Commodity price chaos

[Little John]

Let me be as clear about this as it is possible for me to be.

There is no such thing as the "free market". It's just a human constructed concept that exists in human imaginations like any other concept.

Most importantly, economics is not an analogue of Darwinism, except in terms of its most superficial operation and over the very shortest of terms and the very longest.

If one accepts the above, then arguing about how to make the so-called free-market more "free" is an abject nonsense from the off.

[biffvernon]

And remember that Hayek was very much in favour of central government regulation when it came to things like pollution, where he recognised the inevitable market failure. The neo-liberal right tend to skip that section of the Road to Serfdom.

[another_exlurker]

Let me be as clear about this as it is possible for me to be.

There is no such thing as the "free market". It's just a human constructed concept that exists in human imaginations like any other concept.

Most importantly, economics is not an analogue of Darwinism, except in terms of its most superficial operation and over the very shortest of terms and the very longest.

If one accepts the above, then arguing about how to make the so-called free-market more "free" is an abject nonsense from the off.

You clearly don't understand what a free market actually is. Don't worry, the majority of people don't really understand what it means either.

A free market is one in which prices for commodities, goods and services are set by the seller and the buyer. No government subsidies, no monopolies, no interference by any one, at all. The prices reach their own equilibrium and fluctuate accordingly. It has very little to do with capitalism, and has been advocated by market anarchists, market socialists, and some proponents of cooperatives and profit sharing (such as myself. I fit into 3 of those categories, see if you can figure out which ones).

Profit, however, isn't a necessary part of a free market and neither is private ownership, corporations nor fiat currency. If anything, the truest form of free market economy is probably a barter economy, as both seller and buyer reach a mutually acceptable "price" that benefits them both.

The Theory of Evolution and Darwin's Origin of the Species, has nothing to do with politics, economics or sociology. You're quite right about that. Anyone who uses it to support their political/economic/social hypotheses are usually to be found standing on very thin (intellectual, moral and ethical) ice.

[another_exlurker]

And remember that Hayek was very much in favour of central government regulation when it came to things like pollution, where he recognised the inevitable market failure. The neo-liberal right tend to skip that section of the Road to Serfdom.

Exactly, a free market is about pricing, not about giving corporations free rein to do whatever the hell they like in the pursuit of profit.

The neo-liberals have corrupted the meaning of free markets to mean zero regulation of any kind. As that has been the dominant economic theory for the last 30 years and, as that's all we've heard, it's no wonder the majority of people equate free markets with corporate greed.

[Little John]

Let me be as clear about this as it is possible for me to be.

There is no such thing as the "free market". It's just a human constructed concept that exists in human imaginations like any other concept.

Most importantly, economics is not an analogue of Darwinism, except in terms of its most superficial operation and over the very shortest of terms and the very longest.

If one accepts the above, then arguing about how to make the so-called free-market more "free" is an abject nonsense from the off.

You clearly don't understand what a free market actually is. Don't worry, the majority of people don't really understand what it means either.

A free market is one in which prices for commodities, goods and services are set by the seller and the buyer. No government subsidies, no monopolies, no interference by any one, at all. The prices reach their own equilibrium and fluctuate accordingly. It has very little to do with capitalism, and has been advocated by market anarchists, market socialists, and some proponents of cooperatives and profit sharing (such as myself. I fit into 3 of those categories, see if you can figure out which ones).

Profit, however, isn't a necessary part of a free market and neither is private ownership, corporations nor fiat currency. If anything, the truest form of free market economy is probably a barter economy, as both seller and buyer reach a mutually acceptable "price" that benefits them both.

The Theory of Evolution and Darwin's Origin of the Species, has nothing to do with politics, economics or sociology. You're quite right about that. Anyone who uses it to support their political/economic/social hypotheses are usually to be found standing on very thin (intellectual, moral and ethical) ice.

And you fail to understand that an underlying assumption of Darwinian selection of best fittedness does underlie your model of economic activity. That is to say, you clearly believe that just so long as fully liberated economic agents are left alone by the big bad state, then all prices will self regulate by virtue of a simplistic process of supply and demand forces acting unfettered between suppliers and demanders.

All of which is, unfortunately, to completely ignore systematic asynchronies in things like physical market access, access to market information and, most importantly of all, asycronies in pure naked brutal power to impose one's agenda irrespective of any other market considerations. Ironically and paradoxically, then, the only way something that even resembles a free market can be maintained over any period of time or space is if it is heavily regulated in order to minimise an excessive build up of such asychronies. In other words, by significantly curtailing the freedom of economic agents to act. Even then, if the last century or so has shown anything, it has shown that such asychronies always return and always end up f***ing over the majority (on the wrong side of that asychrony) to the benefit of a tiny minority (on the right side of it).

So long as asychronies exists (and they always exist) there is no such thing as a free market. Even if you start with no asychronies whatsoever, by virtue of random chance alone systemic asychronies will inevitably arise sooner or later and, as soon as they do, it's game over. This, in turn, would require agents, who have otherwise built up monopolistic and rigged positions in markets, politely and self-sacrificially step aside when confronted with more efficient competitors who would otherwise better serve the market.

Of, course, they'd be fools to do so and so this unsurprisingly never happen. Or, at least, not willingly. And so, in due course, the extent to which certain market participants succeed (or not) in the market place becomes ever less due to free-market efficiencies and becomes ever more due to which particular vagina a given economic agent happens to exit from at birth. We may again, at this point, paradoxically note that unregulated free markets will always tend to lead to non-free ones by their very virtue of being free.

The only way that such asychronies could conceivably self-regulate out of the economic equation would be for those agents who are systemically disadvantaged by them to act accordingly to remove them. In other words, to use whatever means at their disposal to remove them. The full and unfettered Darwinian solution in other words. You might be interested to know there are one or two real world examples of this truly liberated, Ayn-Randian model in action. That is to say, where there is little or no state intervention and where economic agents are truly free to participate in the market using whatever tools to promote their own self interest as they see fit and most appropriate. The most notable of these is a part of the world known as Somalia. You might be well advised to visit there. I think you may find the experience rather illuminating.

Or, you could just stop deluding yourself that, in the absence of the most simplistic, and transparent of economic circumstances, markets can ever be anything other than rigged by virtue of what markets are (unless, that is, you are prepared to live in a violently nihilistic world of endless conflict).

In which case it simply comes down to deciding who is to do the rigging and who benefits.

[another_exlurker]

What you are referring to is social Darwinism, which is a highly biased and abused interpretation of Darwin's work, which was itself derived from an even greater misinterpretation/misunderstanding of Herbert Spencer's work.

When Darwin first published The Origin of the Species, it was pounced upon by the emerging industrialists and bankers as a way of challenging hereditary privilege and furthering their own aims, namely undermining what remained of aristocratic power and transferring it to themselves.

Darwin’s theory of Natural Selection was seized upon as scientific proof that competition was nature’s means of improving the world. This became known as social Darwinism. The problem here, by applying Natural Selection to human economic relations, is that the eventual goal of a capitalist is to create a monopoly, at which point competition and evolution cease. It completely ignores the subjective choices of an individual when engaging in market transactions and sees humans as mindless automatons.

A pure free market economy should be resistant to monopoly and is if it is based on workers' cooperatives, rather than private ownership (see Jaroslav Vanek). This works best on a local level, as everyone in the area has access to the market and the market supplies the needs of the local buyers where every participant in the market has equal access to the same information.

Now then...you seem to have, in your blinkered response, failed to notice that I said a true free market is free from any kind of interference be it government, price-setting monopoly, commodity speculation or other authority/player. It was the second sentence, in the second paragraph. Maybe I didn't word it precisely enough for you to comprehend fully.

As cooperation increases, competition deceases. Humans are naturally cooperative (drop something in front of a baby/small child and they will automatically pick it up and hand it to you). Competition is a learned behavioural pattern. In other words, it is a product of socialisation. In a non-competitive environment/society that promotes cooperation, competition doesn't exist and vice-verse.

You seem to have no knowledge of the subjective theory of value and are doing what David Ricardo believed most individuals do, ie that individual people obtain different levels of utility from a service or good, but do not effectively connect those with market prices, seeing them as separately derived from the quantity of labour input and other production factors. Thus, they are, or can be, exploited by profit makers.

What we are seeing today, I believe, is the beginning of a paradigm shift away from the current exploitative controlled market towards a genuine socialist free market.

[Little John]

To put it bluntly, your position is the same as that taken by all proponents of a dying system.That is to say, you cling onto it by trying to argue that the problem is that it is just not "pure" enough. If only those pesky humans would fully embrace it, all would be well.

Okay, I'm going to make another attempt with this and will do so by way of a little parable of sorts.

Once upon a time there was an island and on this island lived a population of doves. The dove economy was a relatively simple one consisting of just a handful of goods and services. Doves, being universally inclined to cooperativeness, whenever they came to exchange their goods or services, would always do so equitably. That is to say, all exchanges would be equal. No one would profit at the expense of another. They would simply exchange something they didn't need for a thing they did. Consequently, there was no need for a government to oversee the dove island civilisation, since there was nothing that needed governing. The economic system was fully self-regulating and no-one ever found themselves disadvantaged or in severe need, or at least no more than anyone else.

Then, one day, a pair of hawks landed on the island. These hawks were quite unlike the doves in their temperament. Hawks would always seek to maximise profit by whatever means their disposal. As such they were not above lying, cheating or even a bit of brute force if they could get away with it in the pursuit of their goals. As you might imagine, given the doves had never encountered this kind of economic behaviour, they were, at least initially, significantly disadvantaged in the market place. Pretty, soon, the hawks had taken ownership of vast portions of the resources of this island. And this is where the doves finally began to adapt.

These doves were, as it happens, very adaptable and so, over time in response to the hawk behaviour, they began to adopt hawk-like behaviour themselves. Not because they were inherently hawk-like. But because if they didn't, they would be economically disadvantaged. Also, in order to mitigate their need to become unacceptably hawk-like, the doves pushed as hard as they could for some kind of overarching governance of their island such that the worst excesses of the hawk's behaviour could be curtailed. This, in turn, meant the doves no longer had to be quite as hawk-like in response. And so, an uneasy truce between the hawk minority and the dove majority ensued. Meanwhile, though, the hawks used every dirty trick at their disposal to ensure as many hawks as possible were ensconced in positions of power inside the government in order to promote their hawkish agenda. Does all of the above sound familiar? It should.....

It's the world you live in.

The essential point I am trying to get you to address is that it doesn’t matter if the majority are cooperative by nature. If the market is allowed to be free and unfettered, it only needs one or two psychopaths to F--k it up for the rest of us and thus force the rest of us to act a little bit psychopathic ourselves just in order to economically survive.

The only way to put a stop to the above is to finally stop pretending and, instead, transparently and honestly rig the market from the off in favour of the majority. That way, the power of the psychopaths is always going to be severely curtailed. That's not to suggest, of course, that they can't still sometimes rise to the top and create havoc. That's always a possibility. What I am suggesting, however, is that in a free, unregulated and unfettered market it is utterly inevitable.

[Mr. Fox]

There are no Doves. There are no Hawks.

Only Dawks. Hardwired.

[Little John]

There are no Doves. There are no Hawks.

Only Dawks. Hardwired.

I am aware of this. My academic background is in psychology, specialising in the evolutionary basis of behaviour. I was merely drawing a schematic to illustrate an essential point. Nevertheless, there is a small minority of people who are inherently excessively hawkish relative to the majority and so the schematic stands. This has even been scientifically verified in a number of studies involving psychometric tests of high ranking members of corporations and other powerful bodies/institutions. The upshot being that if you are poor and a psychopath you will likely end up in prison. But, if you are rich and a psychopath you will likely end up running a multinational corporation.

[Little John]

So, will you address the points raised in my previous post Another-Exlurker? Not least of which is:

.....it doesn’t matter if the majority are cooperative by nature. If the market is allowed to be free and unfettered, it only needs one or two psychopaths to **** it up for the rest of us and thus force the rest of us to act a little bit psychopathic ourselves just in order to economically survive.....

.....The only way to put a stop to the above is to finally stop pretending and, instead, transparently and honestly rig the market from the off in favour of the majority. That way, the power of the psychopaths is always going to be severely curtailed.....

Though addressing the other points as well would be nice.

[another_exlurker]

To put it bluntly, your position is the same as that taken by all proponents of a dying system.That is to say, you cling onto it by trying to argue that the problem is that it is just not "pure" enough. If only those pesky humans would fully embrace it, all would be well.

I promise to respond fully if you answer my following question about your statement about me.

How did you arrive at that conclusion about me? Please feel free to quote me in support of your answer.

[UndercoverElephant]

So, will you address the points raised in my previous post Another-Exlurker? Not least of which is:

.....it doesn’t matter if the majority are cooperative by nature. If the market is allowed to be free and unfettered, it only needs one or two psychopaths to **** it up for the rest of us and thus force the rest of us to act a little bit psychopathic ourselves just in order to economically survive.....

.....The only way to put a stop to the above is to finally stop pretending and, instead, transparently and honestly rig the market from the off in favour of the majority. That way, the power of the psychopaths is always going to be severely curtailed.....

Though addressing the other points as well would be nice.

But Steve...isn't it the case that a lot of the problems at the moment are the result of a lack of a free market? The stock markets, foreign exchange markets and precious metals markets are all totally rigged by the big players in their own interests. The problem with things like the LIBOR scandal, and the on-going rigging of the gold market, has nothing to do with the operation of a free market, but the fact that there are big players out there who are, apparently, able to break the rules of free markets, with impunity. So they get together to rig interest rates so that they benefit from it (at the expense of all the little people operating in the same market), and they "short" gold and then get together to dump "paper gold" on the market, thus divorcing the gold market most people are actually using from the real trade in actual, physical gold. The privatisation of essential services like water and transport is no different - what has actually happened is not an increase in free competition but the creation of private monopolies and cartels designed to screw people who either have no choice about who to buy from, or are bombarded with hundreds of opaque and incomprehensible "deals" to the extent that they give up trying to work out what is the best deal for them and just accept whatever they are given.

You are right that there are psychopaths in control here, but the last thing they want is a genuinely free market. What they want is a situation where they can rig the market in their favour, establish a monopoly or use any other dishonest tactic they can think of to use their power to abuse people with no power.

I agree with you that there are certain cases where a free market is not the best solution - obvious examples being the national health service and the railways, neither of which should be expected to be profit-making enterprises and both of which should be run as a public service, in support of society in general (including the economy in general). But there are plenty of other examples where I see no problem in principle implementing a genuinely free market, provided regulations are in place to make sure the market remains free and is not open to abuse by the most powerful players in that market.

The problem we have at the moment (one of the many) is that those powerful players apparently have more power than the regulators or politicians, and as a result we live in an effective plutocracy/kleptocracy rather than the meritocracy/democracy we're supposed to believe it is.

Edit:

I should have pointed out that things like health, education and transport can be run as profit-making free market enterprises, but only if you've got no social conscience whatsoever. This is, of course, exactly how the US health system works - those who are too poor to afford health insurance end up in a position where they are simply denied medical care, and they die early of preventable/treatable illnesses which would be treated in the UK. Every now and then somebody on the right wing betrays their true thoughts on this, and that is that the poor deserve to be poor, and that it is no great loss to society if they die young (conveniently forgetting that we actually live in a kleptocracy with ever diminishing social mobility). If they could get away with it, those on the political right would treat education and transport in the same way - people who can afford private education would pay for it, and the poor would be reduced a pre-20th-century existence where they start work before the age of 10 and remain illiterate, and likewise with transport - anyone who can't afford to pay for unsubsidised public transport simply doesn't go anywhere. This is not only entirely lacking in social conscience, but also very short-sighted in terms of the general good (it is surely in the interest of the nation as a whole that everybody has access to a decent education, whether or not they can afford it, and that everybody can afford to use public transport).

My point is that the none of problems described here are caused by the operation of a genuinely free market. They are either caused by supposedly free markets being nothing of the sort, or the implementation of a free market for essential services in situations where a large number of people are completely priced out of such a market.

[Little John]

I don't disagree the problems are due to a rigged market UE. I'm not even suggesting that a free-market, if it were possible to sustain, wouldn't work. What I am suggesting is that a free market is inherently impossible to sustain in any economy of any significant level of complexity because, even if you start with a free market, asynchronies soon inevitably arise (if only by random chance) and, as soon as they do, the only way they do not become entrenched is if the ones on the winning side of those asynchronies "play the free market game" and allow themselves to be out-competed. Normal people are unlikely to do that. Psychopaths will definitely not do it. Thus, free markets will, ironically, always tend to result in rigged markets.

The only way the above does not become the case is with very simple economies with a small and transparent number of economic agents. Pre-civilisational, hunter-gatherer tribal groups in other words. Even then, psychos can still rise to the top and take the piss out of everyone else. They are just more likely to get their throats cut in the middle of the night by their neighbours if they do though. We may describe this in terms of an organic self-regulation of such primitive market places. Having said that, even in such an environment, groups will still F--k each other over, given half the chance. Given all of the above, I am simply suggesting it's time to stop pretending complex markets can ever end up as anything but rigged. In which case, it simply comes down to deciding who is to do the rigging and who benefits.

I'm saying the central irony of complex civilisation is that it requires limitations to immediate liberties to optimise long-term liberty for the majority and, conversely, few limitations on liberties eventually makes slaves of the majority. The Neo-Cons know this all too well. Which is why they have firmly embedded a libertarian narrative into the promotion of their ideology because it serves them well at the expense of the majority. The old methods usually involved the point of a sword or the barrel of a gun. The trouble with those, though, is that the suppression of the majority is overt and so the risk of overt rebellion is always not far away. Though, this was previously dealt with by sticking a policemen in everyone's head and calling it GOD. With secular "libertarianism", on the other hand, everyone is erroneously convinced that they are "free" and so must shoulder personal responsibility for finding themselves on the wrong side of those [systemic] asychronies I mentioned. Which is, of course, a very clever piece of ideological bullshit. Indeed, I think a certain Mr Marx might have called it the epitomé of "false consciousness".

So firmly embedded is this ideological mind-set in our broader culture that even many of those on the left (myself included until recently) are unable to conceive of opposition to the current state of affairs except within the framework of a libertarian agenda. Which basically hobbles the left from the start. We don't need more liberty, we need a dictatorship of the proletariat. Or, a dictatorship on behalf of the proletariat (and yes I am acutely aware of the significant dangers inherent in that).

And here's the biggest irony of all; I say all of the above whilst being a libertarian by temperament myself.

[UndercoverElephant]

I don't disagree the problems are due to a rigged market UE. I'm not even suggesting that a free-market, if it were possible to sustain, wouldn't work. What I am suggesting is that a free market is inherently impossible to sustain in any economy of any significant level of complexity because, even if you start with a free market, asynchronies soon inevitably arise (if only by random chance) and, as soon as they do, the only way they do not become entrenched is if the ones on the winning side of those asynchronies "play the free market game" and allow themselves to be out-competed. Normal people are unlikely to do that. Psychopaths will definitely not do it. Thus, free markets will, ironically, always tend to result in rigged markets.

But this is a point about politics rather than economics. You are saying (I think) you don't believe the regulators/politicians will ever be able to keep a free market system honest. And you may well be right.

I'm saying the central irony of complex civilisation is that it requires limitations to immediate liberties to optimise long-term liberty for the majority and, conversely, few limitations on liberties eventually makes slaves of the majority.

Well...if you are saying that large, complex civilisations will never work because human psychology is incompatible with them then you know I'm not going to argue with you!

[Mr. Fox]

even if you start with a free market, asynchronies soon inevitably arise (if only by random chance) and, as soon as they do, the only way they do not become entrenched is if the ones on the winning side of those asynchronies "play the free market game" and allow themselves to be out-competed.

Absolutely right.

Such asynchronies grow due to a self re-enforcing feedback loop, and - as we know - those on the 'winning' side are prone to think that they're 'winners' because they're somehow superior (therefore deserved to win), by implication the 'losers' are inferior (therefore did not deserve to win - the stupid, feckless lazy peasants!).

I would argue that it's not the individuals that are 'born' to act this way... it's the acquisition of wealth that induces them to do so, so I see it as primarily a systemic problem with the monetary system which produces cnuts, rather than (born) cnuts using the system to their advantage.

So, clearly, a political system that is as prone to the influence of money as ours will tend to deliver an environment agreeable to such interests.

To my mind, there is but one system of governance that can break this cycle - by greatly reducing the ability of money interests to influence politics: Sortition.

But... as you rightly point out, there is not a lot we can do about those asynchronies occurring in the first place. Sortition would only act to protect us from their worst excesses at a legislative level (hey, that'd be a start!). They would still exist on the ground, as an inevitable emergent property of the monetary system.

So what appears to be needed is a systemic mechanism to 'level the field' and prevent such disparity occurring - much in the way 'progressive' tax regimes are supposed to - a feedback loop to act against the the one described in my first link above. Such a mechanism may indeed (with a few other radical changes, e.g. to property law) permit us to use the 'free market' model, but without the problems that it currently exacerbates.

But that's probably beyond the scope of this thread.