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View Diary: The Most Important Economic Theorem You've Never Heard Of (174 comments)

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  •  I would think that even in a perfect market (18+ / 0-)

    Capitalism would tend to promote concentration of wealth, and therefore power,

    If I sell a slightly better widget for slightly less than you, I'll drive you out of business.  If I drive everyone out of business I now have a monopoly and can create barriers to entry to prevent any new competitors.  The only real threat to me is the other giant companies who started in another field deciding they want to get into my field.

    If you now want to work in widget-making, I can dictate labor terms because there's nowhere else to go with your skills.

    In a theoretical perfect market, run long enough, there's only one company - the one that swallows all the others.

    We get what we want - or what we fail to refuse. - Muhammad Yunus

    by nightsweat on Fri Oct 14, 2011 at 05:05:39 AM PDT

    •  Highlander Principle (10+ / 0-)

      There can be only one!

      --Mr. President, you have to earn my vote every day. Not take it for granted. --

      by chipoliwog on Fri Oct 14, 2011 at 07:12:17 AM PDT

      [ Parent ]

    •  which would be imperfect, (4+ / 0-)
      Recommended by:
      opinionated, GMary, smarty jones, KJG52

      prices would go up, so a competitor would then enter.  The idea of perfect competition is just wheels spinning.

      Capitalism absolutely does promote the concentration of wealth, which a lot of people have spent a lot of time thinking about.  I think the Rawls approach is much more theoretically sound than the Hayek approach of shouting "freedom" in response to a failure to make his case on economic grounds.  How is freedom defined, e.g.?  if it's in relation to the state, what follows from that?  Isn't the right to be free just one set of relationships with the state, akin to the right to equal protection of the laws or something else?  Then what about competing rights to material goods? I've not seen a better argument than the difference or opportunity principles.

      "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

      by Loge on Fri Oct 14, 2011 at 08:17:25 AM PDT

      [ Parent ]

      •  What I'm getting out of this (3+ / 0-)

        maybe for the first time, is that in one sense the conservatives are equating "freedom" with the idea of the free market.

        This makes Freedom (with a capital F) an economic construct in their minds.

        Whereas what I at least, and probably most here equate with freedom is foremost an issue of human rights.  When you're talking about human rights, simply by virtue of your existence your person is in some state of freedom or servitude.

        This understanding of Freedom (with a capital F) is NOT an economic construct. (which isn't to say that for the person, they aren't going to be concerned about the economic conditions in which they live.)

        I think the real question is -- are people supposed to be serving the market?  Or is the market supposed to be serving people?  

        Keeping in mind that if there were no humans there would be no market, nor even anybody to conceptualize a market, I think I just started to understand the root of our current insanity.

    •  The "perfect market" theory... (6+ / 0-)

      assumes no barriers to entry. Which, of course, is nothing like the real world in most industries.

      I agree with you, though, that even if a "perfect market" existed briefly in the real world, that that would be an unstable equilibrium. It would quickly cease to be a perfect market.

      The theory of the extreme free market types ignores the nature of humanity and of the real world. It's just as much a pile of Utopian garbage as the most extreme forms of communism ever were, and for the same reason: lack of resemblance to how things actually work when you introduce real people into the equation.

      Mixed systems (regulated, moderated capitalism) are the best.

    •  The makers of Monopoly already knows that (14+ / 0-)

      That's why at the beginning of every Monopoly game, each player is given equal shares to start with.

      In an ideal world, every so often there has to be a redistribution of wealth.

      Even our sports leagues recognize that. The teams that finishes last gets first dibs during the draft. The teams flushed with money has to share revenue with the struggling teams. The teams withhuge payrolls have to have pay caps. See- people instinctively understand that socialism works very well to enhance competition.

      •  The board game (2+ / 0-)

        was invented during the great depression, but it really illustrates how luck triumphs over skill a lot of the time.  Its reflection of price theory is a bit simplified but nevertheless sophisticated.  Interestingly, the point of monopoly is also to make the game fun to play for everyone.  "Fun" is a decent stand in for the idea of living a good life.  (And like life, monopoly takes too long and after a while, you just want to go watch tv.)

        "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

        by Loge on Fri Oct 14, 2011 at 10:25:29 AM PDT

        [ Parent ]

        •  I literally grew up on that game. (1+ / 0-)
          Recommended by:

          My siblings and I played it 4+ nights a week for nearly a decade.  Wore out a couple of sets.  We taught my pre-Kindergarten sister math so we could have another player.

          Amazing, when you look back on it.

          -7.75 -4.67

          "Freedom's just another word for nothing left to lose."

          There are no Christians in foxholes.

          by Odysseus on Fri Oct 14, 2011 at 11:25:10 AM PDT

          [ Parent ]

    •  What's supposed to happen is that (2+ / 0-)
      Recommended by:
      drewfromct, Calamity Jean

      the other widget companies improve their own widgets and/or lower their prices. That's how competition is supposed to make things better.  It doesn't seem to work very well.  It often seems to me that the "choice" I have is one crummy product or another, as all the corporations seem to make the same low-quality stuff.

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