PostHeaderIcon Why Socioeconomic Systems Fail

Today, I venture to opine on a subject this has been over opined about by people far more qualified to offer opinions than yours truly.

Still, I will offer my own opinions with the hope that my use of simplification and common language might be more palatable than that typically used by the over educated.

In theory, a Free Market, operated in an environment of laissez-faire, is the best, most reliable and most equitable economic model available. So, how could such a system possibly fail? IMHO, partly due to its own accumulated success.

What could I possibly mean by such a silly statement? How can accumulated success lead to systematic failure? Simple, it does so when the economic model (the Free Market) attempts to operate in a vacuum. Said differently, when the economic model operates as if it alone is responsible for long term societal prosperity.

Secondly, this socioeconomic model fails when it is overburdened from without.

Thirdly, a state of “general prosperity” is anathema to those among us who, seemingly unable to control themselves, seek to control everyone else instead.

Still sounds a bit silly, does it not? Not to me.

In the case of the United States of America, a mostly free market economy (what I see as a “free enough” market economy) took a fledgling nation from a condition of national non-entity to super-power status so quickly that it gave us all a mild form of collective whiplash. It also gave us a level of general prosperity never before seen in the world and, by many, thought to be impossible to attain.

Then, almost suddenly, it all seems to be unraveling at the seams.

I have suggested 3 basic reasons for this:

→ Accumulated success
→ Overburdening from without
→ The desire to control acerbated by unbounded greed

Let us now discuss these individually, in simple terms and using common sense language:

ACCUMULATED SUCCESS

In the beginning of America, when economic freedom still seemed somewhat a novelty, people literally swarmed to America for the opportunity to participate. And, it worked. Oh, how it worked. But, to a large extent, we have allowed our free market to operate in somewhat of a vacuum, and this tendency accelerated over time. Of course, the situation was not helped by the intrusion of a political theory that does not trust individual people to make, and prosper from, their own decisions.

So, we let the “free enough” market chug along but without educating our heirs on how and why it worked so well – and on what their individual roles MUST be if the situation is to continue.

As a very natural result, after very few generation of this lack of economic education and their duties to the social contract, our heirs began to think of the benefits of our socioeconomic system as an “entitlement” rather than an “opportunity”.

That is, merely being American (or even merely being IN America) is now thought by many to be enough. Prosperity is somehow owed to you. This “economy thing” is like the goose that laid the golden eggs – it just does it. No mind how and when the goose gets fed or cared for, just collect the eggs and they will keep coming. Sure they will.

So, our once unstoppable economic engine starts to sputter so what do we do? Why, we do the only thing naturally to be done, we seek to slay the obvious enemy. However, since most of us never followed “Pogo the Possum” we failed to learn from him that “the enemy is us”.

OVERBURDENING FROM WITHOUT

All economic systems (or “models” if you prefer) are limited by certain hard realities. One is that there are never sufficient resources available to provide everyone with everything they could ever possibly want or need. Second is the fact that everything we want or need is the result of applied effort on the part of many individuals. The net amount of goods and services available is strictly limited by the number of individuals willing and able to apply the effort required to produce them.

Thus, when the number of consumers placing demands on a socioeconomic system exceeds the ability the producers of the goods and services demanded, the system will become “overburdened from without”. That is to say, overburdened by would-be consumers outside the system placing demands on the consumers and producers inside the system.

Clearly, the welfare state that America has become is drastically overburdening our socioeconomic system. The only workable solutions are that these outside consumers must be moved inside the system, or, alternately, that they must simply “go away”. Of course, if we continue on our current path and let the “goose” die from neglect, most of the consumers both inside and outside the system will automatically “go away”.

THE DESIRE TO CONTROL

Sadly, the human race has, in general, not yet started to evolve away from the seemingly overwhelming urge to control others (and seldom to control ourselves).

Even more sadly, all good tyrants know that a downtrodden populace is easier to control than a prosperous populace. When people prosper, they feel more confident with themselves (and with the system) and, as one side effect, they want to make their own decisions and to live their lives as they individually see fit.

Many of us see this as a highly desirable outcome.

Those obsessed with the desire to control others do not see it this way. They know that when sufficient numbers of people are reduced to dire straits, they lose self-confidence and become “suckers” for anyone who can convince them that they will take care of them and relieve them from their problems. Said differently, they willingly cede control of their individual lives over cheats, liars and politicians (yes, so I am redundant) who care only about themselves and see the befuddled masses only a a lever to further tilt the situation in their own favor.

This is such a sad comment on the human condition, even in America, that I am almost ashamed to make it. Only, all evidence suggests it is true.

For this simple reason, general prosperity becomes a threat to the most powerful within the socioeconomic system who actually seek to destroy it.

As an aside, in addition to those who are obsessed with the desire to control are those who are obsessively greedy. While their motivations may be a bit different from the “controllers”, their damage to the socioeconomic system is pretty much the same.

IN CONCLUSION

While I have attempted to summarize one of our major ills in language that even a fool can understand, I have no thought that anyone needing the lesson will take any of this to heart. Still, writing such things helps me clear my own mind, vent some of my own frustration, and it is the sort of thing I tell my own children and grandchildren (and a few tolerant friends) whenever I think they might be inclined to listen.

In addition, I am sick of talking, reading and hearing about politics concerning an election that will almost certainly be decided by fraud — or worse.

BTW – in the fable of the goose that laid the golden eggs, which I have several times alluded to, the keepers of the goose did not allow it to die of neglect. Instead, they killed, cooked and ate it. At least they got a good meal on their way down – just as we afford felons convicted of capital crimes to enjoy a last good meal before sending them on that well deserved trip into oblivion.

Think about it.

Troy L Robinson

23 Responses to “Why Socioeconomic Systems Fail”

  • ◄Dave► says:

    I look forward to kicking this subject around with you, Troy; but first, I must challenge a couple of your unsubstantiated premises.

    I know of no place where a truly free market economy has failed on its own, rather than having been destroyed by greedy rascals, maneuvering to regulate it under the color of law. In fact, beyond tiny localized barter economies of old, I know of no place where true laissez-faire capitalism with sound money, has ever even been tried.

    The first century of America probably came closest to being an example of such, despite government trade restrictions and tariffs from the beginning. The now ‘sudden’ unraveling at the seams you lament, of our once prosperous nation, is a failing of ‘Progressive’ government – not a free market.

    The other rather shocking premise that I must protest, is the notion that the economic model extant in America is “free enough.” I don’t know how you could even suggest such a thing. How long has it been since you tried to manage an entrepreneurial enterprise here, under the heavy burden of endless Federal, State, and local bureaucratic regulations, exclusionary licensure constraints, and oppressive taxes? The business climate in today’s America, is the very antithesis of laissez-faire. 🙁 ◄Dave►

    • Troy says:

      My primary error was in misnaming the article. If you read it again with its correct name, I think you will see that we do not disagree in fundamental ways.

      As to “free enough”, that is my description of our past socioeconomic system, certainly not of the present.

      I still don’t really care who or what won in NH.

      Troy

    • Troy Robinson says:

      I know of no place where a truly free market economy has failed on its own, rather than having been destroyed by greedy rascals, maneuvering to regulate it under the color of law.

      You did not add “while the other market participants willingly allowed them to do so.”

      This begs a question: You and I agree that truly free markets are a good thing. Obviously, too many others do not share our belief or the truly free market economy would be demanded by people everywhere. Ergo, there is “failure” somewhere in the equation. I am merely trying to attempt to understand the “weak spots” in the free market notion so that they might possibly be corrected.

      IMHO, one obvious “weak spot” is that free markets cannot exist in a vacuum. They MUST be part of a larger “system” that promotes / provides the environment in which a free market can prosper. For instance, an environment that promotes ignorance and a sense of entitlement is clearly NOT an environment in which a truly free market can prosper.

      True, the notion of the free market may remain pure as the driven snow, even amid systematic failure. But, what socioeconomic failure is not looked back on with a wistful “if only”?

      Troy

      • ◄Dave► says:

        Are you sure? Tell me again why we need a larger “system,” by which I presume you mean a governmental system of some sort. It seems to me that absent a coercive government, attempting to somehow make it ‘fair,’ a free market would thrive nicely on its own. From each according to his industry, to each according to his effort. And, for those with bleeding hearts for the indolent, unbounded private charity options for their personal contributions. 😉 ◄Dave►

        • Troy Robinson says:

          I do NOT mean a governmental system of “some sort”. I mean a cultural system that that guides and teaches our people how and why a truly free market works, and all those human attributes that MUST go with it (honesty, ambition, hard work, education, respect for others, etc.). Outside such a supporting culture, a free market cannot last long because, lacking the attributes I suggest, the market is too easily corrupted into the crony-capitalistic mess that we now “enjoy”. Oor into something even worse.

          No matter how free a market may be in theory, in actual practice it operates in an environment of imperfect humans. When sufficient of the humans within a market cease to work to correct for this inherent imperfection, the market slowly “fails” (my term) or becomes something else (whatever terms you wish to apply).

          Troy

        • Chris says:

          why a truly free market works, and all those human attributes that MUST go with it (honesty, ambition, hard work, education, respect for others, etc.).

          Exactly Troy. Capitalism requires at least one of two things to succeed. Integrity, or intellect. It requires people of integrity to deal with others honestly and it takes people of intellect to know when they are or are not being dealt with honestly. Right now our culture sorely lacks both which causes those who think they have been taken advantage of to call out to the government to level the field. Protect the stupid from the scoundrels. Or the fox watching the hen house.

  • ◄Dave► says:

    Back to the left for full column width. OK, I now get what you two are saying about the necessity of character for participants in a free market. Yes, ideally parents would raise children worthy of perpetuating them. Still, in a truly free market, it wouldn’t matter how stupid and/or dishonest individual consumers and/or producers were. Absent coercive interference, every willing trader always wins in every single transaction.

    There are some axiomatic features of free trade in a free market:

    •Nobody is forced to participate.
    •Participants have a choice to buy or sell.
    •Producers have a choice in what to produce.
    •Producers have a choice in how much to produce.
    •Consumers have a choice in what to buy.
    •Consumers have a choice in when to buy.
    •Consumers have a choice in where to buy.

    All of these factors conspire to determine supply and demand, which in turn determines ‘fair’ market prices.

    •Producers have a choice to sell or not.
    •Consumers have a choice to buy or not.

    Thus, every trade is made between willing participants, who by the very nature of free markets, each got the better deal from his perspective. The seller valued the money received higher than what he sold. The buyer valued the purchase greater than the money he spent for it. Free market trades are always win-win. Otherwise, the trade would not have occurred.

    In the absence of coercive government, caveat emptor – ‘let the buyer beware’ – reigns in the marketplace. Consumer protection efforts by governments make idiots out of consumers, who just assume the government won’t allow unscrupulous sellers to ‘cheat’ them. So, they don’t bother to do any due diligence, before selecting products and sellers for their purchases.

    Perhaps if all parents had spent their lives earning an honest living, and had to take care to make value for value trades in the marketplace themselves, they might be more inclined to pass such skills on to their progeny. Especially if they weren’t counting on government schooling to educate their children in such mundane matters for them. When both parent and child are spending other people’s money, acquired through their ‘entitlements,’ such issues find little importance in their pointless lives, among the vast herds of sheeple. ◄Dave►

    • Chris says:

      Agreed Dave. What any sale transaction boils down to is an exchange of labor for labor. Whether that labor is in the form of producing, modifying, or transporting a commodity or service. Any transaction can include all or any combination of the three. Any buy transaction also requires the exchange of the labor of someone.

      In a family for example that is the labor of a family member that performs one of the three or all the three above mentioned sale functions of a sale transaction. The labor of a family member is likely to be respected by the family so “smart” transactions are made and guidance toward that end is encouraged.

      Where there is no respect for the labor of the labor provider (think tax payer in a welfare situation) there is no motivation to barter that labor in a productive way and thus no guidance to that end.

      That isn’t however the only barrier to a true laissez-faire economy. Government regulation has now surpassed the average every day scoundrel that would simply cheat a stupid public one on one.

      I’m not going to argue for no government regulation but for smart, balanced regulation. (I know. Oxymoron.) At one time the masses were capable of determining the quality of a product and whether it would perform as expected without endangering the purchaser. You could tell if the apple were rotten or the sword dull. Then came technology and the snake oil salesman. We now have consumables that there is no way possible for a consumer to know whether a product will perform as advertised or won’t be outright dangerous. The overwhelming population are not bio-chemists or automotive engineers or architects. Even the smartest among us are not versed enough in an alternate field not their own to know. As a garage owner in the past I can’t tell you how many doctors haven’t a clue about what makes a car work. There has to be a mechanism to prevent outright fraud. I think there is a place for a smart lean FDA for example. The problem with that is the above mentioned lack of integrity. But there is also a way to do that without government regulation.

      Who remembers buying an electric appliance and looking to make sure it was “UL listed”? United Laboratories was a private company that consumers in effect paid to use their expertise to test rate and insure that a product would perform as designed and at least do so without being dangerous. Their business revolved around the integrity lacked by scoundrels and politicians. Without integrity they had no business. I suspect that if government were to get out of the product standards business this sort of industry would become highly developed and perform far superior to the government system without political concerns. UL isn’t the only one. There are many rating companies for say the automotive industry that test and rate cars for all sorts of characteristics. It’s now used mostly for advertising purposes but again their business is balance and integrity. If they give false reports their credibility is out the window and thus their business. That’s what a true market economy does.

      • ◄Dave► says:

        But there is also a way to do that without government regulation.

        Exactly. I was all set to counter your assertion that modern markets and products are too complicated, for consumers to avoid fraud without government regulation. Then, you made my case for me with private UL, et al. When I was a young man, I subscribed to Consumer Reports, and made good use of the BBB. Today, I read various online reviews, and pay particular attention to those by actual buyers on Amazon. I pay little or no attention to the opinions of government bureaucrats.

        Until I moved to Hawaii for 8 years, I had never spent longer than 2 years in the same locale my entire life. When in need of professional service in a new town, I never paid the slightest attention to what government licenses were held, or what trade associations one might belong to. I asked my new neighbors and local associates to recommend someone to me. The same went for restaurants, mechanics, contractors, and other sundry businesses. That they and their competitors all had business licenses was immaterial. The truth is that the primary purpose of government certifications and licenses, is to protect those who have them, from competition from those who don’t. There is nothing government does for the consumer, which couldn’t be done better and cheaper by free enterprise. ◄Dave►

  • Troy Robinson says:

    Once again,I make NO argument for government interference in the free market. What I seek is that societal trait that make the difference between self interest and enlightened self interest.

    Just like religions, socioeconomic systems are biased by their host cultures.

    Dave seems to argue that a free market can exist because it has some safeguards that are inherent in the system. Seemingly regardless of its host culture.

    I counter that, while such a system is desirable, it cannot flourish in a culture that is dominated by such things as entitlement mentality and indifference to the situation of others.

    I will use myself as an example. I tend to be very trusting of my fellow humans. Many people with less than honorable intent can easily detect that and take advantage of me because of it. It is certainly true that, once I realize I am being had, I will quit doing business with the scoundrel. However, I am still susceptible to the next scoundrel in line. Eventually, I will learn to trust NO ONE. Once that becomes the prevailing attitude, in a society, no free market can exist.

    I have spoken my last on this issue because I seem to be failing to make my point — and I accept responsibility for that failure.

    Troy

  • Chris says:

    In complete agreement Troy. I didn’t mean to frustrate you with other issues. In parting on the subject I would like to refresh your memory of things from the past. A valuable lesson we all learned as kids.

    Thinking back to those cereal commercials that would send you the most fantastic spy ring or x-ray glasses or some other toy of unimaginable power. Just send in 10 box tops from the cereal and they will send it right to you. You eat your cereal and save the tops. How ever long after you beg your mom to send in the box tops so you can get your wonderful prize. She tells you it’s a waste but you won’t believe her. The toy is the most wonderful thing in the world. Finally after begging for two weeks mom gives in and sends them. You wait. Then you wait some more. Then six weeks later your waiting is over. You finally get the package. Never mind that five weeks ago an even cooler toy was advertised. You got yours. You open it with anticipation of the grandest item ever received by anyone. Wait. It looked a whole lot better on tv than this little piece of cardboard held together by this piece of plastic. You deceive yourself for a while that it’s actually worth playing with. That can’t really last too long though. You should have waited and sent your box tops for that one they started promoting five weeks ago. Yea, that would have been the thing to do.

    Lessons children don’t learn any more.

  • ◄Dave► says:

    Since this subject has been declared over by Troy, who raised it, I probably shouldn’t bother with a final comment. Doing so, I acknowledge that I will receive no reply. More the pity…

    Having given up any hope of repairing our decadent and dying culture, by any traditional political process, my interests have wandered toward what might replace the statist collective of sheeple, controlled by the oligarchs phony duopoly, with their coercive central government. Increasingly, my studies and personal cogitation on the matter, are conspiring to convince me that outright anarchy is preferable, to even the Founders intent for limited government, constrained by the U.S. Constitution, which I once revered.

    Since I am also a committed laissez faire capitalist, of the Austrian school of economics, I am constrained to believe that such a free market system, can function without a need for a government at all, much less one regulating commerce. Were they incompatible, I would be forced to choose between economic freedom or political freedom, since I couldn’t have both.

    Yet, when I think about it, I can’t imagine what other socioeconomic system could exist in an anarchy, other than a free market. Without some form of coercive government, who would control the marketplace, and how? Therefore, it follows that if anarchy is at all feasible, they must be compatible.

    All of the objections I have seen here, suggest that ‘greedy’ entities in our corrupted society, are what is killing our free market economy. Either greedy politicians, seeking control and/or plunder; greedy consumers, with an entitlement mentality, seeking unearned plunder; or greedy producers, seeking ‘unfair’ profits, while disregarding the plight of the needy.

    I submit that without the assistance of coercive government, these greedy scoundrels would be powerless to achieve their nefarious goals. Without a government, all politicians would have to find another line of work. Without government, there would be no such thing as entitlements, to trap the indolent in an unproductive lifestyle. Without government assistance to squelch competition, producers could never achieve consistent ‘unfair’ profit levels. Without government competition, private charity organizations would once again take care of the truly needy.

    By now, I am surely talking to myself… so I will cease and desist…. 🙂 ◄Dave►

    • Troy Robinson says:

      I have not been ignoring this — we took the weekend off to help my grandsons celebrate their birthdays. At the expense of violating my determination to drop this, I now realize that Dave is opining on the effects of external factors on free markets while I am opining on the need for certain internal attributes.

      I take it as a given that any market regulated from the outside is not a free market.

      Troy

  • ◄Dave► says:

    Food for thought: Was George Washington a Model Entrepreneur?

    Watch the interview. I was intrigued with the suggestion that Washington sought economic liberty foremost, and initially viewed the revolution as merely a trade war with England. From his perspective, the political liberty from the Crown, culminating in a new country, was a consequence of the conflict, not the intent. No wonder he had no interest in being crowned king… he was essentially an entrepreneur seeking to get the government off his back, not an ambitious politician. ◄Dave►

    • Troy Robinson says:

      I never had any doubt that the revolution was about taxes and external regulation.

      Troy

      • ◄Dave► says:

        Funny, although I understood the objections to the stamp act, etc., I always thought of the objection to lack of representation in Parliament (“no taxation without representation”), and all of the grievances they expressed in the DOI against the King and his representatives, were the proximate cause of the revolution itself. At least that was what I was taught; I’ll have to rethink it… ◄Dave►

  • Chris says:

    I wanted to call this video to all your attention. This seemed like the best place to drop the link. feel free to delete it once you have checked it out. It’s a lengthy video by our good friend Bill Whittle and Stefan Molyneux. Frank, pointed, and so politically incorrect Trump hasn’t got the stones to say it. Wrong About Inequality. http://tspeak.us/inequality-why-liberals-are-wrong/

    • ◄Dave► says:

      Great discussion, Chris. I have watched several of the Whittle/Molyneux discussions, and enjoy them immensely. They really click together, seem to be enjoying themselves, and neither is even close to being Politically Correct. 😀 ◄Dave►

  • Troy says:

    I have just started reading Mark R Levin’s recent book Plunder And Deceit which I highly recommend.

    In the first chapter, albeit taking a different approach, Mr Levin effectively makes most of the points I failed to make in this article.

    I hope all of you will read (and enjoy) it.

    Troy

    • ◄Dave► says:

      I downloaded and read the sample first chapter, Troy. It is well written and thought provoking. When I finish a couple of others I am currently reading, I will buy and read the whole Kindle version of it. ◄Dave►

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