What Do We Fix? (Econ)

Based on the introduction to Ha-Joon Chang’s book 23 Things They Don’t Tell You About Capitalism and his RSA presentation below, there might be something wrong with our economic system. As students, however, what do we need to know about economics, capitalism, and western culture in order to fix what Chang perceives as broken? Is our economic system broken at all? Please ignore the first few minutes of his talk – he is somewhat fixated on the title of the book!

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18 thoughts on “What Do We Fix? (Econ)

  1. Why do they call it a "Free Market" if the government can still intervene? I believe that there should be regulations that the Government puts out, not so that they can intervene but that they can stop things from happening that can have a disastrous effect on the market such as monopoly's.

  2. The free market is not what people think it is. As Chang states in the video, people defining the free market like to tell you that politics should be kept away from the economics because it interferes with the market rationality, but the definition of the boundaries of the market (who determines what, who can participate, etc.) are politically determined. The free market is much more political than what people think. Companies are owned by floating shareholders, who do not have any commitments to the company in the long-term future. If GM had not raised their prices to please the shareholders, they would have been able to pay off their debts that made them go bankrupt in 2008. Chang says the easiest way for companies to make money is not to invest. He says that he thinks there are a lot of problems with capitalism, but that it is still the best economic system that humanity has invented, and there are many ways to run capitalism. If the government is participating in the free market as well, then the actual definition of the free market is incorrect.

  3. Our economic system is flawed, it is as easy as that. Companies are going bankrupt because they are trying to appease their shareholders instead of dealing with their dept. Chang says that the "easyest way for companies to make profit is not to invest." He says that investing in things like machinery and research/development is not the best way to run a company. He also makes the point the despite the fall of communism with the Soviet Union we are still living in planned economies. I think is best point is when he says, "making the rich people richer doesn't make the rest of the world richer." This is a astounding point, the gap between the rich and the poor in our world is getting bigger and if we can't stop this poverty is going to become a even bigger problem than it already is. Chang said that the, "people in poor countries are actually more entrepeneur than people in rich countries" these people do not get any opportunity to move forward.

  4. The markets that form Canada's economy, have taken a hard turn in the recent years. It is all caused by greedy people, hungry for power and money. Until you fix this problem of "Greed", the economy will never be perfect. Now the important thing to notice is how big of an effect the news, and politics make on Canada's economic stability. Take the recent dip in the financial markets for example. This was simply caused by a lower dept rating of AA+ by Standard and Poors. This issue had a huge effect on the American, and Canadian economies for two main reasons. One was the News, channels around the globe starting blowing this issue up, until there were questions of another economic ressesion. This information startled people, who were now concerned about spending money, or investing it in securities. The second reason the dept rating had a negative affect on the economies is because of the politics. S&P is now being investigated as to why they lowered their dept rating, when Moody's and Fitch's rating were kept at AAA. Now I HOPE that this was not a political scandal to make Obama look bad, I HOPE. But to some this up, the News and Politics of a country have a huge effect on its economy. These small dips benefit short sellers, and can benefit long term investers if they have cash to invest in quality securities.

  5. There's a pretty good reason that the world's brightest economists have never been able to come up with an economic system that isn't full of big problems; it probably doesn't exist. I listened to this guy speak for a while, waiting for him to get to the point he was trying to make, but after a while I decided he didn't really have one. He talks about a bunch of problems with today's capitalist market, like the fact that "Sven gets paid more than Rham", without giving us any system by which Rham and Sven would be getting paid the same amount. Even if he does suggest solutions, they probably won't work. There are unchangeable problems with human nature and human history that make it impossible for our world to be completely equal. Even in a communist system, where everyone gets the same, nobody makes money which means nobody has an incentive to create and while everyone may be equal, they all have almost nothing. But I know, Chang just supports "different forms of capitalism" – again, they all have their problems, take a look at Europe. So yes, Chang's problems are mostly real problems, but an economic system without problems is impossible and Capitalism in the way we currently use it is probably our best bet. I haven't read the book, and its likely I'm missing a lot of the reasoning behind the stuff he argues which may well be valid, but that's my opinion based on what I've heard.

  6. Chang makes a few facts that could explain why he thinks there's a problem in Capitalism today. The easiest way for a company to earn profit is not to invest. I think it is because more investment might bring the company greater risk. The chance that they take a beating is greater. Also, the shareholders legally owns the company. They are the ones who can actually decide the fate of the company, (since the rise of a company needs the investment of the shareholders) which is actually not good for the company itself. A healthy firm should pay attention to its business not the shareholders. If the company has always been trying to please the shareholders, then the reason of why to start a company has already lapse from what it should be. The shareholders could give up their company when the profit runs down. How to provide more chance to people in poor countries: People in poor countries are more entrepreneurial than people in rich countries. Rich countries have better welfare than the poor countries. The people in poor countries are pool is usually because of some historical reasons. The people in rich countries have already got nice house to live in while the people in poor countries are still worrying about their next meal. That is why people in poor countries want to make favourable turn for their life through carving out (establishing a business). However, rich countries are not helping poor countries to become richer but to seek resources from them while they are moving to the liberization of economy.People should know about many types of economic systems. There are different ways to run capitalism, not only the Free Market of the American style. Also we need to understand the connection between politics and economy. There might be a way to combine Communism and Capitalism to make a relatively perfect economic system. PS. In the 1870s, the economy situation of England was not optimistic. At that time, the theory of "New Liberalism" (which suggested that Free Market should be running under certain policies, but not to let the markt drift) had rised to against the "Classical Liberalism"(the government only exists for protecting the freedom of individuals). and… it is relatively hard for me to understand what he is talking about.

  7. After reading excepts from Ha-Joon Chang’s book 23 Thigns They Don’t Tell You About Capitalism and watching parts of the video presentation about the basis of his book, it is clear that he has strong views about the “flawed” economic system and the free market ideology. For example, Chang refers to a specific example in which bus drivers in two different countries are paid extremely different salaries. Chang argues that the bus driver being paid fifty times more than the other driver is most likely not more skilled than his counterpart. He fails however to examine the other aspects of this specific scenero such as the cost of living in each respective country. This example from the novel helps to prove that Chang’s views are based on extremely selective cases and therefore results in biased assumptions about capitalism, the free market and our current day economic system.Chang does bring up problems that are valid and of concern in our economic system, however his solutions do not seem to be realistic or possible. An ideal system is simply impossible, and unattainable based on the many factors that effect an economic system. The notion of an “ideal system” is impossible to define based on the many different wants and needs of each social group existing within a society. What Chang perceives as a “broken economic system” exists because within any system with so many variables, there will with no doubt be room for failure and concern. However, this doesn’t necessarily mean that our current model of Capitalism needs a complete overhaul.

  8. Chang is basically saying that the capitalistic system we currently use if very flawed. Our system does not have the economic regulations that I believe are required in order for the system to be successful. We cannot put all our trust in “the experts” and for our system to benefit everyone, we must be, as Chang says, “active economic citizens”. The type of capitalism employed in the States for example has led to a giant income gap between the poor and the rich. It has become nearly impossible for the poor to further themselves, as the rich “get richer”. Many people wonder why China’s economy is booming and America owes China trillions of dollars. I believe it is because China never introduced a market that was consider to be 100% free market. To my knowledge, they have always had economic regulations, which has prevented their economy from crashing, like ours. Our course there are other circumstances that cases China’s economy to be much greater than ours, such as their labour conditions.

  9. Thanks for sending me the link to this page! Chang's piece is thought-provoking, and although I will admit to not agreeing 100% with what he is saying, it is a good starting point for looking at some issues in economics. Let me start by saying that I think there are actually a lot of economists who in fact agree with more (and different) regulation, and who recognize that there is a strong role for government in the economy. So when Chang lists his "23 Things" I would say that economists (or at least the ones I know) are already aware of many of them. That said, I think Chang's best contribution is to make us think carefully about the positive / normative divide when looking at policies. He seems to contend that free-market advocates are engaged in a circular argument: free markets exist (!) because they are good, and they are good because they exist. It is probably worthwhile separating these two arguments into (1) The positive question: Are markets free? (he thinks not) and (2) The normative question: Should markets be free, if they could be? I suspect that few of us would want to live in a world where all of our economic activities are heavily regulated. The question is, where do we draw the line?For example, we often think that the opposite of a free market is a monopoly: but if free markets have problems does this mean that having a monopoly a good thing? As you will probably learn (and hear often in economics), the answer is sometimes "yes" and sometimes "no"! Manitoba Hydro is a monopoly which lots of people seem to be OK with, but I would be really upset if Tim Horton's had a monopoly on selling coffee (since I dislike it).

  10. I still believe in a capitistic based economy, but I do see problems in our current system. I like the idea of free market, and the whole idea of the "American Dream," but when I see company executives take home 10s of millions of dollars as they declare for bankruptcy, and the government is forced to bail them out with tax payer's money, I start to ask questions. I think some regulations have to be made on company bonuses. I don't like seeing that division of poverty in American with 10% of the country out of jobs, while company shareholders and executives walk off with more money than they know what to do with.As soon as I suggest regulations, I'm swaying away from what the capilistic code dictates. I think there obviously needs to be some tweaks to the current system, but I'll be the first to say I'm not sure what those are. Maybe we'll learn this year!

  11. There are defiantly some problems with our current economic system, however, all systems have flaws. Entrepreneurs today in our capitalist market are taking on risks, which creates employment opportunities. Sometimes the biggest failures occur when the government intervenes in the market. The government pumps millions of dollars into new projects, however when the money is spent there appears to be little or no effect on the overall economy. This results in more debt which burdens future tax payers. Ha-Joon Chang says that "the easiest way for companies to make profit is not to invest". Companies often expand with the intention of making more of a profit. By expanding, companies employ more people, spend capital on new and better equipment, which essentially stimulates the economy. Chang goes on to say that "making the rich people richer doesn't make the rest of the world richer." Chang seems rather narrow minded in his observations. If for example, a "rich" entrepreneur develops a new hotel, that entrepreneur has stimulated the economy by creating various job opportunities. This entrepreneur has essentially put hundreds of people to work. I believe Chang's suggestions on how to solve the current economic problems seem rather unreasonable as our system isn't broken.

  12. There is no economic system that is problem free. Ha-Joon Chang proves this through his video “23 THINGS THEY DON’T TELL YOU ABOUT CAPITALISM” by failing to bring up examples, which help distinguish his form of capitalism from the rest, as it is clear there is none. During the video, Chang mentions two key examples. One being Sven, who gets paid more than Rham, and the other being the two bus drivers who earn different wages while completely the same task. Chang fails to explain an approach that will make things fair and even, as I personally don’t believe that there is one. I believe we should stick to the current system of capitalism, as it is an economic system in which the means of production are privately owned and operated for profit, which is usually found in competitive markets, which is what motivates people of today.

  13. Chang is excellent at pointing out just how flawed our "free market" system truly is. He first starts his argument off by stating that companies should not be run in the interest of the owners, depending on the company a very valid point when you think about it. Companies today are generally owned by free floating shareholders who don't have any commitment with the company. So why would a company put so much risk in satisfying their share holders who merely want short time profit and the highest possible rate of dividends? Chang also states that despite the fall of communism, we are still in planned economies, and a solely "free market" isn't possible. He also tries to disprove what he sees at myths in the economy; "people are paid what they are worth", "increasing wealth among the rich helps the poor (trickle down)", and "education makes countries more prosperous". People are flawed into thinking that we are living in the best economic world merely because they don't want to listen to people that challenge the system (such as Chang). Free market advocated say that it (the free market) is best at creating wealth, even when it may create inequality, despite the fact that it has been statistically proven that the free market economy doesn't create much growth. During the 60s and 70s it created an economic growth of approximately 3%, now it has been growing at about half that rate, showing that the world economy has dramatically slowed down of the past three decades of free market capitalism. Back to the definition of a free market…it has been proven by numerous people, not intentionally, that a solely free market doesn't exist already. If trying to eliminate child labour is an infringement on the free market, and child labour is slowly BEING eliminated, how can it possibly even be defined as a free market anymore? I don't necessarily agree with everything or anything Chang is saying, but while he may not have the answer, he surely knows the problems. He argues very well that free-market capitalism has created an unstable global economy, and has caused people to feel a great deal of discomfort with the lessening job security that is available. Sidenote: "people in poor countries are more entrepreneurial than people in rich countries." Because there is less risk?

  14. In 23 Things They Don’t Tell You About Capitalism, Ha-Joon Chang points out inefficiencies and imbalances that happen as part of the capitalist system. Although with all of it’s flaws our economic system may seem “broken”, nobody would be able to suggest a better system than capitalism. If capitalism wasn’t the greatest motivator, none of our parents would be paying so much for our education and we would not be trying so hard now to have the best future possible. Capitalism is the reason that people wants to get ahead. Unfortunately, not everybody in the world is able to benefit from the system. Ha-Joon Chang constantly brings up points that suggest that the government should have more control of our economic system. Suggesting more government control could end up causing the system to be more broken because the government doesn’t exactly have any real incentive to do things cost efficiently since they only run off of the money from productive members of society. The people who run companies are the ones that strive to do well for themselves and make a financial profit so they will do anything in their power to succeed in doing so. Instead of the government trying to take more control of the system; they should let people leave things to the market and instead provide an environment where everybody can have the resources (if they want to put in the effort) to succeed. Contrary to what Chang believes, we are smart enough to leave things to the market because that is what would benefit us the most. He also suggests that the “US managers are overpriced”. Who is he to decide that a certain person makes too much money? It is all subjective and the market is what in the end should determine who should make what. While our economic system is flawed, it is still the best of any other option that people have come up with in the past. Taking from the rich and giving to the poor will temporarily even things out and always receive the support of the poor but the beauty of capitalism is that people can try hard to be at the top.

  15. Capitalism offers freedom to the people to buy and sell products they want. In a free market, individuals are allowed to make anything in order to make profit and this keeps productivity levels high. Free markets expands customer base, balances trading and keeps costs of goods down. Despite talks about capitalism being flawed, it’s easy to get carried away and forget what we have going in North America. Take China for example, where the government decides how capital is used and divided. This encourages me to think that the the government there wants more control and they know better than the entrepreneurs and that’s why they’re taking these matters in their own hands. Stating this, China isn’t a completely communist country, as I’m pretty sure they do have their own take on capitalism. There are elements Capitalism drives money in the right places since people don’t want to invest their money where they won’t be any profits. There’s definitely more choices for the people with this system, and isn’t that what we’re supposed to want? More opportunity and freedom? Based on the little I know, I don’t think our economic system is broken, but I guess there’s always room for improvement.

  16. There are defiantly some problems with our current economic system, however, all systems have flaws. Entrepreneurs today in our capitalist market are taking on risks, which creates employment opportunities. Sometimes the biggest failures occur when the government intervenes in the market. The government pumps millions of dollars into new projects, however when the money is spent there appears to be little or no effect on the overall economy. This results in more debt which burdens future tax payers. Ha-Joon Chang says that "the easiest way for companies to make profit is not to invest". Companies often expand with the intention of making more of a profit. By expanding, companies employ more people, spend capital on new and better equipment, which essentially stimulates the economy. Chang goes on to say that "making the rich people richer doesn't make the rest of the world richer." Chang seems rather narrow minded in his observations. If for example, a "rich" entrepreneur develops a new hotel, that entrepreneur has stimulated the economy by creating various job opportunities. This entrepreneur has essentially put hundreds of people to work. I believe Chang's suggestions on how to solve the current economic problems seem rather unreasonable as our system isn't broken.

  17. As many people have reiterated in prior comments the "free market" system in Canada is flawed. If we were to truly abide by the real meaning of a "free market" we would have to seriously re-evaluate. I think that what Chang is essentially saying is that politics will always have some influence on our markets and economy, meaning that the Government will always have ties, and we will never reach that real "free market" status. It seems that Chang also brings forth some possible solutions to our not- so perfect economic system. After reading through the article and watching bits of the video I would have to say I don't really think of his solutions are do-able. Any kind of "ideal economic system seems unattainable because of the many things that must be factored in. Until there are solutions to all of these different variable, we will continue to see the same results we are seeing today.

  18. In the presentation "23 Thing They Don't Tell You About Capitalism" Ha-Joon Chang points out many of the flaws in the capitalist system. Although Chang refers to our system as being "broken" he can't point out a system that is better than that of capitalism. Capatialism allows people to buy and sell products to consumers that they want. This allows for a "free market"; however Chang does not believe that a free market is possible. Chang brings up many points that suggest the the government should have more control over our economy but I believe we should contiue with the free market. Although the free market doesn't produce as much economic growth as we would like there are no better economic systems for us to use. There has been a collapse of communisim so clearly that system didn't work. Cuba for example switched to communisim and they haven't been able to produce a lot of economic stimulus.I do beleive that our economic system is flawed as Chang brings up with the example of the two bus drivers both doing the same job, but one is making more than the other; however I don't believe that we should change our economic system but we need to work and develop on it.

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