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Carl Remick wrote: >In that respect, I think the soft underbelly of the free-market >position would be lack of transparency that contributed to the >magnitude of the Enron collapse. But, Doug, you've seemed reluctant >in the past to identify this as a key issue -- e.g., I recall your >comments in Germany last year when you voiced skepticism re some >comment Lenin made about the unreliability of corporate financial >reporting. It's not transparent, for sure, but it's not as opaque as Lenin put it. It's translucent, I guess you could say. Things got murkier during the bull market, as no one had any incentive to doubt the numbers. A bear market reveals the skeletons in the closet. If the bear market is over, the closet door may get shut again, but if we're in for longer-term stress, then we're going to see lots more pressure to reform accounting, lots more disclosure, and lots more criticism of other managerial schemes to evade their responsibilities to shareholder. Doug
RE: Re: Re: RE: Re: Re: RE: Enron's Success Story
Transparency is a big problem for free-marketeers. It is clearly a constituent part of efficiency, but its pursuit in the real world affronts corporations and leads some conservatives to defend lack of transparency as a property right. Asymmetric information is of course a major topic for Stiglitz. In the case of Enron, transparency was only a temporary problem. In the end, people saw what was behind the curtain and the company folded. More to the point is that, contrary to the market dogma, those responsible did not bear the costs of their depredations and may never. mbs In that respect, I think the soft underbelly of the free-market position would be lack of transparency that contributed to the magnitude of the Enron collapse. But, Doug, you've seemed reluctant in the past to identify this as a key issue -- e.g., I recall your comments in Germany last year when you voiced skepticism re some comment Lenin made about the unreliability of corporate financial reporting. Carl
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Carl Remick wrote: > > > > > >If you're going to fight an ideological opponent, you should have > >some sense of what the opponent thinks. > > > >Doug > You fight an ideological opponent by striving to change the reality which generates the ideology, which is the spontaneous reflection in human minds of everyday reality. Hence the original question was wrong. _Nothing_ can possibly refute free market ideology except the disappearance of the free market. If, for example, you are organizing the unemployed, you don't put "Down with Neoclassical Economics" on your leaflets, nor do you shout "Down with Free Markets." You say something like "Jobs or Income Now!" (JOIN) You organize rallies, pickets, perhaps riots, etc. Some of the people rallied by this sort of activity want to understand better what it is that's screwing them, and want to feel a better basis for reaching out to their neighbors or whatever. So you organize classes for them -- reading groups, forums, whatever. Only at a very late stage (if ever) does one get into an explicit argument with Neoclassical economics. etcetera etcetera etcetera Professors and journalists leap to quickly to the level of abstract debate and reasons. Carrol
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>Max Sawicky wrote: > >>The mere fact of a company failing, >>even a large one, is not a market failure. > >I'm away on an inter-holiday retreat, and only sporadically checking >email, so someone else may have made this point already. No free >marketeer would ever regard a big failure as an indictment of The >Market. On the contrary, it's a sign of success - the forces of >competition punishing a loser, as things should be in this war of >each against all. Only softies and central planners want to prop up >the failing. > >If you're going to fight an ideological opponent, you should have >some sense of what the opponent thinks. > >Doug In that respect, I think the soft underbelly of the free-market position would be lack of transparency that contributed to the magnitude of the Enron collapse. But, Doug, you've seemed reluctant in the past to identify this as a key issue -- e.g., I recall your comments in Germany last year when you voiced skepticism re some comment Lenin made about the unreliability of corporate financial reporting. Carl _ Join the worlds largest e-mail service with MSN Hotmail. http://www.hotmail.com
Re: RE: Re: Re: RE: Enron's Success Story
Max Sawicky wrote: >The mere fact of a company failing, >even a large one, is not a market failure. I'm away on an inter-holiday retreat, and only sporadically checking email, so someone else may have made this point already. No free marketeer would ever regard a big failure as an indictment of The Market. On the contrary, it's a sign of success - the forces of competition punishing a loser, as things should be in this war of each against all. Only softies and central planners want to prop up the failing. If you're going to fight an ideological opponent, you should have some sense of what the opponent thinks. Doug
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Gene writes: > Max, I read the big push to define the Enron affair as > criminal as an effort to > suggest that there is nothing wrong with the functioning of > the market, just > some bad apples who everybody thought were good apples... Max writes: > You could read it that way, but whether or not > the affair does point to an inherent problem with > markets is another matter. Choice and imperfect > law creation/enforcement make illegal acts possible; > that doesn't mean the underlying arrangement isn't > the best available. Perhaps it's impossible to write a perfect law (or to enforce it) when dealing with imperfect/asymmetric information (etc.) combined with rapacious profit-seeking? Jim Devine
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You could read it that way, but whether or not the affair does point to an inherent problem with markets is another matter. Choice and imperfect law creation/enforcement make illegal acts possible; that doesn't mean the underlying arrangement isn't the best available.mbs Max, I read the big push to define the Enron affair as criminal as an effort to suggest that there is nothing wrong with the functioning of the market, just some bad apples who everybody thought were good apples. Which is not to say that pushing the criminal investigation high into the Bush administration is not a good idea. Gne Coyle
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Max, I read the big push to define the Enron affair as criminal as an effort to suggest that there is nothing wrong with the functioning of the market, just some bad apples who everybody thought were good apples. Which is not to say that pushing the criminal investigation high into the Bush administration is not a good idea. Gene Coyle Max Sawicky wrote: > Two different issues seem to be mixed in here. > One is market failure, the other is illegal acts by > Enron execs possibly linked to illegal acts by > the Bushies. The mere fact of a company failing, > even a large one, is not a market failure. Market > failures exist because markets keep functioning > in some perverse, diseconomical way. > > Neither is the commission of illegal acts a market > failure. In this case, such acts happen to be politically > sensational. That's the importance, IMO. Not > market failure. Capitalism is guilty of its successes, > not its failures. > > mbs > > To answer Michael's question below: "No." > > But the reason for the Wall ST Journal story was not to work through > micro theory to get the "right answer." The article appeared to head off > any questioning of "the market" in Congress or State legislatures. People . > . . > > Michael Perelman wrote: > > > Is it ever possible to the disprove market efficiency to the satisfaction > > of a conservative economist? > >
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I would say the relevant test in this context is whether the product kept flowing to customers at prices that covered production costs. The California crisis is clearly an example of consumptis interruptis, but no role of Enron's bankruptcy in that crisis has been raised, as far as I know. So I see no downside in the Enron affair as far as market failure is concerned. Whether it was overhyped by some conservative commentators is another matter. If I was looking around for market failure, my first impulse would be on concentration and the restricted output, high prices, and inequitable distribution of rents associated with them. Also up there would be the proliferation of external costs and failure of government to deal with them. mbs Max, nicely clear statement, isn't there another issue here? Enron supposedly "proved" that market forces were superior to government regulation. It could create low prices for consumers and lush profits for investors. Michael Perelman
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Max, nicely clear statement, isn't there another issue here? Enron supposedly "proved" that market forces were superior to government regulation. It could create low prices for consumers and lush profits for investors. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: Re: Re: RE: Enron's Success Story
Two different issues seem to be mixed in here. One is market failure, the other is illegal acts by Enron execs possibly linked to illegal acts by the Bushies. The mere fact of a company failing, even a large one, is not a market failure. Market failures exist because markets keep functioning in some perverse, diseconomical way. Neither is the commission of illegal acts a market failure. In this case, such acts happen to be politically sensational. That's the importance, IMO. Not market failure. Capitalism is guilty of its successes, not its failures. mbs To answer Michael's question below: "No." But the reason for the Wall ST Journal story was not to work through micro theory to get the "right answer." The article appeared to head off any questioning of "the market" in Congress or State legislatures. People . . . Michael Perelman wrote: > Is it ever possible to the disprove market efficiency to the satisfaction > of a conservative economist? >
