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Luke Hutchison

TED Fellow, Google

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Is capitalism sustainable?

Bono stated in his TED2013 talk that the numbers show that we can eradicate all poverty worldwide by 2030. While I really hope that is true, it begs the question: Is capitalism sustainable? Is it possible to have a rich and middle class without a poor class? The sad reality of capitalism is that if there is an exponentially small number of people with exponentially large wealth, there has to be an exponentially long tail of much poorer people who are each contributing to that wealth. Not that we necessarily need an exponentially small number of people with exponentially large wealth, but would the world keep running without capitalistic incentives that increase the separation between rich and poor? Can we eradicate all poverty without the rich sharing their riches? What happens to civilization when nobody is willing to work in the factories and orchards, or build roads?

(Please don't take this question the wrong way! Personally I wish that nobody had to work menial jobs. I just don't understand how we can eradicate poverty when so many jobs will always translate into low-paid labor.)

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    Feb 28 2013: The trouble with capitalism is that it is controlled by capitalists, and the economy is run by economists.
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      Mar 1 2013: Capitalism does not create greed rather it holds it harmless.

      The only trouble comes from government involving itself with business as government does not respond to the market place. And screams like a child with it is asked not cut it's spending 1%.

      Your comprehension of the economy has to go in the non column.
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        Mar 1 2013: You're right Pat, I'm not an economist. But interested 'end users' should not be precluded from opinion or comment by people like you who may have detailed comprehension.

        Sometimes the view from the outside is more valuable than the narrower views of those who profess to be expert insiders, especially when their area of expertise is showing obvious signs of dysfunctionality and unfitness for purpose - much the same way as the very competent Doctor Frankenstein lost complete control of his own creation.

        What I'm saying is that all areas of narrow expertise need to be more open to the broader contexts in which they are working. It seems to me that, while economic theory and capitalist ideals may look good on paper, in practice the human and environmental costs are proving to be huge - possibly even irreversible.

        Why is this being allowed to happen? My opinion, for what it's worth, is that heads are still buried in paper, graphs and stats without being cognizant of who or what is being affected in the bigger context. Economics is in serious need right now of broadening its remit into sociology, psychology and environmental science.

        I agree that government meddling in anything is a sure recipe for disaster. But can you explain further what you mean by "capitalism does not create greed"? Are you saying that market forces are harmlessly self-regulating, if left alone by government?
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          Mar 1 2013: There are so many fallacies about economics that it renders the common person stupid on the subject, yet it effects all of us. Most of this fallacy is created by politicians.

          Yes the free market governs the transactions or each individuals 100's of transactions per day. First everyone buys from Ward and Harrington they lose competitiveness to Sears who losses competitiveness to Walmart. All the while the consumer looking for the best value has his standard of living raised as well as the Chinese standard of living who makes some of the products.

          Before you say the jobs get exported the undisputed largest manufacturer in the world is the U.S. by far.

          You see the pie gets bigger and we all get a piece. Unless government steps in and stops growth. Yes some regulation is needed but that was whole lot of regulation ago especially here in Calif.
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        Mar 1 2013: I apologize for my stupidity.

        Your ever-expanding pie analogy is interesting, along with the even more interesting statement that everybody gets a piece of it.

        Are you saying that the ingredients for your inflating pie are in infinite supply, and that the economy, under the guise of capitalism, will ensure wealth for all?

        Again, my stupidity is getting the better of me - I need further explanation from you of how that would work, from the very start, right through to your utopian ideal...?
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          Mar 2 2013: I think Bob nailed it when he said people tend to make economics more complex that it is.
          All the fallacies make it hard to reconcile the propaganda with the truth. One thing I use as guide on this stuff is that the truth is generally simple, if it get complicated my BS meter starts redlining.

          Look at how many jobs the world has today compared to 100 years ago 1.6 billion compared to 7 billion today. That would roughly translate into 4 times the number of jobs. And a much higher standard of living. This is evidence of an expanding pie. And more people have a higher standard of living indicates the everyone gets a piece of the pie.
          There is no guarantee but your odds are much better with the free market of which the U.S. has been the leader, my concern is that when the U.S. falls so will the world.

          The zero sum game is another fallacy put forward by the politicians. The very definition of economics explains much in this regard.

          Economics is the study of scarce resources that have alternative uses.

          As the price of oil rises, money which represents a person's time, will find alternative energy sources. If they could figure out how to create fusion reaction the price of energy drops to virtually nothing at which point something else will be the scarcer resource.

          You mention earlier the need for economics to enter into the field of psychology and sociology. The free market does a tremendous job of this naturally, no PHD required.

          The very basis of morale is production. The morale of a worker is at it's highest when production is the highest, the morale of a team is highest when the team wins. Winning and morale are synonymous.

          Another aspect of this is that a business has to work very hard to raise the standard of living of its customer Walmart verses the mom and pop, Toyota verses the Trabant, expensive American unionized labor or Chinese labor at a fraction of the cost. The point is that this is a very objective process that is healthy.
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      Mar 2 2013: Economics is the social science that analyzes the production, distribution, and consumption of goods and services.

      Capitalism is an economic system based on the private ownership of capital goods and the means of production, with the creation of goods and services for profit

      Allan, I will use the two definations above in this reply. You, and I share the lack of in depth knowledge of economics. That is caused in part by politicians using term improperly and messing with our minds to garner votes. For a long time I tried to make something very hard out of economics --- it is a tool used for measuring the health of the country. If your debit is more than your GDP then your policies suck --- no different that your bank account really --- it that case your accountant says your going to jail if you keep it up .... at the macro level the feds use facts to their advantage to cloak the real problems of the present and the future. You, as I did need to look up Keneysian economics and Austrian Economics models.

      Capitalism has a hand maiden called supply and demand. The goal is to make a profit. The size of the profit is dependent upon the demand for your product and your management abilities to produce it at a cost to ensure a profit and to maintain a balance between the supply and the demand.

      Socialists hate it becuase it is beyond the control of the government. As soon as a socialist leader comes into power they immediately attempt to control capitalism through regulations, laws, taxes, and regulations which put the government in charge of a profit making company and that leads to the demise of the agency and many more government agencies left on the books as a burden to the taxpayers that no longer are recieving taxes from the once prosperious company.

      In plain talk there is never a trickle up .... No investors ... bad .... no profit ... bad ... no jobs ... bad and the list goes on.

      There are no assurances .. just opportunities.

      Bob.
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        Mar 4 2013: Bob and Pat - thanks for your responses.

        I have a number of questions:

        The first is based on the notion that the free market has endemic, multi-faceted attributes that effectively render the likes of sociology and psychology redundant - hence your comment, Pat:

        "You mention earlier the need for economics to enter into the field of psychology and sociology. The free market does a tremendous job of this naturally, no PHD required"

        1 Do you think that anything that is seamed through with wealth and materialism, could possibly self-regulate itself and still remain within acceptable parameters of morality?

        2 If so, who then are the guardians of that kind of morality?

        3 Are they the ones at the top of their game within a free-market economy?

        4 What are the mechanisms that have actually propelled them to the top of their game, and is that something that has run concurrently with moral behaviour?

        5 What is the basic lifeblood of capitalism and free market economics? Is it something tangible, like resources of high marketable value that can be dug or sucked out of the ground?

        6 Given that those resources are finite, what happens when it becomes uneconomical to dig or suck them out of the ground any more?

        7 Bob, do Keynesian and Austrian economic models depend on such high value resources to make them workable? Do Keynesian economic models still apply to the marketing of fresh air (or possibly even polluted air, by that time)?

        8 I understand the concept of supply and demand. But here's an analogy (with thanks to Arkady): If you cut off the main tap root, will the tree stay alive - or die?

        I have loads more questions - and I appreciate your time to answer them.

        Allan

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