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Realtors must know how to choose between collectivism & individualism

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The thing about economics is its almost universal vulnerability to subjectivity. Subjective Economics – an oxymoronic concept if ever there was one. Those serious about it though, understand empiricism not only leads to credibility, it allows one to
separate wishes from reality. Sometimes what we wish/hope to be true, simply isn’t, and usually for good reason.

From the editor: please welcome Jeff Brown to AGbeat. Jeff is a real estate investment expert specializing on helping people retire with full pockets, is well known as the “Bawld Guy” and is a second generation broker who became licensed in 1969 and has already trained the third generation in his family. Jeff is a personal friend of ours and we are among those who call him to discuss the business of real estate as he is one of the few who has weathered every storm and remains standing in a very successful position. Please welcome him in comments.

There are basically two schools of thought in economics, though seemingly endless shades of each. One is what I’ll simply call the Collectivist school of thought. The other is the Austrian school. There’s a gigantic ocean between them, including those who’d love us to think they’re not simply a variation of Collectivism or Austrian Economics. For the record, this is my personal view of economics – these two schools.

All effort is for the good of the group

It all boils down to the power of the individual being allowed to act in their own self interest on one hand – OR – all things being based upon the good of the collective group on the other hand.

The former believes if we all act for our own benefit, we’ll adjust our behavior based upon how the market responds to our efforts. The latter believes all things economic should be considered in terms of, as their hero, Karl Marx put it, “From each according to his ability, to each according to his need.”

In other words, all effort to produce is for the good of the group, not ever the individual, and the individual is granted only what they need, nothing more. The ability (freedom) for the individual to choose – even to fail – is simply not a factor in the equation.

Individuals decide for themselves

The Austrian school of thought allows individuals to decide what’s in their best interest. Friedrich Hayek is probably the most widely known economist from that school.

The various would-be schools found between those two disciplines, ultimately favor one or the other.

Besides the obvious difference in emphasis – The Individual vs The Group – one can discern shades of so-called moderation, by testing what the proffered system deems more important: Equality of opportunity – OR – Equality of Results. The Austrians are staunch believers in the former, while the Collectivists are equally committed to the latter.

Austrians allow you and I the opportunity to succeed OR fail on our own merits. They believe it’s axiomatic that you and I are not created equal in the literal sense. That is, IQs vary. Desire and motivation differ. Each individual has different aptitudes.

Two different aptitudes:

You’re a math whiz, while your brother excels in the arts. You’re 7’ 2” tall, with world class hand/eye coordination, while your best friend can’t walk and chew gum at the same time, but can solve architectural problems in minutes. He’ll never play for the Lakers, and you’ll never build the next generation of skyscrapers.

Given the obvious differences between individuals, they opt to let us choose to be pro athletes or architects. Then they teach us to let each individual rise to the level their efforts, skill, and the market allows. Equal opportunity also allows each of us to fail miserably. One might say, “To each according to their own efforts, to each according to their own strength of character.”

The value of the farmer

Collectivism says the farmer who successfully produces higher quality wheat, more abundantly, isn’t valued by the group any more than his neighbor who’s barely competent to sweep out the barn.

The Austrian says the individual’s value to the economy is in direct proportion to the level of difficulty required to replace them. A janitor is more easily replaced than a highly trained heart surgeon. Therefore, the janitor is paid less – as determined by market demand — for his skills than is the doctor.

What about the middle of the road?

That’s where you find road kill, another article altogether. Bottom line? We must all decide whether we prefer equality of results – Collectivism – or equality of opportunity – the right of the Individual to succeed – or fail – on their own merits. Do we like living off of the efforts of others? Or would we rather earn our own way?

Jeff Brown specializes in real estate investment for retirement, has practiced real estate for over 40 years and is a veteran of over 200 tax deferred exchanges, many multi-state. Brown is a second generation broker and works daily with the third generation. With CCIM training and decades of hands on experience, Brown's expertise is highly sought after, some of which he shares on his real estate investing blog.

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16 Comments

16 Comments

  1. Benn Rosales

    March 7, 2011 at 4:28 pm

    It’s funny that we have to have this lesson to understand there is a choice, but didn’t our founding fathers already decide this one for us? What changed? Was it using a crisis to it’s fullest potential? Saving the housing market or to prop it up, means we should just let it fail and let the markets eat the remains? Fastest way to health?

  2. Matthew Holder

    March 7, 2011 at 5:07 pm

    Not sure what the point is? I think the article is missing the ‘why’ and what the article is relating to. Are you relating to agents working in teams v. as individuals? Are you making a case for increased competition among brokers?

    I think you have an important point to make…but I can’t figure out what the point of the econ. theory lesson.

    • Lani Rosales

      March 7, 2011 at 8:58 pm

      Matthew, Jeff is laying out general economic theory to bring some readers up to speed and the title says “Realtors” because that is who the audience is. I believe Jeff’s point is that major economic theories are playing a role in how our country is being governed which ultimately dictates the housing sector, the very industry most readers here live in.

      That said, do you lean more Collectivist or Individualist? 🙂

  3. Arn Cenedella

    March 7, 2011 at 5:08 pm

    Who is John Gault?
    I say Ayn Rand and Jeff Brown have it right.
    Can’t wait for the movie to come out April 15th. Hppe the movie is true to the book.
    To all those that favor collectivism, I suggest they read Atlas Shrugged or Fountainhead. In my mind, these stories clearly lay out the logical and natural outcome resulting from collectivist policies.
    I may be over-stating the case a little but not much when I say our nation’s future hangs on the outcome of the current political battle between the forces of collectivism and individualism.
    Immigrants for over 300 years have come to America for opportunity not a guarranty.
    Immigrants come here to pursue their dreams and to reap the rewards of their own efforts.

  4. Ken Brand

    March 7, 2011 at 9:24 pm

    The good stuff.

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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job openings

Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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Economic News

Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.

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gas tax

gas-tax

Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.

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Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.

Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.

“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”

Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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