Free Market Economics: Why Do We Exchange Things? – Learn Liberty

Free Market Economics: Why Do We Exchange Things? – Learn Liberty


In 1944, at the height of World War II, a
British economist named Radford was serving in the army. He was captured and lived in
prison camps for more than a year. Prisoners at the camps received Red Cross packages that
contained food, cigarettes, and a few necessities. These were precious supplies in POW camps.
At first, prisoners gave away the things they didn’t like, but before long they started
trading instead. Radford’s explanation of this behavior may surprise you. Very soon
after capture people realized that it was both undesirable and unnecessary in view of
the limited size and the equality of supplies to give away or to accept gifts of cigarettes
or food. “Goodwill developed into trading as a more
equitable means of maximizing individual satisfaction.” More equitable? Really? Why would exchange
be more equitable than gifts? Well, in a voluntary exchange, both parties are better off, or
they wouldn’t trade it all. Gifts are nice but only the person receiving the gift is
better off. Of course the giver might expect a gift in return, but then, that’s exchange. There are two reasons that this is important.
Exchange corrects mistakes in allocation because it moves stuff towards higher-valued uses.
And exchange makes everyone who exchanges a lot happier. There are two basic origins
of exchange, and both are important. First, same stuff different preferences. Let’s
say we go on a field trip with boxed lunches that each contain a sandwich, chips, pickle,
and a cookie. I like chips and you like cookies. I threw in my pickle to get you to agree,
and we make the exchange. We’re both happier with our lunches even though we’re still
dealing with the same amount of food overall. Second, there’s same preferences, different
stuff. Suppose I have apples and you have oranges, but we both prefer eating fruit salad
with the two mixed together. If we exchange, then we can both have fruit salad. We’re
both happier with the same amount of fruit. That’s remarkable. In a world of scarce resources, each voluntary
transaction means that people get happier without any change to the total wealth that
was available. That’s what makes trade so powerful. What if we have different stuff and different
preferences? I do an exercise in class to illustrate this. I give away T-shirts to my
students, but I cheat. I make sure almost every one of them ends up with the wrong size.
So I ask, are you happy with your T-shirts? Maybe 10 percent say that they are. Then I
let them exchange shirts if they want to, but only with their neighbors in the same
row. Nonetheless, shirts move. You trade with your neighbor, she trades with hers; the shirts
travel around, improving the welfare of both buyer and seller at every step. When it’s
over, maybe 30 percent of the students are happy with their shirt. It’s a big improvement
but still not great. Then I let people trade with anyone in the
class. The class goes wild. Extra larges trade for small, mediums for larges, and so on.
It looks like chaos with people waving shirts, calling out sizes. No plan, no direction,
but at the end of trading, how many say they’re happy? Ninety percent or more. The same number
of shirts at the start, no one in charge, and yet we went from 10 percent satisfied
to 90 percent satisfied. Some of the shirts changed hands many times. No one knew where
the shirt was headed—it just went. And everyone who exchanged was happier. It seems like magic,
but it’s just markets.

100 Comments on "Free Market Economics: Why Do We Exchange Things? – Learn Liberty"


  1. You live your life in a house or apartment with public water, plumbing, electricity, things that were a luxury years ago. Things that still are a luxury in some parts of the world. You probably own a cell phone, computer, TV, etc. Some things you own people didn't even imagine 30 years ago. You probably have a stocked refrigerator, a different wardrobe for each day of the week and act like someone has robbed you blind. Most people have a good life if they want it.

    Reply

  2. No, it is NOT relative. People in our "glorious" country are not receiving the medical care that they desperately need. And why is that? Because we have corporations that have taken over our democracy to force us to buy their insurance, just so that their CEOs and shareholders can get rich! Am I the ONLY one who is appalled?

    This is not just a matter of rich and poor. It is a matter of power and control, of the masters ruling the slaves. It's unfair, and America is not a free country at all!

    Reply

  3. No. What we need to do is take our democracy back FROM the corporations. The reason why our government is so broken is because the top 1% have used their billion$ to make our votes worthless. Regulation would protect us from corporate greed, BUT ONLY IF WE TAKE OUR DEMOCRACY BACK. I am afraid that it is too late, though.

    Reply

  4. It is impossible for a country of our size to be united on the issues. What works in New York is not the same as what works in Texas, Kansas, or California. Every area of the country has its own regional and demographic issues. You keep using small countries as examples. Again, when has your ideas ever worked for large countries. Regulation will not protect us, because the regulations will be written by those in the corporate world.

    Reply

  5. Health insurance is a joke. People should get a health care savings plan. Health care spending per person per year in the US, including insurance and everything is about $8,400 per year. However, I've figured that if you were to run a savings program that buys gold or some other interest gaining commodity, you could get buy on $2,000 or less per year and have enough to get the same health care. No insurance, no government assistance your entire life.

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  6. The biggest issue in health care, is that we know we will have future expenses, yet we buy insurance which nets in a loss due to administrative and profit costs instead of investing. Its also why the rich own everything. The people that get rich are the people who invest. You can't own anything if you don't buy anything. Of course, now we have Obama Care which mandates we pay into the insurance companies which ruins our chances of dealing with the issue ourselves.

    Reply

  7. You are saying that I do not want to give people in low-paying jobs opportunities? Hardly. I DO want opportunities for all, too. What I do NOT want is opportunities only for people who already have all the wealth and all the power. The best way to provide opportunities for the bottom 99% is for government to take back what the obscenely rich have taken from us, and to invest it in society by ensuring free healthcare and free education for all. Our government is SUPPOSED to serve US!

    Reply

  8. The more expensive it is to do business, the less businesses invest in production in your country. Why do you think everything is made in China? They rich don't pay a dime more in taxes when you raise taxes. They just change which countries they pay taxes to. There is no such thing as free healthcare or free education. It all has a cost. You think someone else fitting the bill will give you freedom, but whoever fits the bill does the rationing.

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  9. The government is suppose to protect the rights of life, liberty, and the pursuit of happiness. Forcing people to pay extreme taxes and forcing services and regulations on people is not protecting liberty. Taking from one and giving to another by force is not liberty. Also, nothing was taken from you. When you buy something at a store, you come to an agreement on the price or you don't buy. Same for everything else.

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  10. Just because some people have more than you, doesn't mean you were stolen from. And you keep saying take back our government. Take it back to what? I certainly don't want the kind of government you do, so how is that empowering me? You say take back for the people, but you really mean yourself. You really mean have the government run the agenda you want. Stop including everyone in your statements, because not everyone agrees with you.

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  11. But the top 1% does not just have more than me, they have A LOT more! And they keep getting more. Meanwhile, the middle class gets nothing! Have you seen how our incomes have increased NOT AT ALL since 1980 (when adjusting for inflation)? American capitalism is all about power and plunder. The top 1% is the new aristocracy. CEOs and hedge fund managers do nothing, and yet they pay themselves HUGE salaries. You are correct: the rich have not stolen from me. THEY HAVE PLUNDERED ME!

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  12. "Take back our government to what?" you ask?. To democracy, where one person has one vote — that's what! Today, the super-rich use their billion$ to get tax loopholes so that they pay NOTHING in taxes. This is not democracy. This is PLUTOCRACY. How can you say that I want to take the government back to myself? Huh? I want a government by the people, for the people, and of the people. I believe in what most sensible Americans believe in. Americans know that "free-markets" empower only the rich

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  13. Here's an example of how the Corporate Right is looting and stealing from me: the housing bubble was caused by the deregulation of banking under Republicans. Greedy bankers tricked low income people to buy homes, just so that they could speculate in real estate with "other people's money". Then came the crash, and banks were ruined. But who bailed out the banks? The middle class! So, CEOs and bankers get to keep their profits and fat salaries, and the bottom 99% has to bail them out.

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  14. Here's another example: private equity snakes (like Mitt Romney and Bain Capital) buy a company. Then they lay people off by the thousands, saddle the company with crushing debt, sell the ruined company to another company, and they get to run off with billion$ in profits. What's worse is that they use their profits to get loopholes in the tax code, so they pay NOTHING in taxes. So now who has to pay for our free education, free healthcare, roads, etc? The middle class!

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  15. Now I know you are the one reading propaganda. How is there a profit in buying a successful business, running it into the ground, and then selling it. Businesses sell at the highest price when they are successful. Your story makes no sense at all. I'm sure Bane Capital buys failing businesses at a fire sale, because the businesses want to sell quick, and then Bane Capital holes on to the real estate until the right buyer comes along. Selling quick normally means selling cheap.

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  16. Who bailed out the banks was the government, who stole the money from the middle class. If it wasn't for the government safety nets, the banks wouldn't have loaned so carelessly in the first place. Banks don't pass Bills, congress does. TARP was a bill that passed in congress that led to the bank bailouts.

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  17. Tax loop holes are caused by an over complicated tax system, just like legal loop holes are caused by an over complicated legal system. Congress passes hundreds of bills each year. Do you really think congressmen can even remember all the bills they have passed, let alone read them? This leads to mistakes, some accidentally and some intentionally slipped in to bills that no one actually reads.

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  18. So you are telling me all that money is from you? Some of that money is inherited, which is unfair yet fair all in one. If you work hard and save for future generations of your family, then they should get that money, even though they didn't earn it themselves. Some is a result of contracts and deals made in the free market. If someone else you something and makes a profit, they didn't steal from you as you agreed to the terms of the sale.

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  19. Your only argument for theft remains that some people have more than you. That does not equate theft. I have an uncle that was a CEO and he worked 100 hours a week, but you say he did nothing? Full time work is 40 hours a week.

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  20. Your realse the government incentivised and actually forced in some cases the banks into giving out loan to high risk people? The ones who were unlikely to replay their loans? That is why the bill out happened, the government promised to come in and save the banks if this went wrong.
    And they are still doing it, amazing really.

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  21. I commend your uncle for working so hard, and for being a CEO who is worthy of the title. But I will bet that he is not in the top 1%. The CEOs of large corporations do NOTHING for their company. That's why they aspire to being CEO: to pay themselves hundreds of million$ for doing no work. If they run their company into the ground, they either get bailed out, or they get a golden parachute — the free market at work, folks!

    I want an America where hard work is rewarded, not psychopathic greed!

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  22. are you stupid? The CEO made the business that gave all those people jobs
    or made a invention that helped mankind solve a problem the CEO spent years studying business and if they are making 100 million or more $ they did more to help mankind then you your mom, dad, everyone you know put together. Plus you say they do nothing for there company they MADE the company and is hard work and may take years to become a large corporation

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  23. Holy crap! You sound like an Ayn Randian. She actually believed that CEOs deserve their pay and that they were heroic. Can you believe that? Ha ha ha ha ha! What a TOTAL joke. I am not even sure whether we have a word in the English language to describe how much of a delusional nutcase she was. Everyone knows that CEOs of large corporations got to the top ONLY by ruthlessness and backstabbing. They are modern day WARLORDS! And yet in America, we allow this injustice to happen.

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  24. There are CEOs that are crooked and CEOs that do not work according to their pay, but I'm sure the lion share of CEOs actually aren't that way. If they were, every company in the US would fail all the time. Its good for a CEO to make more than he is worth, but its not good for the company and companies that over pay CEOs go bankrupt without government interference. That's where bailouts come in, subsidizes come in, and regulations designed to squash competition rather than encourage it.

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  25. The issue is that politicians work for those who can get them elected. That means campaign finance which means rich, powerful people. The reason why people lobby politicians is because politicians have a lot of power. Enough to go to war if they are willing. This power attracts lobbyists and gives an incentive for corrupt people to seek office. The more power you give the government, the more incentive for corruption.

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  26. You might ask for the voters to wake up, but how can they realize what is going on? Congress passes several hundred bills a year and you expect the typical voter to understand what they are voting for? To understand the track record of who they elect? Everyone that votes just picks and candidate and hopes. If there is any hope to "take back our country" its by having a simpler government. One that people can follow and understand.

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  27. But Sweden, Denmark, Norway, and a few other countries have big governments, and yet they do not have the corporate tyranny that we have. They have democracies that really work. Their billionaires actually pay their taxes because they know that it is in the best interests of all that they do. Their governments actually provide social services to all of their citizens, rather than war mongering. Why can't we have democracy? Why do we have so many greedy, power-hungry people?

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  28. For the millionth time, its easier to manage small countries. Each one of those countries is like the size of a state in the US. Its easier for the citizens to know what is going on, because the national issues are also the local issues. Also, there is less incentive for corruption from foreign powers, because none of those countries mean anything on a global scale.

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  29. Also, I'm willing to bet you've never even been to those countries. You know a couple economic statistics you looked up on the internet, but that's far from the full story. For example, their government passed what was considered a very extreme version of SOPA, a bill that Americans almost rioted to prevent. Just because their government makes people pay higher taxes doesn't mean everything there is better. Do they really work in the best interests of everyone there?

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  30. You do also realize countries benefit from the fact that the US, like it or not, is the world police. Norway spends 1.7% of its budget on military, compared to the US that spends 19% of its budget on military. Imagine if the US had an additional trillion dollars to spend on other programs. The countries just are not similar in any way.

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  31. So, you are just going to allow the Corporate Right to continue to destroy our democracy and take our rights away just because America is "too big"? I am not ready to give up on my country. We CAN NOT allow the billionaires to get away with this injustice! That is what caused Adolph Hitler to get elected: the middle class of Germany allowed him to seize power. It might be too late, though. Ronald Reagan utterly gave the country to the corporations, and we have been going downhill since.

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  32. We WOULD have an additional trillion $ to spend on desperately needed social programs if only we could get the super-rich to pay their fair share. When billionaires bribe their puppets in the GOP to give them tax breaks, this deprives EVERYONE in the country from the social services that we want and that we deserve. It is essentially mass theft.

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  33. Not at all. The government is what allows the corporations to become too big to fail. What you don't seem to realize is that there are major disadvantages with being a large company and if the government would stop protecting corporations, small businesses would thrive. Hitler did what he did because people wanted the government to solve its problems. You can't control a population without power and the people gave all their power to Hitler.

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  34. A few years ago, the world had a chance to get rid of the corporate system, but the governments had to step in to protect national interests and the "little man" because government and corps are interdependent institutions.
    The main fascist economical doctrine was corporatism – a system where corporations, worker unions and government work together to benefit the nation. Sounds familiar?

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  35. I'm not sure what you mean. Republicans believe in corporatism, in which the corporations have all the power, and the middle class can never rise. Also, Republicans are fascists, if that's what you mean. Just look at how they blame illegal immigrants on EVERYTHING, how they believe in war and nationalism, and how they use simple black-and-white and us-vs-them arguments to win over the simple-minded.

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  36. Yes, of course the government needs to protect workers and the middle class from corporate tyranny. The government needs to stabilize the economy, provide essential services, invest in society, regulate prices, and so on. But our democracy has been taken over the corporations — "corporatism", as you say — so that our government is not serving its people at all. It serves only the corporate masters. When is this going to stop?

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  37. Both Republicans and Democrats are corporatists. Both parties support bailouts, wage wars, big government. The Democrats started the Vietnam War, the Republicans started the Gulf Wars.
    The current administration is fascist. Why can't you try to look from a broader perspective?
    If you Americans want the world to look at you seriously, you have to change the political system. Vote Libertarian or Green.

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  38. No government in Europe regulates prices (only a few products). Once you regulate prices you don't have a market economy anymore. What else? You want to nationalise the industries?
    In Europe we have a system in which students can freely change schools that fit their standard of education. So parents choose the best school. If a school has little students and bad results is closed down.
    In the US you spend money on schools and teacher's unions not children. That's why your education is shit.

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  39. It suprises me that Americans are looking to socialist policies while in Europe we are looking to market solutions to become more competetive and boost our economies.

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  40. I agree that government should finance essential services (like education and healthcare), but should it provide them? Do you support nationalising private schools, hospitals and clinics? I think the private sector should play a greater role in these sectors, not the other way around. The government should finance the treatment of patients and they will choose the best doctors. They are moving in that direction in Canada.

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  41. I agree that we have to change our political system. We need to get the money out of politics. The corporations and the super-wealthy have used their billion$ to take over our government, and it might be too late to restore our democracy, even if Democrats win every election from here on out. I don't know what you mean by "the current administration is fascist". You must mean George Bush — but he is not president now.

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  42. What? In America, we hear about "market solutions" because of a massive propaganda effort by the Koch Brothers and a few other billionaires in Texas. This, of course, is just a euphemism for TOTAL CORPORATE POWER, in which the middle class is reduced to serfdom, and we have ZERO democracy. By now, EVERYONE should know that free market policies are totally disastrous. The world economy is still in the dumps thanks to right-wing "trickle-down" economics.

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  43. I am NOT saying that we need to "nationalize" industries. I just want to do what is right — for the middle class and for the whole country. Without government protection, the "free-market" will cause all of the wealth and power to be concentrated in just a few greedy, backstabbing psychopaths, sot that there are no social services. The middle class can't exist without government regulation and government investment (in schools, green energy, green jobs, healthcare, etc.)

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  44. Most European countries are moving towards market driven economies and fiscal austerity.
    Countries like Greece and Spain that spended without common sense had to pay the price. The US is similar – the left wants to spend on social issues, the right on the military budget both without any fiscal responsibility. You are a nation that lives on debt and you will pay.

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  45. Obama is no better and he reports to the same people. We want US bases out of Europe and for you to stop policing the world. Look at how many countries you invaded in the last 50 years. I can't name one president (Republican or Democrat) that hasn't started a war or staged a coup d'etat. The Democrats that you support invaded Vietnam, bombed Laos and Cambodia. Millions of civilians suffered and it took… Nixon to end the bloodshed.

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  46. Not only the rich have to pay the taxes. Everybody should. If you want good healthcare and education prepare to give half of your income in taxes. That's how we do it in here. If you overtax companies they simply move production abroad and the rich move to tax havens. The US corporate tax is highest (35%) in the developed world and you wonder why all of your factories are abroad.
    Americans are weird because you don't want to pay high taxes, but you expect the government to fund services.

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  47. But we do want to pay high taxes. America is crying out for an across-the-board tax increase. The trouble is that the super-wealthy use their riches to bribe their puppets in the Republican Party to keep their taxes low. Heck, most of them pay NOTHING in taxes, which means that the middle class has to pay for our free healthcare, free education, and other social programs. It's unfair! Our political system is all wrong. It's not democracy. A small number of powerful people control EVERYTHING!

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  48. If the rich and the corporations move their wealth and factories overseas to evade taxes, then we need our government to stop this travesty. People like you just think that it is inevitable that capital will flee high taxes, so you don't put up a fight when it happens. But there is a solution: MAKE IT ILLEGAL TO MOVE CAPITAL OUT OF THE COUNTRY! Then it can be taxed, as it should be. Note that this only works if you have democracy. In America, we don't. Instead, we have right-wing PLUTOCRACY.

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  49. The "Fiscal Austerity" in the Euro Zone is a CRUEL JOKE! It isn't working. In fact, it is DESTROYING the middle class of Spain, Portugal, Greece, Italy, etc. What they need is MASSIVE government stimulus spending in these countries. All experts agree on this!

    I wonder whether the Koch Brothers have bribed the Euro Zone central bank to forbid the stimulus policies that will save Europe. That's the kind of evil that the Koch Bros. do.

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  50. "MAKE IT ILLEGAL TO MOVE CAPITAL OUT OF THE COUNTRY! "
    Are you going to put limitations on human travel? Violate property rights?
    That kind of thinking belongs in previous century along with nationalism. We have a global world now. It's time to move beyond nations – that's why we have the EU. You are still living in the Cold War.

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  51. We are mostly in agreement here: politicians work for the fat cats, and campaign finance is key to our democracy, and the super-rich LOVE going to war — anything for a profit! That's the GOP for you!

    Of course, we need to get the money out of politics, but the Corporate Right bribed the Supreme Court to strike down the protections against campaign finance in the Citizens United case. How did the corporations get away with this so easily? This is the death knell for our democracy.

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  52. Keynesian economics don't work at all. It gets countries into debt they can't pay. The countries that you mentioned have been spending and for years. The rest of Europe will not pay for their ridiculous polies any longer. If they want stimulus they'll have to stimulate from their own budgets

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  53. That and the Supreme Court stopping programs like ABSCAM. Its not right for politicians to get caught in a sting operation, but the police use sting operations all the time to catch criminals in the public.

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  54. Going to war being profitable is really a myth. What does war create? Perhaps it creates need which could increase production, but I don't really buy that as that's to say that people don't have needs outside of war. As far as the US military, its sort of needed since Europe is so dysfunctional. After WWI, we thought they'd learn their lesson. After WWII we demilitarized them which put an end to World Wars, but now we pay for their defense. Same for many parts of Latin America and Asia.

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  55. As far as political parties are concerned, the main criticism of the GOP from conservative groups is that they do not support small government like they say they do. For example, under George Bush and a Republican majority in the house and senate, we actually increased government spending. The criticisms of the Democrats, is that they do not actually help the poor and actually support big business. Obamacare just forces everyone to buy insurance. Who profits from that?

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  56. I do not propose putting limitations on human travel. If the super rich want to leave our country and plunder someone else, then that's fine with me! But we DO need to prevent the rich from taking their money out of our country so that they can dodge taxes. We also need to stop corporations from shipping jobs overseas. Factories and manufacturing machinery should NEVER be allowed to leave, nor should jobs. Corporations should be REQUIRED to hire American workers.

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  57. As for violating property rights, this is a straw man argument. "Property rights" benefit only the people who already have all the wealth. Most Americans have nothing. "Property rights" is such a silly, meaningless term. It really is just another example of right-wing propaganda, much like "trickle-down economics". What a SCAM! It really means that the rich and the corporations have the "right" to plunder the middle class.

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  58. People who had their property taken away from them by court order because a developer wanted to build a shopping center and they didn't want to sell wouldn't agree. Property rights should be protected because they are fundamental just as personal inviolability and freedom of expression.

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  59. If you go on a trip to Liberia (just an example) for example and confiscate your luggage and refuse to give it back because it'll serve the less wealthy would you comply?
    Besides manufacturing jobs are declining not only because of outsourcing but also automation. Information technology and automatic manufacturing robots are making manufacturing more efficient and cheap. So in 10 – 20 years much of the jobs won't be outsourced, they simply won't exist.

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  60. Are you one of those economic nationalists? Would you reprimand somebody for buying Toyota, Volvo or BMW, instead of GM or Ford? Because the goal of manufacturing companies is not to create jobs, it's to create products for customers and for this they have to be competetive. If the prices of their products are too high and the quality isn't better than customers, at home or abroad, are not going to by their products.

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  61. As I have said before, what you're proposing is simply nationalism. This has no place in global world. In Europe we have created a model for the future world where capital, ideas and people freely transfer between countries. This should become the way of thinking instead of the old nationalistic way of "us and them". Americans are lagging behind (both left and right),

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  62. Am I a nationalist? NO WAY! Nationalists are Republicans. They mindlessly wave their flags and recite the Pledge of Allegiance with their hands on their hearts, being filled with "national pride" — which really means that they love war and they love their guns.

    What I am proposing is putting the brakes on corporate greed. CEOs ship American jobs overseas to cut labor costs just so that they can give themselves raises. Throwing Americans out of work should be illegal!

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  63. It is disturbing that you, not an American, would resort to the mean-spirited right-wing name-calling that Rush Limbaugh, Fox News, the Koch Bros, etc use all the time in my country. If anyone criticizes free-market fundamentalism, and tries to remind people that we need to think of the needs the middle class and the needs of the country as a whole, not just profits, then we get called "commies", "socialists", "nationalists", etc. Only in America is having a conscience considered a crime!

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  64. The only problem is that there is an asumption in this that both traders are in equal positions

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  65. Thats, with all do respect, nonesens. I know its not good that Americans are thrown out of the work force but if you want to pay for your stuff then you must accept that in other places the products are produced cheaper. And the salaries of the CEO's and the dividend of the shareholders doesnt even come in play, the salaries outweigh the number of money the CEO gets, so thats not the problem.

    Want American jobs? Stop calling for regulation, without the minimum wage you get what you want.

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  66. Am I a nationalist? NO WAY!

    +

    Throwing Amaricans out of work should be illegal!

    =

    Somebody that clearly does not understand what they are saying and is only capable of parroting rhetoric. Being concerned with American workers over workers in other nations is nationalism. Being concerned with anyting within your nation over other nations is nationalism.

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  67. Even if one trader starts off with more resources, both traders will still be better off. For example:

    Apple has much greater resources than I, but Apple and I are better off when I trade my money from an iPad.

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  68. True, but even this requires a minimum in order to participate in a manner that benefits you. You have to have enough to afford the iPad in the first place. Say 60% of the world moves to trading on iPad's (we're assuming a good thing), if the other 40% can't, then rather then being in a better situation, they are actually weakened because they are cut out of the marketplace. Advancements are great, but there has to be a possibility of equalizing the playing field if all are to be helped by them.

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  69. If iPads didn't change over time, you *might* have a good case, but consider that new iPads become used iPads. Also, newer iPads will be valued greater than older iPads. Over time, the older and used iPads will be available to the poorer people in the nation. We actually have good studies indicating that poor people in the U.S. usually benefit from new technology about 15 years after the technology is invented. Think of things like A/C, Refrigerators, Cars, Computers, smart phones, GPS, etc…

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  70. That is my point actually. Advances in technology do tend to raise the average in the areas they come to, however, "unnatural" actions are taken to balance there is a significant lag, and in the mean time the world moves on. A 15 year lag would put a person today with a pc from the mid 1990s and dial-up, less fuel effectient (and therefore expensive) cars, etc. This means one side (the poorer group) is always disadvantaged and the other advantaged, meaning they are unequal in the market.

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  71. The flaw in your thought process is that you assume the rich and poor are continually the same people as the years go on. The truth is that most people move up and down through the economic statistics over their lives. For example, I was a statistical “poor” person in 2005 because I was a college freshman! Of course, 4 years later, I became middle class and gained access to more innovations and technologies with my increased pay. Most begin poor and gain wealth until they hit their 50s.

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  72. Yes, there is indeed some social mobility, but what your describing as the simple statistics of the middle class including a poverty faze during school doesn't mean that this is social mobility. It is planned that you will be poor while at school but will be rewarded after by joining the middle class. However, say you help your children to go to school, like a responsible parent, they too would still become middle class after their own "poverty" phase. Generationally you remain in the middle.

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  73. Likewise, a working class background tends to support people becoming working class and the rich becoming rich. Between networking connection, higher quality schooling and other benefits the rich background child enters the market with a privileged position. Having had friends who were children of major CEOs I can vouch for this. It doesn't make them morally bad and doesn't 100% guarantee they will retain the position as rich later, it just exemplifies that the market is unbalanced. If we only

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  74. look at the individual's situation, your mention about the statics becomes more powerful, but the rags to riches stories are really rare, and the rich sent down to absolute poverty are also rare. There is a reason one sees "political dynasties" in the US, (Bushes, Kenedys, etc) because the same principle is applied. Also, most of the rich are not the new wealth types like celebrities. They are old wealth which pass on their advantages to their kids. The poor pass on their disadvantages instead.

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  75. I suggest reading this study and drawing your own conclusions.

    Google: "Income Mobility in the U.S. from 1996 to 2005"

    Read the PDF

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  76. Thank you Tom for your suggestion. I will say first off that I only read 10 of the pages, and the last 5 mildly quickly. So as I'm sure you know, statistics are just a nightmare when mixed with ideology, and I think we both can agree that this was a political work, not simply a neutral report, which was apparent after pages 2 and 3. While I fear that there is simply an impasse in this matter between us, for your consideration here are three web page supporting the other side I have been arguing:

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  77. Help me understand, please. Not everyone who exchanges is necessarily happier. Sometimes you have limited resources, knowledge, and/or skills to exchange with so you use what you have, like getting payed for hours worked at a blue collar job. I identify as an an-cap, but sometimes I wonder if capitalists are ignorant of real issues people face.

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  78. Happier does not equal happy. Just some level of satisfaction better than before the exchange. You may not be happy with the wages you earn at a blue collar job, but you are happier trading your labor for money (and then for food) than you would have been not eating at all. The issues with capitalism usually boil down to the exchange for necessities. An exchange makes both parties happier ONLY when the exchange is voluntary. Is there a point at which need makes it non-voluntary?

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  79. "Is there a point at which need makes it non-voluntary?" What so because people have desires all exchanges are non-voluntary? Even if you are starving, you are still better off with food and will trade a lot of stuff to have it.

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  80. If someone puts a gun to my head and says "your money or your life", it is not a voluntary exchange although we are both normally better off (I live, and he is richer), and I am happier to be alive than dead, but not much happier. I am asking if there is a point a which a NEED (basic food, clothing, or shelter to sustain life) can become the equivalent of a gun to one's head, or at least a means to exploit and distort the market. Doesn't happen in the theoretical free market, but real world?

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  81. Okay, consider the real world – we don't observe upwardly distorted prices for necessities. Consider food prices, clothing prices, and shelter prices – all at or below historical standards, or higher quality (Americans today consume far more calories and live in larger houses than people in the 1950s).

    Need is never an equivalent to a gun because need always comes from within whereas guns need someone to do the pointing.

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  82. If you've ever been to a Boy Scout Jamboree you will see an exchange system of patches self-organize in 24 hours or less. It's one of the most remarkable examples of free trade you could ever witness because it's carried out by kids that are 18 or younger.

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  83. That's why it's up to the individuals to get an understanding of the things they are exchanging. Those who suffer losses are the ones who did not put in enough effort relative to their natural ability to perceive value.

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  84. That's a risk that both parties must assume and calculate for when they make an exchange. Besides, any way you slice it, any sort of intervention on behalf of the government cannot equate for and solve this problem and will likely have unintended consequences on other sectors of private exchange.

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  85. Besides, this is about wants. If both people really want something that the other has, even if they both end up getting something worse than what they had (which isn't possible in 2 person exchanges, only one person can end up objectively worse off in worst case scenario), they don't know it. They wanted the other item. They got it. They assume responsibility of that trade if later on they realize they got a bad deal, because the exchange was voluntary

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  86. Big problem with one assertion, exchange only corrects mistakes in allocation when we assume that individuals have equal starting resources of some kind. Once you introduce a power dynamic into the mix, then those with resources can profit FAR more than their trading partners.

    Take the apples and oranges example. If the orange person is the only person with oranges, while there are three people with one-third as many apples,The person with oranges can make sure that no one gets fruit salad unless he gets more apples than he gives oranges. This leads to the apple people trading at a rate that leaves them with less fruit salad than they could have had and the orange person with all the fruit salad he could expect plus extra fruit. 

    The problem was not corrected, it was replaced by a new problem that cannot be solved by free markets. 

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  87. and what if one of them is made in China, another is a LV, and there are just too many other brands. Can you make sure ppl can still maintain a sense of fairness in the same game? why is it that only shirts get traded. And when the game is so limited, it merely remains as a game. although it might illustrate the function of exchange, many more are hidden from what is really going on in the real world. 

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