History UsefulNotes / Capitalism

15th Aug '16 9:00:53 AM MAI742
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In 'Classical Economics' it is assumed that [[ViewersAreGeniuses consumers are completely rational and always looks for the best, lowest price before buying a product that they want if buying it will make them happier than having the money needed to buy it.]] These mathematically simple individual and small scale 'microeconomic' interactions are then substituted into mathematically complicated functions which describe 'macroeconomic' interactions - which were used to govern the world's economies from the 1970s until the Great Recession of 2008. Unfortunately, it transpired that actual human behaviour departs so far and so inconsistently from that which is predicted by the ''Rational Consumer'' model that the 'macroeconomic' models which use it are incapable of describing or predicting how the economy works in reality.

Recently, 'Behavioural Economics' has produced microeconomic models capable of accurately predicting the behaviour of real humans by using psychological studies of real people's actual consumption habits (which are logically inconsistent, impulsive, and mood-dependent). It is hoped that this discipline can be resolved with the macroeconomic models capable of accurately describing and predicting how the economy works in reality, which have been produced by using statistics collected from the real world. For now, so-called 'Empirically-based Economics' which uses the Scientific Method and real world data seems to be in vogue.

All that said, it is hard to contradict the assertion that Classical Economics ''could'' perfectly model the capitalist economy if people acted like Rational Consumers and not like, well, people.

to:

In 'Classical Economics' it is assumed that every person and corporate entity is a rational entity which always:

* Makes completely informed, or equally informed, decisions.
* Makes rational decisions about what and whether to buy or sell in accordance with a combination of their personal finance and a limited set of desires.
* Always buys at the lowest possible, and sells at the highest possible, price.
* Values potential gains and losses equally.
* Values owned and unowned property with monetary values equally (see above).

[[ViewersAreGeniuses consumers are The Rational Consumer is completely rational and always looks for the best, lowest price before buying a product that they want if buying it will make them happier than having the money needed to buy it.]] These The mathematically simple individual and small scale 'microeconomic' interactions which use The Rational Consumer are then substituted into mathematically complicated functions which describe 'macroeconomic' interactions - which were used to govern the world's economies from the 1970s until the Great Recession of 2008. Unfortunately, it transpired that actual human behaviour departs so far and so inconsistently from that which is predicted by the ''Rational Consumer'' model that the 'macroeconomic' models which use it are incapable of describing or predicting how the economy works in reality.2008.

Unfortunately, actual people and corporate entities:

* Vary wildly and unpredictably in their level of access to information.
* Make semi-rational and semi-impulsive decisions about what and whether to buy or sell given their broad and shifting set of desires, which often take precedence over their personal finance.
* Buy/sell not just at the lowest/highest price, but at a perceived 'fair' price.
* Are ''far'' less motivated by potential gains than they are fearful of losses.
* Value owned property drastically more than unowned property, even when they are of equal monetary value (see above).

Actual human behaviour departs so far and so inconsistently from that which is predicted by the ''Rational Consumer'' model that the 'macroeconomic' models which use it are incapable of describing or predicting how the economy works in reality. Still, it is hard to contradict the assertion that Classical Economics ''could'' perfectly model the capitalist economy [[WhyCouldntYouBeDifferent if only people acted like Rational Consumers]] [[ShapedLikeItself and not like, well, people]].

Recently, 'Behavioural Economics' has produced microeconomic models capable of accurately predicting the human behaviour of real humans by using psychological studies of real people's actual consumption habits (which are logically inconsistent, impulsive, and mood-dependent). It is hoped that this discipline can be resolved with the macroeconomic models capable of accurately describing and predicting how the economy works in reality, which have been produced by using statistics collected from the real world. For now, so-called 'Empirically-based Economics' which uses the Scientific Method and real world data seems to be in vogue. \n\nAll that said, it is hard to contradict the assertion that Classical Economics ''could'' perfectly model the capitalist economy if people acted like Rational Consumers and not like, well, people.
15th Aug '16 8:35:05 AM MAI742
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Karl Marx famously asserted that the world's capitalist class would not allow reform of the wealth concentration dynamic in the capitalist system, and that this would make violent world revolution to destroy the capitalist system and replace it with UsefulNotes/Socialism inevitable. So far this prediction has proven pessimistic, as even the US government was willing and able to disrupt the development of wealth inequality in the period c.1940-1975.

to:

Karl Marx famously asserted that the world's capitalist class would not allow reform of the wealth concentration dynamic in the capitalist system, and that this would make violent world revolution to destroy the capitalist system and replace it with UsefulNotes/Socialism {{UsefulNotes/Socialism}} inevitable. So far this prediction has proven pessimistic, as even the US government was willing and able to disrupt the development of wealth inequality in the period c.1940-1975.
15th Aug '16 8:34:10 AM MAI742
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Failure to create adequate laws will prevent a market from arising, and failure to enforce existing laws will eventually result in CriticalExistenceFailure. This results from the accumulation of too much capital in the hands of the capitalist class, which occurs whenever the market's initial laws governing property-contracts-bankruptcy-monopolies and taxation policy do not specifically prevent it.

to:

Failure to create adequate laws will prevent a market from arising, and failure to enforce existing laws will eventually result in CriticalExistenceFailure. This results from the accumulation of too much capital in the hands of the capitalist class, which occurs whenever the market's initial laws governing property-contracts-bankruptcy-monopolies and taxation policy do not specifically prevent it.
it or are reformed to curb it.

Karl Marx famously asserted that the world's capitalist class would not allow reform of the wealth concentration dynamic in the capitalist system, and that this would make violent world revolution to destroy the capitalist system and replace it with UsefulNotes/Socialism inevitable. So far this prediction has proven pessimistic, as even the US government was willing and able to disrupt the development of wealth inequality in the period c.1940-1975.



This occurs because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, they invest it growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to take the opportunity to acquire political power and become rulers in their own right.

Peasant and Noble rebellions resulting from ''r > g'' were major causes for the disintegration of notable empires including The Ming and Western Rome.

to:

This occurs because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, they invest it growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to take the opportunity to acquire political power and become rulers in their own right.

right. Peasant and Noble rebellions resulting from ''r > g'' were major causes for the disintegration of notable empires including The Ming and Western Rome.
15th Aug '16 7:15:35 AM JulianLapostat
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* Thomas Piketty: Best known for his book ''Capital in the Twenty-First Century'' which has become #1 on the New York Times Non-Fiction bestseller list. Upon publication it was lauded as the most important book on economic theory and capitalist in the 21st Century by the likes of Paul Krugman, Emmannuel Todd, Paul Mason and several others. Piketty pointed out that inequality is a consequence of capitalism and can be checked and contained by state intervention and wealth redistribution, chiefly a global progressive income tax and restrictions on inherited wealth. Piketty pointed out that over time, when the rate of return on capital (r) is greater than the rate of economic growth (g) the result is concentration of wealth, and rather than trickling down, it merely increases the wealth gap if left unchecked and this leads to political and economic instability. While the title alludes to Creator/KarlMarx and makes countless references to the man in the book, Piketty is firmly in the tradition of classical and Keynesian economics and he argues by means of classical data collection and information tools, chiefly the Kuznets curve and investigation of the tax records published by France and United States among others, which means that it's the first real case for radical wealth redistribution in the classical-Keynesian tradition, backed by hard data and achieving a sizable academic consensus, although the book is still highly controversial among other economists who differ with Piketty's conclusions drawn from his research.

to:

* Thomas Piketty: Best known for his book ''Capital in the Twenty-First Century'' which has become #1 on the New York Times Non-Fiction bestseller list. Upon publication it was lauded as the most important book on economic theory and capitalist in the 21st Century by the likes of Paul Krugman, Emmannuel Todd, Paul Mason and several others. Piketty pointed out that inequality is a consequence of capitalism and can be checked and contained by state intervention and wealth redistribution, chiefly a global progressive income tax and restrictions on inherited wealth. Piketty pointed out that over time, when the rate of return on capital (r) is greater than the rate of economic growth (g) the result is concentration of wealth, and rather than trickling down, it merely increases the wealth gap if left unchecked and this leads to political and economic instability. While the title alludes to Creator/KarlMarx and makes countless references to the man in the book, Piketty is firmly in the tradition of classical and Keynesian economics and he argues by means of classical data collection and information tools, chiefly the statistical tools of Kuznets curve and detailed investigation of the tax records published by the state authorities of France and the United States among others, which means that it's others. This makes it the first real case for radical wealth redistribution in the classical-Keynesian tradition, backed by hard data and achieving a sizable academic consensus, although the book is still highly controversial among other economists who differ with Piketty's conclusions drawn from his research.
14th Aug '16 7:26:20 PM MAI742
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Failure to create adequate laws will prevent a market from arising, and failure to enforce existing laws will result in CriticalExistenceFailure.

to:

Failure to create adequate laws will prevent a market from arising, and failure to enforce existing laws will eventually result in CriticalExistenceFailure.CriticalExistenceFailure. This results from the accumulation of too much capital in the hands of the capitalist class, which occurs whenever the market's initial laws governing property-contracts-bankruptcy-monopolies and taxation policy do not specifically prevent it.



In the capitalist system, the average returns to the owership of capital[[note]] increase in the value of property[[/note]] (r) have always exceeded the average growth of incomes (g). If not checked, this eventually produces economic stagnation and wealth inequality which leads to political unrest which destroys the market.

to:

In the capitalist system, the average returns to the owership of capital[[note]] increase in the value of property[[/note]] property including companies, shares & bonds, land, factory plant, money, etc [[/note]] (r) have always exceeded the average growth of incomes (g). If not checked, checked this process eventually produces economic stagnation and wealth inequality inequality, which leads to political unrest unrest, which destroys leads to the market.market's dissolution.
14th Aug '16 7:50:46 AM MAI742
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Recently, 'Behavioural Economics' has produced microeconomic models capable of accurately predicting the behaviour of real humans by using psychological studies of how real people's actual consumption habits (which are logically inconsistent, impulsive, and mood-dependent). It is hoped that this discipline can be resolved with the macroeconomic models capable of accurately describing and predicting how the economy works in reality, which have been produced by using statistics collected from the real world. For now, so-called 'Empirically-based Economics' which uses the Scientific Method and real world data seems to be in vogue.

to:

Recently, 'Behavioural Economics' has produced microeconomic models capable of accurately predicting the behaviour of real humans by using psychological studies of how real people's actual consumption habits (which are logically inconsistent, impulsive, and mood-dependent). It is hoped that this discipline can be resolved with the macroeconomic models capable of accurately describing and predicting how the economy works in reality, which have been produced by using statistics collected from the real world. For now, so-called 'Empirically-based Economics' which uses the Scientific Method and real world data seems to be in vogue.
14th Aug '16 7:46:50 AM MAI742
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'''r > g'''

In the capitalist system, the average returns to the owership of capital[[/note]] increase in the value of property[[/note]] (r) have always exceeded the average growth of incomes (g). If not checked, this eventually produces economic stagnation and wealth inequality which leads to political unrest which destroys the market.

to:

'''r '''Capital Accumulation: r > g'''

In the capitalist system, the average returns to the owership of capital[[/note]] capital[[note]] increase in the value of property[[/note]] (r) have always exceeded the average growth of incomes (g). If not checked, this eventually produces economic stagnation and wealth inequality which leads to political unrest which destroys the market.
14th Aug '16 7:45:35 AM MAI742
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Capitalism is an [[UsefulNotes/{{Economics}} economic model]] which governments implement to organise society in a way that manages scarce resources. The strict division of Capitalism's economic from its political aspects is a FalseDichotomy.

to:

Capitalism is an [[UsefulNotes/{{Economics}} economic model]] which governments implement to organise society enable people to work in a way that manages exchange for scarce resources.goods and services. The strict division of Capitalism's economic from its political aspects is a FalseDichotomy.



The definition of Capitalism accepted by most is a system wherein certain individuals (the capitalist class) own 'the means of production' and dominate economic and political life. There are other definitions, but this is the simplest and least problematic.

'''Creation'''

to:

The definition of Capitalism accepted by most is a political-economic system wherein certain the individuals (the capitalist class) of the 'capitalist class' own 'the means of production' and dominate economic and political life. There are other definitions, but this This is the simplest and least problematic.problematic definition.

'''Creation'''
'''Government maketh Market'''



In Hobbes' anarchic 'State of Nature' there is no government, so there is no market. Markets exist because governments create them.

to:

In Hobbes' anarchic 'State of Nature' there is no government, so there is no market. Markets exist because governments create them.
and sustain them.

->''"The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the "rule of the game" and as an umpire to interpret and enforce the rules decided on."''
-->-- Milton Friedman, ''The Relation Between Economic Freedom and Political Freedom'' (2002)



'''r > g'''

In the capitalist system, the average returns to the owership of capital[[/note]] increase in the value of property[[/note]] (r) have always exceeded the average growth of incomes (g). If not checked, this eventually produces economic stagnation and wealth inequality which leads to political unrest which destroys the market.

This occurs because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, they invest it growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to take the opportunity to acquire political power and become rulers in their own right.

Peasant and Noble rebellions resulting from ''r > g'' were major causes for the disintegration of notable empires including The Ming and Western Rome.

'''Types of Capitalism'''

Here are the laconic versions of various types of Capitalism. There is a fundamental disagreement over whether or not capitalism is an iniquitous and self-destructive system. The flame wars that erupt over the proper role of the state in creating, maintaining, and guiding/not guiding the market and society are not worth getting into here. It's enough to know that there are deep conflicts between different schools of thought and that at times it seems they can't cooperate on anything bar opposition to total public ownership of the means of production.

*'''Oligarchic-Monopolistic/'Free Market'''': a strain which believes that government should structure the market to maximise the powers and profits of the capitalist class, it holds that all market actors almost always acquire wealth which matches their objective value and efforts. Advocates long-term/lifetime or even eternal copyright-patent ownership. Adherents believe that this strain is compatible with meritocracy and even democracy. All other strains fervently disagree on both counts.
*'''Classic Liberal/Libertarian/'Free Market'''': a strain which believes that government should structure the market to prevent the capitalist class from acquiring wealth through inheritance or acquiring too much market power (e.g. monopolies), it holds that market actors usually acquire wealth which roughly matches their objective value and efforts. Advocates long/lifetime copyright-patent ownership. Adherents believe that this strain is compatible with meritocracy and democracy. Some strains disagree on the latter count.
*'''Social Liberal/Social Democratic''': a strain which believes that governments should structure the market to prevent the capitalist class from inheriting wealth or acquiring it through means other than work, it holds that market actors acquire wealth which matches their ability to bargain with other actors as much as it does their objective value and efforts. Advocates the shortest possible copyright-patent ownership times which produce a return on the product's development. Adherents believe that this strain is compatible with meritocracy and democracy. Other strains disagree on the latter count.



For the sake of simplicity most 'macroeconomic' (large-scale, e.g. whole-economy) economic models assume [[ViewersAreGeniuses a completely rational consumer: one that always looks for the best, lowest price before buying, provided that finding it out isn't too costly]].

'Microeconomics' notes that actual human behaviour is very different as we rarely have perfect information, powers of reasoning, or self-control even on the rare occasions when we do look for the best price and think before we buy.

to:

For the sake of simplicity most 'macroeconomic' (large-scale, e.g. whole-economy) economic models assume In 'Classical Economics' it is assumed that [[ViewersAreGeniuses a consumers are completely rational consumer: one that and always looks for the best, lowest price before buying, provided buying a product that finding they want if buying it out isn't too costly]].will make them happier than having the money needed to buy it.]] These mathematically simple individual and small scale 'microeconomic' interactions are then substituted into mathematically complicated functions which describe 'macroeconomic' interactions - which were used to govern the world's economies from the 1970s until the Great Recession of 2008. Unfortunately, it transpired that actual human behaviour departs so far and so inconsistently from that which is predicted by the ''Rational Consumer'' model that the 'macroeconomic' models which use it are incapable of describing or predicting how the economy works in reality.

'Microeconomics' notes that actual human Recently, 'Behavioural Economics' has produced microeconomic models capable of accurately predicting the behaviour of real humans by using psychological studies of how real people's actual consumption habits (which are logically inconsistent, impulsive, and mood-dependent). It is very different as we rarely hoped that this discipline can be resolved with the macroeconomic models capable of accurately describing and predicting how the economy works in reality, which have perfect information, powers of reasoning, or self-control even on been produced by using statistics collected from the rare occasions when we do look for real world. For now, so-called 'Empirically-based Economics' which uses the best price Scientific Method and think before we buy.
real world data seems to be in vogue.

All that said, it is hard to contradict the assertion that Classical Economics ''could'' perfectly model the capitalist economy if people acted like Rational Consumers and not like, well, people.



To a certain extent, an economy can function without being made (controlled) to do so. If there is competition in a sector of the economy, supply will naturally increase or decrease to meet demand. An important concept at economics' inception in the 18th-19th centuries, The Hand was later discovered to have imperfect reach, dexterity, and strength. The extent to which governments should compensate for the hand's shortcomings is a matter of some debate, with some arguing that the hand should be replaced (Marxists) and others that it should be supplemented by government (Socialists and Social Liberals). Others still contend that there are no (big) problems with The Hand, or [[JumpingOffTheSlipperySlope that fixing The Hand's problems inevitably leads to a Marxist-type Controlled Economy]] (Classical Liberals/Neo-Liberals).

to:

To a certain extent, an economy can function without being made (controlled) In very general terms, demand for products tends to do so. If there is competition result in their supply. When a sector of the economy, a market is well run and competitive, there is also a vague tendency for supply will naturally to increase or decrease to meet demand. demand.

An important concept at economics' inception in the 18th-19th centuries, The Hand was later discovered to have be closer to an elbow - with imperfect reach, dexterity, strength, and strength.reach. The extent to which governments should compensate for the hand's shortcomings is a matter of some debate, with some arguing that the hand should be replaced (Marxists) and others that it should be supplemented by government (Socialists and Social Liberals). Others still contend that there are no (big) problems with The Hand, or [[JumpingOffTheSlipperySlope that fixing The Hand's problems inevitably leads to a Marxist-type Controlled Economy]] (Classical Liberals/Neo-Liberals).
4th Aug '16 1:43:20 AM MAI742
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Capitalism has actually been used to mean a couple different things:

The definition of Capitalism accepted by most is a system wherein certain individuals (the capitalist class) own 'the means of production' and dominate economic and political life. Various competing definitions have been created by supporters of capitalism and opposers of capitalism, but they are irrelevant here.

to:

Capitalism has actually been used to mean a couple different things:

The definition of Capitalism accepted by most is a system wherein certain individuals (the capitalist class) own 'the means of production' and dominate economic and political life. Various competing definitions have been created by supporters of capitalism There are other definitions, but this is the simplest and opposers of capitalism, but they are irrelevant here.
least problematic.



In Hobbes' anarchic 'State of Nature' there is no government, and so there is no market. Governments create and sustain markets in four ways:

* Property. Governments define what it is legal to own and how it can legally change hands, and must identify and punish those who break these laws.
* Contracts. Governments define what legally-binding agreements can be made between people or organisations, and must identify and punish those who break these laws.
* Bankruptcy. Governments define what happens when a debtor person or organisation is unable to meet its obligations to creditors, and must identify and punish those who break these laws.
* Monopolies. Governments define the level of power a person or organisation can have over others, and must identify and punish those who break these laws.

to:

In Hobbes' anarchic 'State of Nature' there is no government, and so there is no market. Markets exist because governments create them.

Governments create and sustain markets in four ways:

by creating and enforcing laws. These laws must govern:

* Property. '''Property'''. Governments define what it is legal to own and own, for how long, how it can legally change hands, and must identify what you can do with it.
* '''Contracts'''. Governments define what
and punish those who break these laws.on what terms legally-binding agreements, including the act of buying/selling, can be made between people or organisations.
* '''Bankruptcy'''. Governments define what happens when a debtor person or organisation is unable to meet its obligations to creditors.
* '''Monopolies'''. Governments define how powerful a person or organisation can be.

Inadequate laws or law enforcement causes problems:

* '''Property''': less production due to risk of theft, freedom of powerful individuals or organisations to steal.
* '''Contracts''': less consumption due to suspicion, freedom of powerful individuals or organisations to dictate terms to others.
* '''Bankruptcy''': less lending and investment due to suspicion.

* Contracts. Governments define what legally-binding agreements can be made between people '''Monopolies''': freedom of powerful individuals or organisations, organisations to dictate terms to others, potentially including the government itself.

Failure to create adequate laws will prevent a market from arising,
and must identify and punish those who break these laws.failure to enforce existing laws will result in CriticalExistenceFailure.
* Bankruptcy. Governments define what happens when a debtor person or organisation is unable to meet its obligations to creditors, and must identify and punish those who break these laws.
* Monopolies. Governments define the level of power a person or organisation can have over others, and must identify and punish those who break these laws.
3rd Aug '16 11:09:24 PM JulianLapostat
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to:

* Thomas Piketty: Best known for his book ''Capital in the Twenty-First Century'' which has become #1 on the New York Times Non-Fiction bestseller list. Upon publication it was lauded as the most important book on economic theory and capitalist in the 21st Century by the likes of Paul Krugman, Emmannuel Todd, Paul Mason and several others. Piketty pointed out that inequality is a consequence of capitalism and can be checked and contained by state intervention and wealth redistribution, chiefly a global progressive income tax and restrictions on inherited wealth. Piketty pointed out that over time, when the rate of return on capital (r) is greater than the rate of economic growth (g) the result is concentration of wealth, and rather than trickling down, it merely increases the wealth gap if left unchecked and this leads to political and economic instability. While the title alludes to Creator/KarlMarx and makes countless references to the man in the book, Piketty is firmly in the tradition of classical and Keynesian economics and he argues by means of classical data collection and information tools, chiefly the Kuznets curve and investigation of the tax records published by France and United States among others, which means that it's the first real case for radical wealth redistribution in the classical-Keynesian tradition, backed by hard data and achieving a sizable academic consensus, although the book is still highly controversial among other economists who differ with Piketty's conclusions drawn from his research.
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