Why does capitalism bring out the best and the worst?

[wmw999 2,541]

It sure seems to sometimes. Just look at all of the financial and other products that are really just designed to separate people from their money. When does it go from being "providing goods and services in exchange for money" to "figuring out how to get people to buy something so you can get money."

There's a difference. Sometimes the difference is in the customer -- let's leave outliers off (like the really stupid who can't buy a nickel pencil without getting ripped off, and the really sophisticated for whom junk mortgage derivatives were a good bet).

You can't legislate good intentions (it's ineffective), and you can't just punish wrongdoers (it's too expensive, both in terms of fines/incarceration, and to the victims).

So how to keep most people and businesses honest? How do we avoid over-rewarding the doubtfully honest?

It's an honest question -- I don't have some agenda in mind here.

Wendy P.

There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

[weekender 0]

what are all of the financial products that are designed to separate people from their money? you seem to imply there are many and the intent is blatant fraud. I would prefer if you could list at least a few since you imply so many.

you dont really have to answer. i dont agree with your wording and implication that its common in finance to design fraud. not looking for a fight just wanted to state my disagreement. you seem like a good person so sorry for sounding douchy.

(edited to add last paragraph)

"The point is, I'm weird, but I never felt weird."
John Frusciante

[lawrocket 3]

Because capitalism is the form of economy that allows an individual to be himself or herself. It brings out the best and worst IN people. It brings out the best and worst OF people. Individuals being individuals. People being people.

My wife is hotter than your wife.

[DaVinci 0]

Quote

So how to keep most people and businesses honest? How do we avoid over-rewarding the doubtfully honest?

It is a great question..... But ask yourself this first. Is it your job to make sure I do not act stupidly? That is a major question in itself.

If you think a true free market economy then it is caveat emptor. And the crooks will get run out of the town on rails, or they will shut down because people will not buy their products. Yes, some will get taken in the process. But making mistakes is one of the best ways to learn.

If you think that "someone" be it govt, your parents, your buddy... Whomever should be responsible for your choices.... At what point does that stop? If I give you power of attorney over my investments, at what point do you quit getting to say what I do? If we leave that power to the govt, at what point do they go too far? Imagine a world where the Govt decides the only "fair" way to make sure no one gets taken advantage of is to take over the whole thing and run your investments for you.

Yes, there is a middle ground. But given the choice between the two I'll take #1. Correct me if I am wrong, but I'd bet you would as well.

Quote

There's a difference. Sometimes the difference is in the customer

I'd say that most times the difference is in the customer. I'd venture that you have not fallen prey to any pyramid schemes to sell things.

So the solution? Education. And yes, sometimes that education is costly. And not just for the people making the choices. Until very recently I had to help support my parents because of their terrible money habits.

But education on how to handle money will go a long way. I'd rather see some money spent in schools to make sure people understand basic finance than money spent regulating adults.

And to answer your question.... "Why does capitalism bring out the best and the worst?"

I think almost any economic model in application will do the same. Some people want more and are willing to work, honestly or not, to get it.

[SkyDekker 1,465]

Quote

If you think a true free market economy then it is caveat emptor. And the crooks will get run out of the town on rails, or they will shut down because people will not buy their products. Yes, some will get taken in the process. But making mistakes is one of the best ways to learn.

This sounds wonderful in theory. In practice it simply doesn't work that way.

In practice the wealthier you get, the more you can alter the system in your favour. Specially when there is absolutely no regulation.

[Darius11 12]

I think what you are referring to is the dishonesty that exists in the financial sector. Where when you are investing in something you are not told the risk, the rules seem to change when you sign, but only after.

The mortgage crisis comes to mind, how many good smart people were lead to believe they could afford a mortgage, I think the financial adviser or whomever is selling the product needs to go to jail if they lied, or withheld the truth. If you get to call your self a banker, or a financial planer that should come with the assumption that you know about this product and you are the person someone without knowledge should listen to. I don’t think I can blame a person too much for thinking that the bankers would not lie to them. We do this all the time if you mechanic lies to you you can take them to court, if your doctor gives you the wrong diagnosis and with ill intent so he can rob you he would go to jail. Yet we don’t do that for banker or financial planers.
I believe in the UK they have moved a step closer to what we all need which to is to make lying to people illegal when conducting business.

I always used to think false advertising is illegal but apparently its not all one has to do is watch late night commercials to see if it is illegal we don;t do anything about it.

Better laws, and a regulatory department that is well paid but not funded by anyone is needed.


I will also stand by what I have always said when it comes to capitalism. The people who think it is the answer to every type of business are like extremists they lack logic.
I agree with them that it is a great system for the majority of business models, however it will always fail when profit is the motive on a service or product where the major factor is integrity, and honesty.
When pharmaceutical, jails, News, Health care, law, etc are motivated by profit they are almost always bad for general public.

I'd rather be hated for who I am, than loved for who I am not." - Kurt Cobain

[rushmc 23]

SkyDekker

Quote

If you think a true free market economy then it is caveat emptor. And the crooks will get run out of the town on rails, or they will shut down because people will not buy their products. Yes, some will get taken in the process. But making mistakes is one of the best ways to learn.

This sounds wonderful in theory. In practice it simply doesn't work that way.

In practice the wealthier you get, the more you can alter the system in your favour. Specially when there is absolutely no regulation.

Which is ecactly what socialist leaders do
And they are harder to make answer for it

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[SkyDekker 1,465]

rushmc

***

Quote

If you think a true free market economy then it is caveat emptor. And the crooks will get run out of the town on rails, or they will shut down because people will not buy their products. Yes, some will get taken in the process. But making mistakes is one of the best ways to learn.

This sounds wonderful in theory. In practice it simply doesn't work that way.

In practice the wealthier you get, the more you can alter the system in your favour. Specially when there is absolutely no regulation.

Which is ecactly what socialist leaders do
And they are harder to make answer for it

Thank you Captain Obvious, but this thread wasn't talking about the merits and disadvantages of socialism.

Socialism and capitalism fail for the same reason. Greed.

[rushmc 23]

SkyDekker

******

Quote

If you think a true free market economy then it is caveat emptor. And the crooks will get run out of the town on rails, or they will shut down because people will not buy their products. Yes, some will get taken in the process. But making mistakes is one of the best ways to learn.

This sounds wonderful in theory. In practice it simply doesn't work that way.

In practice the wealthier you get, the more you can alter the system in your favour. Specially when there is absolutely no regulation.

Which is ecactly what socialist leaders do
And they are harder to make answer for it

Thank you Captain Obvious, but this thread wasn't talking about the merits and disadvantages of socialism.

Socialism and capitalism fail for the same reason. Greed.

Of course there failures within capitalism
But that does not mean capitalism fails

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[DaVinci 0]

SkyDekker

This sounds wonderful in theory. In practice it simply doesn't work that way.

In practice the wealthier you get, the more you can alter the system in your favour. Specially when there is absolutely no regulation.

That is why I said, "I think almost any economic model in application will do the same. Some people want more and are willing to work, honestly or not, to get it. "

It does not matter the system. From Capitalism to Communism you have those in power with more.

If I had to choose, I think Capitalism provides better opportunity to move up.

[Darius11 12]

I don’t think it’s black and white,

Your making a car great capitalism is the way to go, your making a TV same thing? Profit is a great motivator

Now you’re reporting news? You are providing Health care? Profit is counterproductive to what gives you good values, Care and honesty.
If drug companies are motivated by a profit and profit only imagine the nightmare scenarios that can occur.

I'd rather be hated for who I am, than loved for who I am not." - Kurt Cobain

[Lefty 0]

Darius11

Now you’re reporting news? You are providing Health care? Profit is counterproductive to what gives you good values, Care and honesty.

And who would provide the news and health care with care and honesty as the principle motivation?

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[airdvr 210]

https://www.youtube.com/watch?v=MQ0-cDKMS5M

It may not be prefect but tell me about a better way.

Please don't dent the planet.

Destinations by Roxanne

[Darius11 12]

Lefty

***Now you’re reporting news? You are providing Health care? Profit is counterproductive to what gives you good values, Care and honesty.

And who would provide the news and health care with care and honesty as the principle motivation?


You pay the people and you pay them well however you take the profit model out of it.
Reporters would get paid becaus people want news, however you remove advertising, when you remove advertising then your no longer worried about who is watching and how many people clikc your link.
There is reason the whole world finds out Milly Cyrus is shaking her ass because people click on the link so that website or news organization and show how many click s and get moor money from advertising.
As for Health care same thing, the doctors and scientist all get paid for there work however you don’t make a business of selling pills, You need to take the corporate aspect out, they do it all the time in other countries.

Same thing for privet jails: You pay police but yo shouldn't set up a system where the more people you arrest the more money Police Inc. makes.

Get it its the system and the mechanism that they work in which is a the issue and is counterproductive.
Out goal shouldn't be to prescribed the most amount of pills, or arrest the most people it should be to help people and arrest people who need to be arrested. When you add profit motive to these sort of things its begging to be corrupted.

I'd rather be hated for who I am, than loved for who I am not." - Kurt Cobain

[Lefty 0]

Who is this "you" you're referring to who will pay the reporters? Where does "you" get the money to pay them?

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[Lefty 0]

airdvr

https://www.youtube.com/watch?v=MQ0-cDKMS5M

It may not be prefect but tell me about a better way.

Not sure if you meant to reply to me, but I agree with Friedman's points. In fact, I figured I'd be posting that very video sooner or later in this thread. It's such a nice catchall refutation of any "greeeeeeeeeed" whining.

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[ibx 2]

Quote

Who is this "you" you're referring to who will pay the reporters? Where does "you" get the money to pay them?

In Germany we have the so called "Öffentliche Rechtliche Medien" every household has to pay about 17 EUR a month(this is about 7billion EUR a year). This money guaranties ad-less and unbiased news on TV and radio. It's taken very seriously, the Aid of minister was fired because tried to stop the airing of a documentary on a "öffentlich rechtliche" channel where his minister was not portrayed optimally.

Obviously there are some problems with this system. But we don't have the partisan bullshit media that the US has.

[Bertt 0]

C'mon, you're a smart guy. Do we have to recite every Ponzi scheme since Ponzi himself, every HealthSouth, every Enron, every MF Global? Did the economy go bust in 2008 because a few individuals asked for loans they didn't intend to pay back and left the poor, well-meaning mortgage originators holding the bag?
Wendy asked for the best and the worst. There's plenty of both, but there's enough intentional fraud and dishonesty that it's an ongoing concern. Not wanting to put words in Wendy's mouth, but I took her question to be a way of asking why some people take the high road and some take the low road from the same starting point? Capitalism certainly gives people more freedom to do as much as they can in either direction. There's more to it than that and it's something I'm sure a lot of people would like to get a handle on.

You don't have to outrun the bear.

[Lefty 0]

ibx

Obviously there are some problems with this system. But we don't have the partisan bullshit media that the US has.

Bullshit though our media may be, you'll forgive me if I'm in no rush to have more money taken from me rather than voluntarily given. Especially if it's going to the same batch of reporters who prove their bias to one side or the other day in and day out.

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[weekender 0]

Bertt

C'mon, you're a smart guy. Do we have to recite every Ponzi scheme since Ponzi himself, every HealthSouth, every Enron, every MF Global? Did the economy go bust in 2008 because a few individuals asked for loans they didn't intend to pay back and left the poor, well-meaning mortgage originators holding the bag?
Wendy asked for the best and the worst. There's plenty of both, but there's enough intentional fraud and dishonesty that it's an ongoing concern. Not wanting to put words in Wendy's mouth, but I took her question to be a way of asking why some people take the high road and some take the low road from the same starting point? Capitalism certainly gives people more freedom to do as much as they can in either direction. There's more to it than that and it's something I'm sure a lot of people would like to get a handle on.

my point wasnt that there isnt fraud in finance.

There are trillions of securities transactions a day. the overwhelming majority are not fraudulent. Mortgage securities were not created to defraud people. Enron didnt create financial instruments to defraud. They committed fraud with real time electric trading profits. Corzine didnt create fraudulent securities to defraud people either, he committed plan old bank fraud. So did health south.

Ponzi is the one example you gave of a guy who created a fraudulent product for the sole purpose of committing fraud. It's a obvious crime and still rare considering how many trillion non fraudulent transactions occur daily.

my point wasnt that there isnt fraud. every industry has criminals. i dont agree with a broad statement that implies the legitimate financial industry creates fraudulent products for the sole purpose of separating people from their money. the products have legitimate purposes and sometimes are sold using fraudulent means. there is a difference to me. i hope that is more clear.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[GeorgiaDon 379]

Quote

So how to keep most people and businesses honest?

I have no doubt that capitalism is vastly more efficient than any centralized system (such as communism) at responding to markets to provide goods and services. I also believe that most people want to be honest in their dealings with customers and the communities they operate in. Obviously flat-out fraud/theft (failure to deliver promised goods or services after they have been paid for) must be punished. Beyond that, though, I think there are 2 things that need to be considered:
1. Regulations that establish a minimum standard of conduct. The point here is that we don't want people who want to be honest/ethical to be forced out of business, or to be forced to behave unethically, in order to be able to compete. For example, if we didn't have regulations regarding pollution, someone would cut costs by dumping their waste in the river, and everyone else would have to follow suit or find some other way to cut costs, such as employee pay or the quality of raw materials used to make their product.
2. Regulations to ensure consumers actually have access to enough information to make an informed decision. While there is always going to be a conflict between the need to protect propriety information and the need for transparency, there is no way to be an informed customer if the information you need is concealed. This is a big problem with medical costs, for example, where everything is either a "trade secret" or is (perhaps deliberately) made so complex that there is no way for a patient to figure out what the costs will be at the end of the day.

When it comes to the "doubtfully honest", I think that being an informed consumer is key. If you're planning to spend a lot of money on something, get lots of references. Talk to people who have dealt with that contractor/car dealership/whatever. Check with the Better Business Bureau. These days there are also lots of online resources. Just beware of bad reviews posted by business competitors.

Completely unregulated capitalism, especially in a global market, provides too many incentives to cut corners. If you are polluting in China but selling in the US, it isn't realistic to expect US customers to find out that you are a bad citizen and then refuse to buy from you, so simple market forces (such as "the marketplace will reward good actors and punish bad ones") doesn't always work. On the other hand completely centralized economies fail spectacularly, partly because no one person or agency can plan for everything (for example, toilet paper shortages in Russia in the 70s), and partly because no personal reward for effort means no-one will make the effort.

One more thing, "socialism" is not the same as "communism", which it seems is not obvious to some of our "conservative" colleagues in Speaker's Corner. Every modern society has some element of socialism, because there are some services that need to be provided but are inherently not profitable, or that we don't want to be driven entirely by a profit motive. Hence, the truism that the military is the biggest socialist program in the US.

Don

_____________________________________
Tolerance is the cost we must pay for our adventure in liberty. (Dworkin, 1996)
“Education is not filling a bucket, but lighting a fire.” (Yeats)

[Rick 67]

ibx

Quote

Who is this "you" you're referring to who will pay the reporters? Where does "you" get the money to pay them?

In Germany we have the so called "Öffentliche Rechtliche Medien" every household has to pay about 17 EUR a month(this is about 7billion EUR a year). This money guaranties ad-less and unbiased news on TV and radio. It's taken very seriously, the Aid of minister was fired because tried to stop the airing of a documentary on a "öffentlich rechtliche" channel where his minister was not portrayed optimally.

Obviously there are some problems with this system. But we don't have the partisan bullshit media that the US has.

That sounds like a good system. I would love to find a news outlet without a political or corporate agenda here in the U.S.. Watching the local Fox news in the morning and they are reporting on what happened on American Idol. WTF seriously? That's not news that's advertising.

You can't be drunk all day if you don't start early!

[lawrocket 3]

Darius11

I think what you are referring to is the dishonesty that exists in the financial sector. Where when you are investing in something you are not told the risk, the rules seem to change when you sign, but only after.

Right. Welcome to real life. But note the rules do change all the time. Take, for example, a person who has worked, paid taxes, employed dozens and provided health insurance for them. Their taxes get raised, they face new regulations that make them change their business or even put them out of business.

Rule changes come from government and not a free market.

[Reply]The mortgage crisis comes to mind, how many good smart people were lead to believe they could afford a mortgage, I think the financial adviser or whomever is selling the product needs to go to jail if they lied, or withheld the truth.

[ibx 2]

Quote

Bullshit though our media may be, you'll forgive me if I'm in no rush to have more money taken from me rather than voluntarily given. Especially if it's going to the same batch of reporters who prove their bias to one side or the other day in and day out.

I know where you are coming from, I am also critical of the system because you not only pay for news but also for entertainment and for example the soccer world cup to be freely available. The details of the whole setup would require a super long explanation.

The news is not biased, that is the whole idea of "öffentlich rechtlich". It guaranties unbiased information which is essential for a functioning democracy.
The Tageschau, the 8 o' clock news is the most watched program on German TV. I think this is a really good system and I also think citizens should have to pay their democracy tax.

I personally don't think you would pay a damn cent for unbiased news if you are not forced to...

[ibx 2]

Quote

That sounds like a good system. I would love to find a news outlet without a political or corporate agenda here in the U.S.. Watching the local Fox news in the morning and they are reporting on what happened on American Idol. WTF seriously? That's not news that's advertising.

I've heard good things about http://www.democracynow.org/. I haven't really compared it to other single sources since I use news aggregators with lots of sources...