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Everything Popular Is Wrong: Malinvestment And Consumers
Submitted by J. Dayne Girard of The Ludwig von Mises Institute,
“Everything popular is wrong” — Oscar Wilde’s famous quote can be supported by economic theory. One of the seemingly neglected aspects of malinvestment is the effect it has upon the popular perception of products, services, and lifestyles.
Malinvestment, while misunderstood by many, is nonetheless an easy concept to grasp. Imagine that the government decided that cars were unsafe and, therefore, more people should drive trucks. To encourage the use of trucks over cars, the government offers easy credit to truck buyers through a federal truck loan program. The easy credit creates an artificially high demand for trucks, increasing revenue and profits for truck manufacturers at the expense of other industries.
The easy credit encourages more people to buy trucks than would otherwise buy them. That’s malinvestment in a nutshell — capital being diverted from somewhere to somewhere else through government intervention.
Malinvestment is a term usually reserved for the malinvested capital created by credit expansion. But, any kind of government intervention in the economy creates malinvestment, whether it’s a loan program, regulation, or other economic intervention. In many cases, if it manipulates behavior, it causes malinvestment.
The same effect could be obtained by regulation. The government might require those who drive cars to study for a special license, then pay an annual fee for that license. Just like the loan program, this would cause an imbalance in economic investment. People would avoid buying cars because of the additional expense and hassle. Instead, they would be more likely to buy trucks, which don’t require the extra license.
The government intervention, in whatever form, causes an increase in revenue for the truck industry. This increase in revenue means larger marketing budgets for the truck manufacturers. Larger marketing budgets will afford more advertisements touting the value of trucks over cars. They will spend more money creating and promoting research that exposes the negative traits of other types of vehicles. With their larger marketing budgets, they can reach the masses with their message as never before.
What makes these marketing messages so dangerous is that they are indeed true. The research that the truck industry puts out will be accurate and convincing. It will show up before the eyes of the population and convince many. But there is a missing message that should be balancing the truck manufacturers’ marketing. The revenue diverted from car manufacturing to truck manufacturing results in more marketing for trucks but also results in less marketing for cars.
Significant amounts of research and marketing for the truck industry are created that should have never existed. On the other hand, research and marketing that should be informing people about the advantages of cars never comes into existence. Combine the prevelance of one messsage and the absence of competing messages and the result is a perfect storm for widespread misinformation. This is all the result of government intervention in the ecomomy.
Higher education, an industry bloated with government incentives and malinvestment, shows the effects of malinvestment in spades. Students are told that degrees provide the path to higher earning potential. I believe that this is true. There is still value left in the higher education system. But malinvestment in higher education has saturated the economy with this message so pervasively that alternatives are not even considered.
Consider the student pursuing a business degree. Is it really possible that spending four years and $60,000 is the best method of preparing for a career in business? $60,000 is enough to cover the average startup costs of two small businesses. As an entrepreneur myself, I would argue that many business concepts can be easily market tested in three months for $4,000. In four years, an aspiring businessperson could test 15 different business models for the equivalent cost of a business degree. In terms of effective preparation for success, I find it hard to believe that a college degree could even begin to compete with four years of experience working on business startups.
Consider also the hundreds of wonderful educational resources made available online for free. In college, I learned more from a one hour YouTube video lecture by Murray Rothbard on the Fed than I did in my entire Macroeconomics class at the state college.
But these alternatives do not have the long marketing arms that regionally accredited higher education institutions have. Government does not offer incentives for alternatives to traditional college and, therefore, few people realize they even exist. The partial truth that higher education offers a path to a better future so heavily dominates the “path-to-a-better-future” landscape that it might as well be a lie.
Healthcare provides another fascinating example of unbalanced messaging. Patent laws and strict FDA regulation provide synthetic drugs exorbitant revenue compared to natural healthcare products (which cannot be patented). Hunter Lewis writes, “Only a medicine protected by a government patent can hope to recoup the enormous costs (up to $1 billion) of taking a new drug through the government’s approval process.”
The result on the American psyche is obvious. Any product that has not undergone rigorous double-blind, placebo controlled clinical trials is considered quackery. Synthetic drug manufacturers masquerade their research with marketing budgets hundreds of millions dollars deep and convince the masses that nothing else is as safe or effective.
While it is true that natural products have not been tested as thoroughly, this is not necessarily because they are less effective or safe. It’s because the product’s creators cannot afford the testing. Natural products never get a chance to compete because they are stuck playing in a completely different economic arena.
The story is the same in nearly every other area of the economy. Government intervention in the economy manipulates the buying decisions of the population. The resulting malinvestment quickly turns into malinformation and imbalanced marketing messages. Our minds are dominated by the marketing messages of malinvestment which blankets our economy in a dark fog of partial truths.
In a free economy there are no advantaged or disadvantaged parties. The best product obtains the most revenue and has the biggest marketing budget. Messaging from one industry is balanced by messaging from competing industries.
But our economy is another story. Partial truths masquerade as the whole story, granting subpar products and services unchallengned attention and popularity. Oscar Wilde was right: “Everything popular is wrong.”
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Malinvestment? Like billions and billions to criminal bankers and defense contractors?
On the other hand... if it weren't for malinvestment there would be no investment at all...
"Everything popular is worng"? Even the Copernican Principle?
http://beforeitsnews.com/science-and-technology/2014/06/top-scientists-f...
Shit....why don't you tell it how it is?
No....No....It gave me a job....Here is your Coke
Malinvestment? Like billions and billions to criminal bankers and defense contractors?
Malinvestment?
You're soaking in it.
/Madge
Fed will provide free money: that IS the economy.
Instead of bailouts (old "demand-side" economy based on screw ups needing bailouts), Fed will move toward providing money before the screw ups (new "supply-side" economy) and we'll never have crises or recessions again!
“If ever again our nation stumbles upon unfunded paper, it shall surely be like death to our body politic. This country will crash." — George Washington
The average auto-loan term increased to 66 months during the first quarter, according to Experian Automotive...
Making matters worse, nearly 25% of all new vehicle loans originated during the quarter had terms extending out 73 months to 84 months...
Of all new vehicles financed, 30.2% were leased compared to 27.5% a year earlier...
http://www.usatoday.com/story/money/personalfinance/2014/06/08/wscs-are-...
maybe americanreality will reply to this comment also saying that i don't understand the usa car situation either. lulz
Must keep up with the Darshians. whatever it takes. Amerikans are resilient
i need a cah. howmuchamonth?
Good time for the globalists to abandon ship and move in with the armed forces to take over the central banks in exchange for amnesty from whatever the CIA is blackmailing them with.
Guilty. I believe it.
reposting:
Silent Generation is put forth in a theory called The Fourth Turning (I've been thinking on this). https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory
But "Silent Suffering" is an English Quality and a tradition weaved into WASP, Catholic, Mormon, and other religions (I Guess).
Congressional Propaganda & Presidential, GOP, NEO-CON, and Democrat Propaganda is strong. The whole Advertising Industry jumped techologically around WWI (from what I read). So that by WWII government propaganda for these wars was in full swing. Subliminal Advertising Investigations by Congress squash any question of limits to propaganda (Except for Smith-Mundt Act). After the Church Committee there doesn't seem much interest in truth.
https://en.wikipedia.org/wiki/Propaganda_in_the_United_States
https://en.wikipedia.org/wiki/Church_Committee
https://en.wikipedia.org/wiki/Smith-Mundt_Act
http://subliminalmanipulation.blogspot.com/2010/09/subliminal-messages-i...
"...The shift from wartime to peacetime "propaganda" operations was not taken lightly by Congress, especially with fresh memories of President Woodrow Wilson’s Committee for Public Information (CPI), President Franklin D. Roosevelt’s Office of War Information (OWI), and the Nazi propaganda machine..."
"We are convinced that there is no subliminal advertising in America today" said Charles F. Adams speaking for the American Association of Advertising Agencies in 1981."
I know congress studied the issue and passed no laws on subliminal ads or messages. At least one congressman stood up and proclaimed the issue was looked at and no evidence was found to support legislation. But do you believe everything.
Anyway White House calls it Public Relations. Your tax dollars go to pay for both thousands of employees in Public Relations, and to Madison Avenue firms. Think Tanks.
Lies. Spin.
- There are Weapons of Mass Destruction in Iraq
- Warren Commission concluded there was no conspiracy
- 9-11 Commission concluded not much but 19 highjackers
- No Investigation of MLK Assassination required
- We fought WWII with no advertising or influence
- There is no such thing as a False Flag Attack
- Project for New American Century did not call for a "pearl harbor type event"
- Wealthy People don't control the Media
- CIA never paid media
- There is always someone responsible at the top in Federal Government
- US military would never plan to attack it's own country
- Truth Reigns Free in the USA
- Freedom of Press is a fact in the USA
- Money has no Influence over Politics
- MIC is passive and has no lobby offices in DC
- Halliburton was only qualified contractor in no bid contract worth up to $7 billion, to put out oil well fires
- Federal employees don't raise their hand and pledge to defend the US Constitution (So they are not constitutionalists or terrorists)
https://en.wikipedia.org/wiki/Operation_Mockingbird
https://en.wikipedia.org/wiki/Project_for_a_New_American_Century
https://en.wikipedia.org/wiki/Operation_Northwoods
https://en.wikipedia.org/wiki/Dr._Strangelove
"In an authoritarian government, truth becomes treasonous." -- Ron Paul
Orwell I belive.
Great minds and all that…? Thanks for this additional input.
"Truth is treason in the empire of lies." ..George Orwell
"In a time of Universal Deceit, telling the Truth is a Revolutionary act!" -- George Orwell
“[Snowden]'s done a great service, because he's telling the truth and this is what we are starved for. The American people are starved for the truth. And when you have a dictatorship or an authoritarian government, truth becomes treasonous. For somebody to tell the American people the truth is a heroic effort..” --Ron Paul (Ron Paul, "For somebody to tell the American people the truth is a heroic effort...he knows it's risky"), Piers Morgan - CNN, 10 June 2013
I kind of like Ron Paul, Dennis Kucinich, Alan Grayson. I'm just not sure Rand Paul & Libertarians know banking & economics well enough not to crash us back to the 18th Century.
Austerity must have degrees. We have Fraud, Waste, & Abuse in the Federal Government since there is so much money splashing around in the Scotch. Uncle Sugar is a target of contractors, bankers & Corporations. In the USA Politics is usually about money too.
Clearly we can shift money away from prisons, military, security, intelligence, and weapons (including maybe space weapons). And if the Fed is going to print money why send that money to TBTJ/TBTF Dealers? Cut these things, fix old programs like Social Security & Medicare, and fix our future needs for infrastructure & utilities.
Reverse Privatization means stop contracting out functions of government & start using low paid or medium pay employees to do work in-house. We can't imagine all the federal contracts (100s of thousands). Hire more computer people, server managers, and hire direct crews to work on our highways, bridges, dams, waterways, utilities, maybe start mining for national stock piles, maybe start Uncle Same Petroleum to Refine Gasoline, maybe drill and pump oil & gas as an emergency buffer for coming shortages in commodities, maybe Uncle Same Farms for Wheat & Corn. Hire expert Team Leaders & Make USA Infrastructure #1. Re-establish National Stock Piles, Metal, & Mineral Reserves.
Privatization means 2-3 times more money spend from federal budgets and goes to contractors (we got this in wars and they want your social security & medicare too).
VA Medical Reform is a Spending Bill. It will have $150 Billion dollar budgeted in Private sector spending in 10 years.
Immigration Reform is a Spending Bill. Not only does it ignore the Worker Compensation, Pension, Medical Bills we already have with non participation of 92 Million... but it will join 10-15 Million Immigrants into our broken Social Security & Medicare.
we are stuck on Stupid. Fix, Review, Investigate, Inspect, Audit all our Government Contracts & Big Programs. Bring back GAAP Accounting Rules & Honest Financial Ratings Agencies.
As Prof. Micheal Rozeff says, if Rand Paul and Hillary Clilnton are candidates for president in 2016, we don't have a choice.
With every step, Rand Paul disappoints (endorsing McConnell over a qualified challenger, suggesting Roe vs. Wade probably can’t be overturned, refusing to side with senators to shut down the government over Obamacare and suggesting Obamacare cannot be repealed, and proposing a bill to deny foreign aid to the Palestinians if they do not recognize Israel), and we haven’t even reached the primary; if he were the Republican candidate how many more positions would he surrender?
And, now, this:
Let’s hope this sinks Rand Paul…
Rand Paul’s Terrible Position on Ukraine | LewRockwell.com | May 5, 2014
Michael S. Rozeff
Rand Paul’s position on Ukraine is like that of the Senate warmongers who have signed on to that terrible “Russian Aggression Prevention Act of 2014? in being anti-Russian and pro-intervention. It’s not precisely the same but its premises, tone, goals, thrust, blame-placing, call for sanctions and childish treatment of Russia all add up to his brand of interventionism in Ukraine and in Ukraine-Russian relations. If the U.S. political process produces a Hillary Clinton vs. Rand Paul race in 2016, voters who now favor a much greater non-interventionist position will have no place to go in the two major parties.
Rand Paul’s op-ed on Ukraine is filled with a lot of rubbish.
http://www.lewrockwell.com/lrc-blog/rand-pauls-terrible-position-on-ukraine/
Rand Paul is the Republican Party's Obama.
He is a Politician, so we have to assume he would lie.
I mean as a Libertarian he might never take us to occupy Ukraine, start a nuke war with Russia, go nose to nose with Putin and Russia, or engage in an expensive cold war with Russia. He might just be calculating what he has to say to win Republicans.
I'm not really read up on next Presidential race yet.
I assume I will vote for some underdog.
Rand Paul has stated that he is not a Libertarian.
The maladjustment coming from malinvestment throws markets and the economy out of balance. It’s the same as a tire with a split tread; the tire doesn’t keep clicking away but gets worse with every revolution as the split widens – rubber peels or the automobile loses control.
Malinvestment, just as the example given when the government intervenes in the economy and forces more sale of trucks than cars contrary to demand, creates the same maladjustment that fits in with what I expect for the overall economy. The central planners will so maladjust the economy it will fail on them. Almost every day new revelations come from the government that increase the pressure on businessmen and individuals, stifling their freedom of enterprise, pressuring the balance of commerce, killing the goose that laid America’s golden eggs.
And just as the financial planners are socializing the market, the social planners are doing the same with the culture and most everything else.
By intervening in the established culture, whether marriage mores, family foundations, health care, communications, education and history, morality, finance or whatever, the government is knocking the entire social cycle out of balance. And the cycle doesn’t just keep turning round and round out of balance; it responds violently, moves to extremes, going faster and faster. Until it self-destructs.
That’s what’s happening with the daily releases of more and more government takeovers – like a flywheel out of balance, the culture starts throwing pieces.
A society out of balance, for example, when the courts begin to dictate principles with which the majority of people disagree, is not a condition the people will tolerate year after year. For Obama, his success in getting more socialism and expanded welfare pushed into society doesn’t stop with those developments. It only produces more and greater occurrences until socialism, the wobbling economic model, completely fails.
Social Economics?
- Mass Social Movements
- Mass Demonstrations & Activism
- Worker Rights
- Universal Suffrage
- Civil & Individual Rights
- Right to Free & Fair Elections & "A Voice In Government"
- Freedom from Complicated Laws & Tax Schemes
- Freedom from Usury, Systemic Fraud, False Political Systems
Economic Policy/Government Policy: You can Suppress History, Education, (and maybe Credit) through Economic Policy, Public relations Policies (propaganda), Gerrymandering, Money in Politics, and control over money, businesses & Investments by Private Banks ((Question: Why turn Economic Policy over to a Federal Contractor like the fed?? Or to Lobbyists on K Street??))
- Central Planning (Economic & Military)
- Decentralized Economy & Decentralized Government
- Federalism (Federalization of States, more power to National Government)
- Sovereign Power of States
Social Deterrents:
- Legislation, Deters Crime not Stops Crime,
- Regulations, aids commerce, aids free markets, deters fraud in markets, protects citizens from commerce, standardizes accounting rules, standardizes banking rules, standardizes Tax Rules
- Prohibition Acts (Failure in many cases)
- Social Taboos
- Religious Culture (Any Religious Culture)
- History
- Education
- Processing Information, free flow of Information, helps coordinate better adapting skills
- Mal-Investment & Mal-Adjustment have to be addressed through the Free Internet
Democracy & Rights come from = Free Press, Free Speech, Free Internet, Large Degree of Small Businesses, Large Degree of Self Employment
Enemy of Democracy is Big Corporations, Big Government & the power over voters and Employees by Big Wealth
Retail in in Death Throws. I'm getting double and triple off coupons from just about every department store not to mention the double bonus cashback emails ... sometimes 2 or 3 a day. This 'recovery' must be beating retail to death.
Sears & JC Penny are anchor stores. I heard they are closing a bunch of those and putting malls in bad times. The Fed Chart shows Department Stores didn't do well.
I Selected ALL EMPLOYEES Charts, but if we have a BLACKMARKET for Labor that is trending up in Retail I wouldn't know. I'd Guess that Hotels & Restaurants pay "Under the Table".
http://research.stlouisfed.org/fred2/series/RSDSELD (Down, Peak was year 2000) Retail Trade: Department Stores (Excluding Leased Departments)
http://research.stlouisfed.org/fred2/series/USTRADE All Employees: Retail Trade
http://research.stlouisfed.org/fred2/series/CES4244800001 (Down) All Employees: Retail Trade: Clothing and Clothing Accessories Stores
http://research.stlouisfed.org/fred2/series/CES4244400001 (Down) All Employees: Retail Trade: Building Material and Garden Supply Stores
http://research.stlouisfed.org/fred2/series/CES4244200001 (Down, lagged just behind the fall in housing in 2005) All Employees: Retail Trade: Furniture and Home Furnishings Stores
http://research.stlouisfed.org/fred2/series/CES4244300001 (Down, peaked year 2000) All Employees: Retail Trade: Electronics and Appliance Store
http://research.stlouisfed.org/fred2/series/CES4245400001 (Almost up to prior 2008) All Employees: Retail Trade: Nonstore Retailers
http://research.stlouisfed.org/fred2/series/CES4244700001 (down) All Employees: Retail Trade: Gasoline Stations
Hotels are worse or Flat compared to eating & drinking places... Trend is back prior to 2000
http://research.stlouisfed.org/fred2/series/CES7072100001 All Employees: Leisure and Hospitality: Accommodation
http://research.stlouisfed.org/fred2/series/CES7072200001 (good trend line) All Employees: Leisure and Hospitality: Food Services and Drinking Places
Every thing popular is rigged to be popular.