Freedomain Radio

I have listened to some of the earlier podcasts where DRO's are explained and it all seems like a good enough system. Heck, any system that can take the rule of government out of the picture is worth a try.  I can't help but over look a potentially destructive flaw in the system, the capitalist worship of market forces.  Has the issue of market forces been discussed on one of the earlier shows? If so I'd be happy to check that out.  If market forces hasn't been discussed as a detrimental factor and instead is actually looked upon as a perfectly functional part of the system, I'd love to hear the reasoning behind that. For example I, as Mr.Joe everyman, may love eating a hamburger that costs a buck less but I'm too ignorant to understand it's destroying a vital ecosystem, and even if you told me that it was destroying the ecosystem I feel all to insignificant in believing I have to really do anything to stop it. I'd most likely think, "Let someone with power handle that stuff." (It's this irresponsible mentality that spawns a need for a ruling force.)  Get what I'm saying? Who is responsible?

[Youtube:j27XJ0vjr0Y]

That's actually why we need the market to do the calculation for us, rather than leaving this task to governments. Via its price mechanism, the market already has worked out the efficient level of 'ecosystem protection' that people want, and because of the way it is constantly recalibrating itself, it will always trend towards delivering the best outcome for us.

In a free market, the amount of people buying burgers will not detrimentally affect the environment anymore than what the consumers were willing to tolerate in the first place. If people liked 'nature' so much, then obviously they would be willing to pay to see nature. The people who make the meat for us to eat burgers with, would just do that separately. See the meat farmers and the "people who run nature parks" have to compete for land right? And because land is up for sale, whoever can offer the most, will be able to buy the land.

So if there's lots more money to be made from "running nature parks" then they will win out. On the other hand, if there's more money to be made from selling hamburgers, so be it, the land will be used for meat farming. Keep in mind we're just talking proportions here, not 100%. The amount to which meat farming is efficient, it will use that much land, and the rest could be nature parks for example.

Apprehension about market forces could lead one to make a solid case for dictatorship.  Unfortunately, the vast majority of people who justify violent intervention as a required response to uncontrolled "market forces" put forward a paradoxical argument for a representative "democratic" government.

The paradox is as follows:  "the people" cannot be trusted to value some long term gain (e.g. maintaining "a vital ecosystem") over a short term gain (e.g. "eating a hamburger that costs a buck less") but they CAN be trusted to elect someone into power who does value the long term gain over the shorter term.  Thats like saying I can't trust myself to voluntarily go to the dentist, but I can trust myself to voluntarily hire someone to force me to go to the dentist - pure madness.

The paradox is as follows: "the people" cannot be trusted to value some long term gain (e.g. maintaining "a vital ecosystem") over a short term gain (e.g. "eating a hamburger that costs a buck less") but they CAN be trusted to elect someone into power who does value the long term gain over the shorter term. Thats like saying I can't trust myself to voluntarily go to the dentist, but I can trust myself to voluntarily hire someone to force me to go to the dentist - pure madness.

This is a really good way of putting it, I like this

volition:

the market already has worked out the efficient level of 'ecosystem protection' that people want, and because of the way it is constantly recalibrating itself, it will always trend towards delivering the best outcome for us.

So the business person and his constituency both have in mind whats good for all those around them not involved? Interesting assumption. When you make a transaction when exactly does the idea of "us" ever come to mind over "me"?

volition:

In a free market, the amount of people buying burgers will not detrimentally affect the environment anymore than what the consumers were willing to tolerate in the first place.

 I love buying juicy burgers and I will tolerate as much ecosystem destruction as the near slave laborer in Brazil will tolerate to make them for me.  By your logic it should be taken care of by the laborer in Brazil, it's his peoples land being clear cut.  How will a DRO prevent human voluntary compliance with destructive practices for money?

volition:

See the meat farmers and the "people who run nature parks" have to compete for land right? And because land is up for sale, whoever can offer the most, will be able to buy the land.

 Exactly. All land will be bought by the biggest bidder.  I see a nature park winning out only in the instances you are willing to say, "I am giving 6 dollars to this restaurant and because I like my world, I'm also going to give 6 dollars to this (not necessarily imminent need) fund. It's clear who is going to glean more from people.

Although keep in mind I am not arguing FOR government nor am I coming in defense of it.  I am criticizing Anarcho-capitalism in a stand-alone frame of reference.
 

 

Thank you Nathan for posting that video again. I had seen the introductory version, but it's always nice to get refreshed. I have a few points about the logic I'd like to have explained but first I'd like to hear about these. 

indipunn:

What do you mean by "market forces"?  Of course capitalist "worship" market forces, since a competitive marketplace is an intrinsic feature of a capitalist economy.

Is the quick emergence of monopolies also an eventual feature of a competitive arena? When you pit 4 fighters against one another does one not eventually dominate naturally? How does a DRO deter the existence of monopolies without a person paying for protection for their good and service prior to the formation? (do you pay money for your apples every month to ensure a monopoly dose not develop resulting in you paying more for apples? Seems self defeating.)

indipunn:

Why can't the free market be involved in protecting the environment?
The free market should be researching into environmentally friendly fuels.  Besides, his government really protected the environment?  The US federal government is the biggest polluter in the United States!  Also, did Chernobyl, and the subsequent contamination in neighbouring areas, occur because of free market forces?  Was the USSR a bastion of laissez-faire economics?

We know the government is supposed to take care of that stuff.  Your assumption is that without it, within people a generous light will go off in people that will tell them,"You are now responsible for your world." and everyone will in kind give considerable portions of their money to a fund doing research that may or may not actually result in anything that directly affects them. Is that what your saying?  

indipunn:

  Thus, if society values environmental protection highly, then companies in the marketplace would cater to this, since in a capitalist economy people only buy goods and services that suit their needs and wants.  Ultimately, no one has to purchase products from any specific supplier within the free market.  There always is choice.

In a world in which people are all virtuous this system works marvelously.  Too bad all systems that work have to be designed not with optimal conditions in mind, but the opposite. The same way a U.S. Abrams is an "excellent" and very advanced machine but can only operate in the desert for a few hours before having to be cleaned to keep functioning, whereas a Russian tank is engineered so simply and robustly that it's known to keep working under the harshest conditions even though it is not nearly as efficient of a machine. The resilient simple design works better because it was designed with the worst conditions in mind, whereas the Abrams was designed with optimal. 

Is this system designed to function given that humanity may turn out to only choose the wrong choices, for themselves and everyone else? 

Is what's good for the economy and exact measure of whats good for "us"? 

 

A lot of your questions, particularly about monopolies, are addressed on and off in the first 200 some-odd podcasts.  If you use Stef's program to search through the podcasts by topic and look for "DRO", you'll find some good answers to your questions.

 Since insurance companies have a wide customer base, they have an economic incentive to look at what's best for society as a whole.  If a DRO exists to take on only polluting construction companies, other DROs are going to place disincentives around dealing with that DRO, because it is hurting their property values.  It may be better for the construction companies to pollute, from a purely short-term, economic scenario, but since their DRO is hurt by the decision to pollute, it will not cover them, or will place a heavy rate hike on pollution.

Thanks for that concise and clear return elisswyatt.  So you postulate the generalized interest of a DRO's customer base and their well being, will inherently neutralize the intrinsic self-centered slant of capitalism, creating a balance between two forces so to speak? Interesting. I thought I had already searched for the DRO episodes and listened to quite a few but I think I decided not to listen to some of the later episodes after feeling like I had enough of an idea of the system based on the earlier podcasts.  I will go back and listen again for anything I may have missed. Thanks.

 I still have a simple question at mind:

What happens when I am a worker who in the interest of saving money, decides not to pay anything extra to a DRO for protection from things like, unsafe job environments, health regulation violations, unreasonable labor hours, contamination and destruction of my home environment?  Perhaps my plan is to simply save money by not getting coverage for any of these things. (I.E.- This is all the people out there deciding to go for inadequate car insurance, that is really against their best interest but looks good in the month to month basis because it saves a portion of earnings.)

And of course one individual doing this is unfortunate for him and nobody needs to be concerned with an fool. However, what happens if people decided as a laboring community to not spend a little extra on speculation that they may get paid off in the future for things that "might" happen.  Of course people are going to pay a portion of money to a DRO to protect their air, but I would guess usually ONLY after they find that a factory is going to be built.  In this case rates will go up considerably since a DRO has no investment prior concerning that situation.  After the news the rates will undoubtedly sky rocket. On top of this I as a potential buyer of the DRO's new premium dose not even know if the factory is actually going to end up polluting my air. Is all of this covered in the earlier shows? If that is the case I am very sorry to have wasted your valued time but if not I'd love to hear if this is really even a problem and if so how does it get solved?
 

As volition pointed out, there will be competition for resources, namely land in the given example.  If environmentalists or those wishing to run nature parks win out and buy up more land then that means that ranchers who raise stock for beef will either have to increase prices, since the amount of cattle that can be raised healthily is dependent on how much land they have.  Less land for ranching=less cattle brought to market=higher beef prices due to rising demand for a scarcer resource.

 

This will cause one or several other outcomes to occur: 1) Beef will be consumed less because of its cost 2) Ranchers will become more efficient at cattle raising (i.e. raising breeds with more beef and less need for land, going into partnership witht he nature parks to graze land that is becoming grown over, or any number of things) 3) People will begin consuming other meats that cost less in comparison to the rise in price of beef.  Certain countries eat more seafood (Japan) because they do not have the land to raise cattle on at a scale that makes beef anything less than a delicacy, others (the English Isles) breed several types of animals for meat (pork, fowl, sheep, and beef) so that the consumer has a variety and these competing products force one another into competition and efficeiency 4) Or like Japan, people will buy foreign imports of beef at lower costs since domestic producers are no longer the most efficient.

 In the end both ranchers and nature park owners will have an incentive to maintain and most efficiently utilize the main resource common between them: land.  Whole economies that are manipulated by the state always go fro short-term gain and only correct when disaster occurs.  Individual owners will, to avoid the mammoth costs associated with putting right a collapse of the arability/grazeable land/natural beauty (for the nature park) of their property will take the long view and from year to year improve their assets to make them become as easy to maintain as possible and less likely to go fallow.  This solves the problem of natural resources wasting and depredation since it is an individual who realizes his livelihood is tied up with how well he treats the land.  Corporations who "rent" land form the government or the government itself do not care.  The corporation can move to another patch when they ahve destroyed the original one and governments can always take the cost out of the backs of its citizens.  Owners must compete and maintain their property by themselves and so seek to do it at the lowest possible cost; this means doing the least amount of damage as is possible while still gaining the most viable economic use out of it.
 

Ah yes I see. The corruption of a valued resource IS the enabled via irresponsible government conduct, otherwise no fool who owned the land would waste such commodities.

But can you really blame some the horrible practices by corporations on a state intervening with the capitalist process?

I known people to say, "Yeah one of rules when starting up companies is to become incorporated. That way you feel not as much of a repercussion for cutting corners and screwing workers over because if the business gets sued it's the individual corporation under fire, not you." Will a DRO link credit to executives who are involved with a "corporate individual" who has it's credit destoryed?

Corporations only exist due to the government.  It is a crafted legality precisely to shield part-owners from negative repercussions.  In a DRO system I doubt corporations will work like this.  If a corporation screws up each stock holder will then become proportionately liable. Like one of your products kills someone and your and the deceased's DROs find that the company is at fault and it owes the grieving family $100 million.  Well, instead of saying "I'm only a stockholder I have nothing to do with it" as happens today and nothing does really happen then the DROs will say that since you owe 10% of the company you can pay $10 million or else have the company, and thus your investment, liquidated to pay the bill.  After liquidation whatever is left unpaid will be covered by the shareholders money that is not directly tied up in the company's stock.  Like, your $10 million does not get covered because after liquidation the proceeds from the company only yield $50 million; you still owe $5 million.

 

How irresponsible would stockholders allow the company to act in this situation?  How much short-selling of the future would they allow the company to do this when they have to break out their checkbooks every time the board of directors tries to gin up the stock rather than achieve sustainable growth? 

Cooper MacLean:

If a corporation screws up each stock holder will then become proportionately liable.

 But is it really fair to the stockholder (wait...did I just say that?) to transfer liability to him? Take for example a pharmaceutical company with a stock holder that provided capital but didn't really understand the business, but relied on the reputation (moral and technical) of a certain group/business. If it's a huge company with a lot of "corners" let's say, and the internal white papers are pretty technical. Say they produce a new drug to treat something rather minimal, like athlete's foot. The doctors can run liabilty assessments based on their own understanding. Now let's say that some combination of biological factors leads to an increased risk of a rare form of airborne vampirism and that they made a logical and/or statistical error(s) in the analysis that said cases of vampirism should be minimal or nonexistant. Obviously when the outbreak is contained, the lawsuit should be mammoth and directed towards whoever is liable. If we hold the stockholders liable, then that kind of punishes them for something they didn't really do themselves, and it was just a tragic mistake made by somebody inside the corporation. I don't feel comfortable saying that liability should transfer to stockholders, since by definition they're kind of abstracted from a lot of the internal processes. If you can prove he was urging them on, then that's one thing, but I still consider the organization itself and the doctor(s) involved is where I feel liability should lie. I just don't think it's sufficent to say "you own stock so there must have been something more you could of done." maybe yes, maybe no, if so then he'll remember that when the company gets liquidated costing him the money invested and future earnings...I defended capitalism...I feel like taking a shower now...

Cooper MacLean:

How much short-selling of the future would they allow the company to do this when they have to break out their checkbooks every time the board of directors tries to gin up the stock rather than achieve sustainable growth? 

You're assuming two things: a) they know enough of the internal processes to understand that there's something about something someone somewhere is doing that's screwing up their long game (which I realize it basically my first point, sorry about that) b) that those involved actual care to be sustainable. If I can just ravage an area and make it uninhabitable  by sprinking radioactive material into the soil for some reason, if I can still cash a check for a profit, some people deem that good enough. The issue he's hitting around on are externalities which I don't think cover "fly-by-night" operations or people who don't care what damage they cause or the liability incurred if they're just going to "skip town" by the time it comes time to pay the piper. With the entire world to hide their assests in that may make things difficult for any firm looking to back someone's interests for any reason. Also as pointed out, not much luck is going to be had on getting DRO's to punish damage incurred before they get their policy, short of one ran as a charity. You can look at "pre-existing condition" for an example of that.

It's examples like that that make me prefer industry/trade federation over DRO's even though DRO's do have their advantages over the former.

Stock holder liability also would drive confidence into the ground and in turn drive earnings from stock trading down also,making the economy not as strong. Who's a board of executives I know I can trust before I buy this companies stock? (I'm sorry I have to contain my laughter.)

If I as a stock holder am going to be held responsible for a companies actions, then I really am not just a stock holder any longer, I am an employee or board member so to speak, and with such risk involved for me the only way I'm gonna buy stock is if I can have unlimited access to oversee the companies actions..which would actually be fine with me. If I could show my document stating I own 1000 shares of the companies stock at the security gate and they let me in and unlock all the safes and record cabinets...then that system would be fine. 

mind you I am still on the side of a DRO over government. If a DRO can't solve these issues then so be it, a government seems to not be able to either.