

Patient capital, markets that work and ending the endless emergency of poverty - Banzai10
http://sethgodin.typepad.com/seths_blog/2009/08/patient-capital-markets-that-work-and-ending-the-endless-emergency-of-poverty.html

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JabavuAdams
"When two people trade, both win. No one buys a bar a soap unless the money
they’re spending for the soap is worth less to them than the soap itself."

Huge fail. People simply aren't rational actors. What about the case where an
actor buys what he wants to buy, but that's not what he needs? You may want
cigarettes and lottery tickets, but to say that you benefit from buying them,
because otherwise you wouldn't buy them is stupidity.

To clarify, I'm distinguishing the transient benefit of "yay, I got what I
wanted" from a productivity-enhancing benefit.

~~~
CWuestefeld
_What about the case where an actor buys what he wants to buy, but that's not
what he needs?_

Who are you to say what he needs? Obviously by your values, the cigarettes
aren't "correct", but it's really not your life to live.

Anyway, I think that Godin has it right as far as he goes. However, a market
cannot function where there's no reasonable expectation of property rights. I
mean, you're not going to risk investing in the drip irrigation system if
you're afraid that the local warlord is going to just shake you down for any
money you make, and maybe even rape your daughter in the process. And you're
less likely to enter into a contract to partner with someone else if there's
no court system to enforce the contract.

This is why so much of the aid to places like those in Africa, where there is
no effective protection of property and no established system of enforcing
contracts, at least for the little guy, is an abject failure. Much of it winds
up being absorbed by the parties other than those for whom it was intended,
and in fact makes the problem worse by strengthening those local bullies.

Godin is right, but before his solution can be pursued, we need to stop
providing the sort of aid that so frequently perpetuates the bad system.

[EDIT: fix grammar error]

~~~
JabavuAdams
"Who are you to say what he needs? Obviously by your values, the cigarettes
aren't "correct", but it's really not your life to live."

I'm not moralizing. Godin was talking specifically of getting further ahead
financially, rather than falling further behind. There are many things that
people want to spend money on that actually put them further behind.

To get further ahead financially, you either need to save your money now, or
spend it on something that will pay off +ve, later (while not experiencing bad
enough cash flow that you die before the expected benefit). This is simple
arithmetic.

Many, many projects or expenditures fail to live up to their initially
expected benefit. Beyond that, at any moment, we're not aware of all the
investments we could make, nor are we certain of their outcomes. So, it's
foolish to write, as Godin does:

"When someone in poverty buys a device that improves productivity, the device
pays for itself (if it didn’t, they wouldn’t buy it.)"

I like the rest of the piece, I was just pointing out the obvious flaw in his
uncritical, simplistic, free-market claims.

EDIT> You seem to be reacting emotionally to the smoking issue. What about
this example instead?

Suppose someone offers to sell some poor sod a supposedly productivity-
enhancing perpetual motion machine, and the potential buyer believes it will
work.

Is it incorrect for me, as a third party, to say that this would be a foolish
investment (from the perspective of increased finances/productivity)? After
all, it's not my life to live. Who am I to interfere?

~~~
CWuestefeld
_Suppose someone offers to sell some poor sod a supposedly productivity-
enhancing perpetual motion machine ... Is it incorrect for me, as a third
party, to say that this would be a foolish investment_

Since you say "perpetual motion machine", I assume that you're saying that the
purchaser is being defrauded, since we know that there's no such thing as
perpetual motion.

But that's exactly the second point I was making in my first response. For a
market to work, there needs to be some protection of the sanctity of a
contract. When the buyer discovers that all he's got is snake oil, when he
contracted for something real, he should be able to seek restitution. Without
this, the market's not going to get off the ground.

------
cia_plant
Free-market liberalism has been the dominant ideology for almost 200 years. If
it hasn't solved poverty yet, there must be something wrong with the argument
that it will inevitably solve poverty.

~~~
CWuestefeld
_If it hasn't solved poverty yet, there must be something wrong_

Or, perhaps it hasn't really been tried. I would challenge you to cite an area
where the market really is free. I don't think there's any industry for which
you could make this claim. But the areas that have come closest are also the
ones that have shown the greatest advances, and the most productivity.

While I'm afraid of derailing off the topic of solving poverty, I think it's
important to point out how the free-market fallacy is central in the current
healthcare debate. Those in favor of universal healthcare argue that the free
market system has failed. The funny thing is, the current healthcare industry
is just about the _least_ free market in America. In particular, bizarre
insurance regulations, following salary controls (put into place by FDR, but
doesn't it sound familiar today?) set up an environment where it's virtually
impossible for an _individual_ to obtain health insurance, with insurance now
being almost entirely provided by either the employer or the government. This
wasn't because of the free market -- it's because of meddling of government.

