This is a eulogy on the laissez-faire approach to the market:

"There have been an awful lot of advances in economics, especially coming out of the application of the school of mathematics known as "games theory," that couldn't have been made without fast and inexpensive computer simulations.

". . . all too frequently, the market doesn't have TIME to fix itself. Suppose that even just one company cheats by finding a way to make its products more profitable in a way that harms the buyers or that downstreams costs to its non-customers, imposes costs on them involuntarily, and manages to keep this at all secret for even a matter of months, or at most a couple of years. It can then drive prices down to the point where none of its competitors are making any money. They go bankrupt; this company then buys them out or monopolizes the market.

"As one company cheats, therefore, there are morally crippling pressures on other companies to find ways to match the cheating company's prices; if anybody cheats, they all know within a matter of at most a few months that they have to cheat, too. Nor can they go public with their knowledge that the other company "must be" making deadly safety compromises with their product or dumping toxics onto an unsuspecting public. They know from their own business experience that that's the only way that the other company can be making that product, in the same market they are, with the same raw materials costs and vaguely similar wages and the same broadly-known business practices ... but they can't prove it in a court of law. It could take them years to find the evidence they'd need to protect themselves if they made that accusation and got sued for libel and slander. And they don't have years; they'll be out of business long before then, probably.

"Nor does it help that we had a wave of shareholders' rights lawsuits back in the 1970s and 1980s, all with the same conclusion: company boards of directors have a fiduciary duty to their shareholders to maximize shareholder return in the short run, and since it is a fiduciary duty, they can be sued for not doing it. If there are investors out there (and there are) who think that the company should take insane risks with public safety because their competitors are doing so and thereby returning more value to their shareholders, it doesn't even help if the company that would rather do the right thing and wait for the market to catch up is still somehow minimally profitable, or if it has the cash reserves to wait until the evidence comes out: they'll still get sued, there'll still be a hostile takeover of that company, and new management will be put in that has no such optimistic faith in the goodness of markets."

-- Modified on 7/25/2008 1:49:32 PM

that's it! All in a nutshell. Proves communism is the key to utopia. Just vote Hussein Osama, sit on ass, enjoy life and everything is free. All we were waiting for was a new generation of pseudo-liberals who stumbled onto the novel idea of letting your neighbor work two jobs because it is only fair that he support you in exchange for your telling him how to run his life.  Damn'd, life is good.

Thanks for posting this!

Two failed experiments in supply side economics - Reagan/BushI and BushII, both resulting in (near) recession, bank crashes, etc. - obviously have been failures.

I'm surprised that there isn't armed revolt over the clearly deliberate policies to enrich the rich and shrink the middle class. I'm surprised that Grover Norquist has any public exposure these days except as a target of derision.

The middle class, pretty much accidentally, largely got convinced in the late '90s that their financial future was in the stock market, with numbers shown that seemed to show that the market is your best long-term investment. In truth, if in 1998 you put your $50-100k in the average index fund, today, ten years later, you have exactly the same amount of money, accounting for inflation. If you invested in individual stocks, you have less money than you started with.

The insane, unsustainable worship of growth is specifically what is wrong with our economy, and it is what is wrong with healthcare, the auto (and general manufacturing) industry, and even with the rise in taxes and government spending that so-called conservatives rail about.

The difference between what our parents paid for medical care and what we do is simply what goes to the executive suite, board members and institutional shareholders, both in the medical institutions and the insurance businesses that they support. Bring some sanity back to the market and to employee compensation, and the majority of us might once again be able to afford to actually pay for our medical care and for American-made goods.

Besides using your personal preferences and ad hominum attacks, tell me how this could be incorrect?

De-regulation is dead. The next two or three elections are going to show that.  

something Bubba.    SOCIALISM SUCKS!!!!  COMMUNISM/SOCIALISM HAS BEEN TRIED IN EVERY WAY SHAPE AND SIZE AND FORM------AND IT FAILS EVERY TIME!!!!!

Why don't you take a few econ classes, and few history classes and read Milton Friedman's book:  Free to choose.  Then come back and post intelligently.

In the meantime,  go soak you head in a bucket of ice.  that might keep you from saying:  uh uh uh?? more taxes and more gove programs =-- uh yeah yeah that's it.  More gov programs and taxes duh uh yeah.

That's like saying getting oil out of the ground and into our cars is based on free market capitalism.

We've had regulation for a century.

Yeesh!

Whattaya tryin' ta say, we bureaucrats don't do nuthin'?

You're going on my list!

Many bureaucrats, in fact, didn't do nothin'. And here's a link that proves that many of them didn't do a thing, and illustrates how companies have been allowed by State Legislatures and Congress  to to set up  parallel, unregulated forms of the same business. In the mortgage industry, Loan Originators did the exact same thing as Mortgage Brokers, but they weren't regulated.

The result is the worst of all worlds. We have plenty of regulations and plenty of bureaucrats on the payroll, but they weren't watching anybody who needed watching. That was the form of compromised de-regulation under the Republicans and Democratic enablers. The compromise meant the taxpayer doesn't save any money in taxes while crooks are allowed to fleece them on a massive scale and then leave them with the bill at the end.

I realize that free-market blockheads will say, we just didn't deregulate enough, and that Dubya wasn't a real conservative, and that the Democrats still sabotaged everything, and that Clinton had already ruined the country for the following eight years of George Bush, and now Obama is going to ruin it before Conservatives could ever fix it . . .

Quit with the dumb excuses and bullshit, guys. If you couldn't apply real free market principles under Reagan and two Bush's, and a free-market centrist like Clinton (and spare me the complaints about Mr. wellfare reform and his wife, NAFTA) it's because a little taste of it was not sweet, and further de-regulation looked-- like a very stupid thing to do.

You still couldn't do it with control of Congress, most the State Legislatures, and most of the Governorships, and two presidents who had approval ratings of eighties and nineties.

Nor did massive deregulation work in Russia nor Pinochet's Chile which was about the closest thing to a "controlled" experiment you could ever get in economics, and it was spearheaded by the ultimate superteam of Free Marketer economists.

oking crack.

Chile's social security program was privatized and it's working out good.  That's what I heard.  but wait a minute.  What are you talking about?  By regulation, do you mean government controlling and running an industry----as in what that evil witch Hillary wanted to to w/healthcare???!!!!!

If that's what you mean, then you must change your mind and not be a lunatic. If that is not what you mean, then what do you mean?

of my buds got the shaft when Bubba downsized the SEC role?

Tell me an industry that isn't regulated and is behaving badly. I'll give you ten that are messed up and costing consumers more money because of feckless government.

-- Modified on 7/25/2008 2:40:29 PM

Why is the government always guilty till proved innocent, while business is considered innocent till proved guilty? I don't mean in a court of law, here, I mean just in reasoning. Why do the conservatives look for government sabotage or error when people who had the motive were in industry, or were industry people who infiltrated government.

Isn't regulated and is behaving badly? The link I started with already described how de-regulation was done, officially the mortgage industry wasn't unregulated, it was allowed to set up unregulated sectors and switch their investments there.

We've had a whole slew of deregulation nightmares. The biggest ongoing deregulation nightmare has been in the airline industry, which reached its fatal apex with 9/11. Of course, they've been putting half-assed regulations back on since the initial cluster fucks, which have been a further misery.  

The pharmaceutical industry behaves pretty badly. Ah, yes, you'll gauk at the all the regulation. But I can't call an industry that goes around doctors and sells to consumers "regulated" to any degree, nor could I say it's in any way stringent when drug companies do their own studies, and are allowed to throw out the studies that say their products are no more effective than placebos.  

If not that, there's our other patent medicine industry, the supplement industry. So many of those "supplements" are found to lack the ingredients that they are supposed to have, and scientists who have found this have been threatened into silence by the industry.  

Then, take the example below where fragrances in common products are unregulated and contain toxic chemicals, some of which have no safe exposure level.

I'm sorry you had a contingent of friends laid off by Clinton, don't know what you were trying to prove mentioning that, though.

the blogger who wrote this nonsense or you for believing it.

First off, Reaganomics is not synonymous with laissez-faire. If you don't know the distinction, you should not be posting about it.

Second, the blogger claims Phil Gramm "was one of the main intellectual architects of Reaganomics..."
Bullshit. When Reagan was elected back in 1980, Gramm was still a Democrat. He didn't even switch parties until Reagan was halfway through his first term, in 1983.

Third, he claims "hands-off-big-business had been Republican party dogma since the robber-baron days of the 1880s and '90s..." Total nonsense. Has he not even heard of Teddy Roosevelt, Republican president at the turn of the century and the most famous trust-buster of all time? Republicans used to be the populist party.

I couldn't even continue reading that garbage. What a waste. Just because someone parks a domain name and spews out a bunch of words on his personal blog, doesn't mean he has any idea what he is talking about.

This guy is a total idiot.

We must privatize the US POSTAL SYSTEM!!!!

Yes, the US gov should sell off our postal system.  It's a great big giant white elephant.

FedEx, UPS, DHL and others will do a much better job.  

If some lunatic wants to write a letter in Oregon and send it to Florida,  they should have to pay market price which is probably a couple bucks.

The improvement in mail service would prove my point.
Long live laissiez-faire.  Long live freedom.  Long live the free markets.  Yeah!

The mail carriers, mail clerks and mail handlers will get jobs with the aforementioned private sector shipping companies.

I agree postal system needs an overhaul, but, yet again, you do not seem to know much about what you are talking about.

The postal system is an independent agency with the executive branch. It has to get permission from a board to change prices. That is because it has a government-granted monopoly on first class mail. Assigning first class mail to FedEx will not be much of an improvement if the monopoly stays fixed. That is the source of the problem. Remove the priviledged monopoly on first class mail, and open it up for competition -- same as all other mail.

The problem though is that it simply is too cost prohibitive to deliver letters to far flung rural areas. Private companies will service densely populated areas only so others will go without service altogether, or else it will need to be heavily subsidized. There are huge economies of scale in mail delivery. Packages are different and costs reflect that.

I would agree with you in that I assume you don't accept government granting monopolies, even when its not the government doing the production directly. But even if open competition on first class mail is a success (which I think it would be) this proves nothing beyond the postal service itself. A more efficient competitive free market postal service does not prove laissez-faire works for everything. That's what's known as the 'Fallacy of Composition'. If something works in one situation, it doesn't mean it works in every situation.

To promote laissez-faire means you don't believe in the concept of externalities. Free markets are inefficient. Accept that. Its an empirical question as to whether regulated markets are more or less inefficient. Evidence suggests it differs by market, with many markets made worse by regulation, but certainly not all. And would you want private markets for police protection, courts, or the military? If not, don't go around yelling laissez-faire and "deregulate everything".

Perhaps you can also explain why someone in Oregon wanting to send their parents in Florida an anniversary card is a "lunatic".

And for the love of all that is holy, lay off the caps in your titles.

The Republicans, in all truth, were as close to being laissez-faire as one could realistically be.  

It isn't that the guy parks a domain name.I'm been reading him for a long time, and he's a mathematical whiz-- with Aspergers Syndrome. He could read a book in an hour. You're right, he is an idiot-- idiot savant, that is. I would have said everything he did myself, but since he said it first, and better, referring to game theory, and I felt I had to attribute it.

Reaganomics was, what? Reagan himself said, "The government isn't the solution, the government IS the problem." It was the beginning of the wider trend of deregulation. And if Republicans haven't gone Laissez-Faire yet, it's either because each of them have that one or two government programs that they actually like, or it is because they didn't have the guts.  

I looked it up just to make sure I had this right. Reaganomics had four pillars.

  1. reduce the growth of government spending, (actually Reagan called not cutting spending a failure of his Presidency)
  2. reduce marginal tax rates on income from labor and capital,
  3. REDUCE GOVERNMENT REGULATION OF THE ECONOMY
  4. control the money supply to reduce inflation.

Do you read that? REDUCE GOVERNMENT REGULATION OF THE ECONOMY. You're right, it wasn't Laissez-Faire per se. But followers, and in fact, many here, definitely believe that markets were generally better at regulating themselves, and if there's a problem, suspect government first. Now what is that?

About Republicans and business, you are taking the exception and declaring it the rule. The party of Ulysses Grant was EXTREMELY pro business. The Republicans had shelved Roosevelt in the VP office, hoping really, that his career would end in obscurity.  Then McKinnley, of course, was assassinated. Roosevelt's unexpected presidency represented a great change in the Republican party-- which up till then, was EXTREMELY pro-business. This was a departure. Roosevelt ran against Taft and destroyed the Republicans because Taft had taken the party back to its pro-business roots. In other words, Roosevelt betrayed his party, rightly or wrongly.  

You give a snap shot of Roosevelt to prove a rule, when he was an exception-- an exceptional exception. Truth is, most of what he did was UNPOPULAR in his own party, but the man was a force of nature.

You make largely the same error with Phil Gramm; switch parties in 1983 did he? Actually, he came out of the closet as a Republican in 1983, but you fail to note that by 1981, for lack of a better term, he was a Republican double-agent:

"In 1981, Gramm attended Democratic Caucus budget meetings and then secretly shared their strategy with Republicans to help pass newly inaugurated President Ronald Reagan's budget.[citation needed] In response, the House Democratic leadership stripped him of his position on the committee."

http://en.wikipedia.org/wiki/Phil_Gramm

Moreover, his switch in parties midway in Reagan's term doesn't contradict anything in the blog. Put your attention, instead, on what Gramm did as an academic, as an economist, that is, before he was in public office, and how that influenced Reagan, who was at the time, a DEMOCRAT himself!

You should really check more closely on what you're saying.

-- Modified on 7/26/2008 5:29:05 PM

-- Modified on 7/26/2008 5:35:13 PM

-- Modified on 7/26/2008 5:56:57 PM

On every single point you try to make.
Not much time, so I'll be brief.

1.Roosevelt was not an exception within the Republican Party. The Sherman Anti-Trust Act of 1890 was named after John Sherman, a Republican, and signed into law by Harrison, a Republican president.  As I stated, Republicans were the populists at the time, and remained that way until well after the turn of the century.

2. Nothing you said about Gramm relates to him being the so-called "architect" of Reaganomics. He was not. He was not even officially a member of the party until halfway through Reagan's first term. As stated. He supported Reagan's plan --- he did not create it.

3. Reaganomics is simply not laissez-faire. You don't understand the difference. Laissez-faire is consistent with libertarianism. Not Reaganomics. You can connect laissez-faire to Ron Paul or Barry Goldwater, but not Reagan. Reduced regulation is simply not laissez-faire. That's like saying an obese person who wants to lose a few pounds is bulimic. Laissez-faire is unregulated markets. Not reduced regulation. Nothing in Reaganomics ever called for elimination of Dept of Labor, ICC, SEC, etc. Reduction is not equivalent to elimination.

4. I'm not even going to bother about the game theory stuff. He may know about mathematics, perhaps, but he's relatively clueless on economics. The role of game theory in economics is vastly different than ascribed to.

Here's another web page, famoustexans.com, that pretty much confirms exactly what infamous brad says about Gramm. Here's a direct quote:

"After Gramm co-authored President Reagan's economic program, he lost his seat on the House Budget Committee."

Why would a Democrat do such a thing? The site answers that, too: "The long-standing state tradition was for right-wing Texans to pose as Democrats to get elected."

As for Republicans under Roosevelt, it's a red herring. The point is that Republicans have been the party of big business as long as we've been alive. That's what matters here. A party can shed its skin a lot in 100 years.

Yes, I know the difference between Reaganomics and Laissez-Faire. I hold, though, that Reagan's program was meant as the first of successive gradual steps toward laissez-faire. You mention that Goldwater would be considered a libertarian. Republicans praise Goldwater as the Founding Father of modern conservatives and the ideological fore-runner to Reagan.

"As for Republicans under Roosevelt, it's a red herring. The point is that Republicans have been the party of big business as long as we've been alive. That's what matters here. A party can shed its skin a lot in 100 years."

I never said any different. The idiot you quoted from on your original post made the claim that GOP was purely pro-business since 1880, and I refuted that. He simply doesn't know political history. It was one of several errors he made at the very beginning of his blog that I pointed out. I never said GOP is not NOW generally pro-business. I don't know about you, but I've not been alive since 1880 so your point is moot.

And again, and for the last time, Gramm did NOT co-author Reagan's plan when Reagan first got elected. Period. He supported it, and his support is what got him stripped of his committee status by the Dems. There's a world of difference between support and authorship.

Likewise, moving toward laissez-faire is not the same as laissez-faire. If I move across the street, I'm further west and now closer to Tennessee, but I'm certainly not in Tennessee. And quite frankly, unless someone is a Libertarian, they do not support pure laissez-faire. Wanting a reduction in regulations is fundamentally different from wanting the elimination of all regulation in every single market. Reagan NEVER espoused that. Ever. So if you really do know the difference as you claim to, stop equating Reaganomics with laissez-faire.

You are slipping. You forgot your alias on your last post.

My point was moot. I was saying your point was moot.

Really, I don't consider the guy to be an expert, the way a professor of history is an expert. I expect that he makes some errors. But lets look at this:

Grant: pro-business
Hayes: pro-business
Arthur: balanced
Harrison: pro-business/populist
Mckinley: pro-business

I'll point out that the Sherman Anti-Trust Act was arguably passed to protect trade that the trusts stifled. It was neither pro- nor anti-business. It was anti-trust. This seems different from the populists were farmers who were more concerned about the coinage, the banking system, tariffs, and how each one gave them the shaft. It might be considered a parallel movement with the trade unions. However, it seems they were separate movements with a few common concerns.

It seems that populists had their own organizations and parties, and didn't have much use for the Republicans or Democrats till the time Roosevelt.  

After a bit of study, no I don't see Republicans as populists till Theodore Roosevelt.

Maybe infamousbrad flubbed a few things, but for the most part, he is right.

About Gramm: again, the key is in his academic work and any influence it might have had on Reagan, but since I found another website that says he did author Reagan's economic plan, it seems that there is a myth that he did. In other words, you could understand the mistake.

About laissez-faire, that's all, please. I know what you're saying. I know what you're trying to correct. You've corrected it.

I have to add fuel to the fire on this point though: if Reaganomics was about reduced regulation, then it was just a gimmick. I could see reconsidering regulations and correcting them when they weren't working, or doing away with them if they were proved failures, but I can't respect a policy of just REDUCING regulations.

Why? Because before you've looked at an industry and its regulations, how can you say reducing  regulations is the responsible thing?

The Federal Government is Constitutionally obligated to run the Postal Service. "Establish post offices and post roads." They didn't think it could be done by private companies.

There have already been privatization experiments. I'm skeptical that it could ever work. . . well. Obviously it could work badly, and then be said to work better than what we have now, without actually being true.  

I remember when deregulated airlines "worked." As little as it was working, it then deteriorated into the clusterfuck that we see today. I remember experts saying how much the consumer was saving on fares, compared with the industry we no longer had.

You don't know what was going on 100 years ago, and now you are going to try your hand at 230 years ago?

A little historical perspective please. At the time of the Constitutional Convention, all internal communication was via post. Not even the telegraph had yet been developed. For security reasons, it was necessary to have government run postal service. Technology has taken care of that. Do you really think that national security information is sent via first class mail today?

As for privatization of postal service, it won't work unless the monopoly priviledge is removed. But look at New Zealand's reforms. Doesn't guarantee success here, but its supportive of the concept.