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Less Government, Not More.

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  • PuroFreakPuroFreak Posts: 4,131 ✭✭
    Blazing Saddles! LMAO
  • ScramblerScrambler Posts: 746 ✭✭
    urbino:
    kuzi16:
    ALL government programs fail.
    I feel certain this will be news to the U.S. military. Also, the entire Common Law system, the private property system, the private corporation, the railroad system, the interstate highway system, the navigable waterway system, the broadcast television industry, the telecom industry, the electrical utility industry, the cable television industry, the internet, our food supply, etc., and so forth and so on.


    The common law system arose, pretty much, from a lack of gov't regulation. In the absence of legislation, customs and traditions determined what is right and wrong. As you point out, it works pretty well, without gov't intervention. Private property needs gov't simply to protect, not to create it. The "corporation" is something created to allow private businesses to fit into the system created by gov't. The highway and waterway system are the things that gov't is intended to do: provide for that which the private sector can't do effectively, and which benefit all members of society.
    urbino:
    kuzi16:
    if i am not mistaken it was the government pretty much forcing freddie and fanny to make those loans. see what happened?
    It's not the case that Fannie and Freddie caused the mortgage crisis. Fannie and Freddie made a lot of sub-prime loans. Those loans were always guaranteed by the federal gov't. The problem that developed was that purely private lenders looked at Fannie and Freddie and said, hey, that looks like a money-maker, we want in on that action. So they started making a lot of sub-prime loans. Way too many. And then selling other, extremely leveraged financial instruments based on those loans. The failure of all that private debt is what triggered our current crisis.

    I'm not saying Fannie and Freddie didn't get carried away and create a problem. I'm just saying their problem wasn't what caused the crisis we have.
    The gov't, through regulation, created an environment where these two companies had an unfair advantage. That is, they could make bets without having to worry about losing. In order for other companies to remain competitive, they were forced to be more aggressive.
  • ScramblerScrambler Posts: 746 ✭✭
    Just today, the National Bureau of Economic Research released a paper titled Experimentation, Patents, and Innovation. The paper basically concludes that the gov't subsidized research can not deliver the same innovations that private sector research, with patent protection, can. Again, the gov't should be there to protect (intellectual) property rights, but not to get in the way of or try to replace, the private sector.

    Here is the NBER abstract

    NBER Working Paper No. 14408
    This paper studies a simple model of experimentation and innovation. Our analysis suggests that patents may improve the allocation of resources by encouraging rapid experimentation and efficient ex post transfer of knowledge across firms. Each firm receives a private signal on the success probability of one of many potential research projects and decides when and which project to implement. A successful innovation can be copied by other firms. Symmetric equilibria (where actions do not depend on the identity of the firm) always involve delayed and staggered experimentation, whereas the optimal allocation never involves delays and may involve simultaneous rather than staggered experimentation. The social cost of insufficient experimentation can be arbitrarily large. Appropriately-designed patents can implement the socially optimal allocation (in all equilibria). In contrast to patents, subsidies to experimentation, research, or innovation cannot typically achieve this objective. We also show that when signal quality differs across firms, the equilibrium may involve a nonmonotonicity, whereby players with stronger signals may experiment after those with weaker signals. We show that in this more general environment patents again encourage experimentation and reduce delays.
  • urbinourbino Posts: 4,517
    From that abstract, Scramz, it sounds to me like what they're saying is that public funding of research should not be used instead of a patent system. "In contrast to patents, subsidies to experimentation, research, or innovation cannot typically achieve this objective."

    They don't seem to have addressed a mixed system -- that is, both patents and research subsidies. I don't know of anybody involved in conducting serious scientific research who think it'd be good if gov't stopped funding research.
  • ScramblerScrambler Posts: 746 ✭✭
    One more thing I came across today, before I get back to homework.

    image

    I currently fall right around that $45K point, where under the current law, for every additional dollar I earn via overtime at my second job I pay no additional taxes. Under Obama's proposal I would pay nearly 40 cents of that dollar. If I work enough extra hours to earn another $5,000 this would be an effective tax hike of $2,000. No thanks. This de-incentivizes working harder.
  • PuroFreakPuroFreak Posts: 4,131 ✭✭
    urbino:
    From that abstract, Scramz, it sounds to me like what they're saying is that public funding of research should not be used instead of a patent system. "In contrast to patents, subsidies to experimentation, research, or innovation cannot typically achieve this objective."

    They don't seem to have addressed a mixed system -- that is, both patents and research subsidies. I don't know of anybody involved in conducting serious scientific research who think it'd be good if gov't stopped funding research.

    To me it's not so much "that" they fund research, it's "what" research they fund and I think we seriously need to evaluate things and cut WAY back. The fact that millions were spent to study cow flatulence and the effect it has on the quality of air and it's impact on the ozone is totally absurd!!! Government spending it completely out of control and needs to be seriously reformed. That is one area of the government that needs to be reduced immediatly.
  • ScramblerScrambler Posts: 746 ✭✭
    urbino:
    From that abstract, Scramz, it sounds to me like what they're saying is that public funding of research should not be used instead of a patent system. "In contrast to patents, subsidies to experimentation, research, or innovation cannot typically achieve this objective."

    They don't seem to have addressed a mixed system -- that is, both patents and research subsidies. I don't know of anybody involved in conducting serious scientific research who think it'd be good if gov't stopped funding research.
    I agree that the gov't shouldn't stop funding (some) research, and the abstract states that the paper is based on a simple model, which the real world isn't. But this is talking more about creating better widgets, not curing AIDS or "saving" the planet. The premise still holds that the government can not equal the private sector when it comes to innovation and technological advancement.
  • urbinourbino Posts: 4,517
    Scrambler:
    The common law system arose, pretty much, from a lack of gov't regulation.
    True, I suppose, but not a terribly effective argument. It's equivalent to saying gov't regulation arose from a lack of gov't regulation. The common law system is gov't regulation. It's regulation in that it tells private actors what they can and cannot do, and it's gov't in that it is the product of a judicial system.
    Scrambler:
    Private property needs gov't simply to protct, not to creat it.
    Depends on in what sense you mean that. If you're making a natural law argument about the a priori existence of private property and rights therein, okay. However, natural law property rights are pretty useless without positive law to record boundaries and ownership, to list the rights protected, and to enforce those rights. Even John Locke doesn't go so far as to argue otherwise.
    Scrambler:
    The "corporation" is something created to allow private businesses to fit into the system created by gov't.
    Created by whom? The gov't. The private corporation, that icon of private enterprise, doesn't, never has, and can't exist without a gov't charter. They are entirely a legal construct, and therefore a gov't construct.
    Scrambler:
    The highway and waterway system are the things that gov't is intended to do: provide for that which the private sector can't do effectively, and which benefit all members of society.
    But I mentioned those in response to the claim that all gov't programs fail, Scramz. Under that argument, there are no things that gov't can do that "the private sector can't do effectively [better, in fact]."
    Scrambler:
    The gov't, through regulation, created an environment where these two companies had an unfair advantage. That is, they could make bets without having to worry about losing. In order for other companies to remain competitive, they were forced to be more aggressive.
    But they weren't forced to do any such thing. Those private institutions have been around a lot longer that Fannie and Freddie. Certainly long before the Community Reinvestment Act. They could have made sub-prime loans at any time to the people Fannie and Freddie ended up serving. If they were convinced there was a lot of money to be made in that market, it was theirs to exploit for decades and decades. They didn't do so. That's why the CRA was passed in the first place: to give those folks a chance to own their own homes, even though private institutions wouldn't give them a home loan.

    Private institutions that refused for decades to make loans in a market can't then turn around when the gov't steps in and sets up a program to get that market served and say, "Hey, there's a lot of money to be made there, and we're unfairly disadvantaged!"

    Private institutions didn't make those loans for all those decades because they were risky, and they knew they were risky. (Well, that's not the only reason, but it'll do for now.) They were still just as risky when they finally decided they did want to make them. They just didn't care anymore. As a result, they made a bunch of bad loans, leveraged the hell out of them, and then lost their ass when the loans went bust. (Or would have lost their ass, anyway.)

    There's no sense in which that's Fannie and Freddie's fault. Now, we can argue over whether Fannie and Freddie should ever have been privatized to the degree they were, but that's a different argument, and it's gonna be a little weird to hear a conservative arguing for less privatization.

    (As I hinted before, I think Fannie and Freddie did have problems of their own, but I don't think they can be blamed for the actions of private banks, or for the scale of our current crisis.)
  • urbinourbino Posts: 4,517
    Scrambler:
    I currently fall right around that $45K point, where under the current law, for every additional dollar I earn via overtime at my second job I pay no additional taxes. Under Obama's proposal I would pay nearly 40 cents of that dollar. If I work enough extra hours to earn another $5,000 this would be an effective tax hike of $2,000. No thanks. This de-incentivizes working harder.
    That's based on a graph from AEI. They're not exactly a non-partisan source. Nor exactly a reliable one.
  • ScramblerScrambler Posts: 746 ✭✭
    urbino:
    The 1929 crash was due to too little regulation. Our current problem looks to me like the same, but opinions differ.
    The bubble of 1924-1929 may have been caused allowed by too little regulation, but the crash was in large part due to gov't intervention. It was the tightening of the money supply by the Fed that caused (or at least magnified) the crash.

    In arguing for the bailout today, people seem to be saying "the market isn't correcting itself, we need the gov't to step in". The fact is that the market HAS corrected itself. The correction was the prices falling. It's working as it should. The high stock prices in 1929, and the high housing prices this year, were artificial. Allowing prices to adjust to a more real level isn't something to be avoided, it's necessary. It's when the gov't tries to restrict this correction that things don't always turn out as intended. We don't need the market to now "correct" back to higher levels.
  • ScramblerScrambler Posts: 746 ✭✭
    By the way, I realize I'm not exactly forming coherent arguments here. I'm just throwing out obsevations in support of the title of this thread as they occur to me, mostly from things I've read or conversations I've had over the past few days. It's a great time to be studying Political Economy.
  • LasabarLasabar Posts: 4,473 ✭✭✭
    Scrambler:
    One more thing I came across today, before I get back to homework.

    image

    I currently fall right around that $45K point, where under the current law, for every additional dollar I earn via overtime at my second job I pay no additional taxes. Under Obama's proposal I would pay nearly 40 cents of that dollar. If I work enough extra hours to earn another $5,000 this would be an effective tax hike of $2,000. No thanks. This de-incentivizes working harder.
    Nice job Mr. Perot
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