Saturday, March 29, 2014

Henry Blodget — Sorry, But There's No 'Law Of Capitalism' That You Have To Pay Employees As Little As Possible

Sorry, Mr. Blodget, but it is a law of capitalism. It is the fatal flaw of capitalism along with the tendency of capital, both real and financial, to concentrate. It's called market efficiency. This is the way markets work left to themselves. This is what happens when economists ignore the effects of power, as Marx observed. 

Competition results in Pareto optimality, where no one can be made better off without making someone else worse off. Redistribution makes a few less well off in order to make everyone else better off, and that's why plutocratic oligarchy uses its power to prevent this from happening institutionally. 

Business Insider
Henry Blodget


googleheim said...

A surplus in Germany is a deficit in the rest of the EuroZone.

Germany eats their PIIGS and yet the pigs have no food.

Unknown said...

"Competition results in Pareto optimality"

No, neoclassical perfect competition general equilibrium models result in pareto optimality.

"Under certain idealized conditions, it can be shown that a system of free markets will lead to a Pareto efficient outcome. This is called the first welfare theorem. It was first demonstrated mathematically by economists Kenneth Arrow and Gérard Debreu. However, the result only holds under the restrictive assumptions necessary for the proof (markets exist for all possible goods so there are no externalities, all markets are in full equilibrium, markets are perfectly competitive, transaction costs are negligible, and market participants have perfect information). In the absence of perfect information or complete markets, outcomes will generically be Pareto inefficient, per the Greenwald–Stiglitz theorem.[3]"

Clonal said...

Also, one has to realize that competition and cooperation are at odds with each other. Competition inherently leads to a zero sum game. Competition also leaves no room for altruism, kindness, empathy, and any of the "virtues"