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The Fatal Flaw of Socialism

Xerographica

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The government can't know how much you value something before you buy it.

If the knowledge problem identified by Mises and Hayek make rational central planning impossible for something as simple as a quart of milk, what chance do central planners have to make rational, effective plans for something as complex and difficult as educating the children of a diverse nation of more than 300 million? - Kevin D. Williamson, The Politically Incorrect Guide to Socialism

In addition, only the individual can comprehend (albeit imperfectly) the trade-offs that he is willing to make between the things he wants now and in the future. Only the individual can understand before the fact what he is willing to forgo for a product as simple as an apple; only the individual knows under what circumstances he prefers to eat an apple. - Richard B. McKenzie, Bound to Be Free

Given that our public sector is a command economy (aka "socialism"), because of its fatal flaw, it's a given that the government will supply the wrong quantities of public goods...

Voting and other democratic procedures can help to produce information about the demand for public goods, but these processes are unlikely to work as well at providing the optimal amounts of public goods as do markets at providing the optimal amounts of private goods. Thus, we have more confidence that the optimal amount of toothpaste is purchased every year ($2.3 billion worth in recent years) than the optimal amount of defense spending ($549 billion) or the optimal amount of asteroid deflection (close to $0). In some cases, we could get too much of the public good with many people being forced riders and in other cases we could get too little of the public good. - Tyler Cowen, Alex Tabarrok, Modern Principles of Economics

Why would you want the government to supply the wrong amount of defense, education, environmental protection or any other good? Deviations from the optimal amounts make society worse off.
 
As if that's the only or most important problem an economy faces.
 
In an economy, what's more important than determining how resources should be allocated?

You've changed the topic. Not surprising. Socialism is very good at allocating resources. You were talking about prices, which isn't the same thing.
 
You've changed the topic. Not surprising. Socialism is very good at allocating resources. You were talking about prices, which isn't the same thing.

So was that a "straw man" or a "true scotsman"?
 
In an economy, what's more important than determining how resources should be allocated?

That's pretty important, but who's to say what does it best? The market or market planners. Frankly neither have a very good record.

The fatal flaw of capitalism seems to be that repeated cycles of boom and bust are inevitable. It only serves the interests of the elite minority, and no one else. Despite all the tools of coercion and manipulation, eventually the shat upon majority are going to wise up.
 
You've changed the topic. Not surprising. Socialism is very good at allocating resources. You were talking about prices, which isn't the same thing.

If the government doesn't know how much you value any good/service, then how could socialism be very good at allocating resources?

With capitalism, each individual determines for themselves how much they value a good/service...and the result is an allocation of resources which provides the maximum value for society.

How can socialism use resources to provide the maximum value for society when the government has no idea what value you place on any good/service?
 
That's pretty important, but who's to say what does it best? The market or market planners. Frankly neither have a very good record.

What's important is understanding the basic concept. What happens when you gamble your home on the wrong horse? You lose your home. You misallocated your resources. But you didn't misallocate my resources. You'll suffer a "depression" but it won't effect me.

Capitalism is people allocating their own resources. Socialism is 300 congresspeople allocating 300,000,000 people's resources. Yet, you want to blame cycles of boom and bust on markets.

The fatal flaw of capitalism seems to be that repeated cycles of boom and bust are inevitable. It only serves the interests of the elite minority, and no one else. Despite all the tools of coercion and manipulation, eventually the shat upon majority are going to wise up.

But you don't become an "elite" minority by shatting upon the majority. Watch, start a business where you literally take a shat on people. That's your product. Are you going to become an "elite" minority? If not, then why not?

Markets work because its the masses who determine how well somebody uses society's limited resources. Even idiots like Michael Moore understand this basic concept...

I'm a millionaire, I'm a multi-millionaire. I'm filthy rich. You know why I'm a multi-millionaire? 'Cause multi-millions like what I do. That's pretty good, isn't it? - Michael Moore
 
But you don't become an "elite" minority by shatting upon the majority. Watch, start a business where you literally take a shat on people. That's your product. Are you going to become an "elite" minority? If not, then why not?
McDonalds? CocaCola? Kraft? They've been making billions from sh** products for quite a while now, wouldn't you say?

Markets work...
Really? I'm pretty sure that they have been doing the opposite for some time now.
 
You've changed the topic. Not surprising. Socialism is very good at allocating resources. You were talking about prices, which isn't the same thing.

Actually prices help decided allocating. ;)
 
You've changed the topic. Not surprising. Socialism is very good at allocating resources. You were talking about prices, which isn't the same thing.
Prices and resource allocation are not exactly separate topics. Assuming they are is actually where some socialists go wrong.
 
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McDonalds? CocaCola? Kraft? They've been making billions from sh** products for quite a while now, wouldn't you say?
That's entirely subjective. Plenty of people love those brands. What matters everyone's opinion, not just yours. For the price, people obviously do not think its just ****, or they wouldn't pay for it.
 
McDonalds? CocaCola? Kraft? They've been making billions from sh** products for quite a while now, wouldn't you say?

Right, and so has Michael Moore and Brittney Spears. But guess what? I don't have to spend my money on his movies or her music. And when Mormon's knock on my door I have the freedom to say "no thanks". That's how and why markets work.

If the government wants to spend your taxes on yet another war can you say "no thanks"? When the government wants to spend more of your taxes fighting a war against drugs can you say "no thanks"?

Really? I'm pretty sure that they have been doing the opposite for some time now.

"Working" is when the allocation of resources reflects everybody's unique circumstances. How in the world can 300 congresspeople know the circumstances of 300,000,000 people better than those 300 million people can? Obviously they can't. There are fundamentally harmful consequences that result from allowing those 300 congresspeople to allocate half our nation's resources. We end up with too much war and not enough public healthcare.
 
That's entirely subjective.
Of course it is. It's my opinion. In what way is your opinion not subjective?
Plenty of people love those brands. What matters everyone's opinion, not just yours. For the price, people obviously do not think its just ****, or they wouldn't pay for it.
Plenty of people are obese and suffering Type 2 diabetes through believing all the advertising that those (and plenty of other) companies tell them about their products. Just because someone thinks something is worth buying doesn't mean it actually is. The entire advertising industry is predicated on persuading someone to do something that they had no intention of doing otherwise. Selling unhealthy, unethically produced, unsustainable products is included in that mission.
 
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Of course it is. It's my opinion. In what way is your opinion not subjective?Plenty of people are obese and suffering Type 2 diabetes through believing all the advertising that those (and plenty of other) companies tell them about their products. Just because someone thinks something is worth buying doesn't mean it actually is. The entire advertising industry is predicated on persuading someone to do something that they had no intention of doing otherwise. Selling unhealthy, unethically produced, unsustainable products is included in that mission.

Therefore...socialism? Therefore...you take people's choices away from them? Therefore...rather than rely on persuasion...I force you to do something that I want you to do? Does that sound like a good idea?

Should I force you to like tax choice on facebook? Because I'm pretty sure that allowing you to choose where your taxes go is in your best interest.
 
Why limit that to value/economics? You can say the same about government on nearly any topic it has significant influence in.

I think anyone should intuitively learn this if they are wise, during the course of every day life. As soon as you delegate something, even to ONE person removed from you, even to one person you know very well for their entire life, who you trust entirely, who is eminently capable, etc., will never do things precisely, always, in exactly the way you would have chosen yourself. Want it done right do it yourself? That's old wise-talk for this phenomenon. That's as close as you can get to the individual, without mind melding the two, and it's RIFE with evidence of complete inability to do things the way you would want them to be done, or the way you value, etc.

The idea that a government that's so far removed from individuals, that is governed primarily by politics, money, power, and activism, could in any way even remotely come close on what's best for everyone on most issues, is absurd. You don't need to read anything to know this, you don't' need to appeal to other people who thought about, every one of us is capable of thinking about it.

This is why as much as possible and practical should be left to individuals to solve. Sure some issues, especially those dealing with competing interests in a society, need third party arbitration...but government should be the last resort. Not the first place you turn to. Even in areas where government can intervene with good results, for example, those who haven't figured it out get basically "best practice guidance", but no government typically steps in heavy handed making it law or a tax associated with, etc. If you have to choose, government regulation is better than government ownership, for similar reasons.

Socialism very strictly moves a significant amount of such individual choice, to some group, be it a worker group, or a government group, it makes no difference. It moves things in the wrong direction on that scale, and it will all else equal produce worse results. This isn't even getting into the pitfalls of how this pools more power and creates more ways to corrupt the system, slippery slope of wanting more power for the group because it will provide "safety and security to the citizens", and how that sad story always ends...
 
Of course it is. It's my opinion. In what way is your opinion not subjective?Plenty of people are obese and suffering Type 2 diabetes through believing all the advertising that those (and plenty of other) companies tell them about their products. Just because someone thinks something is worth buying doesn't mean it actually is.

And you're going to make this choice for all of us?

You do understand that a lot of our lives, I mean from things we spend our money on, things we spend our time on, etc., are done for emotional reasons, peace of mind, etc. Isn't that what religion is in large part about? Why did I get a new car? Clearly my old one worked fine, but I spent a lot on a new one....did it save the world or stop global warming? No...but it's my choice to make! Do you mind people tithing 10% of their entire income to fictional placebo (religion) but when it comes to someone with a real health issue, giving money for a real produce that arguably may not be the right one, or perfect yet, but that raises public awareness of the health issue, and of possible remedies....AND That publicity serves to later go back and evaluate "Was this drug worthwhile?", and over time results in bad drugs off the market and better ones in their place...

You think THAT'S the issue you're compelled to put on your red cape and tights to save the rest of us from? :)

I want there to be money in big pharma, the long term bet is we'll do far more harm then good. Sadly to innovate it requires failure, and if you want to use that fear and say that government will take that choice from us in return for them "keep us safe from the bad pharama", you're following the oldest trick in the big...
 
If the government doesn't know how much you value any good/service, then how could socialism be very good at allocating resources?

With capitalism, each individual determines for themselves how much they value a good/service...and the result is an allocation of resources which provides the maximum value for society.

How can socialism use resources to provide the maximum value for society when the government has no idea what value you place on any good/service?

Easy. Some goods and services have no price elasticity. Health care for instance. You can charge a man anything you want to fix the broken leg of his child. He'll give you everything he owns. And thus the market is flawed and produces all sorts of problems -- sick poor people, bankruptcies, people not moving to better jobs so they can keep their health care.

In contrast, government allocates health care much better than the market. Though this raises the issue -- which you of course avoided -- of what we even mean by "better" in the context of resource allocation.

Like most market evangelists you want to count the benefits of poorly regulated markets, but not the burdens (some of which I mentioned above), and you want to count the burdens of regulation, but not the benefits.

You won't get away with that here.
 
Easy. Some goods and services have no price elasticity. Health care for instance. You can charge a man anything you want to fix the broken leg of his child. He'll give you everything he owns. And thus the market is flawed and produces all sorts of problems -- sick poor people, bankruptcies, people not moving to better jobs so they can keep their health care.

In contrast, government allocates health care much better than the market.

How can the government allocate health care much better than the market when the government has no idea how much you value health care? Are you under the impression that resources can be efficiently allocated in the absence of people's values? Or are you under the impression that everybody values health care equally? Or are you under the impression that people's values can be derived from their words alone?

Values can only be derived from what people are willing to sacrifice. And you can't know what other people would be willing to sacrifice because everybody is different. You can certainly make guesses...and that's what entrepreneurs do. If they make good guesses...then they receive positive feedback (money) from many people. If they make poor guesses...then their resources are shifted to the entrepreneurs who made good guesses.

Though this raises the issue -- which you of course avoided -- of what we even mean by "better" in the context of resource allocation.

"Better" means more valuable. Right now you're allocating your time to this forum. Is this a better (more valuable) allocation of your time than spending it with your family or work? Only you know the answer to that question. Markets give you the opportunity to answer that question for yourself...which is why they allocate resources "better" than planned economies.

Like most market evangelists you want to count the benefits of poorly regulated markets, but not the burdens (some of which I mentioned above), and you want to count the burdens of regulation, but not the benefits.

You won't get away with that here.

Nonsense! In case you missed it, I'm a pragmatarian. A regulation is simply a law...and obviously we need laws. But no two laws are equally valuable. The costs of some laws far exceed their benefits. Prohibition was a perfect example.

How can we keep the most beneficial laws and discard the most harmful laws? Easy. We simply allow taxpayers to choose where their taxes go.

If you derive benefit from drugs being illegal, then you should have the opportunity to spend your taxes on the enforcement of that law. The allocation will be more efficient (better/valuable) because it will reflect your true values. Like everybody else you'll have a limited budget...which means that you'll have to prioritize what you spend your taxes on. When millions and millions are given the freedom to prioritize, we'll ensure that we derive the maximum value from the allocation of resources. That's because everybody wants the most bang for their buck. Everybody wants the most value for the least amount of sacrifice. Everybody wants the most gain with the least pain.

Planned/command economies cannot efficiently allocate resources because you're not given the freedom to prioritize how you spend your time/money. As a result, the allocation does not accurately reflect the true values of millions and millions of unique individuals in unique circumstances.

Think of an equation that determines how society's resources are used. If your priorities do not go into the equation...then how could the answer be correct? If the input is lies...then how can the output be true? Garbage in, garbage out. That's the problem with command economies.

Socialism fails to recognize that your true values are not garbage...

Apart from their other characteristics, the outstanding thing about China's 600 million people is that they are "poor and blank". This may seem a bad thing, but in reality it is a good thing. Poverty gives rise to the desire for changes the desire for action and the desire for revolution. On a blank sheet of paper free from any mark, the freshest and most beautiful characters can be written; the freshest and most beautiful pictures can be painted. - Mao Zedong

People are not blank discs...but socialism assumes they are. Once you appreciate the importance of respecting other people's values...then you'll recognize the importance of allowing taxpayers to shop for themselves in the public sector.
 
Actually prices help decided allocating. ;y)

Yep, but market flaws exist, such as in heath care, and in those cases government can allocate "better", depending on what outcome we want.

If you want better public health, single payer systems are empirically superior to our for profit system. If you want to make a lot of money for rich people, then our system is "better". So first you have to decide what the goal is, and there is no unitary goal of allocating resources.
 
How can the government allocate health care much better than the market when the government has no idea how much you value health care? Are you under the impression that resources can be efficiently allocated in the absence of people's values? Or are you under the impression that everybody values health care equally? Or are you under the impression that people's values can be derived from their words alone?

Values can only be derived from what people are willing to sacrifice. And you can't know what other people would be willing to sacrifice because everybody is different. You can certainly make guesses...and that's what entrepreneurs do. If they make good guesses...then they receive positive feedback (money) from many people. If they make poor guesses...then their resources are shifted to the entrepreneurs who made good guesses.



"Better" means more valuable. Right now you're allocating your time to this forum. Is this a better (more valuable) allocation of your time than spending it with your family or work? Only you know the answer to that question. Markets give you the opportunity to answer that question for yourself...which is why they allocate resources "better" than planned economies.

Not to sick kids it doesn't. Public health is superior in countries with single payer systems. You lose.

Nonsense! In case you missed it, I'm a pragmatarian. A regulation is simply a law...and obviously we need laws. But no two laws are equally valuable. The costs of some laws far exceed their benefits. Prohibition was a perfect example.

How can we keep the most beneficial laws and discard the most harmful laws? Easy. We simply allow taxpayers to choose where their taxes go.

If you derive benefit from drugs being illegal, then you should have the opportunity to spend your taxes on the enforcement of that law. The allocation will be more efficient (better/valuable) because it will reflect your true values. Like everybody else you'll have a limited budget...which means that you'll have to prioritize what you spend your taxes on. When millions and millions are given the freedom to prioritize, we'll ensure that we derive the maximum value from the allocation of resources. That's because everybody wants the most bang for their buck. Everybody wants the most value for the least amount of sacrifice. Everybody wants the most gain with the least pain.

Planned/command economies cannot efficiently allocate resources because you're not given the freedom to prioritize how you spend your time/money. As a result, the allocation does not accurately reflect the true values of millions and millions of unique individuals in unique circumstances.

Think of an equation that determines how society's resources are used. If your priorities do not go into the equation...then how could the answer be correct? If the input is lies...then how can the output be true? Garbage in, garbage out. That's the problem with command economies.

Socialism fails to recognize that your true values are not garbage...



People are not blank discs...but socialism assumes they are. Once you appreciate the importance of respecting other people's values...then you'll recognize the importance of allowing taxpayers to shop for themselves in the public sector.

Asked and answered. Since well known market flaws exist in the production and supplying of certain goods and services, government is simply better at providing certain goods and services than markets. Health care is one. Utilities is another. All the empirical data rebuts your wild-eyed ideological claims. So you lose.

Get used to it: markets aren't a panacea to all economic problems. And even "markets" is an ambiguous term, since all markets are created by rules (i.e., government action).
 
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This is why as much as possible and practical should be left to individuals to solve. Sure some issues, especially those dealing with competing interests in a society, need third party arbitration...but government should be the last resort. Not the first place you turn to.

You're throwing the baby out with the bath water. You correctly identify the problem with government...a small group of planners making valuations for a multitude of people in a multitude of circumstances...but then you're over correcting. If taxpayers could choose where their taxes go, then each and every taxpayer would be able to use their taxes to indicate exactly what the government does that's worth keeping.

Money is simply positive feedback. So taxpayers choosing where their taxes go is the same thing as taxpayers choosing who they give their positive feedback to.

Can we possibly know which government organizations millions and millions of taxpayers would give their positive feedback to? Well...no. Just like we can't possibly know which private organizations millions and millions of consumers are going to give their positive feedback to.
 
You're throwing the baby out with the bath water. You correctly identify the problem with government...a small group of planners making valuations for a multitude of people in a multitude of circumstances...but then you're over correcting. If taxpayers could choose where their taxes go, then each and every taxpayer would be able to use their taxes to indicate exactly what the government does that's worth keeping.
I wrote to err on the side of individual choice. Which coincides with your notion of taxpayers having individual choice. I don't necessarily agree with you on that specific instance, but in general, what I wrote looks consistent with your approach, not throwing out the baby..

Money is simply positive feedback. So taxpayers choosing where their taxes go is the same thing as taxpayers choosing who they give their positive feedback to.
Can we possibly know which government organizations millions and millions of taxpayers would give their positive feedback to? Well...no. Just like we can't possibly know which private organizations millions and millions of consumers are going to give their positive feedback to.
Of course not. Some may say it's not really our job to know where our tax dollars go, "that's not how taxes work" the proclaim with ignorant indignity.
The issue is that when you dig deep enough, even people involved may not know, there are certainly very, very few checks and balances, transparency, market incentives, etc., regardless of if they know where it goes, etc. If at the end of the day your taxes go to line someone's pockets, or to get someone elected, even if they know where it goes it's entirely indefensible.

Not many things strike me as really scary about our current system (thankfully), but the idea that people on this forum (any group to be fair) would be making routine decisions about what I could own, or how much value my work was worth, would be enough to make it time to shop for a better government/society.
 
Not to sick kids it doesn't. Public health is superior in countries with single payer systems. You lose.

Did you really miss the part where I'm a pragmatarian? Again, I support allowing taxpayers to choose where their taxes go. If public healthcare is truly superior, then I'm sure that taxpayers would give their taxes (positive feedback) to public healthcare.

Asked and answered. Since well know market flaws exist in the production and supplying of certain goods and services, government is simply better at providing certain goods and services than markets. Health care is one. Utilities is another. All the empirical data rebuts your wild-eyed ideological claims. So you lose.

Again, I'm not a libertarian so your well-rehearsed arguments are completely irrelevant. I have not once argued that the private sector is better than the public sector at supplying anything. So please stop regurgitating your anti-libertarian rhetoric.

Get used to it: markets aren't a panacea to all economic problems. And even "markets" is an ambiguous term, since all markets are created by rules (i.e., government action).

The problem we're dealing with is that the government does not know how much of any public good to supply. I have no problem assuming that we need public healthcare...but how in the world can the government possibly know how much public healthcare to supply? Clearly it's detrimental if there's a shortage of public healthcare...but it's also detrimental if there's a surplus as well. If there are too many doctors then there's invariably going to be a shortage of scientists, engineers, etc.

The solution is simply to allow taxpayers to choose where their taxes go. Why? Because taxpayers wouldn't want there to be a shortage of doctors. So if they have to pay taxes anyways, and assuming the government is superior at providing healthcare, then the amount of money that taxpayers give to public healthcare will be the optimal amount of money...and we'll have an optimal amount of doctors.

So please stop spewing your anti-libertarian arguments at me. I'm not a libertarian. I'm a pragmatarian. I'm fine with the government as long as taxpayers are allowed to use their taxes to reveal what the actual demand for public goods is. Without knowing what the actual demand for public goods is...it's impossible for the government to supply the optimal amount of public goods. This is the problem that you haven't addressed. It's basic supply and demand.
 
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