Every Successful New Technology Has Created Panic From Those It Disrupts

from the well-said dept

Fri, Jun 22nd 2012 5:35pm — Mike Masnick

Jeffrey Tucker has an all around fantastic essay on capitalists who fear change -- discussing how companies and industries in an otherwise capitalist/free market society freak out when they face competition from disruptive innovation. They go to amazing lengths to claim that it's not real competition or innovation they face, but something that must be illegal, immoral, unethical or the death of all things good and holy. The technopanics set in with alarming frequency, and in the end, they are always wrong. The end result ends up being bigger and better than ever before, even if some of those legacy players don't make it through. Tucker tells the story wonderfully:

Through our long history of improvement, every upgrade and every shift from old to new inspired panic. The biggest panic typically comes from the producers themselves who resent the way the market process destabilizes their business model.

It was said that the radio would end live performance. No one would learn music anymore. Everything would be performed one time, and recorded for all time, and that would be the end.

Of course that didn’t happen. Then there was another panic when records came out, on the belief that this would destroy radio. Then tapes were next and everyone predicted doom for recorded music since music could be so easily duplicated (“Home Taping is Killing Music”). It was the same with digital music: surely this would be the death of all music!

And think back to the mass ownership of books in the 19th century. Many people predicted that these would destroy new authors because people would just buy books by old authors that were cheap and affordable. New authors would starve and no one would write anymore.

There is a pattern here. Every new technology that becomes profitable causes people to scream about the plight of existing producers. Then it turns out over time that the sector itself thrives as never before but in ways that no one really expected.

Tucker includes other examples, but then explains the reality of innovation and profits. Profits are a temporary thing: because copycats do come along. But that's a good thing, because it forces greater innovation, as others seek to collect profits. You profit by being unique and different, and you encourage that to continue by letting others copy. That leads to more incentives to keep innovating and keeping make the world a better place. But, of course, that's hard, and companies want to keep their profits. So they move away from free market capitalism, towards crony capitalism:

This is why business is always running to government for protection. Kill this crazy new technology! Stop these imports! Raise the costs on the competition! Give us a patent so that we can clobber the other guys! Impose antitrust law! Protect me with a copyright! Regulate the newcomers out of existence! Give us a bailout!

And, of course, the public often accepts the moral panic story. Hell, I'd bet that even the companies making those claims -- completely out of self-interest -- believe the horrible things they're predicting from these new technologies. Jack Valenti was being sincere when he thought the VCR would destroy Hollywood. He was wrong. They're always wrong.

Here is a striking fact about the human mind: we have great difficulty imagining solutions that have yet to present themselves. It doesn’t matter how often the market resolves seemingly intractable problems, we still can’t become accustomed to this reality. Our minds think in terms of existing conditions, and then we predict all kinds of doom. We too often fail to consistently expect the unexpected.

This poses a serious problem for the market economy, which is all about the ability of the system to inspire discovery of new ideas and new solutions to prevailing the problems. The problems posed by change are obvious enough; but the solutions are “crowd sourced” and emerge from places, people, and institutions that cannot be seen in advance.

Capitalism is not for wimps who don’t want to improve. If you want guaranteed profits for the few rather than prosperity and abundance for the many, socialism and fascism really are better systems.

The full piece is absolutely worth reading.

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Filed Under: capitalism, competition, disruption, monopolies, technology

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Prashanth (profile), 22 Jun 2012 @ 5:45pm

One disagreement
I do have one disagreement. "Impose antitrust law" doesn't really fit in with the other statements around it except that it is also a case of people asking the government for help. That particular bit of help would, in my opinion, help free-market capitalism instead of promoting crony capitalism. And it is meant to be done by the people who should be innovating but can't...because of the large corporations blocking them through the other mentioned means.

Otherwise, it's a really great article.
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Anonymous Coward, 22 Jun 2012 @ 5:45pm

Someone should send a link to David Lowery. I would, but im not really interested in spending time educating him on reality.
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varagix, 22 Jun 2012 @ 6:01pm

Re: One disagreement
The reason "impose antitrust law" is there is because its asking the government to step in and do something when a company has a dominant position. It doesn't matter if that position came about through cronyism or through doing an honest-to-gods better job than all the competition by vast margins.

Even if the original intentions were to protect the public from things backroom dealings and collusion, its a hard thing to prove or disprove. The competition points to their success as proof of wrong doing, when common sense should prove that's seldom the case.

Unless you divorce the pleas and accusations of the competition from the anti-trust proceedings, and make them conditional on hard evidence of wrong doing, anti-trust laws become a barrier to success rather than a deterrent to wrong doing.
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fogbugzd (profile), 22 Jun 2012 @ 6:47pm

>>Capitalism is not for wimps who don�t want to improve. If you want guaranteed profits for the few rather than prosperity and abundance for the many, socialism and fascism really are better systems.

Unfortunately, it seems that the US has decided on fascism.
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Overcast (profile), 22 Jun 2012 @ 7:10pm

Free broadcast radio and TV is what made vast amounts of media profitable.

Without 'recording' and duplicating devices - the entertainment industry as we know it, wouldn't exist.

I just think the industries that are litigating don't understand new media or have run out of ideas on how to market it. Artists should make a note of that fact - the fact that the companies they are contracting with, aren't keeping up with changes in media. The changes in media - are here to stay.
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Stephan Kinsella (profile), 22 Jun 2012 @ 9:30pm

Re: One disagreement
Prashanth, see the comments about Rothbard and Kolko here -- http://archive.mises.org/14623/state-antitrust-anti-monopoly-law-versus-state-ip-pro-monopoly-law/ -- it is true that laws like antitrust, minimum wage, pro-union laws, etc., which are normally said to be "against business", actually help big business at the expense of smaller businesses. They help to increase costs for newcomers etc. and entrench oligopolistic entrenched firms. They, like patent and copyright, are anticompetitive. The only true monopoly is the state's, yet the antitrust laws do not apply to them. Antitrust law should be abolished. It is anti-free market. It punishes companies that are too successful, which is ridiculous.
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Richard (profile), 23 Jun 2012 @ 1:27am

Re: Re: One disagreement
The only true monopoly is the state's, yet the antitrust laws do not apply to them. Antitrust law should be abolished. It is anti-free market. It punishes companies that are too successful, which is ridiculous.

People often confuse the free market with anarchy. Markets do require some enforced rules in order to operate properly just as sports require rules about foul play and a referee to enforce them. Sports administrators spend a lot of time tweaking the rules to improve the competition.

Once you admit that some rules are required they you have to address the awkward and complicated process of working out what the rules should be and how they can be enforced. Of course large and powerful organisations will try to subvert the rules to favour themselves. This may occur even with rules (such as anti-trust) that were originally intended to limit their power but that isn't a reason for not having such rules. Rather it is a reason for ensuring that they are encoded and enforced in line with their true purpose. Not having such rules is worse.

Anti-trust laws, properly formulated, do not punish companies for being too successful. What they do is to prevent those companies from turning financial success into political power that they can use to entrench their position beyond what they could achieve using honest market forces alone.

Similarly it is a mistake to see minimum wage and other employee protection laws as helping big business at the expense of small. What these laws should do is to prevent business from exploiting its workforce and then externalising the human cost so that the rest of society has to pick up the pieces. The reason such laws can appear to favour big business over small is not in their essence but rather in the bureaucratic means that are employed to implement them.
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Hephaestus (profile), 23 Jun 2012 @ 4:37am

Re: One disagreement
I am going to guess mike means things like Microsoft going after Google. Because the young upstart is cutting into an existing large and entrenched companies profits.
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That Anonymous Coward (profile), 23 Jun 2012 @ 5:43am

I saw this story earlier in the week and something about it hurt my head.

"There we have it. The American Chamber of Commerce � the supposed defender of free enterprise � is in a meltdown panic, determined to either crush 3-D printing in its crib or, at least, to make sure it doesn�t grow past its toddler period."

Except there is not a single mention of the Chamber of Commerce before that line. The example as given was about Games Workshop, a company known for aggressive protection of their IP. I've had run-ins with GW claiming rights they didn't actually have based on a flawed automatic web scraping system that isn't reviewed by a human unless you stand your ground and call them out. No small feat for the little guy vs a large multinational with lawyers needing projects to justify their paychecks.

The problem is once upon a time companies had to actually compete, then the "better" ones rose to the top and used their power and money to lock themselves into the top slot. They get laws and barriers to keep anyone from joining the market, because they don't want to change how they work. Changing their model might mean making less money and they fight against it tooth and nail and eventually progress wins... and they are making just as much if not more money than before.

I wonder if anyone has ever done a study about how much corporations sink into killing progress, and then what happens when they finally adapt. To put an actual quantifiable amount on how much money and time they wasted trying to stop what ended up benefiting them more in the long run.
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Stephan Kinsella (profile), 23 Jun 2012 @ 5:52am

Re: Re: Re: One disagreement
Richard: Just because some "rules are needed" for a free market to function does not mean "anything goes." In fact the rules needed are fairly simple: define and respect property rights and contracts. Antitrust law is unsupported by sound economic theory and also is immoral as it punishes companies for charging too much (monopolization), too little (predatory price cutting), or the same as others (collusion). This lets the state cherry pick who it wants to persecute. And the economics make no sense whatsoever. There is no objective way to define "the relevant market." There are innumerable other problems with it as shown by scholars like D.T. Armentano , Murray rothbard, and even Alan Greenspan and Robert Bork. http://mises.org/daily/4397/ http://mises.org/daily/2694 http://mises.org/daily/5005/Alan-Greenspan-Was-Right-About-Antitrust-Anyway

"Anti-trust laws, properly formulated, do not punish companies for being too successful. What they do is to prevent those companies from turning financial success into political power that they can use to entrench their position beyond what they could achieve using honest market forces alone."

Think about what you said: it's about preventing them from getting political power. Now this is actually not true--that's not the aim of antitrust law. But if it were, you want to trust the state itself, to enact laws limiting corporate power, to ... prevent corporations from getting state power. Why doesn't the state just pass a law addressing this very issue, instead of using antitrust law as the excuse? The state could limits its own power to be bought by corporations, or limit teh ability of corporations to bribe the state. The solution to the problem that large companies get in bed with the state is to limit the power of the state in the first place, not to hobble companies so that they never become rich or successful enough to have enough money to buy politicians!

"Similarly it is a mistake to see minimum wage and other employee protection laws as helping big business at the expense of small."

It is not a mistake at all; it is reality. Take a look at my previous link where I link to a discussion about Rothbard and Kolko on this. Just b/c state propaganda characterizes its policies a certain way does not mean it is so.

"What these laws should do is to prevent business from exploiting its workforce and then externalising the human cost so that the rest of society has to pick up the pieces. The reason such laws can appear to favour big business over small is not in their essence but rather in the bureaucratic means that are employed to implement them."

This is not true. this is in fact the essence of such laws. Walmart, for example, recently lobbied for an increase in the minimum wage. The reason is walmart already pays its employees above minimum wage. So it would not be hurt by an increase. But the increase would hurt smaller competitors of Walmart. this kind of thing is rife in the history of such legislation. Not to mention that federal minimum wage law is blatantly unconstitutional, since there is no enumerated power authorizing Congress to legislate in this area.
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Richard (profile), 23 Jun 2012 @ 7:06am

Re: Re: Re: Re: One disagreement
Think about what you said: it's about preventing them from getting political power. Now this is actually not true--that's not the aim of antitrust law. But if it were, you want to trust the state itself, to enact laws limiting corporate power, to ... prevent corporations from getting state power.

I did not mean political power in the narrow sense of state power, I meant it in the broader sense of any power that extends beyond straightforward competition. For example the kind of power that Standard Oil exerted over the railways (which was part of the motivation of anti-trust law) would count as political.

Walmart, for example, recently lobbied for an increase in the minimum wage. The reason is walmart already pays its employees above minimum wage. So it would not be hurt by an increase. But the increase would hurt smaller competitors of Walmart.

If smaller competitors can't compete with Walmart at any particular level of wages then they can't compete period.

Competing by paying your workforce less is not competing, it is cheating.

The questionable area of such laws relates to the bureaucracy necessary to demonstrate compliance.
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Eric Reasons, 23 Jun 2012 @ 7:32am

Exhibit A
An Illustrating example:

Anti-Cable TV spot encouraging the viewer to "Let your lawmakers know how you feel in the fight against cable TV and Pay TV".

How'd that work out?

http://youtu.be/QIgZHZpiq1U
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Prashanth (profile), 23 Jun 2012 @ 10:23am

Re: Re: Re: Re: Re: One disagreement
So I guess really my point is that while I don't think that monopolies are a good thing for consumers, antitrust laws are to be enforced not when one company simply dominates a particular market but when said company starts abusing said market power to either forcibly stifle competition or unilaterally affect other industries. Also, once again, although implementation of antitrust suits are often poorly-executed due to too much zeal, they aren't usually bad in principle (unless used against natural monopolies, and I use "natural monopoly" here in the economic sense).
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Stephan Kinsella (profile), 23 Jun 2012 @ 10:57am

Re: Re: Re: Re: Re: One disagreement
"Competing by paying your workforce less is not competing, it is cheating."

I don't even know how to respond to this. It is so confused and wrong. I suggest Henry Hazlitt's Economics in One Lesson as a place to start.
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Stephan Kinsella (profile), 23 Jun 2012 @ 11:10am

Re: Re: Re: Re: Re: Re: One disagreement
Musing "I don't think that monopolies are a good thing for consumers" is not the way to figure out what laws or just or not. You don't just toss of this kind of stuff, implicitly assuming that an unprincipled, incoherent, ad hoc consequentialist or utilitarian standard is the appropriate one for justifying the use of force against people. Antitrust law is wrong, because it is the initiation of violence against people who have not initiated violence against anyone else. Antitrust law is theft. It is like taxation or other forms of regulation. the state has no right to tell people waht to do with their property, so long as they are not violating others' rights. If one company acquires a monopolisitc position because consumers voluntarily pay them money for providing them with services or goods they value, then no one's rights are violated. The state has no right to step in. At all. If two companies collude to set prices, that is their right. If you don't want to guy from them, don't. You don't have a right to their products or for them to make an offer. The free market, and justice, and liberty, are about respecting people's property rights. so long as people do not commit acts of aggression they should be left alone by the state and the law. Just because some liberal activist law professor or state-paid economist says it's "bad for social welfare" if peopl "are allowed" to have "monopolies," this is no justification for the armed thugs of the state to threaten some peaceful businessmen with imprisonment. Antitrust law is utterly and completely evil.
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Xtian, 23 Jun 2012 @ 11:10am

So true
Amazed by this article. This is so true and we've a perfect exemple here in France with Free who is a new inovative player in the mobile operator space and competitors are so scare that they keep trying to stop it.
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Richard (profile), 23 Jun 2012 @ 12:43pm

Re: Re: Re: Re: Re: Re: One disagreement
I am not at all confused - and I am very clear about what I am saying here.

If you can only compete by paying less then it follows that your systems are less efficient than those of your competition. Hence you require more workers to do the same work and can only afford to do it because you pay each worker less. It is like playing a game of football (proper football not the American variety) with 14 players. You might win - but you are cheating.

The difference between your economics and mine lies in what you choose to hold constant and what you allow to vary.
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Richard (profile), 23 Jun 2012 @ 12:53pm

Re: Re: Re: Re: Re: Re: Re: One disagreement
The free market, and justice, and liberty, are about respecting people's property rights. so long as people do not commit acts of aggression they should be left alone by the state and the law.

I would say that the way in which monopolies are almost always used amounts to aggression.
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Richard (profile), 23 Jun 2012 @ 1:23pm

Re: Re: Re: Re: Re: Re: Re: One disagreement
Antitrust law is theft. It is like taxation or other forms of regulation. the state has no right to tell people waht to do with their property, so long as they are not violating others' rights.

I'd be interested to know just how you propose to enforce property rights without taxation to provide resources for police, courts etc..
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Stephan Kinsella (profile), 23 Jun 2012 @ 1:42pm

Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
"I'd be interested to know just how you propose to enforce property rights without taxation to provide resources for police, courts etc."

Sure. It's fine to be curious. Or to ask questions. But remember: asking a question is not an argument. Just because you have questions, does not mean the state's aggressive actions are justified.

I would suggest you start with For A New Liberty by Rothbard, The Market for Liberty, by the Tannehills, both available at www.mises.org for free, and others in this bibliography, if you are really sincere -- http://www.lewrockwell.com/hoppe/hoppe5.html
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Prashanth (profile), 23 Jun 2012 @ 2:00pm

Re: Re: Re: Re: Re: Re: Re: One disagreement
OK, then let me be more clear. Monopolies are not good for consumers unless they are natural monopolies (again, in the economic sense). If you plot the possible cost and revenue curves for a monopolistic firm versus a competitive firm in the same industry, it almost always happens that the competitive firm produces more output at equilibrium and at a lower price than the monopolistic firm. The competitive outcome is thus for sure better for consumers. I don't think that is a point that can be disputed.
But really, the problem doesn't come so much in that itself. It comes when monopolies start abusing their powers to affect other industries, and especially when monopolies use the courts and laws to effect such abuse.
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Prashanth (profile), 23 Jun 2012 @ 2:06pm

Re: Re: Re: Re: Re: Re: Re: One disagreement
Actually, I am going to have to agree with Mr. Kinsella on this. Being able to achieve lower marginal costs (and that includes labor) is the way to compete in a free market. That said, the whole point of a minimum wage is to be able to guarantee workers in the labor market a certain decent standard of living. The side effect is that firms' ability to supply contracts, so although employees are better off, there are fewer employees as a result. The question then becomes whether you would prefer to guarantee a lot of workers employment with a decent standard of living and then require the state to take care of the unemployed, or whether you are OK with everyone having a job (minus those experiencing frictional or cyclical unemployment, because minimum wage issues are structural) but barely getting by/possibly living in squalor.
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A Guy (profile), 23 Jun 2012 @ 8:40pm

Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
I'm going to agree with Richard. Humanity doesn't exist to serve markets. If you allow humans to be commoditized it leads inevitably to facism. Mercantilism and militarism destroy free markets.
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A Guy (profile), 23 Jun 2012 @ 8:47pm

Re:
We're not alone. China and Germany are right here with us. For some reason, people have decided mercantilism is a good system worth emulating everywhere around the globe.

China is kind of a surprise. They went from very socialist to very fascist really quickly.
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Andrew, 24 Jun 2012 @ 12:05am

Defining the Monopoly
One problem with the mainstream, "market-power" based concept of competition/monopoly is that it enables copycats to be treated as "unfair competition", thus paving the way for limited-term copyright/patent "protection" for the innovator. The Rothbardian (Austrian school) view professed by Mr. Kinsella plugs this loophole by reducing all monopolies, copyright/patent included, to grants of special privilege by the state (broadly meant to include other aggressors such as mafia) reserving a particular market niche for a particular producer.
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TDR, 24 Jun 2012 @ 6:47am

I've wondered sometimes what would happen if corporations were forbidden from growing beyond a certain size, from becoming big enough to be able to have any influence on government whatsoever, and that all existing companies that are larger than that threshold would be immediately divided into multiple non-profit sharing companies too small to affect government and its officials. Obviously this would eliminate all multinational corporations and force the smaller companies formed from their dissolution to remain in their region of origin. This would mean, I guess, that companies could never grow beyond the local level (local as in city). Imagine Wal-Mart or Microsoft or Apple being cut up into thousands of smaller independent companies, for instance. I'm not sure what the effect would be, to be honest, but it might make an interesting experiment.
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Richard (profile), 24 Jun 2012 @ 6:49am

Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
If all you can do is refer me out to some weighty tome to somehow tune me in with your particular mode of thought then I don't think you have an answer to my question.
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Richard (profile), 24 Jun 2012 @ 7:05am

Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
Being able to achieve lower marginal costs (and that includes labor) is the way to compete in a free market.
The purpose of economic competiton is to improve technology and organisational structures. It is not an end in itself. Therefore a lower marginal cost that is only achieved by lower wages is not a real lower marginal cost at all.

That said, the whole point of a minimum wage is to be able to guarantee workers in the labor market a certain decent standard of living.
No, actually that is not the only reason for it. The reason for minimum wage (and for welfare benefits) is to ensure that technical progress is not undermined by cheap labour. Cheap labour (aka slavery) was the reason why the technology of the Greco-Roman world stagnated. The current wave of advancing technology can be traced back to the black death, which reduced the supply of labour, pushed up it's costs and started the move toward greater efficiency.

As a secondary purpose it also compensates the ordinary person for the existence of property rights in land - which prevents him from getting a living by hunting and gathering as our ancestors did.
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Prashanth (profile), 24 Jun 2012 @ 9:17am

Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
Cheaper labor is a lower marginal cost, because the total amount of wages changes with output. To the firm, there is really no difference between achieving a lower cost of production through technological means or through cheaper labor, because in the end all that matters for determining the level of production is the point where marginal cost equals marginal revenue.

Minimum wages are actually inefficient because they create a disparity/disequilibrium between the demand and supply for labor. The minimum wage is essentially a price floor in the market for labor, so there are more workers than there are positions. Because firms will not employ more than a number of workers given by the intersection of their demand for labor and the minimum wage line, both consumer (firm) and producer (worker) surpluses decrease, and that decrease is not compensated for by an increase anywhere else, so the result is a deadweight (efficiency) loss to society.
The current wave of advancing technology can actually be traced back only to the industrial revolution. Between the dark ages (i.e. plague) and the industrial revolution, there was certainly a lot of scientific advancement but not as much economic progress as you might think. The real reason for increased efficiency is because using steam and coal instead of human-power produces vastly more output. As a result, less human labor is needed, while the labor that is needed is more skilled, so the result of that is a higher wage for the workers that are there, and this pretty much follows any advancement in technology.
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A Guy (profile), 24 Jun 2012 @ 10:24am

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
That is all true.

However, your analysis fails to take into account the tragedy of the commons. If you can dupe people into working for a system that leads to inefficient consequences for them personally, they will vote to tax you to fix it later nullifying your temporary gains.

Let's say your uninformed, low paid worker cannot afford health insurance and cannot afford to (or doesn't) educate themselves about the consequences of not taking care of themselves. Can you think of any potential consequences that may come as a result in the future? (i.e. individual mandates, expanded medicare/medicaid, exploding disability costs, lots of tax/borrow/print and spend politics, massive economic crisis)

The other commodities cannot vote.
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Prashanth (profile), 24 Jun 2012 @ 11:11am

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
I should have been more clear that what I was referring to regarding using cheaper labor to achieve greater production assumes perfectly competitive labor and goods markets. Of course these are not true in real life; workers do have some minimum nonzero bargaining power for their wages and benefits, and as voting citizens they have the power to force corporate action through non-market means.

Now, it is possible for there to be a system without any unemployment/health benefits for those out of work or for those with low-paying jobs. Such a system would have no government intervention whatsoever, and more people would be working, yet more workers would have really low-paying jobs that would lead them to barely get by/live in squalor. It's capitalism in its purest form. Is that something I want to see? Of course it isn't. But the reason for you and I to assume that there are health benefits [et cetera] is a moral one, not an economic one. There is no economic reason for us to assume a priori that there are to be health benefits [et cetera] in what we discuss. So what I said above is true, holding other things equal and making it such that the only government intervention being considered is that of the enforcement of a minimum wage.

Also, how does the tragedy of the commons play into this at all? Nothing that I have said involves multiple individuals depleting a common resource in their own rational self-interest.
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Prashanth (profile), 24 Jun 2012 @ 11:16am

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
To Mr. Kinsella, the question wasn't really a question. It was a valid rhetorical question that does not ask for an answer, but instead casts doubt on your line of reasoning. I'm surprised you didn't catch that.

To Richard, to be fair, wouldn't we commenters here on TechDirt refer people to articles on this site if they have an opinion about business models [et cetera] that we know to be unsupported by facts? That said, what Mr. Kinsella posits isn't necessarily factual; economics has not truly been settled and will never be settled because it is the study of human behavior, and that changes over time. And I agree that simply linking us to books promoting the Austrian school of economics essentially cops out on the argument, because it essentially says that "I can't synthesize a good counterargument using my knowledge of Austrian-style economics and keep the discussion going, so instead I'll pretend to have the upper hand by referring you to this one-sided book and hope that you come around to agreeing with me."
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A Guy (profile), 24 Jun 2012 @ 11:45am

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
In this case, the common resource is the labor pool. Everyone dips into it to create things at the lowest marginal cost, and (conceivably) becomes so degraded that it no longer functions properly.
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A Guy (profile), 24 Jun 2012 @ 12:45pm

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
Also, I don't understand why economists say "non market means". This is not specific to you. I just object to the term in general. Since the reality is we do commoditize human beings through the labor market, we must acknowledge that war, disease, taxes, government, and the various other risks of the human condition are a natural part of that market and factor it into the price. Pretending that they aren't market forces seems disingenuous.
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A Guy (profile), 24 Jun 2012 @ 12:51pm

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
Also, I don't understand why economists say "non-market means". This is not specific to you. I just object to the term in general. Since the reality is we do commoditize human beings through the labor market, we must acknowledge that war, disease, taxes, government, and the various other risks of the human condition are a natural part of that market and factor it into the price. Pretending that they aren't market forces seems disingenuous.
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Prashanth (profile), 24 Jun 2012 @ 6:30pm

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
Here's the problem with the "tragedy of the commons" analysis that you are using: what you're saying is that the lower you pay a given number of workers in the labor pool, the worse-off they'll be. If the labor pool situation really was a tragedy of the commons, what that would imply is that it is beneficial for workers for there to be high unemployment, because at any given wage if more workers are used for their labor then all of them will be worse-off and less efficient producers, and this is simply bogus. What you are thinking of is not a "tragedy of the commons" but an efficiency wage, which is the notion that paying workers a better wage incentivizes them to be more efficient workers. To me, this is a pretty reasonable assumption up to a point; empirically, I've seen a few studies that have shown that efficiency wages work really well for blue-collar/low-skill/mechanical jobs but they only work well up to a certain point (beyond which point they actually become counterproductive in many instances) for more skilled/thinking-type jobs. I don't know enough about the effectiveness of efficiency wages to further comment, so I will leave what I say about that topic at that.

Now regarding your other comment, the reason why several things like war, disease, taxes, and government action are considered non-market issues is because those things typically (though there are of course exceptions) do not spring from a voluntary transaction between a laborer acting as a consumer and a seller in another market. Plus, my original statement was that citizens could enact changes upon corporations through voting for new laws and new enforcement of said laws; this is not a market action because it does not involve the voluntary transaction between consumers and the given corporation, but instead involves consumers routing around that market and using the threat of legal action (as opposed to market action) to force the corporation to behave a certain way.

Also, wow, this thread has gone quite a number of levels deep, and WHYISTHETEXTSOTHIN???
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A Guy (profile), 24 Jun 2012 @ 7:43pm

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
I disagree to a certain extent. I believe there is a certain level of income that becomes a liability to everyone once reached. If the worker cannot afford to take care of their own health, or become unable to educate themselves about making certain basic economic choices, they become a massive liability to all of us. (i.e. taking out massive amounts of bad loans and have too many children) I know many (unfortunately) won't take the opportunities they do have to educate themselves about these very basic things, but it shouldn't be due to lack of means.

I still don't agree with the "non market means" term. Just because a market doesn't use a dollar as an official currency, doesn't mean it can't be defined as a market. I think a vote could easily be thought of as a unit of currency in the democratic system. Our politicians actually do exchange them for dollars regularly, as I understand it.

I agree with your other points. Anyway, good discussion. Thanks for humoring an amateur economist.
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Prashanth (profile), 25 Jun 2012 @ 5:03am

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One disagreement
Actually, your first statement was what I was trying to get at, so clearly I didn't do a good job of it. What I was trying to say was that studies seem to show that even for skilled laborers, there definitely needs to be a nonzero minimum level of income to motivate said workers to do work. Beyond that, efficiency wages work up to a point, but beyond that point, efficiency wages cease to be effective. For instance (and I'm using arbitrary numbers here that are not reflective of economic realities), if a skilled worker needs $100 per day to live and function properly, giving $150 will certainly help efficiency, and that relationship between wages and efficiency could hold true up to maybe $250, but maybe not up to $750.

Your idea of voting being a currency seems pretty interesting, but I'm not sure it's the right way to abstract the functions of a government. I will say though that the government hiring police officers, lawyers, et cetera to enforce laws does happen in a market for such people (whether that market is competitive or oligopolistic).

Finally, I always appreciate engaging in discussions like this. It also helps me think about and solidify/modify my own understanding of basic economics more too.

PS: Isn't it odd that Mr. Kinsella left this discussion rather early? (Teehee!)

PPS: WHYISTHETEXTSOTHIN???
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Stephan Kinsella (profile), 25 Jun 2012 @ 10:31am

busy guy
"Prashanth" (if that is a real name) pretends to ask a question by blurting out: "PS: Isn't it odd that Mr. Kinsella left this discussion rather early? (Teehee!)".

Is there a particular question? The thing is, I am 46 and not yet retired, because your criminal state gangs have preveneted it, so my time is not as open as I'd like. But your snarkiness and sarcasm are not coherent arguments for the state. Go to bed tonight realizing that you can be a punk and smartass, but that this does not justify the horrible invasions of rights that are perpetrated on innocent people in your name, with your authority. For shame.
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Prashanth (profile), 25 Jun 2012 @ 4:55pm

Re: busy guy
When I wrote that little snarky comment, it was over the weekend, and I figured that considering that you seemed rather quick at responding to my comments (I mean, at one point, I was actually surprised that you were able to write a pretty lengthy and detailed reply so quickly), it seemed odd that you would suddenly stop commenting on that thread. Now I know why, so I sincerely do apologize for my snark and sarcasm; I don't have an excuse for turning an innocuous question ("where are you?") into a lame comment saying that your viewpoint might be incorrect (or something like that).

That said, I think I and the other commenters have responded to most of your previous comments, so I will not discuss that again in this context. What I will say will be in response to this particular comment.

Yes, my real name is in fact Prashanth. It is comes from a word of Sanskritic origin meaning "peace", so "Prashanth" as a name means "one who is peaceful". Typically my personality is that way, so while I won't apologize for holding a position on economics with which you and I disagree, I do apologize if at any point I let my emotions get the better of me in this comment thread. Deeper in the thread, I have tried to be careful to separate my own emotions from what I have learned about rational microeconomic analysis, but I can't guarantee that I haven't slipped up somewhere else in that thread.

This particular comment of yours seems to be rather over-the-top in its anger and vitriol against me, other commenters who don't necessarily agree with the Austrian school of economics, and the government in general, and I can tell that it is the culmination of a buildup of anger in general over all of the comments you have left on this article. (By the way, if you want to quit your job because you either have made your fortune or you are willing to depend upon either the state or the kindness of others, that is totally up to you. No one is stopping you from retiring/quitting your job early. You'll just have to have some sort of safety net to be able to subsist, either from your own savings or from someone else.) I hope that you aren't having problems at home or work, and I hope that you aren't having any financial or other troubles. Moreover, I hope that whatever may make you angry outside of TechDirt isn't the cause of your rather vitriolic comments. If you are having issues, please do take a holiday or something, get some rest, perhaps take an aspirin, and tell your family and friends how much you love and appreciate them.

I've quickly browsed through your website C4SIF, and it actually looks eminently reasonable. Sure, I may not agree with all of it, but I agree with a lot of it, and it makes me happy to see people like Michele Boldrin there too (because I really liked the book Against Intellectual Monopoly). Considering that we seem to agree on a lot of things that come up on TechDirt, it's really a shame that my little comment about antitrust legislation had to lead to this point. I hope that we can move on from here with minimal to no hard feelings and that we can continue to complement (and compliment) each others' posts about stuff like patent/copyright reform, et cetera.

Cheers!
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Stephan Kinsella (profile), 25 Jun 2012 @ 5:40pm

Re: Re: busy guy
Prashanth:

"...I sincerely do apologize for my snark and sarcasm; I don't have an excuse for turning an innocuous question ("where are you?") into a lame comment saying that your viewpoint might be incorrect (or something like that)."

Okay by me. But I'd prefer you not favor policies that take money property or liberty from me.

"Yes, my real name is in fact Prashanth. It is comes from a word of Sanskritic origin meaning "peace", so "Prashanth" as a name means "one who is peaceful"."

I am for peace too. It's one of the main tenets of libertarianism and my group libertarian blog www.libertarianstandard.com. The thing is, anyone who is sincerely and genuinely in favor of peace, and who has a modicum of consistency and economic literacy, has to realize that most (if not all) state policies and laws amount to the use of violent force and aggression against innocent people. That is the opposite of peace.

"This particular comment of yours seems to be rather over-the-top in its anger and vitriol against me, other commenters who don't necessarily agree with the Austrian school of economics, and the government in general,"

I don't mind people who disagree with me. But the government does more than this: it kills people with bombs. It jails people who don't pay taxes or who use unapproved drugs. The state robs me every g*ddamned day. It threatens me and my loved ones. It is evil to the core. Someone really valuing "peace" would recognize this. How can someone who is in favor of peace be on the side of a criminal organization the kidnaps, murders, enslaves, bombs, and robs on literally daily basis on a scale unknown in the history of the world?

"By the way, if you want to quit your job because you either have made your fortune or you are willing to depend upon either the state or the kindness of others, that is totally up to you. No one is stopping you from retiring/quitting your job early. You'll just have to have some sort of safety net to be able to subsist, either from your own savings or from someone else."

Yes, well your criminal state has robbed literally millions from me over the last 15 or so years, and if they had not, I could retire right now. So thanks to your state for robbing decades of my life and my freedom.

") I hope that you aren't having problems at home or work, and I hope that you aren't having any financial or other troubles. Moreover, I hope that whatever may make you angry outside of TechDirt isn't the cause of your rather vitriolic comments. If you are having issues, please do take a holiday or something, get some rest, perhaps take an aspirin, and tell your family and friends how much you love and appreciate them"

I am actually very well off and successful, and have managed to do this despite the state's predations. This does not justify what your criminal state does to me or to others, though I am starting to think what it does to its supporters is at least half-justified.

"Considering that we seem to agree on a lot of things that come up on TechDirt, it's really a shame that my little comment about antitrust legislation had to lead to this point."

People ought to know what they are talking about before mouthing off on important policy issues in public. My grandma doesn't know anything about this stuff but doesn't presume to mouth off in public about it, either.
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Prashanth (profile), 25 Jun 2012 @ 6:58pm

Re: Re: Re: busy guy
Alright. I'm done arguing with you on this thread. (Then again, I'm not sure why I indulged in continuing the argument in the first place.) I tried my hardest to be forthcoming and pleasant with you and left many disagreements as they were without inciting further argumentation. Instead of responding in kind, you have stuck your fingers in your ears like a petulant child (with a tinfoil hat on top) and screamed "LALALALALALAIWILLIGNOREYOUANDPARANOIDLYCLAIMTHEGOVERNMENTISALWAYSMURDEROUSLYEVILLALALALALALA!" For someone who claims to be in favor of peace, your words don't sound particularly peaceful to me either.

At this point, all I can ask you to do is take some medication and stay away from this thread for some time so that you can regain your ability to form cogent arguments and make insightful comments here like you have done in the past. As for me, I will not reply to any new comments on this thread so that I too can keep my sanity intact.
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Stephan Kinsella (profile), 25 Jun 2012 @ 7:29pm

Re: Re: Re: Re: busy guy
The reason we have the state is smug statist technocrats like you who mock the complaints of those that the state violates. They rob on the order of a million dollars from me every year. I guess sanctimonious liberals can dismiss these complaints as "petulant". I guess it makes you feel better for condoning violence and theft.

You say you've tried to be "pleasant"; that is fine, but what I want is for the state, and people like you, to not want to take my stuff from me by threat of force; not to threaten my children with being drafted to fight in wars; not to drop bombs on brown people in the Middle East; not to cause poverty and unemployment and misery with the fed, the business cycle, minimum wage, etc. I want action--or rather, lack of action--not pleasantries.

It is uncharitable and sad for you to use "petulant child" or "tinfoil" etc. to dismiss as loony or childish, the legitimate complaints of an erstwhile free man who is robbed on a daily basis by the criminal state. You can dismiss the people that are victims of the state you apparently favor, but this does not mean their complaints are not justified. As Papinian said, it is easier to commit murder than to justify it.

As for your ridiculous and belittling insinuations of medication and insanity--unless you were born into wealth or are some hypersuccessful genius it is highly, highly unlikely my achievements in career, money, family, life, etc., are anything you could look down on.
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annoximity, 26 Jun 2012 @ 6:51am

So now you're shilling for laissez-faire capitalist goons? , the very predatory types that brought us this colossal economic train-wreck? Amazing.

Dear Tech-dirt readers, If you like the financial blood-bath now grinding the middle-class and poor into pulp, for the enrichment and amusement of the 1/10th of 1%, then you'll Love how "the world 'manages itself, and how, unless 'we all just leave it alone to find its own best way', then, well, gee, just terrible things might happen.

Stuff like democracy, voting, free assembly and (cover your eyes and ears, now) Organized Labor. Yes sir, it's scary. It could (and once did) lead to things like unemployment insurance, health-care (I mean real actual health care, not just useless and unaffordable "health insurance").

See, at the page to which he refers readers,

http://lfb.org/today/capitalists-who-fear-change/

"Laissez-faire Books", (their motto, "Leave the World Alone, It Manages Itself)

and they, in turn, are owned by Agora Financial Consultants; LLC.

Sheesh!

Hey, Tech-dirt readers, really, I urge you to get a good eye-full of the likes of the truly creepy Cut-Throat-Capitalist kind who Mike sees fit to pander and shill with and for.

Read All ABOUT IT! Instruct yourselves, from the people whose article Mike calls, "from the 'Well said' Dept." Yeah, right:

http://lfb.org/about-us/

http://agorafinancial.com/columnists/
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Anonymous Coward, 26 Jun 2012 @ 6:53am

Creepy BS, this article.
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Andrew, 26 Jun 2012 @ 11:20pm

Re:
So now you're shilling for laissez-faire capitalist goons? , the very predatory types that brought us this colossal economic train-wreck? Amazing.

Every laissez-faire-capitalist-pig FAQ on the ongoing depression begins with placing the blame on Greenspan the Regulator for holding loan rates artificially low by issuing fiat money, and on governments for cultivating moral hazard with their consistent bailout policies. So, to the laissez-faire crowd, there was still not "enough" self-regulation in the recent time, and the recipe is even less government involvement. If that's a recipe for a different kind of disaster, then so be it - but Austrians should not be confused with Chicagoites anyway.
Got gold, BTW? :)
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Niall (profile), 3 Jul 2012 @ 5:13am

Re: Re:
I think China isn't really fascist in the true sense of the word - extremely socialist/communist societies control a number of things the way fascism does as well. Though to be fair, in the extreme, they are very hard to tell apart, especially for the man in the street.

Germany certainly isn't at all fascist - they would have been jumped on again by everyone else in Europe, and they are the last people to want that. They are into mercantilism, but Germany has a very strong humanitarian ethic as well, which seems to be missing from many countries.

Unfortunately, the US is slowly drifting in a fascist direction, although it has a long way to go. Listening to some of the GOTP rhetoric though, sounds like 80 years ago in Europe...

People tend to treat 'the market' or 'property (rights)' like they are a religion, forgetting the human element. That is one reason for laws limiting the market.
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Tiffany Trionfo, 8 Jul 2012 @ 10:03am

I found this blog to be interesting, because I have always found that when people are introduced to new things they tend to freak out. Most of us are afraid of the unexpected so our first reaction is to disagree, and throw out the idea completely. I do believe that technology is good when used for the right reasons. There is good and bad in everything, and it is up to the individual how they will use it. Money is a big issue to people in the free market, and it seems to me that people can get greedy and are always wanting bigger and better things, but when it starts to happen they freak out.
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