Quote of the Day: The Glory of the Market vs. the Compulsory Monopoly of Bureaucratic Government
"The essence and the glory of the free market is that individual firms and businesses, competing on the market, provide an ever-changing orchestration of efficient and progressive goods and services: continually improving products and markets, advancing technology, cutting costs, and meeting changing consumer demands as swiftly and as efficiently as possible.
The libertarian economist can try to offer a few guidelines on how markets might develop where they are now prevented or restricted from developing; but he can do little more than point the way toward freedom, to call for government to get out of the way of the productive and ever-inventive energies of the public as expressed in voluntary market activity. No one can predict the number of firms, the size of each firm, the pricing policies, etc., of any future market in any service or commodity. We just know—by economic theory and by historical insight—that such a free market will do the job infinitely better than the compulsory monopoly of bureaucratic government."
~Murray Rothbard in "For a New Liberty"
HT: Dennis Gartman in today's The Gartman Letter
The libertarian economist can try to offer a few guidelines on how markets might develop where they are now prevented or restricted from developing; but he can do little more than point the way toward freedom, to call for government to get out of the way of the productive and ever-inventive energies of the public as expressed in voluntary market activity. No one can predict the number of firms, the size of each firm, the pricing policies, etc., of any future market in any service or commodity. We just know—by economic theory and by historical insight—that such a free market will do the job infinitely better than the compulsory monopoly of bureaucratic government."
~Murray Rothbard in "For a New Liberty"
HT: Dennis Gartman in today's The Gartman Letter
81 Comments:
very nice link
Tell it to the USDA and the ethanol lobby.
Can I get an amen?!
Amen, Brad.
When it at the same time produces shoddier products at those lower costs, thus making the products worse and putting people out of work without any replacement.
There is no glory in the market, just its use against US citizens as a means to marginalize their choices, not give them more American (and thus better) choices.
The "compulsory monopoly of bureaucratic government" may result in another E.U. recession and a hard landing in China, which will have negative effects on the U.S. economy:
Is a Chinese economic slump on the horizon?
January 8, 2012
First, Europe’s slump has weakened China’s trade; Europe buys about a fifth of its exports. Second, housing is showing signs of a bubble and is deflating. Finally, China’s government will have a harder time deploying a stimulus than during the 2008-09 financial crisis. Government debt rose from 26 percent of gross domestic product in 2007 to 43 percent of GDP in 2010.
"...a drop in growth to 5 percent or less...for China’s modernizing economy and huge labor force, a 5 percent growth rate would raise unemployment and social discontent. The adverse GDP swing would roughly equal the U.S. decline in the 2007-09 recession.
******
Consumer Spending Growth In China Fades; Spending a Mere 34% of GDP; Can China Fail Like Japan?
June 17, 2011
Government data this week showed retail sales growth slowed to 16.9 percent in May, less than the average of the past five years and a figure that’s inflated by soaring prices for food. By contrast, spending on fixed assets such as factories and property climbed 26 percent, excluding rural households, in the first five months, the fastest pace in almost a year.
Investment has indeed grown far faster than GDP. From 2000 to 2010, growth of gross fixed investment averaged 13.3 per cent, while growth of private consumption averaged 7.8 per cent. Over the same period the share of private consumption in GDP collapsed from 46 per cent to a mere 34 per cent, while the share of fixed investment rose from 34 per cent to 46 per cent.
If this pattern of growth is to reverse, as the government wishes, the growth of investment must fall well below that of GDP. This is what happened in Japan in the 1990s, with dire results. The question is when.
Fixed investment in China is going to collapse at some point. When it does, it will take China's massive property bubble with it. Losses at Chinese banks will be staggering.
"When it at the same time produces shoddier products at those lower costs, thus making the products worse and putting people out of work without any replacement"...
Liar...
Sorry sethstorm, there's no other way I know how to say it...
I mean you never back up what you say with something credible but you continue to make these at best questionable allegations anyway...
“Tax less, spend less” policy could help China
Jan 9, 2012
Beijing’s fiscal revenue growth has outpaced that of the economy in the past decade and now amounts to 25 percent of GDP, up from 15 percent 10 years ago.
Despite fast rises in salaries, disposable income as a percentage of GDP has been falling steadily.
Lowering taxes for the poor and consumers will make China’s people feel richer, and spend more.
More consumption is necessary to offset sluggish investment and exports in 2012.
Beijing lifted the threshold for paying income tax in June, but could offer bigger concessions to tax-payers.
Personal income tax revenue has risen about 30 percent in 2011, three times as fast as income growth.
High consumption taxes, especially on imported goods, deter spending at home and send shoppers abroad.
seth-
that's just an absurdity.
it creates choice.
i never have any trouble finding quality products to buy.
the fact that less expensive and less well made products are available need not have any effect on you.
are you being made to buy them?
there is plenty of high quality food, housing, cars, health care, entertainment, you name it.
i'll bet you cannot name one product that is not available with high quality.
When it at the same time produces shoddier products at those lower costs, thus making the products worse and putting people out of work without any replacement.
You are confused. It is government that can get away with shoddy products and services, not producers in a free market where the consumer has choice and votes with his purchasing power. If a parts maker does not like FedEx prices and service he can choose to use UPS, DHL, or some other competitor. But if that same parts maker is not happy with first class mail service he has no choice but to stick with the USPS because no competition is permitted.
There is no glory in the market, just its use against US citizens as a means to marginalize their choices, not give them more American (and thus better) choices.
The man called you a liar. He may be right. If he isn't and you believe what you write then you are just stupid.
"The libertarian economist can try to offer a few guidelines on how markets might develop where they are now prevented or restricted ... No one can predict the number of firms, the size of each firm, the pricing policies, etc., of any future market in any service or commodity.
Yet Rothbard insisted that only 100% gold backing could be supported by unregulated banking.
Myself an early fan of The Market for Liberty, since actually working in private security, I see that the Tannehills not only failed to predict the future, they did not understand the present very well.
Similarly, Rothbard, Hayek, and Mises had a woeful ignorance of numismatics, allowing them to create castles in the air about the nature of money. Hayek, at least, owned up to his ignorance, and advocated for truly unregulated banking, rather than Rothbard's "free market regulation" (if that's what it was).
I mean only to underscore the main point. We do not know what will not be. Edison lobbied to make alternating current illegal. Imagine if he had succeeded.
Blah! Rothbard! Had to wash my hands after reading his name.
"Similarly, Rothbard, Hayek, and Mises had a woeful ignorance of numismatics, allowing them to create castles in the air about the nature of money. Hayek, at least, owned up to his ignorance, and advocated for truly unregulated banking, rather than Rothbard's "free market regulation" (if that's what it was)."
I couldn't agree more. Rothbard's theories on this were just plain undefendable
In other words: why the heck do we pay economists for anything?
In other words: why the heck do we pay economists for anything?
I sure my good conservative friends would agree that there is no free lunch, so why would you try to convince us that there is a "free" market. Unregulated banks come with very high social costs due to their boom, panic, bust cycle. The regulation through carnage costs too much.
morganovich: "i'll bet you cannot name one product that is not available with high quality."
Well, maybe just one. :)
Glory of the market seems a little over the top.
"When it at the same time produces shoddier products at those lower costs, thus making the products worse ........
++++++++++++
Juandos.... have to agree with Seth, at least on the first part of his statement.
There are plenty examples of new, shoddy products. Also of new and better products created in response to government regulations.
Over all, the market is equally likely to race to the bottom as it is to the top.
i never have any trouble finding quality products to buy.
the fact that less expensive and less well made products are available need not have any effect on you.
If it meant that quality was unaffected, you would have a point.
Right now, those cheaper goods are causing quality goods to decline.
there is plenty of high quality food, housing, cars, health care, entertainment, you name it.
i'll bet you cannot name one product that is not available with high quality.
Cars, like their customers, are experiencing a European-style bifurcation.
For the masses, choices rapidly decline into low-quality golfcarts with low capacity engines and shiny bling to distract from such. Ford is the largest example, where they have eviscerated their US-style lineup in favor of un-American Eurotrash.
For the few, they have no problem finding whatever exotic they want.
This bifurcation gets rid of the affordable muscle that the US has managed to have, replacing it with extremely low quality cars and extremely unaffordable exotics.
Computer equipment is affected as well. Unlike cars, you cannot get quality even if you pay for it. Manufacturers like Lenovo, Dell, and Acer exemplify this for making progressively shoddier equipment in the quest for cheapness.
Housing is likely not to be high quality if the builders are illegals.
Frank,
Not only is your assertion unadorned by evidence, but your definition of "free market" is as mangled as it gets.
A free lunch means one for which there is no cost. A free market simply means that people enter into private arrangements without outside coercion (usually by the state). A free market does not mean a world without costs or consequences.
Sean says: "...why the heck do we pay economists for anything?"
Obviously, economists raised your standard of living too quickly.
the fact that less expensive and less well made products are available need not have any effect on you. are you being made to buy them?
How about more expensive and less well made products?
Are you forced to buy them? No, but often there is no real choice, as when a product is a component of another product.
My recent example is the $300 free market Headlamps that replaced the government regulated $8 Headlamps.
Agreed, the illumination is better ( sometimes, not always), sure the lights are more stylish, but are they really better?
And maybe, given perfect knowledge, one might find a vehicle without the defect of expensive, hard to replace bulbs, but that is only one potentially shoddy and expensive part.
The argument of free choice in the market strikes me as not very true.
Also, while the market is self correcting about some things, it takes a long time, and usually with little or no recompense for the stuckees.
You may believe the market does pretty well, but I expect a lot better of it.
i never have any trouble finding quality products to buy.
+++++++++++
You must have low standards.
"You must have low standards."
what a preposterous (and inaccurate) thing to say.
i have VERY high standards. i'm just willing to pay up for quality.
name for me one product for which high quality versions are not available.
bet you can't.
"My recent example is the $300 free market Headlamps that replaced the government regulated $8 Headlamps."
this doesn't make any sense at all.
how can a cheap headlamp that is in great demand stop being made?
i'll bet you that far from being free market, there is government regulation in there somewhere.
if there is meaningful demand for a specific quality level of product, it will get produced by a free market (barring interference).
i think you are also making stuff up on pricing. headlamps have not been $8 since the 50's.
that's like complaining about nickel movies going away.
and this:
"The argument of free choice in the market strikes me as not very true.
You may believe the market does pretty well, but I expect a lot better of it."
just shows that you do not understand.
markets are not perfect, they are just the best system we know of.
in particular, they can fail to serve the desires of those with tastes too far from the mainstream.
they stopped making the deodorant i liked. that's life. i found a new one. the market will not provide for every desire for every person. my desire for spinach flavored ice cream is just not going to get it in stores. no one else wants it. but there must be 300 other flavors to choose from.
that said, i can certainly get someone to make me some. it'll cost more than a mass produced product, but, for a price, it's available.
Michael E. Marotta: "Yet Rothbard insisted that only 100% gold backing could be supported by unregulated banking. "
Do you understand why? Unless you favor total government control of people's money, a commodity money is necessary, such that a given weight of the commodity is recognized as money. There are many reasons why gold is the best commodity for this purpose.
Here's what Rothbard actually said about that:
"If it is imperative that the dollar be defined once again as a weight of a market commodity, then what commodity (or commodities) should it be defined as, and what should be the particular weight in which it is set?
In reply, I propose that the dollar be defined as a weight of a single commodity, and that that commodity be gold."
"Similarly, Rothbard, Hayek, and Mises had a woeful ignorance of numismatics, allowing them to create castles in the air about the nature of money. Hayek, at least, owned up to his ignorance, and advocated for truly unregulated banking, rather than Rothbard's "free market regulation" (if that's what it was)."
While I hadn't realized that they were incompetent coin collectors, that's a pretty sweeping statement! Is your evaluation of three of the most prominent, and well respected Austrian economists a result of your own work, or are you relying on the work of others? In either case, It would be great if you cited your sources, as unsupported opinions can't be taken seriously.
"Over all, the market is equally likely to race to the bottom as it is to the top.
Overall the market is likely to race to what customers want, as evidenced by their purchases.
If you like shoddy products at cheap prices, and vote for them by buying them, producers will respond to your wishes.
"My recent example is the $300 free market Headlamps that replaced the government regulated $8 Headlamps."
Please, please don't mention that again. It has lost all meaning, and is now just wasting time.
of course we could get 70 octane fuel instead of 87 if the govt would get out of the way, eh?
PeakTrader,
Obviously, economists raised your standard of living too quickly.
Yes, they should have held out more of my money before doing.... what? Teaching courses explaining why not to interfere with stuff?
I don't buy this, but it is kind of an "interesting" thing for Rothbard to say.
Why has it lost meaning? I have not seen anybody refute it, and it is only one example many of many.
.......Just the best system we know of.
So we cannot make them better and there is no reason to try?
Overall the market is likely to race to what customers want, as evidenced by their purchases.
In the aggregate.
Add a few billion in the Third World, and you can drag down quality while squelching the voices of those in developed nations.
That's why products are getting shoddier - they're based on top-tier designs of junk as opposed to lower-feature versions of solid quality products.
Jf you like shoddy roducts at cheap prices, and vote for them by buying them, producers will respond
+++++++++++++++
Nice hypothesis, but it assumes perfect knowledge.
A d it says nothing about shoddy products at expensive prices.
Generally one does not know the product is shoddy until after it is purchased. Sometimes long after...and it is still shoddy.
I am reminded of the cartoon of two monks watching the painting of the ceiling in the Sistine chapel. One say to the other, "It is too bad, for another thousand sisterci, we could have had Guido."
"Why has it lost meaning? I have not seen anybody refute it, and it is only one example many of many."
There is nothing to refute. You are unhappy with the price of replacement parts for your car, and it's been discussed in past threads, although obviously not to your satisfaction.
You might as well keep saying "Ow! My stomach hurts!" Everyone has heard it, no one can do anything about it except you, no one cares, and I suspect most here are really tired of hearing about it. Perhaps like with so many other things, no one sees it as a problem except you,
Your car headlight just doesn't seem to be a subject anyone is interested in, as you can tell from the lack of responses to your frequently repeated comment about it, so STFU.
"Nice hypothesis, but it assumes perfect knowledge."
No it doesn't. You can't have perfect knowledge, but if you see a product priced at 1/2 of what most other ones cost, you should wonder why. If there is a detectable difference in quality only you can decide whether the lower price outweighs the lower of quality.
"Generally one does not know the product is shoddy until after it is purchased."
In which case you return it to the retail seller.
"...Sometimes long after...and it is still shoddy."
One can only wonder how long you would have to use something before realizing it's shoddy, but if it is beyond reasonable to return it, then your remedies include not buying that product again, not shopping at that seller again, writing to the retailer or manufacturer expressing your displeasure, and warning everyone you know.
Market forces work well for most people, they just don't work for you, perhaps because they don't like you.
There is nothing to be done about it - just live with it.
"Add a few billion in the Third World, and you can drag down quality while squelching the voices of those in developed nations. "
That's a fascinating concept. Can you explain how, exactly, that's done? Specifically how is that few billion applied for greatest voice squelching?
Are you still living in your mother's basement?
Hopefully you're taking some online courses to update your skill set so you can be attractive to an employer. You will never find a job with the obsolete skills you have.
"I am reminded of the cartoon of two monks watching the painting of the ceiling in the Sistine chapel. One say to the other, "It is too bad, for another thousand sisterci, we could have had Guido."
Which makes my point. They were satisfied with the shoddier quality of the work performed by the low bidder.
Yet Rothbard insisted that only 100% gold backing could be supported by unregulated banking.
He used logic to show that in an UNREGULATED system credit lending out of funds that a bank did not have would soon have that bank out of business as competitors withdrew funds and pushed it into insolvency. His point was that it was regulations that made the large scale fraud possible. Looking at the hundreds of trillions in the derivative markets and the CDO fiasco it seems to me that the facts support Rothbard.
Myself an early fan of The Market for Liberty, since actually working in private security, I see that the Tannehills not only failed to predict the future, they did not understand the present very well.
I am sorry but you need to be specific. I have the book somewhere and have no idea what predictions that you are talking about. I think that you may be suffering from faulty memory or taking something out of context.
Similarly, Rothbard, Hayek, and Mises had a woeful ignorance of numismatics, allowing them to create castles in the air about the nature of money.
Numismatics? I think that you did not understand what they actually wrote. When talking about numismatics the gold content is the trivial part that determines value. In that case you have subjective factors that look at conditions, rarity, etc., that determine value. When they write about gold they are talking about its monetary value. Numismatics has nothing to do with monetary value.
Hayek, at least, owned up to his ignorance, and advocated for truly unregulated banking, rather than Rothbard's "free market regulation" (if that's what it was).
LOL...Read this again and see if it was what you wanted to say. Truly unregulated banking and free market regulation are the same thing. In neither case does the author claim that there are no rules; only that there is no regulator. There is a big difference which you have missed.
I mean only to underscore the main point. We do not know what will not be. Edison lobbied to make alternating current illegal. Imagine if he had succeeded.
Rothbard opposed the legal tender laws. He wanted them repealed so that the market could determine what was used as money. Obviously you missed it and are confused. It might help you to read him again. After all, he is one of the clearest of all writers and should be easy for you to understand.
Blah! Rothbard! Had to wash my hands after reading his name.
How dare Mark reference a man who argued for individual liberty and peace. Doesn't he know that many people prefer to have blood stained hands instead?
Mark J. Perry: Quote of the Day: The Glory of the Market vs. the Compulsory Monopoly of Bureaucratic Government
Black and white thinking.
I sure my good conservative friends would agree that there is no free lunch, so why would you try to convince us that there is a "free" market. Unregulated banks come with very high social costs due to their boom, panic, bust cycle. The regulation through carnage costs too much.
Not true. Most of the booms and busts were caused when government got into the banking business. The Fed is not the first central bank in the US but the third. Obviously you are not as aware of The History of Money and Banking in the United States as you should be.
A good comparison between regulated and unregulated banking systems during the same historical period could easily be made. If we look at the US, Canada, and Hong Kong from the mid thirties to the end of the 1950s we see a regulated system with a deposit insurance scheme (US), a regulated system (Canada), and an unregulated system (HK). The massive contraction that resulted in the Great Depression was over. There were no great external financial shocks to the financial system. Yet, the US banking system still saw bank failures while Canada and Hong Kong had none.
I suggest that you look at the first part of Rothbard's book. Once you have read it you will realize that your comment has no basis in fact and that our modern regulatory system created a far less stable system that imposed higher costs on bank depositors than the unregulated system that you are attacking.
Over all, the market is equally likely to race to the bottom as it is to the top.
There is no logic or fact to support this view. Are TVs shoddier than they used to be? How about telephones? Computers? Yes, you can have modern dishwashers that don't dry the dishes or get them very clean or toilets that don't flush very well but that is caused by government regulations, not producer competition.
Right now, those cheaper goods are causing quality goods to decline.
I don't believe that this is true. An inflation-adjusted $25 knife today is better than a $25 knife purchased ten years ago. A good personal computer purchased today is much better than a computer purchased a decade ago and even better than a supercomputer from the 1970s. Take a look at TVs and you find a huge improvement. Want a good calculator? Well, you don't need one because your phone will do a better job than any calculator from the past. Mine will solve differential equations that used to take me hours in the past. Not only that but it will find for me the next time my kids can look at the ISS in my area and will give them the coordinates in the night sky that they need to point their telescope to in order to see it.
All of these products were created in a very competitive environment that destroyed most of the producers who could not deliver what the consumers wanted.
Yours is a typical, 'people are too stupid to know what is good,' statement that is used by statists to argue that the power of government over individuals needs to be increased.
"So we cannot make them better and there is no reason to try?"
what a nonsense canard.
1.
markets try all the time. that's what they do.
2. i certainly have not seen you do so.
3. your headlight example was refuted. go back and read it. they not only have not existed for 50 years, but you provide zero evidence that the government either created them or banned them. you appear to just be speaking gibberish.
4. this is just the sort of "i know more than the market" thinking that makes markets work less well, not better. what you are really saying is "i would like to force my preferences on others" but you are putting it forward as "making markets work better" because deep down, you are a fascist and think you know better.
it is precisely guys like you at which this whole piece was aimed. the fact that you cannot see it just makes it all the more poignant.
"A d it says nothing about shoddy products at expensive prices. "
this is just foolish.
it completely ignores consumer sovereignty. who buys bad products at high prices? what, are you being forced to? not by a market you aren't.
i note that you have not been able to come up with even one example of a product where you cannot buy high quality versions.
that's because your whole argument is nonsense.
repeating the same ludicrous claims over and over with no substantiation just makes you look mentally unbalanced. it doesn't advance your point at all.
VangelV: If we look at the US, Canada, and Hong Kong Cfrom the mid thirties to the end of the 1950s we see a regulated system with a deposit insurance scheme (US), a regulated system (Canada), and an unregulated system (HK).
Most Canadian bank deposits are covered by CDIC. In addition, most mortgages are guaranteed by the CMHC. Forty-three financial institutions have failed in Canada since 1967, all covered by CDIC.
""Generally one does not know the product is shoddy until after it is purchased."
what a complete load of crap. that's what brands are for. that's what using you brain is for. what, you just pick up things at random and buy them?
you don't, say, check consumer reports or online reviews on a car or a TV? information is more available than it has ever been.
what, do you not pick up a shirt and look at it before you buy it? see the stitching, feel the fabric?
do you not know which brands make quality goods and which do not? do you seriously expect an old navy jacket to have brioni quality?
sounds to me like this is not a market problem but a personal problem you have. most of us have very little trouble assessing quality before we buy things.
if you are so unable to gauge the quality of items pre purchase, i'm really not sure what to say to you. most of us are quite good at that. seems to me that you have a real problem there, but assuming that the rest of us share you deficiency and somehow need to be protected as you seem to feel that you do is just inaccurate.
speaking for myself, i feel quite satisfied in my ability to judge quality pre purchase.
perhaps you need to develop your own skills instead of so persistently lobbying to have markets altered to account for your deficiencies.
Ron H. said...
That's a fascinating concept. Can you explain how, exactly, that's done? Specifically how is that few billion applied for greatest voice squelching?
The companies just build for the Third World, and largely abandon First-World specific designs. The only attention to First World details are compliance with regulations - no attention to quality of construction. The best you get is that it is a top-tier Third World product that is given a slight boost.
The billions of people in the Third World squelch the voices of the First World by their numbers alone.
morganovich said...
That presumes a better option is available, much less one that isn't priced in the stratosphere. Never mind that there are some products that do not have even that option - these being complex goods such as cars, computers, complex electronics, and similarly complex products.
What you call consumer sovereignty is actually consumer tyranny. It has abandoned First World engineering for Third World relabeling.
This comment has been removed by the author.
...to update your skill set so you can be attractive to an employer. You will never find a job with the obsolete skills you have.
You make the incorrect assumption that the employer can do no wrong, and that I can do no right.
"You make the incorrect assumption that the employer can do no wrong, and that I can do no right."
Based on your comments, that seems like a pretty safe assumption.
markets try all the time. that's what they do.
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Markets try, and they fail all the time. They are neither efficient nor fair, and much of marketing consists of trying to obtain unfair advantage, either through unequal knowledge or other means.
I do not see that it is a canard to suggest that we may come up with a better plan, if we work at it. I have suggested previously that one possible approach is to have market based regulations.
That way you only have the regulations that people agree to "buy into".
And it says nothing about shoddy products at expensive prices. "
this is just foolish.
it completely ignores consumer sovereignty. who buys bad products at high prices?
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Consumer sovereignty is what is foolish. Often you have no way of knowing the (brand name product you paid MORE for) is faulty until after it fails.
A friend had a new Ford Bronco that caught fire and burned, the first day he had it. Ford refused to stand by its product and claimed it was a matter for his insurance comapany to solve.
So much for Quality is Job One.
There is nothing to refute. You are unhappy with the price of replacement parts for your car,
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You are an idiot who is deliberately mistating the case.
1) My argument has nothing to do with the price of replacement parts or even of the price for the OEM parts. It has to do with the fact that the quality of light provided is not improved consistent with the cost increase.
The quality of light provided may even be less as more people drive around with one headlight due to the cost and inconveninece of replacement.
The new brighter lamps make it imperative that they not shine in the opposing drivers eyes. I have encountered several that achieve this by having a hard cut off on the vertical height. This has the result of making you feel as if you are driving into a tunnel, and there is not enough "spillage" to read a street sign.
2) Cost of the replacement parts aside, the product is faulty if known replacement parts cannot be installed, require special tools or training, etc. Or replacement parts are discontinued, makeing the entire product obsolete. A more subtle ersion is when the replacement parts are improved, after a defect becomes known, but no credit is given for the previous bad parts.
I have not examined other vehicles to see if the trait of the headlamp bulbs being blocked or difficult to install is common, but I am willing to bet that it is.
3). The previous situation was government controlled. There were few styles of headlamps, all interchangeable, at low cost.
When manufacturors prevailed we wound up with many custom styles of light housings, which however still accepted a handful of bulbs. but the light housings themselves are expensive and do little or nothing to enhance the product.
But, they are the first thing to break in a minor collision and therefore run up insurance costs for everyone.
What I am suggesting is that this is a situatio in which "newer and better, and more high tech", just isn't so. it is basically a more expensive rip off to the consumer, and one that is difficult to avoid through consumer sovereignty.
no one can do anything about it except you,
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No one can do anything about it, including me.
Which is the whole point. Consumer sovereignty is bunk, in the real world.
what a complete load of crap. that's what brands are for.
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Nonsense. Brands do not protect you from crappy products. Branding is there for the producer, not the consumer.
Based on your comments, that seems like a pretty safe assumption.
If you're presuming that you're incorrect, fine.
you don't, say, check consumer reports or online reviews on a car or a TV? information is more available than it has ever been.
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Sometimes, but even then there is no such thing as perfect knowlege. I will never have as much knowlege of the product as the vendor, and even if I did, I may not be able to induce a change.
Your example only shows that even with the help of many other brains, it sometimes takes a long time and many failures to identify a shoddy (brand name) product - long after the sale.
I'm not complaining that my headlight failed after 170,000 miles, or that they don't give (somewhat) better light. I'm complaining that they cost fififty times as much as the predecessors, even if I had to replace the predecessos three times as often.
Now I am putting out the word to the market. MAYBE in ten or fifteen years it will be fixed. In the meantime millions of dollars will be made (or wasted) on this crap, depending on which side of the transaction you are on.
If it meant that quality was unaffected, you would have a point.
Right now, those cheaper goods are causing quality goods to decline.
Not true. For the same (inflation adjusted) $100 that a decent calculator used to cost I can by 10 that will last a lot longer and will save me quite a bit in battery costs.
For the masses, choices rapidly decline into low-quality golfcarts with low capacity engines and shiny bling to distract from such. Ford is the largest example, where they have eviscerated their US-style lineup in favor of un-American Eurotrash.
While I am not a fan of what the car companies have done in order to comply with the ridiculous regulations it is clear that those low-quality cars will run around three times longer than the cars that Ford used to make. Competition has forced the automobile companies to adopt new procedures that ensure a much better product for the money paid. The number of defects per new vehicle have fallen by more than 80% in the past twenty years and the days of black smoke and oil leaks in three-year old vehicles are long gone.
of course we could get 70 octane fuel instead of 87 if the govt would get out of the way, eh?
Really? Who would buy it? The AAA and CAA would tell their members to avoid any company that sold it. The insurers would not honour any warranties that they have written if the owner of the vehicle uses it. If the oil company lied it would get sued by car owners and would see its share prices get killed.
You fools seem to think that every consumer is as incompetent as you are and don't really pay attention. But in reality when it comes to running their daily lives most people seem to be a lot smarter than you are.
Most Canadian bank deposits are covered by CDIC. In addition, most mortgages are guaranteed by the CMHC. Forty-three financial institutions have failed in Canada since 1967, all covered by CDIC.
Try reading more carefully. As I pointed out in my posting, no banks failed in Canada from the beginning of the Great Depression to the time that deposit insurance began in 1967. The same was true of unregulated Hong Kong.
And which banks have failed in Canada since 1967 again? I recall one or two failures of minor banks in the 1980s but no more than that. And how does that compare with the US, which has a much tougher regulatory regime or Europe?
VangelV: And how does that compare with the US, which has a much tougher regulatory regime or Europe?
Canadian banking has historically been an oligarchy with five banks controlling 80% of banking in the years leading up to the Great Depression. The Canadian banking system was essentially a cartel. When the Home Bank of Canada failed in 1923, the government imposed an Inspector General of Banks.
Part of the problem is that the U.S. has been averse to central regulation of banking, which led to the creation of regional banks, while Canada has always had nationwide banks. In the U.S. this led to a hodgepodge of regulation, and the growth of securitization.
This paper has some insights:
Bordo, Redish ^ Rockoff, Why didn't Canada have a banking crisis in 2008 (or in 1930, or 1907, or ...)?, Social Sciences Research Network 2011: "Starting in the nineteenth century, Canada and the United States took divergent paths: Canada set up a concentrated banking system that controlled mortgage lending and investment banking under the watchful eye of a single, strong regulator. The United States allowed a weak, fragmented system to develop, with far more small (and less stable) banks, along with a shadow banking system of less-regulated securities markets, investment banks, and money market funds overseen by a group of competing regulators."
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1918642
VangelV: And which {financial institutes} have failed in Canada since 1967 again? I recall one or two failures of minor banks in the 1980s but no more than that.
"Since CDIC was created in 1967, 43 member institutions have failed."
http://www.cdic.ca/e/insuredWhere/history_failures.html
VangelV: And which {financial institutes} have failed in Canada since 1967 again? I recall one or two failures of minor banks in the 1980s but no more than that.
Z: "Since CDIC was created in 1967, 43 member institutions have failed."
Notice how you twist what is said or change it outright to try and support a narrative that does not work when examined too closely? In Canada there are rules about banks that are different than rules that govern insurance companies, trusts, or credit unions. Since the smaller institutions have to take on much risk due to their exposure to certain areas that may be vulnerable it is not surprising if there were failures. But the number of failures is higher because of the government guarantees to depositors. When depositors do not have to worry about losses they have no trouble lending their money to credit unions that pay out higher interest rates because they take on much higher risks.
My point was that there were no banking failures from the beginning of the Great Depression to the time that the government came up with its insurance scheme. And if you look at totally unregulated Hong Kong you find exactly the same thing. The data clearly points to a problem when government decides to meddle in banking. It creates a moral hazard that encourages more risk taking and leads to more failures.
I suggest that the next time you try to deal with the points that I wrote, not to create straw men to knock down. And while you are at it take a look at how the Basel agreements wound up destroying the EU and American banking systems. It is interesting how the crisis has hit the 'good' banks that complied with the rules far harder than the 'bad' banks that supposedly had lower quality reserves.
VangelV: Notice how you twist what is said or change it outright to try and support a narrative that does not work when examined too closely?
Here's the original statement you took issue with.
Zachriel: Forty-three financial institutions have failed in Canada since 1967, all covered by CDIC.
VangelV: In Canada there are rules about banks that are different than rules that govern insurance companies, trusts, or credit unions.
That's right, so a direct comparison doesn't make sense. The problem in the U.S. was mortgage-backed securities. This brought down investment banks, as well as chartered banks.
You completely ignored our points. We will repeat them for your convenience.
Canadian banking has historically been an oligarchy with five banks controlling 80% of banking in the years leading up to the Great Depression. The Canadian banking system was essentially a cartel. When the Home Bank of Canada failed in 1923, the government imposed an Inspector General of Banks.
Part of the problem is that the U.S. has been averse to central regulation of banking, which led to the creation of regional banks, while Canada has always had nationwide banks. In the U.S. this led to a hodgepodge of regulation, and the growth of securitization.
This paper has some insights:
Bordo, Redish ^ Rockoff, Why didn't Canada have a banking crisis in 2008 (or in 1930, or 1907, or ...)?, Social Sciences Research Network 2011: "Starting in the nineteenth century, Canada and the United States took divergent paths: Canada set up a concentrated banking system that controlled mortgage lending and investment banking under the watchful eye of a single, strong regulator. The United States allowed a weak, fragmented system to develop, with far more small (and less stable) banks, along with a shadow banking system of less-regulated securities markets, investment banks, and money market funds overseen by a group of competing regulators."
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1918642
" My point was that there were no banking failures from the beginning of the Great Depression to the time that the government came up with its insurance scheme."
are you serious? You're obviously not talking about the US.
" During the 20s, there was an average of 70 banks failing each year nationally. After the crash during the first 10 months of 1930, 744 banks failed – 10 times as many. In all, 9,000 banks failed during the decade of the 30s. It's estimated that 4,000 banks failed during the one year of 1933 alone."
http://www.livinghistoryfarm.org/farminginthe30s/money_08.html
" In the years immediately
before the 1934, when the FDIC began insuring bank deposits, over one third of all extant banks failed."
http://www.unc.edu/~salemi/Econ423/Depression_Era_Bank_Failures.pdf
Z: Here's the original statement you took issue with.
Zachriel: Forty-three financial institutions have failed in Canada since 1967, all covered by CDIC.
No. The original statement is this one"
V: "A good comparison between regulated and unregulated banking systems during the same historical period could easily be made. If we look at the US, Canada, and Hong Kong from the mid thirties to the end of the 1950s we see a regulated system with a deposit insurance scheme (US), a regulated system (Canada), and an unregulated system (HK). The massive contraction that resulted in the Great Depression was over. There were no great external financial shocks to the financial system. Yet, the US banking system still saw bank failures while Canada and Hong Kong had none."
Note that the comparison was between the unregulated system (HK), a regulates system without insurance (Canada), and a regulated system with insurance (US). The data shows that the regulated system with insurance had the most failures.
You did not deal with that statement but chose to look at post 167 Canada and to expand the debate to non-bank institutions.
Like I said, stick to the argument that is provided. Once that is settled I would be more than happy to deal with your diversions.
That's right, so a direct comparison doesn't make sense. The problem in the U.S. was mortgage-backed securities. This brought down investment banks, as well as chartered banks.
No, a direct comparison between banks in the different regions is totally acceptable. The banks in Canada and the US had every opportunity to invest in MBS paper just as EU and American banks did. Some actually had MBS holdings but the losses were insufficient to lead to insovency and require a multi-trillion dollar bailout by the Fed and the ECB.
It is a fact that all of these risks were piled on in a system where there were more than a hundred regulators to keep an eye on bank management. They failed.
And I am glad you brought up the mortgage-backed paper issue that created much of the problem. The Fed was partially responsible for the bank capitalization regulations (Basel II) that created the mess. Prior to Basel II agreement the banks had to place subprime, alt-A, jumbos, no-doc, and other non-conforming mortgages in their own portfolios. This meant that the banks had to keep sufficient capital in reserve to protect the bank against defaults.
But once the Basel II rules were adopted, banks were able to exchange their mortgages for higher rated paper. This allowed them to take on more leverage because it reduced their capital requirements.
The idea was that the risk was more evenly spread. (Listen to Greenspan's many speeches on that point.) But in reality the banks were increasing the correlated default risks because there was no incentive to maintain strict underwriting standards. (Makes sense since the banks no longer held the mortgages in their own portfolios.) The incentive was to create and sell more paper, not to make good loans.
To make things worse, the regulators allowed the sale of insurance in the form of CDS paper. Buyers were under the impression that the purchases were less risky because they did not believe that the regulators and central banks would allow the insurers to fail. The effect of Basel II was to increase leverage as it removed the capital cushion that was necessary to avoid default.
What I find interesting is the response to the failure of Basel II. The Finance Ministers and CBs got together and decided to come to a Basel III agreement. So instead of holding reserves in the form of mortgage papers the banks were allowed to hold sovereign debt such as Euro denominated bonds issued by Spain, Italy, Greece, or Portugal. As we have seen, those regulations have also had their unintended consequences. Which is why the least solvent EU banks are the 'good' ones.
are you serious? You're obviously not talking about the US.
Correct. I was talking about Canada and Hong Kong.
Canadian banking has historically been an oligarchy with five banks controlling 80% of banking in the years leading up to the Great Depression. The Canadian banking system was essentially a cartel. When the Home Bank of Canada failed in 1923, the government imposed an Inspector General of Banks.
First, the Canadian banks are just as competitive as the American ones. As Boeing, Airbus, and McDonnell Douglas proved, having just a few companies control a global market does not mean that there is a cartel that will make each one of them a nice profit.
Second, you are ignoring the other example; the unregulated Hong Kong banks. None of them failed either even though there were few regulations and, as in Canada, no insurance scheme. In both cases the regulators were the depositors who were keeping bank management in line by preferring that their bank be prudent when taking risks and when they did the risk was priced properly.
Part of the problem is that the U.S. has been averse to central regulation of banking, which led to the creation of regional banks, while Canada has always had nationwide banks. In the U.S. this led to a hodgepodge of regulation, and the growth of securitization.
Actually, local credit unions, regional banks, and other financial institutions are regulated by provincial governments. The Canadian banks are very similar to the big Wall Street banks and broker/dealers. Yet, they came through the crisis quite well while the big American banks needed a Fed bailout.
This paper has some insights: ....
There are lots of papers that draw lots of conclusion. For the record, I believe that the Canadian banks, while not as bad as their big US counterparts, have almost as many problems. If you look at their securities filings you still see a lot of black box stuff that should worry any prudent investor. They still hold far too much government issued paper that promises to pay them back in fiat paper years into the future. They still have far too much leverage for my liking. And they will still come hat in hand to the BoC after the next crisis that sheds light on their balance sheets.
As the Basel fiasco has shown the problem is regulation. And as long as the banks continued to be regulated as they are rather than be responsible to their depositors in a free market the problem will not go away.
VangelV: No, a direct comparison between banks in the different regions is totally acceptable. The banks in Canada and the US had every opportunity to invest in MBS paper just as EU and American banks did.
You just said you were only comparing it to the short period between 1929 and 1967, which was under the control of an Inspector General. Now, you are talking of the recent crisis.
Canada has higher quantity and quality of capital reserve requirements than international norms. They were also subject to stress tests *before* the financial crisis, and they were constrained by the leverage ratios. In addition, since the banks failures in the 1980's, Canadian regulators have been proactive, and confront problems before they fester, along with cooperation between the various levels of regulation. This is contrary to the American practice of competing and disjointed regulatory regimes, and a culture of allowing markets to self-correct.
As for mortgages, again, excessive securitization was an American phenomena which developed due to the fragmented banking system, itself a result of distrust of consolidated federal control. Of the securitized Canadian mortgages, most are explicitly backed by the CMHC, meaing they are in plain view, and subject to full underwriting guidelines, similar to your FHA.
In the U.S, on the other hand, securitization broke the link between underwriting accountability from the security. At its peak, the shadow market was as large as the regulated sector.
You just said you were only comparing it to the short period between 1929 and 1967, which was under the control of an Inspector General. Now, you are talking of the recent crisis.
I was clear that I was comparing three systems. One was not very regulated (HK). One was a system with regulation but without a government deposit insurance (Canada). The last was a system with regulation and with a government deposit insurance (US). The only system that had a failure was the US. I chose the period that I did because Canada did implement an insurance scheme in 1967. It is my opinion that this scheme has made the system less stable.
Canada has higher quantity and quality of capital reserve requirements than international norms. They were also subject to stress tests *before* the financial crisis, and they were constrained by the leverage ratios. In addition, since the banks failures in the 1980's, Canadian regulators have been proactive, and confront problems before they fester, along with cooperation between the various levels of regulation. This is contrary to the American practice of competing and disjointed regulatory regimes, and a culture of allowing markets to self-correct.
First, there was no bank failure problem in Canada during the 1980s. Your list is primarily made up of small trusts and credit unions that were regulated by the provinces. Second, the US regulatory regime is far bigger and more intrusive. Third, the Bank of Canada was much more careful about creating asset bubbles by expanding the supply of money and credit. By lagging the moves made by the Fed and by being willing to hike interest rates when the economy heated up it kept Canada's bubbles much more manageable. Forth, Canada's bankers are much more conservative and do not tend to buy into new theories and fads because the hard money critics are much louder and more respected than they are south of the border. The US has had so many more failures because it had a more compliant Federal Reserve and so many more regulators who provided cover for the banks. While Canadians can be just as naive so many more first generation Canadians have a distrust of government paper that it is hard for the banks to be as reckless.
As for mortgages, again, excessive securitization was an American phenomena which developed due to the fragmented banking system, itself a result of distrust of consolidated federal control. Of the securitized Canadian mortgages, most are explicitly backed by the CMHC, meaing they are in plain view, and subject to full underwriting guidelines, similar to your FHA.
No, it was not. The securitization became popular thanks to the new regulatory regime that allowed banks to hide risks by holding CDOs just as many of the Austrian economists predicted. And, just as they predicted again, the new regime that substituted government debt for CDOs will have a similar effect to leverage and solvency as the old regime did.
In the U.S, on the other hand, securitization broke the link between underwriting accountability from the security. At its peak, the shadow market was as large as the regulated sector.
This is a nice bit of revisionism. But without the CRA, the GSEs, and the new capital requirement regulations there would have been no problem. The US banking system collapsed because the regulators encouraged speculation and an expansion of liquidity to prevent a correction after the liquidity created NASDAQ bubble burst.
Not true. For the same (inflation adjusted) $100 that a decent calculator used to cost I can by 10 that will last a lot longer and will save me quite a bit in battery costs.
The problem is that you would have to go through all 10 to meet the same reliability. For something that's supposed to work well enough for an average person to use.
For more complex electronics, this also applies, but with a much higher cost of replacement.
The problem is that you would have to go through all 10 to meet the same reliability. For something that's supposed to work well enough for an average person to use.
That is not true. The new ones are just as reliable as the calculators we used to buy. We can actually do a simple comparison by looking at HP. Its original 12C was the best financial calculator of its day. When it was first introduced its price tag was $150, which comes out to 360 if we use the understated CPI to measure purchasing power. You can buy the Platinum Edition of the HP 12C today with a much faster processor, much more memory, and many more functions from HP for around $70. That is not a knock off that uses cheaper components and wider specs. It is an improved product coming from the original manufacturer who has tightened the specifications.
VangelV: I was clear that I was comparing three systems.
Yes, and the response was that a facile comparison doesn't tell us much.
VangelV: It is my opinion that this scheme has made the system less stable.
And yet, Canadian banks were much more stable during the recent financial crisis, indicating that there are more important factors than deposit insurance. You yourself detail many of those differences.
Yes, and the response was that a facile comparison doesn't tell us much.
But it does. You had the same periods and the same basis for the legal system. The only thing that differed was the degree of government involvement. The data showed that the more the government meddled by regulating the system the worse the outcome.
And yet, Canadian banks were much more stable during the recent financial crisis, indicating that there are more important factors than deposit insurance. You yourself detail many of those differences.
They were more stable because there were fewer regulations and no government edict to lend to subprime borrowers. That said, the banks were still very reckless in their lending and got lucky that Canada did not get hit harder by the global downturn. That allowed the banks to write down their CDO exposure without killing their earnings. But the banks still have a big problem and are technically insolvent just as the American banks are.
That is not a knock off that uses cheaper components and wider specs. It is an improved product coming from the original manufacturer who has tightened the specifications.
Unless Hewlett-Packard somehow resurrected the factories and the dead calculator division, that 12C is one of the many Taiwan-built HP's.
While HP was able to keep some quality in that particular type of product for a long time, I do not expect it for their current models. The build quality that might be in my US-built 28S (circa 1986) or my Singapore-built 48GX is definitely not there in the more modern variants.
Granted, you might get more features with a few rearranged & die shrunk components, but their execution will be below par.
Unless Hewlett-Packard somehow resurrected the factories and the dead calculator division, that 12C is one of the many Taiwan-built HP's.
My old calculators were made in Singapore so I do not really understand the point you are trying to make. There is no reason to assume that a contract manufacturer will build a higher quality product in Singapore than it does in Taiwan.
The producers do not drive the market; consumers do. They want the best product at the lowest cost. If contract manufacturers are capable of producing high quality 12C calculators or iPads at a lower cost in Taiwan they will be the ones who make them.
And keep in mind that final assembly is low value added work. While it helps provide many jobs abroad, American consumers have shown that they will not pay enough to have those same low-value added jobs done at home.
While HP was able to keep some quality in that particular type of product for a long time, I do not expect it for their current models. The build quality that might be in my US-built 28S (circa 1986) or my Singapore-built 48GX is definitely not there in the more modern variants.
The way I remember it, the 28S used to break quite easily because its design was not all that sturdy. For less than the original price you could buy a better quality calculator today that does far more.
Granted, you might get more features with a few rearranged & die shrunk components, but their execution will be below par.
Not at all. There is more memory, faster processors, better power management routines, the ability to communicate and share data with other hardware, and significantly better features. Users want prices to be low enough that they can upgrade their systems quite rapidly. They do not need hardware that can last 50 years but is obsolete in nine months. And because that is what they want, the producers have to give it to them or risk being out of business.
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