What is the main purpose or goal of capitalism??

[kentuck]

Is it to help society?

Or is it to accumulate as much wealth as is humanly possible?

[Writer]

1. It's based on the scottish enlightenment view that individuals should be in charge...

of their destiny, and that destiny is closely aligned with the ability of one to own his or her property, and to freely trade that property with others.

Beyond that is received capitalism.

[kentuck]

4. That is basically a pure concept of freedom...

But what is "received capitalism"? Is that meant as an adjective?

[Writer]

6. It means capitalism reduced down or reinterpreted in such a way that it doesn't really...

match what was originally suggested.

But John Locke had one rather stern caveat for liberalism: DO NO HARM. Otherwise, it would be anarchy.

[kentuck]

9. Yep.

It has gone off track.

[paulsby]

2. neither

capitalism's purpose is to allow individuals to control capital, and in the process, build wealth.

capitalism does build wealth. that's irrefutable to anybody who studies history.

capitalism allows the market to define value, vs. such bogus theories as "labor equals value".

think about how absurd that it. if labor equalled value, then there is equal worth between a hole in the ground, and a great work of art. after all they both required the same # of labor hours to produce.

the primary reason capitalism works so well is that it provides built in incentives for whomever invents the better mousetrap.

capitalism is the greatest economic system ever devised.

[kentuck]

7. But there has to be a sheriff ?

Even though capitalism may be a great economic system? At least compared to the ones that have been tried? There are probably a couple more systems that have not yet been tried? Capitalism is not the end-all of all economic systems yet to be tried?

[paulsby]

10. of course

i never said capitalism is the "best of all possible worlds" when it comes to economic systems. i merely said it's the best that we have invented. i certainly hold open the possibility that a better mousetrap may be invented. ironically, it wouldn't surprise me if a superior system was developed from within a system of capitalism, since the capitalist system recognizes the greatest degree of economic freedom. how ironic would that be, alanis?

[kentuck]

12. I agree...

However, it will be created out of necessity.

[Fumesucker]

16. All "value" is subjective..

Something is only "worth" what it can be sold for.

And so many artists who created "great works of art" died paupers. There is a Dire Straits song about great artists and how they are treated.

http://www.youtube.com/watch?v=V3D7DmKiDsA

As a a sometime "inventor" I can assure you that the quickest route to pauperism is to invent a better mousetrap, marketing may not be everything but it's about 99.9% of everything. The very worst thing you can call yourself in order to be taken seriously is "inventor", it automatically carries the connotation of "crackpot". No, you are a "product development engineer" or something similar, never, never ,never an "inventor"..

Don Lancaster is one of the most prolific and creative "inventors" of whom I'm aware, I've been reading his articles and books for over thirty years, his take on patents and inventing can be read at his website.

http://www.tinaja.com/patnt01.asp

For most individuals and small scale startups, patents are virtually
certain to result in a net loss of time, energy, money, and sanity.

One reason for this is the outrageously wrong urban lore involving
patents and patenting. A second involves the outright scams which
inevitably surround "inventions" and "inventing".

A third is that the economic breakeven needed to recover patent costs
is something between $12,000,000.00 and $40,000,000 in gross sales.

It is ludicrously absurd to try and patent a million dollar idea.

[paulsby]

20. exactly right

value IS subjective.

and there has to be some way to determine what it is.

how many quatloos is my painting worth?

the only rational way to decide this is the free market. the free market can be much broader, like a 2 way auction process (think the Chicago Board of Trade where i trade futures).

at any given time, the value of a corn future is equal to the lowest price somebody is offering it and the highest price somebody is bidding it.

those will necesasrily be seperated by at least one tick, since if they were THE SAME, then a transaction would be conducted, and the price would thus move and new bid/asks would be the inside ones.

the system is genius.

of course the market, and capitalism can be inefficient. in the long run, its the most efficient system, and also the most effective at building vs. merely redistributing wealth

[kentuck]

24. Of course, people like to be paid for their labor?

We don't hesitate to put a "minimum" value on labor? And labor creates all wealth. Simply trading paper promises on a market does not constitute real value. It is only an illusion.

[paulsby]

29. first of all

i never said trading paper (or in the case of CBOT) electrons representing contracts on bushels of corn creates wealth

the futures market is a zero sum game. NO wealth is created. the stock market is NOT a zero sum game. wealth IS created.

the issue of value is correct, though. the PRICE of a contract on bushels of corn is how the market perceives value, and follows the bid/ask metric i just described to you.

it is brilliant, because it is completely fluid to market demand and supply

[The Magistrate]

32. And Also, Sir, Vulnerable To Hysteria, Manipulations, and 'Corners'....

[paulsby]

34. of course

hysteria, and emotional extremes for example are sometimes a good thing.

i love them.

but regardless, since capitalism is a product of human intellect and emotion, it is necessarily imperfect. but it is MORE perfect than any other system

the more inefficient a market is(in the short run) the greater edge a trader can find.

i only trade when i perceive an edge. if markets were truly efficient, as idiot academics claim(ed) for years via efficient market hypothesis, then day traders couldn't succeed. iow, they could not have an edge in a perfectly efficient system/ the ONLY way they could make greater gains would be to take greater risks (leverage).

this is si mply not true. real investors and traders (vs academic) realize this. it's why warren buffet can beat the market.

[The Magistrate]

35. And Thus, Sir, You Expose The Great Difficulty Of The Arrangement

What is beneficial for the trading sharpster is detrimental to either the producer or the purchaser. If the price is run up by internal exchange forces, the purchaser will be over-charged or unable to buy; the producer loses if the price is run down below cost of production, and by reduced sales if the price is run up. Thus the actual business of producing goods is frequently interfered with by the parasitism of those engaged in side-bets on their activities, to the detriment of all save the handful who profit by the interference. People go out of work, businesses close down.

[paulsby]

37. you fail to understand how futures work

the whole point of a futures market (why they were invented) was to allow a mechanism to PROTECT against such price changes. and the system works.

futures markets were invented in scandinavia for the purpose of hedging.

say i am a farmer, and i intend to bring 50,000 bushels of corn to market in August. it is currently june.

corn is currently selling for $4 a bushel.

i can lock in that price and ASSURE that no amount of price "manipulation" will hurt me.

how?

i simply short the notional equivalent of 50k bushels.

if the price of corn goes down $1 per bushel to $3, then i will get 150k for my crop instead of 200k. HOWEVER, my futures contracts that i shorted will increase in price by 50k (I sold 50k bushels contracts at $4 and can now buy to close my short at $3)

so, i have locked in that price. the market can't touch me. that's one way producers can hedge and lock in price.

similarly, a consumer, just does the opposite. they can buy (go long) the notional value of product (corn, wheat, sugar, whatever) they wish to buy in the future. if the price goes up, they will have to pay more, but their contracts will go up in value to offset the price they have to pay.

etc.

that is the PURPOSE of derivatives markets and they work seamlessly.

specs (i am a spec) make up a small part of the float at any given time.

[kentuck]

39. And how does this magnificent market handle surpluses and shortages?

And who suffers the most from the "invisible hand".

[paulsby]

40. it handles them quite well

it's called supply and demand.

hth

[kentuck]

43. like the present swine-flu vaccine?

Is there a shortage? How does that affect the price? And, more importantly, how will it affect those that do not have availability to the vaccine?

[Horse with no Name]

41. They don't work seamlessly

People starve because they can't afford food--but you get your money.
People freeze to death because they can't afford their oil--but you get your money.

These ventures have always held risks. It was part of the business of farming and oil production. Now, the government pays the farmers NOT to grow and the oil folks not to produce and they still have their futures. It is a win/win situation for the people at the top of the food chain--not so glorious at the bottom and look at the price we ALL paid so you could get "yours". Then to have to sit and watch you talk about capitalism when you want ALL the benefit without none of the risk is sickening.

[The Magistrate]

50. My Lack Of Understanding, Sir, Is Legend

And your potted capsule is as helpful here as a high school Civics textbook is to understanding the processes of government.

To deal just with your example. Manipulation of the price in the market may produce a situation in which the cost of planting and harvesting cannot be recovered even if the best price available is hedged. The cash price on delivery frequently does not track exactly with the price of contracts on the exchange, and is generally somewhat lower, so that even when the hedge more or less works in a period of declining prices on the exchange, there will be loss, relative to the originally anticipated price. The hedge also requires the producer to forgo a possible gain from increase in price, which, over a period of years, may prove as detrimental to the enterprise as a drop in price in a particular year.

The fact is that the overwhelming preponderance of contracts are bought, held, and sold by persons who neither have, nor are interested in receiving, the underlying commodity. Their activities distort the exchange of goods, and do so to the benefit of no one but those among them who fall out on the winning end. They would do much better by society to simply frequent race-tracks and watch the ponies run.

[kentuck]

38. Well said, Magistrate.

Well said. :-)

[Fumesucker]

28. The problem with subjective value is that subjectivism is so vulnerable to manipulation..

Think "pet rocks", a brilliant example of the manipulation of subjective opinion.

Which is where marketing comes into play.

Kind of like PT Barnum's sign "This way to the Egress", since a great many rubes didn't know that "egress" meant "exit", they were manipulated into thinking that was yet another freak of nature to be viewed and hurried on to the exit.

[kentuck]

30. Right on Fumesucker...

:-)

[paulsby]

33. but that;s a good thing

nobody was forced to buy pet rocks. the market saw them as valuable enough to justify their price and those that chose to buy, did so. nobody was forced into it, and no centralized govt. (as in socialism) set the price.

of course, as i said, the market can be inefficient (in the short run) , irrational (in the short run - see tulip bulb scandal or tech stock boom), etc.

but it still allows freedom to build wealth and to place capital at risk to make more capital.

it's simply a wonderful system, but it cannot be perfect, since humans, the driving force behind capitalism, are imperfect.

we are emotional, irrational, short sighted at times, etc.

[Fumesucker]

36. But the manipulation of public perception has become a sophisticated science..

At one time the playing field was somewhere close to level, now it is so tilted it has become something rather like a cliff face.

It takes a quite unusual personality to be able to step back and perceive the manipulation for what it is.

Erasmus once said that in the kingdom of the blind the one eyed man is king. Erasmus was a flaming optimist, the quickest way to get yourself ostracized as a crackpot is to see further than your fellow men.

Heinlein was referring to this when he said that being right too soon is socially unacceptable.

[kentuck]

42. But the entire foundation of our democracy....

is built around these manipulations, from the newsmedia downward, in all parts of our society. From the military down to our churches, these manipulations are well-rooted.

[Fumesucker]

47. At one time the manipulation was on an ad hoc "seat of the pants" basis..

It is now very much a science based on the latest psychological research with things like PET studies of blood flow in different brain regions.

The mechanisms for social control that would turn Big Brother green with envy are here now.

[The Magistrate]

22. You Mis-Understand, Sir, The 'Labor Theory' Of Value

Which you would find is laid out explicitly in Mr. Smith's 'Wealth of Nations'.

At every step in production, labor adds value to what is worked on. Spun yarn is more valuable than sheared wool, and is so because of the labor that went into converting it from a mass of fiber to thread. Woven cloth is more valuable than thread, and is so because of the labor that went into converting from simple thread to a sheet of cloth. Cloth cut and sewn into clothing is more valuable than a bolt of cloth, and is so because of the labor that went into converting it into a garment. You cannot account for the difference in price of an equal weight of wool in the form of shearings and in the form of a tailored suit without recognizing the value added by labor to the material through its various transformations of state.

What is essential to capitalism is that the person who carries out the labor necessary for these increases in value must be paid somewhat less than the value that labor adds to the product, else there is no room for profit to the employer. It is because the 'labor theory' of value lays this bare that it is so frequently attacked by the simpler apologists for the capitalist system. Obviously, the employer has some part in the addition of value, by organizing and financing the labor, and acquiring the raw materials that are worked, and is entitled to his or her portion of the value so added. But the general practice is to extract a greater proportion of the total value added, and to pitch the wage as low as the workers can be made to tolerate, whatever the actual increment of value they add to the finished goods.

[Swamp Rat]

52. Thank you, Sir.

:thumbsup: :hi:

[The Magistrate]

54. What We Are Dealing with Here, My Friend, is Un-digested Heinlein-ism....

Straight off the pages of 'Starship Troopers' and lodged in the unreflecting mind ever after....

[Swamp Rat]

56. Grok

;)

[Oregone]

58. "labor necessary for these increases in value must be paid somewhat less than the value that labor"

Thats one hell of a way to sum it up.

[Oregone]

51. Capitalisms main concern isn't if a hole is of less value than a piece of art

Rather, it is if the owner of the art studio or the child of the founder of the hole digging company "deserve" the profits accrued over the actual artist or laborer.

Capitalism doesn't create wealth. As an economic system, it merely determines how wealth is distributed between laborers and owners who may not be involved in the labor. In capitalism, the workers are often paid a set fee and they become nothing more than another cost of production similar to the machinery. After such expenses are paid, it is the owners (those who descend from sweat shop owners and plantation operators) who get all the profits from the wealth that is created.

"the primary reason capitalism works so well is that it provides built in incentives for whomever invents the better mousetrap"

Capitalism provides no incentives to the artist or inventor, unless an exceptional stipulation is written into a contract. Capitalism provides all the incentive to the owners (and if the owners are the laborers, this could drive innovation and quality, but it is not often the case as owners are normally not materially involved in production).

[targetpractice]

3. To enrich shareholders...

Shareholders are like super-citizens.

[valerief]

5. Bingo. nt

[AllentownJake]

8. We don't have capitalism right now

We have an odd mix of corporate and state power that utilizes some capitalist principles, some socialist principles and fascist principles.

Adam Smith was a big advocate of regulation and was against corporations.

[kentuck]

11. I think we may need some sort of "contractual democracy"?

Where there is a contract amongst those at both ends of the spectrum. No one should apply anything to himself that he would not agree that those below his status do not likewise deserve.

[AllentownJake]

13. Shit will have to hit the fan before anything changes

As long as people are comfortable, they aren't going to demand any big changes.

[kentuck]

15. A lot of shit will have to hit a big fan...

I can't think of a bigger fan than the one the shit just hit. :-)

[AllentownJake]

19. People are still holding onto their pre-crash ideologies

When the white middle class manager class realizes that the wealthy look at him/her no different than they look at the lower middle class working class and poor...the shit will hit the fan.

Right now, they are still bought into the lie that they are valued and the "lazy" people below them are holding them down.

[kentuck]

26. And those holding most tightly to their pre-crash ideologies...

are those that crashed the hardest. Money is the only comfort they need.

[AllentownJake]

31. I'm part of that group

My father was a managing engineer at a Fortune 500 firm and I'm a graduate of a management training program for a fortune 500 firm and worked as an auditor.

I picked up on this when I was in college. My father was being told to buy more stock in his company by the senior executives while the same executives were selling theirs. I realized than that those at the top viewed my father as a chump to be manipulated, and I never trusted the guys at the top my entire career.

My father was a Bill O'Reilley loving Independent leaning Republican, he didn't realize he was a chump till he was dying of cancer. I wasn't one to have too much of a conversation about that with him at the time.

[kentuck]

45. I might have guessed.

By your intelligent discussions.

I hope you have many fond memories of your father.

[AllentownJake]

49. I do

and my father was a product of a different era. The wealthy class that my father had to contend with at the beginning of his career were smarter assholes. They realized what would eventually happen if they started to take from those that manage things and make things for them.

[kentuck]

27. delete

A city so nice they had to name it twice.

[Horse with no Name]

14. To have the poor assist the wealthy by shoveling the

money to the top of the heap so that they can throw a few cents down now and then for services rendered.

[kentuck]

17. Does capitalism have no compassion?

Should it?

[Horse with no Name]

18. No and No.

It is a cold and unfeeling tool. It doesn't have to be utilized, it can sit next to the other unused tools that society discards.
It is up to the people to decide which tool works best--and capitalism as it is defined and utilized in this country is about as useful to the common working person as a pitchfork without prongs--and we don't need another broken tool.

[kentuck]

21. Would healthcare be considered a part of our capitalism?

And do you think 47 million uninsured is acceptable to these unfeeling tools?

[Horse with no Name]

25. Yes. Because we have allowed healthcare to become another for-profit industry

Money and humanity don't mix. They never have and they never will.
There simply is NOT any profit in humanity and profit is the only goal of capitalism.
Money has to be taken out of the equation.
I don't understand why it is okay to use "socialism" for fire departments, police, and other functions but not healthcare?
If we are going to do that--then why isn't it okay for me to "opt out" of these services that I have never used and funnel it into something that I use frequently--health care?
It is ONLY because I ALSO pay for the gatekeepers insurance. He has no vested interest to make sure I have health care. He has his. Mine isn't his problem.

[kentuck]

46. Very well said..

and very important words.

[OHdem10]

23. It is an economic system based on competition.which left to its

own nature produces winners and losers. Governments can
use this tool for good or for ill.

Because of its competitive nature Capitalism left unregulated
will be constantly pushing a few winners to the very top. No regulation
and you will most likely have the same winners winning over and over.

If you believe in an aristocracy, oligarchy, etc .(Few wealthy and very
wealthy at top while masses become less wealthy to poor) . If you
believe in that rugged individualism, and pretty much if you are poor
it is of your own making----Bingo You believe in Unregulated Capitalism.
It is kinda like churning milk--the creme always rises to the top.
Likewise with human beings, the smartest, most gifted, luckiest
will end up at the Apex of the Pyramid in a country where Unfettered
Capitalism is the economic model.

If you believe in a common good where conditions at least appear
a more equitable . Sharing responsibilities for the country, then
you must develop a wise regulated Capitalistic model.

Unfettered (Unregulated) Capitalism contributed to our present crisis.
Funny those Bankers are pushing to stay unregulated after we the
Taxpayer pulled them out of their mess.

[kentuck]

48. Absolutely!

I believe there should be a contract amongst citizens, that there can be no billionaires so long as we have sick or hungry people amongst us.

[Oregone]

55. Competition is not inherent to a capitalistic system

This is a red herring hiding the disaster that capitalism is.

All that capitalism means is that private people can have complete ownership of a business entity. By these means, all such profits from business activity are distributed to these people (shareholders). None, whatsoever, are required to be distributed to the workers. Despite the quality of their work, they are merely an expense that is considered the same as any other operational expense.

In regards to the workers, at the end of the day, it comes down to the bottom line. They have no further incentive, beyond survival, to work above a standard required to keep their jobs. The shareholders have no incentive to keep them if their expense is not justified by profits generated.

But what this creates, by nature, is a caste system. There exist those that own are born owning, as the capital has already been invested. They collect profit by birthright, with no labor on their part. By doing so, it is infinitely disproportional distribution of wealth generated to labor performed, as all the profits go to non-laborers.

Unfortunately, as we have observed, as wealth disparity grows arbitrarily close to infinity, political power does to. So capitalism also has a political effect that may transform a democracy into a corporatocracy over some period of time, which further exacerbates the problem of disparity and poverty

The reality is that as long as few can perpetually profit off an initial investment made over a century ago (though shuffled around), they will eventually end up with all the chips at the end of the day, creating instability in the marketplace (due to rampant poverty) that either causes a complete collapse or totalitarianism to control it.

[kentuck]

59. "...a caste system" ?

But politically, does it not depend on an army of unwitting citizens that are willing to believe that which is not in their interest?

[Oregone]

60. Perhaps it does,

but be sure to realize what citizens do or not believe can be greatly influence by but a small percentage of the population (and their money/means).

Maybe most of those unwitting citizens also did not have access to the finest education system or media, etc, and have been engineered by ingrained social memes to continue to be exactly what they are and culture another generation in their image.

Just because a structure is supported by nothing more than foolish belief doesn't mean that those beliefs are not being "forced" upon the people, nor does it mean other means will not be used if belief alone does not suffice. If you really think about it, almost any caste system can be destroyed by the realization of the illusion by the masses, as well as a willingness to take a risk to do something about it (politically or otherwise). But "belief" goes far beyond something you hear at the dinner table (it can actually be encoded physically in your brain). It is not always such an easy thing to do away with, nor is acting once you have done so.

If you have a culture that believes it is not appropriate for laborers to profit from their own work, which therefore suppresses social mobility and keeps people generally where they are born, that is very much a caste system. Is there anyway to describe a system in which a child can profit off the sweat of thousands who will never improve their social standing, perpetually, for merely being born to the proper man?

India has Brahmins. America has Shareholders

[The Magistrate]

61. Only, Sir, While Those Benefiting Most Are Concerned To Maintain a Cloak Of Democracy About Them

The system as we know it in modern, Western form, did not begin under this necessity. The political struggle of people powerful because of money from trade with people powerful because of their noble lineage and holdings of land took place under conditions of monarchical absolutism in its early stages. The rising bourgeoisie cast it as a struggle against privilege by commoners, and as they did out-number the nobility, when the whole range of small traders and tradesmen was taken into the count, they often used the language of democracy in forms we would recognize nowadays. But they were every bit as autocratic to their laborers, and in this were always backed by their governments. The idea that Capitalism and Democracy are linked in some fraternal bond is wholly false. Indeed, the bulk of the deliberations of the men who wrote the Constitution of our country were concerned with how the numerous people with little or no property could be prevented from using Democratic institutions such as they proposed to establish in order to limit the prerogatives of the wealthy, necessarily less numerous than they. The real safety valve of our system was in those days the expanding frontier, which offered persons the opportunity to become propertied through direct investment of labor as homesteaders. With that closed off, the system is starting to show severe strain, with social mobility hugely lessened, and the predations of those at the top becoming cannibalistic in nature. As the concentration of wealth proceeds, it will become both impossible, and unnecessary, to maintain the increasingly threadbare fiction of 'government by the people'....

[kentuck]

62. Very interesting, Magistrate.

How far until we are at the end of this impossible and unnecessary fiction??

[anonymous171]

44. To accumulate capital of course. nt

[yurbud]

53. it is amoral, so it only helps those who help themselves--to as much as possible.

[old mark]

57. Rich get richer, fuck you and me - and everyone else.

Always was, always will be, even if it's sugarcoated.

mark