Re: Another potential flaw in current economic theory... (fwd)

[Jim Burnes <jvb@ssds.com>]

On Tue, 6 Oct 1998, Jim Choate wrote:

> Forwarded message:
> 
> > Date: Tue, 6 Oct 1998 11:19:54 -0600 (MDT)
> > From: Jim Burnes <jvb@ssds.com>
> > Subject: Re: Another potential flaw in current economic theory... (fwd)
> 
> > Hmmm.  You imply that the employees and employers interests are not
> > the same.  
> 
> Obviously this [is] so.
> 

Demonstrate.  Are you saying the interests of the employees is
not in making money?  In corps that is done by making a profit.
I guess the employees could just steal from the cookie jar.
I don't imagine the majority of the employees favor this route.

> > The whole idea is to make a profit.
> 
> There is MUCH more involved than simply making a profit.

Demonstrate.  The basis of capitalism is wealth creation through
capital accretion and investment.  Investment is risk laden.  Why 
should I invest my capital, which represents many things, goods,
services, time, etc if there is no payoff?  Might as well stay
in bed.

If profit is not the driving concern of investors, maybe you could
enlighten us unwashed masses.  The wealth that is created (payroll
included) can be then used for anything you like, from buying snowcones
and sniper rifles to donating your cash to the Nature Conservancy. 
Whatever agenda you prefer.

> 
> [irrelevant material deleted]
> 
> > Any other sort of interest would simply induce a market distortion
> > in the cost of investment capital.
> 
> Demonstrate please.

It follows that if you water down the proceeds without any accounting
system then all you're doing is giving away benefits.  These will 
(all other things being equal) reduce profits and decrease the
value of the stock.  It will then cost a lot more to attract
investment capital -- perhaps to the point of dissolution of
the company for lack of investment.  The most the employees
will be out is their job.  The investors could be out their
entire life savings.

> 
> > The market detects socialism as damage and routes around it.
> 
> Whoa horsey. I didn't say a damn thing about any third party regulatory
> agency getting invovled here. Don't start trying to change the rules in the
> middle of the game.

OK.  But my point still holds -- that all other things being equal
sending more bennies out to the employees isn't going to help your
stock prices, unless it also produces a concommitant increase in
productivity.  Still they are just bennies -- nothing new.

If you are going to give the employees equity in the company's future, how
do you do the accounting??  Somehow you will have to keep track of those
shares of equity.  Woops...were back to stock again.  If you're argument
is that that still doesn't make the management answerable, then what are
voting blocks of shares?  If there is an issue that is important to the
employee voting block they can take it up in the stock meeting.  If they
loose, they can simply threaten to sell the block of stock and start their
own company.  Maybe they can do better.  Good luck to them.

> 
> > The entire market would never do this voluntarily, so by definition any
> > distortion would have to be induced in a centrally managed economy.
> 
> Demonstrate.

Because these benefits are simply added cost to the production of
goods and services (all other things being equal).  When Joe Consumer
goes to buy something, cost (at some level of acceptable quality) is
usually the driving concern.  They don't give a damn about lofty
employee bonus programs.  Most people don't give a damn if their
cool new hiking shoes are made in Denver or Beijing.


> 
> > By definition socialism.
> 
> Wrong. Socialism is the belief that property is best managed and owned by
> the government. This is within the context of a free market. This means that
> the *ONLY* two parties involved are the producers and consumers. I am
> discussing an alternative approach to business management.
> 
> Fascism is the belief that property should be owned by private individuals
> but managed by governments.
> 

You're simply splitting hairs here.  Systems of "fascism" and "socialism" 
have redefined "ownership" until people become slaves to the people
controlling the definitions.  Private ownership in the current system,
fascist systems and socialist systems is a legal fiction.  Ownership
implies having sole benefit from use and disposal of the items in
question.   Under most governmental systems now in existence ownership is
actually just rental where the state owns everything and tells you what
your percentage is going to be.  The only difference between
marxism/socialism/communism and fascism is the point at which the
state reclaims its property.  In marxist systems the State reclaims
its "property" in the beginning, assuming all people are of a criminal
mindset and not worthy of real ownership.  In socialist and
pseudo-socialist systems like ours, ownership is a fantasy until
profit is derived -- you are then assumed to be a robber baron.
In a free state ownership is yours until a court can prove you
are a criminal who has caused harm to others.  What is amusing is
that our system has finally removed the burden of proof in
civil forfeiture law so that your "property" is considered to
be a criminal until proven otherwise.  It is then taken into
custody.  (*)

The primary failing of marxism is that people were never allowed
to even *believe* they could "own" something.  That being the case
they were unlikey to bother adding any value to anything.  That is
why they are boiling stones for soup.  Now "ownership" has devolved
to the russian mafia.  Same thing.  Unless the people of Russia
smuggle themselves in a bunch of arms, institute and enforce a 
free market system with private property ownership they will never
be anything more than peasants. (*)  

The reason why socialism-light (our system) works is because people
are allowed to believe they own assets until those assets become
valuable.  The state then comes to tell you what your percentage
of the sharecropping you get to keep.  Of course you're allowed to
believe you own something unprofitable forever (unless your using
it write off taxes ;-)

This allows socialism-light to succeed over marxism.  By the time
people have successfully created wealth its too late to go back
and wonder what the hell you've gotten yourself into.

(*) Footnotes:

Footnote 1:

Its interesting to note that civil law, where property can be
held accountable, is an outgrowth of medieval trials where
non-sentient entities where held accountable for acts of god
(or the devil).  If there was a crop blight, several local pigs
could be put on trial, found guilty and burned.  Strange people,
humans.

Footnote 2:

People who have never known real freedom, never know when they
should fight for it.  Two cases in point:

I was flying back from Anguilla into Denver in '97 and was sitting next to
an intelligent and attractive Russian woman in her late teens/ early
twenties.  She was telling me all about what was going on in Russia with
the Mafia controlling the cities.  Extorting money from her father's
restaurant seemed to be a favorite pastime for them.  I thought a second
about this and asked her why her father and the other people on the
block didn't just buy a bunch of hunting shotguns etc and blow them
away next time they tried to collect.  She looked at me with a face
of total puzzlement.  The thought of defending themselves never crossed
her mind.  Much like the farmers who were ravaged during the
Japanese civil wars they had no idea that simply arming themselves
would discourage most would be attackers.

Yesterday I was getting my hair cut and one of the women doing the
haircuts was obviously a Russian immigrant.  She was also complaining
about how terrible it was right now.  She was saying that "all people
really wanted was to be left alone".  It really sickened me that 
here was a person with a peasant mindset.  That person came to the
United States and is now a citizen.  One more person that doesn't
have the guts to stand against criminals.  Unfortunately one more
person voting in the United States.

Freedom isn't free.

jim burnes
definitely out in the weeds now