Chestaan wrote:Wolfmanne2 wrote:That's human nature in the sense that is a completely rational approach to take. Changing economic systems or abolishing the one we have will not change human nature and human nature will cause imperfections. If something falls in value because the value of a product is overstated, tough luck; it happens all the time and the economy keeps on chugging along. But people get things right too; for instance, if you thought that the iPhone was revolutionary when it came out and people would buy it because of how good a product was, you would have been correct because it was a big seller, people did buy it and Apple's share price went up. And that financial investment from the purchasing of those stocks partially could have contributed to that (i.e. might had been used to cut down production costs) - but overall, the product itself was good enough in its own right that it would have been a profitable investment.
We're not in the pre-crash world. There was a lot wrong with the pre-crash world. If something is broken, fix it. If something isn't broken, don't fix it and certainly don't do what you'd like to do which is break it completely and try use some glue to fix it back together again.
Well of course. That's perfectly rationally behaviour; if a company is in trouble, then you're going to make less of a return and it is safe-bet to pull out. If you're concerned about short-term investments, then there are government policies that can encourage people to stick it out for the long-term (I don't think this is good policy, but as an example you could allocate extra voting powers to those own shares in a company for, say, three years). Capitalism can be made responsible.
Perfection is difficult to obtain. Is the system flawed? Yes. Does it need tinkering? Yes. Should we fix or destroy things that aren't broken? No.
Nowhere here have I made the argument that we need to rip the system apart. I am simply stating that the compensation received by the financial sector is vastly greater than it's value added.
My point about the self fulfilling prophecy, the CDOs, Keynesian beauty contest etc. was that using market values for assets is not a perfect indicator of how well a company (and certainly not an economy) is doing. In many cases valuations can be rationally based on arbitrary rumours. Institutions can collapse on the whims of the financial sector even if they had high positive value.
My other point is that the financial sector doesn't add information. We already have the information in the public sphere, and if they have information that we do not that is illegal insider training. The information is all there. Information leads prices, not the other way around.
As a communist, then by definition you must by definition believe that the financial sector has to be significantly reformed beyond recognition if not abolished?
It isn't the only source of information, but it is another source of information. If a headline about Microsoft's performance does come out, how the stock market responds is in an indicator of what sort of situation the company has found itself in and how positive or negative it is.
The point you've made isn't something that people don't know. Of course things can be overvalued. They can also be undervalued. I think that's just human nature.
The compensation received might be greater than the value added, but then all that needs to be done is that legislation needs to address that, though not to the point that we drive companies involved in finance abroad and lose more than we gain. It's fine line to balance. You also have to remember that, in spite of what Elepsis thinks, finance is more than moving numbers from one Excel spreadsheet to another. It is a very high skilled job for the best and the brightest and them earning a large amount is money is justifiable in terms of what they contribute. Should it be as high as it is in many cases? No. But as a generality, I'd say for the products financiers provide and the net benefits that are provided what they earn is justifiable.
Souseiseki wrote:Wolfmanne2 wrote:There is social value. Take stock market trading. Base on what is traded we can figure out which companies are healthy, how the economy is progressing, figure out where economic markers are etc. A stable and booming stock market is an indicator of prosperity. Traders are one big focus group for us all to see how well the economy is doing - and as a benefit, they make money for said economy for doing just that (there aren't going to be big losses, there are risky trades and safe trades, but like in all economic sectors they do spread risk).
so an entirely incidental benefit of what they do, then? i mean, we could eventually create a system where the number of drunk men in suits blowing party horns becomes a good measure of how healthy the economy is but i don't think that would be a good argument towards the inherent value of getting drunk and mass utilizing novelty party items.
Lots of things can be used to determine how healthy an economy is. If a company that specialised in getting people drink and mass utilizing novelty party items was on the stock markets and was booming, then yes, it is an indicator that the economy is healthy, because such an activity of pointless so I could conclude that disposable incomes among a subset of the population has risen so high so that they can do this.
