Free Market Fundamentalist Ideology is based on a Logical Fallacy.

Discussion in 'Economics & Trade' started by Kyklos, Jul 8, 2018.

  1. Kyklos

    Kyklos Well-Known Member Donor

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    Free Market Fundamentalist and Libertarians are radical supporters of Lassie faire capitalism that is there should be no government interference in the operations of the marketplace. They argue the market is the sum total of the countless rational individual participants’ voluntary choices of buying and selling freely seeking the best bargain for themselves. Consequently, they argue the market is also free, and efficiently reflects the rational choices of the participants’ self-interests that on the macro scale benefit society as a whole.

    Unfortunately, this argument about free self-regulating markets commits the logical Fallacy of Composition. You cannot infer something is true of the whole from the fact that it is true of some part of the whole: "If someone stands up out of his seat at a baseball game, he can see better. Therefore, if everyone stands up they can all see better." The Fallacy of Composition is essentially fallaciously reasoning that claim attributes of the parts of the whole are also attributes of the whole itself. The fallacy can have various forms such as “the machine is made of many light weight parts; therefore, the machine as a whole is light weight.” Or one might say, “The lead actor in the play was excellent so the play as a whole was excellent.” Another example the composition fallacy is, “Each aircraft in the squadron is ready for combat; therefore, the whole squadron is ready for battle.”

    In each case the fallacy confuses the “distributive” and “collective” use of a general predicate term. One can say that college students are only allowed to vote once in a general election; however, it is also true that college students cast millions of votes in a general election. Of course in the first proposition the predicate term “vote” is used distributively, but in the second proposition the term is used collectively.

    There is a difference between a collection of elements, and a whole constructed out of those elements. A pile of bricks is not a house. Likewise, a collection of individual buyers and sellers making directed voluntary choices do not make a market possessing those same attributes.

    This why Wall Street advisers often tell investors who are losing their butts in a falling market when all the econometrics point to a rising market, “The markets can stay irrational longer than you can stay financially solvent.”
     
  2. GodTom

    GodTom Well-Known Member Past Donor

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    This is one of the main downfalls of the current libertarian party.

    When you break their party platform down, it is basically going back to slavery. But you can smoke pot or shoot up this time. To ease the pain...
     
    Last edited: Jul 8, 2018
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  3. Baff

    Baff Well-Known Member

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    There should be no government interference, but there always will be.
    To ignore this is folly.
     
  4. Reiver

    Reiver Well-Known Member

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    Macroeconomics certainly went astray when it tried to impose microeconomic foundations. Trying to ensure consistency between macroeconomics and neoclassical micro, it just encouraged a right wing policy perspective that ignored the risk of economic crisis.
     
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  5. Kyklos

    Kyklos Well-Known Member Donor

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    Thanks Reiver for your commit. Yes, macro and micro economic terms are very useful in this critique.

    I was reviewing Hannah Arendt's book, "The Origins of Totalitarianism, 1951, (Harvest Book, Hb244) by Hannah Arendt. I eerily felt like she was describing the current events today in depressingly great detail. In one passage, she makes nearly the same argument I make about the "composition" fallacy of the so called "free market:"
    Thank you Hannah!
     
    Last edited: Jul 11, 2018
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  6. Reiver

    Reiver Well-Known Member

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    I think it was the real world economics movement that asked, following the financial crisis, where did economics go so wrong? Microfoundations guff, from the Lucas Critique to rational expectations, is repeatedly mentioned.

    They took Keynes. Misrepresented his approach. Then used microfoundations to say that misrepresentation doesn't work. That it ended in scholarly tears was guaranteed.
     
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  7. Wildjoker5

    Wildjoker5 Well-Known Member

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    You fail with your baseball fan analogy. If anything, the fan who stands starts imposing his will on others because its something he wants to do. The one who stands creates a shift in the market place and makes the rest of the people behind him have to defend themselves because they are now having their right to see the game infringed upon. The usher at the game is the minor government that will tell the fan to sit back down because he is disturbing others. Libertarians are all, or even mostly not anarchist, they are minimalist government.

    Markets always self correct, even with government intervention. Less people are going to college because of the governments involvement in tuition that has caused the rise in prices. More people are using Bitcoin because of the governments intervention and fiat currency manipulation. The housing market crashed after the government made the bubble of over priced homes. Only the government spread the pain to everyone with the "too big to fail" fallacy. So instead of allowing corrupt and shady businesses to fail and redistribute the opportunity for new companies to rise, the government took more of the citizens money to prop these failure companies up.
     
  8. Reiver

    Reiver Well-Known Member

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    Even orthodox economics has ultimately had to reject that premise. See, for example, hysteresis in unemployment. Self correction was based on a microeconomic premise of one equilibrium. It now acknowledges multiple equilibria, such that a market can be stuck in an inferior outcome.
     
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  9. Wildjoker5

    Wildjoker5 Well-Known Member

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    Are we talking about now, when there are outside forces that keep the market from fully correcting itself?
     
  10. Reiver

    Reiver Well-Known Member

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    Now, in the future and in the past. You can't understand how markets evolve without reference to concepts such as multiple equilibria.

    Of course the OP is also perfectly correct. Take unemployment. The microeconomic foundations kack derived make-believe stuff like a natural rate of unemployment, suggesting some automatic correction to a warped notion of full employment. That is based on understanding the labour market, in its totality, as two lines. A downward sloping labour demand, an upward sloping labour supply. Complete hogwash of course!
     
    Last edited: Jul 12, 2018
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  11. Kyklos

    Kyklos Well-Known Member Donor

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    Good point. In fact, the "natural" state of the commodity markets, and financial markets like interest rates is to be out of equilibrium! Self-correcting market dogma is a religious doctrine. see article:
    Philip Pilkington: Purging Economics of Religion – A Rebuttal to Robert Nelson’s Defence of The Great Chain of Being: Market Equilibrium: The Great Chain of Being Versus Intelligent Design

    My comment is that today’s Neo-Liberal macroeconomic mathematical models are builds on a number of assumptions not consistent with the way markets actually function. One such assumption is the first welfare theorem also known as the financial market efficiency hypothesis—that markets cannot be improved by market interventions. There are many other a priori logically consistent market model assumptions: that markets are rational, markets seek full employment equilibrium; that markets have a single equilibra; there are unbounded (having unlimited knowledge) rational agents always seeking maximum utility; competitive markets are frictionless; no single agent is large enough to influence prices; and the rational expectations hypothesis which assumes that all agents are free to make trades contingent on any future observable event and are not systemically wrong in their predictions. Although economist John Maynard Keynes led the way in modern statistical analysis of market behavior, he always had a healthy skepticism toward such methodological tools so as not to let logico-mathematical models dictate how markets ought to function rather than describe how markets behaved in their totality.
     
    Last edited: Jul 12, 2018
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  12. james M

    james M Banned

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    Got it, so free markets don't work and we need a Nazi statistician to intervene at gunpoint everywhere to make them function perfectly!
     
    Last edited: Jul 12, 2018
  13. Kyklos

    Kyklos Well-Known Member Donor

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    The Nazis are already running the markets! Don't your read the news? Oh, that may be the reason.
    • Political Intelligence Firm Marwood Group to Pay $375,000 to Settle SEC Charge for market manipulation.
    • Bernie Madoff produced fake trading statistics for decades. His son Allen Madoff had all kinds of titles like Manager of NASDAQ Desk, Co-Director of Trading, and three other titles. The SEC has to tell Allen that his firm had not trade a single stock in 14 years! He looked like a total fool!:confusion:
    • Elizabeth Holmes took hundreds of millions of dollars from investors for a blood testing device that didn't even exist! The entire financial sector fell for the scam!:roflol:
    • PMorgan Chase, Citigroup, and Bank of America participated in manipulating the Libor (“London interbank offered rate”) rates that determines the interest rate for all loans in the world and $350 Trillion dollars in derivatives!!! Here is transcript of a trader running the LIBOR desk in our "Free Market:":rip:
     
    Last edited: Jul 12, 2018
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  14. james M

    james M Banned

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    • yes I read and see that 130 million can afford iphone supercomputers in their pockets here while Stalin and Mao starved 120 million while they regulated the imperfect free markets!!
    ever wonder why Europe lives at 65% of our GDP or why Florida does better than Cuba?
     
    Last edited: Jul 12, 2018
  15. Kyklos

    Kyklos Well-Known Member Donor

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  16. james M

    james M Banned

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    Last edited: Jul 12, 2018
  17. Kyklos

    Kyklos Well-Known Member Donor

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    So this isn't really a discussion, you are just trolling.
     
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  18. james M

    james M Banned

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    and 90% of Chinese could because they save more despite 30% of the income. Americans don't have to save because economy is so stable and liberal govt has saved trillions in welfare entitlements for them! Now do you understand?
     
  19. james M

    james M Banned

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    its a debate you now see you are losing and you're looking for a way out. Sad! Ever see a conservative who has to run away?
     
    Last edited: Jul 12, 2018
  20. Reiver

    Reiver Well-Known Member

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    I wouldn't say that. He genuinely doesn't understand any political economy. That's why he crows about free markets, but lauds human rights abusing China.

    Without actually knowing any of the economics, he's also a fanatic of Friedman. Of course Friedman is also a key figure behind the fake debate between monetarists and bastardised Keynesians. Given the false application of microeconomics to macro model, he's on a loser straight away. Just don't expect him to realise it...
     
    Last edited: Jul 13, 2018
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  21. james M

    james M Banned

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    lauds? if the silly liberal has evidence i will pay him $10,000. Bet?
     
  22. Moonglow

    Moonglow Well-Known Member

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    If it ain't the govt. it's your competition and if it's not them it's the customers or the suppliers... It never ends..
     
  23. james M

    james M Banned

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    Only because free markets made us the richest people in the history of the world while your socialist markets killed 120, million human souls
     
  24. Reiver

    Reiver Well-Known Member

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    Friedman is behind monetarism. Free markets are neither achievable or desirable. As I said, you don't understand any political economy.
     
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  25. Kyklos

    Kyklos Well-Known Member Donor

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    LOL, you mean Milton Friedman who said he could NOT understand a word of von Hayek?
     
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