Thursday, August 20, 2015

Wisdom Is Too Long, Markets Are Concise and Honest

The collected (nit)wit and (un)wisdom of Bernie Sanders:

The linked article is chock full of excellent rebuttal of the fallacies of Bernie Sanders -- and by extension the entire current dominant political view in America ... that of the Democrats, Media, Academia, etc that I call "The Party".

I recommend reading it, but I'll give you the part that I found to be especially clear, easy to understand and somewhat non-intuitive. The BIGGEST advantage of Capitalism and Markets is that they quickly and accurately deliver BAD NEWS, and other systems very much tend to try to hid bad news, which is BAD!! This is most certainly true -- and well worth realizing, understanding, and taking to heart in everything you do! The whole article this is from is linked here.
... "The most valuable property of the price mechanism is as a reliable mechanism for delivering bad news." These two statements explain a lot about why socialist systems fail pretty much everywhere but get pretty good press, while capitalism has delivered truly astounding results but is constantly besieged by detractors. 
It is simple really: When the "Great Leader" builds a new stadium, everyone sees the construction. Nobody sees the more worthwhile projects that didn't get done instead because the capital was diverted, through taxation, from less visible but possibly more worthwhile ventures — a thousand tailor shops, bakeries or physician offices. 
At the same time, markets deliver the bad news whether you want to hear it or not, but delivering the bad news is not a sign of failure, it is a characteristic of systems that work. When you stub your toe, the neurons in between your foot and your head don't try to figure out ways not to send the news to your brain. If they did, you'd trip a lot more often. Likewise, in a market, bad decisions show up pretty rapidly: Build a car that nobody wants, and you're stuck with a bunch of expensive unsold cars; invest in new technologies that don't work, and you lose a lot of money and have nothing to show for it. These painful consequences mean that people are pretty careful in their investments, at least so long as they're investing their own money. 
Bureaucrats in government do the opposite, trying to keep their bosses from discovering their mistakes. 
Likewise, the pricing system tells people things that they can’t know directly. In a command economy, where bureaucrats set production targets, if someone uses more pig iron than expected, there’s a shortage. In a market, prices for pig iron go up, which sends two signals: To pig iron producers, the signal is produce more pig iron. To pig iron consumers, the signal is don’t use more pig iron than you have to. Both ways, the prices tell people things that they need to know, without any direct communication required. This is why market economies do better than command economies, as historical examples ranging from the old Soviet Union to today’s Venezuela demonstrate over and over again.
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