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Liberty News ForumLNF Forums HerePolitical Opinion Page - The Hot Seat › Is This a New Take on the Broken Window Fallacy?
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Hot Topic (More than 10 Replies) Is This a New Take on the Broken Window Fallacy? (Read 483 times)
forgotten centrist
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Re: Is This a New Take on the Broken Window Fallacy?
Reply #10 - Feb 7th, 2019 at 3:54pm
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wyattstorch2004 wrote on Feb 7th, 2019 at 2:37pm:
Tax rates should not be based on "need" just as tax hikes shouldn't be based on "ability".

Raising taxes on someone just because they can afford it is destructive.


The recent corporate tax cut was done to spur corporate investment.  Hiring, specifically.  But if a company has so much cash that it considers buybacks a better return than hiring more labor, then no amount of tax cuts will induce the company to hire.  They've already decided they don't want to.  A tax cut for such a company will only result in more buybacks, not in more hiring.

You are saying that those buybacks themselves move capital to where its needed.  But that's an argument for tax cuts in general, not tax cuts targeted at a certain sector.  Even if we scope it to "corporate tax in general", we have to keep tax rates broadly even to avoid having people just reclassify themselves as "companies" to get a lower rate (as was being done in Kansas.)

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Exactly.  If we really want to treat the disease, it is done by stopping the government from manipulating markets and protecting market share with all their intrusions into the activities of participants.


I disagree with you guys.  Government interventions and protection rackets do distort markets, but that can be mitigated by transparency, electoral reform, and evolving best-practices.  Monopolies, duopolies, monpsonies, etc also distort markets.  The remedy for that is govt intervention.

What?  Competition fixes monopolies?  Yes, Microsoft's grip on the OS market has slowly been cracked open.  But not without decades of major disruption, competition-throttling, innovation-killing, vertical-consolidating market destruction.  Busting them into a handful of component companies wouldn't even have caused loss -- shareholders would get proportional control of each shard.
  

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Re: Is This a New Take on the Broken Window Fallacy?
Reply #11 - Feb 7th, 2019 at 7:40pm
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forgotten centrist wrote on Feb 7th, 2019 at 3:54pm:
The recent corporate tax cut was done to spur corporate investment.  Hiring, specifically.  But if a company has so much cash that it considers buybacks a better return than hiring more labor, then no amount of tax cuts will induce the company to hire.  They've already decided they don't want to.  A tax cut for such a company will only result in more buybacks, not in more hiring.


When they buy back shares, what do the sellers of those shares do?

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You are saying that those buybacks themselves move capital to where its needed.  But that's an argument for tax cuts in general, not tax cuts targeted at a certain sector.


These tax cuts were pretty general.

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Even if we scope it to "corporate tax in general", we have to keep tax rates broadly even to avoid having people just reclassify themselves as "companies" to get a lower rate (as was being done in Kansas.)


That would be good.  I prefer lower taxes.


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I disagree with you guys.  Government interventions and protection rackets do distort markets, but that can be mitigated by transparency, electoral reform, and evolving best-practices.


If only the central planners just constantly make things better, maybe someday they will have the knowledge the market does and know how to properly act on it enough to reduce a small fraction of the distortion they cause.

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  Monopolies, duopolies, monpsonies, etc also distort markets.  The remedy for that is govt intervention.


No, the cause quite often is government intervention.

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What?  Competition fixes monopolies?  Yes, Microsoft's grip on the OS market has slowly been cracked open.  But not without decades of major disruption, competition-throttling, innovation-killing, vertical-consolidating market destruction.


Microsoft's grip on the market was, necessarily, based on one of three things or both:

1) a product that was so superior that nobody in the market could best them (the goal, after all, of an entrepreneur -- I think it was Bezos or Musk who pointed this out -- is to avoid competition...to be so good or in a market so unserved that you don't have to compete)

2) government protection that hampered competition

3) violently preventing others from participating

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  Busting them into a handful of component companies wouldn't even have caused loss -- shareholders would get proportional control of each shard.


Then what would be the point?  Busing them how?
  
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Re: Is This a New Take on the Broken Window Fallacy?
Reply #12 - Feb 8th, 2019 at 2:36pm
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wyattstorch2004 wrote on Feb 7th, 2019 at 7:40pm:
That would be good.  I prefer lower taxes.


In this recent tax cut, some people's taxes are actually going up, in order to finance the tax cuts for others.  The justification is to spur hiring.  If hiring stays flat, then the justification to finance cuts for the wealthy disappears.  Disgruntlement ensues.

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Microsoft's grip on the market was, necessarily, based on one of three things or both:

1) a product that was so superior that nobody in the market could best them (the goal, after all, of an entrepreneur -- I think it was Bezos or Musk who pointed this out -- is to avoid competition...to be so good or in a market so unserved that you don't have to compete)

2) government protection that hampered competition

3) violently preventing others from participating


No no no.  Microsoft didn't "innovate".  They copied, they bought competitors, and they signed deals with clueless vertical partners.  There were many competitors in the beginning, and they were arguably superior in many ways.  All pushed out because MS leveraged early dominance into near total market consolidation.  They were then able to charge much higher prices, and consumer options started vanishing.

The govt didn't help them do it, and nobody ordered up any goon squads.  This was all done with speculation and arbitrage.
  

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Re: Is This a New Take on the Broken Window Fallacy?
Reply #13 - Feb 8th, 2019 at 2:53pm
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forgotten centrist wrote on Feb 8th, 2019 at 2:36pm:
In this recent tax cut, some people's taxes are actually going up, in order to finance the tax cuts for others.  The justification is to spur hiring.  If hiring stays flat, then the justification to finance cuts for the wealthy disappears.  Disgruntlement ensues.


Sure.  Whose taxes have gone up? 


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No no no.  Microsoft didn't "innovate".  They copied, they bought competitors, and they signed deals with clueless vertical partners.  There were many competitors in the beginning, and they were arguably superior in many ways.  All pushed out because MS leveraged early dominance into near total market consolidation.


So that would by my option 1, then.  They out-competed them. 

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They were then able to charge much higher prices, and consumer options started vanishing.


And nobody (or very few) chose to come in and compete with them.   Why?

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The govt didn't help them do it, and nobody ordered up any goon squads.  This was all done with speculation and arbitrage.


I would strongly disagree with the idea that government didn't help them.  Unless, unknown to me, Microsoft did this without any patents or benefits from regulation of businesses that might have otherwise competed with them.

From my options, I would say that option 1 and 2 were both effective in leading Microsoft to have such great market share.  Option 1 is totally fine.  If a business gets huge market share by delivering more value to customers than others are capable of doing, great.  But if they get there (or if option 1 is made easier) due to government protection, manipulation and infringement, then that is not.

But adding MORE option 2 isn't the answer.  Eliminating option 2 is.

Also, you didn't get to this question from the post you partially quoted:

"When they buy back shares, what do the sellers of those shares do?".
  
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Re: Is This a New Take on the Broken Window Fallacy?
Reply #14 - Feb 8th, 2019 at 3:12pm
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wyattstorch2004 wrote on Feb 8th, 2019 at 2:53pm:
Sure.  Whose taxes have gone up? 


This has been covered in other threads.  The bill puts a cap on SALT deductions, which hits people in high tax states.  About 10% of income tax payers are expected to have higher tax bills as a result.

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So that would by my option 1, then.  They out-competed them. 


And nobody (or very few) chose to come in and compete with them.   Why?


I would strongly disagree with the idea that government didn't help them.  Unless, unknown to me, Microsoft did this without any patents or benefits from regulation of businesses that might have otherwise competed with them.

From my options, I would say that option 1 and 2 were both effective in leading Microsoft to have such great market share.  Option 1 is totally fine.  If a business gets huge market share by delivering more value to customers than others are capable of doing, great.  But if they get there (or if option 1 is made easier) due to government protection, manipulation and infringement, then that is not.

But adding MORE option 2 isn't the answer.  Eliminating option 2 is.


Bill Gates bought a version of DOS, rebranded it, and signed a deal with IBM to package it in.  He did nothing to innovate or create -- he speculated and signed deals.  He inserted himself between the creators (of OS software) and the users (IBM customers).  He got rich by being the middleman.  OS/2 was by all accounts a much better tool than Windows, but by that point MS had firmly ensconced themselves as the only real player.

Hardware vendors were under pressure to include MS on everything they shipped, or risk losing favorable terms on every MS product.  That's not "competitive", that's leveraging monopoly power.  Consumers, especially in business, were under pressure to go with something that maximized standards and interoperability, which MS exploited.  They shut down interoperability with competing tools.

The same shenanigans went into play with the browser market.  MS entered that space with the full weight of their pre-sold position, killed Netscape, and proceeded to scope DOWN browser innovation.

Competitors eventually emerged, driven by other market-consolidators like Oracle and Google, but for decades browser innovation was held down and throttled so MS could continue sucking coin.

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Also, you didn't get to this question from the post you partially quoted:

"When they buy back shares, what do the sellers of those shares do?".


I addressed this earlier.  Share buyback money gets moved elsewhere in the market.  I didn't say buybacks were inherently "bad".  I said they were a symptom of market dysfunction.
  

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Re: Is This a New Take on the Broken Window Fallacy?
Reply #15 - Feb 8th, 2019 at 7:00pm
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Waiting in response from fc, with links to his posts here questioning Clinton foundation conflicts of interest.

This will be telling.
  
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Re: Is This a New Take on the Broken Window Fallacy?
Reply #16 - Feb 10th, 2019 at 7:36pm
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forgotten centrist wrote on Feb 8th, 2019 at 3:12pm:
This has been covered in other threads.  The bill puts a cap on SALT deductions, which hits people in high tax states.  About 10% of income tax payers are expected to have higher tax bills as a result.


How much income does it take (or how much house value) to have that cap have enough of an impact to counteract the lower rates, higher standard deduction and wider brackets?


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Bill Gates bought a version of DOS, rebranded it, and signed a deal with IBM to package it in.  He did nothing to innovate or create -- he speculated and signed deals.  He inserted himself between the creators (of OS software) and the users (IBM customers).  He got rich by being the middleman.  OS/2 was by all accounts a much better tool than Windows, but by that point MS had firmly ensconced themselves as the only real player.

Hardware vendors were under pressure to include MS on everything they shipped, or risk losing favorable terms on every MS product.  That's not "competitive", that's leveraging monopoly power. 


It is leveraging market power that, by your own story, they got via making better deals and growing market share through mutual agreements. That is competition.  You just don't like that they did it better than others.  You want to cap how much they are allowed to achieve. 

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Consumers, especially in business, were under pressure to go with something that maximized standards and interoperability, which MS exploited.  They shut down interoperability with competing tools.


Ie, they out-competed others.

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The same shenanigans went into play with the browser market.  MS entered that space with the full weight of their pre-sold position, killed Netscape, and proceeded to scope DOWN browser innovation.


Again.  This is competing.  Netscape couldn't deliver the value that Microsoft could. 

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Competitors eventually emerged, driven by other market-consolidators like Oracle and Google, but for decades browser innovation was held down and throttled so MS could continue sucking coin.


From willing, paying customers who were free to seek browsers elsewhere.  But they didn't. 


Quote:
I addressed this earlier.  Share buyback money gets moved elsewhere in the market.  I didn't say buybacks were inherently "bad".


You imply it every time you discuss the topic.  You bring the idea into discussions as a negative.  As a bad alternative to internal investment.  "These companies didn't invest in growing their business, instead they just did share buybacks, enriching their shareholders".  Sound like something you would say?  See how that carries the implication that buy backs are bad choice?

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  I said they were a symptom of market dysfunction.


And I say that is wrong.  Allocation of capital is a key feature of a properly functioning market.
  
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