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Economics: more or less government intervention?


Omar

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In the 2012 election thread,(http://forum.tip.it/topic/310206-2012-us-elections-president-obama-re-elected/) Donnie made the claim that government intervention was never desirable. I got into a discussion with him, and then we were shooed away. This new thread is meant to resume this discussion. Feel free to port the discussion about private vs. public health care here as well.

Matt: You want that eh? You want everything good for you. You want everything that's--falls off garbage can

Camera guy: Whoa, haha, are you okay dude?

Matt: You want anything funny that happens, don't you?

Camera guy: still laughing

Matt: You want the funny shit that happens here and there, you think it comes out of your [bleep]ing [wagon] pushes garbage can down, don't you? You think it's funny? It comes out of here! running towards Camera guy

Camera guy: runs away still laughing

Matt: You think the funny comes out of your mother[bleep]ing creativity? Comes out of Satan, mother[bleep]er! nn--ngh! pushes Camera guy down

Camera guy: Hoooholy [bleep]!

Matt: FUNNY ISN'T REAL! FUNNY ISN'T REAL!

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Is "just enough government intervention" an option?

Less is more!

99 dungeoneering achieved, thanks to everyone that celebrated with me!

 

♪♪ Don't interrupt me as I struggle to complete this thought
Have some respect for someone more forgetful than yourself ♪♪

♪♪ And I'm not done
And I won't be till my head falls off ♪♪

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Any point on the continuum is up for discussion.

Matt: You want that eh? You want everything good for you. You want everything that's--falls off garbage can

Camera guy: Whoa, haha, are you okay dude?

Matt: You want anything funny that happens, don't you?

Camera guy: still laughing

Matt: You want the funny shit that happens here and there, you think it comes out of your [bleep]ing [wagon] pushes garbage can down, don't you? You think it's funny? It comes out of here! running towards Camera guy

Camera guy: runs away still laughing

Matt: You think the funny comes out of your mother[bleep]ing creativity? Comes out of Satan, mother[bleep]er! nn--ngh! pushes Camera guy down

Camera guy: Hoooholy [bleep]!

Matt: FUNNY ISN'T REAL! FUNNY ISN'T REAL!

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My claims to cut back the US national debt were.

 

1.) Totally private health insurance would be relatively and absolutely cheaper and more accessible for the individual, including the poorest 10% and retired medicare recipients and minimum wage employees. Would also save over a trillion dollars annually from government spending.

 

2.) Military spending is unnecessary aside from nukes. I conceded to fallout and martyr countries making this unlikely to be an effective strategy. I still think the military could do with a 50% cut in spending. So about 400B+ cut.

 

3.) Market interventions are always bad. NO EXCEPTIONS. The great recession was caused by intervention and the bail outs only make things worse in the long run.

 

4.) Social security "fix". Pay out to everyone over 50 when they should receive it. Everyone 30-50 has the option of whether or not to pay into it and recieve benefits or opt out. Everyone 30 and younger is forced to get an IRA and life insurance in place of SS (if you believe people sould be forced ot save for retirement). Long term fix to a broken ponzy scheme, medium term cost to it.

 

5.) Release all prisoners convicted of a victimless crime. If you disagree with this one thats fine its almost not in the same category as everything else.

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Why do subsidies make prices higher? It runs counter to intuition; you'd think prices would drop.

Matt: You want that eh? You want everything good for you. You want everything that's--falls off garbage can

Camera guy: Whoa, haha, are you okay dude?

Matt: You want anything funny that happens, don't you?

Camera guy: still laughing

Matt: You want the funny shit that happens here and there, you think it comes out of your [bleep]ing [wagon] pushes garbage can down, don't you? You think it's funny? It comes out of here! running towards Camera guy

Camera guy: runs away still laughing

Matt: You think the funny comes out of your mother[bleep]ing creativity? Comes out of Satan, mother[bleep]er! nn--ngh! pushes Camera guy down

Camera guy: Hoooholy [bleep]!

Matt: FUNNY ISN'T REAL! FUNNY ISN'T REAL!

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Is "just enough government intervention" an option?

Less is more!

True, but too little and you've got plenty of opportunities for corruption. Kind of similar to too much in that regard :razz:

</annoyingly middle-of-the-road>

And too much means all Hell breaks loose when the leaders of the country are corrupt :P .

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Why do subsidies make prices higher? It runs counter to intuition; you'd think prices would drop.

 

It creates bubbles and it desensitizes institutions to good business practices.

 

Ex 1:

James J. Hill is a good example of this. While every transcontinental railroad in the US was subsidized his was not. What they would do is have really bad work and exploit the subsidy to the fullest. They got paid more to go up hills so they would instead of sticking a shorter route. A lot of Hill's competitors chose to go through scenic routes because of the subsidies. Hill since he was an actual market entrepreneur wanted the fastest route and best built railroads and Hill's railroad was the only one not to go out of business in the 1890's as a result of this.

 

Ex 2:

College subsidies, two different ones are at play. State paid subsidies and federal student loan guarantees. State subsidies are money given to colleges that they dont have to earn.

 

State funding for colleges. Colleges have more money to spend on whatever they want. These colleges make the schools very pretty looking and pay the teachers more. Neither directly correlate to college students having a better education and being worth the added cost. However students like these nicer schools and also forces private colleges to raise tuition to compete. The result of states trying to make college more accessible is that you make them less accessible because you raise the cost of competing.

 

Student loans. If a bank was giving out student loans (without all those laws that make it so you must pay even if you file bankruptcy or w/e) they would loan out money to students most likely to earn it back. Ie: lawyers, doctors, engineers would be the first people they would loan to. Now the government can loan directly to art majors and since everyone can afford college now they can charge more for different degrees then before. So if it was known that art isn't a profitable degree the school might've charged less for the classes. But when you cna loan to everyone this drives up the prices for each student.

 

 

On these if your still confused I might've stated too much on what is instead of why. I am kind of tired :D

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Not going to claim to be an expert here as I'm in my first college semester of Macroeconomics, but:

 

You want just enough to prevent natural monopolies from being dicks and unneeded monopolies from forming, along with making sure essential industries such as farms produce reliably.

Not much more than that though because government intervention causes waste.

^^General answer that doesn't address the hardest question: "Where do you draw that line?" But as a freshman in Business Management I don't know nearly enough to try to answer that. :sad:

 

I guess I'm really just repeating what Alg said.

The only difference between Hitler and the man next door who comes home and beats his kids every day is circumstance. The intent is the same-- to harm others.

[hide=Tifers say the darndest things]

I told her there was a secret method to doing it - and there is - but my once nimble and agile fingers were unable to perform because I was under the influence.

I would laugh, not hate. I'm a male. :(

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Donnie:

http://www.economics...l-monopoly.html

Also, how do we deal with climate change and other such tragedies of the commons or prisonner's dilemmas without top-down rules?

 

Tragedy of the commons (private) solutions:

 

Roads are a good example of tragedy of the common. Traffic and wear and tear sucks. A toll road solves that, if there is too much traffic raise the toll, if the fee is too high they lose money.

 

Farmers feeding animals is another example. If you have a common field and allow all the farmers to let their cattle eat the grass each wants to feed their cattle as much as possible so the other guys dont take it all. Easy solution is for someone to own the field and charge based on how much grass was eaten. Solves that problem and improves the health of the field.

 

Pollution is another example. Pollution in the early industrial revolution was treated as a property rights violation until the factory owners payed off the courts or lawmakers to remove those laws. Go back to those standards and thats yet another one solves on a free market (in this case a free market of law).

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Not going to claim to be an expert here as I'm in my first college semester of Macroeconomics, but:

 

You want just enough to prevent natural monopolies from being dicks and unneeded monopolies from forming, along with making sure essential industries such as farms produce reliably.

Not much more than that though because government intervention causes waste.

^^General answer that doesn't address the hardest question: "Where do you draw that line?" But as a freshman in Business Management I don't know nearly enough to try to answer that. :sad:

 

I guess I'm really just repeating what Alg said.

Don't worry about it, I don't know much either. If this interests you though, find some good blogs and such. There's a "100 blogs for economics students" list out there.

 

Donnie, what do you think about subsidies in agriculture? Europe is a great example of waste (so much milk/butter sitting in warehouses), but then again you don't want famine because of exogenous elements.

 

Would be cool if someone who has a more center/left position could provide some insight.

Matt: You want that eh? You want everything good for you. You want everything that's--falls off garbage can

Camera guy: Whoa, haha, are you okay dude?

Matt: You want anything funny that happens, don't you?

Camera guy: still laughing

Matt: You want the funny shit that happens here and there, you think it comes out of your [bleep]ing [wagon] pushes garbage can down, don't you? You think it's funny? It comes out of here! running towards Camera guy

Camera guy: runs away still laughing

Matt: You think the funny comes out of your mother[bleep]ing creativity? Comes out of Satan, mother[bleep]er! nn--ngh! pushes Camera guy down

Camera guy: Hoooholy [bleep]!

Matt: FUNNY ISN'T REAL! FUNNY ISN'T REAL!

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I would think it is a situation of quality over quantity. Depending on the situation, it may be that the market is able to arrive at the best possible setup on its own, and other times you want intervention to keep it from doing things like forming cartels and monopolies, since both are bad for the consumer. You also have have externalities where costs carry over to one side or the other without being transmitted by price (air pollution, your neighbors really awesome garden), which are often handled with special taxes and subsidies to help correct production to where it should be, and eliminate or reduce the deadweight loss.

 

On the other hand, any tax or subsidy in a perfect competition situation will instead create a deadweight loss.

 

 

Subsidies tend to come up in the production of public goods (like vaccines, where there is a benefit to people who don't get them as well as the people who do). It is a common problem that public goods will be under produced because of the discrepency between private demand and societal demand. The benefit to society is greater than the cost for some ammount of production beyond what the producer would naturally operate at, because the private demand is lower than the societal demand. A subsidy is used to get them to produce more, and eliminate the dead weight loss (this will also raise the price, but it is still more efficient up to the equilibrium point for the societal demand curve).

 

It's related to positive externalities, which is why you will also see subsidies in environmentally friendly alternative industries (green power).

 

EDIT: A little add on. It would be typical to not see the increased price. Generally a subsidy would cover enough production costs to allow for incresed production at a slightly lower price, because you also want people to buy it. And vaccines are a more interesting case because you can (in some countries) make them mandatory, though you actually don't want everyone to get them for certain viruses (everyone getting the flu shot is a waste. You want the people who will recover the slowest covered, and enough people in general to prevent people from passing it around, which is probably more like 1 in 7).

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cartels and monopolies only form with the governments help btw.

 

vaccines can be reverse engineered soon after creation plus if they exploit their monopoly people wont stay loyal to them after competitors come out. If costs time and money for company A to make the vaccine and if they [bleep] everyone over with it, peopel might boycott their other stuff for reverse engineered competitors.

 

green subsidies fail for all the same reasons as anything else. The only way you can fix pollution is to treat it as a property rights violation if someone pollutes your air.

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American Airlines was caught a while ago as the leader in a cartel scheme where the other airlines mutually and unoficcialy agreed to follow AA prices. AA would set prices, and the next day everyone else would match them. They didn't need the government to do that.

 

And obviously there are different approaches, though I would point out that a property rights violation is still massive government intervention (all laws are by definition, government intervention). Regulatiion by proxy. Your not officially legislating the pollution, but you set it up so that you can still control people in a round about way by putting up barriers to do anything else.

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This whole argument that market failure isn't possible because it's a prisoner's dilemma doesn't work. Prisoners themselves use top-down solutions to the prisoner's dilemma (you talk, the gang kills you). Companies have to be *very* near-sighted in order to think that temporary gain as a free rider (since every one else will drop the agreement) will outweigh long-term gains through organized collective action.

Matt: You want that eh? You want everything good for you. You want everything that's--falls off garbage can

Camera guy: Whoa, haha, are you okay dude?

Matt: You want anything funny that happens, don't you?

Camera guy: still laughing

Matt: You want the funny shit that happens here and there, you think it comes out of your [bleep]ing [wagon] pushes garbage can down, don't you? You think it's funny? It comes out of here! running towards Camera guy

Camera guy: runs away still laughing

Matt: You think the funny comes out of your mother[bleep]ing creativity? Comes out of Satan, mother[bleep]er! nn--ngh! pushes Camera guy down

Camera guy: Hoooholy [bleep]!

Matt: FUNNY ISN'T REAL! FUNNY ISN'T REAL!

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American Airlines was caught a while ago as the leader in a cartel scheme where the other airlines mutually and unoficcialy agreed to follow AA prices. AA would set prices, and the next day everyone else would match them. They didn't need the government to do that.

 

And obviously there are different approaches, though I would point out that a property rights violation is still massive government intervention (all laws are by definition, government intervention). Regulatiion by proxy. Your not officially legislating the pollution, but you set it up so that you can still control people in a round about way by putting up barriers to do anything else.

 

Its very unstable though if one backed down everyone else is screwed. It takes unanimous support to maintain a cartel. My argument is that governments are the only reason they can last. For example a barrier to entry (perhaps some shady lobbying that requires all newcomers to pay an extra billion to enter the game) making it nearly impossible to have more then the current number of airlines is whats needed to maintain a cartel. Otherwise someone notices high profits and enters the market and breaks it up. If that newcomer was smart they would do everything in their power to tell their customers what the other guys were doing and why you should boycott their business.

 

Im not against regulations. If someone dumped trash on my house I would like to be able to sue them. The free market solution to pollution from day 1 of the industrial revolution was that it was a property rights violation. But a massive government intervention interfered with the general will of the population at large. I dont believe in having some government regulating body to watch who is polluting or not, i believe in people living in a city and a mining company covers the city in smoke being able to enter in a class action suit against them.

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So if I litter, you want to be able to sue?

Matt: You want that eh? You want everything good for you. You want everything that's--falls off garbage can

Camera guy: Whoa, haha, are you okay dude?

Matt: You want anything funny that happens, don't you?

Camera guy: still laughing

Matt: You want the funny shit that happens here and there, you think it comes out of your [bleep]ing [wagon] pushes garbage can down, don't you? You think it's funny? It comes out of here! running towards Camera guy

Camera guy: runs away still laughing

Matt: You think the funny comes out of your mother[bleep]ing creativity? Comes out of Satan, mother[bleep]er! nn--ngh! pushes Camera guy down

Camera guy: Hoooholy [bleep]!

Matt: FUNNY ISN'T REAL! FUNNY ISN'T REAL!

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So if I litter, you want to be able to sue?

 

something small like that no. Maybe if you do it everyday and I have some proof you do. Potentially yes.

 

by trash I had something more like toxic waste in mind though

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So if I litter, you want to be able to sue?

There are limits to lawsuits. In America, $20.

 

I'll have to do more research on this, but I'm vaguely remembering a situation where someone's neighbor started building a factory that produced air pollution way back when. That someone successfully sued for the change in value of their property based on the air pollution.

 

______

 

The argument for a limited government comes down to a few basic principles, starting with individual responsibility, self reliance, and inalienable rights, and ending with a social contract in order to protect individuals from each other and external threats. The two basic competing views stem from ideas of individualism and collectivism.

 

A good question separating the views can be summarized with "What outcome is fair?"

The outcome is fair because the rules were fair.

The outcome is fair because the beginnings/results were fair.

 

Another question, "Is it moral to take from a has and give to a has not?"

 

Anyhow, if you don't agree with a particular set of principles, it's near impossible to reconcile the policy differences. As much as I hate bringing it up, it's very similar to the abortion debate. The views are incompatible, and if there is such a thing as absolute truth, one side is right and the other is wrong. Without an absolute scale it's impossible to be certain which is which, other than the fact that I know I'm always right. 8-)

99 dungeoneering achieved, thanks to everyone that celebrated with me!

 

♪♪ Don't interrupt me as I struggle to complete this thought
Have some respect for someone more forgetful than yourself ♪♪

♪♪ And I'm not done
And I won't be till my head falls off ♪♪

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Cf. Your signature.

Matt: You want that eh? You want everything good for you. You want everything that's--falls off garbage can

Camera guy: Whoa, haha, are you okay dude?

Matt: You want anything funny that happens, don't you?

Camera guy: still laughing

Matt: You want the funny shit that happens here and there, you think it comes out of your [bleep]ing [wagon] pushes garbage can down, don't you? You think it's funny? It comes out of here! running towards Camera guy

Camera guy: runs away still laughing

Matt: You think the funny comes out of your mother[bleep]ing creativity? Comes out of Satan, mother[bleep]er! nn--ngh! pushes Camera guy down

Camera guy: Hoooholy [bleep]!

Matt: FUNNY ISN'T REAL! FUNNY ISN'T REAL!

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I think we are on the same page now (or at least in the same book). I thought you were opposed to regulation, not just in favor of a different method.

 

Cartels are inherently unstable, but that doesn't meant can't work for significant amounts of time if the conditions are right. Leverage is probably the most sure way to keep them in line (blackmail), but logic will work as well. For as long as the long term loss of breaking the cartel is greater than the short term gain, the motivation is to abide the cartel. Most of them will last for several years (average is someplace north of 5), which is longer than anyone really wants to put up with them.

 

Also, once a cartel is broken and everyone uses the dominated strategy, there is motivation to reform the cartel as it will allow everyone to make more money, so it is not unheard of for a cartel to reform some time after breaking.

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So if I litter, you want to be able to sue?

There are limits to lawsuits. In America, $20.

 

I'll have to do more research on this, but I'm vaguely remembering a situation where someone's neighbor started building a factory that produced air pollution way back when. That someone successfully sued for the change in value of their property based on the air pollution.

 

______

 

The argument for a limited government comes down to a few basic principles, starting with individual responsibility, self reliance, and inalienable rights, and ending with a social contract in order to protect individuals from each other and external threats. The two basic competing views stem from ideas of individualism and collectivism.

 

A good question separating the views can be summarized with "What outcome is fair?"

The outcome is fair because the rules were fair.

The outcome is fair because the beginnings/results were fair.

 

Another question, "Is it moral to take from a has and give to a has not?"

 

Anyhow, if you don't agree with a particular set of principles, it's near impossible to reconcile the policy differences. As much as I hate bringing it up, it's very similar to the abortion debate. The views are incompatible, and if there is such a thing as absolute truth, one side is right and the other is wrong. Without an absolute scale it's impossible to be certain which is which, other than the fact that I know I'm always right. 8-)

Sometimes though the argument is between two policies which have the same result. More tax vs. less tax in light of Laffer curve for example I guess.

Matt: You want that eh? You want everything good for you. You want everything that's--falls off garbage can

Camera guy: Whoa, haha, are you okay dude?

Matt: You want anything funny that happens, don't you?

Camera guy: still laughing

Matt: You want the funny shit that happens here and there, you think it comes out of your [bleep]ing [wagon] pushes garbage can down, don't you? You think it's funny? It comes out of here! running towards Camera guy

Camera guy: runs away still laughing

Matt: You think the funny comes out of your mother[bleep]ing creativity? Comes out of Satan, mother[bleep]er! nn--ngh! pushes Camera guy down

Camera guy: Hoooholy [bleep]!

Matt: FUNNY ISN'T REAL! FUNNY ISN'T REAL!

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