Barack Obama is the #1 Hayekian in the World

Cody linked to a, erm, memorable, pic at a Hayek-oriented website. Surfing around in that web site, I found this surprising, to me at least, quote:

Barack Obama is the #1 Hayekian in the World

...as Obama confessed to New York Times reporter David Leonhardt on Aug. 20, 2008: “The market is the best mechanism ever invented for efficiently allocating resources to maximize production. And I also think that there is a connection between the freedom of the marketplace and freedom more generally.”

In the same NYT piece Obama goes on to qualify that statement, as one would expect a Democrat to do, but still!

I looked at that photo and in my opinion, Mr. H is not showing much respect for private property.

Though maybe this was reseach for The Sensory Order or the origins of cattle-laxy...

:)

Oh, the groans, krolik. The groans!

What is the end of a totally free market? Total freedom, competition, and choice or monopoly?

My head tells me monopoly.

What do you think?

First of all, please tell us why you believe a society in which the free market reigns supreme will ultimately end up with a series of monopolies controlling the various industries.

6 > I think it boils down to "people are dumb" (and gullible).

All it takes is one business that wants to get bigger. they will do what they can to take business away from competitors. At a certain point in a geographic area they will have enough power/resources (by being the best deal) to either force out their competition or buy them out. Once all competition is eliminated, move on to another area and continue, while raising the prices in the conquered area to pay for more conquest. Rinse, Lather, Repeat.

We've pretty much seen it descending to that state already. It was broken up by Rossevelt's Trust Busters. Allowed to develop completely without regulation we would have one oil company, one auto manufacurer, one power utility, one railroad, one airline, one communication company, etc. The powerful eat the weak until only one survives.

>7 readafew:,8
Jesus, you two. What a dog-eat-dog worldview!

PS: I'm all for killing Bill Gates. Libertarian principles...meh, I'll make an exception for that guy.

Dog is tasty, but is it good for me?

Any Vietnamese out there want to clue krolik in as to the finer points of masticated, domesticated canine? I would, but my culture is rather put off over the thought of Fido for lunch, so I'll just let that slee....

If the powerful eat the weak until only one survives, what happens when these energies are directed from the free-market and into the realm of government? Since man's desire to dominate over others is innate, how does government rein in this desire? One way to accomplish this would be to establish a series of checks and balances and regulations such that the power hungry are compelled to moderate their desire. But if man's desire to dominate over others is innate, and men (or women!) are placed in positions from which they develop the checks and balances and regulations which direct the passions of the power hungry, what keeps those very people from manipulating the system in their favor?

>13 codyed:, codyed, Check what's happened over the last thirty years. Once all the checks and balances that represent Reaganism were put in place we had an overheated economy that was more than 50% credit, sucking money out of the middle class (the only people expected to pay their debts with real purchasing power) like a tornado, and now, with no more fuel it is wobbling like a top about to collapse.

I will be the first to admit that for all its bluster Reaganism has nothing to do with "Free Markets", it has to do with an economic regime that relies on "those very people ("those who desire to dominate over others") manipulating the system in their favor".

BTW, I have no sympathy whatsoever for anyone whose stock is canceled as part of the solution to this. There is no Constitutional (or otherwise) right to make a profit or at least not lose money in the stock market. The stock market is a huge Faro Wheel, around and around it goes, where it stops ... Well I'm sure you get the picture. Nothing galls me more than hearing someone piss and moan about losing money in the market.

14: You want to know who those people who will lose out if stock is canceled are? You, probably. If you have any kind of pension, you are heavily invested in the stock market, whether you know it or not. Pensions are the largest single class of stock owners in the U.S., so the people who will be wiped out aren't primarily wealthy peopel sitting on piles of money, they are working families who used to be looking forward to the possibility of retirement.

One of the most interesting developments in the last couple of decades, to my mind, has been the spread of ownership in corporate America to the average person, largely via the pension plans StormRaven mentions.

Marxists wanted capital to be socially owned, but I don't hear any of them appluading this development. I guess if it's accomplished without a bloody revolution it's not exciting enough.

But don't worry, some capitalist firm out there will still sell you a Che T-shirt!

Carny, who are you addressing with that last post. Me or my pinko, commie fellow traveler straw man avatar?

That post makes no sense.

As far as regular old people, myself included, if we lose our pensions it will just be one more reason why Reaganomics will not return as a viable economic system for at least fifty years and probably more than a hundred this time.

The only reason we are experiencing what we are now is that the people who remember how we got here before are all dead. We, the young, self-informed, whippersnappers of the seventies and eighties knew better than our parents and grandparents who had a front row seat for what happens when credit gets out of hand. Oh, well, so much for the wisdom of youth and inexperience.

Had we listened to Bush and the other Randian Reaganomocysts and dumped social security into the stock market where would any of us be at all?

No, the stock market is a gamble: you pays your money (or if you are an institutional investor your nickel on the dollar) and you takes your chances. Don't invest what you can't afford to lose.

It should be illegal for someone else to invest your money on your behalf without your consent.

Gene: I wasn't addressing anyone in particular.

However, it does make me think of a socialist-leaning dude I know. He was griping about capitalists, so I pointed out the fact that most of us are in fact capitalists, if by that you mean we are significantly invested in stock and bond markets.
"I know," he groused. "Capitalism forces us all to become capitalists!"

I was like, um, "forces"? I thought the whole point of The Revolution was to have capital ownership be as widely spread as possible.

It should be illegal for someone else to invest your money on your behalf without your consent.
It is, isn't it? I sure as hell hope so!

I guess I let my narcissism run away with me, after all it is all about me, isn't it?

Yeah, I guess if I join my company's retirement plan I am giving tacit approval for them to gamble with it. I should be able to direct that money to my mattress if I want to. What is a capitalist that does not participate in capital ownership called? (This is a serious question, not a joke.)

A saver.

Assuming one exists in a real economy, a saver is someone who contributes, along with other savers, to the supply of loanable funds. These loanable funds allow businesses to invest in capital and other necessary components of business.

17: Well no, the reason we are experiencing what we are experiencing now is that the people who lived through the Great Depression built the economy back up, invested heavily in pension plans, and retired on the proceeds. You think those auto workers of the 1950s were stuffing money under their mattresses or something?

The thing is, unless you stuff your money under a mattress any institution you give it to is going to invest it. Put it in a savings account in a bank? Where do you think the bank gets money to pay you interest? A pension plan? Where do you think the plan gets money to pay your retirement benefits? A 401k? Invested.

Ownership is widespread, almost everyone who works is heavily invested in capital endeavors in some way or another. That's why the people who want to "punish the capitalists" are mostly fools. Because they by and large are the capitalists.

Now, as to whether investing social security in the stock market would have been a good idea, I think there is a very good argument that it would be. There is the liklihood that the additional capital inflows to industry would have stabilized the market. In addition, it would be a better situation than the way social security funds are invested now.

Because social security funds are essentially backed up by nothing more than a giant IOU from the government. Remember twenty or so years ago when the social security trust fund was created to "save" money for the day when baby boomers retired. It was, and remains a lie. The trust fund was created by increasing the premiums paid into social security by current workers over and above those needed to pay current retirees. But the social security administration needs to do something with that extra money. They can't invest it in private industry (for a variety of reasons), so they invest in treasury bonds. Which will have to be paid back from the general fund later, out of taxes current at the time. No money was "saved", all the trust fund did was change the tax burden from being paid via payroll taxes to being paid using general receipts.

Saying the turst fund is money "saved" is like saying you've saved $10,000 by giving yourself an IOU for that amount payable in ten years. Its inherently bullshit. But politicians sell it because they are eityher too dim to understand the reality (and believe me, I've talked to some who are), or don't want anyone to know what sort of shell game the government is engaged in.

This doesn't even begin to address the fact that the social security system amounts to nothing more than a government sponsored ponzi scheme. If any private company tried to run an operation like the SSA, they'd be prosecuted for fraud. Even though my federal pension plan is as yet unfunded, I'm happier with that than I would be if I had to rely on social security.

Has someone who has invested a few bucks in a stock truly be called an owner? Especially if he has invested through a mutual fund? Sure if the company is liquidated he will get his fair share, but he has no say in whether the company will be liquidated, no say in anything unless he has a substantial portion of the shares.

In fact the vast majority of people investing their 401ks in the market are just sticking their money somewhere that the experts tell them would be good. They don't really have a desire to be an owner as they have no desire to control what they buy.

>22 StormRaven: "Now, as to whether investing social security in the stock market would have been a good idea, I think there is a very good argument that it would be. There is the liklihood that the additional capital inflows to industry would have stabilized the market."

Is anyone really making that argument? That's a new one for me. I'd expect that still more money chasing overvalued stocks would have made the collapse even worse than it has been. And we'd all be holding shrunken social security accounts to go along with our shrunken 401Ks.

BTW ownership hasn't really spread that much, because the net savings rate has fallen so low. True, people put more of their savings in mutual funds than previously, but they have far less savings, at least in this country.

If the worth of a bank is negative because the money managers have gambled away the money, the stockholder's money is gone, and the government should not restore it. Some bank stocks for insolvent banks still have some market value because people are betting that the government will give enough money to the banks so that they can recover. That would be a very bad thing to do. Probably my mutual funds have money in bank stocks, but I still would not want the government to pay me back for the value of those stocks. The government has already nationalized a bunch of banks (two or three a week lately) because they were insolvent. The government paid the depositors, sold the assets, and liquidated the banks. The stockholders lost everything. That's the way it works.

The savings rate is only truly low if you don't consider the pension plan contributions people make - and many people are heavily invested in their pension plans. That is where most ownership is derived.

I don't think it is that hard to follow the logic that investing social security funds in private industry might have helped the market. Essentially, the current problem boils down to a liquidity crisis - companies simply cannot raise needed capital because of the credit crunch. As things stand now, social security funds that aren't paid out immediately to current beneficiaries are invested in government securities (which makes them public debt), and the government is currently using a large portion of funds derived therefrom to provide capital for companies and banks to stay afloat. Why not simply cut out the middleman, avoid creating additional public debt, and accomplish the same result earlier snf with less political wrangling?

Plus, if you think that social security funds are somehow "safe" because they are invested in treasury bills, where do you think the funds to repay those bills will come from? Unless industry recovers and begins paying taxes, no one is getting anything out of social security without a massive increase in payroll taxes (which will cause its own problems).

>26 StormRaven: You are wrong about savings not including pension plan contributions. When the savings rate is computed, it includes contributions to 401Ks, defined benefit plans, and the like. And, until the crash, it was nearing 0. Savings rates were in about the 11% range until the Reagan years and have fallen steadily since, until a few months ago. Some people do save, but many are way in debt.

The current problem is indeed a liquidity crisis, which is caused by a lack of confidence. Nobody believes that borrowers can be trusted to repay. If there had been more money coming into the market to loan and invest, there would have been still more debt accumulated. The big influx of investment dollars from Asian central banks is a primary cause of the current crisis.

I don't think that Social Security dollars are genuinely safe in treasury bills ... but the market says that right now the money is safer there than anywhere else, as reflected by the very low interest rates that T bills now pay, and I think the market is right about that.

27: You aren't following me, which I think may be because I wasn't very clear. Just like social security has an "employer contribution", which in reality is simply imputed income to the employee that is paid in payroll taxes, most pension plans have an "employer contribution" or a matching contribution on a 401k and so on. If I remember correctly, the portions "paid" by the employer aren't considered as part of the saving rate. But that is money that really is going to the employee, so I think it should be.

The influx of invetment dollars is also tied to the drop in the savings rate. The added dollars drove interest rates down in the U.S., which encouraged borrowing rather than saving. But if dollars had been shifted from government bonds to private industry, it would have had no impact on the total dollar amount available for investment, but would have established a regular and reliable supply of capital that wouldn't be interrupted by a crisis of faith. That would tend to stabilize the market, as it would have diminished the impact the loss of capital inflows from the Asian secotr had (when they lost confidence in the U.S. housing market).

The problem now is that this is going to repeat itself unless something is changed about the fundamentals of the market. Asian investors invested in the U.S. because it is seen as a safer investment locale than most of the Asian countries - and that won't change in the forseeable future (even if the U.S. has problems now, it will recover, and become an attractive investment option again), which will drive down interest rates, which will encourage borrowing, and so on. The market needs a reliable backstop source of funds that won't be affected by this ebb and flow.

>28 StormRaven:. As of 2003, only 41M Americans had a defined benefit pension plan, and that number is falling. Employer contributions to such plans are indeed not counted as household savings,(although they are counted as net national savings) and employers have invested it in various ways, often unwisely and never under the control of those who may eventually receive it, if in fact adequate contributions to the plan have been made by the employer to meet pension obligations, which is frequently not the case in the US. So, IMHO, one should not consider someone who has a vested pension to be a capitalist. They are just somebody the capitalist will eventually owe.

I don't think the crisis of faith in the credit system has anything to do with having a "regular and reliable supply of capital". The US is still getting far more than its share, except now it's going into T bills. The current liquidity and confidence problem has to do with financier's irrational expectations, horrendous gambling habits, and a general lack of transparency in financial markets. It may also have to do with a problem in sustaining demand at a time when inequality is rapidly rising. The US middle class is up to its neck in debt, and so they can't keep spending, and must start defaulting.

The Dow has lost over 50% of it's value in the last two years, where has all that "money" gone? Or has it realized it's actual state, credit, and evaporated altogether?

If the baby boom is a large bubble moving through the economy, what happens when the boomers have gone? We will have an economy built to support some larger amount of people than presently exists. What does this portend for the future.

The thought of higher taxes on people making over a quarter million dollars a year breaks my heart.

Am I a foot soldier in the class war against the middle class? You bet your bippy!

29: The question is not whether owners have control over the companies, but whether their fortunes are tied to the companies they (via their pension plans) are invested in. They most certainly are, which means that any proposal to wipe of stockholdings will ultimately wipe them out too.

We can go around in circles on whether investment of social security funds would be beneficial or not, so we may have to simply disagree on that. But the one question I have for you is this: why is it stabilizing and helpful to the market to have the government borrow money from the SS trust fund and then turn around and pour it into the private sector via virtually unaccountable ad hoc programs such as the TARP, but it would not be stabilizing to simply cut out the middleman in the process and have SS funds invested at the direction of the beneficiaries?

30: Unfortunately, unless something drastic changes there will likely be higher taxes on everyone to keep social security going. Not just "people making over a quarter million dollars a year". And since the changes will require higher payroll taxes, the taxes will likely be highly regressive.

>25 jmcgarve:
ownership hasn't really spread that much, because the net savings rate has fallen so low.

Two different questions. Half or more of adults are invested in the stock & bond markets (through retirement plans, mutual funds, etc.).
Whether they also have debts that make their net saving rate low or negative is a separate question.

John Duca at the Dallas Fed reported that about 50% of households had stock investments in 1998. The continued spread of mutual funds and intermediaries like that makes me think that this % has probably risen since then. Though I haven’t checked.

One of the problems with this discussion is of course that there are a lot of ways of measuring saving, as jmcgarve and StormRaven’s back-and-forth shows.

Also, people themselves are fuckwitted about this and a lot of them don’t know that they’re invested! The Panel Study of Income Dynamics asks people, Are you invested at all in stock markets? and reminds them that they could be invested through an intermediary like a retirement plan or mutual fund. Even with that, many people apparently still say “No” when in fact the correct answer, per Duca, is “Yes.”

Another item from MarketWatch today:
In the late 1980s, only 20% of American households held stock. But that percentage has jumped to over 70% because of the advent of 401(k) plans, said pollster Scott Rasmussen.