From: lewchuk@cs.UAlberta.CA (Michael Lewchuk)
Subject: Re: A minor problem
Organization: University of Alberta, Edmonton, Canada
Distribution: usa
Date: Fri, 1 Jan 1993 04:03:08 GMT

sa114984@longs.LANCE.ColoState.Edu (Steven Arnold) writes:
>	In general, technology vastly expands the resources available.  Two
>centuries ago, who would have ever believed that the earth could produce 
>food as it does?  Nobody!  We have ample food today
>because of free market profit-seeking
>principles.  The free market, in effect, CREATES, INVENTS new resources.

I think you're confusing sheer survival motive with entrepreneurism.  Survival
has been far more an issue in the past than simple entrepreneurism and will
probably be the one key motivation for a long, long time, even surpassing
"bettering yourself", at least until survival is guaranteed.  Personally I
do not equate "free market", "bettering yourself" and "survival motivation".
The freer spread of ideas has been the foundation of, and the basis for,
the free market, and benefited us in many ways such as the spread of science,
far before sheer profit motive was considered in many places.

>|> 2) Environmental issues - I don't see environmental concern arising
>|> naturally from capitalistic goals (or at least until the environment is
>|> way too polluted to recover)

My comment: this I see as a personal failing of our species rather than a
problem with Objectivism or many other capitalist systems.  In general we
are a rather shortsighted bunch of people.

>|> ones, ... Unfortunately, we've seen that companies tend to collaborate
>|> to fix prices, squeeze out new competitors,

>Suppose companies A and B collaborate to fix prices at an abnormally high
>level.  Wouldn't people buy company C's product?  Ah, you say, but suppose A, B

This argument is often made and has one simple counterargument:
If company C and D and E etc. are not seen as being establishable (in other
words, if they cannot sustain economic attack by A and B) they will not be
created.  Also, A and B may try to sell products at below cost, thus outselling
C and D and E, and distribute the cost on other products and blame it on
inflation.  The problem is that businesses C and D and E may be very feasible
in the long-term but cannot establish themselves unless they have a lot of
support capital to withstand and counter the economic damage that A and B's
pricing policy will have.  And this kind of attack would be a large deterrent
against people wanting to establish a business: even to get the point of
having a somewhat profitable firm they have to undergo a vast initial loss.
Unless there would be a group who would be willing to take that large loss
available, and sustain it as long as necessary (thus having more economic
power than A or B), the investment would not be feasible since the company
would go bankrupt before it had a chance to be feasible.

>C would have to lower their prices again.  The point is this: in a free market,
>no company can keep its prices artificially high for very long.

Assuming of course that there are investors D, E, etc. who are willing to
go bankrupt for the sake of the public good (namely keeping prices down).
An infinite number of investors, since eventually the prices will stay high
as no more investors invest.

>	Suppose A, B and C formed ABC incorporated, a railroad company.  Suppose
>they raised their prices sky-high.  You'd agree, wouldn't you, that some
>consumers will realize that they really don't need to travel so much or ship so
>much cargo after all?  And some consumers would start using trucks or airplanes
>or boats.  So the railroad would STILL lose money.

You assume of course that the increase in profit does not offest the amount of
customers lost.  This may not be the case.  The extra profit possible in a
monopoly (or oligopoly) where there is no competition, and the price can thus
be chosen without regard to cost, only consumer demand, may grossly outweigh
the losses taken through loss of customers.  If I am forced to sell widgets
at $2 each with a 20c profit on each because my competitor will sell them at
$2 and keep me out of the market if I don't, is far different than if we both
team up and charge $4 a widget and have only 2/3rds of our customers.  We
are making a much larger profit because we can meet the supply/demand curves
at optimum instead of as close to cost as possible.

>	It all comes down to this: in a free market with no government
>intervention, prices will tend to remain at a level suitable for a producer to
>make a product and sell it at a reasonable profit.  While this will vary
>slightly, in general overpricing and underpricing are not long-term
>propositions.

Unless of course the initial investment required and the initial start-up
time required to get "loyal consumers" and the probability you will go
bankrupt because competing firms will try to push you out is so significant
that the risk is not worth taking, even considering the large profit possible.

>|> In general, the underlying problem I see is that just following the
>|> principle of maximizing profits (making money, whatever you want to
>|> call it) isn't enough to create a continually thriving society. There
>|> will always be some way of making a quick buck at the expense of
>|> someone else (the environment, future generations, ...)

>	That is precisely what government is for.  If the "expense" you're
>talking about involves taking somebody's life, liberty or property without their
>consent, government can and must prevent that.

Also, it's fraud, and in general defitcit spending.  I believe he was
referring more to the latter.  Consider: say I get zillions of dollars of
loans on one company that isn't even worth a tenth of what I got in loans
and proceed to live well on it.  Who will pay for the loan default?  This
problem is one of, well, taking care of what you own.  It's also a problem
of taking care of the species.  If we are to survive as a species, and
actually live better, I question whether we should exist as essentially
environmental predators.  Sooner or later there isn't gonna be any more
environment to take.  By balancing ourselves now with regards to the
environment and learning not to deficit-spend our environment (as the
governments deficit spent themselves into a BIG hole), we can maintain
a sustainable economy.  

Now the big question: do we "owe it to future generations" to build a
sustainable economy, or do we leave it to them to clean up the messes as
we "live high on the hog" and leave the debt to them to clean up?  The
lesson of the deficit spending governments is not one to be taken lightly:
the governments deficit spent us into debt so that we and our children
will have to pay it off.  Do we owe it to future generations not to burden
them with the price of our luxuries?  Do we owe it to them to pay entirely
for our products ourselves, which includes not degrading the environment?

Which reminds me, how is fraud to be prevented in an Objectivist society?
I'm still not clear on this.  Especially this one: without governmental
regulatory agencies, how do you know that what's on the label is what's
in the can?

>Steve

					Michael Lewchuk
					lewchuk@cs.UAlberta.CA
Newsgroups: alt.philosophy.objectivism