchy definition for this system to fall under but nothing sounds right. I guess maybe anarcho-capitalism but the term is way too loaded. Anyway whatever it is, the beginnings of it are already here, and they started with the free software movement.