Efficiency with regard to what goal? The current allocation of capital in the US is quite inefficient if we're interested in the welfare of the public. Billionaires have far more capital than they know what to do with, and since they're unaccountable for their investment choices, they strongly tend to steer the economy toward vanity projects. Meanwhile, many families can't put food on the table, and infrastructure is falling apart.
Whatever it is about this system that you find "efficient," I don't find it valuable. The Chinese state takes a rather strong hand in allocating capital, and that has treated it fairly well over the past few decades. A mixed economy where private capitalists are not solely responsible for investment choices, and where ownership of that capital is more evenly distributed among the public, could fix a lot of problems.
Is take the American system every day. What is the moral justification for a state stealing private property?
Billionaires get to invest however they want because it's their property. What you see as a vanity project actually employs workers, feds families, and generates tax revenue. They are massively contributing to the economy.
> What is the moral justification for a state stealing private property?
I think it'd be good, is why. Non-intervention with private property is extremely low on my list of moral priorities. If someone's starving, I don't think you really have a right to keep food away from them.
> What you see as a vanity project actually employs workers, feds families, and generates tax revenue.
…and are they actually making anything useful? Or are they wasting everyone's time? Workers could be employed doing any number of things. For a rich person to "creating jobs" means nothing if those jobs are pointless. We could easily take that money away and create jobs doing something more important.
> If someone's starving, I don't think you really have a right to keep food away from them.
I believe in private charity, which would solve this. But I do not believe the state gets to steal from some people to give to others. The only reason for taxiation is to fund public goods.
> …and are they actually making anything useful? Or are they wasting everyone's time? Workers could be employed doing any number of things. For a rich person to "creating jobs" means nothing if those jobs are pointless. We could easily take that money away and create jobs doing something more important.
Who gets to define importance? This argument always devolves into state controlled economies which are charactetized by deadweight loss, corruption, and poor incentives. I'll take my access to private property every time.
Taxation in a sovereign state doesn't fund anything. The state creates the money to pay for stuff. The tax frees the resources so they can be purchased and simultaneously imbues the currency with value, which makes people want to accumulate it.
As an aside, do you also believe in private knocking-you-on-the-head-to-take your-food-you-don't-think-they-deserve?
As a matter of accounting, all the net money in the system was first created by the state before the private sector could accumulate it. You're welcome.
The money in the system was created by the state, but all it does is ease exchange. Value in the system, which the money represents, was created long before the system created money and will continue to exist after the system ceases. The value is created by private individuals trading freely.
As an exercise, I invite you to trade without money: barter your goods or services with others. It's more work but completely doable. But remember the state is still expecting taxes on that transaction. And then ponder upon whether state-issued money is truly the source of private sector asset accumulation.
Money is and always has been a tool of the state in order to exercise power, backed by coercive taxation. The barter myth is contradicted by historical evidence. The broader point is that the money has value precisely because it is inside a system of coercive taxation.
The public sector produces plenty of wealth - security, public goods, law and order, environmental protections, public health measures...
Nobody is obliged to accumulate state pegged money, yet most people do. Feel free to accumulate cheese if you wish.
> A lot of government funds have also been looted by CCP honchos.
Yeah, because they're corrupt and undemocratic. I certainly don't endorse China. But they do put to rest the idea that the freer the market, the stronger the economy.
What are your reasons for thinking that the Chinese economy is well-performing? Chinese per-capita income is slightly less than that of Mexico, and you wouldn't use Mexico as an example of a well-performing economy.
China is strong because of its massive population combined with an economy that performs better than the only other country with a similarly massive population.
No they don’t. China got richer when they implemented free market reforms, proving the idea.
Unfortunately Xi is now focused on saber-rattling about national security and bullying neighbors. He has cracked down on free markets, and China’s economy is suffering due to his incompetence.
It's not a binary. If we say market freedom is a spectrum with the USSR at 0 and the US at 10 (reductive, but let's pretend) then China moved from 0 to 5 and became a global power within a couple decades. This is a strong argument in favour of a level-5 economy, not a level-10 economy..
The system is not perfectly efficient because humans aren’t efficient. I think the idea is, keeping a market relatively free (with a sane amount of regulation) allows capital to seek returns. This leads to a lot of independent, decentralized value production, like startups popping up out of nowhere because some founders have an idea and attract capital.
The thing is, people who pile up capital don’t have to be efficient with it. They can basically do whatever they want with their money. They can build giant vanity estates, which you could certainly call inefficient — who needs 20,000 square feet for a family of 3? But… we also care about freedom, so we let people do inefficient things. The only difference between rich people and poor people is they have more money so their inefficiencies are louder. But everybody spends money on senseless wants and vanity. Who needs manicures and hair extensions? Arguably nobody. The “poor” spend on vanity too. And we let them because we care about freedom.
If you wanted to implement a perfectly-efficient system, would that mean banning the fulfillment of any desire that wasn’t strictly a need? I don’t think anyone would want to live in such a system.
>If you wanted to implement a perfectly-efficient system, would that mean banning the fulfillment of any desire that wasn’t strictly a need? I don’t think anyone would want to live in such a system.
Holy mother of slippery slopes x) Do you think $current_economic_system can be improved? Ah so you want to ban fulfillment of any desire? Sheesh
You’re strawmanning. I was caricaturing the call for efficiency by blowing it up into a monster. I wasn’t saying I want to ban fulfillment of desire, or saying that’s the only alternative to the status quo.
The irony of accusing the other person in the conversation of strawmanning while describing your own strawmanning as "caricaturing" as if that were any different
Efficiency is measured exactly by people maximizing their utility subject to their preferences and constraints.
What you see as vanity, such as hair extensions, may be a high utility item for others. Consider the hair extensions make them a more attractive mate and provide them the opportunity to breed with a better stock, for example.
Similarly, consider that 20k ft sq mansion in context: all the prior owner(s) of that property were traded revenue for the land. And the construction workers were paid. And now the gov gets taxes.
At every step, each contributor to the end product voluntarily participated and maximized their outcomes. That is maximally efficient, economically speaking.
> That is maximally efficient, economically speaking.
It is not. The resources which went towards that mansion would be (by your definition) much more efficiently spent elsewhere. The utility which one wealthy person gets from a 20k sqft mansion is much smaller than the total utility which 20 homeless people would get from a 1k sqft apartment.
Yeah I’m all for these things that I was calling “vanity”. I was only using the word vanity because the comment I was responding to used it pejoratively: “vanity projects”.
> The only difference between rich people and poor people is they have more money so their inefficiencies are louder.
Yes. Their inefficiencies are deafeningly loud and have a massive impact on the rest of us. This is why I am suggesting that we intervene to get rid of the ultrawealthy as a class.
> If you wanted to implement a perfectly-efficient system
Stop right there. Don't pretend that "what if we got rid of billionaires" is a slippery slope towards a society of perfect clones where all individuality is suppressed. You don't really believe that—you're just fishing for gotchas, and it's beneath you.
>The current allocation of capital in the US is quite inefficient if we're interested in the welfare of the public.
The welfare of the public today is not the same as the welfare of the public for all time. The Soviet Union couldn't compete on the development of computers, because the USSR was trying to optimize towards what could computers be used for then and there. It turned out that computers could be used for a lot more than what people thought of at the time.
Drug R&D and patents lead to enormous profits for companies, because they can charge outrageous prices for the drugs. But the benefit to the public is that now those drugs and the knowledge about them exist. That's going to have a cumulative positive effect for hundreds of years in the future.
> The Soviet Union couldn't compete on the development of computers, because the USSR was trying to optimize towards what could computers be used for then and there.
You assume pharmaceutical profits are all funnelled to R&D, rather than to shareholders. I see no reason why we shouldn't slash profit margins on medicine and offer the money back in earmarked grants.
So you see, I'm actually radically in favour of R&D.
No, I'm not assuming that. The profit motive is why they get the capital to do the R&D. I'm not just talking about developing an entirely novel drug but also manufacturing and testing it.
Without the possibility of this outrageous profit we would just get less drug research done. That money would then be invested in something else. Drug prices wouldn't be so outrageous (probably), but we probably also wouldn't have as many treatment options. They might be too expensive now, but there's a chance they won't be in 50 years.
> The profit motive is why they get the capital to do the R&D.
A massive amount of research is funded by public grants. iPhones are a famous example of a private-sector product almost entirely created off the back of public research. It is absolutely not true that private investment is required for pharmaceutical R&D.
> Billionaires tend to steer the economy toward vanity projects.
Musk's only meaningful contribution to SpaceX was money. We could just have raised NASA's budget instead, but we didn't. There are lots of things that we need to spend money on. Space is not our top priority.
Musk, however, is independently wealthy and can spend his money on whatever he wants. So he spent it on rockets, as a vanity project. Yes, some useful innovations came out of that. But what was the opportunity cost? Was this where the money was best spent? I have no reason to believe so.
NASA does a lot of things. If they'd been given SpaceX's capital and a mandate to build reusable rockets, I'm sure they could. They're world-class engineers.
> It was a heck of a lot more than that. See "Elon Musk" by Vance.
I'm not going to read his biography for the sake of your post. Rich people like to act as if they're uniquely good leaders, but it's easy to take credit from a room full of people when they're all on your payroll. If Musk had something to contribute other than fame and cash, name it.
> Becoming the richest man in the world through his investing is a whopper of a reason that it was well spent.
Not at all. Him becoming rich benefits nobody but himself. Funnelling money toward one individual's personal wealth is an extremely poor allocation of resources.
> He's reached cash flow positive.
Barely. And so what? Pet rocks were profitable. Did we actually need SpaceX? Is this really best the direction that so many billions of dollars worth of economic activity could have been directed? Is Elon Musk, the buffoon who ruined Twitter, really the person who should be making that choice?
Efficiency with regard to what goal? The current allocation of capital in the US is quite inefficient if we're interested in the welfare of the public. Billionaires have far more capital than they know what to do with, and since they're unaccountable for their investment choices, they strongly tend to steer the economy toward vanity projects. Meanwhile, many families can't put food on the table, and infrastructure is falling apart.
Whatever it is about this system that you find "efficient," I don't find it valuable. The Chinese state takes a rather strong hand in allocating capital, and that has treated it fairly well over the past few decades. A mixed economy where private capitalists are not solely responsible for investment choices, and where ownership of that capital is more evenly distributed among the public, could fix a lot of problems.