nrh@inmet.UUCP (10/10/86)
>/* Written 9:00 pm Oct 1, 1986 by mangoe@umcp-cs.UUCP in inmet:talk.pol.misc */ >/* ---------- "Just Call Me An Economic Heretic" ---------- */ >Rather than begin with a lot of one-line repartee, I'll summarize the first >portion of the responses. Melissa Silvestre argues that government is >inherently less efficient and incorrectly reflects "demand". I am not >convinced of the first, and the second is irrelevant, because it assumes >that obeying economic "necessity" is what we should want everything to do. >Having gotten that off our chests, we can continue: No, no, no... Private action doesn't obey economic necessity, but rather private motives. Private action is *constrained* by economic necessity. By taxing people the government renders it less possible to carry out those private actions -- whether those actions are economically motivated or not. You may not be "convinced" of the first argument, that a government is inherently less constrained to obey the force of demand, but it's possibly because you seem to be ill-informed economically. Do you know of any firms that stay in business that are free to be as rude to their customers as the government is? For goodness sakes! Ask someone you trust who knows something about government and economics. > >Melissa Silvestre writes: > >>> The >>>parenthetical remark seems awfully naive, too. Large corporations quite >>>commonly contain huge bureaucracies as well. Management seems to have this >>>fatal tendency for this kind of aggrandizement, whether governmental or >>>business. > >>Again, the point is that a business always has an incentive to be >>as efficient as possible (competition), but that a government does >>not. Government only has a few watchdog groups which aren't terribly >>effective because they have no enforcing power. The free market >>has built-in enforcement. > >THis is yet another spurious economic argument based on one-man businesses. Er, I doubt that very much. Or perhaps you've never faced (or understood) the nature of a Board of Directors. >In a large corporation, the economic pressures motivating the actions of >managers need not have anything to do with the survival of the company-- >they may even work against it. Your retreat to the term "may" is noted. By the way, I believe it was Galbraith in "The New Industrial State" who made this argument most forcefully: credit where credit is due, unless, of course, you wish to claim the idea was original? Be that as it may, it begs the question: the counter-productive actions of managers RETARD the ability of the firm to compete and ultimately lead to future losses, *IF* they are allowed to go through with such actions. The notion applies with equal force to the hypothetical one-man firm: he MAY decide he needs more people, but he pays for it by raising his costs. In modern corporations, my impression is that exactly the sort of jockeying you portray goes on to some extent, but is countered by the heartfelt wish (and constantly felt authority) of the Board of Directors, pervasive stock-ownership in the company, profit-sharing, and the fact that the company doesn't stay in business long unless the tendencies are somehow countered. This is not, of course, to say that firms cannot make mistakes, but the mistakes are more subtle than hiring a bunch of people on a whim, and tend to be wrong actions justified for the greater corporate good. An article in the October Datamation details such a mistaken decision by IBM: to render their various system lines incompatible, so as to make enormous profit on upgrades while still being able to sell introductory models cheaply. (Sorry if I'm not explaining it well, but see the October Datamation for details). The point is that such an action could not have been done without the tacit acceptance of the stockholders representatives, and would not have been considered except that it appeared to offer a chance for great profit (the modern downside, of course, is that commmunication with IBM systems is, putting it very politely, difficult). >Once this assumption is jetisonned, it >suddenly becomes very easy to explain the sorry state of american business-- >it is because economic pressures no longer drive the corporations into >fruitful competition, because the managers find it against their own >personal interests. Er, no. This sort of thing *can* occur, especially in extremely large outfits like, say, GM, but I do not think one finds it to the extent needed for your argument in most firms. No fruitful competition? Have you noticed the prices on cars recently? On stereos? On computers? Also, the argument you advance doesn't explain the Halcyon state of American industry in years past: managers faced the same incentives, directors had the same blind spots: what changed? A side-note. The sort of "Galbraithian Alienation" is related to a notion I've heard about why there seems to be a limitation on the tendency of "natural monopolies" to become real monopolies. Too many layers of management render a firm inefficient, but are needed to administer the larger apparatus. The more layers, the greater freedom an individual manager may have to hide his inefficiency. >>>>For example, the Fed pays those traffic controllers with money it >>>>"stole" via taxes from the private sector. The private sector, had it >>>>been allowed to keep that money, would have generated the same number >>>>of jobs with it (and if the need (read: demand) is there, maybe even the >>>>same jobs). > >>>This of course depends upon the economic fallacy that demand and need are >>>the same thing. > >>When you are talking about the job side of the market, they are. If >>a company "needs" more employees, that means that they have determined >>that it will benefit the company economically to hire more. Thus the >>market sees the increased demand. Unlike govt, companies take into >>account the costs of hiring new people when deciding if hiring new >>people is economically sound. > >Or it means that a manager decided he needs more people for reasons of his >own, reasons which need not have anything to do with the furtherance of the >company. Charles, I suggest you go to a company head somewhere, join up, work your way into middle management, and then try and hire some people. You'll notice that you have to justify the action. You don't simply DECIDE to hire more people for fun: you must justify it. If you are DELEGATED that power, it is because somebody higher up TRUSTED you to make a decision for the good of the company. Not that they can't be mistaken, but it is NOT the usual case that one may simply hire a bunch of people "for one's own purposes". >>> Wants and demand aren't even the same thing. To have demand, >>>there has to be both want and a supply of wealth to back it up. The poor >>>have a greater need for medical care than the rich, but the latter have the >>>wealth; guess whose wants are reflected in the demand for medical services? > >>We are talking about jobs here, which is the "flip-side" of the economy. >>See above. > >Well, it is a forgone conclusion that neo-classical economics (or even >classical economics) does not explain the job market adequately. The job >market never clears, indicating that something always disturbs the pattern. Noticed the minimum wage? The large amounts of government-imposed side-costs associated with employing someone? The coercive laws W.R.T. labor unions? It would be INCREDIBLY surprising if the market cleared. Please, please, PLEASE read some economics before you make another suggestion like the one above. I don't expect you to agree with me, nor do I claim economic "enlightenment", but let's have the disagreement be on a higher level than an implication that the current US job market is predicted to clear by neo-classical (or even classical) economics. Quite the contrary. When I was in college, Samuelson was the standard introductory text. I can also highly suggest "The Worldly Philosophers" by Heilbroner. And don't worry: they're not particularly "libertarian". >>>> This will of course bring us back to the same argument of will the >>>>private sector meet all the needs of society that govt currently does >>>>(in the way of services - we're talking jobs here, not welfare). > >>In fact, I consider it particularly dense of you to drag things like >>health care into your article when I made it perfectly clear that >>that kind of example was NOT what I was discussing. Can you >>say "strawman"? > >Well, the private system does NOT do so now with respect to health care, >even with the moeny that the government pours into it. "Well, the Poles still don't solve their economic problems, despite all the help from the Soviets..." >THe American health >care system is an object example on how economic pressures conspire to >produce a situation which is pretty wretched, and I doubt that the argument >that it is the best possible way is going to win many supporters. Government money is, of course, part of the problem. A most dramatic case was highlighted in "Reason" a few months back (I posted excerpts) where the government's aid system discourages doctors from suggesting kidney transplants by making it economically more profitable to keep patients on dialysis. And would an all-public system will do better? Like the one in Norway, where the waiting list for a hip replacement is five years long? Or perhaps the medical miracles of the Worker's Paradise? Heck: Ortega buys his GLASSES here. Have you noticed the trends in dentistry since open advertising began? Costs down, aggressive marketing, and (I'm told) no appreciable loss in professionalism.