Why Free Market Capitalism is Inefficient and a Poor Ecnonomic System

I'd like to hear your arguments against me, I am looking at this from a more neutral point of view, however I'd like to see points for the contrary.

Okay, maybe I was slightly misleading on the thread title. I believe free market capitalism (I will refer to it as FMC from now on) is an utter failure when it comes to tangible items. Since the idea of trading with FMC ideology is something along the lines of this:
"I have these kegs of beer. It is worth 1000 dollars."
"I have 1000 dollars worth of cell phones. Let's trade"

The transaction is complete. The problem? There is absolutely no profit or revenue from either party with this transaction, thus rendering it impossible to get ahead in FMC, unless you commit fraud, defraud, or other illegitimate methods of trading which are forbidden in a FMC society. Things like such as supply and demand are essentially fraud, as the objective value of something can be claimed as something else. If you make something, and it cost you fifteen cents, and you sell it for twenty cents, you are essentially committing fraud. It is no different than if you sold a dime for a dollar because someone else was desperate or dumb enough to buy it, which ironically are things prohibited by FMC. Remember, the idea of FMC in its most literal form is to exchange goods amongst each other that are of equal value in a system where the workers own the means of production, which essentially is Marxism. Nice. All FMC ends up doing is let the elite few to pillage the poor unfortunate who weren't able to commit fraud and fuck over their fellow traders in the ass (see Wall Street).


I'm really interested to hear what you have to say in return to this. Go.

 

Hey wizard.

Both parties have increased their wealth. You're making the mistake of thinking the kegs and phones have an inherent value. A phone's worth is determined by the person using it, and if two people trade willingly they've judged that the others' item is more valuable to them than their own. Both parties have effectively received a profit.

Not exactly. You're ignoring all intermediate steps which increase value.

Person A mines copper. He sells a shipment of copper to person B for 1 keg of beer. Person B melts the copper and crafts nails (his work has increased the material's value), and sells them to Person C for 2 kegs. Person C packages the nails, labels them, and sells them in his nail shop for 3 kegs. Though Person C's contribution isn't as obvious, he has facilitated the purchase of the nails. If Person C's service isn't required or can be accomplished by Person B, Person B is welcome to put in the extra work and try to sell the nails himself. Person A can also add to his workload to complete the jobs of all three if he judges it beneficial.

You need to understand that billionaire CEOs pose a significant threat to their own company's viability. It's simple dollars and cents; the more a company pays a fat cat, the less efficiently it runs. These corporations rely a great deal on the government to provide subsidization and forcefully eliminate their competition. Wall Street is thoroughly permeated by government. I'm not sure how the current situation resulted from a free market. Could you elaborate?

 

I think you are missing the entire section about credit. Our whole economy runs off of people lending money to one another and essentially creating more wealth than there actually is (or something like that).

 

"Creating more wealth than there actually is" makes no sense, could you clarify?

 

I really don't know. I just hear economists talk about our lending system as creating wealth that isn't actually there. If we stopped lending, the whole system would fall under because we depend on the free flow of money to keep it going which drives up the amount of wealth or something. Basically, lending is important and you can't ignore it. >_>

 

An individual's labor is worth something.

The market determines the value of goods; privately owned isn't publicly owned.

 

Hi Tyro, good response. My problem is with this of argument is that our perception of "value" doesn't necessarily incorporate the amount of how long something lasts for, rather labor and materials. The person who has the copper essentially is much better off than the one with the keg of beer, because suppose that person made a key out of the copper, the key can be used several times, it's not a one-use thing. The beer really is only good for one round of consumption, so it seems as though there is a bit of an unfair trade there. Also, you must incorporate subjective value as well. Suppose you had literally truck loads of water, and I had truck loads of cheese. We have so much we literally don't even know what to do with it. Despite this, we obviously must attach a value to it. Supply and demand obviously would say that you really are starving, and you are willing to pay extreme amounts of water for enough cheese for you to live. I don't think that every item sold will have a fair price, as I could take advantage of you and demand outrageous amounts of your item for a bit of mine, and vice versa.

How do we measure an individual's labor exactly? Also when you say the market determines the value of goods, don't you find that a little scary? Take for example, the sale of party hats on Runescape. Obviously now there is the whole Grand Exchange thing, and if you want a party hat, there is regulation attached. This regulation is a good thing, as it prevents people from committing fraud because of the other person's subjective value. For example, if you were selling a blue party hat, (imagine there is no Grand Exchange) and I REALLY wanted a blue party hat, like it had some sort of sentimental value, you're in a position of power. You can exploit the fact I really want a blue party hat and you can sell it for something more than it is worth by far. That is fraudulent.

 

Who is determining the worth of the item in this situation?

If a drink isn't worth the price, don't buy it. Your questions are fine, but under a capitalist system, they are dealt with by the consumer when deciding whether or not to trade his goods.

 

This is more of a weeks worth of economics class rather than a single forum post, but here it goes.

The banking system takes money in from savers, then 80% of that money is then lent out. (I believe the current federal reserve ratio is 20%) Which means that they have on hand 20% of all the money they have lent . The 80% of money goes out to borrowers who pay a premium (interest) to have the money. So the bank at this time is, on good faith, telling the savers that they have X amount of money in their account while the bulk of the money is actually in the borrowers hands. It creates the illusion of more money in the economy than there actually is.

 

They also take money from investors, but yea. That sort of thing that you'll never actually understand without taking an economics class.

 

I'm taking my third economic class in university, and from what all of my professors have said, free market capitalism, it its purest form, is not good.
Naturally, the drive of capitalism is to let the under-class work, while the higher-ups reap the benefits. You should read on Hegelian philosophy, especially that of his "Phenomenology of Mind", it puts the defects of capitalism in a very raw form.