What Happens When the Free Market has Its Way...

[buddhist]

A true free market would work in this way with the OP's specific case:

An individual grows his crop conforming to his community's historically accepted methods, proven through use over time. His personal reputation in his community would predispose his immediate neighbors to trust him and his product. If he tries to cut corners for selfish or greedy reasons, and it causes problems with his customers, he would destroy his personal reputation and his source of income. He would not cut corners, because his customer is his childhood babysitter's granddaughter (e.g. everyone in his local community is basically his extended family), and he would not knowingly poison any of them. His personal wealth cannot grow to obscene levels, creating a balance between him, his family, the community/population size, and nature. The small, local community, in such a way, innately watches over and protects one another, and ensures goodwill and protection of natural resources for the good of all, and discourages and censures greed and evil misbehavior.

On the other hand, corporate and legal fictions allows the same individual to separate his private wealth from his business funds. Legally, he is personally shielded by the state from personal liability. He does everything within his power, hopefully within the limits of the law, to minimize business expenses in order to maximize his income from his business venture. He imports other ways of maximizing his crop from other communities/nations in order to maximize his revenue, processes unknown to his local community. He works hard to increase his personal profit before his customers can discover the corners he cut in his product, to amass as much wealth as possible - in competition with other businesses also doing the same. He doesn't care much if he cuts corners or not, because he doesn't personally know his customers, nor do they personally know him - they do not have a personal, emotional investment in each other's welfare. If his business fails because his business is selling an obviously inferior product which can no longer be ignored, he can simply close up shop and start another under another fictitious name. As others begin to cut corners as well (this is just "normal" business practice, after all), false prosperity increases across the board, causing a corresponding rise in population. Morality and ethical behavior is no longer the norm, there is no check by individuals in a community who no longer personally knows one another, harmony between mankind and nature becomes unbalanced, and greed is rewarded.

 

[buddhist]

Or raise the standard of living either, right?

Depends on your definition of "standard of living".

My definition of a high standard of living is to have a small, loving community of like-minded family and friends in tune with nature and its rhythms, while celebrating love and family, exploring spirituality, recognizing and accepting physical life and physical death, and leaving behind a minimal impact on the Earth when I pass on. The true free market system I described promotes this standard.

As I see it, it seems the Western definition includes maximal entertainment (distractions), maximal amassing of personal resources, maximal personal space, and maximalism in consumption, for the purpose of hiding and distracting man from his innate sense of suffering and to prolong his physical life to the greatest extent possible. The corporate system currently in place promotes this standard.

 

[Shadow Wolf]

[The whole short article is well worth reading and can be found here]

Are free, unregulated markets better than regulated markets? Why or why not?

Obviously we need regulations, because things like the OP story are far too common, and often end with catastrophic results. Or we could extend self-defense to include "severe harm and/or death via industrial poisoning." (what are they really going to do do a terminal cancer patient who got the stuff from being poisoned in the first place?)

An individual grows his crop conforming to his community's historically accepted methods, proven through use over time. His personal reputation in his community would predispose his immediate neighbors to trust him and his product. If he tries to cut corners for selfish or greedy reasons, and it causes problems with his customers, he would destroy his personal reputation and his source of income.

Then how does a company like Ford, who knowingly released a faulty car model that was prone to fires and exploding upon rear impact, a design flaw they were aware of knew they could easily fix it but chose not to because of "costs," a choice that did result in severe injury and death, how are they still in business? How does Apple, a company that sells products that are made in horrible conditions by people who are severely exploited, dominate the market? What about BP, who chose not to get a rig up to code, a decision that resulted in a massive ecological disaster? If what you propose is true, how does Hershey and Nestle stay in business when a source for their chocolate is produced via child slavery? The consumers simple are not aware enough, and often times effort to reveal the truth end in disaster for those revealing the truth, such the NFL who brought out the big guns to go after Dr. Bennet Omalu, the man who discovered playing football can lead to earlier and severe brain damage.

If his business fails because his business is selling an obviously inferior product which can no longer be ignored, he can simply close up shop and start another under another fictitious name.

The thing is, it's not at all unusual for a company to sell an inferior product, such as Microsoft Windows, and dominate the market. We get cheap junk from sweat shops in places like China, and the consumers aren't caring because it's cheap, and they care not that they get what they pay for.

The problem with the "free market" today is that it isn't really free. Individuals are shielded from personal liability through corporate fictions and other legal methods. It doesn't scare a business proprietor to cut edges any which way he can manage, when his personal wealth is legally shielded apart from his business venture.

That too is another huge problem. Ideally, however, given adequate consumer knowledge and adequate operations disclosure laws, even investors should be held liable over damages for giving money towards a bad service or good. Or perhaps we should do this now, and give people the option of selling their stock or facing a penalty for supporting a company involved in destructive, irresponsible, and exploitative behaviors. I wouldn't even be beyond imposing a hefty burden on lawyers who defend "unethical and immoral" companies.

 

[buddhist]

Then how does a company like Ford... How does Apple ... What about BP... Hershey and Nestle

You made my point. Get rid of businesses (legal fictions) altogether.

 

[Laika]

[The whole short article is well worth reading and can be found here]

Are free, unregulated markets better than regulated markets? Why or why not?

It's probably best to keep in mind that, on the production side, we already largely have a planned economy. Only it isn't planned by the government but by large corporations. This is something both libertarian and marxist economics agree on, although they have different interpretations of it. The freedom of the consumer is actually limited, as they can only buy products that are in store and are already produced so they are not entirely "soverign" within a marketplace with large companies. Nor is it possible to characterise "greed" as bad as a motivation, as that doesn't take into account the structures of free markets condition people to behave in a "capitalist" way or the very high level of accumlated wealth in capitalist economies.

There are problems however. The lack of "consumer rationality" is compounded by the mass media and the use of advertising creating a culture where consumption is promoted as a value. It's not promoted on the basis of "rational" choice, but rather on appeal of to emotion and instant gratification. Further, the use of brands, logos and mascotts is also a way to try and "trick" consumers into treating corporate entites as if they were people. part of the process of getting people to identify with the brand is to use psychological processes that show the "corporate person" in a freindly or positive light. (e.g. happy children eating at mcdonalds with ronald mcdonald). For this reason, the "superfical" cliams to rationality are largely an ideological instrument to justify practices by big businesses as serving the consumer, when in fact large companies do have "market power" and can- to a greater or lesser degree- change consumer behaviour through psychological manipulation and suggestion (advertising). insisting on the rationality of consumers and essentially victim-blaming is therefore a way of keeping back the tide of regulation.

 

[Revoltingest]

It's probably best to keep in mind that, on the production side, we already largely have a planned economy. Only it isn't planned by the government but by large corporations. This is something both libertarian and marxist economics agree on.

This libertarian doesn't agree.
Our economy is far more an emergent property of a stochastic process than it is planned.
(Please excuse the fancy jargon.)
By analogy, it's about as planned as is evolution.

 

[Revoltingest]

You made my point. Get rid of businesses (legal fictions) altogether.

You'd get a lot of violent opposition from those of us who own businesses, & from whole bunch'o our workers.
So that's not so practical a solution.

 

[Laika]

This libertarian doesn't agree.
Our economy is far more an emergent property of a stochastic process than it is planned.
(Please excuse the fancy jargon.)
By analogy, it's about as planned as is evolution.

That is fair in so far as there is no overall structure of centralised planning from the state (in a fascist/communist sense anyway). it's still "planning" done within corporations themselves. my point was both Libertarians and Marxists have a problem with the concentration of market power under capitalism through "corporate capitalism" (liberatarian) or "Monopoly Capitalism/State Monopoly Capitalism". The major differences is libertarians would argue that concentration of power is due to legal arrangements and the government, whereas Marxists would say it's due to technological changes and shift from small scale to mass production, with larger industrial units.

 

[Revoltingest]

That is fair in so far as there is no overall structure of centralised planning from the state (in a fascist/communist sense anyway). it's still "planning" done within corporations themselves. my point was both Libertarians and Marxists have a problem with the concentration of market power under capitalism through "corporate capitalism" (liberatarian) or "Monopoly Capitalism/State Monopoly Capitalism". The major differences is libertarians would argue that concentration of power is due to legal arrangements and the government, whereas Marxists would say it's due to technological changes and shift from small scale to mass production, with larger industrial units.

I don't want monopolies, but that does not mean that companies plan the economy.
Individual companies each act in their own self interest, & they do so largely independently
(Agreed upon industrial standards notwithstanding). Certainly, companies who are failing
don't intend this fate, eg, Sears.
Planning by individuals is not the same thing as a planned economy. Similarly, we consumers
each plan our spending, but that doesn't mean that as a group consumer spending is "planned".

Regarding concentration of power, I'd say it exists where you find it.
And this is in many places. (I like distributed power.)

 

[Laika]

I don't want monopolies, but that does not mean that companies plan the economy.
Individual companies each act in their own self interest, & they do so largely independently
(Agreed upon industrial standards notwithstanding). Certainly, companies who are failing
don't intend this fate, eg, Sears.
Planning by individuals is not the same thing as a planned economy. Similarly, we consumers
each plan our spending, but that doesn't mean that as a group consumer spending is "planned".

Corporations are not individuals, but are collective entites composed of many people. So their internal behaviour is governed as much by "office politics" and the principal-agency problem (conflicts between managers and shareholders) as much as by self-interest. Corporations are bureaucratic entites, though we don't associate the term with it because "bureaucracy" carries implications of public sector inefficiency and its almost a taboo to call it that.

Though for the record, yours is the orthodox view in economics and my leftie "heterdox" economic tendencies are showing.

 

[Revoltingest]

Corporations are not individuals, but are collective entites composed of many people. So their internal behaviour is governed as much by "office politics" and the principal-agency problem (conflicts between managers and shareholders) as much as by self-interest. Corporations are bureaucratic entites, though we don't associate the term with it because "bureaucracy" carries implications of public sector inefficiency and its almost a taboo to call it that.

The above notwithstanding, companies are all individual players relative to each other.
Their acting independently makes the macroeconomic result largely unplanned.

Though for the record, yours is the orthodox view in economics and my leftie "heterdox" economic tendencies are showing.

I'm hardly the orthodox view here on RF, which is dominated by slavering, wild eyed, frizzy haired, Alternet fueled, commies.

 

[Laika]

The above notwithstanding, companies are all individual players relative to each other.
Their acting independently makes the macroeconomic result largely unplanned.

Agreed. It is far easier to model corporate behaviour as if they were individuals when it comes to macroeconomic models and dealing with questions of market structure, (e.g. the interdependence ofcompanies in "oligopolistic" markets) [a handful of firms with power to influence prices for non-economists]

I'm hardly the orthodox view here on RF, which is dominated by slavering, wild eyed, frizzy haired, Alternet fueled, commies.

We'e just getting started. We haven't brought back slavery yet. Or shall we say..."Job Security".

 

[Revoltingest]

We'e just getting started. We haven't brought back slavery yet. Or shall we say..."Job Security".

Of course, you know that I referred to over-active salivary glands.

 

[Laika]

Of course, you know that I referred to over-active salivary glands.

I missed that. lol.

 

[buddhist]

You'd get a lot of violent opposition from those of us who own businesses, & from whole bunch'o our workers.
So that's not so practical a solution.

I don't doubt that that would happen, if corporate fictions were eliminated. Business owners want to be shielded from personal liability - IMO the root cause of all the miseries associated with business today.

Workers can be employed directly by another individual, instead of being employed by the business.

 

[Revoltingest]

I don't doubt that that would happen, if corporate fictions were eliminated. Business owners want to be shielded from personal liability - IMO the root cause of all the miseries associated with business today.
Workers can be employed directly by another individual, instead of being employed by the business.

What you call a legal "fiction" isn't really.
It's merely a facet of liability law.
If stockholders were personally liable for all the actions of a company, investment would be far more difficult.
Not a big deal you might say?
It would cripple business here relative to the rest of the world.

 

[Shadow Wolf]

The major differences is libertarians would argue that concentration of power is due to legal arrangements and the government, whereas Marxists would say it's due to technological changes and shift from small scale to mass production, with larger industrial units.

Many Marxists would argue both. The legal side, things such as NAFTA, are just "icing on the cake" to further concentrate power because the technological shift had concentrated power enough so that corporations and their executives could buy politicians. Now the can spend unlimited money on them during campaigns, with-or-without the consent of the candidate.

 

[Shadow Wolf]

If stockholders were personally liable for all the actions of a company, investment would be far more difficult.

It would make investors think twice before financially supporting a company that actively participates in slavery, exploitation, toxic dumping, and the myriad of other unethical behaviors that should be illegal, or penalized so harshly that no company can shrug it off as a "slap on the wrist."

 

[Revoltingest]

It would make investors think twice before financially supporting a company that actively participates in slavery, exploitation, toxic dumping, and the myriad of other unethical behaviors that should be illegal, or penalized so harshly that no company can shrug it off as a "slap on the wrist."

Most investors don't have the expertise to evaluate companies to that degree.
And one can never predict all the possibilities for liability,even for companies
which behaved responsibly, eg, the Dow Corning debacle. Other countries
wouldn't be so dumb as to enact such laws, so capital & business would flee there.

 

[buddhist]

What you call a legal "fiction" isn't really.
It's merely a facet of liability law.

It's a fictional person.

If stockholders were personally liable for all the actions of a company, investment would be far more difficult.
Not a big deal you might say?
It would cripple business here relative to the rest of the world.

Exactly ... I'm all for that.