Hillary Clinton grilled by Chris Matthews

[JustWinBaby]

(01-10-2016, 01:56 PM)fredtoast Wrote: I am no expert in economics, but as I understand it Smith's "invisible hand" is a reference to the claim that a free market works best for society without regulation, and history has proven this is not true.  

That's because people aren't that smart/rational and lack perfect information.  Otherwise regulating out the "bad" wouldn't be necessary because those companies don't make any money and quickly fail.  Most good regulation is about removing barriers to transparency and disclosure of information.  I can't actually audit a companies financials I'm considering for a stock purchase, and that's why we need the SEC to establish standards and police it.

But Adam Smith's point stands that you don't regulate what the free market is able to do effectively.  Central planning almost always proves suboptimal to the market allocating resources.

[fredtoast]

(01-10-2016, 05:48 PM)JustWinBaby Wrote:  Otherwise regulating out the "bad" wouldn't be necessary because those companies don't make any money and quickly fail.

Companies do not even value their own continued existence anymore.  They will make decisions that will lead to their own eventual failure as long as they get immediate short term gains.

Then they are replaced my n ew companies that will do the same thing.

[JustWinBaby]

(01-10-2016, 07:32 PM)fredtoast Wrote: Companies do not even value their own continued existence anymore.  They will make decisions that will lead to their own eventual failure as long as they get immediate short term gains.

Then they are replaced my n ew companies that will do the same thing.

That's not a failure of capitalism, that's a result of less than perfect information.  

You can't or won't go inspect the kitchen of a restaurant, it's storage policies, etc...You would have no clue if a manufacturer is polluting the water, especially in another state.  If you knew those things, presumably neither you nor anyone else would ever buy the product.  But you can't know those things, so we have regulation.

And you're falling for the left-wing meme that companies only care about the short-term.  That usually hammered home by people who've never spent time in a Board meeting and have no real concept of how and why decisions are made.

[fredtoast]

(01-10-2016, 11:24 PM)JustWinBaby Wrote: And you're falling for the left-wing meme that companies only care about the short-term.  That usually hammered home by people who've never spent time in a Board meeting and have no real concept of how and why decisions are made.

Not true at all.  For example......


https://hbr.org/2014/01/focusing-capital-on-the-long-term


a McKinsey Quarterly survey of more than 1,000 board members and C-suite executives around the world to assess their progress in taking a longer-term approach to running their companies. The results are stark:

• 63% of respondents said the pressure to generate strong short-term results had increased over the previous five years.
  

• 79% felt especially pressured to demonstrate strong financial performance over a period of just two years or less.
  

• 44% said they use a time horizon of less than three years in setting strategy.
  

• 73% said they should use a time horizon of more than three years.
  

• 86% declared that using a longer time horizon to make business decisions would positively affect corporate performance in a number of ways, including strengthening financial returns and increasing innovation.
  

http://hbswk.hbs.edu/item/the-high-risks-of-short-term-management

 leading up the financial crisis, companies like New Century Financial or Countrywide Financial built their success by incentivizing their employees on volume--to sell as many mortgages as possible with little regard for quality—and the stock market rewarded them handsomely for their spectacular growth. In that case, short-termism manifested itself through the myopic underweighting of the long-term adverse consequences associated with the high credit risk of many mortgage holders and the possibility of a halt to rising home prices.