Free Market has turned us into *Matrix* drones

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I think this article has much merit. I too agree that the advent of the washing machine is far more significant than the internet. So is indoor plumbing for that matter.

meljomur's picture
meljomur
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Chang's correct and appears to deal with the human being and reality rather than captalist dogma most economists base their work on. Most economists have failed, such as the Chicago School, because they accepted fundamental tenets about the human animal that had no basis in reality, which leads to a totally dysfunctional society. People are not rational by nature.

As far as I'm concerned, economics is primarily a religion in that much of it is based on beliefs, such as people are rational, and so they develop ideologies that support an already developed world view, such as that based on Calvinism. I think that the fundamental flaw in our system is precisely that it is based on Calvinism, which posits that people are exalted, wealth is the measure of a person's worth, those that have are better than those that do not have, and that the earth was created exclusively for us by god. This can only lead to a failed system.

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jeffbiss
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Jul. 31, 2007 4:01 pm

But humans are rational, and we tend to make rational decisions in economic exchanges based on our current financial position.

People trade their dollars for goods and services that they determine to be worth more to them than the dollars they are trading for it. Otherwise, they wouldn't do it. If I see a pair of shoes I want and the seller wants $50, I may determine that the shoes are not as important to me as the $50 is. Much of this decision is based on the amount of dollars I have at my immediate disposal, so if I only have $100 to my name, spending half of my dollars on a pair of shoes isn't a good decision when I have other things that are more important to me, like food, shelter, etc...

The problem is that capitalism gets blamed for creating these huge economic disasters when the reality is that people are making rational decisions based on the distorted views of their own personal finances. And these distortions are almost always the result of some kind of external interference in the market - government. When someone is led to believe that they have access to much more money than they should, in reality, have access too, they will in turn make decisions based on the amount of money they BELIEVE they have. So maybe the $50 shoes would get purchased by someone who in reality only has $100 worth of assets, but based on distorted figures and values of their assets, think they actually have $500 instead. And with $450 left over, the same person may take his girl out for a nice dinner and a movie for a hundred bucks, and now he's down to $350.

When these distortions are cleared up and the truth reveals itself, the only thing left over is the fact that the money he thought he had, was all an illusion, and now he's $50 in debt. If he'd been aware of the true value of what he had, his spending decisions would certainly have been different. His decisions to spend the money were still rational because they were based on what he thought were accurate estimates of how much wealth he had.

Free Market Capitalism functions just fine as long as government keeps their hands off. Irrational decisions are punished and rational decisions are encouraged and rewarded. It is the fear of not having any money that prevents people from spending irrationally it in the first place. If I make an irrational decision to spend all of my money on things I don't require, then I am forced to live with the consequence of not being able to afford the things I do need when I need them until I have saved up enough to purchase them. Making that same mistake over and over again and expecting different results every time is hardly rational and 99% of us wouldn't do it.

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Cheesebone
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Sep. 1, 2010 9:18 am

Truth be told, the more we allow government to interfere with our freedoms (and economic freedom is right up there at the top of the importance list), the closer we are to a Matrix-like state where we are basically just tricked into believing that this current system is "just the way things are".

Red Pill or Blue Pill, slavery or freedom. If Chang believes that true Capitalism is what the problem is, then he's pushing the pill that plugs you back into the system.

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Cheesebone
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Sep. 1, 2010 9:18 am

Mr. Cheesebone, I don't think Mr. Chang is advocating your tired out Libertarian premise of "government is the problem".

Do you think if you keep saying the same thing over and over, it will at some point sound different?

Why do you think the countries with the strongest social democracies seem to be the only ones which will weather the current global crisis.

There must be a reason why China is implementing a socialized health care system for its 1.3 billion citizens, starting next year.

It's the nations which think everything should be privatized, which are going to be left in the dust in the next decade...

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meljomur
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Jul. 31, 2007 4:01 pm

Yes, you're right, which obviously explains why 26 or the 27 countries in the EU are on the eceonomc watchlist, or why Denmark has a massive labor shortage and a record deficit for in 2010. It's because the social democratic environment it so conducive to economic stability!

At least China can AFFORD to make these financial mistakes right now, they have surpluses, lol, the US wants to try all these things (that have *never* worked for any other country for long periods of time) using borrowed money, and if they can't borrow it, they'll just print up the difference and make the situation even worse.

It doesn't need to sound different if I say it again. It just makes sense to me.

Cheesebone's picture
Cheesebone
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Sep. 1, 2010 9:18 am

Oh dear another Libertarian chirping from the coal mine.

meljomur's picture
meljomur
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Jul. 31, 2007 4:01 pm
But humans are rational, and we tend to make rational decisions in economic exchanges based on our current financial position.

But humans aren't rational, as proven by the problems we cause ourselves and the failure of free market capitalism as in the causes of the current recession. That they have distorted views of their personal finances indicates that they are irrational. Otherwise, they'd conclude that they had financial problems, or would have avoided financial problems in the first place, thus never resulting in financial crises. Your economics is religion, based on belief and want. Your preferred economic theory has been proven a travesty.

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jeffbiss
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Jul. 31, 2007 4:01 pm

Haha, I dunno if I'm exactly a Libertarian. Really I have no clue where I'd stand in the whole partisan scene.

But I'll stand by my rationality statement, as I feel that you're confusing rationality with knowledge and education. People generally make rational decisions based on what they know. Whether or not they decide to educate themselves beyond what they're told, is up to them. When they're told that they can buy a house they normally couldn't afford because property values are going to continue rising at certain rates, and they decide to take the information being told to them by these "experts", then they were absolutely making rational decisions based on the information they were fed. When they were told they can borrow against the newfoud equity in their homes because the value will continue to rise, again, people acted rationally by doing exactly that. They didn't know better. They were uneducated. Not irrational.

As a result, an emormous amount of malinvestment occured because people didn't educate themselves, they just saw the potential for more wealth, and rationally, made the decision to invest that way.

I'm sure that a large, large majority of these people, given the information that we all now understand, would have NEVER made these poor investment choices.

Cheesebone's picture
Cheesebone
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Sep. 1, 2010 9:18 am

Well Mel, I agree that indoor plumbing (water and sewer with treatment) is bigger than both the internet and washing machine. IMHO, for the US, the washing machine was also an important impetus to suffrage and civil rights while the internet has also had significant impact by enabling outsourcing and then offshoring design, back office, IT and call center work. Chang has succeeded with me - lol popped my internet bubble (again) - didnt think this morning that I would see the internet as so significantly bad right now ...

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LeMoyne
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Jul. 31, 2007 4:01 pm

Cheesbone wrote: "But I'll stand by my rationality statement, as I feel that you're confusing rationality with knowledge and education. People generally make rational decisions based on what they know"

poly replies: If people were rationale, the advertising business would be dead in the wwater...and neither Obama nor McCain would have headed the ticket of any party.

Obama's presidential campaign was voted the most successful "Brand" marketing campaign of the year...ahead of Apple Computers..

Bush's Third term is coming along as expected. .Obama will be replaced By Bush's 4th term...or Clinton's 6th. Nothing changes except the name plate on the Oval Office. "Managed democracy", as Sheldon wolin calls it, is also coming along as expected.

Americans "deserve it all...need it all". Watch any 30 sec. TV spot. Add a lifetime of "you deserve it all ...you need it all" to that.

Can't expect rational, ill-educated people to come out of an irrational paradigm. designed to suck every last penney from their pockets...with government support (like health care reform that isn't)..

My mentor once told me many, many years ago..".If you want to be successful, grab as much of everyone's income as you possibly can. It's the way to wealth." Morality and ethics didn't come into play. He was a multi-millionaire playing by the rules. his class put into place..

His favorite game was selling the same properties over and over...to people he knew couldn't pay the mortgage. He chuckled over every sale.

..".If you want to be successful, grab as much of everyone's income as you possibly can. It's the way to wealth." Morality and ethics didn't come into play The nation operates on that principle....especially at the top.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

People voted for Obama because he promised them things they'd never heard from someone who was actually going to be president. His "change" was a relatively new concept from the perspective of the American public. And seeing how terribly Bush ended his 2nd term (or Clinton's 4th as you'd say, which I don't disagree with, lol), of couse "change" seemed like a rational choice.

Not to mention that he started talking about things like single payer health care and basically more free stuff for the rest of the country - any time you offer people valuable stuff for free, they'd be irrational to NOT take it.

That's why he's president right now.

The problem is that the American public was too ignorant to completely understand exactly what they were voting for in the end. The realities of what he was campaigning on might as well have been if he told everyone that voted for him that, if he becomes president, his supporters will sprout wings and be able to fly. Of course it sounds great, but anyone willing to educate themselves beyond what they're told would learn that it's just not gonna happen succesfully.

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Cheesebone
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Sep. 1, 2010 9:18 am

Oh Cheesebone, you and your lot are only dangerous because you can vote.

If you would only get yourself out from behind your computer and really see how countries which are socialist actually do very well.

But no. It's much better to listen to the right wing mumbo jumbo, which tells you how to think and what to say, than experience the real world.

Like I said, it might not be such a big deal, but you people can actually vote.

meljomur's picture
meljomur
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Jul. 31, 2007 4:01 pm

Truth be told, I can't stand right wing talk. It's too cold, very menacing, I don't like the way they "do business", I can't stand FOX... (The only thing I've found redeeming about that station is Andrew Napolitano, who is admittedly a huge Libertarian, but again I don't agree with everything he says either) You may find this funny but the only political news stuff I really listen to from normal media sources is Progressive talk, I happen to think Thom Hartmann is one of the brightest, most welll educated guys I've ever heard speak and really do appreciate his views and opinions.

I just don't agree with all of them, primarily when it comes to economics, and a lot of politcs "bleeds over" into economics.

The reason I began looking into the economics of these European Soclalistic countries is because of what I heard Thom mention about the healt care available in France and the way Denmark has been progressing.

What I learned, turned out to be different. I wasn't looking for faults, or progaganda, I just wanted to know why it was working. And I found out that it isnt, lol, that's really about it. Yes, there are many benefits these countries see right now, there is absolutely no doubt about that. But it's their future which shows the fundamental flaws of the system. These countries are facing economic problems that will absolutely cripple their current way of life unless drastic changes are made.

If you do the research yourself and actually do it from an unbiased perspective, you'll come to the same conclusion, if not then you're either just ignoring the facts that you don't want to hear or you didn't read them in the first place.

I did not always feel this way about things, it wasn't until about 2 years ago that I first started seeing the flaws in the Keynesian blueprint (and I'm not an old guy by any means, I'm a 28 year old technician, so I still have lots to learn) but the thing is that, at the end of the day, when you look at the big picture, that system doesn't make sense. Central Planning CANNOT work properly and keep people happy. And history has certainly taught us that. History has not had the chance to really show what true Free Market Capitalism can do because those with elected power have always managed to usurp the forces within the market and flex them into positions they were never intended to be in, creating problems and failures that they then turn around and blame on the free market.

I will never claim to be an economist or anything, but the reason this nation is so screwed up is because our Economy has been tampered with to the point of absurdity, and that frightens me. The same mistakes keep getting made only in bigger and more dangerous ways, whether it's been a Democrat or Republican or Autobot or Golden Retrienver in office (who would probably do less damage than either major party anyway).

Cheesebone's picture
Cheesebone
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Sep. 1, 2010 9:18 am

Well having lived (UK, France, Holland) and traveled through pretty much every other part of Europe, I can assure you social democracies are in fact successful. Perhaps we just have a different idea of success, that's all.

But in fact most of these countries have low unemployment, low crime, better education, better health care (and for all), better infrastructure.

I tend to define success a bit differently than how many billionaires a nation can produce. Big deal. Its far more advantageous for a country as a whole when society is equal. But that is my idea of success, I doubt most Libertarians would share it.

meljomur's picture
meljomur
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Jul. 31, 2007 4:01 pm

Should success be define by how one works for it? Is success define how one get started? Who define success? The Matrix answer all those questions with problems.The Matrix needs a "new program".(more natural & moral)

tayl44's picture
tayl44
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Jul. 31, 2007 4:01 pm

Mel, I'm not disagreeing with what you're saying in that these other countries are currently more appealing for various reasons. What I am saying is that the very thing that makes these countries more appealing, is also unsustainable. These policies absolutely will catch up with them and cuts will have to be made in all areas and in large quantities.

Of course if I invited you over to my house and offered you food, drinks, movies, a good time, over and over again, you'd find my place pretty appealing (assming you find these things fun & entertaining) and you'd be more inclined to come by more and more frequently because of all these "benefits".

But what you may not realize is that, for me to continue this lifestyle, I'd either need a huge raise or I'll just go into debt to keep organizing all of these events which in reality do nothing for me personally except improve my CURRENT lifestyle. I'd be doing nothing to help my FUTURE lifestyle, if anything I'd be guaranteeing myself a future of severe underconsumption and sacrifice in order to pay off all the debt I accumulated to enjoy myself right now.

These governments spend more money than they take in, that's just a simple fact. That's why they're running deficits. There are two solutions - cut spending and shrink the amount of resources needed from the private sector to fund these ever-growing departments, or increase taxes. And, again I'll use Denmark as an example, this creates a problem. When you realize that people earning over $70k/yr (USD equivalent) are being taxed at over 60%, these people take their skills and go somewhere that lets them keep more of their hard earned paycheck. Denmark spends all this money to provide excellent education for their population which doesn't want to be taxed into oblivion on the money they earn from the jobs they got that they got because of their "free" education. So, they relocate. And now Denmark is facing a huge labor shortage because they're chasing many of their productive citizens out of the country with high taxes.

The benefits of the education are absolutely very important, and it's such a nice idea to make it available "for free" to the entire population, but it's the normal human reaction to go with what's best for one's self PERSONALLY, and if moving across the border with your skills can provide you with nearly twice the paycheck for the same amount of work, then people WILL do that. I agree that Denmark is producing, at the hands of taxpayers, very competent, well-schooled people. The problem is that it doesn't do anything for Denmark. The system defeats itself because humans generally look for the best value, and if the same amount of labor investment can result in a much larger compensation in pay, that is the direction that humans will go in. Loyalty is not a strong foundation for an economy - assuming that people will stay loyal to a government that gave them free things at FIRST, at the expense of their earnings in the future, is like leaving your pampered, well-trained dog at home alone with a stack of T-bone steaks next to the dog food bowl and assuming that they'll remain untouched when you get back home.

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