Comment by dnautics | Hacker News Reader

Comment by dnautics | Hacker News Reader

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No, inflation is most damaging to people whose spending is close to their salary. To simplify the math, I will use 'easy numbers', obviously the magnitudes are off, but you should plug your own numbers to verify that this is still true:

if a poor family is spending 90% of their income on day to day expenses, and a rich family is spending 20%, and there is 10% inflation, then the poor family will then be spending 99%, which is a 90% reduction in margin of safety/ability to invest. The rich family will then be spending 22% which is a 2.5% reduction in margin of safety/ability to invest.

Now, you might argue that wages catch up. For starters, many poor are on fixed incomes. BUT even for the employed, liberal economists routinely argue for screwing the poor out of their wages (of course they don't put it that way):

http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hig...

It goes like this: even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts.

Think very carefully about what that means.

Ironically, it was keynes himself that warned:

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become 'profiteers,' who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat.

You can exploit the fact that the utility of money has an asymptote (steep rise, in real systems) near the threshold of survivability to justify welfare policies too.

Libertarians whine about arbitrary confiscation of wealth by the government, but they have no problem when competition drives the price of labor down to (or below!) the price of survivability, even though from the point of view of the poor person both justifications for taking their money are equally arbitrary. The government promises to use the money to help people (translation: to fill rich peoples' pockets). The market promises to use the money to increase efficiency (translation: to fill rich peoples' pockets). The question is which party is better at delivering on their promise. You have noticed that the government isn't great at delivering on their part of the bargain. I would like to add that the market isn't stellar at this either. I believe the market tends to be worse (i.e. that "trickle down" is less realistic than "bubble up"), but I must admit that this belief is the product of my political beliefs rather than the other way around.

There are two reasons to believe that the market is better. One, market transactions are voluntary, so they are generally speaking "positive-sum games". Government transactions are not necessarily so (think Kelo vs. City of New London). Secondly. In order to wield economic power, you have to be willing to give some of it up. This is not necessarily true of political power. For these reasons, government tends to vectorize power in the upward direction; markets tend to flatten them out in the long run.

Again, it is worth also considering that the nordic countries, which have favorable income distributions, have had extremely low headline inflation rates over the last 50 years.

You make an false analogy: The government promises to use the money to help people (translation: to fill rich peoples' pockets). The market promises to use the money to increase efficiency (translation: to fill rich peoples' pockets)

But consider: Who is the market? It's everyone. Who is the government? A select few. So let's say indeed both systems are not "great" at delivering on their part of the bargain. Given that the market is everyone and the government is a select few, which one do you suppose will be a bigger failure at serving society's needs in a just fashion?

> One, market transactions are voluntary, so they are generally speaking "positive-sum games".

Nope. Suppose a robber puts a gun to your head and demands your wallet. You give it to him because you value your life more than your wallet. According to naive market theory, this is a positive sum transaction with consent from both parties! Obviously you didn't consent to getting held up, but it wasn't a market transaction. Restricting your attention to market transactions is the ridiculous simplification that allows markets to trivially triumph in thought experiments.

Generally speaking, "create the sickness, sell the cure" is a perfectly good business model. We make the obvious ones illegal (pointing guns and demanding money), but more sophisticated versions riddle our economy. For instance, the Goldman Sachs Artificial Aluminum Shortage applies the same basic principle.

> markets tend to flatten [power] out in the long run.

Are you kidding me? This is almost objectively untrue (unless you cherry pick "long run" or invoke timescales over which attribution to democracy vs capitalism is impossible). Are you sure you didn't mean to make the "rising tide lifts all boats" argument instead? It's a base rate fallacy, but at least it sounds reasonable.

> Who is the market? It's everyone. Who is the government? A select few.

The market is "everyone" in name only, just like a democratic government. The reality is that the biggest players get to make the rules. Sometimes they do it via regulatory capture, which you can correctly blame on the government. Sometimes they do it by collusion, undercutting, or some other anti-competitive practice that must be attributed to market failure. Sometimes they do it by taking advantage of arbitrary existential facts (we have an excess of workers -> workers can, collectively, be paid less). Nobody consented to their need to eat, breathe, and house themselves, nobody consented to have a certain amount of competition, yet the market has historically had no problem exploiting these facts to extract obscene concessions from people, even when the fundamental resources were abundant. Whatever the market does represent, it's certainly not the free will of the people.

Look, I generally agree with you that markets are usually more flexible and better at self-regulating. I think that most sectors of the economy function better under market control than state control. But I also think there are glaring exceptions (healthcare) and that libertarians jump too quickly and eagerly to the point of view that deregulation is the answer, even in the presence of abundant historical or comparative evidence to the contrary. They like to pretend the free market's shit doesn't stink (it's a feature, not a bug that unskilled labor consistently gets the crap beaten out of it at the negotiation table due to the fact a single person creates marginally more labor supply than demand). They don't take responsibility for messes the market creates (they are convinced it's not the market's fault our healthcare is 2x as expensive as in single-payer countries), and instead of basing their decisions on comparing strengths and weaknesses of different systems (markets are good at X, bad at Y, governments are good at Y, bad at X) they trumpet facile arguments from the rooftops.

Nobody here is claiming that markets are perfect. However, the claim is that economic redistribution on the part of government will over time fail to help the very constitutents they are supposed to protect and instead enrich the rich. This has happened time after time and shows no sign of stopping because of fundamental problems, which you partially hit on when you talked about regulatory capture (and goldman sachs, which uses so much state privilege that it's not entirely clear how much 'free market' there is in that company). The point is, that regulatory capture is inevitable.

"[The socialists declare] that the State owes subsistence, well-being, and education to all its citizens; that it should be generous, charitable, involved in everything, devoted to everybody; ...that it should intervene directly to relieve all suffering, satisfy and anticipate all wants, furnish capital to all enterprises, enlightenment to all minds, balm for all wounds, asylums for all the unfortunate, and even aid to the point of shedding French blood, for all oppressed people on the face of the earth. Who would not like to see all these benefits flow forth upon the world from the law, as from an inexhaustible source? ... But is it possible? ... Whence does [the State] draw those resources that it is urged to dispense by way of benefits to individuals? Is it not from the individuals themselves? How, then, can these resources be increased by passing through the hands of a parasitic and voracious intermediary? ...Finally...we shall see the entire people transformed into petitioners. Landed property, agriculture, industry, commerce, shipping, industrial companies, all will bestir themselves to claim favors from the State. The public treasury will be literally pillaged.

And here is the clincher (think very hard about the last sentence):

Everyone will have good reasons to prove that legal fraternity should be interpreted in this sense: "Let me have the benefits, and let others pay the costs." Everyone's effort will be directed toward snatching a scrap of fraternal privilege from the legislature. The suffering classes, although having the greatest claim, will not always have the greatest success."

In other words. It's perfectly reasonable for society to want to do things that go against the precept of "profit first". But if society should want to do such a thing, it should do it through private charity and not through the coffers of the state.

I practice what I preach. I volunteer every week feeding sick people and personally run a non-profit scientific corporation.

> This has happened time after time and shows no sign of stopping because of fundamental problems

Maybe in the US but it's not a fundamental of governments generally.

Libertarians whine about arbitrary confiscation of wealth by the government, but they have no problem when competition drives the price of labor down to (or below!) the price of survivability

With unemployment low, people would switch to jobs with more favorable conditions. That's one of the reasons Ford paid (relatively) much more than other employers. In a world with high unemployment, the employers dictate the conditions.

That's what I said. My point was that libertarians assume there is inherent justice in this situation. I don't.

Please provide your definition of "justice". Libertarians are averse to coercion, but they do not assume the results of liberty-enhancing policies will always favor their priorities. For example, I like the opera, but I do not think the government should be coercing the citizenry into subsidizing La Traviata.

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