Rope Merchants

Koch Fellow Rachel Balsham has a smart post over at Obernews on the adaptation of the market to the prevalent distaste for the market. After a number of interesting examples, she predicts that

given the prevalence of vague anti-market preferences among bobos, the rise of bobo culture will bring about more creative ways to be capitalist without the aftertaste of oppression. And eventually, maybe private enterprise won't taste so bad to the cultural elite.

I think this raises all sorts of interesting questions, few of which I will raise here.

I will say that Balsham's Conjecture strikes me as containing a deep tension between the expression of preference in the market and in the voting booth. If enough people have anti-market preferences, then the market will, soon enough, begin providing goods and services packaged in a manner that appeals to those preferences. And if enough people have anti-market preferences, they will vote for anti-market policy. They are in effect buying the same thing in both cases: self-narrative coherence.

noose.jpgRachel seems to think that once the market starts giving anti-market folks products that flatter their ideological self-conceptions, the edges will begin to rub off the classic anti-market tropes, and anti-market commitments will soften. But this might be backwards. The market may gratify anti-market preferences by selling products that affirm and entrench classic anti-market tropes, thus cementing or even sharpening anti-market preferences. These preferences, expressed electorally, are bad for the market.

As the Marxists were fond of saying, “The capitalist will sell you the rope with which to hang him.” Or something like that. What we have, then, if we turn Balsham's Conjecture on its head, is a sort of ideological tragedy of the commons, where entrepreneurs race to profit from products that undermine the cultural conditions of entrepreneurship.

Oh, the contradictions of capitalism!

  • The only thing that an economist can logically say about inequality is that the market, always tending toward equilibrium, always tends toward the inequalities that will bring it about, and that any attempt to reduce them, like any interference with the market, will be completely counterproductive, and not reduce but increase them.

    • Really? How’s that?

      • uknowbetter

        Putting poor people in large high-rises tended to make them poorer and worse off in the 60s-80s. That’s just one example.

  • Taking from the rich to give to the poor doesn’t just draw money but manpower downward upon the hierarchy of production and the social scale. For there must be a line between rich and poor, and, at that line, but one penny of income separating them. So, when you take it from the one to give to the other, you reverse their positions. The poor become rich and the rich poor, attracting manpower from the former occupations of the one to those of the other.

    To restore the manpower allocations it had preferred, the market must bid the net wages of the formerly rich back up and of the formerly poor back down. But, anticipating increasing rates of redistribution, and compensating not just for the current but for the greater anticipated rates, it bids the net wages of the formerly rich to even higher levels and of the poor to even lower levels than before, for differentials greater than before.

    Which is why taking from the rich to give to the poor can not reduce but only increase inequality and “social injustice.”

    • “For there must be a line between rich and poor, and, at that line, but one penny of income separating them…”

      Beautiful!

      • Must give credit where it’s due.

        I learned that from David Friedman, the great son of a great man.

  • Income inequality is problematic if that inequality was produced in a situation that was unfair.

    The powerful institutions in the U.S. (government, Media, universities, etc.) all feature exclusive access, usually maintained by financial barriers. If some Americans have better access to those institutions, and those institutions are instrumental in wealth aggregation, then that system is unfair.

    In short, the game is rigged. In a society this wealthy, we should not allow an economic system that let’s people go hungry, homeless and risk early death. These are the moral problems of inequality.

    • uknowbetter

      Instead, we should just give people shit for free and act like incentives don’t matter.

      Please.

  • That’s all the Left is, denial of human nature and plain facts.

    • Sandwichman

      Get over yourself, lesvic (and you too, uknowbetter). First you need to learn to distinguish between an ideal, a law and reality. Maybe your ideals are lovely (or maybe not). Calling them laws is wishful thinking. Assuming those imaginary laws govern the outcome of events in the real world is delusional.

      The laissez faire utopia — like the socialist utopia — is a utopia. It exists nowhere and never will because it is a dream… a scheme… a moonbeam.

      dg lesvic’s explication of “the line between rich and poor” with “but one penny of income separating them” was beautiful like a soap bubble — a delicate, transparent hymen of surface tension between air and air. It was an unintentional satire that took notions of hierarchy and entitlement to the “end of the line” and burst them. Anthropomorphic markets with ‘preferences’? Please, draw the cartoon!

  • Bologni Slicer,

    Ceteris pariblus, which means, all other conditions constant, price goes up as quantity demanded goes up. That’s a law of economics.

    Taking from the rich to give to the poor can not reduce but only increase inequality. That’s another one.

    If the “laissez faire utopia” could never exist, why must you outlaw it?

    Simple question:

    Is there a line between rich and poor?

    Simple question: at that line, does more than a penny of income separate them?

    Prediction:

    We won’t get a simple answer.

    • Sandwichman

      Simple answer 1: No. A line? Are you kidding?!! (prediction falsified)

      Simple answer 2: Since there is no “line” there is no “penny”.

      PS: see Sorites Paradox. Anyway it is quite possible for a “poor” person to have a higher income than a “rich” one.

      But, let’s get back to something we can agree on. I would be suspicious of “taking from the rich to give to the poor” because who is going to do the taking? The rich!

      There’s no need to outlaw a laissez faire utopia. It doesn’t exist and it won’t. There is only a need to distinguish between a wish, a law and a delusion.

  • Bologni Boy,

    Let me put it to you this way: are there rich and poor, or are we all equal?

    What difference does it make that a poor person may have a higher income than a rich person. The rich person may have no income at all. He may live entirely on his savings, and without even any interest on it. But that doesn’t change the fact that taking from the rich to give to the poor makes the poor poorer.

    You wrote:

    I would be suspicious of “taking from the rich to give to the poor” because who is going to do the taking? The rich!

    What difference does it make? Whoever does the taking, it will make the poor poorer.

    I don’t recall how the question of laissez faire got into this. For the sake of discussion, let’s grant everything you’ve said about it. The question remains: does taking from the rich to give to the poor make the poor reduce or increase income inequality?

  • I didn’t mean “make the poor reduce or increase income inequality. That was a typo. Of course, I just meant “reduce or increase…”

  • If, as it appears, we all agree now that taking from the rich to give to the poor cannot reduce but only increase inequality, what more must be said about it?

    • Sandwichman

      “what more must be said about it?”

      Only this: that the idea of “taking from the rich to give to the poor” is not the only way to approach the problem of inequality. Giving to the poor is ineffective to the extent that it doesn’t change their standard of living. Now “standard of living” is a complex notion that can’t be reduced to level of consumption or expenditure. It has to do with habits, customs and beliefs. Taking from the rich is a misnomer because it is the rich who do the actual taking and who they take from is the median income people (who are commonly referred to as “middle class”) , not the rich.

      It is, in fact, possible to do something about inequality without taking from the middle class and giving to poor. But it requires an understanding of economics quite different from the “rational actors with given preferences maximizing their utilities” hocus pocus. It requires, if you’ll pardon the expression, a more conservative understanding of economics. By more conservative, I don’t mean the right-wing, free enterprise, laissez faire Utopian success story clap trap that has mesmerized American know-it-alls and know-nothings at least since the gilded age. That more conservative view would readily dismiss the fiction that the predatory New Bureaucracy of CEOs who award themselves multi-million dollar salaries and bonuses are somehow being rewarded by “markets” (although I’m sure the boys and girls at Goldman Sachs would like you to keep believing that’s true).

      Let’s establish that there are some inequalities of income that are fruitful in that they create incentives and rewards for effort and achievement. Let’s also admit that their are other inequalities that simply reflect the pecuniary predation of slick operators. The key to reducing (unjust) inequality is to first distinguish between the two. Second, it is to discover what everyday habits of ordinary people contribute to the aggrandizement and institutionalization of the second kind of inequality. Thugs succeed not because they are tough and cynical but because people look up to their image of toughness and cynicism.

  • Baloney Boy,

    You can refute any thoerem on your own terms, but the test is to refute it on the author’s.

    Mine again: taking from the rich to give to the poor can not reduce but only increase income inequality.

    If you can not refute that, and must accept it, on its own terms, the question remains: what more need be said about inequality?

    • DMonteith

      The whole problem with your view has to do with your confusion of market processes with political processes.

      The manpower (or any other resource) allocations that a given market “prefers” depend on the existing patterns of distribution that the market operates within. If you change the distribution patterns, the market’s “preferred” allocation changes too. If under one pattern of distribution there is a large allocation of resources devoted to the gold plating and diamond encrusting of urinals there is no “market preference” for this state of affairs. A change in the pattern of distribution might lead the market to re-allocate urinal enhancement resources to flood prevention instead. There is no “preference” inherent *in the market itself* for an allocation oriented towards luxury toilets just as there was no “market preference” pushing allocation away from that before the change in distribution.

      Distribution is a reflection of the political fight over the returns to various factors of production (not just wages, which you seem fixated on in your original comment), not a reflection of market “preferences”. The shape of any particular distribution will largely influence the shape of the allocations observed in the market but, again, markets, since they don’t have minds, are indifferent to those particulars. Humans, on the other hand, are very concerned about distribution and the allocations that flow from it and spend a huge amount of time and energy trying to influence it.

      The appeal of just so stories about markets that explain huge disparities in circumstance as natural outcomes of impersonal and uncontrollable forces is undeniable, but it turns out that these outcomes are actually amenable to alteration by human decisions that have moral significance. Sorry about that.

    • Sandwichman

      What’s there to refute? There is no theorem (or “thoerem”). You made an assertion that is not a logical deduction from agreed, self-evident or established premises. You offered no evidence for your assertion. If you find such a procedure persuasive, there’s no way I could convince you otherwise using logic and evidence. Let’s not play games about “on its own terms.”

  • I can’t understand what you’re saying, so, let me try to translate it into what I could understand.

    You wrote,

    “The whole problem with your view has to do with your confusion of market processes with political processes.”

    What confusion? There are market wages and political distortions of them. Period.

    You wrote,

    “The manpower (or any other resource) allocations that a given market “prefers” depend on the existing patterns of distribution that the market operates within.”

    The manpower allocations that a market prefers depend upon its preferences.

    You wrote,

    “If you change the distribution patterns, the market’s “preferred” allocation changes too.”

    If you rob Peter to pay Paul, the market will be forced to cater more to Paul and less to Peter’s demands than previously.

    You wrote,

    “If under one pattern of distribution there is a large allocation of resources devoted to the gold plating and diamond encrusting of urinals there is no “market preference” for this state of affairs.”

    I cannot translate that into anything that makes sense to me. It seems to me that you’re saying that if there is one state of affairs, there will not be that state of affairs.

    You wrote,

    “A change in the pattern of distribution might lead the market to re-allocate urinal enhancement resources to flood prevention instead.”

    Robbing Peter to pay Paul may result in different demands upon the market.

    You wrote,

    “There is no ‘preference’ inherent *in the market itself’ for an allocation oriented towards luxury toilets just as there was no ‘market preference’ pushing allocation away from that before the change in distribution.”

    There is no inherent market preference for one thing over another.

    You wrote,

    “Distribution is a reflection of the political fight over the returns to various factors of production (not just wages, which you seem fixated on in your original comment), not a reflection of market “preferences”.

    I understand and agree with that just as it stands.

    You wrote,

    “The shape of any particular distribution will largely influence the shape of the allocations observed in the market…”

    Again, I agree.

    You went on,

    “but, again, markets, since they don’t have minds, are indifferent to those particulars. Humans, on the other hand, are very concerned about distribution and the allocations that flow from it and spend a huge amount of time and energy trying to influence it.”

    If markets are not comprised of human beings, what are they comprised of, apes?

    You wrote,

    “The appeal of just so stories about markets that explain huge disparities in circumstance as natural outcomes of impersonal and uncontrollable forces is undeniable, but it turns out that these outcomes are actually amenable to alteration by human decisions that have moral significance. Sorry about that.”

    Market forces are uncontrollable but are controllable. Sorry about that.

    You should be.

    • Sandwichman

      dg: I can’t understand what you’re saying…

      Why don’t you take proverbial your fingers out of your metaphorical ears, then, dg?

      Of course you “can’t understand” what DMonteith is saying, dg. Although it is perfectly lucid, it doesn’t fit into your prefabricated categorical boxes. Instead of translating what DMonteith said into the opposite of what he said (e.g. your “market forces are uncontrollable but are controllable”) why don’t you try emptying your mind of preconceptions, objections, rebuttals, come-backs and all the other obstacles to listening and… simply… listen. Even entertain — for the sake of argument — the idea that something you KNOW must be wrong might be right.

  • Chopped Liver,

    Good idea. I’ll ry that.

    Sorry. It doesn’t work.

  • I didn’t mean ry. I meant try.

  • DMonteith

    dg lesvic 5 days ago:

    To restore the manpower allocations it had preferred, the market must bid the net wages of the formerly rich back up and of the formerly poor back down.

    dg lesvic today:

    If you rob Peter to pay Paul, the market will be forced to cater more to Paul and less to Peter’s demands than previously.

    My job here is done.

  • Congratulations! You have indeed revealed a contradiction in my thinking. Even though it was my intention to interpret your statement rather than express my own thinking, my own thinking did creep into my interpretation of your statement, and it was indeed contrary to my previous thinking.

    My considered opinion, in light of all this, is the previous, not the later one.

    Thank you for your help.

    Let’s keep working together.

    .

    • DMonteith

      My considered opinion, in light of all this, is the previous, not the later one.

      Knock yourself out. Don’t let any of the following stop you:

      -a confusion of wages with wealth;
      -a charmingly naive belief that political realities/social norms are “distortions” rather than essential components of market prices;
      -the lack of a logical/plausible theory of market behavior;
      -the absence of any empirical evidence that redistribution always exacerbates inequality the way you claim it does.

      To the extent that you’re willing to let these considerations influence your position, I’m willing to keep working together on this.

      Cheers!

  • Let’s take my sins one at a time:

    “a confusion of wages with wealth”

    I have to plead guilty to that one. I do believe that wages are a component of wealth.

    “a charmingly naive belief that political realities/social norms are “distortions” rather than essential components of market prices”

    Again, if I understand you correctly, I must plead guilty. How could “political realities” and “social norms” at odds with market valuations and prices not distort them?

    “the lack of a logical/plausible theory of market behavior”

    How about this? The market, always tending toward equilibrium, always tends toward the optimum state of affairs, and, any interference with it, tending toward disequilibrium, tends toward a less than optimum state of affairs.

    How about this? Interference with the market is always counterproductive, bringing about the exact opposite state of affairs aimed at.

    How about this? For every action against the market, there is an opposite and more than equal reaction.

    How about this? Taking from the rich to give to the poor can not reduce but only increase income inequality and “social injustice.”

    My theory is that the market always tends toward equilibrium, that equilibrium is the

    “the absence of any empirical evidence that redistribution always exacerbates inequality the way you claim it does”

    Again, I plead guilty, inasmuch as I am not an historian but an economist.

    Jeers!