The Connection between Economy and Ecology

Many people believe that government bailouts of ailing businesses are necessary, because these businesses employ most people, and without the bailouts all would be jobless, homeless and might even go hungry. They suggest that the bailouts are a necessary evil in order to provide for the greater good.

Many of the same people who support the bailouts for economic reasons are concerned about ecological issues. They see that our forests are being denuded, that wildlife is dying out, that entire species are going extinct. They call for government intervention for the sake of ecology.

When I tell people that bailouts in the economic sector are fueling the ecological disasters we are experiencing, they accuse me of being intellectually dishonest. Many assume that all I want is lower taxes and higher interest rates, and I don't really care about the environment. It's not true. Economy and ecology are intertwined. I care about both.

How does the economy affect ecological issues? The higher the level of industrialization, the more quickly natural resources are depleted. The fewer natural resources you have per capita, the more likely it is that a country will turn to socialism. I also think that during the twentieth century much of America's industrialization was subsidized by the government.

I'm going to give you my own historical economic background, so that you'll have some idea where I'm coming from. Then we'll talk about the big picture.

My parents and I emigrated to the United States in 1970, and my father spent a year at the University of Michigan in Ann Arbor getting a degree in aerospace engineering. He already had a Ph.D. in physics and had been a tenured physics professor at the Weizmann Institute in Israel for a number of years.

There were many reasons for this move, some of them directly to do with the political situation in Israel. But the change from physicist to engineer was an exercise in "downward mobility." My father gave up a higher position for a lower, for ideological reasons. He wanted to do something useful.

In 1971, my father accepted employment at LTV in Grand Prairie, Texas. LTV was founded by James Ling. The letters stood for Ling Temco Vought. Vought was the aerospace division. The company had seen better years, but now it was being mismanaged, and in time it would be dismantled and entirely destroyed. It was not a good time and place to be joining the aerospace engineering profession, but my father did not know it.

When we moved to the area, people told my father that though the plant was in Grand Prairie, he should choose a different place to live. Grand Prairie was where the shop workers lived. Engineers lived in Arlington or North Dallas.

My father was amused by this "snobbishness", as it seemed to him, and he did not accept the advice. For nearly  twenty years, from 1971 to 1991, my parents lived in Grand Prairie, Texas.

We lived in a rented house for a year, and then my parents bought a four bedroom, two bath home with a large corner lot just south of Highway 303 and west of Corn Valley Road. The neighborhood was fairly new, but we bought the house on an assumption, and it had been lived in before. The land in that area had been used for cotton fields until quite recently.

It was a working class neighborhood, we gathered, but it was a very nice place to live, and we had never lived anyplace better. This was the first home my parents ever owned. Before, they had either rented or lived in university housing. The house was valued at about $30,000, and today on Zillow they have it down as worth $108,000. I assume that most of the difference is accounted for by inflation.

All our neighbors were very nice people. They were friendly and helpful and always took very good care of their houses, their lawns and their cars. We realized that these people must have an income much lower than my father's, and yet they obviously spent a great deal more than we did.

They watered their lawns and fertilized them so as to keep them in peak condition. Sometimes they used so much fertilizer that they killed the small trees that were growing in their front yards. They washed and waxed and babied their cars, and then every few years they would trade in their old car for a new one. They would change the wall-to-wall carpeting in their houses and paint the walls and redecorate and buy new furniture. They went out to dinner frequently, and as I grew older, I got to babysit for some of them as they went off to dinner and a show.

Meanwhile, we watered the lawn a great deal less.We never fertilized. We watched over the little stick-like trees in our yard, and eventually they grew big enough to give shade. During the twenty years that my parents lived there, they never once changed the carpets or remodeled. My father painted the exterior every five years or so, keeping costs down to a minimum. We kept our old cars for years. We had a 1970 Ford Maverick that my parents bought new , in cash, back in Ann Arbor, that was still around twenty years later. Our neighbors were buying new cars every few years -- on credit!

During most of those years, we lived on a single income. My brother was born soon after we moved to the new house. My mother clipped coupons and prepared meals and found ways to make the dollar stretch without ever compromising the excellent meals she prepared. She used only the best ingredients, but she never bought them unless they were on sale. We did not eat out much. My parents hardly ever went out.

I don't want to give the impression that we didn't have fun. That's not the point at all. We had fun on a budget. We went swimming at the lake. We even went sailing.

Kool cigarettes ran a promotion in which they sold a small sailboat for a very reduced price. Even though neither of my parents smoked, my father got an empty carton from friends at work and he got that boat. The bottom was made of something very much like styrofoam and it seated only two people and a dog, but it was a real sailboat and we got a lot of mileage out of it.

My father enjoyed owning firearms and using them for target practice. In the U.S,, this could be done legally, whereas in Israel it would have been illegal. He loved to fly planes. In Israel, private airplanes were very expensive, due to regulation. In Grand Prairie, my father at one time even owned three airplanes. He bought them used. They were very old, but not quite old enough to be antiques. He defrayed the expenses of keeping them by renting them out to others and by giving flying lessons in his spare time.

LTV went through a series of hard times, and eventually my father was laid off, like many other people working at the plant. The difference between my father and all the other laid off workers was that while many of them had to scramble around and look for a new job right away, my father could afford to wait. He had what he called "breathing space." His breathing space was the savings my parents had accumulated over years of exercising thrift.

The issue is not one of shop worker versus engineers. All the other engineers were living in much more expensive neighborhoods than ours in more "socially upscale" municipalities. No matter what their education, walk of life or level of income, most of the Americans we knew were spending nearly all they earned on their day to day living. Because of this, they were tremendously dependent on their jobs.

What does any of this have to do with ecology, you might be asking yourself at this point. Well, just imagine that everyone in Grand Prairie and in Texas and in the United States as a whole exercised the same degree of thrift as my parents. No matter what their level of income, let's say everybody saved a big percentage of it. What would this have done to the economy?

We were living in a working class neighborhood on a fraction of our income. But no matter where they lived, most of the people at the time were living on most of their income, spending rather than saving.

If everyone lived as we did, then about half as many cars would be manufactured. A lot fewer and less elaborate houses would be built. Restaurants would close. Whole lines of clothing and makeup would go completely bankrupt. Entire industries would have to either close down or reduce their work force.

As a result, many would be unemployed, especially those in industrial manufacturing and the construction industry. They would all have to go back to the countryside to the family farms that they abandoned a generation earlier.

With all of these changes in effect, thanks to everyone following our thrifty example, there would be a lot fewer trees cut down, less fossil fuel burned, less ecological damage. Oh, and also, I think the population would be reduced, too, since part of my parents' thrifty way of life was not having more children than they could afford to feed.

But what makes me think that our neighbors would ever have followed our example? Well, to some extent, if not for government intervention they would have had to. They bought all major big ticket items on credit. They would get a new car before they ever finished paying for the old. The government encouraged these habits by the following interventions:

  • keeping interest unnaturally low.
  • administering special programs to allow everyone who had an income easy access to home ownership loans
  • encouraging spending by printing more money and inflating the currency.

If not for these government interventions, all of us would have had less money to spend, because the economy would have been more sluggish. There would have been fewer jobs. Those jobs would have paid less. We would all have had less money to play with. Even my family would have had to live in a more modest house, because the assumption that we took on was of a government sponsored home owner's loan.

"But you're just buying all of Keynes's arguments," a friend said to me recently, when I suggested that without government bailouts there would be less industry and hence less ecological damage.

"Am I?"

"Yes, you are, because Keynes said that without stimulus the economy would collapse, but really it's the stimulus that makes it collapse!"

The truth is that I've never read Keynes, and while I generally find myself on the opposite side of the political compass, I have a very foggy notion of what he actually said. "And you think Keynes was wrong about this?"

"Yes, he was wrong. Without government intervention, the economy would achieve a natural equilibrium between supply and demand. The situation would bring about optimal productivity."

Well, that sounds good. But what is "optimal productivity"? Is it the most productivity? Or is it the most sustainable productivity?

My friend said that the most sustainable productivity is also the most productivity -- in the long run. But how long is the long run? And why should any particular market participant care about maintaining productivity? Are we supposed to just assume that productivity is something we all want -- and the more, the better? What if "the long run" turns out to be more than a single human lifespan? What is to keep people who think productivity is the goal from considering only sustainability during their own lifespan and to hell with the rest?

According to the wikipedia article on Keynes: "In the 1930s, Keynes spearheaded a revolution in economic thinking, overturning the older ideas of neoclassical economics that held that free markets would automatically provide full employment as long as workers were flexible in their wage demands. Following the outbreak of World War II Keynes's ideas concerning economic policy were adopted by leading Western economies. During the 1950s and 1960s, the success of Keynesian economics was so resounding that almost all capitalist governments adopted its policy recommendations."

I can't help but be confused by this statement of what neoclassical economists held: that the free market would provide full employment? What is full employment, and why should providing it be a measure of whether an economic system is successful? And for that matter, what is the relationship between employment and productivity? Is there a conflict between those whose goal is "optimal productivity" and those whose goal is "full employment"?

Isn't the whole point of a free economy that each person gets to decide how to spend his time, money and resources without any pressure from the government? Isn't a natural economy characterized by periods of growth followed by periods of rest, when nothing much happens? Isn't it also natural for there to be times when more businesses close than are opened, and when people spend more time at home than outside the home?

Sometimes we cut down trees to clear land for agriculture and to build homes and even cities. Sometimes the process reverses itself, and houses that are abandoned fall into disrepair, and nature re-establishes itself, when man leaves the area. As long as every period of growth is followed by a similar period of rest, then we will never run out of land, and our way of life is sustainable.

But how will we feed our burgeoning population? Aren't we dependent on industrialization to feed ourselves? Well, everybody comes from someplace. Why assume they can't go back to that other place and that other way of life, if the need arises?

Also, from a historical perspective,  aren't periods of population growth naturally followed by reduction in population? Whether the reduction happens as a result of migration, lower birth rate, or a combination of those elements, isn't fluctuation in population size always tied to the amount of production that is going on in the marketplace? Isn't the birth rate really an integral part of the economy?

Lately, I have heard lamentations both from left wing and right wing Hubbers about the loss of productivity. The left winger said that we are still feeling the impact today of the regrettable loss of productivity that America suffered during the great depression. The right winger said that we are feeling the loss of the millions of unborn citizens who were never conceived because their mothers were on the pill. In both cases, I was quite shocked.

Do we have the right to expect any particular level of productivity or of reproduction from past or future generations? Isn't the whole point of the free market that we can do business with others -- but only if they want to do business with us?

In fascist or communist nations, it is considered the patriotic duty of women to produce future citizens and of workers to maintain maximal productivity. In a free country, there is no such duty. Children are born to people who want children. People work when they choose to and spend their money and their time as they see fit.

The whole point of a free economy is that whatever the economy is doing is okay, because that represents what each market participant chooses for himself!

I do believe that without government intervention the economy would be more stable than it currently is. However, in order for the economy to be free, stability can't be the goal. Productivity can't be the goal. Employment cannot be the goal. In a free economy, the only goal is freedom of choice!


(c) 2009 Aya Katz

Comments 191 comments

F L Light 7 years ago

These couplets, Aya, deal with savings and savers, and how Maynard Keynes thought accumulated capital was less important to prosperity than current spending. It seems that the people in your neighborhood were influenced by government policy to behave as Keynes would have wished.

From Shakespeare Versus Keynes (offered on Amazon)

51

Maynard Keynes, loathing reservoirs of hope,

Told prudent savers “Prodigally cope.“

52

Capital lakes are waxing in concern

For innovations, which may lucre earn.

53

Maynard Keynes, profligating the resource

Of capital, conceived a wasteful course.

54

Capital lakes the Keynesians desiccate

Who think all savers should be profligate.

55

The Rockefeller lakes of capital

Should not be emptied by a prodigal.

56

Keynes to resourceful savers was averse,

Not counting prodigality a curse.

57

Carnegie, having lakes of capital,

Let an expensive enterprise befall.

58

Keynes to redundant thriftiness denied

His praise who hapless debtors magnified.

59

Saved means may realize multitudes of new

Profusions for effectual revenue.

60

Against the capital realities

Of private means, he would resources seize.

61

Saved means are enterprised in new effects

Of manufacture costly and complex.

62

No capital particulars are more

Conserved than means for a proprietor.

63

Saved means unkeynesian men for capital

Endeavors have reserved whose hopes befall.

64

Sans lucre may insanities enlarge

Where Keynesian functionaries are in charge.

65

Saved means, for lucre meant, may larger scope

In businesses allow, no little hope.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

I don't quite understand your point.

If "whatever the economy is doing is OK", why isn't it OK when the economy destroys the ecology?

If the goal is do what is best for the ecology, how can your free market compete with hypothetical authoritatarian governments that exterminate >99% of their citizenry and ban the practice of industry?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

F. L. Light, thanks for the couplet and also for using the word "prodigality" which reminded me of the story of the prodigal son.

It seems, sadly, that in at least one matter, Keynes was right: people can be influenced by government intervention to behave irresponsibly. Not all people, and not all to the same extent, but many people and to a great enough degree that these policies do achieve the short term effects they were intended to achieve.

I think that the long term effects were never considered, since most people are not that concerned with planning beyond their own lifetime. Most economists are like this, too. They act as if life began with the industrial revolution, or even with the twentieth century, and they don't bother to analyze the cycles of growth and decay that occurred before then in order to make long term projections.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, thanks for your comment. That's a very good question: "If "whatever the economy is doing is OK", why isn't it OK when the economy destroys the ecology?"

The whole point of laissez faire is that there is no goal. The goal is not to make money, produce things or to employ people. The goal is also not to achieve any particular ecological result. There is no goal except allowing things to proceed naturally. If the economic activity in a certain region impinges on the environment, then so be it.

My point was that we don't have an economy in which there is not intervention. Our economy has been revved up artificially by those who want "full employment." Those same people blame businesses and "capitalism" for ravishing the environment. It is they who are two-faced, not me. I was merely pointing this out.

In fact, the economy is only a small part of the ecological niche of every animal. We will not get away with destroying our niche, either. It's just that allowing the small fluctuations in food supply and production to occur naturally might be a good way to keep a cataclysmic event at bay.

Free enterprise is not a way to avoid reality. It's not an unlimited get rich quick scheme. This means that natural fluctuations in the market should be embraced, because they let us know where we stand, not only with each other, but with the greater reality imposed by nature.


Bard of Ely profile image

Bard of Ely 7 years ago from Lisbon, Portugal

Lots of thought gone into this great hub, Aya!

I see it where I live - farmland and traditional ways abandoned by islanders seeking ater the Western dream. The island is being ravaged by pollution from factories, urban sprawl, roads, traffic, litter etc. I can see the way forward as for people to return to using the land they gave up on. Some are already doing that here because money has become scarce. People have to get to understand that they do not need all the stuff the consumer society sells and as they do then yes, factories and businesses would go under.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Bard of Ely, thanks for your comment!

It sounds as if the natural cycle of things may be reasserting itself where you are.

One of the ways that land us is kept artificially "productive" is by high property taxes that require the highest possible return on investment. Without this artificial incentive, many people would make wiser use their land.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya,

Surely you must see how the distinctions you are trying to make might not be so interesting to your intended readers.

It might be that you and the Keynesians are right that it is

possible to arrange government interventions which increase

the long term growth of the economy.

But that doesn't mean that people who are indifferent to

freedom but oppose growth should support you. Because

Keynesianism does not imply that every possible goverment

intervention accelerates long term growth.

The convivialists might have ways of damaging the economy

which are superior to just going to a free enterprise system.

There may be limits to growth, but there are no limits to

decay.

Nets


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, I think I understand what you are saying, and to a large extent I agree. I have noticed how the distinctions I am making seem uninteresting to those whose goal is to take away freedom. However, there is one sentence in your comment that confuses me: "There are no limits to decay". Are you sure? I think there are. You don't actually believe in the "bottomless pit" model of economic depression, do you?


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

I think it is theoretically possible for all sentient beings to become extinct. Don't you?

Nets


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, well, yes, of course it's possible for all currently known sentient beings to become extinct. But even that will bottom out with the death of the last one. In order to have decay, you need life. With the last bit of life snuffed out, decay ends.

Also, you have to admit that "sentient" is a category that is open to argument. As long as some form of life remains, then the possibility of sentient life re-emerging, given enough time, still exists.

Anyway, are you suggesting that the Convivialists are capable of snuffing out all sentient life? Or even that that is their goal?


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Decay is measured on a logarithmic scale.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Oh! I was thinking of biological decay.


Paraglider profile image

Paraglider 7 years ago from Kyle, Scotland

I agree entirely that overconsumption, e.g. of cars, fuel, water, luxury goods is environmentally damaging and that it is prudent to live within, let's say, 75% of our means and put away the other 25%. Where I don't agree is in blaming government for people not doing so. It is profit-based private banks and credit companies who encourage irresponsible borrowing, and it is corporations who create, through advertising, demand for hitherto unnecessary products, and sustain the demand with built in obsolescence. Government play a part of course, but I don't think they are the major factor any more. The lobbyists are in many cases master of the lobbied.

(As for everyone came from somewhere so can they not go back there? No they can't!)


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Paraglider, we both are aware of the same ecological problems. I, however, am interested in fairness to all. You seem to be interested in fairness only to those people who live a particular way and have specific values. That makes it unfair to the rest.

For instance, I never said how much of a person's income should go into savings. I didn't give a percentage. I believe it's up to each of us to make that decision on our own. Some will save more. Some will save less. What I want is that the natural consequences of these choices will follow. That means, if you save more, you get to have more. If you save less, you get to have less.

Where government intervention comes in is that once people do save, it gets taken away. This means there is not much incentive to save, and a great deal more incentive to spend. It also means that those who spend are not really spending their own money. They are spending someone else's money.

When people are spending their own money, they naturally spend less. They naturally affect the environment less. Nobody has to tell them to do this. Self-interest is the best motivator.


Paraglider profile image

Paraglider 7 years ago from Kyle, Scotland

For goodness sake, Aya, I can't say anything right?? I said "let's say 75%" That's what's called an example, not a prescription. It's a normal way of talking. Make it 50% or 10% - I don't care. Fairness is fairness to all. That's what I'm interested in. Where we differ is that I do not interpret that to mean there should be no government.

Much of this comes down to education. Your example of your father is a case in point. He was educated to the point of thinking for himself. Maybe most of the neighbours weren't?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Paraglider, no, it's not about education. It's about life experiences. And, no, the point of this hub was NOT to look down on our neighbors. If it came out that way, I'm really sorry. Our neighbors knew what they were doing. The government made it possible for them to live outside their means, and they intuitively understood that if they did save, they would be penalized. My parents were not flexible enough to do what would have been the right thing under the circumstances. They were immigrants, and they did not understand the system.

To some extent, my parents were brought up to save because they lived through very difficult times. My father's family escaped Poland in 1939. On their way to Palestine, they had to be extra thrifty in order to survive. They spent some time in a single room with an aunt, so that when they got to Palestine, being able to rent a one bedroom apartment looked like a pretty good thing for a married couple with a child. My mother's parents were pioneers, and for most of my mother's childhood, they lived in a one bedroom house (her parents, her brother and her.) Thrift was learned from the circumstances and the consequences that followed from being thrifty.

Our neighbors were actually pretty smart -- they understood where their bread was buttered, and they did what was best for their families under the circumstances.

In fact, the shop workers, the engineers and the academicians who were American behaved in typically the same way: they spent most of what they earned. Each family strove to live in the "best" (most expensive but also most socially upscale) neighborhood they could afford, using government sponsored loans. This also meant that their children went to the "best" schools they could afford, because the school system was funded by property taxes.

My father did not understand this. He thought when you buy a house, you get a house. He didn't understand that you also get a community and a school system. He homeschooled me, because he was shocked at the level of the local school, but he never asked himself why that was!

When it came time to send their children to college, my parents learned to their dismay that thrift did not pay off. Financial aid was available to all Americans, (the children of shopworkers, engineers and academicians alike) -- as long as they didn't have savings! But if you had savings, you were considered well off, and you had to pay for everything from your own pocket.

Due to my parents' lack of proper planning under the system as it was then constituted, I never had a chance to apply to an Ivy League school. But if they so desired, everyone of the neighbors' children could have.

So, no, I don't think it's a matter of education. It's a question of knowing how to work the system -- or not!


Paraglider profile image

Paraglider 7 years ago from Kyle, Scotland

Everyone's experience is different, but in mine, education, which doesn't necessarily mean formal education, is often the key to a more successful life. Not necessarily financially successful, but successful in helping people to understand and adapt to whatever is thrown at them.

I did not read 'looking down on your neighbours' into what you wrote. Not sure where that idea came from.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Paraglider, perhaps I misunderstood your comment about education. I thought you meant formal education. It's true that my father had a greater formal education than our neighbors. But his educational peers, say American physicists or American engineers, did not behave differently from our neighbors. They all followed the same fiscal policy, each on the scale that their income allowed.

The ethos -- created by government intervention -- was one of spend now because tomorrow you won't be able to use it. Tomorrow it will be worth less due to inflation. Tomorrow, if you have it, people might count it as wealth, and discriminate against your children, based on the idea that they had more resources available to them. Tomorrow, if you have it, it will be tapped to create jobs for somebody else.

Redistribution takes many forms. All of them discourage savings.


James A Watkins profile image

James A Watkins 7 years ago from Chicago

Actually, there are far more trees in America today than there were 100 years ago.

That said, I enjoyed your essay very much. In economic downturns I always see that people who were wise with their resources—not rich people, average people—do just fine. It is those who blew every dime they got their hands on and then some—such as yours truly—who are in serious trouble.

I used to live in Ann Arbor. Great town. And I was in the general aviation business for 14 years. So, we have some common ground.

Anyway, your words are wise and you are an excellent writer.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya,

You say that ALL forms of redistribution discourage savings.

Are you sure this is true?

What if the redistribution comes from a VAT or a sales tax?

Nets


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Another interesting example is the American social security system. It is entirely a system for wealth redistribution.

Using a certain formula, taxes are collected. Using another formula, benefits are paid. Let us review these formulas.

Social Security taxes are 12.4% of earned income up to a certain income cap. (For an employee, the tax is formally paid half by the employee and half by the employer. This is

a kind of fiction intended to conceal its true size.) It is

important to note that the tax is only on earned income. It does not tax interest, dividends, capital gains, or other

income associated with savings or investment. For most people, the tax is flat, although taking account of a small

percentage of the highest earners, it is actually regressive

since they pay no social security tax on income above the

cap.

Now what is the formula for calculating benefits? A recipients (Social security taxed) income is averaged over his 35 years of highest earnings (indexed for wage inflation.) A percentage of this average is his annual benefit. This percentage is not flat but progressive. The

lower the recipient's average income, the higher is the

percentage he receives as his benefit.

This system certainly discourages earned income (work). But

it takes no account of savings. Our father worked a relatively small number of years (a lot less than 35)

in the U.S at a fairly high income. As a result, his average

income was quite moderate and in terms of the benefits formula, he did well under this system. Our mother still

receives survivor's benefits based on this formula. She is,

for all practical purposes, a welfare recipient, and in no

way were her savings, or our father's savings, taken into

account.

Now this is all relatively insane and I hasten to add that I

do not support any system for redistribution of wealth. But

can you really object to it on ecological grounds? I often

hear it said that the 12.4% being taxed can't be saved by the earner. But from the point of view of ecology, it is savings. It isn't being consumed by the earner.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

James A. Watkins, I am not familiar with the statistics on the number of trees, but I am willing to take your word for it. The more interesting question is: are these natural trees growing in natural forests, or cultivated trees grown for a specific purpose? There are ecological ramifications for the answer.

Anyway, I do appreciate your comment and the compliment!


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, thanks for your comments. At first glance, I was about to say that you're right about sales tax, because on some level it does encourage savings and might help reduce the exploitation of natural resources-- but that's only if you think of people as unavoidably consumers and not producers. If there is a very stubborn type of individual who tries to avoid paying any tax, the sales tax will encourage barter and self-sustaining methods of earning a living -- like subsistence farming and building your own furniture. I think there might be less ecological damage from this, because sales tax discourages sales, and industry thrives on sales. Anything you tax discourages participating in the activity taxed. Tax sales and there will be fewer of them.

In the case of the social security tax, it definitely got me to spend more. Here's how it worked: I was a lawyer with an office in the home. I depreciated all my assets on my income tax return, and I got to deduct expenses from my business. If my business showed a profit of even $400 per year, I was taxed. Otherwise, I wasn't taxed. Sometimes I would go out and buy something toward the end of the year -- something like a printer or other office supplies that I didn't really need-- just to avoid paying the social security tax. I figured it was better for me to have the object I bought than to have to part with a single dollar to pay the tax.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Social Security definitely doesn't work by the same logic for the self-employed as for the employed.

But imagine an employed person. He can't reduce his income except by working less. Social Security does not induce him to spend.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

In any case, you made a claim that any system for redistribution of wealth by necessity discourages savings. Do you stand by your claim?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, I said that any system of redistribution discourages savings, and you demonstrated that not every system discourages savings in the case of every individual, and the different methods certainly don't affect everyone the same. So I will modify the claim like this: Any system of redistribution discourages some people from saving. Different systems of redistribution discourage different people in different ways. But they are all discouraging!


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

How do you know that any system of redistribution discourages some people from saving?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets,

You ask: "How do you know that any system of redistribution discourages some people from saving?" Do you mean, how can we tell people were discouraged?

That's a difficult question! From a philosophical perspective, we could just state that everyone has free will, and that they can do whatever they choose to do and to hell with the consequences. If that was your point, I agree with it.

However, let's remember the context of the original discussion. We were talking about Keynsian economics and the claim, made by some, that "economic stimulus" helps to create jobs. How does economic stimulus do this -- if, indeed, it does? Well, by discouraging savings. The example of what the American public did in the 1970s and 1980s, that I gave, taken from people I knew in Grand Prairie, Texas, but projected a little beyond, was meant to show that there is some truth to the Keynsian claims. People can be induced to spend more than they otherwise would have, by the economic stimulus of easy credit and low interest rates.

You may maintain that the desires of the people I mentioned would always be to spend as much as they could. I don't actually believe that, but I have no way of proving it objectively. My point was that even had they wanted to, they could not have spent this much under a free economy -- because the money they spent was not their own. It was taken from people who did have savings by means of inflation and lending laws. If not for the stimulus, people who did own the money would have had the option of spending it -- or not.

So the bottom line is that the system of redistribution not only discouraged the people whose money was spent from saving it, it outright prevented them from doing so!

That's what real redistribution does. It takes money away from people that have it and gives it to people who don't. But in order to keep it, whoever has it at the moment has to spend it, or it will be distributed to someone else. So the money naturally finds its way into hands that will spend it.

Your question about the sales tax was a little trickier, because not every tax is for the purpose of redistribution. I think that most sales taxes are not actually about redistribution, as they are currently constituted.

One of the reasons many libertarians support a national sales tax is because it is not progressive. They imagine that for this very reason, it won't be used for redistribution of wealth. You may be hinting that actually, it could be.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

No I'm not asking how you know that a specific system does it. I am asking how you know this general statement about any possible system.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, I concede. I do not know for sure that any possible system of redistribution discourages saving. It is merely a working hypothesis.

It is quite possible that a system of redistribution that uses a formula so complicated that no ordinary person can understand it might not discourage saving, since ordinary people might not be able to predict what the result of any particular course of action might be for them.


Jerilee Wei profile image

Jerilee Wei 7 years ago from United States

Well, I don't know, seems like everyone has said it all in many directions of the issue(s). I did enjoy reading this but it'll take me awhile to digest some of the comments. Thought provoking hub!


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Jerilee, thanks! I'm still thinking about some of the comments and revising my take on the issues as well.


James A Watkins profile image

James A Watkins 7 years ago from Chicago

The reason is that trees were used for firewood before coal, gas and electricity came along; so everybody had to chop down trees back then. Thanks for the response.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

James, thanks for the clarification. Do you have a cite for your statistics? I am not necessarily questioning the validity of your numbers -- I have none of my own -- but I'd be interested in seeing the source.

While it is true that a much smaller percentage of homes use firewood to heat than in the past, our overall population has grown exponentially. Woodlands and grasslands and swamps have been cleared for purposes of agriculture, industry and housing. So while fewer trees are burned for purposes of heating, many trees have been cut just to create a place to live. Much wood is used by the construction industry as building material, but often trees are cut down for no better reason than to create a flat space on which to build cities, towns and roads.

BTW, where I live, firewood is used for heating by most of my neighbors. It is not a bad heating method, and I am not opposed to it! When the trees greatly outnumber the people, then all can afford to heat with firewood and still leave plenty of forest for animals and future generations of humans.

The problem isn't the number of trees, James. The problem is the number of people!


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

I just got in the mail a copy of "The General Theory of Employment, Interest and Money". From flipping through the first chapter, I got this impression of Keynes's argument: "The more people earn, the less of it they spend, because the poor can't help but spend a higher percentage of their income than the rich. So, to the extent that those with wealth save, rather than invest, there will be fewer jobs created. For this reason, those with wealth should be induced to create new jobs by spending, rather than saving. In this way, more people will have jobs, although each of them will earn less."

It seems to be a scheme designed to make everybody poor, and everybody productive, because no one will ever be able to feel that he can afford to stop working.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Aya, you never come right out and say it but I think that the point you're trying to make is that free markets are self regulating.

As an example, let's look at The Lorax. In this story the Once-ler cuts down the Truffula trees in order to make Thneeds. Now here is where the story before it is itself from reality. In reality, as the trees became more and more endangered, the cost to create a Thneed would go up. Sooner or later, the cost of a Thneed would increase so much that it would be unprofitable to sell anymore. Since each Truffula tree would become more valuable as they were cut down, the cost to produce a Thneed would force one of two outcomes. Either industrialists would have to plant more Truffula trees, or so few Thneeds would be sold due to the cost, that production would have to stop.

That's the point most anti-industrialists were never realize. They don't understand the mechanism of price and cost. You are correct when you say that price is what people are willing to pay for a particular item and that price is determined based upon the intersection of supply and demand. Where most people get confused is cost to produce those goods or services. If costs go up, prices must go up or production must go down. So in a free market, there is a mechanism to key wholesale devastation from occurring.

Oil is another example. A couple of years ago, when the price of oil went so high, people actually began to change their habits, rather than pay that much for gas. It's misleading to think that we will ever run out of energy, its energy that we need, not necessarily oil. The only reason we use oil is because it is relatively cheap and has been, until recently, fairly abundant. As oil becomes more scarce, price will go up, people will change their habits, entrepreneurs will search for viable alternatives to oil. Part of solving a problem is correctly defining. Our problem is not necessarily oil, but energy. Oil is just the way we generate most of our energy, but that doesn't mean it's the only way to generate energy. That's the beauty of the free market, there are always alternatives.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I agree with most of what you said about supply and demand. Nets (nhkatz) has written a hub about this that mentions The Lorax. If you haven't read it yet, you might take a look.

http://hubpages.com/politics/Supply-and-Demand-Cap...

I'm coming at all this from a slightly different perspective: what if someone doesn't want to produce or consume? What if someone is happy with what he has already earned and wants to enjoy knowing that if he needed to spend it he could, but he doesn't really want to. Can we let this person alone and stop trying to encourage him to spend?

The scarcest commodity on earth is not trees but land. We don't want to be so productive, by whatever means, that we fill it all up.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Everybody produces and consumes things, it's part of living. We all need things and let's face it we do somethings better than others. Therefore it's in our best interest to maximize the time we do things we are good at, and use the out put of that production to trade for the things we need. In short, that's when the economy is. What you really asking is at what point does a particular person content with what they have?

What I would really depend on the person. One of those other strange quirks about humans is that we all have differing value systems, some things we value more highly than others. In addition, different people have different value systems. Some people, for example positively, absolutely must have name brand clothing. Other people, could care less. Each person is going to value those things differently, and each person will be content with different things.

That is why a free market is preferable to any other type of market. It meets the demand of people for most anything, and lets them decide what's best for them. Any other type of system, is only taking from one group of people to give to another, which is inherently unfair. And yes, that includes things like bailouts and stimulus and manipulation of the interest rate, those are just the mechanism for taking from one group and getting to another.

Thanks for the link, by the way, I'll be sure to check it out.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I'm with you when you say the free market is the best possible system! Where our values may differ a little is in regards to why. You seem to think it maximizes productivity. For me, it's the only system under which a person can be free to choose what he does. It doesn't matter why we like it, of course. As long as we can work together to support its continuation.

However, saying that everybody produces and consumes and that's how life works is to conflate biology with economy. Is it still consuming if no money changes hands? Is it still producing if no laboring for another is involved?

Keynes distinguished between saving and investment. Investment is participating in the market. (That could be expressed in something as ordinary as opening a bank account, as demonstrated in Mary Poppins.) Investment involves risk. True saving is more like putting gold bullion in a coffer in your house. This does not involve other people, no money changes hands, and you are not a market participant.

If I live under my own vine and fig tree and live on grapes and figs, I am certainly consuming in the biological sense of that word. But I am neither a consumer nor a producer in the marketplace.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Ignore Keynes, he really didn't know what he was talking about. If you look at what is going on around in Washington today, that's straight Keynes. If you want a different model for how the economy works, how it really works I would say, check out Human Action by Ludwig von Mises.

Keynes was wrong about differentiating between saving and investment. You're getting confused because money is involved, not an uncommon thing. Money is just a commodity we use to exchange goods and services. It's better than barter because as long as the commodity used is fairly stable, so are the units of exchange. Thus it is easy to decide how much something is worth. Once you have that understanding you can decide if you want to get that something now or later. Your decision will be based on your personal values.

Now you usually get money in accordance with your labor. For doing X amount of work you get Y amount of money. Time really is money when you think of it that way. Money is also a measure of your productivity. The more you produce, the more money you can get for your effort. Now is it possible for you to be totally self sufficient and do everything yourself. Sure, there have even been times in history where that has been done. The Middle Ages is a good example. But the living standard was horrible, at least until the Crusades and the re-establishment of trade during the High Middle Ages. If you look at history, you find that when there is trade, there is a huge gain in the standard of living.

Now Keynes believes the decision to save takes money from the economy and makes people poorer. Not so. By saving money you're merely saving your accumulated labor. Labor is money is time after all. Now we only have a finite amount of time, labor or money so we all seek to maximize it do we not? The way we do that is to invest in productive ventures. So savings = investment. Keynes believes that spending = investment, but you know as well as I that sooner or later you run out of money to spend. What do you do then? Borrow. At least until your debt becomes oppressive and you default. Which is exactly what is happening here in the States today. You cannot spend your way to prosperity and you can only create a viable economy through saving and investment. Check out Human Action and let me know what you think. A word of warning, it's his magnum opus and a pretty dense read. You'll probably spend some time at it. I had to use the study guide and will probably have to go over it a time or two to fully understand the subject and its implications.


youcanwin profile image

youcanwin 7 years ago

Minimizing the expenses in the good time can help you in the bad times to sustain. Many of us having the life stayle of "living Today" not thinking about tomorrow, Life style needs to be changed. Economically balanced life style is the answer to the current situation prevailing in the world.

Nice reading, Keep writing.


KyonSOS23 profile image

KyonSOS23 7 years ago from Nabon

Economy rise and preserve Ecology, it's dream.I ask you "Are you begin preserve Ecology by change your life first? " .

If not ,it 's dream only.

If yes, our world begin better .


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefenstech, I think you really should read Keynes rather than ignore him. Know thine enemy! Keynes has some pretty diabolical ideas, and in order to counter them, you have to first understand them. I ignored Keynes for years, because I knew I didn't like him. But that's the wrong strategy. It's like ignoring Toohey.

In the middle ages, most people were NOT self sufficient, so that is not a good model for what not participating in the market is like. In the Middle Ages farmers were serfs and scholars belonged to the Church, and every craftsman belonged to a guild. The things that are happening today are much more like the middle ages than you imagine.

If you want to see examples of self-sufficiency, look at chimpanzees in the wild, or hunter-gatherers, like the San People of Africa or the Plains Indians (AKA Native Americans) or even the homesteaders who replaced them. All of these people produced everything they consumed. (Or nearly everything, in the case of the homesteaders.)

The difference between investment and saving is not illusory. Investment involves risk. Investment means that you let others play with your money. Savings means you store your valuables in a safe place, and nobody can use them to start a new business. Nobody can use them to gamble with.

Keynes saw the marketplace as a big casino, but he didn't want the winners cashing in their chips and going home. He wanted them to keep playing forever.

Please understand, engaging in business is a little bit like gambling, in the sense that success is never guaranteed. When you gamble with your own money, you take fewer risks. Gambling with other people's money loosens your inhibitions.

Toward the end of his book, Keynes mentions someone named Gesell, a colleague of his. Gesell had this idea that money should be time-stamped with an expiration date. His slogan could have been: "Money, use it or lose it!" Keynes speaks approvingly of Gesell's way of thinking, but his ultimate conclusion is more like: "Good idea. But it would never work! It's too obvious. People would find ways around it. They just wouldn't use money for savings. My idea is better, because it's more subtle. Use interest rates to control the money supply, and then people will lose their inhibitions to invest without realizing exactly what happened!"

This is brilliant! It's pure, unadulterated evil. LDT, don't close your eyes to it. Study it first. Then let's decide what to do about it.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

You-can-win, thanks for your comment. Yes, it's good to minimize our expenses when we are earning so as to have something to fall back on when we are not. But we also need a monetary system that permits us to do this without being penalized.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

KyonSOS23, thanks for your comment. The economy in its natural form is the best defense the environment has. Unlimited economic growth is not a natural part of a free economy. When people earn a lot, they decide to save more of it, so then they start producing less, because they need less. We have only a limited amount of time on this earth, and people want to enjoy that time. They don't want to grind away at production forever, way past the point where they have enough.

The secret to a happy life for all is to realize that the slogan "Time is Money" has its limitations. If time really were money, the more money you had, the longer you would live. But it doesn't work that way!

I think that if you look at Keynes's argument as to why there is no such thing as a negative interest rate, it might clarify the issue.


James A Watkins profile image

James A Watkins 7 years ago from Chicago

US Forest Service shows the all time for trees in the U.S. was in 1920. 1,200,000,000 trees now—half in Alaska. 750 million acres of forest, plus all the trees not in forests.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

James, thanks for dropping by with the numbers. So are you saying that the all time high for trees in U.S. was in 1920, or that there are more trees now than in 1920?


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Oh believe me I know how diabolical Keynes is. He's had his detractors from the first. I don't really need to read Keynes, I got most of his BS in macroeconomics. That class is why most people forgo the study of economics in the first place. There is seriously something wrong with you if you can reconcile classical economics and macroeconomics.

http://mises.org/story/3582

That was written in 1952. In it, Hahn talks about the pervasive belief that the economy would crash into a Depression after the war. Montgomery Ward himself got caught up in the hysteria and closed a bunch of his stores. We all know now that the post war world was a boom for the US. Free market 1, Keynesians 0

http://mises.org/story/3583

That article does a pretty good job of debunking Keynes' Frugality Paradox.

http://mises.org/story/3566

Of course the memory of the sheeple is short. We went through the exact same debates we're having today back in the 1970's. Keynes was debunked then, and he'll be debunked today. The only reason people listen to idiots like Krugman is because he promises a return to the land of milk and honey. He'll get strung up when people realize the con he's been running.

http://mises.org/story/3539

Lilburne seems to have a real hate-on for Krugman, not that I cast any blame. Krugman, like Obama is damned by the idiotic statements they have made in the past.

http://mises.org/story/3497

This was L. Albert Hahn's full frontal attack on Keynes.

More germane to this topic are the following articles, one on environmentalism without government: http://mises.org/story/1844 and a rather interesting treatise on allowing a private individual to bear the cost of waste disposal: http://mises.org/etexts/environfreedom.pdf

I, of course, don't see such a sensible course being taken, as most collectivists want to know what [i]you[/i] are going to do in helping the problem, they are usually rather vague about what they are going to do about the problem.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, thanks for your comment. That's quite a lot of reading you've assigned me. ;-> It'll take me a while. In the meanwhile, can I just give you a small hypothetical?

Say a man works forty years of his life and accumulates enough money to pay for the next forty years. Say his dream is to do something that doesn't pay in the free market. Doesn't really matter what it is. Raise children or dogs, or paint or write or do scientific research, or just commune with nature. Whatever it is, he knows he can do it for the rest of his life for the amount of money he has.

Why should he invest that money in anything? Why shouldn't he keep it at home? Well, one answer could be inflation. But let's say there is no inflation. The currency is sound. It will be worth exactly the same thing in forty years. You might say, well, maybe he wants to make a little extra. No, he doesn't. He wants it to be safe. He doesn't want to risk it. Well, what about thieves? Maybe he'll rent a safety deposit box in the bank, and pay an annual rental, but how will that help the economy to flourish? Assuming the annual rental is negligible compared to his annual expenditure on food, he might rent that safety deposit box. Otherwise, not.

The safety deposit scenario is really the closest we come to negative interest. We're willing to pay a small fee to make sure it's still there. But we're not willing to risk losing it, unless manipulated by inflation.

You might say, "But he'll spend it all in forty years, and that will help the economy." Yes, but if all he buys is food and a few other necessities, then he won't be investing in anything. He will be consuming it all, one year at a time. One day at a time. And entrepreneurs are never going to get their hands on that money to start speculative businesses with someone else's capital.

Can't you see that the economy would be slower under these conditions? It might be just fine, but it would in fact consume fewer natural resources.

I'm not saying the economy would collapse if not for inflation. I'm saying, we'd have to go a lot more slowly. There couldn't be exponential growth all the time. It's exponential growth that is killing the environment.

Ledefenstech, would you support a stable economy without growth? Because that is really the issue here.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, here is a quote from your first link of assigned reading (Keynsians Can't Predict):

"The second postwar boom, not caused, I think, but accentuated by the outbreak of the Korean war in 1950, led again to predictions of continued and even of runaway inflation. But 1951 was basically a year of deflation, and of inflation only in the areas where it was governmentally fostered."

So, how does the fact that inflation was caused by the government counter anything that I've said so far? People with savings pray for deflation. It's the government that always deflects it!


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

It doesn't counter anything you've said. What it does illustrate is that the government can't always control what it thinks it does. Despite their inflation in 1950 due to the outbreak of war, deflation followed in 1951. Still, I think the inflation began problems that didn't manifest themselves until the late 1950's, which led to the easy credit "solution" of the 1960's.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Aya, in your example above, your hypothetical person is still participating in an economy. If he raises chickens, for example, what does he do with the excess eggs and meat? Surely he will sell them. Even if he is content with hat he has he still have to dispose of what he does not personally use. By living, we are all part of the economy. The only people who do not contribute to the economy are those who produce nothing.

Like Keynes, you don't grasp that saving or spending is a personal decision. If that person chooses to spend now or later, it doesn't really matter. Even if they save all their lives and leave an inheritance when they die, the inheritors will be the ones to save or spend.

One of the problems with hypothetical situations is that they don't really mirror reality very well. It's good for illustrating a point, but bad if you use that hypothetical and expand it to the real world. Sometimes logic really is a way to go wrong with confidence.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, okay. Maybe the government can't control what it thinks it does. I'd be the last person to expect them to know what they are doing! But that doesn't mean that there wasn't an element of truth to Keynsian theory. (The fact that certain economists who purport to follow the theory are incompetent, I think, is beside the point.)

Would you support a stable non-growth economy, if the free market produced it?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, you don't seem to grasp that my hypothetical is reality based. I'm raising chickens myself. We only have enough eggs for my family to eat, and we don't plan to butcher the hens. When they die, they die. They live mostly off of kitchen scraps.

Look, the person in the hypothetical was spending money on food and other necessities. (He was not totally self-sufficient.) The only thing he refused to do was to risk the money on investment -- not even a bank account.

If he lives for forty years, he will have spent it all. There is no inheritance for his heirs. (Whatever work he does will never produce a dime of profit, because there is no market for it.)

The difference between the way he will behave under an inflationary economy and under one with stable currency is what I want you to pay attention to. In an inflationary economy, he will have to at least buy CDs to help his cash keep up with inflation. That gives the banks money to invest in the marketplace. If the interest rates of the CDs will not keep up with inflation, he might take even riskier measures to hold on to his capital so that it can have the same value for forty years.

There is no risk free course of action in a Keynsian setup -- he will have to participate in the economy as an investor or lose his cash. Other people are already spending it. Can't you see that?

I ask again: Would you support a stable non-growth economy, if the free market produced it?


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

I would support a stable monetary policy, which is what Keynes opposed. Are you aware that the dollar's purchasing power increased 11% from 1776-1913? This was also a time that included the industrial revolution and the largest increase of the standard of living the world had even known. I wouldn't call a stable economy a non-growth one. One thing Keynes discounted was the creativity of entrepreneurs. His worldview had no place for people like Bill Gates or Tim Berners Lee, two men who created entirely new industries through their ideas.

The one thing a stable money gives us is the ability to judge future conditions. Inflation skews that forecasting ability. In Austrian parlance, malinvestments are produced due to inflation and when too much malinvestment has occured, the market collapses. The housing bubble is a textbook example of the Austrian Cycle of Business in action.

Governments like Keynes because it allowed them to break the economic rules that Smith, Ricardo and other classical economists discovered. But only for a time. Inflationary economies are inherently unstable. When you go to mises.org look up welfare-warfare state for an explanation.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, glad we agree on the benefits of a stable economy.

I'm not that big a fan of Bill Gates, though. Do you really think we need a new operating system every two years? I know, I could refuse to buy it, but you know what, the system I have keeps updating itself all the time, whether I like it or not.

That's probably a little off topic, but not entirely so. If not for inflation, would we be able to keep buying new computers and operating systems all the time? Isn't Gates somehow part of the system? When government entities demand that you submit forms in the latest version of MSWord, don't you think that something smells a little foul?


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

No Bill is as much a prisoner of the system as anyone else. Because he can't rely on a stable currency, he has no choice but to "update" his operating systems as time goes by. Remember too, that we're in the early days of mass home computers. Operating systems don't necessarily keep up with new technology very well. One example I have is Windows 98 and USB. Very hard to implement. 2000 did a better job and XP fully integrated the technology. I tend to buy operating systems that are staggered. I got 98, for example, skipped 2000. Got XP, skipped Vista, except that it came with my laptop and am going to upgrade to 7 when it comes out.

Likewise with hardware, the tech is continually evolving. But that's a feature of the free market. People who want cutting-edge can have it. People who don't will wait until it becomes more affordable. They fly in the ointment are the people who want cutting edge, but aren't willing to pay for it. It's not just in the computer field that this is a problem.

As for the government demanding that you use the latest version of Word, that's the nature of bureaucracies. Because of their size, they get a deal on the software they purchase. That's why the require you use the latest software. Still there are indications that in a cost cutting move, some agencies are moving towards Open Office and more open programming in general. That's a feature of the free market too. People are always looking for ways to cut their costs. That's why monopolies can't just jack up their prices to whatever they feel like. Alternatives will always be found.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

As for the system updating itself, that's just patches to protect you from vulnerabilities, taking advantage of new or updated technology or fixing problems in the operating system they didn't get to before it was shipped. I think what you're really concerned about is not understanding what the updates are about.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I'll cut Gates some slack, but I think we both know that the entire computer industry has been shaped by the inflationary economy we've been living in for decades. I have no idea what it would be like without the ready investments of people trying to keep up with inflation. I imagine we would be repairing computers more often and replacing them less often. Things might be slower under a free economy, but I far prefer freedom to anything else!


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

I think you'll find that things move faster with a free economy than a controlled one. Part of the allure of cartelization is that barriers to entry are erected in markets, what are the consequences of doing that?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, in a free economy, there is not a lot of credit floating around. There's not a lot of investment capital. This does not mean that new businesses can't be started. It doesn't mean they can't turn a profit. What it does mean is that they will not employ a lot of people, and that everything will be on a more modest scale.

Technological advances may come, but it's not a get rich quick scheme, because the growth is not exponential, and people don't count money that other people are using as "savings".

You can't have your cake and eat it, too.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Yes and no. As an example how you can have your cake and eat it too, look at the Free Lakota Bank: http://freelakotabank.com

There you have the stability of a gold standard, proof against a run because the bank is fully reserve and a general fund you can invest in that the bank will use to originate loans. Now will the Lakota Bank be able to loan like Bank of America does? Of course not, but they will be much more careful to whomever they lend.

Another thing you don't consider is that if you want a loan you'll have to show a bank that you'll be very profitable and very safe. Not necessarily bad things after the bubble fiasco we've recently been through.

Finally, you'd probably see an end tho housing loans and vacation loans and things like that. Since credit would be restricted, the price of such things would have to fall so that a reasonable person can afford those sorts of things. Also without inflation, you'd not see prices go up for the sake of inflation but they'd go up due to factors like supply and demand. This would make planning much easier since you won't have to fudge your numbers with what you think inflation will be.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, even a very "safe" investment poses some risk. Why would someone who has everything he needs and wants take any risk? The only people who would take such risks would be those inclined to gamble and those who felt they didn't have enough and could afford to gamble because they were pretty desperate already.

Do you concede that in a free market, some people might really be happy with what they had and not want to take any risk at all of losing it?

Here's what I think would happen. New businesses would indeed be started. Some of them would be very successful, but the businesses would have to be frugal, just like their owners. They would employ fewer people, because they couldn't afford a salary. Instead, family members and friends who knew each other well would start businesses together in partnership and work in the businesses. No salaries would be handed out, but business owners would share in the profits. There would be many more businesses than there are today, but a lot fewer employees.

Remember that this is completely consistent with Keynes' concern about full employment. He thought everybody who wasn't a business mogul needed to be employed, and he wanted to arrange the economy that way. But it doesn't have to be that way. And I think it wouldn't be, under natural conditions.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

http://mises.org/story/3608

Note particularly this quote: "These followers of Keynes forget, when they reiterate the necessity of "maintaining full employment," that labor is more scarce than the material factors of production, that in a truly free market there can be no such thing as prolonged mass unemployment."

Employment is a service much like any other. If you cannot find employment in one area, you can find it an another. Keynes is a socialist at heart and his attempt is to find a philosophical framework that will allow it to work. It's not full employment we need to be concerned about but the ability to allocate labor as needed to meet production needs. Nothing does this better than the free market. Of course what you find yourself doing may not be what you think you should be doing, but at least in that case, you can always spend some of your time developing new skills.

http://www.fee.org/pdf/books/Free_Market_and_Its_E...

I know I keep assigning reading but I've spent the last few years at this, whereas you're getting it cold turkey, so to speak. The previous book has a very illuminating lecture by von Mises on why people hate the free market an capitalism. I'm curious as to what you make of it.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, not only can people find employment elsewhere when they lose a job or unable to find one in their trade of choice -- they also don't have to be employees at all! They can start their own business using the skills they already have, as well as newly acquired skills.

You needn't tell me that "full employment" is not necessary. That's the very point that I have been trying to emphasize.

The thing that I think you and I are butting heads on is something a little different: the role of the entrepreneur in a truly free market, and what sources of capital he might have at his disposal.

You said before that only very "safe" risks will be taken -- very profitable and very safe. Come on! If it stands the chance of being very profitable, it can't be very safe. When you bet on a sure thing, you can't expect much of a return. It's betting on the long shot that will get you the profits -- if you don't lose your shirt in the process!

Have to sign off for today. Will check your assigned reading tomorrow!


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

OK, that's the issue then. Yes some investments can be considered safer than others but all investments carry risk. One of the jobs of a bank is to assess those risks when they lend money. They'd better be good at it, otherwise you get what we had last year. Banks going out of business.

While you can't eliminate all risk, you can eliminate most of them. Risk is part of the economy. Heck even farmers know risks. If they guess wrong about what to grow, it could bust them. Even the big agribusinesses have to worry about that.

I suppose it's much like a supply and demand chart only you're weighing risk and payoff. Where the two intersect is probably where you're going to invest. Still there are instances where you can bet on something and get stellar returns. Investing in companies that make goods used in infrastructure, for example. Much of the US is reaching the end of the useful life for things like water pipes, roads, pumping stations, electrical stations, etc. Investing in these companies is a risk, but when you take into account that these improvements will need to be done, you have very high confidence that you can make a bundle, as long as the need for infrastructure remains. When that changes, so does the risk and payoff outlook. I suppose that's why I enjoy economics so much. You learn quite a bit about the why of things, make the world a better place and can make a bundle doing it.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya thinks that in a free market risk tolerance would be greatly reduced rendering some projects uneconomical. Of

course, she can't know for sure since in a free market

people may have as much or as little risk tolerance as they like. But perhaps there's an evolutionary argument.

There are some flaws in this theory. One obvious one is that certain side effects of unfree markets, like taxes, tend to reduce the payoff from risk requiring more risk tolerance, not less, for the same project.

There is a subtler and deeper problem however. Exponential

growth is natural in the frontier state, where there is

no scarcity of resources. Growth only becomes constrained in

a Malthusian way when many of the resources are already in use. If Aya does

not see this, and understands what exponential growth is,

she should take a deep breath, ask Sword if she can borrow the playstation for a few hours and meditate while playing

Katamari Damacy. She should pay special attention to the

time and diameter readouts. (Hint: Whatever his faults, the

King of All Cosmos is not altering the money supply during the course of "Make the Moon.")

Now according to dogma which Aya espouses, free markets are

natural precisely in the frontier state, and the temptation

to destroy them becomes irresistable when the world is crowded and resources are constrained. Thus it hardly matters what free markets do in that situation.

In a frontier state, one might have free markets. This leads

to exponential growth. This growth eventually causes there

no longer to be a free market.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, Nets has set forth the argument correctly in his comment above, although it may not be couched in terms that are naturally transparent to the greatest number of readers. For instance, people who are not familiar with the video game Katamari Damacy might have difficulty making out the issue under discussion .

I would disagree with Nets's analysis perhaps only in this: that the frontier state need not ever disappear if appropriate measures are taken to curb population growth. These measures need not be unnatural or forced. I am working on a hub concerning human nature that might explain this better, but it's not ready yet.

To speak in terms that may be clearer for a broader audience: Keynes's theory hinges on reducing risk aversion. He states this clearly in his book.

Keynes disapproved of Marx's idea of redistribution, because he understood that if you decouple distribution from production, the whole system falls apart, and production is diminished. (Apparently, Obama does not understand this.)

Keynes's sole concern was that the system of capitalism in effect in his time had large reserves of capital that were not in use. The reason for this was prudence on the part of those who owned or managed the capital. Keynes thought that in order to be maximally productive, the system would have to reduce risk aversion. Hence, inflationary measures on the part of the government.

The logical conclusion that we may draw is that absent this government intervention, the system would be somewhat less productive -- and hence would harvest fewer natural resources. Yes, I understand that some people would still take risks under a free economy. Risk taking is a natural phenomenon. However, it is not unreasonable to conclude that fewer risks would be taken. As such, the economy would in all likelihood grow, if at all, on a much more modest scale.

Thus, anyone in favor of conservation ought to favor the free economy over that devised by Keynes.

QED


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, to answer some of your earlier comments, I have been reconsidering the possibility that some convoluted system of redistribution might be devised that would not undermine savings. It seems more and more plausible to me now that one could be devised, but I hope that it won't be.

Keynes's contribution to economic theory was that it allowed regulators to engage in redistribution without undermining the work ethic. This was ingenious, and at least to some extent, it seems to work.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Welfare already existed in Keynes's day, and he argued there would be less welfare if 100% of the available workforce were employed. To this end, he wanted to force people to use their savings to fund investment. The reason this did not directly undermine the work ethic is because most ordinary people did not understand how it affected them, and because receipt of funding from someone else was contingent on ordinary market forces. This was a form of welfare that did not encourage idleness.

I think the lesson that you need to learn from this is that other people's behavior is influenced by consequences they can understand, but completely uninfluenced by consequences they do not understand.

A mathematical understanding of the economy is useless unless you also have some insight into the psychology of those affected by the consequences that you uncover.


Lgali profile image

Lgali 7 years ago

very nice article I like this Productivity can't be the goal. Employment cannot be the goal. In a free economy, the only goal is freedom of choice!


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Lgali, thanks for your comment. Glad you agree!


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Nets, you read too much into Malthus. One of his great weaknesses is that he assumed that as long as the food production increases so will the population. That's where you get your fancy exponential growth graphs from. But here's the thing. Industrial countries produce far more food than any other type of farming method. If Malthus were correct, we'd be seeing an explosion in the population of industrial nations. Yet, if anything, industrial nations are declining in population. Why?

Most of our growth in population comes from places that are engaged in age old subsistence farming. The reason those areas are increasing in population is that subsistence farming is labor intensive. They need that population in order to grow more food, which necessitates a greater increase in population. So Malthus only has a point when you're talking about pre-industrial methods of farming.

Also, Malthus ignores the innovation that would take place when a population can no longer increase in size and more food needs to be produced. There will be, after all, some people who refuse to sit around and starve to death. Some of those people will search for solutions to the food shortage. In that case, economics tells us that labor saving machinery or other methods will be developed and employed to both decrease the labor involved in farming and increase the yield per acre.

Aya, apparently Keynes was wrong about welfare, as he was about so many things, we've had state sponsored welfare for decades now and all we've managed to do is create a great underclass of second-rate citizens who only exist to eat, breed, and cash their check.

I'd also say that absent government intervention, companies would be forced to be more prudent with their raw materials and get the most bang for their buck as it were. Conservation and free markets are pretty much one and the same.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I think that you misunderstood my remark to Nets to the effect that Keynes found a method to hand out welfare without encouraging idleness. The reference was not to the welfare system as we know it now. It was to the jobs that were created with somebody else's money according to the Keynsian method of unstable currency.

When you realize those jobs would not exist without money exproriated from others, then you can see that they are a form of disguised welfare. However, it's a really good disguise, because the people receiving this welfare have to work hard for their keep.

This was the genius of Keynes's method. He understood people. He understood what motivates them, at least up to a point, and he was able to find a way of faking the economy that was far better than anything Marx thought up.

Please understand that today's welfare state is not pure Keynsian, either. It's a hodge podge of different things. A pure Keynsian economy would have no welfare checks -- just inflation.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya:

Your argument for ecologists preferring the free market over the economy devised by Keynes, depends on the premise that the economy devised by Keynes works. Positing that for

a moment, you're right. But of course, those aren't the only two choices. How should ecologists feel about the economy devised by Obama or by Stalin or by Nero. The less productive the economy is, the better they should like it.

More people should play Katamari Damacy. It is an important cultural experience.

Ledefensetech: I don't really take Malthus seriously per se,; I just conflate his name with the logistic equation.

If you have growth like

dE/dt= k E

you have exponential growth regardless of the size of k, which is what most economists dicker about.

All an equation like this really means is that the economy scales up.

If you have

dE/dt = k E (C-E) with C the carrying capacity, then it's Malthus, and this is the typical situation where the growth

fails to be exponential.

Here the economy only scales up when it is small and behave differently when it is large because there are too few

available resources. It looks like exponential growth

when E is small.

Of course you could imagine other equations like

dE/dt = c E^2

But that doesn't seem very realistic. I once had to teach out of a

book that claimed this equation gives the secret for breeding an infinite number of alligators within twenty years.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Nets, Malthus' logic is good for some things, but it's very easy to take it to an extreme.

Aya, I'm horrified that you would think Keynes any sort of genius. His prescription for "fixing" the economy is nothing more than theft, pure and simple. There is nothing wrong with a free economy that needs tinkering. Supply and demand will rise and fall based on people's choices and individual values.

All Keynes really did was find a way for the market to work marginally better under his system than it would under Marx. Is it any wonder the fascists began implementing these ideas as soon as they were published? Consider this: the fascist style economy was productive enough to outproduce the communist economy. Our relatively free market economy was not only able to outproduce the fascists but also productive enough to jump start the communists failed economic system. So much so, that communism endured for a further 44 years after the War.

Margaret Thacher had a point when she said that in a socialist economy: "Sooner or later you run out of other people's money to spend". We've spent our inheritance from our forefathers already, are currently spending foreigner's money; like Wimpy from Popeye, sooner or later, we're going to get cut off. Then how are we going to pay for all of this nonsense?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, okay, I accept that I might need to use a different argument for someone who doesn't believe that Keynes' economy works, and a different one still for someone who supports Stalin or Nero.

However, do you now see that when arguing with Ralph Deeds, who does believe in a Keynsian economy and who presumably is also concerned about ecological issues, I was not being "intellectually dishonest"?

After all, that was the impetus for writing this hub.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, you write: "Aya, I'm horrified that you would think Keynes any sort of genius. His prescription for "fixing" the economy is nothing more than theft, pure and simple."

I am taken aback at your inability (or unwillingness) to recognize the difference between intelligence on the one hand and goodness on the other. Do you imagine that if someone is a thief he cannot be a genius?

This is one of the biggest problems that I have encountered in trying to have objective discussions about political subjects. Can't we assess how ingenious a scheme to defraud someone is without seeming to support fraud?

I called Keynes an evil genius, because his scheme for theft is much more likely to succeed among "civilized beings" than Marx's.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Aya, I think were tripping over definitions again. You call Keynesian evil genius, I consider him diabolical. Genius, I reserve for people like Einstein or Newton, people who pushed forward the knowledge of humanity in such a way that it benefited humanity. There is nothing about Keynes that benefits anyone, except for an elite aristocracy. So whereas you use evil genius, I use diabolical.

It's not really possible, I think, to be totally objective about something. When you have something as diabolical as Keynes, a truly civilized person should be war if I, quite rightly I would think, at the implications of such a scheme. It's this lack of were, that it's led us to our current deluge. At any rate, that is the whole point of conversation, is it not? We each of us start out with our own ideas, and through whatever medium we attempt to communicate the essence of those ideas. I just think we have a habit of saying the same thing, only in different ways.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, we're definitely on the same side! It's just that I believe in giving credit where it is due. I think you ought to consider the true consequences of a Keynsian economy (minus the welfare and the other complications that we have in the existing system.)

The problem all of us face is that the demand for freedom is all too elastic, using your own term in the hub on HFCS. I'm just now appreciating Keynes's method of stretching it without breaking.


James A Watkins profile image

James A Watkins 7 years ago from Chicago

1920 was the all time low for trees in the United States.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Aya, Keynesianism does break the economy. The problems we're experiencing today, our direct outgrowth of Keynesian economics. The stagflation we saw in the 1970s is directly attributable to Keynesian economics. The length of the Great Depression is directly attributable to Keynesian economics. In some of the reading I've posted above, you'll see why, those authors can explain a far better than I can.

Ludwig von Mises had a lecture series he did in Argentina I believe it was. One of his lectures was on why people dislike capitalism. The thrust of the argument was envy. Bill Bonner likes to say that a free market will take you where you should be, not necessarily where you think you should be. That, in a nutshell, is why people constantly think the free market needs fixing. Rather than actually work for their rewards, they would rather have somebody else at a cost. That's what Keynesian economics allows.


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

I read yesterday that a us manufacturer is outsourcing his production to an asian country,I think it was korea.They will be producing a new type of light bulb that uses less energy that looks something like the bulbs we use today with the exeption that it has a reflective coating that keeps the filiment hot thus producing the same amount of light as a higher wattage bulb.The people who used to produce the older style bulbs are all going to lose their jobs to overseas workers simply to offset the cost of producing these new bulbs.If this is an example of a green economy our production workers are for more layoffs as a result.

What we really need is an all out effort to find more fossil free energy sources that can be small in size and used in any environment without the required transmission lines we traditionally use at present.Cheap energy is one of the keys to a more environmentally freindly economy.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Someone, that's how the economy works. Somebody else can make something for less, guess what, people are going to buy from them. It's really that easy. If American workers want to have more manufacturing jobs, their labors to have to get much more competitive with the rest of the world. Of course the labor unions won't like that, because that will pretty much put them out of business.

We do have cheap energy, it's called oil. Until something cheaper comes along, oil is it. Now because oil is not renewable, sooner or later, somethings better come along that's better. The only question is, what is that going to be?

You also don't consider the fact that because cheap labor is being used in the production of these lightbulbs, they won't be nearly as expensive as they been made with more expensive labor. That's the part you never hear about this whole "Made in America" nonsense. Because American labor is so expensive, that gets passed along to the customers. That is why we've been losing manufacturing jobs for so long, it's not some great conspiracy by evil industrialists to destroy the American worker or any other such nonsense. It's simple economics.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

James A. Watkins, thanks for the clarification. That's an interesting bit of information.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I agree that Keynsian economics destroys the economy eventually. The question is: does it do it before or after we reach the point of no return as far as ecological damage. It most certainly does create a lot of waste, because when someone isn't paying full price for a product, he's likely to dump it and buy another without thinking twice.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Someonewhoknows, when the jobs are outsourced to foreign countries, eventually American workers will have to look for work where the jobs are. They will then see under what conditions they have to work in order to remain competitive.

In case you think that's harsh, please keep in mind that I couldn't find a job in the US either, and I spent three years working in an "Asian country".


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

Lens Eye see your point,and I agree with your accessment except for the part about the economy not being controlled.It is controlled.F.D.R. said "what ever happens in the world you can bet it was planned in advance." I believe he knew this from personal experiance


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Aya, now that is an interesting question. I would say, probably not, because if you look at the old Soviet Union and Eastern Bloc countries, ecological collapse didn't happen there. Which makes sense when you consider that free markets strive for optimum use of resources and that socialist economies cannot use resources effectively. That's the real weakness of the socialist economy, is that they do not control their resources very well. So what will wind up happening is the economy itself will collapse long before you have your irrepairable ecological harm done. In short, the economy will collapse before the ecology does.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Of course he said that, someone, he was the one who personally recreated our economy in Keynes' image.


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

I rest my case


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Someonewhoknows, Ledefensetech, FDR did try to redesign the economy according to Keynsian blueprints. But it hasn't quite collapsed yet. Obama may be redesigning it according to more traditional Marxist lines, and that may bring about the collapse that saves the ecology. Or not.

Just remember Chernobyl was under the Soviets.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

At least we don't black out parts of our nuclear power plant operator's manual because of "state security".


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, okay. Is that a point in favor of a Keynsian economy as opposed to a Marxist one? Because, really, we haven't had a free economy in close to a century, and I'm not sure either of us could predict exactly what a free economy would do.

We both support a free economy. But you like growth, so you predict that a free economy would bring growth. I like stability, so I predict stability.

It would be nice to find a more objective way to predict what the true outcome of a free economy would be.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya,

Ralph Deeds does not support a pure Keynesian economy. He supports redistribution.

Nets


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya,

If a scheme is ingenious, does that make the inventor a genius, or was he merely displaying a bit of ingenuity?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, you and I both know that Ralph Deeds does not support a pure Keynsian economy. I'm not sure that Ralph Deeds knows this, though. He told me that Marx was outdated, and he didn't support Marxist redistribution. He told me told me to read Keynes. So I have!

As to whether the originator of an ingenious scheme is a genius, I would say yes. But, of course, some people might accuse me of the "etymological fallacy."


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya,

Here's a good way of slowing growth:

http://news.yahoo.com/s/time/20090903/us_time/0859...


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, thanks for the link. Jerilee Wei in her hubs has also been covering the exodus from Florida to some extent.

The question is, after enough people leave, will the oppressive measures stop?


zyfwm profile image

zyfwm 7 years ago

Interesting article.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

zyfwm, thanks for your comment!


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya,

I'm sorry if this is off-topic here, but you really should check out pgrundy's latest post at dropoutnation, a reflection on the nature of work:

http://dropoutnation.blogspot.com/

She seems to be deeply influenced by you. She is on the cusp of advocating for a ban on agriculture. Also, she has

a radical reinterpretation of Marx. It seems that his whole

doctrine is a consequence of his dictum that he will not

live for any other man, nor ask any other man to live for him.

Just don't leave any comments.

Nets


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, how bizarre! I'll check it out. Of course, I learned long ago not to leave comments.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

It's funny how regular people are stupid enough to work for these "robber barons" against what should be their own self interest. I get so tired of the Marxist rhetoric. I think I'm finally beginning to understand why some people in the North and South were so ready for the Civil War. I had hoped that we'd moved beyond the trial by combat phase of resolving differences, but there is a certain allure to it when things reach this kind of an impasse. The great danger being, of course, the unintended consequences of violent action. Our founders were very wise to attempt to protect our property and liberty. It's our great failure that we failed to insist on inheriting our birthright.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

You might find the following pretty interesting: http://www.foxnews.com/video2/video08.html?maven_r...//www.foxnews.com/glennbeck/index.html

You think we would have learned by now to leave farming to the farmers. Under our mostly lassiez-faire system, we've been able to grow more food with less and less labor for well over a century now. I suppose the social engineers can't just leave well enough alone and let something work.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, apparently these regular people had "no choice", or at least that's how I read the text. It's the question of choice that gets me in trouble in these discussions -- I've been told not to "blame the victims". I think ultimately, everyone does have a choice, but sometimes it takes courage and foresight to exercise it.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Of course they had choice. Preindustrial worlds don't have a proletariat, they would have died from starvation or malnutrition or froze to death or some other horrible way to go that was commonplace before industrialization gave us a cornucopia of material wealth. Not even the Romans or the Chinese at the height of their various empires ever had as many people live as well as we did starting in the 19th century and continuing into today.

It goes back to my point about people having different values and making decisions according to those values. For someone who works in a coal mine, they know that black lung is a hazard. That's why coal miners are paid so much more than say, a farmer, in Appalachia. I've actually thought that company stores could have been a very good idea. The problem is that they were paid in scrip, which ended up not being worth the paper it was printed on. Again, any type of paper exchange loses its value over time.

If they'd been smart, the companies would have paid in cash money, and used their ability to buy in bulk as a way to bring in supplies to the company town at competitive prices. If they could do this at a profit, they could offset some of the cost of paying wages, while increasing the standard of living for their workers. That, in the end, is what we're talking about. The standard of living of the people and which system allows for those standards to rise sustainably.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I took a look at that Glenn Beck clip you posted, although I wasn't able to watch all the way through. My internet service isn't that great, and it kept stopping.

From what I did see, although, of course, I don't support the EPA getting in on the action there, California farmers are in serious trouble that is not all government created. The drought is real. Don't you think it's weird that farmers are having water shipped in? How can that possibly be economical? Wouldn't it be better to relocate to a place where it actually rains?

This reminds me of the dust bowl. These things -- economic depressions and ecological damage -- are not completely unrelated, it seems.

BTW, it's raining right here, even as I write. Tons of rain. Isn't Missouri a better place to grow things?


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

You need to shed your misconceptions. If you want to look at this like an economist you have to look at it backwards from the way you have been looking at it. You're asking why don't the farmers farm elsewhere. What you don't realize is that the farmers of the Central Valley are not only able to farm in that place, but they do it well enough to produce 57% of California's agriculture output. It's not really that hard to farm there.

Even when you add in the costs associated with trucking in water, farmers are still able to make a profit on growing food. That's how good they are. The problem is that the government isn't allowing water to be brought in because of "environmental issues". That is what's going to cause expensive food, food shortages or in the extreme, famine. In a free market water would flow or farmers would go out of business or relocate. Either way the problem would be solved and food would still be abundant.

You mentioned the dust bowl, which was due in part to subsistence farming methods. Also if you look at the areas hardest hit, they were places that were marginal for farming. Consider this, even with the dust bowl, food prices continued to fall so FDR actually paid farmers to not farm. This was at a time when other farmers were no longer able to farm, and fled to places like California. Food prices were also increasing during the [i]Great Depression[/i] which contributed to the soup lines. You only get that kind of craziness when you let politicians take control of the economy.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, about the dust bowl: it wasn't subsistence farming that did it. It was farming for re-sale. The price of food dropped due to depression and deflation. The farmers had debts, so they were in bad position to enjoy the benefits of deflation. (If they had had savings, it would be the other way around.) So they kept growing more and more food to make up in volume for their loss of earnings in dollars. The more they grew, the less they made, until they had completely exhausted the soil.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Yes, but the most productive farmland still produced food. The dust bowl hit places like western Kansas, the panhandle of Texas, eastern Colorado, southern Nebraska and northeastern New Mexico initially. Those are very hard areas to farm. They're in an intermontane climate and those are very hard to farm in. That's why places like Wyoming are good for herding and that's about it. Later North Dakota, South Dakota, Minnesota, Iowa and Wyoming were affected.

One point that is very interesting is that these were some of the last of the frontier territories to be settled. Why? It's much easier to farm in places like Oregon and California, than those intermontane states. Soil has to be worked in those areas and due to the sparse topsoil, the area is very susceptible to soil depletion. The dust bowl times were also a time of drought. This was the "tipping point" event, along with other factors, yes including soil depleting activities of farmers that made the situation worse. Made the situation worse, not caused the situation.

Farmers always have debts. They gamble their futures on the fact that they've correctly forecast the supply and demand of farming output. Those that succeed, continue to be farmers, those that don't go bankrupt. They weren't very good farmers, or at the very least they were not very good at keeping their risks down to a manageable level. Whatever the reason, they obviously aren't fit to provide food to others.

You'll note I hope that the dust bowl didn't hit places like California, Georgia, Appalachia, even the Northeast was safe from dust storms. The dust bowl occurred exactly where it did due to the unsuitability of that area to farming. So long as you do not have drought conditions, the land can support farming, but you're on the margin in those areas. Once things change, just a little, you're probably not going to be farmers anymore.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, farmers should not have to gamble. Nobody should be forced into a situation where he has to predict the market. If you see the value of stability, you will see that it has to be possible to grow enough to keep yourself and sell any surplus you may happen to have in any particular year, keeping enough in reserve to plant next year's crop and to provide for the next few years in case it isn't a very good decade.

This goes back to why I think Keynsian economics is bad. It forces everyone to gamble. Deep down, I think that growing up under a Keynsian economy, you may have accepted that ethic.

Going bankrupt is a terrible sign of moral depravity, in a place where a person has the choice not to gamble. It is immoral to promise to pay someone later and to fail to do so. But if gambling is unavoidable, then it is also unavoidable that some will go bankrupt each year. This is how the socialists build their case against "capitalism". This is how people working for "robber barons" feel victimized. Please don't accept this ethic. It's got to be possible to live debt free in a free market.

The dust bowl didn't hit California because it wasn't overpopulated at the time. It is now.


Misha profile image

Misha 7 years ago from DC Area

Good questions Aya, damn good questions! Now I am off to reading comments :)


Misha profile image

Misha 7 years ago from DC Area

Good questions Aya, damn good questions! Now I am off to reading comments :)


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Thanks, Misha, glad you dropped by!


MikeNV profile image

MikeNV 7 years ago from Henderson, NV

Did you know there are 1,022 cars in the United States for every 1,000 people? Do we really need more cars? No one addressed the "cost" of destroying cars that still run but supposedly are a burden to the environment. Will these cars be recycled or buried? And what about the toxic chemicals in the electronics? And what about the energy used to build more cars? Just one example of the "bailout" being an ecological disaster. I heard a woman complaining on some Forum that she was the only one in the family that didn't have an iPod! Does everyone need an iPod? Does anyone share anymore? I read an article on the rare earth metals needed to manufacturer Hybrid Engines and Batteries. Is there a "cost" to the mining activity used to get these metals? Humans are far too materialistic and the whole "Consumption" driven economy is bound to fail. Better sooner than later. Time to rethink the "life" experience and purpose. And you know what is really sick? Pollution. I read an article on the plastic wastes floating in the center of the Ocean. I watch Survivor man and Bear Grylls Born Survivor, and no matter where they go or how remote they always encounter human pollution.

The entire USA Economy is based on paper and numbers and the false promise that the acquisition of material items will bring wealth, success and happiness.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Aya, any human endeavor is fraught with risk. For every Bill Gates, there are thousands or millions who didn't make the right choices. How many times have you seen people say "wish I'd thought of that"? The difference between those who succeed and those who don't is simple. Those who succeed take risks. In essence that's what economics is, weighing risks.

Gong bankrupt is due usually to people making mistakes. That's why our bankruptcy laws have been so liberal in the past. It encourages people to risk and some of those who take risks will succeed, to the benefit of us all. For those who don't succeed, they can fail and not pay the price for the remainder of their lives. Those who fail have also learned what does not work and thus are more likely to succeed in the future.

Now there are people who will use those laws to their benefit. They use those laws to get out of contracts they signed in not so good faith. But that's the sort of behavior you can expect in a country which no longer places vale on keeping your word and dealing with the consequences of your actions. If everyone is "exploited" by everyone else, well then we live in a constant state of civil war. I don't buy that argument.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

MikeNV, thanks for your comment! You make a lot of very good points. I, too, deplore the wasteful dumping of plastic in the ocean and don't see why everyone needs a new ipod. I think that a free economy without government bailouts or incentives for investment and spending would leave us with a cleaner environment and happier lives.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, every human endeavor is fraught with risk, but there's a huge difference between taking a risk on yourself and risking other people's money.

To give an example, my father started his own business in the 1980s. At first he made some money, and then the business stopped making money. In the end, my father closed the business, having lost some money, but still with plenty of savings. He owed no money to others. Whatever risk he took was with his own money. This kind of gambling is moral. The other kind is not.

I am morally opposed to letting people off the hook in bankruptcy proceedings. When I practiced law, that was the only kind of case I wouldn't take.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Investment is a risk, what your father risked was his personal investment money. That's why, unlike with personal savings, other people's money charges interest in order to mitigate risk. Riskier ventures charge more interest, less risky ventures charge less. That's the true evil of Keynesian economics, you start to lose the ability to judge between safer risks and dangerous risks. That is when all you are left with is gambling with money.

A person who is able to judge the risks in a free market has much more control over his money, than someone who cannot judge risk in a controlled economy.

As for not taking bankruptcy cases, you probably passed up all kinds of people who were being screwed by our current economic system. Medical bills come to mind. Our system is set up so that prices continue to skyrocket despite our ability of our wages to keep pace. So in this type of an economy people need bankruptcy proceedings more than they would in a free market.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, what my father risked was his savings. He did not play with money from other people.

Judging the risks in the market is like betting on the state of mind of other people and what they will want later. It's a game of politics.

While I am not opposed to speculation, I am opposed to forcing people to speculate. If you can't see that the Keynsian system forces everyone to speculate, while a free market doesn't, then you don't really distinguish between a free market and one that is manipulated by the government.


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

Maybe one of these energy inventors will come to the rescue and save our economy and ecology.

http://www.free-energy-info.com/


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Aya, I am talking about, of course, people choosing to invest their money, rather than being forced to. Why do you think I'm so opposed to fractional-reserve banking? In a fully reserve bank you can choose how much of your money you want to risk originating loans, but the bulk of your wealth can be held inviolate in your personal accounts.

Keynesianism in many ways is an attempt, much like central banking, to "fix" the unfixable. It is impossible to protect banks from runs because you're gambling with people's money. If you screw up, entire lifetimes savings are lost and that makes people worried. That what all of this bailout boondoggle is about. By convincing people that things are getting back to "normal" the entire system can keep going. All it will do in the end is further destroy wealth.

In order to have a sustainable economy we need sound money and fully reserve banks. That maximizes people's freedoms and allows them to weigh the risks themselves and decide for themselves what to do with the fruits of their labor.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Someonewhoknows, maybe. Even if these machines work, though, how will they deal with the government's encouraging people to build new houses instead of fix up the old? As long as the cost of living in the city keeps going up, more people will leave the city and build suburbs where its is cheaper. But by doing so, they will bring up property values in non-urban areas. As property values rise, local taxes will rise, forcing rural people to go out looking for work, in order to pay for the right to live where they live.

I can even imagine every household creating its own energy from solar panels or windmills. But as long as we have to pay taxes for the right to hold on to our property, we'll still be forced to work for others in order to pay the taxes. And the taxes will keep going up.

Our problem isn't really a lack of cheap and pollution free energy. The problem is that no matter what we have, we're not allowed to keep it, but are forced to go out and earn it over and over again.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

The only reason people moved to the suburbs was because cheap energy allowed them to leave the city and have a "country home". Well that and the fact that welfare was starting to eat out the hearts of our cities and making it so that everyone who could move out of the city would move out of the city. You don't see that sort of thing in developing nations, everyone there is desperately trying to get into the cities, that's where all of the jobs are after all.

It will be interesting to see if current changes will send people scurrying back into the cities. Should present trends continue, I think we'll see a reemergence of rural and wilderness areas in what was once suburbia.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I wasn't talking about fractional reserve banking. I was talking about the very strong stand that you just took in favor of letting people off the hook for their debts in a bankruptcy proceeding. You explained that if not for bankruptcy laws, fewer people would take the risks necessary to start businesses, and that risk-taking was necessary for the sort of economy you want to have flourishing. As I see it, that's not really different in theory from what Keynes wanted to do to encourage investment. Think about it. In both cases, people who were never asked ended up funding a business that employed people until it went under... Good way to keep people employed at the expense of people who never agreed to invest.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I don't think people will be scurrying back to the cities if there are no jobs in the cities.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

If you limit bankruptcy proceedings to those who have failed in business, then you create a no fault system that encourages risk taking and will encourage economic growth. One of the risks investors take when they invest money is that they might not get it back. Knowing which investments to take and which to pass on marks you as a good investor or a poor investor.

I'm not sure you understand the consequences of fractional reserve banking. With a fractional reserve bank, the banks only keep enough capital on hand to cover daily transactions, perhaps a little more, in case people's confidence in the bank wavers. The rest of the money is used to originate loans, some of which will not be paid back. If a bank has more good loans than bad, they will make money and the whole system keeps chugging along. In this type of a system, you are not given the choice as to how much money you risk when the bank originates loans. Fractional reserve banking violates people's property by allowing banks to use your property for their own purposes without your consent.

Bank runs occur when people become fearful that a bank has lost so much money, that people's deposits are in danger of disappearing. Every bank crisis prior to 1913 featured bank runs as the mechanism which caused a recession. Even in post 1913 crisis, we've had bank runs.

Aya, cities have always been sources of jobs. That's why people have moved there. The post-WW II landscape was strange in many ways. People left the cities because of transportation improvements like interstate highways, the automobile and cheap power. Those things are beginning to change, I think. Cities have one thing going for them. Transportation costs are much less than commuting, in most cases. Like I said the post-WW II world was a bit strange.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, if the currency is really stable, there's no need to keep our money in the bank, because it will preserve its buying power even if we stash it in a mattress. I didn't say I was against allowing fractional reserve banking to occur privately. I'm just saying that most retired people wouldn't put their savings there, if not for inflation. Only people who wanted to invest would, knowing there was a risk involved.

Cities may have always been where the jobs were, but people used to do fine without jobs. The US population was mostly rural until recently.

If somebody borrows money from me, I expect it to be paid back, no matter what they say they plan to do with it. I don't want it to bankroll jobs created for others, and then never be paid back to me. No, I don't think people who borrow to start businesses should be given special privileges not to return the money. What message would that be sending? People who borrow money in order to be bosses get to go off the hook, but workers have to pay back every penny? Isn't that the sort of discrimination based on class that we don't want to have?


Misha profile image

Misha 7 years ago from DC Area

Wow, the comments thread is excellent, too! Thank you both Aya and LDT for this very educational and thought provoking conversation. There is something for me to ponder about for a while.

I have to say that more often I found myself agreeing to Aya's side of the story, her position seems to be more coherent. :)

Also, looks like the major source of disagreement is in LDT assuming that technological progress is a necessary component of any conscious living, while Aya allows for a happy life without technological improvements. :)


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

We need to live closer to people we identify with


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

Like the Amish


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Aya, the whole point to banks was to have a safe place to put your money so it would be guarded. Otherwise you'd have to have a vault in your home, complete with guards. It's much more economical to pay someone to keep your money in a vault because the banker can then use the fees to hire guards and security systems. You might be content to have a virtual Fort Knox in your home, but most people will opt for the convenience of a bank.

Sure you can live rural, but the standard of living almost always lags behind those in the cities. Are you sure you're not stating your preference in your choice of where to live?

As for your money, well that's your money. If you want to insert in a clause that your claim in bankruptcy proceedings will take precedence, you are more than welcome to insert that into a contract as it is for you to insist that leaving that clause out is a deal breaker. Of course the types of investments you're likely to invest in will show lower returns than would otherwise be the case. Again that's your choice and I respect that.

I'm comfortable with a bit more risk. I might have an increased risk of losing money, but I'd also have a better chance to invest in the next Bill Gates or Andrew Carnegie or Henry Ford. I'm even willing to forgo repayment if I'm convinced that the individual in bankruptcy is using the law to get a fresh start and not simply a mechanism for getting out of debt.

That, I think, is your major beef with bankruptcy laws and I can sympathize with that view. My concern has always been for letting the business owner off the hook, not allowing people to rack up debt, then get it written off. There is quite a bit of work required to reform the ways bankruptcies are done here, I never meant to imply that the system was perfect.

@Misha, Oh sure, take her side. :D Actually I enjoy having intelligent people to talk to, it enables me to explore and refine the implications of economics and free market systems. Plus it allows me to hone my arguments and make them better. Sometimes I know what I want to say, but I'm not so good at doing it. Discussions like this make me better at that.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Misha, thanks! I do think that we can be happy at any technological level, if left in peace to develop our lives to the fullest. I am not either for or against technology or technological advancement. I think a free economy has no bias in either direction. If advancement happens, great. If it doesn't happen, that's great, too. Each man should do that which is right in his own eyes. (That comes from the book of Judges -- a sweet period of anarchy when Israel had no king.)


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Someonewhoknows, there are many Amish in this area. So if that's a prescription for me, I'm already doing it.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledfenesetech, really? The reason people put their money in the bank is fear of thieves? Then why don't people pay the bank for guarding their money? Why doesn't the bank charge us interest, instead of paying us interest?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, think about what you just wrote about bankruptcy: "My concern has always been for letting the business owner off the hook, not allowing people to rack up debt, then get it written off."

Why do you want to let a business owner off the hook? Exactly how do you define "business owner" as opposed to every other human being who is not a "business owner"?

I believe a free market has no bias for or against any particular way of making a living. You seem to want there to be a bias in favor of the accumulation of capital in the hands of a few.

Am I mischaracterizing your position?


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Because all banks are fractional reserve. Instead of us paying them, they pay you a nominal sum to use your money, they get to use your money to originate loans that they lend out at much higher rates than they give you in compensation for using your money. The problem is you can't opt out of the system, not with a fractional reserve bank. It's interesting to me that you can be so against investors being forced to take a loss on their money and not see the banking system for what it is.

As for letting the businessowner off the hook, that's simple. When loans or investment agreements are written up, there should be clauses inserted to cover eventualities like bankruptcy. That's only prudent. I don't think you'll find many people who are willing to take investment money without some sort of clause that concerns the folding of the enterprise.

My position has always been that investors know they risk their money when they invest in a venture. Much like a businessowner, an investor takes risks. If you're not willing to risk your money, don't invest. Likewise, if you invest money understand that you may not get it back.

That's why investments and loans need to be covered under contract law. The contract will determine who is and who is not a businessowner and will also spell out the terms of repayment, bankruptcy, etc. That way it's all out there on the table, no misunderstandings and no going back after the fact like we do now. In that case free market principles are upheld because both parties are able to walk away from the deal if they wish.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, we seem to be having a problem communicating with regard to fractional reserve banking. All I said was that if the risk to the depositor is unreasonable, the depositor will not make a deposit. Absent government intervention in favor of investments, these banks will have very little money to play with.

If you allow a business owner off the hook in bankruptcy this will affect all sorts of creditors, many of whom never intended to be investors. This will affect people damaged by negligence of the business owner or his employees. This will affect suppliers who were never paid. This will affect employees who never received their salaries.

If businesses are viable, they don't need any special privileges. If they need special privileges, they are not viable.

I agree that contract law should govern. And the law should be completely unbiased as to what kind of contract it is. All people should have the same rights under contract law. There should not be one law for the entrepreneur and another for somebody else.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Those people who get hurt other than banks and investors by the very act of granting credit, invest in the operations of a firm. That's the nature of credit. If you don't want to take the loss, don't grant credit to your suppliers. People do grant credit, because by granting credit, you increase sales. Again, it's a matter of managing risk.

I don't advocate granting businesses special privileges, I advocate giving people the ability to take risks and not bet the rest of their lives on the outcome. That's why I default back to writing that sort of thing in the contract. That way there is a meeting of the minds and people know what each party is risking and the duties of each party. The same should hold for granting credit as well.

In the end I suppose I should say that I, personally, would not accept a loan or credit or investors without the ability to declare bankruptcy. I'm taking the risk of starting a business anyone who invests with me should be willing to run the same risks.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech,

You write: "In the end I suppose I should say that I, personally, would not accept a loan or credit or investors without the ability to declare bankruptcy. I'm taking the risk of starting a business anyone who invests with me should be willing to run the same risks."

It sounds to me as if you are not looking for business associates. You are looking for partners. Partners share equally in the risk. Partners have a say in how a business is run, and as such, they also get to share equally in the profits and the losses.

Suppliers don't have to offer credit in order to be burned. A delivery might be made exactly when the business is going under. The supplier has every right to expect to recover the full amount owed and to hound the bad businessman all his life until the debt is paid. An honorable person would work all his life to remove this stain from his honor.

A person killed in an accident caused by the operation of a business has the right to have his family paid in full.

No businessman should expect innocent bystanders to share in the risks while having no power to control the business or share in the profits.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

I'm saying that your "innocent bystanders" are not so innocent. You've stated that those innocent include creditors of the business for items used by that firm to conduct business. I've countered with the idea that granting credit means that you assume the risk that you might not have your claim paid off.

Again it's a matter of choice and self interest. I can choose to grant credit to my customers without any control over their choice to repay me. Overall I can expect that many people will repay their debt to me, but there will always be exceptions. Thus it behooves me as a businessowner to take steps to minimize my risk. I can't tell my customers how to run their business, but there are other methods to shield myself from risk. But the risk is always there.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, no, I am saying that bankruptcy is bad because innocent bystanders have no recourse against the bankrupt. By all means, make contracts with anyone you want to that if you spend all the money they give you they have no recourse against you. But just see how many will willingly agree! On the other hand, absent such an explicit agreement with someone, there should be no way to worm your way out of a debt. Especially a debt to someone who never had any choice in the matter, such as the victim of a hit and run.

That's not unreasonable, is it?


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

If,your talking about small business I'm sure your right.Big business is a different story it thses days it seems.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Someonewhoknows, if you're simply observing that the situation with big businesses is quite different nowadays from what I described above, I totally agree.

But should the situation be different? What, in theory, is the difference between Big Business and any other business? Is this a distinction we want to maintain? Whose interests does this distinction serve?


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

my point as well


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Big business uses the power of government to erect barriers to entry and restrict competition. This has the effect of guaranteeing corporate profits at the cost of raising prices for everyone else. A free market is always driving prices down and weak firms are always going out of business. Incidentally that's one reason I'm so lenient on bankruptcy for business owners.

I think that's why we disagree on that particular issue, Aya. All debt should be subject to contract and thus contract law. That is pretty much the only way that both sides can come to an understanding of the risks involved in extending credit, loans, investment money, what have you.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Someonewhoknows, then we are in agreement!


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I don't disagree with you that debt should be subject to contract law. I said so before. You can agree to whatever terms you like with someone in a contract. But there is no way to contract around tort liability. That's why bankruptcy should not be allowed.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

I'm not a big fan of the idea of tort liability. Accidents are just that, accidents. You open up a whole new can of worms when you start assigning liability due to accidents. Not that I necessarily have a fix for those problems, but there must be a better way to deal with those issues.

As far as bankruptcy goes, well that's simple. Remove bankruptcies from tort law and only consider them under contract law. The more concrete we can keep these things, the better I think. Tort law is too abstract to make for consistent decision making concerning damages and liability.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, if you repeal all tort liability, then you encourage recklessness... But let's not spend all our time on this, because it's a subject for another hub.

If you've already determined everyone's rights and obligations under contract law, why do you need a bankruptcy court?


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

I didn't say repeal all tort liability, just that it's a very subjective area of law and one needs to exercise special care when dealing with that sort of thing.

As for your second question, well doing things that way would eliminate bankruptcy courts then wouldn't it?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, let's shelve the tort issue for now.

Are we then agreed that there is no need for bankruptcy, and that contract law alone can determine obligations between and among willing market participants?


Vizey profile image

Vizey 7 years ago

Thanks Aya for writing informative and useful article on ecology and economy. Both Economy and Ecology are closely interrelated. Economical progress at the cost of Ecology is not a good idea. What do you think Aya?


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Vizey, thanks! Not only is economic progress at the cost of ecology not a good idea, I don't think it's even possible. True wealth comes from natural resources in conjunction with human labor and ingenuity. Take away the resources, and the whole thing collapses.


someonewhoknows profile image

someonewhoknows 7 years ago from south and west of canada,north of ohio

Aya while industrial technology requires ecological intervention in order to manufacture almost anything,it can be minimised and even reversed given the will to do so.I believe as we grow technologically we may well be able to create the natural resources we need by creating them from the very source of all creation.Energy itself! Everything is madeup of energy that has been coverted into solid objects.If we ever learn to dematerialize solid matter then we should be able to reconstruct it also.Then this is speculation on my part.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Someonewhoknows, I think I understand what you are trying to say. There is conservation of energy and matter, and matter and energy can be converted into each other. But the problem is that the conversion costs us. It's like the problem of converting from one currency to another. We can keep our money in whatever form we like, but converting it to another form is going to cost us. Liquidity is an issue.

People also make this same argument in nutritional circles. A calorie is a calorie is a calorie, they say. This is true. But have you considered the amount of energy that it takes to convert a calorie in the form of fat into a calorie in the form of carbohydrates? This is why it does make a difference what form of calorie you consume.

We can very laboriously create better storage systems for energy, but it's going to cost us, and the more complicated the system is, the more the government is going to get in on the action.


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

Aya,

I could not agree with you more. Here's a video clip about what can happen when schemes for power storage become too convoluted,

http://www.youtube.com/watch?v=q9YVppQKgnc


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, cute! The old "giant capacitor" trick. How easily we fall for it!

But seriously, are you saying you disagree with me?


nhkatz profile image

nhkatz 7 years ago from Bloomington, Indiana

No I was agreeing wholeheartedly.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Nets, okay! Good.


Kimberly Bunch profile image

Kimberly Bunch 7 years ago from EAST WENATCHEE

Interesting Hub! Here's one I wrote: http://hubpages.com/politics/drought


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Kimberly Bunch, thanks for your comment. I'll take a look at your drought hub.


Steve R McDowell profile image

Steve R McDowell 7 years ago from Atlanta

You said so many points, some of which I agree with and some of which I don't, and I would have to write an entire new hub to cover all of it, so I'll just say a couple of main points here ^_^

I disagree with government intervention. It seems that you do to, but I disagree for a different reason. If a company, no matter how large, is suddenly no longer able to compete in a free market, why do they deserve a special boost from the government to keep going? Isn't that encouraging inefficiencies? Aren't inefficiencies bad because they are a waste of resources? I think so.

As for productivity being the goal of a good economy, I disagree. I think the goal of a good economy should be efficiency. To use all of the available resources in such a way that we don't use too much and we don't use too little. That applies to human labor and trees in the forest. And I think a free market tends to lead to optimizing efficiencies. Government interventions encourage inefficiencies, and while that might provide more jobs, it isn't using those jobs in an efficient manner. Losing those jobs and getting new ones from a new competitor in the market, or even in a different market, is much more efficient.

I'm sorry if I'm babbling, but I suppose that's the main point of my comment. The goal of a free market is optimal efficiency, at least that's what I believe.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Steve R. McDowell, thanks for your comment!

I agree that no business should be bailed out. The reason: nobody should pay for somebody else's economic prosperity, unless they are willing to pay. They should not be forced to.

I disagree that the goal should be efficiency. Efficiency at doing what? Exploiting natural resources until they are all gone?

I like free enterprise because people have a choice what to do with their lives, and nobody can force anybody else to do something that that person does not wish to do.

Free enterprise means exactly that! Freedom.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Now we see eye to eye, I think. All matters concerning bankruptcy should be addressed in a contract whenever a loan, credit or investment money is extended. That way people know what to expect and can walk away from the deal if they don't believe it to be in their best interest.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, okay. Then we are agreed!


Steve R McDowell profile image

Steve R McDowell 7 years ago from Atlanta

For my previous statement about efficiency, the efficiency I'm referring to is using the least number of resources to allow the most number of people to get what they want and are willing to pay for as possible. This would rarely lead to a complete depletion of natural resources simply because as the resource becomes rare, the price goes up, making it inefficient, then it would be abandoned. The only times it would not be abandoned (theoretically) is if we are too dependent on that specific resource... the main example of that right now is oil.

So, I still think efficiency is the goal, but I do agree that free enterprise gives people more freedom, which is always a plus! ^_^


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Steve R. McDowell, efficiency is a worthy goal for some people to pursue. As a personal goal, I'm not knocking it! However, that can't be the goal of the economy as a whole, because if pursued unrelentingly, using the least number of resources to support the most number of people would create a population explosion and deplete all resources to the point where any further effort would give diminishing returns. As a society, I don't think we want to go there!


Steve R McDowell profile image

Steve R McDowell 7 years ago from Atlanta

I don't want to argue, but I do enjoy a good debate. With that in mind, let me respond to that.

I don't think it would result in a population explosion, at least not on its own. Just because people are capable of having more kids doesn't mean that they will. Culture plays a bigger role in that. Furthermore, the alternative is to fail to support people, either condemning people who are already alive to death (less likely) or forcing people who want kids to not have them (more likely). So, which is better? Supporting people or supporting the environment? Because it seems almost like it's impossible to do both sometimes.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Steve R. McDowell, I like a debate, too, which is why I welcome your comment!

I agree that we don't have to have a population explosion. In my hub about Homo Sapiens, I discussed many alternatives to a population explosion. All of them were based on people making their own decisions and not being forced by others. I want to avoid government coercion.

It isn't a question of supporting people or supporting the environment. People are dependent on the environment. It's a question of finding the right natural balance. Which is why I stick to my original contention that efficiency can't be the goal of the economy.


Steve R McDowell profile image

Steve R McDowell 7 years ago from Atlanta

Perhaps it's not quite "efficiency" that's the goal... perhaps it's "balance". A lot of economic principles center around the idea of maintaining some kind of balance, including but not limited to the laws of supply and demand.

I personally see the two terms as very similar in the context of the economy, but perhaps they're a little further apart than I imagine them as.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Steve, I think we're getting a little closer here to a common goal. The problem with the term efficiency is that it always begs the question, efficiency at what. When the answer turns out to be "maximizing productivity", then the question that pops up after that is: for how long?

Balance is a little closer to what most people really want, if they stop to think about it. But as I said in my hub, in order for the market to be free, balance can't be an explicit goal either. It's just better if the natural operation of the market is allowed to balance and create a more or less stable state.


Steve R McDowell profile image

Steve R McDowell 7 years ago from Atlanta

I feel that balance can't be an explicit goal because it's impossible for people to know what balance really is in the grand scheme of things, at least economically. But I believe that it's still the goal of the economy. I do think it will only be reached if it's allowed to organically, as opposed to trying to manipulate it into "balancing", as governments like to try to do sometimes, though.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Steve, I agree.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

You see maximization as utilization of all resources, Aya. That's not the case. At some point the use of one more unit of raw materials becomes unprofitable. Look up marginal utility for an explanation. Marginal utility can cover both supply and demand. Garret Garret wrote a book about wheat farming, "Satan's Bushel" in which marginal utility of growing wheat makes an appearance.

That's what Steve means when he talks about resources that become more and more scarce rising in price. Sooner or later it will be unprofitable to use that particular raw material, so either production will stop or an alternative will be found. Unlike him, I believe that holds for oil too. Look at how people shifted their driving habits when gas prices went to almost $5 a gallon. That's the law of diminishing marginal utility. At some point people will value the gas more than the activity they plan that will use gas.

That's what makes subsidization of price so bad. It causes demand to spike which can easily swamp existing infrastructure. That's why universal healthcare has runaway costs associated with it. Or subsidization could send "build" signals to the market, which then causes an overproduction of goods and the collapse of that market. That's what happened with housing. We still haven't cleared the glut of overproduced homes. The people who are talking about a recovery are dreaming.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, yes, I understand that when one source of energy reaches a point of diminishing returns, another one will be used. But which other one? The one that didn't seem like such a good deal until you ran out of the easier source. And when the second easiest source is depleted, you will go to a third one. But each time it will get harder, and it will really be harder to sqeeze energy out of the next layer. In the end, we will have used it all up or gotten to the point where we are all poorer for having to harvest from such bad sources.

It's the same situation with water. When there are few people in an area, they can drink from the stream. When there are more people, they have to drill wells. When there are even more people, then the ocean's water can be de-salted. Don't you see that eventually water costs a lot more because the process of harvesting it is more expensive?


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Nobody knows which other form of energy will be used, except to say that it will give you the most energy for the price you pay. That's why we use oil. No other substance we use now can give us the amount of energy burning oil can.

What you don't understand is that price will determine when a particular power source is abandoned. That will spur people to find better and cheaper ways to produce energy. By allowing this to happen we can avoid the waste and corruption of something like subsidizing ethanol plants, not to mention the unintended consequence of making things like food more expensive.

There's a guy who is currently working on a fusion power plant that comes in at under 10 million to build. Nobody is quite sure if it will work, but the underlying science is sound. http://www.popsci.com/scitech/article/2009-06/more...

Will this be the thing to unseat oil as our power producer. Nobody knows until it happens. Or it could be we'll have to go back to coal. Heck we still use coal to meet half of our power needs in the US. Or will it be nuclear power?

Few people know that you can build a nuclear power plant that the byproducts cannot be used to build a nuclear weapon. The only reason we built ones that did was because we were building nuclear weapons. http://www.hyperionpowergeneration.com/

The interesting thing about Hyperion's batteries is that several of them have been used by the government to provide power for out of the way research or observation stations.

It's not the harvesting of water that makes it expensive, it's the demand for water. In sparsely populated areas, the "cost" of water is negligible. The more population you get, the more clever you have to get in providing it. Streams to drilling to desalination, etc.

Even so it's the demand for clean water that makes it costly. Consider the fact that we have 300 million people here in the States and we have access to clean water. Very few other places can make that claim. The only reason we're able to do so is because we're finding better and cheaper ways to provide clean water. You're letting the fact that it's our technology that allows us to do that blind you to the fact that we do provide clean, cheap drinking water to the masses of our people.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, of course, in economic terms it's the demand for something that makes it expensive. But forget for a minute about markets and money. The more sophisticated our method of getting necessities, the more expensive it is in real terms, too. In man-hours. In what it would take one person working alone to accomplish it.

When I talk about de-salting the ocean, it's not just the demand for water that makes it expensive. It's the process. It's labor intensive. It's something that even if we had a small population (say, after a disaster of some kind) would still make people have to work too hard for their water.

Everybody can scoop some water out of a running stream. Not everybody can dig a well. Certainly, not everyone can take something that isn't drinking water and turn it into drinking water. Can it be done? Yes, but the expense is huge.

Everybody can build a fire. Not everybody can build an internal combustion engine or a power generator. Getting oil out of the ground is more labor intensive than chopping a tree down. As our technology becomes more sophisticated all of us depend on things that none of us can do alone. In that sense, living becomes more and more labor intensive and more and more expensive.

Do you see what I mean about losing our independence?


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Living becomes more complex, I think is what you mean. If it became more expensive, it wouldn't be done. Look even if we use desalination plants to create fresh drinking water, it's still done at little cost to the person who buys the water. It is very much more complex to do that than to scoop water out of a stream, but when you're talking about supplying water to large numbers of people, you can't afford to do anything that is too human labor intensive.

Even after some sort of a natural disaster of some kind that wipes out a large portion of the population, after a period of adjustment after the disaster, you will find people trying to do more with less labor. In fact, much like after the Black Death, I'd expect technological advances to increase to offset the productivity cut of the disaster.

I also think what you're trying to say is that as our technology advances we become more and more dependent on it and each other. That is neither good nor bad. It just is. You can always choose to opt out of that scenario and live somewhere where you can do things yourself, but materially speaking it will not approach the lifestyle of someone who is part of an advanced economy.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefensetech, I don't think we always have the choice of opting out. Once a habitat for primitive man (or chimps) is destroyed, we don't have the option of going back.


opinion duck 7 years ago

It is not the bailout per se that is the problem. It is the ineptness and lack of direction by the government that makes a bad problem even worse.

On the bailout, the government unloaded billions of shotguns. It didn't work and it won't work. Now the government is trying to spend trillions more on the health arena.

The government is also the biggest offender in the ecology area. They use and misuse vital resources and then they blame the private sector for the damage.

The government had over 4 decades to work on and solve the energy and water problem in the US. They chose to not only do anything to solve the problem, they implemented a course of inaction to make the energy and water problem worse. In the amount of time the population increased from 200 million people to over 340 million people. Their plan was conservation and that just doesn't work with an ever increasing population.

They could have made the transition from coal and oil to a cleaner fuel, but they worked on the cheap with oil. Now decades later we have to wait for decades to fix a problem that shouldn't exist.

For the water problem, especially on the south west coast, a national aqueduct, similar to the national highway system could have been built and completed. This would share water from overly abundant areas of the country to those living in drought.

If they really believed in global warming and a rising ocean, they could have built enormous desalinization plants on the coasts.

Unless you can limit the population, ecology has to be used for the benefit of man to live and survive.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Opinion Duck, I don't think we can ever expect to rely on the government to solve our problems. You are correct in your assessment that the government has made things worse by its actions. Therefore, it follows that inaction on the part of the government would have been better.

I don't like your national aqueduct idea at all. You write: "This would share water from overly abundant areas of the country to those living in drought." I don't believe there is such a thing as "an overly abundant area", any more than I believe that a person could be too rich or too happy or too smart.

I own my ten acres and my own well, with my own pump that draws the water into my pipes in my house. I would be very upset if a national aqueduct stole even one drop of my water. In this part of the country, water rights are still considered important property rights.

The population problem, I think, is something we can agree on. To allow things to continue as they have will cause everyone to lose all their rights... and in the end, we may not even survive.


ledefensetech profile image

ledefensetech 7 years ago from Cape Girardeau, MO

Well if we both live long enough, we'll see if the population is rising or falling. You might be interested to note that areas of the Great Plains are reverting to wilderness because of demographic changes.

Also look at the restricted zone in the Ukraine. Rather than being a lifeless wasteland, it's one of the largest nature preserves with some of the most abundant flora and fauna in the world. So I don't believe that a habitat is every really destroyed.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Ledefenstech, yes, we shall see if the population is falling or rising. On EmpressFelicity's hubpage on Ecoskepticism, you mentioned that in "advanced" countries of Europe, the population is falling. But you do realize that socialism has something to do with it, don't you? They can't afford to have more than two children per couple. I think that if they could afford them, they would have them.

And, no, I don't think people have children just to have someone support them in old age. It would take a lot of planning and foresight to have such a long range plan. I think for most people, having children is just a natural impulse with no premeditated motive.


Sufidreamer profile image

Sufidreamer 7 years ago from Sparti, Greece

Hi Aya - an interesting Hub, as always. Whilst we are aloways going to disagree on many things, it is nice to find areas where we do agree. Living within our means is one of them - it really is a win/win situation.

I would like to pick up on your last comment:

"But you do realize that socialism has something to do with it, don't you? They can't afford to have more than two children per couple. I think that if they could afford them, they would have them."

Very wide of the mark - we don't live in abject poverty over here, you know. I have many friends and family with three or four children. I have none, and that decision is nothing to do with financial constraints, just personal choice. That is the danger of looking at averages - they hide many trends and sub-trends.

The reason is that a generation of bright young women are making careers for themselves and starting families later in life. This trend is also happening in Turkey and the Gulf States, for example, as women carve out more freedom for themselves.

In this rural area, the majority of women leave for Athens and work their way up the career ladder or become entrepreneurs, rather than leaving school and wandering straight into marriage. Not sure how you manage to work socialism into that - making sweeping generalisations about countries that you know little about does not help your otherwise interesting argument.


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Sufidreamer, nice to know we agree on some things, though we may never agree on others. I always enjoy reading your comments in which I find that you make important points.

Of course, I realize that not everyone wants children. I have friends who have chosen not to have children, too. I applaud the choice.

I, myself, have always wanted children, though, and it took me years to make that dream come true. I still think most people do want children, and when their means allow, many people enjoy having large families.

I kind of envy my friends, women my own age, who started having kids in their teen years. That wasn't the course I took, but there was social pressure on me to follow a career. I wonder how many of your rural neighbors really want a career in the big city!


Sufidreamer profile image

Sufidreamer 7 years ago from Sparti, Greece

My big sister would have loved to swap places - she had unplanned children when she was very young and it set back her teaching career many years. Still, my two nephews are now fine young men, so it worked out well!

On your last point, most of them; Greece is slightly unique - although technically part of Europe, it is more Middle Eastern in many ways. Even 25 - 30 years ago, women were supposed to stay indoors, cook, have babies and be a good wife. Many other Middle Eastern countries are experiencing the same trend towards equality.

This has changed - Spartan women are very strong! - and they are relishing their independence. There is a big generational battle going on in Greece, but it makes for interesting times!


Aya Katz profile image

Aya Katz 7 years ago from The Ozarks Author

Sufidreamer, Spartan women were strong, but they didn't put off child bearing until the middle aged years! Being strong doesn't mean you have to postpone motherhood. Ancient Judean women were strong, too! Read about Deborah and Ya'el.

It isn't the middle eastern culture that requires women to be submissive. It's the Judeo-Christian-Muslim ethic as developed there that does that.

I think in early America, women could be strong, too, and at the same time play the role of a mother. Laura Ingalls Wilder was a frontier shool teacher at fifteen and a mother at nineteen. She was a strong figure of a woman, with her own opinions and her own career.

See my hub on misconceptions about teenaged mothers.

http://hubpages.com/family/Misconceptions-About-Te...

I think the idea that we can go to the big city and have an exciting career is misleading. Most of the people, both men and women, who work in the city have jobs -- not careers. They play a very small part in a very large commercial machine. If they had stayed on the farm, they would have had the opportunity to make a lot more executive decisions.


nathalia27 profile image

nathalia27 2 years ago

I understand your point, Aya. However, we can only achieved free economy if people have strong discipline to ourselves.


Aya Katz profile image

Aya Katz 2 years ago from The Ozarks Author

Thanks, Nathalia27. I think we need to get the government out of the economy to have a free one, and that at the moment might require disciplining the government.

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