Perspective on "Free Market Capitalism" and Taxes

Discussion in 'Politics, Religion, Social Issues' started by samiwas, May 15, 2011.

  1. samiwas macrumors 68000

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    #1
    After reading a few threads about scalping, and reading some of the comments within, I came up with an interesting (to me) thought:

    In any discussion regarding free-market capitalism, many people claim that the price of a commodity is whatever the highest-paying consumer is willing to pay. Therefore, if an object is sold my the original seller for $50, but someone might be willing to pay $80 for it, then the price SHOULD be raised to that price. Some even take it upon themselves, and believe it's their duty, to buy the item at the lower cost and sell at the higher cost. All items MUST be sold at the highest cost possible, and it's unreasonable to think otherwise.

    But when it comes to taxes, the same people will say it is unreasonable for the fee (tax) to go up to cover the commodity (government services). THAT is considered stealing. Instead of raising costs to what is required to cover the service, the service should instead be dropped.

    I'm guessing the reasoning here is that in the first situation, people have a choice and in the second they don't really?

    Still, I find it an interesting perspective.
     
  2. skunk macrumors G4

    skunk

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    #2
    I actually raised exactly this point with a "tax=theft" merchant here a little while ago. Taxes are, in effect, simply a charge for a bundle of services.
     
  3. CorvusCamenarum macrumors 65816

    CorvusCamenarum

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    #3
    This only holds true if your goal is to maximize profits. It certainly is so for normal business entities, but government has no designs on making or maximizing profit, and is perfectly fine with leaving money on the table as it were.

    Government, by and large, is not in the business of creating value, only transferring it.
     
  4. LethalWolfe macrumors G3

    LethalWolfe

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    #4
    The first situation provides an opportunity for the person to make money where as the second situation does not. You'll also probably notice that many free-market capitalists will, in practice, attempt to socialize as much of their debt as possible while privatizing as much profit as possible. They want 'big government' out of their business except for when big government is providing them with subsidies, tax breaks, bail outs, etc.,.



    Lethal
     
  5. samiwas thread starter macrumors 68000

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    #5
    Right, but if you aren't charging enough to cover the cost of your services, do you raise the fee, or drop the service?

    One quote I saw on another thread was that in times of emergency (hurricanes, earthquakes, etc), that businesses should be able to raise their rates to make more money (not because they have to, but because they should be able to profit off disaster). In this situation, the country is in what I would call an emergency: the debt is too high. But the thought of raising the rates is considered stealing, not working towards fixing the problem.

    It appears to me that people who support this idea see it as this: I should be able to acquire as much money from others as I can through whatever means necessary, but no one else has the right to do it to me.

    My opinion.

    Interesting thought. Basically, as long as the money is coming TO them, and they are not having to GIVE it to someone else (even if that's the cost of society), that's their priority. And they will gladly take free money from others, while saying it's stealing to have to give it to anyone else.
     
  6. eawmp1 macrumors 601

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    #6
    An interesrong thought, but hardly original.

    As the goal of the capitalist is to maximize return in a business, the needs of the consumer are secondary, if considered at all.

    As the role of government is to administer the trappings of civilization (infrastructure, public safety, defense, legal system, education, welfare for those unable to care for themselves, etc.), the costs associated with the primary mission are passed onto the taxpayer.

    The sound bite "run government like a business" is inherently flawed in that government is not a business, and cannot be viewed as such.
     
  7. Huntn macrumors G5

    Huntn

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    #7
    I've listening to conservative BS for 30 years, I've decided that any politician whose campaign consists of "vote for me and I'll lower your taxes" is a charlatan. A responsible discussion has to be "what do we want and how much do we want to pay for it?"
     
  8. itcheroni macrumors 6502a

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    #8
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    I'm sorry if I sound condescending but you really need to learn more about what the free market is.

    And taxes aren't bad per se. Taxes on specifically income and investment is "bad". I am phasing out my MR usage but I read a thread the other day where the general sentiment was that rich people got rich inpart because of everyone else in the marketplace. And as such they should pay more taxes which would then be redistributed to the less prosperous in the marketplace or to public services. There is particular scorn for investment income The way I view it, as a free market capitalist, this perspective is unfortunate. Taxing a rich persons income and investments would work to punish that person. If that is the primary goal then it would be successful. But if you expect to make the non rich better off by taxing the riches' income and investments, you'd be disappointed. They would in fact be worse off. Rather than me explaining inarticulately on a message board, you should earnestly seek to learn more before disagreeing. Your current understanding of the free market is flawed. It's easy to feel like you're discrediting mathematics when you can't add two plus two.
     
  9. cherry su macrumors 65816

    cherry su

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    #9
    Raising the price to what the highest-paying consumer is willing to pay does not necessarily generate highest profits. For example, in an economy with two people, if there were one person willing to pay $10 for a good and two people willing to pay $7 for a good and the cost of producing each good is $2, then the optimal price is $7 because profit(q) = 2*7 - 2*2 = 10 > 1*10 - 2 = 8. To repeat, the goal is to maximize profit, not price.
     
  10. samiwas thread starter macrumors 68000

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    #10
    I never suggested that government be run like a business in the terms of maximizing profits, but rather that the government does have costs involved in operating, just as a business has costs of operating. Is this not true?

    Every business has costs. And those costs are always passed on to the consumer. If you think otherwise, you are deluded. For instance, if gas prices go up, airlines generally raise their prices as a result. This is not seen as stealing in the capitalist mind, it's seen as a wise business move to not let profits go down. Never should a business eat the cost of operations.

    But if the cost of general government operations goes up, and the government then tries to raise taxes to cover those costs, it meets with large resistance and shouts of stealing. The people paying the prices are the ones consuming the services, but most do not want to pay for them. Many would instead like to see the services discontinued.

    So the moral of the story is: Business should charge as much as humanly possible for any service offered to make profits as high as possible (and they shouldn't have to pay taxes on those profits), while government should never be able to raise taxes to even cover operating costs, but should instead just cut services.

    Now I'm starting to see it.
     
  11. itcheroni macrumors 6502a

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    #11
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    Motives seem to color a lot of the opinion here. If someone is interested in profits then it must not be good as someone who doesn't have an interest in making profits. If a poor country has a shortage of bananas some evil capitalist will have the nerve to try and find more bananas to make money. The problem isn't the supply, it's the price! Sure more supply would make the come back down but the benevolent government should step in to fix this. They should cap the price of bananas so those evil profit seekers will lose the profit incentive to look for more bananas. Or a politician could set up a banana research facility in his district, creating jobs, and fulfill his motive of getting reelected. But of course the best scenario is to have the government give a no bid contract for a subsidiary of Halliburton to increase the banana supply. Sure this option would be the most expensive because the profit motive is there, but the option to not buy isn't there, but thankfully the government doesn't care how much anything costs because they don't have that evil motive for profit(there is of course a profit motive in raising campaign funds, but no worry. Halliburton will kindly step in here). The solution is to just raise taxes to cover this.

    Right at this moment, there are countless people trying to think of things I might need or want. And they're trying to deliver that good or service at a price at which I would willingly part with my money. Doesnt the thought just make you sick? Steve Jobs really needs to stop trying to come up with products everyone wants. I'm sure a government tablet computer would be every bit as good and cheap as the iPad.
     
  12. eawmp1 macrumors 601

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    #12
    Well you can't raise taxes, because the rich and powerful and middle class have to pay to provide more services for those powerless freeloaders lower down on the economic ladder, so we'll just cut the services that are "disincentivizing" them to work. :rolleyes:
     
  13. LethalWolfe macrumors G3

    LethalWolfe

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    #13
    Profit above all else is a problem, not profit in and of itself.


    Lethal
     
  14. firestarter macrumors 603

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    If that were true, than Margret Thatcher's 'poll tax' would have been lauded as the most fair and equitable tax in UK history.

    The problem with the 'tax as service charge' argument is that tax taken does not reflect services used. Not only does tax take rise with income, but (in the UK at least) the tax percentage ratchets up so you're paying more of more. And I'm not talking about the mythical super-rich here who 'don't pay tax'.

    I'm really not opposed to the rich paying more, or for poor people to get some sort of a break. Taken too far (and I do think the UK has gone too far) I think there starts to become a problem of representation and a breakdown in democracy though. If too large a proportion of the population end up voting for services for which they never pay - we just end up with a situation of out-of-control public spending and decreasing competitiveness.
     
  15. citizenzen macrumors 65816

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    #15
    By "here" do you mean this thread? Because I haven't seen any post that would suggest that outlook.

    I am, however, a skimmer, and may have overlooked it.
     
  16. itcheroni macrumors 6502a

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    #16
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    Care to explain why? With a profit motive, you're deeply concerned with potentially harming your customers because loss of customers and litigation will eat into your revenue more than most others things. How, with corporations responsible to the common law, can a profit motive be bad?
     
  17. firestarter macrumors 603

    firestarter

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    #17
    Well, he didn't say that profit was itself a problem. He said 'profit above all else'.

    Profit isn't a problem, but sustained growth of a company's profits above government base rate could be. In order to achieve this level of growth, US corporations have outsourced first manufacturing, then white collar work to developing nations. These developing nations are now becoming serious competitors, primarily due to this US-aided expansion of their industrial and educational base.

    How long will this model be sustainable for?
     
  18. itcheroni macrumors 6502a

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    #18
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    Probably not long. But if a Chinese worker and an American worker can do the same job, why should the American worker be paid several times more? There's a strong sense of entitlement with a hint of racism in there. I personally feel the US standard of living has been decreasing for decades. We are in the midst of a rude awakening. If a ton of people can do the same job as you, you're probably going to have to accept lower pay. If you want to make more then you should develop some specialized skills.

    Anyways, I'm still waiting to hear how profit above all else could be bad in a system responsible to the common law.
     
  19. firestarter macrumors 603

    firestarter

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    #19
    Absolutely, I'm not arguing for protectionism. But the 'free market' has always supported distorting concepts such as patent and copyright, to allow originators the fruit of their inventiveness. This seems to have been ignored on a national scale though - with working methods, assembly techniques, and money handed over gleefully to a competitor.

    Well that's nice... but it's a principled person who'd stand by that belief as they watch their own standard of living fritter away. The whole world is not using democratic free market-capitalism (clue; the main beneficiary - China - does not).
     
  20. itcheroni macrumors 6502a

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    This is my own personal view of the term free market. I don't know if it's in line with anyone else's definition.

    I view the free market as a science like physics. Nothings happens in a vacuum but studying what happens in a vacuum is fundamental to understanding how things work in the real world. If you design an airplane without regards to physics, good luck. If you design economic legislation without regard to the free market, good luck.

    I am currently in China right now and I have to tell you, in my opinion of course, that they get it much more than us in the States. They are simply better capitalists than we are right now. They aren't using a dictionary definition of free market but they have taken into account the physics of their policies. Allowing their citizens to work for a profit motive was the major step back in 1974. Now, we are decrying the profit motive here because many people mistakenly believe it is the problem rather than the solution.

    Moreover, Singaporeans aren't worried about China because most of their workers have specialized skill sets. They were heavily into manufacturing about 30 years ago but have progressed since. Americans, on the other hand, haven't gained any skills in a generation. The Chinese have caught up with us in most manufacturing. In terms of education, our policy is to subsidize it regardless of whether a student is learning mech engineering or mass communications. I personally would have the government stay out of education completely but if one insists on it, an understanding of how the free market works would be necessary. Lee Kuan Yew had this understanding better than any other politician in the 20th century, which is why Singapore went through all the stages of economic development faster than any other nation in human history...afaik.

    In 73 or 74, Xiaoping paid Yew a visit and was surprised to see Singaporean citizens driving cars and owning homes. He was under the impression that capitalism would cause havoc but seeing the clear difference between the prosperity of Singaporeans and the literal starvation of his own people impressed upon him the simple but powerful notion of allowing people to work for profit and to save.
     
  21. LethalWolfe macrumors G3

    LethalWolfe

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    #21
    Which came first, child labor or laws against child labor? Improper food handling or laws against improper food handling? Dumping toxic chemicals into the environment or laws against dumping toxic chemicals into the environment? Collusion and price fixing or laws against collusion and price fixing? How deeply concerned are the tobacco companies that cigarettes kill hundreds of thousands of people, of their customers, a year in the US alone?

    And what happens when the US gets too 'restrictive'? Companies start shipping things overseas and plead plausible deniability when the press uncovers that sweat shops are making Nikes in Southeast Asia or impoverished people in India are being exposed to heavy metals as they sift through growing mountains of e-waste from the West looking for bits of copper or gold to sell.


    Capitalism, socialism, communism, etc., have more in common with baseball or soccer than physics. Aerodynamics is constant no matter where you live in the world but how much a bag of rice or diamond is worth depends on rules set down by people not by laws of nature. NASA cannot manipulate aerodynamics the way OPEC manipulates oil prices.

    Capitalistic theory is about making the better mouse trap and having the best man win. Capitalistic reality is about gaming the system. Why make a better mouse trap when you can use unfair business practices to drive all the other mouse trapper makers out business then charge whatever you want when you are the only game in town? Why make a better mouse trap when you can just merge w/other mouse trap makers and then change whatever you want because you are the only game in town? Why make a better mouse trap when you and the competition can agree to sell mouse traps at fixed prices? There is no 'choice' for the consumer when all the manufacturers conspire together.

    In a perfect world capitalism, like socialism or communism, would work perfectly but we live in an imperfect world.

    Why should the Chinese worker be paid several times less? Did it ever cross your mind that the Chinese worker might be getting ripped off? Seems like a hint of racism to imply that a Chinese worker shouldn't be paid as much as a worker in the West...

    Of course part of the obvious answer is that things like local economies, cost of living, currency values, etc., impact wages. Even people doing the same job in the same country, the same city even, can make different amounts for doing the same type of work.

    With that being said, I like profit. I like when my personal business makes a profit. I like it when the companies I work for make profits. I like it when the companies I invest in make profits. But making profits shouldn't rank above being a responsible human being. We are all humans inhabiting an increasing crowded world and I'd rather we worked together towards a utopia than against each other towards a dystopia. And there certainly are companies that do this. Being a successful company that is eco-friendly and employee friendly is not mutually exclusive from being a profitable company. It does take more work though. And it does require the people running the company to look long term and resist the allure of greed, power, and short terms windfalls.


    Lethal
     
  22. Pachang macrumors regular

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    #22
    This is never true in free market capitalism. The goal of the producer is to set the price at whatever makes them the most money from selling those goods. Setting the price at what the person who would be willing to pay the most for it would not achieve this goal.

    What you are probably getting confused with is thinking that after the producer has sold to the highest paying customer they can just drop the price to what next highest paying customer is willing to pay and so on. They can't do this in reality.

    But this principle is sort of used. Eg Playsation 3s start off at $600 then once all the people who were willing to pay $600 have bought one, say after 4 months, they lower they lower the price to say $500.

    This makes them more money but it takes them longer to make it. It's a trade off between money now or more money later. If they ever tried to do it exactly as you were saying they would sell one unit of their goods to the highest paying seller and then not sell anymore.

    I don't think anyone thinks this....speculators buy things because they think the price will go up. They're trying to make money though, it's not 'their duty'. Some people buy things because they know some way of selling it someone who won't know they can get it at a cheaper price and make money that way. Like when you buy weed from a dealer and then sell it to your friends for a higher price who don't know any dealers or something.

    If they do that, then they are not free market capitalists.
    The word for them is corporatist.

    By your logic:
    If I cleaned your windows without you asking me to, and then took your car as payment for that service, you would not consider that theft.

    The only difference in principle is that with government taxes you get to vote for the people that clean your windows and take your stuff. So you have 1/hundereds of million say on what service you get and what gets taken from you.

    Free market capitalists do not support patent and copyright as a general rule.
    Patent and copyright are distortions of the free market.
    Some Objectivists (Ayn Rand followers) do though, and are typically considered free-market capitalists which may be where your confusion comes from.

    The free-market libertarian view can be found here along with a debunking of objectivist views and others in support of copyright and protection.

    I'm sure that many of the things you have in your house, or things that were used to make the things in your house were made by people/organisations that valued profit above all else. Is it a problem for you? Have they damaged yours or someone else's life by doing that?
     
  23. LethalWolfe macrumors G3

    LethalWolfe

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    #23
    It's a problem I attempt to avoid when I can and do you really have to ask if things like cigarettes, sweatshop labor or improper disposal of hazardous waste have ever damaged someone's life?


    Lethal
     
  24. Pachang macrumors regular

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    #24
    The problems here can mostly be solved by proper enforcement of property laws. I guess a law stopping children under the age of 14 from working even if they want to work should be there.

    Your objection to collusion and price fixing is based on misinformation. The most damaging collusion is when the government colludes with corporations which can't happen in the free market.
    The most damaging price fixing in the past has been price fixing by governments.

    If you understood economics it, you would know that schemes to collude and fix prices will not work out in the free market. You will either lose money by selling less or in some cases you might be able to break even.
    LOL about as deeply concerned as the people who destroy their own bodies by smoking.
    Lol terrible analogy. But economics is governed by something that helps us understand it. Just like physics is governed by the laws of nature. Economics is governed by Human Action.

    Socialism and Communism do not work even in a 'perfect' world. Unless you consider a perfect world that where everyone is a robot. Then they could work.

    capitalism works precisely because people have differences.
    Again the things you are worried about don't happen in the free market. And if people try to do the things you suggested, they quickly learn their lesson. You don't have to take my word for it, you just have to research it yourself.

    Well part of the reason that chinese people are payed less is because of the way their government manipulates the price of the yuan. They are constantly suppressing their currency by printing money and destroying the value of their worker's wages. They do this mostly because it enriches themselves and they think it is what has created the boom so far. It isn't.

    The other part has to do with that they are not being payed less because they are chinese but because they are willing to work for less. You mostly hit on the reason for this.


    I agree but I think proper institutions of private property protects the environment and employees in the best possible way. I think strong government regulations on who you can and can't hire and what you can pay them are very destructive to employers and employees and only empower unions and other special interests. Situations where some environmental problem is outside the scope of an individuals property can be protected by laws I guess.
     
  25. samiwas thread starter macrumors 68000

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    #25
    Actually since the thread was based on another, this is exactly what someone said. That a business should sell for the highest number possible that people are willing to pay, and if they don't, someone should come in and make that happen. ie, scalpers. Basically, he said that the business SHOULD have charged the higher number to begin with, and basically they were wrong for doing otherwise. There were several others who agreed, so I do not think this is an unheard-of thought or practice. This is a practice I think is abhorrent, but hey...it makes people money, and that's what it's all about, isn't it?

    Of course we all have things from profit-motive companies...you can hardly research every single item you purchase in life. Especially going all the way down the chain of suppliers to each supplier to each supplier of each manufacturer.

    And do you really need someone to answer that question about damaging people's lives with mega profit motives? A company wants to streamline to add to their bottom line, even if they are already currently making huge profits. So they lay off 1,700 people. I would say those 1,700 people's lives were damaged as they no longer have an income. But this has never happened, right? FedEx. Or a company decides to close a factory and outsource all that work to an overseas contractor for cheaper, even if they are making money. The people working in that factory will be pretty damaged without an income. This happens every day.

    It's cute that you think profit motive *above all else* is not a problem for anyone.

    And I can see in some following posts that you really don't agree with environmental regulations or any sort of worker protections. As long as it's profitable for the business, it should be free and clear. Screw the workers...there are more of them to fill your place. and with your thought that as long as an environmental issue doesn't leave the owner's property...really?? It will more than likely not be that owner's property for eternity.

    What I see in the minds of capitalists is the US becoming a third-world country. Wages at all-time lows with a few successful businessmen at the top raking it in. If we need to lower our wages to those of the Chinese, we cannot live in the country we have today. How can an American live on $10 a day (which is 50% more than the minimum wage in China). A factory worker there got a 20% raise to $275 a month. That's $3,300 a year. You can barely survive in America for that. But if that's what you want to go to...wow.
     

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