"Freedom" thread or something

^^^  We are trying to move to inflation targeting now (yeah, because we are always 50 years behind the West, right?).  And the Central Bank head said it should be the responsibility of the govt to fix the inflation target.  I am not sure that approach would work in countries where inflation is already very low. But for developing nations, price rise is a hot issue so it makes govts accountable if they try to force central banks to keep easy money going too long.  We've had situations where govts bear down on the central bank to maintain easy money and when the price rise gets unbearable, they sack the poor guy.  So, as usual, there are downsides to govt oversight as well.   Raghuram Rajan's idea of making the govt accountable to the electorate for inflation is a good one, IF govts do buy it.

Edited by rogerthat - March 17 2014 at 07:24

I think the term easy money simply refers to the ease with which private consumers can obtain money, not money that the CB creates.  How the CB manipulates that (I mean in the sense of controlling, not like fraud or stuff) is by maintaining a low interest rate and keeping reserve requirements for banks low (so that there's more liquidity in the system).  The theory is that by making money easily available, you spur spending and generate demand and in turn growth.  But what happens is as increasing demand is generated, it constrains the fixed plant and equipment in the economy, the supply of which does not increase anywhere near as fast as that of money.  So while money remains in the hands of consumers, producers run into supply constraints and hike their prices to balance the high demand.  And there you have it: inflation. Ideally, the CB should start tightening in a timely manner to avoid overheating in the economy.  And that is where inflation targeting could be useful.  Because once you say inflation is not a flexible function of a desirable growth rate figure  and fix a ceiling for how high it can get to, you keep booms in control and hopefully set the economy on a somewhat slower but steadier course.

Edited by rogerthat - March 18 2014 at 19:38

I think we can all agree that competition is good and subsidies are bad.  When it comes to proposing that even laws should be self-determined, is where I think most people get off.  Actually, financial sector of the 80s and onwards is a good demonstration of what can happen if you trust business too much.  

And people wouldn't buy their products because?  It would actually be much easier for a large business unit to buy out the smaller ones and monopolise the market.  And hey, I am talking about real world happenings, not one where everybody abides by non aggression.  In the real word, dominant businesses go to the extent of extorting transporters not to supply raw material to competitors so that they are bled to death.  I see no reason to believe this did not happen in the 19th century either; only that it's too far back in time for anybody to remember.

rogerthat wrote: And people wouldn't buy their products because?  It would actually be much easier for a large business unit to buy out the smaller ones and monopolise the market.  And hey, I am talking about real world happenings, not one where everybody abides by non aggression.  In the real word, dominant businesses go to the extent of extorting transporters not to supply raw material to competitors so that they are bled to death.  I see no reason to believe this did not happen in the 19th century either; only that it's too far back in time for anybody to remember.

Businesses do abide by non-aggression. No business coerces people into buying its product. You say you are talking about the real world: how about a real world example of a monopoly of the kind you are talking about? They don't happen, and they don't persist. Extortion is not coercion.

Why would they not buy the product? Because they don't like it or want it or can afford it, among about a million other reasons.


Edited by thellama73 - March 18 2014 at 19:59

rogerthat wrote: And what if it was an essential product that they can't do without?  Wouldn't they need to buy it irrespective of price or quality.

Buy from a competitor, r produce it yourslef. You're going to say "what if there are no competitors?" to which I again respond, name a time when that has ever happened without the government using force to stifle competition.

rogerthat wrote: And, er, ok, if you say extortion is not coercion , then I am sorry to say that I don't understand what you mean by non aggression and from what angle you find it non-aggressive.  I do not see the point then of carrying on this discussion.

Coercion is force or the threat of force. The example you gave did not involve those. It involved private companies (and the individuals who run them) declining to engage in voluntary activity. How do you not see a difference?

JJLehto wrote: Amazing, I ask where they've all gone and llama pops in.  Magic!

I was in the mood to berate someone for being stupid.

JJLehto wrote: That is true, they are voluntary, but isn't a free market supposed to be, in theory, individuals? I could be wrong, but I thought a "pure" free market would not have firms. I know we've actually discussed mergers, you are 100% right about what you say, but that's the problem in my book. Consumers have no choice in the matter, firms are not competing via better prices/products/or even marketing. Families are kind of like a hoarding of money and resources, (which is of course necessary).

I don't think I have ever heard anyone allege such a thing. No libertarian, or indeed, anarchist, that I know says cooperation is a bad thing. Cooperation is self-evidently a good thing and should be highly praised. The organization of a firm, or a merger of firms is nothing more than cooperation.

The difference between voluntary cooperation and coercive action is that no one has a reason to cooperate unless all parties involved benefit. If someone would not benefit, they would simply decline to cooperate. Therefore all cooperative action results in a net benefit to all parties involved, or in other words to use a term I dislike, to society.

I don't understand your point about families hoarding money and resources. Do they not spend? Do they not invest?

Regarding mergers depriving consumers of choice and competition: it is a valid concern but it is simply not supported by the evidence, and there is good theory to explain why. In the absence of government barriers to entry, it is relatively easy for an upstart firm to arise and steal customers from the monopolist, if he has been abusing his market power. The greater the abuse, the greater the incentive for the entrepreneur to jump into the market.

The myth of the megacorporation that owns everything and buys up all competitors is punctured by the fact that as firms pass a certain size they become less and less efficient. Coordination becomes more difficult, and it takes much longer to react to changing circumstances. In most cases, a young, lean firm can outmaneuver an old behemoth (as we have seen with companies like Google supplanting Microsoft.) I just don't think the claim that unregulated markets will devolve into huge monopolies is accurate.

In all of the least regulated markets now, we see vast amounts of competition (For example, I have about three dozen options for lunch every single day. By your logic, shouldn't McDonald's have acquired them by now?)

In fact, regulations tend to help incumbents maintain their power and shut out competition, since they are in a better position to comply than new firms just starting out. Before the deregulation of the American beer market, there were only a handful of breweries in the entire company and they were all terrible. Now we have thousands, many of them among the best in the world. This was due to deregulation. So I just don't think your claim is supported by as much evidence as my claim.

By the way, libertarian historian Tom Woods is a prog head:

Have to shutter over his love of The Final Cut, though

How'd you fall back into a school of economic thought that's collapsing the western world around us?