This is a good illustration of how misunderstood the concept of “capitalism” is, and why we should prefer some other word to express the concept of a system of free markets.
[Late Sunday night update]
More thoughts at Volokh, with lots of good comments. Particularly on the distinction between Atlas Shrugged and The Fountainhead.
[Bumped]
For those who have trouble distinguishing “money” from “value”, I direct to Francisco’s speech in A.S.
I prefer “competitive markets” to “free markets.” Free markets have been associated by some (and not entirely unfairly) with unregulated market participants using any means at hand to reduce the transparency, efficiency, and competitiveness with markets, thus harming consumers. That way lies lobbying, licensing schemes, cartels, monopolies, DMCA contracts, etc., etc.
A competitive market contemplates that some sort of regulator, such as the FTC or SEC, exists to ensure that consumers have the information and market power necessary to bring competitive pressures to bear on would-be profiteers. Lots and lots of sunlight; no technological or contractual “lock-in”s.
Government’s other role in “competitive markets” is to create and protect property rights in the Court, so the markets aren’t perfectly “Free” there. You aren’t “Free” to claim ownership over things unless the law says you can.
I’m not sure what sort of “-ism” this would be called. Suggestions welcome.
I’m not an expert on the etymology of the word capitalist, but I think it’s current meaning was popularized by Marx and Engels as a derisive term for those that supported free markets rather than command economies. An example of adopting the vernacular of the enemy.
Rather than an example of how misunderstood the word ‘Capitalism’ is, Kirsch’s comment is an example of critical theory in action (see Frankfurt School). Misrepresent and denigrate your philisophical opponents.
Kirsch implied that a real Capitalist would sell their intellectual integrity (why not first born? grandmother?) for a couple cents per page, and that even Ayn Rand gagged at such an offer (marking her a hypocritical charlatan of evil).
Apparently he wasn’t paying attention, because The Fountainhead covers the question of the supremacy of intellectual integrity, almost exactly. No, what Kirsch was describing isn’t a ‘Capitalist’, but something else we already have words enough to describe, an unprincipled opportunist. His attempt to conflate the two should inspire questions as to his motives.
It would really be a waste of time as the debate between Capitalism and Socialism is a relict of 20th Century political economics. The new research thrust is now on evolutionary economics also known as complexity economics. It basically looks at humans as humans, not the logical “economic man” that the old economics was dependent on. It also looks at markets as the critical force in economics by providing the natural selection process that shapes healthy econsystems. Unhealthy econsystems result when markets are manipulated by government or individuals to limit choices.
For example when you cut down a healthy diverse forest ecosystem and replace it with a plantation with a limited number of species its much more subject to damage from fire, insects, disease, etc. Similarly when a natural econsystem (many firms competing in a market) is replaced with a single or few dominate firms (Pemex, AIG, GM) you get an econsystem vulnerable to changes in the economy, as we have seen.
In terms of health care an evolutionary economic approach would be to simply provide an annual $2500 voucher to each American to buy insurance. They may use the voucher themselves, or combine it with others at work, clubs, professional groups, etc. for bargaining power. They may also add their own money to the voucher if they wish for better coverage. Then let the market work just as it does with auto and homeowner insurance. The vouchers would be paid for with a surcharge on Social Security, splitting the cost between employer and worker just as with the current social security. A similar surcharge would be on railroad workers are not currently in social security. For employers the increase in Social Security would be offset by no longer having to provide health care as a benefit. For most workers the money they now pay into their insurance at work would just go to the surcharge. The health care industry would then be shaped by market forces, not government management.
Brock:
You’ve got it backwards – government regulation is a necessary condition for those things you detest (lobbying etc.). A government without the power to pick players, winners or losers in the economy won’t be a target for industry collusion. A government with the power to approve (promise) certain entities as safe/viable/whathaveyou overwrites the market’s natural operation by destroying the valuation of reputation and providing a false sense of security (TSA security theatre: “The current threat level is ORANGE”…).
Players in an unregulated market can’t get away with trying to cheat their customers – word will spread and they won’t have any more.
Free markets are only half of the economic and social equation. The other half to capitalism is, well, capital.
It could be something as simple as wanting to work as a pizza delivery driver — i.e. labor. For that labor to be able to deliver pizza in a timely manner and earn tips, the pizza delivery driver needs, well, a car. Whether the driver supplies the car and the pizza place puts one of those goofy lighted signs on top, or whether there is some other arrangement behind the car, the car is a form of capital.
It seems that Karl Marx thought there to be something fundamentally “unfair” about capital. Suppose there is some capitalist, who owns a fleet of these pizza delivery cars and then has some kind of arrangement of renting them out to the drivers. The idea is that the capitalist, whether the owner of delivery cars, a car wash, a dry cleaning store, a whatever, just kicks back and collects “economic rent” from the poor working stiffs laboring away, driving pizzas, working the car wash, taking customer orders at the dry cleaning store.
Yeah, but “capital” in just another form, it is a kind of “store of labor.” Someone had to bolt the car together. Someone had to work in a nasty, hot, dusty steel mill to make the steel in the car. Someone had to dig the ore out of the ground.
There is also a lot of labor involved in management as well — making sure you have enough drivers, car dryer-offers, cleaning order takers simply showing up to work every day that you can keep the business going, but maybe that is another story besides capital itself. But again, suppose you are the Evil Landlord collecting rents. You have this big fat pot of capital to purchase a building and then rent it out and just collect money to pay for your winter Florida stay. But then again, there is a lot of management effort, and then there is the “sweat equity” of painting an apartment or maybe doing your own plumbing or whatever to keep your apartment building from falling apart around your tenants’ ears.
But without capital we are back to subsistence farming or perhaps even subsistence hunting, and effective hunting weapons are yet another form of capital.
But the problem with private capital is some people, by circumstances of luck, birth and inheritance, hard work and thrift, accumulate capital, that is, property-rights ownership of means of production, and some people are without. The other thing is the effect of compound interest. If one is able to accumulate even a small surplus and get a positive rate of return, over time a person, a family, perhaps a tribe can become fantastically wealthy, and that wealth can breed resentment and a desire to “spread the wealth around.” Why, policies to encourage people to save and acquire ownership of the “means of production” are no more than “trickle-down economics.”
Trouble is, the proposed alternative of government ownership of the means of production just doesn’t work. Even corporate ownership doesn’t work in some circumstances — farming especially, regardless of the talk about “corporate farms.” Many of the successful “mega farms” remain family businesses.
As to government policy since the time of the Great Depression, to paraphrase Menken, it is based on the unhappy belief that someone, somewhere is becoming wealthy. Hence the tax policy, the inflation policy, and the economic regulation policy to nip wealth accumulation in the bud.
If one is truly Libertarian, I would think the most offensive government policies are such things as 401K’s, Roth IRA’s, medical savings accounts, and these goofy childcare wage set-asides.
I mean, why should saving money for some government-mandated “good purpose” such as retirement, education, healthcare, or childcare merit some protection from taxes? Why should it matter to the government if you are saving for retirement, saving towards medical expenses, or simply saving because you want to afford a fancy home theatre system or an overseas vacation? Shouldn’t all forms of saving be protected from taxes and inflation, or maybe not, forbid that some people be able to save and become wealthy?
I Read or Re-read Atlas shrugged only last year. To tell the truth it’s one of those books that is iconic to the point to where people THINK they know it, without having ever read it. I went through the same thing when I read “The Prince” 10 years ago.
The book and John Gault himself could have been better served with a speachwriter, rather than a cheerleading mom as an editor.
Ayn is not a great writer, the book is only interesting to philosophers and political thinkers, it’s not a novel for the ages, but it is a very valid prediction. Damn near everything she wrote, is occuring now.
I think “Beggars in Spain” is a much better representation of the value of value and contract.
One of the best short stories I have ever read.
It would really be a waste of time as the debate between Capitalism and Socialism is a relict of 20th Century political economics. The new research thrust is now on evolutionary economics also known as complexity economics. It basically looks at humans as humans, not the logical “economic man” that the old economics was dependent on. It also looks at markets as the critical force in economics by providing the natural selection process that shapes healthy econsystems.
Heh. This is the flip side of a meme I’ve been pushing for years: the best terminology to describe the philosophy behind command economies, be they “communist,” “socialist,” or “fascist,” is economic creationism.
Mike G?
I’m an atheist, DEFINE the creation of the universe?
And your definition of the origin of the universe IS NOT a Creation theory/myth?
YOU, using science, and having no clue project theories as fact, but THAT is better than those ignorant of science, who accept the existence of god as an all powerful being are STUPID! AND IGNORANT AND OFFENSIVE!?
Is that your attitude.
I happen to know some very well educated people who are young earth believers, I think they are wrong and I believe quite strongly that there is a whoe crapton of evidence that proves it, but they are not irrational, they are just wrong in THAT aspect of belief.
Now, you believe in “the big bang” perhaps, what initiated the bang? What was the fuse? Also, the X-ray imaging that shows that the univers is all 14 billion years old (I think that’s the number) is based on. . . .what?
FAITH! BELIEF!
I think that maybe OUR GALAXY was created 14 billion years ago, but the universe? x-ray cartography is almost uniformly 14 billion years in age, but why? Maybe because the most energetic matter in the detectable spectrum happens to be the remnants or our own galaxy rather than that of the universe as a whole.
Don’t get me wrong, the mechanisms of the universe are infinite, but I actually believe in infinity. There might have been a big bang, but it was a mechanism of a greater system, and I believe in creation, which is just the nature of destruction.
To Crap on those who simplify the nature of god and his influence on us is not to make them stupid, it is to do the same you, likely, do with your faith in the big bang.
Mike G is getting there. Hayek described the wider phenomenon of which biological evolution and market economics are local instantiations: emergent order. If you don’t understand — even intuitively — how large numbers of local actions can produce complex results over time, you will always think there needs to be some planner arranging things.
Douglas: WTF?
Jim Bennett: Yes, indeed. What makes using the term “economic creationism” so much fun is that many of the people who sneer at biological creationism will fiercely embrace and defend economic creationism and will not appreciate having their noses rubbed in the similarities between the two. But economic creationism relies on the concept of an omniscient, omnipotent, omnibenevolent Higher Power whose decisions are wiser, more efficient, and more just than the spontaneous order of the grubby, tainted, immoral marketplace.
I Miss meaning sometimes. Sorry about that.
Douglas, a suggestion: the mere appearance of the word “creationism” in a comment doesn’t always refer to the theory of evolution and/or its critics. 😉
To be blunt, capitalism is quite appropriate as a label for a system that has privately owned capital. I see no reason there not to exploit a modest amount of the language of Marxism for better ends.
The key point is that the Socialism-Capitalism debate implies a false choice in terms of how to “manage” econsystems. By contrast evolutionary economics emphasizes that econsystem are very complex and that is why market choice is fundamental to a healthy econsystems. It emphasizes that there are likely to be severe consequences to the long term health of the econsystem when markets are replaced as a mechanism for allocating resources. There is no choice for politicians to make, markets are just too complex to replace with bureaucrats. You over ride them at your own risk.
For example, instead of just dumping money into failed banks to bail them out you allow them to go under so the more successful ones to reallocate the resources the failed ones were using. Joseph Schumpeter, whose work is foundational to evolutionary economics, called this “creative destruction” and its a critical process for the long term health of an econsystem.
You are seeing the consequences of the now government ignoring evolutionary economics as many banks are returning to the same risky behaviors that caused the current recession ensuring that another bubble, perhaps worst then the current one, will burst with worst results. At the same time the caps on compensation that are now a consequence of the government bailout will result in the most capable managers leaving those same banks leaving management decisions to much less capable executives. It has short circuited the market for executive hiring and compensation. The results will be the decline of the major banking institutions, further government bailouts, and a downward cycle for the industry. Just look at the history of Chrysler which was ‘saved” by a government bailout in the early 1980’s as to the future of the banks that were ‘saved” by bailouts in the last year.
If Chrysler had gone bankrupt in the early 1980’s it would have gone through the reorganization that was needed then to make them competitive. Or disappeared allowing competitors to split up its markets. At the same time its failure would have sent a clear message to Ford and GM that they were not too big to fail giving them, and their unions, the stimulus they needed to make the radical changes they needed to be more competitive. They didn’t get that message and we see the tattered wreckage of the auto industry today, and its status as a ward of the federal government, as a consequence of the government’s interference in the market with Chrysler decades ago.
I know, mike and MgGehee.
Like I said I know some young earth creationists, and I was raised catholic, though I’m an atheist.
Sorry about the preachyness.
I found an insult that really wasn’t there.
I happen to know some very well educated people who are young earth believers, I think they are wrong and I believe quite strongly that there is a whoe crapton of evidence that proves it, but they are not irrational, they are just wrong in THAT aspect of belief.
You mean they aren’t wholly irrational. In my view, “well educated” and “young Earth believer” is an oxymoron. It’s one thing to believe in the weaker forms of creationism. After all, we’ll probably never be able to prove the existence or nonexistence of some all powerful deity who only meddles when nobody’s looking.
It’s another to believe in something that has been soundly trounced by reality. I don’t consider that aspect of belief even remotely rational. Also, given their apparently willful ignorance of biology, astronomy, and especially geology, I wouldn’t call them “highly educated”. Maybe they were exposed to a lot of education, but it didn’t stick.
Massively off-topic, but I can’t resist …
In my view, “well educated” and “young Earth believer” is an oxymoron. It’s one thing to believe in the weaker forms of creationism.
Karl, I have two good friends, husband and wife, who are young-earth creationists. And they both have Ph.D.s — one in astrophysics (from a major university), the other in physiology. But they were raised in strict religious families, and they’ve learned how to compartmentalize.
It isn’t that unreasonable, IMHO, to believe in young-Earth creationism … as long as you are willing to believe that the universe was created cintaining information that deliberately misleads us — the old “Did Adam have a navel?” conundrum. It simply requires the Creator to have some of the characteristics of Loki or Coyote. Heck, can you prove the universe wasn’t created seventeen minutes ago, complete with all of the internal evidence, including your own memories, sufficient to convince you that the Big Bang occurred 13.7 billion years ago?
The whole point of which would be to rationalize the worldview according to ancient peoples with no knowledge of astrophysics and thus picked a large number at random. Lipstick meet pig.
I don’t actually have a problem appropriating the coffee czar’s term of “fair trade” as opposed to “free trade.” That’s the goal of a sizable slice of regulations anyway: Tell the other side what they’re getting -exactly-.
The other non-laissez fair-ism to adopt is: strongly favor small businesses over large businesses. To big to fail means -> chop the company into at least five chunks, make sure the executives are both fired and have their contracts with the company voided.
That is: If you’re a megacorp, you’re -already- on thin ice with the government, don’t make us come over there and thrash you.
I agree with Titus. It is not even remotely reasonable to ignore the only evidence we have in favor of a good story. Personally, if I were Christian, I’d consider the young Earth theory blasphemy. It’s misled Christians deciding on their own what they think God really did and spurning the use of the gifts that God gave them (things like their senses, intelligence, wisdom, life experiences, etc).
Perhaps they should consider why Charles Darwin is the third most influential Christian ever, after Jesus and Saint Peter.
“Personally, if I were Christian, I’d consider the young Earth theory blasphemy. ”
You will all have to wait until I read the indictment from this scroll.
Thwwwapp!
Allright then, who threw that? C’mon all, who threw that? So, it was ‘im? You then, you’re going to ‘ave to go to the back o’ the line!
Paul, it’s cool as long as there’s no women present at the stoning.
More seriously, what religious offense describes the offense of saying untruths about a god that one supposedly worships? Sure they aren’t lying, but they should know better. “Blasphemy” seems to be the appropriate label for it.
Al,
Yes, if a firm is too big to fail it is too big. The merger that created it should have never been allowed. And it should be broken up into smaller more competitive units at the first opportunity. That really should be one of the first order of business for the banks that received TARP funds, breaking them into smaller corporations that would be able to fail without taking the economy with them or requiring the government to intervene.
Karl, if there is a God, and as an agnostic I have an open mind about these things, the one commandment I’d like to see Him enforce – preferably in a real Old Testament way – is the one about taking the Lord’s name in vain.
Oh not the saying “Damn you all to Hell” stuff, but those evil creatures who claim to have a direct line to what God said or meant and why I should do things their way and believe what they tell me to, (and give them lots of power and wealth for the privilege).
Sadly God, if He exists, seems to have given up interfering in this world otherwise we could be entertained by weekly smitings of the likes of Khameni, Gore and even the Once.
Check this out. The author, Anne Heller of the Ayn Rand biography just so happened to contribute almost $5,000 to Obama’s campaign, MoveOn.org, and the Democrat Party. And now she’s getting good press from the NYT book reviewers (who jumped all over the strained Rand story mentioned in Rand’s original link). Awful lot of ax grinding going on here. Also, I’m seeing some astroturfing at Slashdot for the NYT book review. Don’t know who that’s coming from (since it’s anonymous). Could be a variety of suspects.
Correction: almost $5,000 to Obama’s campaign, $500 to MoveOn, and $200 to the Democrat Party.
To a controls engineer, the reason for the superiority of a market based economy over a command economy is simple: co-located feedback.
There is no worker exploitations. If there is then you can also say employer exploitations. workers want to get paid as much money as possible, and employers want to pay as least as possible. Wages are not dictated on the employer/worker. They are set by the market value of the labor.
If Employers offer wages too small they won’t get workers and lose business, if they offer too much they’ll go bankrupt. To put a min. wage would cause major unemployment or production loss; both kill economy.