before elaborating on the term, let me point out a few key differences between capitalism and socialism.

Capitalism:

- 100% Free enterprise. No limits on earnings, expansion, or savings, offering more incentive to start a business. The only government connections are taxes and sometimes, government grants and contracts, if accepted.

- Little regulations on the financial sector, never going beyond a few basic laws to prevent the people from being treated unfairly without their knowledge. Employers have total control on employee wages, with the only regulations being a legally binding "minimum wage," and, of course, taxes.

one of the key criticisms of this system is the lack of control on the financial sector, resulting in different "classes" of quality of life, based on wealth of said individuals. Being apart of the lower classes make it more difficult to engage in free enterprise, often subject to minimum wages and bleak existence while a select few in the higher classes live a hugely decadent, unregulated, unrestricted life, and amass huge personal fortunes, some large enough to run a small country. due to lack of regulation, the wealth is unevenly distributed.

one of the key pros of capitalism results from heated competition between any two free enterprises participating in the same profession, which is accelerated advancement of technology, and, in most cases, better quality of life. Due to large amounts of wealth and resources by few individuals, research and development is applied in a more concentrated effort. Scientists and researchers are allowed to freely choose a profession and subject of R&D, again resulting in a greater wealth of knowledge, free information, which in turn results in advancement.

a huge key example of a capitalist country is, of course, the united states of america. but examples of capitalism exist throughout the world. Capitalism is not, in fact, a form of government, but a policy (or lack thereof) put in place by a government.



a system like socialism or communism, for example, has policies put in place specifically to prevent capitalism.



Let's look at a few key facts about Socialism:

- Businesses and corporations are subject to either partial, or total governmental control. in most cases, businesses are government-founded and run, and corporations are almost non-existent. Most or all profit goes to the government, to be used how they see fit.

- There are absolutely no private interests in the financial sector. Banks are non-existent. Most or all wealth is directly government-controlled, eliminating the need for laws and regulations, at least among the citizens. The government still has guidelines on how to use the wealth.

Right away, the key criticism of socialism is a "class-free society." everyone lives in the same kind of house, there is one brand of coffee, one brand of computers, one brand of cars, etc. All research and development is government controlled, offering little incentive to pursue a career in science, academics, as the government decides what is to be researched and what goals are to be reached. Ultimately, everyone is forced into the same bleak existence as the lower class of most capitalist countries. rarely are people allowed to choose their own jobs, as jobs are only created based on what is needed.

The upside to socialism is, unlike the lower class of a capitalist system, the citizens need not worry about losing their jobs due to a failed enterprise, as economic demand is directly satisfied by government-controlled industries. in short, no product is produced more than it needs to be, and no industry has more money than it needs. all that saved money and labor goes to the government, whom then decides how much of it to give to the citizens based on cost of living needs, and how much of it will be put into whatever industry needs to be expanded at the time, whether it is agriculture, education, or military.



so, the key problem with most socialist countries today is that most of them have turned into dictatorships, because citizens rarely cooperate with the system, due to the very human need to always want more. a need which is satisfied by the free enterprise system of capitalism. even the lower classes receive some profit from their wages, while a citizen in a socialist country almost always gets only exactly as much as they need.

and the key problem with capitalism is the existence of a high class, with no regulation on how much money they can have or how they can spend it. a corporation could manufacture something that costs one dollar and sell it for five hundred dollars, whereas in a socialist country, if it costs one dollar to make, it costs the buyer one dollar and one cent, for example. the high class amass huge personal fortunes and act as giant black holes on the economy by saving copious amounts of money, and removing it from the economy, while still paying a much smaller tax percentage than lower classes.

a capitalist country is a black hole that will eventually implode upon itself, while a socialist country is a massive revolt waiting to happen.



with that out of the way, socio-capitalism suggests that these two systems can be combined, and that they are not such polar opposites. allow me to elaborate:

- In an ideal social capitalist system, free market and enterprise still exists, co-owned by private interests and by the government. the government can pick and choose which businesses to endorse and not to endorse, while it is still theoretically NOT impossible for a business to do well on it's own. The profit of a business is shared between the business and the government itself, the business can use their profit to expand how they see fit, and the government can use their percentage of the profit on strong social support for the poor, resulting in more capital participation, and more positive economic outcome.

- The financial sector remains government controlled, with policies in place giving the people right to their earned profits, and putting a "profit cap" in place to prevent unnecessarily large personal fortunes, and reduce the massive inequalities inevitably generated by large corporations.

The criticism of this theory remains much the same as socialism. People always want more. It is not impossible, but extremely difficult nonetheless, to engage in a one hundred percent free enterprise. with a profit cap on people's government-controlled bank accounts, the large amounts of money required to start an enterprise are all but impossible to achieve without great personal sacrifice, resulting in only the most determined individuals succeeding in their enterprise on their own. The government can still have too much unnecessary control on which science and research projects succeed, and which ones don't.

The upsides to such a system can negate some of the criticisms. A profit cap system ensures that one individual will still earn only what they need, and a little extra, but not enough to buy a massive house or ten cars. This ensures maximum tax revenue, resulting in the government able to profit from free enterprise. Much more concentrated efforts would be put into education, expansion of industry, and social support programs for the poor, resulting in a "poor" class being all but nonexistent. It would result in the creation of more government jobs, with a lack of jobs in general being a prevalent problem in a capitalist system.

now, this is only a theoretical system, but one that has been much considered these days, considering all the economic turmoil.



discuss. do you agree? disagree?

While you may see profits as excessive, I think is important to understand that that profit/loss plays an important role in any economy. Let me try and illustrate with an example, lets say a flood hits the city of Dublin and the supply of drinking water decreases in large quantities but the citizens of Dublin still need to use a similar amount. What will happen is that the price of drinking water will rise and those suppliers still have some of the commodity to sell will earn higher profits. With this rise in profits those sellers of drinking water will now be tempted to go to Dublin to sell drinking water because they can earn more there then anywhere else. As more people begin to go to Dublin to sell their drinking water the prices will beging to decrease as supply increases and profits will move downwards in this area. This will go on until it is no longer more profitable to sell drinking water in Dublin then any where else.

Profits act as a call for help when supply is too small to meet demand. They attract resources into more urgent areas and thus provide an important role coordinating economic activity. The cap that your proposing would distort this process. If a cap was placed upon sellers of drinking water in my example to same level as drinking water sellers elsewhere then there would have been no incentive for more drinking water to come into Dublin.

Extreme capitalism has probably never existed in the modern world, the government always taking something or funding something. Even in the US, agriculture has always been subsided in modern times.

Extreme socialist has turned bankrupt, the only remaining state with that kind of system is probably North Korea, even Cuba has some small businesses I think.

The worst ever combination of capitalism and socialism is in China. The state has some control, but other than that it lets bosses and the rich exploit their workers, pollute, and in reality they answer to no one and are often leading members in the Communist Party themselves. In the countryside they practically own everything and no authority can do anything, not much different from European medieval feudalism. The state also helps do business with selling the organs of people who have been executed.

Agriculture, the military, r&d, car companies etc. etc. etc. similar to Europe ... in certain boundaries.

And these extreme socialist countries have been?
Maybe you confuse it with state capitalism. And North Korea is a dictatorship with monarchical tendencies.


Interesting how you contradict yourself in the paragraph. What is China ... socialism or not? And the state has some control? You are joking, right?

How about the Welfare State in the Scandinavian Countries? Isn't it what you propose, or better?

So .. if they want more, then why do the countries turn into a dictatorship in which a small elite is able to take a big bite out of the countries annual income. I fail to see your line of reasoning.
I do not know on what planet you live, but on this one capitalism is currently ruining not only it but also exploiting the population of countless countries. Maybe you shoudl take a look on the average of some workers in the 3rd world or how a country like Kongo is currently exploiting its own resources ...
and what about the deteriorating ecosphere, the loss of species, the dwindling amount of resources, the transfer of these into the 1st World for next to nothing -- which leaves the 3rd World without a prospect of adequate development --, the loss of financial securities of the working class (where it is still existent) etc. etc. etc....

The current system has no perspective, because it is ultimately in a doomsday loop, due to the limited amount of resources as well as limited carrying capacities of the ecosphere.

I'm too busy to read the entire thread, but here's a very uninformed post from an angry Finn:

The best in existence as such, but impossible to maintain. A welfare state becomes enormously indebted before you can say scandinavia.

None of the nordic countries are really welfare societies. Our politics are in part based on an utopistic ideal which bears the aforementioned name, but as long as people are short-sighted enough to vote for those idiots who promise lower taxing and claim it benefits the working class, we're stuck in what these people see as a post-socialistic society which is in constant drift towards a free market economy and a night watch state. It will never reach that point of course.

Economy which is driven only by human greed and a state to regulate it (for example, preventing banks from becoming bankrupt to save the state from a financial crisis) is not that simple.

What will happen is that some banks make huge investments with a massive risks, and when they fail, our politicians politely scramble together a relief package of a few billion euros so countries like Ireland can afford basic social services for the "less fortunate" (which is obviously unfair: no bank's failed investments should affect the social services of the state, even in massive financial crises), and so that the banks won't drag our economy to mud as they fall. Knowing that no state will ever let these banks fall in fear of crises, they continue to make these risky investments. If they succeed the next time, don't think anyone who paid massive amounts of taxes to afford the relief payment ever gets a penny back.

It may be better than either extreme, but it has its flaws.


Things to consider:
1. Nokia came from a country like this.
2. What else did, really?

Perhaps the most succesful ideas are born in states where the companies are not hard pressed to make maximal profit out of nearly nothing, and innovation is more free to exist when workers need not be brutally exploited and then fired. Due to the personal sacrifices founding an company means, fewer become entrepreneurs, but the most willing to make these sacrifices do, and they have greater resources available to them, hmm?

The downfall of the system is that when this is all done, they can move their organisation to China or India where equally highly educated people work for 10% of the pay

Hey OP, your "facts" on socialism are completely wrong. I believe that you are confusing a totalitarian style of communism with socialism. Have you ever been to a socialist country before? Norway, Sweden, Denmark, Germany, Poland, etc etc.

1. There is not just one brand of everything, there is choice and selection in consumer and industrial goods to choose from.

2. Profit from businesses does not go to the government, it is collected in taxes just like capitalism is. Yes the tax rate is higher but not ALL of the profits from companies go to the government.

3. Banks do exist in socialist countries.

4. People are allowed to choose their own jobs.

5. There are massive incentives to pursue sciences and acedemics, due in part to EDUCATION ACTUALLY BEING AFFORDABLE.

I could list more, but the fact is you should actually dom some research on the basic systems themselves.

Did you also notice that no society actually has the capitalism he outlined? I think he was putting them in the most extremes. Anyway, I'm not doing this thread because I have done this a million times and doing it in the "Tavern" of MA is going to be mind numbing.

those countries you listed do adopt socialist policies, but are not entirely socialist. in all fairness, there is a blurred line between socialism and communism. But all the examples of definitively socialist/communist countries, such as cuba, the USSR, china, etc. are not pretty stories as far as economic stability goes.

let me clarify my facts:

in a capitalist system, economic demand is satisfied by free enterprises and businesses enticed by the incentive of profit. this runs the risk of price-gouging where whatever product or service is desperately needed. while competition between businesses can alleviate such a risk, each free enterprise runs it's own risk of losing profits altogether, causing otherwise stable industries to collapse, and leaving the surviving industry the ability to once again, price-gouge it's clients. a perfect example is that of the Apple corporation. it costs them 25 dollars to manufacture an ipod, and they sell it for eight times that. that's a perfect example of price-gouging. competing businesses have also been known to engage in what is called "price-fixing." a highly illegal, but hard to prosecute, practice in which two or more competing businesses will meet under the table and agree to keep their prices at often outrageously high amounts and share the profits evenly, again, bringing us back to the problem of price gouging.

in a socialist system, economic demand is satisfied directly by government-controlled industries, with all profits going directly to the government. again, the risk of price-gouging is there, on the part of the government itself, which has no laws or restrictions above it to prevent it from doing so. this profit rarely returns to the people, and is used for government interests. the results are citizens being forced to work more in order to simply get by, and more money going into the effort to keep revolt from happening.

now, these are the worst-case scenarios. all of these things have happened in one way or another. for example, the american government had to spend billions of taxpayer's dollars to resuscitate dying industries in the country in the past few years, due to little financial regulation on the part of the government. the USSR collapsed on itself due to poor financial decisions on the part of the government, for example, putting too much economic power into it's military expansion, using the people's money, an industry which gave no profit back.

Dear DescensionToCocytus,

I had always thought that price gouging was when in an emergency, producer(s) sought economic rent because they are providers of goods with low price elasticity of demand and transportation costs of the goods reduced the geographic market thus granting them temporary monopolist power.

I am a little bit confused why you say that something selling more for its value is gouging. Are you suggesting that value is derived from labor or expenses rather than supply and demand? It sure seems like you are. This interests me because no one in mainstream economic thought agrees with this position and even socialist countries and thinkers hold this opinion typically. Not a fan of Pareto, Neumann, or Morgenstern?

You mentioned price fixing a a fact of capitalist systems, were you relying more on a Kwoka dominance index, four firm concentration ratio, or a Herfindahl-Hirschman index for your definition of competing businesses? Why do you think this is such a huge problem? I am of course assuming you don't give much credence to the likes of Bane and Knight in this area and rejoice in the fact that Robert Bork was not appointed to the Supreme Court of the United States.

Also I was wondering why in describing capitalism in your first post you adopted the most extreme stance possible. Are the contributions of Keynes, Stiglitz, and Sen insignificant?

You also mention that it is unregulated and cite the United States as such a system. Did Congress abolish all of the securities and trading laws? Also I was wondering what happened to all of the Delaware Supreme Court case law limiting corporations? Do corporations invariably cause inequality when they can make charitable donations when it helps their community and not be challenged as acting ultra vires?

You said "the american government had to spend billions of taxpayer's dollars to resuscitate dying industries in the country in the past few years, due to little financial regulation on the part of the government." This was also surprising because I thought the consensus was that the crisis was a standard bubble that was caused by a lack of regulation and even the presence of bad regulation in specific industries rather than the overall way capitalism operates and myriad other factors.

To conclude:
Thank you so much for explaining that the economic order of the world that I thought was infinitely complex could be improved by through a Hegelian dialectic by synthesizing capitalism and socialism. Taking the middle ground between those two very bad things you described would save us from the problems in either system.

the economy is the people and their money. period. there ARE regulations on commerce in the US but there isn't enough, plain and simple, seeing as our government had to use MORE of our money to clean up after their needless risks and mistakes. they don't realize that the billions of people they're screwing over are the reason they're so successful in the first place.

supply and demand is essential to any economy, and when the government itself directly meets that demand, profit is maximized and does not end up in the hands of private interests such as oil companies and OPEC, who are price-gouging and screwing over the entire fucking world. this, of course depends on the interests of the government, which, in the case of most socialist regimes of year's past, are corrupt, and exploit their own people.

oh, and on the subject of price gouging, selling a product for more than it's manufacturing cost is also essential to an economy. selling a product for 8, 50, or 100 times it's manufacturing costs is highly unnecessary, and, again, the profit ends up with private interests, and leaves the said economy. forever. it goes nowhere, and the taxpayers end up having to pay for the void created by all this insatiable greed.

Socio-capitalism has it's flaws, i will admit, but no one political party or type of government has all the right ideas. the more we collaborate, the more we can reach what we call common interest.

have you a better idea, i'd love to hear it.

Are you referring to the latest economic debacle? Because that isn't even remotely close to what happened. It wasn't created by a lack or regulation. It was made by bad policies and the special privileges of Fannie Mae and Freddie Mac.



No. NO. That is not how economics works at all. What are you talking about? It doesn't leave the economy at all. My head is being numbed by the sheer magnitude of nonsense just like I knew it would be.

This discussion is going no where fast. You still have no idea how these systems work. I'm not going to bother politics on here, I joined to discuss metal. Good day sir.

Yes, but this only applies to first-world countries, where profit is still to be made. Somehow I don't think drinking water companies would flock to Rwanda in the same situation.



An interesting idea (I do agree), but there is absolutely no way whatsoever that you will ever ever ever convince the billionaires of the world (who, let's face it, have most of the power) to start hating their money. A large social revolution hasn't happened because the largest mass of people want a change (most of us do, though we don't all agree on what needs to change), but because those who have power also have a vested interest in keeping power.

While I am a raging socialist at heart, I also know that the larger a government gets the more corrupt it will be by its very nature, because people, once given power, want to keep their power.

I think that the best option would be somewhere between capitalism and socialism. I do not think a free market completely consumer driven capitalist society is the way to go. I think capitalism could be OK if there were regulations to keep it ethical. The problem I find with the capitalism that is prominent in today's society is that it encourages greed and creates a huge gap between the rich and the poor.

by them and countless other banks and corporations contributing to the problem. the great depression was also caused by businessmen with too much power. And corporations and banks like the ones you quoted were given the power in the first place to let their decisions affect the rest of the country, and where the taxpayers' money went as a subsequent result. the taxpayers suffered for it, and will never see a penny of they money they had to pay as a result of the subsequent tax increase.





it does leave the economy. it ends up in the savings accounts of oil-billionaires and the like, and just sits there. sure, we tax the hell out of the rich, but they usually only pay less than 1% of their annual income, which is still an astronomical amount, while an average joe with a regular day job ends up paying as much as a fifth or even a third of their annual income in taxes.

what's wrong with this picture?

edit:


agreed, but that still is not the core of the problem. capitalism under-polices the financial sector while most socialist countries over-police it. it's extremely difficult to create an in-between. not impossible, but extremely difficult.

But Frannie Mae and Freddie Macs power was given to them by the US government. They were given special privileges that allowed them artificially low interest rates from the fed, they got this because they are a government sponsored enterprise whose objective was to get more Americans into homes. The problem is this objective was dumb, some people can't afford homes and shouldn't have them. Now, the lower interest rates allowed Frannie and Freddie to give riskier loans(hooray, more Americans in homes, who care if they can afford it) and take on the bad loans from other banks. So Freddie and Fannie is where all the other banks could dump their sub-prime mortgages. Since these other banks could dump their shit into Frannie and Freddie they weren't disincentivized to make shittier loans to shittier clients. This set up the perfect shit storm for when Frannie and Freddie went insolvent. Now everyone was gonna get raped because now all those banks had no where to dump those shit loans, so they had to eat their shit sandwiches. The problem was the dumb policy of getting more Americans into homes faster despite if they couldn't really afford it. Because of Frannie and Freddie, other banks were not disincentivized from making shitty loans like they would have been without Frannie and Freddie and the artificially low interest rate privilege. Frannie Mei and Freddie Mac were government sponsored entities that were given special privileges by the FED which they gladly used to create a system of housing loans that was bound to self destruct on a giant level, and it did.





It ends up in all kinds of places all of which are IN the economy as you have already defined. "The economy is the people and their money." Even if some of it does end up with oil billionaires, that isn't leaving the economy and no one has to pay for it. Also, it probably just won't sit there, billionaires do spend their money and expand there businesses. Also, savings are important, banks pay interest on the money you keep in the bank for a reason, they use it.

it does leave the economy. it ends up in the savings accounts of oil-billionaires and the like, and just sits there.[/quote]
This is quite incorrect, actually. When a billionare's assets are reported on the "richest people on earth" lists, they count all assets, not just liquid. Though it might say that Bill Gates has 42 billion dollars (quick Google search gave me that number, and whether or not it's accurate is not the point), he does not have access to all of that. It is tied up in stocks, company assets, personal assets (his house, cars, private jets, thousands of computers I'm sure, etc) and personal investments as well. Billionaires , like most business people, are always looking for more ways to make more money, and they won't make much from the interest in a savings account, and even if Gates did have 42 billion dollars in a savings account, the bank itself would be investing that money itself. That's where interest comes from; the bank pays you for the permission to invest your money in things. Of course the more money you invest, the more interest they give you because the more money they have to invest, and of course the more money they will (hopefully) make. This is why if you are going to take more than a couple thousand dollars out of the bank at a time you have to let the bank know beforehand so they can withdraw enough from their own investments to give it to you. It is still your money, and they have to give it to you when you request it, but like anything involving money and electronics it takes time. So money never really "leaves" the economy, unless you take all of your money and toss it into a mattress the old fashioned way.

Capice?


Also, I am interested in the OP's opinion on http://robinhoodtax.ca/

The analysis would still apply but you would have to take into account compensating differentials as well. There are a number of negative aspects inherent in third world countries that are not in the first world so the monetary profit would have to rise higher in these areas to make up for the loss of psychic profit so as to entice suppliers to sell in these areas.

America does not have Capitalism or Socialism, it has a bastardized version of Keynsianism. If it was socialism then the gap between the rich and the poor wouldn't make most african countries look egalitarian by comparison, and if was capitalism then there wouldn't be welfare or state education.

Laissez fair capitalism is, in my view, the best system anyone has come up with. However, I don't think society is ready for that yet, not in England, not in America, and certainly not anywhere else in the world.

Laissez-faire capitalism? Yeah let's ask Margaret Thatcher and Ronald Reagan how that worked out for 'em.

Lets not.

Maybe you mean to criticize neoliberalism of monetarism or maybe you are just defining laissez-faire capitalism really broadly. Either way, neither of those leaders even remotely adopted a pure laissez-faire approach, because as others have noted, no such capitalism has ever existed. It never could either. Pure capitalism relies on economic models with assumptions that are universally known as simplifications that are not entirely true. In fact, anyone who has a basic grasp of microeconomic theory will tell you that under perfect competition profits are equal to zero.

Politically, both of those leaders faired better than average with their respective parties not loosing power until after their successors (Major and Bush I). Its fine to criticize them for these policies but the way you worded it makes it seem like they did not do well for themselves politically, rather than for their respective nations.

Satans_love_child, you are aware of Keynesianism but still advocate laissez-faire capitalism as the best system but don't say why.

DescensionToCocytus, let me be completely blunt with you, as all you seemed to get out of my post was the sarcastic tone. Unfortunately it was the least important thing I was saying.

I am pointing out to you that you are discussing a wide range of topics and demonstrating a weak knowledge base in those topics. I used specific examples of approaches to concepts to show that you lack a basic understanding of those underlying concepts, specifically price elasticity and market power in how they apply to price gouging.

I also suggested that you have views on a good's value that are outside of the mainstream consensus. I tested to see if this was based on anything by mentioning some proponents of this theory. Its called marginal utility, and you seem to be proposing a labor theory of value. Rather than showing you were in some small minority by arguing against them and for that theory you did not mention anything germane to the debate. This hardens my suspicion you are not knowledgeable about what you are saying and only know enough to realize that there are problems in the world that could be fixed.

I also made my earlier post in a way to make it look like you were also unaware of the current understanding of how the economy works and that you used this position of ignorance to set up two straw men of economic systems that never existed in a battle against each other. I followed by accusing you of engaging in grossly simplistic analysis by suggesting a happy medium between two systems.

You ask if I have a better idea? Fortunately for you, people much smarter than me work on this all the time. If you are really interested in the area you can too. The thing is though, you are all over the place in what you are talking about and do not seem to know much about any of these areas. Corporate regulation, executive compensation, banking regulation, comparative economic systems, microeconomics, macroeconomics, political science, you bring up all of these things.

I really hope you do not just think myself and the others who have pointed out that you are wrong about simply disagree with you. Government economic regulation is simply not the all or nothing dichotomy you paint it to be. You need a much better understanding of how the world works.

I don't judge someone's political success by how long they managed to not "loose" power or how well they "faired" at fooling people into thinking they were right, but by how much of a positive impact they had on their country. Britain has been an economic catastrophe for decades, and Thatcher didn't help in that aspect, and it's thanks to Reagan that we have the EXTREME WAR ON DRUGS MARIJUANA IS BAD PUT EVERYONE IN JAIL mentality that permeates the US.

You're right in that laissez-faire capitalism IN ITS TRUEST FORM has not been tried, but really you're splitting hairs there. I could say that democracy is not practiced anywhere on earth anymore because nobody adheres strictly to the precedents set out in Athens in the 4th century BC, but what am I getting at there? How am I furthering an argument by nitpicking?

He is not using the fact that laissez-faire capitalism has not existed as an arguement in favor of it but instead states in the same paragraph that he does not think pure capitalism could exist. Although, I am not sure why the inherent simplistic nature of Neo-Classical market models would prove a purely free market society to be an impossibility.

DrFunkenstein, thanks for clearing that up, that makes much more sense.

I do not think it is splitting hairs at all because I see the differences as highly important. When people retain the view that some countries are pure capitalists and others pure socialists it propagates a the Cold War propaganda mentality. When you talk about things as a spectrum I find it really further arguments because rather than the usual us v. them mentality people speak about policy in matters of degree. When you do this its easier for people to let go of ideology and adopt better policies.

This is a huge problem in the US, where an embarrassingly high number of Americans believe that Obama is a socialist (which to many people, essentially means the next incarnation of Stalin.) I think it is a straw man to talk about capitalism as laissez-faire, and used as a rhetoric device by those who believe we need much more regulation.

The differences are not only important but also large (in both scope and number.) Most capitalist countries have profound and systemic regulations, set certain market prices, and have nationalized several industries. Its not like Somalia but with deceptive business practices replacing the guns. In response to the current problems Congress passed the Dodd-Frank Act to increase regulation. I think it is over 2,000 pages, lets hope its good. No matter what though, it is better than viewing the problem as the US being a laissez-faire state and the solution mixing in a little socialism. I do not think you suggested such a thing at all though.

bucfan5252, neo-classical market models have the follow assumptions that are impossible and create barriers to perfect competition: zero transactions costs (wow I just found a Solefald CD without having to spend any time looking for it!), firms may enter and leave the market freely, all information is immediately and universally known, humans act as rational profit-maximizers, and importantly that transactions perfectly capture the costs of doing business. The last involves things that happen as a result of transactions that have a cost, externalities. I do not know enough about Pigou or welfare economics to say whether that also makes a perfect market impossible though.

The idea though is that a government would tax things so that these transactions would capture the real cost. So suppose I go out and buy some gasoline (petrol) right now the price I pay only marginally covers the cost of my use of that insofar as the tax to compensate for the wear on roads I cause. There are also other costs such as pollution that could hypothetically brought back into the transaction. Internalizing the externality would mean taxing the gas so I instead end up paying the real cost of my purchase rather than merely the price.

O yeah, I remembered some more assumptions because of that, but I surely am forgetting some. Classic economic thought assumes that goods are rival (when I use it, you can not at the same time), and excludable (when I own it, I can stop others from using it.) Instead not all goods are like this, so we have the government control certain means of production (also because the average costs decrease with economies of scale for certain goods.) If this really tickles your fancy, Ronald Coase has a book with a really interesting section on lighthouses but I suspect he is a bit to the right for the people who managed to read through all my drivel.

To sum up again, capitalism is not some wild west caricature of unregulated markets. To contrast it with socialism in broad unequivocal terms sets up a false dichotomy. Criticizing a system from simple theoretical definitions rather than empirical study is no way to advance anything. So for the purposes of this socio-capitalism thread, all societies have been in between the two, and they always will be because governments are better described along a spectrum rather than two discrete categories.

This is quite incorrect, actually. When a billionare's assets are reported on the "richest people on earth" lists, they count all assets, not just liquid. Though it might say that Bill Gates has 42 billion dollars (quick Google search gave me that number, and whether or not it's accurate is not the point), he does not have access to all of that. It is tied up in stocks, company assets, personal assets (his house, cars, private jets, thousands of computers I'm sure, etc) and personal investments as well. Billionaires , like most business people, are always looking for more ways to make more money, and they won't make much from the interest in a savings account, and even if Gates did have 42 billion dollars in a savings account, the bank itself would be investing that money itself. That's where interest comes from; the bank pays you for the permission to invest your money in things. Of course the more money you invest, the more interest they give you because the more money they have to invest, and of course the more money they will (hopefully) make. This is why if you are going to take more than a couple thousand dollars out of the bank at a time you have to let the bank know beforehand so they can withdraw enough from their own investments to give it to you. It is still your money, and they have to give it to you when you request it, but like anything involving money and electronics it takes time. So money never really "leaves" the economy, unless you take all of your money and toss it into a mattress the old fashioned way.

Capice?


Also, I am interested in the OP's opinion on http://robinhoodtax.ca/ [/quote]

my opinion is that such a tax already technically exists. rich people already do pay taxes, about 0.5 percent of their income as it is. sometimes more, sometimes less. at the same time, let me explain again, people living in the middle and lower classes pay up to a third of their annual income in taxes. the solution to such a problem? Everybody pays the same fraction. period.

now, high taxes on the common classes are not necessarily a bad thing, it depends on where those taxes go. in the case of the United States (which, might i add, just added an extension onto Bush's tax cuts for the wealthy), the taxpayer's money is being put into "bailouts" for businesses being run by horribly irresponsible people. such actions not only exacerbate the problem by encouraging more irresponsible behavior, but by increasing taxes by a much larger fraction for the common classes, while it makes almost no difference to the wealthy.

let's look a GOOD example of a socialist country; sweden. Citizens in sweden pay around half of their annual income to the government, but that money goes directly toward social programs for the poor, education, and other causes that directly benefit the people. people living in poverty get that little extra they need to get by, and the wealthy only have a little bit more than they need. Sweden is a perfect example of responsible tax revenue by the government. if one pays taxes in America, they have no idea where their money is going, but it can be easy to guess when you look at how much money the American government spends on military expansion (in addition to research on more efficient ways to kill people), how much money also goes to OPEC, and to the economies of other countries that America considers "strategic allies"

in conclusion, a "Robin Hood tax" is theoretically a good idea, but only in a country where there are not multiple government-supported private interests, especially private interests in other countries. again, i suggest a solution where everybody pays the same fraction of their annual income in taxes. everybody.

If we go by the Athenian precedent, democracy is built upon slavery. I don't think this is necessarily a cheeky point either.