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Adam Smith
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Maryland, USA
Jan 1970
time: 00:17
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Jeeeez....where to start.....
First place, most of you are barking up the wrong tree about Enron. The failure of Enron was not caused by the relationship between Enron and the government. The problem is the relationship between the management of Enron and its stockholders / owners. Enron management was robbing the company blind with various pyramid scheems designed to book profits and hide losses, and the owners, in whose interest management is supposedly working, apparently did not have sufficient information about operations to detect, prevent, or correct this. This is what is known in economics as an agency problem. How do the owners get their agents (management) to act in the owner's interests (long term profits) rather than in mangement's interests (high salaries, big offices, fast cars, whatever)? Government agencies such as the SEC are one step removed from the source of theproblem, making it even harder for them to get information than it is for the shareholders, as Roland's post suggests. Active involvement by large, interested shareholders such as large retirement systems and mutual funds is a step in the right direction.
Second, Adam Smith argued for laissez faire in preference to the existing mercantilist system. He specifically recognized that market failures may exist in a laissez faire economy. Monopolies, defense, and pollution from neighbors chimneys (IIRC) are specifically mentioned in Wealth of Nations. Smith argued against government involvement in many of these cases due to his views on personal liberty, not on the grounds that it would make the economy less efficient.
Third, the statement that the advent of corporations limited personal liability is literally correct, but the effect is exactly the opposite of what people are arguing. Corporations were developed in order to make it easier to raise capital. They do this in two ways. First, the corporation survives the death of any individual person associated with it, meaning that existing contracts need not be renegotiated. Second, if a tort is committed, the corporation is sued not the individual. While this lets the individual off the hook for liability, it exposes the corporation, which has much larger assets than any individual, to liability. By allowing the corporation to be sued, plaintifs are more likely to recieve compensation than if only individuals could be sued. Investors are more likely to recover their money, again making it easier to raise capital.
Lastly, who says markets cant work with respect to schools, airline security, HMO'S? HMO's have worked very well in certain areas. Western New York, Wisconsin, and Northern California come to mind. IIRC, Harvard, Yale, Princeton, Stanford, Chicago are all for-profit schools, not to mention many outstanding private primary and secondary schools. As for airline security, El Al is probalby target number on e on every hijackers list, but has never had a hijack. Why? Their customers demand, and are willing to pay for, a very high level of security. (edit: the addional security is provided primarily by the airline, not by the government. In other words, El AL provides a much higher level of security than other carries have at JFK or other major airports outside Israel.)
I probably forgot six other points to make, but that's enough for now.
Last edited by Adam Smith on 24-01-2002 at 00:02
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Libertarian
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quote:
I have yet to see a decent libertarian solution to the airline security problem. |
I've never understood this.
So you believe that people are too stupid to select a safer airline, given the freedom to do so, and given the airline's freedom to discriminately select its passengers — yet you believe they are smart enough to elect professional racketeers to make their decisions for them.
Bizarre.
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Hoek
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of knock-you-off-your-ass chili
Jan 1970
time: 00:17
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El Al is government owned, government run. They have a monopoly on Air service to and from Israel, and they have the resources of the Israeli government at their disposal. The customers have no choice whether or not to be safe.
The other problem with Enron is that they bilked their own empoloyees out of their retirement money. Granted, they know the risk involved in 401K's, but by Enron falsified their earnings reports, and then barred employees from selling their stock. Therefore, employees were totally unprotected from the management's shananagens.
I know that Adam Smith argued for more government involvement than most libertarians would permit, but my argument with regards to the environment are in opposition to modern, not classical libertarianism. My criticism of Smith's theories are that while some fundamental truths apply (supply and demand), the industrial (and now the information) revolutions add very complex dynamics to our economic systems. Good examples of these complex dynamics inculde things such as energy trading, waged workers, "company towns", corporate paternalism, and the such. Smith's theories work best in simpler economic systems, where the sweat of your brow really was the best way to make a good living. As the society grows and becomes more complex, it requires government to grow to meet these demands.
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Libertarian
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You're more slippery than a greased cat. Your question was answered. You keep changing the subject.
The necessary complexity of government is directly proportional to how you define it. If its sole role is to secure the rights of its citizens, then it need "grow" toward one purpose only. You can't use a dicto simpliciter to prove your point.
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Libertarian
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You know what? The whole premise of this thread is kooky. It's like asking Marxists to step up and defend Stalin.
Feh.
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Libertarian
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Gah. I'm debating with a man who wonders whether I'm familiar with Chaos Theory. Please don't be patronizing. The relevant theory in this instance is an economic one, Hayek's Theory of Spontaneous Order.
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Hoek
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of knock-you-off-your-ass chili
Jan 1970
time: 00:17
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Yes, Chaos Theory is indeed a law. Take any chemistry class, and you'll hear about how disorder is always increasing in the universe. This applies to human society also. Look, for instance, at the exponential increase in the human population. Look at the exponential increase of computing power in computers. Look at the exponential nature of any technology. Look at any economic indicators, and you'll see their polynomial nature if it is represented graphically. That's complex, I know, but let me try to simplify my argument: If a town has one hundred citizens, one sheriff could probably do a decent job enforcing the law. In a few years, lt's say the population has grown to 200. The police department would have to grow as well. The same is applicable for any number of functions. Additionally, as technology grows, government must take on even more functions. While our government may be slightly larger than needed, if you look at any other government's size, you'll see similar statistics. And now, with the advent of computers, the government payroll can shrink (by moving human functions to computer functions) while not actually reducing the level of governance.
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Libertarian
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Chaos Theory is the mathematical analysis of nonlinear systems. Here's a brief introductory essay from Duke University.
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Wraith
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Austin, Texas, USA
Aug 1999
time: 23:17
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--"Not all of us do."
Good thing I said "several" instead of "all" then 
--"Even with huge fines against the airport security company, it still didn't get it right."
And you fail to understand what part the government played in that failure.
I would love to see where you got that 70% stat, by the way, not to mention when it was gathered.
--"Protection from death, protection from environmental ruin, protection from extreme poverty, protection from poor health coverage."
The government cannot protect you from death. The most you get from the government is a promise to try and try track down your killer if you're murdered (there are several instructive Supreme Court cases on this subject, btw).
Environmental ruin. Gods, will you stop with the sensationalims. I do agree that the government is there to protect property rights (protecting rights is its sole just function), but I know that's not what you mean.
Protection from extreme poverty is not the government's job. That's what charities are for.
Protection from poor health care. Gods, look, health care is not and can never be a right. Nor can having a job be a right, nor can being fed be a right. Government should stay out of this.
--"the last ice age reversed in the course of about 25 years"
 Okay, I am not even going to bother arguing this issue with you. There's obviously no point.
--"and then barred employees from selling their stock."
As I have already (and repeatedly) stated, this does not appear to be the case according to more recent reports. If they did, it would still be fraud, but at least leave the problems to what they have done.
--"As the society grows and becomes more complex, it requires government to grow to meet these demands."
Ah. The magic government argument. I'm sorry, but government is made up of individuals. If they can't be trusted to run their own lives, as you claim, then how can they be trusted to run other people's lives?
--"Did it work?"
Hard to say, since we didn't allow it to happen.
--"I'm not "changing the subject,""
Dropping context, changing the subject, ignoring answers, whatever you want to call it.
--"The airline security tycoons?"
 Okay, now there's a good line. I'll have to remember this one. I think this is a good candidate for my quote file, really. I mean, we all know about the airline security tycoons, right? I mean, Carnegie, Rockefeller... wait a sec...
--"Why don't modern libertarians?"
If you would damn well stop ignoring my comments, you would stop saying this. Minarchist is not the same as anarchist. Your earlier comment about privitizing law enforcement was totally uncalled for, especially after I said specifically that police are one of the things libertarians see as a just government function.
--"If not, I'll explain later, but basically chaos theory helps explain why governments are always going to grow"
Chaos theory has diddly to do with the growth of government. There are other, just as fundamental, principles behind this. One of them is known as "protecting your power base".
The increasing complexity of things is exactly why government is increasingly failing. Government is, pretty much by definition, slow to change. The free market is very quick to change; there is a large financial incentive for doing so in ways that match what's going on in society. Your argument is bogus.
--" Take any chemistry class, and you'll hear about how disorder is always increasing in the universe."
Which would be entroy (or the second law of thermodynamics, if you prefer), not chaos theory, which is something else entirely.
Wraith
I'll try being nicer if you'll try being smarter.
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Adam Smith
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Maryland, USA
Jan 1970
time: 00:17
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The arguments on this thread are just going all over the map. Just a couple comments.
First, Adam Smith laid out the basic framework. He recognized taht markets can and do fail. In the succeeding 226 years economists have identified further possible market failures, and proposed solutions for them. These solutions do not necessarily involve government performing the function in question.
Second, it is not at all clear what the mechanism of market failure is in the airline security case. People on this thread seem to have variously argued that
1. Private security providers will cut security in the interest of increasing profits;
2. Airlines do not have the resources to provide adequate security;
3. Consumers do not have a choice between more and less secure airlines;
4. Individual firms may not provide security since consumers may balk at paying higher prices.
Putting aside the fact that some of these arguments are mutually contradictory, the argument appears to boil down to
quote:
What makes enforcing FAA regulations so inherently different than the police enforcing other laws? |
The answer is that this is a case where the solution does not necessarily involve government. While most individuals are in no position to hire their own police forces, most airlines are capable of and have a financial interest in hiring their own security forces and ensuring that they do a good job, as indicated by the El Al example. (Note also that while most individuals are in no position to hire their own police forces, they can often choose between living in towns that have better or worse police forces, higher or lower crime rates.)
(edit: removing the Curse of Apolyton)
Last edited by Adam Smith on 24-01-2002 at 01:53
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The Eliminator
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Eliminatorville
Nov 2001
time: 23:17
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Hoek, I recommend that you read a book called "Capitalism and Freedom" by Milton Friedman. Its a short book, you can read it in an evening, and I guarantee it will promote you look differently at the situations that you are arguing for.
Slippery as a greased cat indeed. Free markets are the answer to most of the problems we are facing right now. Modern governments are confused in their role, they have gone from faciliators to owners. The biggest problem facing the North American economy is the increased desire of our governments to crowd out private enterprise.
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Libertarian
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quote:
The arguments on this thread are just going all over the map. |
Amen to that. Chaos Theory? Entropy? Next thing you know, they'll invoke the Alvarez Hypothesis.
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Libertarian
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quote:
Modern governments are confused in their role, they have gone from [facilitators] to owners. |
Well said. Rights, of course, are merely an attribute of ownership. The de facto owner of property is whoever calls the shots with respect to it. That's true no matter who the de jure owner is. And the owner is always the prescriptor of rights.
Rights are meaningless outside the concept of property.
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Libertarian
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No problem. Take all the time you need to get your ducks in a row, and then get back to us.
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Hoek
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of knock-you-off-your-ass chili
Jan 1970
time: 00:17
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People do not have the ability to directly voice their security concerns through their dollars since there is a step in between. Airlines hired security guards, and people paid for the tickets. The voice of not giving an airline your money is not always a clear indication of what's needed, and beyond that, the system is essentially flawed in that, for instance, police forces do what is needed to enforce the law, whereas private security firms will do the minimum needed to operate at a profit. This incrementalism can be avoided by federalizing the security forces. Additionally, it provides a uniformity in security from place to place.
In terms of rights, I think government's role should be prioritized as follows (which is why it was listed in this order): life, liberty, and property. If somebody's liberty threatens another's life, then that liberty should not be allowed. If somebody's property threatens somebody else's liberty or life, then it must be taken away. I put the highest emphasis on the right to life because property and liberty can come and go, but you only have one shot at life.
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Libertarian
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Your life is your very first property.
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Wraith
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Austin, Texas, USA
Aug 1999
time: 23:17
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--"The arguments on this thread are just going all over the map"
Non-linear, far from equilibrium, and strangely attracted.
Since we're delving into math theories...
--"most airlines are capable of and have a financial interest in hiring their own security forces"
In this case they were not allowed to do so, however. I want to cover this in a bit.
--"much of this argument is based on the first chapter of "the age of spiritual machines""
I really hope you're basing your politics on more than one chapter in a book
--"but those who have studied this would know a little better than you."
Yes, and most of those people agree with me. The people most vocal in support of it have little to no knowledge in the subject. Most of those have large vested interests in seeing the hoax perpetuated. Eco-scares are a huge, profitable industry. Implementing something like Kyoto could be the first step towards turning it into an even more profitable one.
--"Airlines hired security guards, and people paid for the tickets."
You need to understand the way airline security worked before the federalization (not that it's changed yet). At an airport, all airlines that operate there must pay into a security fund. This is used to pay for the airport security. Any airline deciding it wanted greater security was either out of luck or had to pay to also incresae the security of all of its rivals. This is a large disincentive to improved security.
In addition, federal standards ensured a very homogenous security level. Your "increased uniformity" was already in place. In addition, this kind of uniformity is a bad thing from a security standpoint. If every airport is the same, then anyone trying to violate the security does not have to worry about the little differences that can trip them up. They only have to learn and counter a single system.
The point about federal standards for security nullifies the voting with bucks point. Passengers have two options: accept the federally mandated level of security, along with its expenses and delays, or not fly. They could not choose between multiple levels of security, and in some cases can not readily choose not to fly (international business trips, for instance). There was no market freedom for the airlines, either, thanks to the security pool I mentioned above.
--"If somebody's liberty threatens another's life, then that liberty should not be allowed."
But without liberty, life is pretty meaningless. This argument could easily be used to make slaves of everyone in the country (and, really, is in the process of doing so).
The right to life is the most fundamental of all rights, but that does not mean the government can guarantee it. All the government can do is set forth laws and protections to keep people from violating it. This means that you should be protected from murders, but it does not mean that the government should give you food and shelter.
You cannot justify the violation of one right by saying it's to protect another, because rights by definition cannot function in that manner.
Wraith
The big print giveth, and the small print taketh away
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23-01-2002 23:57
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