From: Michael S. Lorrey (retroman@together.net)
Date: Mon Jan 18 1999 - 10:17:08 MST
phoenix@ugcs.caltech.edu wrote:
> Dick.Gray@bull.com wrote:
>
> > arguments, i.e. it's not only what works, but what's right. Nevertheless,
> > market freedom can be, and often is, defended on purely practical grounds
> > apart from ethical considerations. The same doesn't seem true of socialism
> > (at least not any more).
>
> Socialism, no. That doesn't mean total market freedom is the only
> alternative.
>
> Until a few weeks ago I called myself a classical liberal, meaning my
> positions were close to libertarian but my reasoning wasn't; the difference
> between Hayek and Ayn Rand. Now I call myself confused. The difference was
> reading Galbraith's _The Affluent Society_, which is modern liberalism (or
> one variety) presented by an actual economist. I will attempt to summarize.
> snip...
> He also points out that a moderately managed society might be more productive
> than a laissez faire one, in that it would avoid the very severe productivity
> loss caused by the deep recessions such as America had frequently in the 19th
> century. Lots of people unemployed equals lots of people not producing.
>
> Eh. This'll have to do for now. It's a good book.
I'll have to read it. With regards to 19th century America, most of the economic
vacillations were not due to natural economic phenomena, but because of a) the
vacillations in the amount of fiat and private money being printed/stamped which
did not reflect accurate changes in the actual dynamic needs of the money supply
(thus rapid inflation/deflation and changes in interest causing boom/bust feedback
cycles), and b) changes in the policy of the feds toward a money standard. Gold,
silver and wheat all were used or proposed at various points, the standard
evaluation rate changed frequently, and the massive influx of gold into our
previously mostly agrarian economy in the mid 19th century fron the California
gold rush caused a hellacious amount of inflation much like what occured with the
Spanish Empire during the conquistador era. This great boom caused a significant
resonance effect that was amplified and maintained by the money policies described
in (a) above. Other factors include trade/tariff policy changes in our own and
other governments, and immigration rates.
The cyclic effects we have seen this century are also resonance effects aided by
the tax laws. Because corporate managers are focused on the quarterly or annual
profits, not usually in the long term growth of the company, such short
sightedness feeds the excesses of the 'business cycle', while the fed tries to
dampen them out. If corporate managers' own performance were judged on the
company's long term growth, I think that this feedback loop would die out much
more easily, and the fed would begin to lose its reason for living. Management of
an economy is only needed when the factors by which the system function are being
biased by government policies based on insufficient or inaccurate information.
Mike Lorrey
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