Reread my post. I'm not saying a free market is bad, I'm saying the opposite. I'm arguing that it's government's job to get us as close as possible to a a free market, and that can only be done through proper regulation. Regulation doesn't exist for its own sake. It exists because in the real world, both people and organizations cut corners, lie, cheat, steal, and do all sorts of other things that a free market cannot be equipped to deal with.

If that's the case, then the message isn't getting through. That's not what I'm getting from your posts. (not trying to imply anything here, just stating a fact)

This makes no sense to me. A free market is a theoretical concept that can never be achieved. The absence of government regulation is a sine qua non to that unachievable theoretical concept. To my way of thinking, this is entirely equivalent to the old "We had to destroy the village in order to save it."

I'm with you here, at least theoretically.

Where I think we differ is what we think happens in the real world. I firmly believe that the political system we have, with the oft demonstrated deceit, corruption, and/or incompetence, often results in "regulation" that distorts the situation in order to provide advantage to one player over another commensurate with the amount of the bribery or other remuneration provided by the players, and not for the "common good". In many cases, the results of the regulation actually decrease the "common welfare". Let me rephrase a part of what you say to illustrate my point: ". . . in the real world, people, organizations, government, and regulating entities cut corners, lie, cheat, steal, and do all sorts of other things . . ." In other words, I believe that government is part of the problem: giving it even more power will exacerbate the problem, not fix it.

The solution, if that is even possible, is to fix government first, and then perhaps its regulations might drive the economic system in a direction that will ameliorate current excesses and/or distortions.

And I do admit that, sometimes, some of the regulations imposed by government have resulted in the improvement of the "common welfare". In my opinion, these types of regulations are less common that those that distort the market we do have in ways that favor some of the players over the "common welfare".

That's because you think that the village is the corporation. I don't. I think it's just another tool that villagers should use with extreme caution, like a chain saw that can cut you even more easily than it can perform its intended function. Safety rules need to be adhered to when using either one. In the case of corporations, those rules can only come from government regulation.

True, in a free market the results would be even more disastrous.

Not at all. I was merely trying to point out the logical inconsistency of a statement that for all practical purposes says "We need to increase government control in order to achieve an economic system that is characterized by absence of government control".

I used the "village" statement as an example of a similar logical inconsistency. I could just as easily have used "f***ing for virginity" or "sugar quotas to enhance the free market" or many others.

Statements like this lead me to believe that you don't really understand what a Nash equilibrium is. Not only can it exist in the real world, it does exist in the real world.

I'll give you an example:

It is in no single online business' best interest to develop their website to conform with W3C standards instead of IE compatibility. To do so would cause them to miss out on potential business from customers that use IE and don't know/care that there are better (more standards compliant) alternatives out there.

However, if all online businesses began developing with W3C compliance instead of IE compatibility, then they could all experience development savings from coding to a single standard, regardless of browser. In other words, it is in no one's best interest to change their practices alone, but it is in everyone's best interest to do so as a whole.

Don't like that example? Here's another:

It was not in any single tobacco companies best interest to singly give up advertising in any medium, because doing so would offer benefits to other companies that did not give up such advertising. However, when such advertising is ceased by the entire industry, the entire industry benefits by being able to save those advertising dollars and use them elsewhere.

Nash Equilibriums are very real, and very real world.

Incorrect. In a free market, there is no outside regulation, therefore there is nothing to stop monopolistic or oligopolistic players from participating. A free market promotes such players, it doesn't discourage them. One only needs to see what Microsoft became without regulation to understand this.

While I largely agree with your premise, that is, by definition, not a free market, which implies zero external regulation. Perhaps a fair market would be better terminology?

I'm not interested in being a virgin. I fully understand that it is impossible to have a 100% free market. I also understand that the dismantling of government controls that has taken place over the last 7 years in the name of a "free market" has taken us farther from a free market, not closer to it. I think the idea that adding controls is necessarily a move away from a free market is overly simplistic, and corporations prey on the public by using it. Adding a control, such as: you will not price gas above $3/gal takes us very far from a free market, but for example, one that requires Exxon to pay the industries that it harmed when the Valdez destroyed fisheries brings us closer to a free market. In a free market, business needs to be self sustaining, which means that in addition to making a profit, it must clean up after itself.

Yes, fair market would be better, but those who champion deregulation won't use it, so we're stuck with free market. ;)

I would think that in reading the previous posts, you might have realized that the discussion was about the overall, "big picture" economic system, not any fragment(s) thereof. In assuming that the reader would comprehend the context of my statement, I erred by not including the necessary qualifiers.

You are absolutely correct that many functioning examples of Nash equilibria exist in the real world, in limited cases with well defined boundary conditions. Just as in limited cases, with well defined boundary conditions, perfect socialism works just fine as an economic construct.

However, just because we have local air conditioning does not mean that universal entropy has been overcome, or because a family unit or a small commune can successfully operate on pure socialistic principles does not mean that competition or selfishness in human nature does not exist. Similarly, just because Nash equilibria are actually achieved in various specific examples in the real world, this does not lead me to believe that the possibility of their universal attainment in the overall system is a viable solution to the macroeconomic (and political) problems that are being discussed, as you seem to have proposed in a previous post.

If you'd care to discuss the mechanism of how you believe that it is realistically (or even just theoretically) attainable on a macroeconomic level, it might result in a discussion of greater value than simply "Yes, it is! No, it's not! Yes, it is! . . ."

I think I see where you're heading here, but that's a fundamental problem, and it's not the "free market" which is going to fix it.

To the best of my knowledge, the only shortcoming (in a purely economic sense) of the "perfectly competitive free market" that even its staunchest supporters can find no answer for without compromising their self-avowed principles, is what is often called the "tragedy of the commons". Specifically, collectively owned assets tend to suffer at the expense of the "system".

For these things, one needs some disinterested party to have the power to curtail activities that cause such damage, or to force restitution by the entity responsible for the damage. I fully agree that, in the ideal case, this would be a proper role for government, but, in the real world they have tended to screw this up, too. Government has (most of the time) tended to do the bidding of the business community by going along with the "privatize the profits, socialize the losses" philosophy. Obvious examples include the Superfund fiasco, grazing, logging, and mining on public lands, among many others. To make it even worse, the government exempts many government facilities, e.g., military bases, from many environmental-type regulations.

Unfortunately, so long as politicians and regulators are bought and sold as is currently the case, I see no reasonably likely solution to the problem.

And who's doing the buying but the large, powerful corporations? Who's helping those corporations continue to buy politicians? Isn't it people who oppose regulation in the name of a "free market" that is really controlled by those same large corporations?

The larger picture is but the summation of the smaller pictures. There's no magical point beyond which Nash equilibria no longer apply. Phillip Morris competes against other tobacco companies, not against every other player in the macroeconomy. Mattel doesn't compete against Kraft. Ford doesn't compete against Levi-Strauss. Microsoft doesn't compete with Schwinn. The economy as a whole is made of it various parts, various industries. Nash equilibria need only apply to individual industries to be relevant at the macroeconomic level.

Of course. I don't know what the argument is here.

To me, it seems self-evident that so long as government/regulators are bought (or buyable), imposing additional government regulation will not ameliorate the current system.

I honestly don't comprehend why you think it would improve things. An explanation would help.

(FWIW, I think that something along the lines of party A is bad, party B is good is a cop-out. Both parties have contributed materially to getting us into this particular handbasket, and neither demonstrates a believable inclination to change what's rotten about the system as a whole.)

I must not be understanding your position. If you agree that regulation is necessary, but believe that it can't be done, then what would you have us do?

There is no alternative but to find a way to get effective regulation passed and enforced. That means breaking up some large companies, and restricting other's abilities to buy up smaller ones. As long as we don't do that, those same companies will continue to produce shoddy products with lousy customer support while shipping good jobs out of the country without reducing prices.

But the fundamental premise of the Nash equilibrium requires that "no player can benefit by changing his or her strategy while the other players keep theirs unchanged". (from Wiki, sorry:))

Problem 1. - Our entire economy is based on dynamic shifts in knowledge, inventions, products, production methods, marketing, transport, etc., etc. All of the examples I've read about Nash equilibria (beyond Wiki, but it was a long time ago) refer to relatively static circumstances. When one considers that new inventions/processes are developed, competitors introduce products, changes in market conditions occur, etc., etc., at a pace that is faster than the decision cycles in many industries, the fundamental premise of "other players keep theirs unchanged" is blown away almost on a daily basis.

Problem 2. - (What I called "perfect knowledge" in another post) Given the way business operates, no player is able to know exactly what the strategy of another player is. There are corporate secrets, corporate strategy decisions that are not obvious until after major steps to implement them have occurred, etc., etc. By the time a player figures out what his competitor is doing, his "original" business strategy, unless changed, will often result in losses. The scenario of all the corporate leaders in any particular industry sitting around a table promising each other not to change their strategies in order to maintain a stable or orderly system just doesn't seem credible.

Problem 3. - (What I called "perfect altruism" in another post) The idea that a significant fraction of for-profit business will be satisfied to earn less than the maximum profit it can in return for a stable system that maximizes societal value rather than its value, is so antithetical to everything we have observed and learned about human nature that it is just incredible to me that it could happen voluntarily on any significant scale.

Problem 4. - (What I called "uncorruptible government" in another post) If we could get government to play the role to force (or otherwise "encourage") the activities necessary to achieve a Nash equilibrium, human nature being what it is, one or more participants in each of the Nash groups are very likely to jockey for just a little bit of an advantage by bribes, etc. Just this possibility (likelihood) will result in the government not being seen as an honest broker by the participants, and will wreck even the potential for significant progress towards equilibria in these groups.

Again, I just can't see how it can be achieved on a national, macroeconomic scale.

Let me see if this works to explain what I think.

To start with, I don't have a problem with regulation, per se, so long as I am convinced it is reasonable, evenhanded, and benefits the nation as a whole, rather than just a favored segment of it.

I believe that the current economic system, while great in many ways (mean standard of living, mean "quality of life", etc.), has problems as well (pollution, exessive influence on gov't policy, waste & inefficiency, etc.).

Totally unchecked by any regulation, not through any malevolence, but due to their very nature, business and other interest groups will make sure that things will get worse.

With corrupted gov't, regulations will serve only to maintain or worsen the status quo while providing cosmetic change only. For example, buried in the fine print of the recent min wage bill are exemptions for certain companies located in the districts of certain powerful Congressmen. Another example: farm bills over many years have resulted in higher and higher payments to agribusiness while "family farmers" have seen higher and higher rates of bankruptcies/abandonment.

The path to amelioration is to first fix government, then to revamp the regulatory system. Get rid of all incumbents (both parties) at every election unless they have demonstrated by their actions that they are actually cleaning up the system (by promoting the following, for example). Make all campaign contributions part of the public record. Make "bundled" campaign contributions illegal. Require every member of Congress to recuse himself from all legislation that has other than just peripheral impact on anyone from whom he accepted contributions. Require every meeting or hearing by Congress or any regulatory agency to be open except when demonstrably related to national security. Prohibit former gov't employees from accepting any job with any company he had any relationship with as a gov't employee, or at least establish rules that call for forfeiture of all government benefits for any retired gov't employee who, after retirement, takes a job in an industry that he had dealings with as a gov't employee. Require all laws to be voted on by Congress to be available on the Internet for ~1 week prior to any vote. Strictly enforce current bribery/influence laws. Eliminate the de facto immunity that most gov't employees have for the consequences of their actions. Eliminate the gov't regulations that allow companies to absolve themselves of consequences for their acts "without admitting any wrongdoing". Lots & lots more. If these don't work, I'd give serious thought to "shoot the bastards" and start all over.

Only after we're on our way to clean up the government can we hope to see regulations that are intended for the national welfare, rather than for the "friends" of the regulators.

Then I think we agree. It's a big task though, and there are many steps between here and there. The first baby step would be to get rid of the worst offenders in government, then the next worst, and so on. You're not going to get rid of the average lobbyist for example, if you can't loosen Big Oil's grip on the White House and Congress.

Pretty much, it appears, on the fundamental issues. Around the edges, perhaps, not completely.

For example, I believe that both parties (with very, very few individual exceptions in each) are essentially undifferentiated scum while you seem to think one is not quite as bad as the other.

Also, I would much rather trust a businessman who looked me in the eye and said that all he's interested in is maximizing his profits/income and to hell with everything else, than to trust a politician (nearly all of them) who says whatever he thinks is most advantageous to him. By comparison, the businessman is an honest man. :eek:

Anyway, it's been an interesting discussion - not one that I would have expected to result in a significant amount of agreement, originally.

I believe that one party has been worse than the other, while painting themselves as pious, family-oriented business men. What's more, I believe that trusting them is about the same as trusting that businessman who is only interested in profits. Neither cares about the long term as long as things look good this quarter. Both will leave you with a mess to clean up and little money to do it with.

I don't know if a politician can be much better, but I know they can't be worse.

I think largely new inventions and processes are not developed and implemented so quick as to have a significant effect on players' knowledge. Obviously, there are, and will be exceptions, but on the whole our economy moves along at a fairly predictable pace.

Given the wy business operates, the players can all assume that the strategy of the competition is to outsell/outproduce everyone else in order to make the most money. Tactics to carry out the strategy, while unknown in absolute terms, are usually, buy certainly not always, fairly predictable by the competition.

Less than the maximum profit is relative. On average, the players make more money, since they use their resources more wisely after collectively changing strategies. I guess an important question would be, "What if the leading player refused to change strategy with the group? Would that player be at an advantage or disadvantage at that point?" I'm not sure of the answer, nor am I sure the answer would be the same in all scenarios. My hunch is that it would depend on market share.

The Nash equilibrium is already in effect. Nash equilibria are typically not optimal equilibria.

I agree that government corruption needs to be dealt with. I do not believe that is an economic issue. Government corruption can affect economics, but the root of the problem is political. In the case of the US, I believe the problem is political apathy, based on typical voter turnouts. To a lesser extent, I think loyalty to certain parties without consideration of candidates' actual stance on real issues causes problems. In its current state, our system is broken. How to overhaul it it a topic for a different thread (and perhaps site).

As W.J. Clinton once said, "There is nothing wrong with America that cannot be fixed with what is right with America." In my opinion, the best course of action is let the government tend to their responsibilities and somehow motivate the citizenry to care. I don't believe relieving our government of their duties will solve any problems.

It's not a matter of whether or not it can be achieved. It's a mathematical property that exists, both in theory and in the real world. The question is, can we set aside our blind faith in supply and demand as the only relevant market force long enough to accept reality and set our economy up for success in the next century?