Monday, May 22, 2006

Respond Another Day

A few days ago I had a conversation with some friends about economics and trade. There was a lot of disagreement and naturally there are some things I wish I said but am not witty enough to think of it at the time. So here's a list of quick retorts if you ever find yourself on the other side of one of these claims as I did on Saturday.

Corporations only care about the immediate future. This is a rather strange argument in world where a firm is legally an immortal entity. Even stranger because all industries engage in investment (notably medicine, real estate, energy, computers). The only reason why we think all firms are so short-sighted is because most of their activity necessarily revolves around certain and immediate (thus urgent) changes in the world around them.

If a firm finds a loophole in the legal structure and uses it to their advantage, the firm should be blamed. So if I find a bag of money on the street with a sign that says "free money" I'm at fault if I pick it up? Paradoxically, the lawmakers who shamelessly created these flawed regulations are the same politicians who celebrate themselves for making laws that give people incentives to do good.

Only governments can reliably aid in a disaster because of their large size. Which is like saying ten people have an easier time agreeing on pizza toppings than two people. Human beings are not mindless ants; the capacity of our society does not increase as our bureaucracy inflates. Many specialized organizations do every day what governments can't.

People should give aid (such as water) away during disasters rather than sell them to ensure the most frail will get what they need. In reality, the strongest will be first in line for water they may or may not need while the weakest will definitely be least likely to lay their claim on the scarce and vital resource. Selling water forces people to prioritize and create the incentive for others to supply more. "Price gouging" merely advocates shaving isn't as important as living.

The only reason companies want to be located in the US is because the liability laws are slanted to their favor. Because the only thing Time Warner cares about is legal shelter in case someone claims TV really did rot their brain. There are hundreds of reasons for companies to leave the US; I find it hard to believe there is only one reason why those thousands (tens of thousands?) stay (to the point that I almost feel silly listing them: educated work force, high quality graduate schools, ease of immigration, favorable labor laws, proximity to financial institutions, stable government, etc etc).


Anonymous said...

"Corporations only care about the immediate future."
So how far ahead do they plan? Or even SHOULD they plan? A quarter? A year? Until the CEO retires? 900 years? Evolution of sentient squid? Proton destablization? I'd like to know.

Here's an example. Since Microsoft decided to postpone Windows Vista to next year (or by some rumors 2008), the PC makers have been grumbling because they were planning on big Xmas sales. Who failed in their planning? MS for not getting a product out on time or the PC makers for believing MS's release schedule?

"If a firm finds a loophole in the legal structure and uses it to their advantage, the firm should be blamed."
This leads to a Catch 22. If you try and make a law that is clearly spelled out, it has to explain things in such exhaustive detail ordinary people will get confused. Confusion leads to loopholes. Think about what would happen if Brian from KotDT went pro and started looking at corporate law the same way as he sees Hackmaster rules. He said he does it to make a better game, but it's BA who suffers the most and the game only gets more confusing as you try to patch up the existing loopholes.

How do you make laws plain enough to be understood, but not so complex that it leads to loopholes and exploitation?

What happens if the bag of "free money" you found is stolen? Do you have to give it back? What happens if you go on a spending spree and buy your brother a plasma TV? What if you buy things that can't be returned? Who should wind up paying for them in the end?


Anonymous said...

I would say the person who said corporations only care about the immediate future were speaking in terms of corporate policies that help the corporation in the short term but hinder it and the economy in general over the long term. IBM laying off all those people helped in the short term but precipitated a recession in the long term, which caused a decrease in consumption of their goods as well as the goods of most other companies. Environmental policies (pollute now, worry about the Amazon later) also fall under this.

As for governments helping in disasters - we're a first world country. Disasters here aren't meant to be Darwinian. You should try to help all people, including the poor, the sick, and the weak. Why? Because we can. And who should do that? Well, a corporation is a profit-making entity. The government is not. So shouldn't the entity that is there not for profit, but for our protection and for all the things that make a society viable that are not profitable be the one to assist?

As for giving away supplies, again, the purview of the government because that's what they're there for. A company can't be expected to do that because a company is there to make a profit. You need a charitable organization or an organization out to help, not to make money. The largest such organization happens to be the US government. Stuff like this is the whole reason governments exist in the first place.

Otherwise I generally agree with you.