I am a libertarian capitalist, who has made a reasonable amount of wealth. This article is good, but it ignores several institutional sources of "unfairness" in common parlance. The most obvious ones through history were slavery, government-sanctioned racism, widespread sexism and so on.
Leaving those things aside, today active government policy promotes borrowing vs saving (through Federal Reserve credit policy), and actively bails out Wall Street speculators - who made a mint during credit bubbles.
Common people aren't stupid if they feel at times "the system is stacked against me". It often is stacked against them. I am no socialist, but libertarians recognize that the fastest way to push people into socialism is to institutionalize unfairness this way.
I'll take a contrarian point of view, just for fun:
> But economists who debate certain issues about the perfection of markets are not debating, say, whether prices give incentives. Almost all economists recognize the core benefits of the market mechanism; they disagree only at the margin.
Sometimes, though, you wonder how marginal the 'margins' are. For instance, information asymmetry (http://en.wikipedia.org/wiki/Information_asymmetry). In a modern, advanced economy with complex products and services, who can really judge a product just by picking it up and looking at it? Even something so simple as the food we eat might be grown with toxic weedkillers, and we can't tell that just by picking it up and looking at it.
Not that I'm actually anti-market or free trade... far from it. I just like to push back, at times, it's healthy to question things.
We likely have more information about product quality than at any time in history through the Internet. This is also an argument for allowing legal action like the class action lawsuit to discourage faulty and negligent craftsmanship. Although, if that is an argument for or against market forces I'm not sure.
Sure, but having that information is not the same as being able to utilize it. I can't look up everything I buy every day, nor would I really want to. It makes things easier if I can basically trust that people aren't trying to rip me off. I think in most markets, it's in the interests of the vendors to not attempt that, but still, it's an interesting question, and I'm suspicious of all-or-nothing answers on any side (the market/government should take care of everything).
One thing I have wondered is if enterprise software (like CRM and ERP packages; process automation stuff) is actually helping the common man. The theory is that all this enterprise software makes large companies more efficient by cutting their costs. Then since these large companies are so competitive, they will pass on the savings to the consumer by cutting the prices of goods/services. Thus consumers can more easily afford higher quality lives.
But it seems like in the past 20 years, prices have stayed the same or gone up, employee salaries have stayed the same or gone down, but executive pay packages have sky rocketed. Does this mean that all the innovation and "wealth" created by enterprise software is just making the rich more money?
How can you say prices have stayed the same or gone up? In 1996 I paid $2300 for a 486 with 16mb of RAM. A month ago I paid only $1700 for a Core 2 Quad with 4gb of RAM. Seven years ago a 50 inch plasma cost $10k.
Even outside electronics, which experiences persistent price deflation (and hence rising volume), prices are not rising as fast as wages. In constant 1990 dollars, gasoline cost $1.10/gal in SF in 1987. This rose to $1.66 (1990 dollars) in 2007. (http://www.mtc.ca.gov/maps_and_data/datamart/stats/gasprice....) Median wages in the same period rose from $14,498.74 to $23.962.20. (http://www.ssa.gov/OACT/COLA/central.html) $1.66/$1.10 = ~1.51 ... $23,962.20/$14.498.74 = ~1.65. Even gas is getting cheaper.
As random anecdotal evidence on food. My dad told me he started his career 33 years ago at $4.10/hr, and finished it in 2006 at closer to $40/hr, at the same company, without climbing into upper management. When he started, a week's worth of groceries cost him about $25-30. Now, they cost around $75-100. A threefold increase in the cost of food, but a tenfold increase in his income.
Sure, the sticker price may go up, but over the long run in a growing economy, wages increase just as fast, if not faster.
To what prices are you referring? Computers, VCRs, air travel, refrigerators, TVs, dishwashers, books? People today can buy more of almost everything than they could 20 years ago.
The trouble with these ideologic arguments is that the hard questions are never debated.
For instance, my own opinion is that it is good that you can get rich by creating things that others need. On the other hand we know that inequality of income creates inequality of opportunity in the next generation. Which means that not everyone has the same opportunity to get rich by creating something that others need.
Capitalism isn't perfect but it's the best income redistribution method we've come up with combined with a small government tax. What scares me is that capitalism is probably still going to be around once scarcity of energy is eliminated on Earth -- it seems like copyright is keeping a market around for information when there is no reason for one to exist anymore.
Here are some contrarian positions (to go with those already presented):
The article currently refers to "a society's wealth" but not the distribution thereof. The American economy has grown significantly since 2000, for example, but the median wage has not. Is there any point to a growing economy when the median citizen is not benefiting from it?
There is a brief mention of the irrationality of voters who do not trust increasing market forces as a means of solving health care problems. However, one can argue that we have a more market based health care system than the systems of Western Europe, for example, but worse health outcomes. How can we be sure, then, that increasing market forces even more will improve the situation?
Health care, whether anyone likes it or not, can never be a free market. A free market requires willing buyers and sellers. Health-care consumers are uniformly unwilling. This prevents the occurrence of something you see in penny stock markets: The formation of a spread, in which buyers and sellers are unwilling to trade. In health care, the sellers can force a sale in such situations.
It's simply that economists often assume that all markets are (or potentially are) free, when that isn't the case. Some markets come close (items on eBay, stocks, commodities, currencies, etc) while others don't. If you start with a naturally "unfree" market, the same set of rules don't apply.
It's just economists' long-standing physics-envy coming through. They want to think their field has "laws of gravity" that are always true.
I've always found religious prohibitions on "usury" to be particularly disturbing. My parents are from Lebanon and are familiar with people who've gone through life with only cash transactions. The tight-knit communities there make things easier for people who won't pay interest, but even so, it must cool growth. Saving up to buy a car or a house in cash is no small order, and forget about entrepreneurship. (I wonder if applying to YC would be verboten...)
Leaving those things aside, today active government policy promotes borrowing vs saving (through Federal Reserve credit policy), and actively bails out Wall Street speculators - who made a mint during credit bubbles.
Common people aren't stupid if they feel at times "the system is stacked against me". It often is stacked against them. I am no socialist, but libertarians recognize that the fastest way to push people into socialism is to institutionalize unfairness this way.