Is capitalism perfect?

[Rourke]

We have not had near exponential growth in GDP over the past 60-75 years, as that chart indicates. However we have had near exponential inflationary pressures on the dollar. In order to have an accurate picture of the real GDP over the past 100-200 years, one would need to peg it to the price of gold. In other words, a certain amount of gold would be called the dollar, and all prices would have to be converted along that scale, rather than in terms of the inflated dollars of the past 75 years. Gold is now at about 880 dollars to the ounce, and I remember not too long ago it was at 300 dollars per ounce; which means that inflation has more than halved the value of the purchasing power of the dollar. So, while that chart showed a steady increase in GDP, that was really not the case, since one would have to adjust the scale down by over 50% from the time gold was at 300 dollars to the ounce to now.

Well, saying expotential growth is hyperbole on my part, didn't really mean it literally. But I don't follow your reasoning on GDP being pegged to gold to understand inflation. I'm no economist, but if inflation has halved the value of the dollar since it was at $300/oz (around 2000 or so?), then when you index prices for consumer goods that should play out. But I don't feel my dollar now buys only half as much bread, milk, cars, etc, that it did 8 years ago. In fact the US Department of Labor CPI calculator comes up with 20% increase on prices due to inflation over that time, and this seems to comport more closely with reality.

To get back to the topic of this debate, morally speaking capitalism is perfect, in that it forbids the initiation of force in transactions and protects private property. In Objectivism, the moral is the practical, so capitalism would also be the most practical political / economic system. Again, I refer you to Capitalism: The Unknown Ideal by Ayn Rand.

Again, I don't follow the logic here of "the moral is the practical." My points on this thread argue that laissez-faire capitalism appears to be impractical, for the reasons I have outlined. It seems that the insistance on one single primary value, that of individual rights, is flawed, because it would seem one should hold the value of the sustainment of society/civilization as well. It would seem logical that in order to benefit from the advances of civilization, one would need to be in it, and to be in it, one would need to assure its continuity. And since the evidence as I see it says that LF capitalism leads to massive wealth disparity and hence unstable political/social systems, it does not provide for its own continuity. But what I can determine from Objectivist philosophy by the answers I find here seem to boil down to that if a LF capitalist society cannot survive, then it deserves to go down in flames. There is no plan B, no concessions to pragmatism.

[Rourke]

The free-market system can be thwarted, that's for sure -- corporations do it every day. The primary way they do this, however, is by using government power. That is to say: they use the "bad side" of the mixed economy. A simple example is the way cable companies use the government to monopolize certain areas. Consider all the things that people like "Common Cause" rail against, when they speak of the corruption that flows from current campaign financing. The part that the Common-Cause get wrong is that they wish to replace money-initiated force with vote-initiated force; instead, they we should do away with the initiation force altogether.

But what about price fixing and market collusion by oligopolists? Its notoriously difficult to thwart this now even in a much more regulated system.

The fundamental principle is that sane adults should be free to be irrational. Who am I to force my view of rationality on another sane adult human being at gunpoint? To use your example, if I were a seller of generics, I could try to convince that lady that my drug is just as good as Advil -- using the advertising that is often reviled -- but it would be immoral for me to get gunmen to stop Advil from being sold, or to get gunmen to impose some type of tax on Advil to make it less favorable.

Of course people make mistakes and can be downright irrational. However, as long as this does not violate your rights, you have no place making yourself the philosopher-king.

Yes, people have a right to be irrational. That wasn't the point. The larger point is that when large numbers of people behave in an irrational manner, then the market forces so sacred to laissez-faire capitalism are not working efficiently. And when large numbers of irrational actors get crushed by economic realities, then the historical evidence shows they will move to challenge the system.

And advertising has long since evolved past simply educating consumers. In fact you often find very little factual information in commercials these days, but just blatant appeal to emotion. And it works.

Inequality is not a measure of goodness. Clearly, the poorest quartile in western economies are substantially better off that the second-poorest quartiles in some socialist counties. Giving up wealth for equality is poor economics. Even so, while this higher average wealth points to the more practical system, it still does not address the moral issue. Morally, one simply does not have the right to force one's view on others, nor force people to act against their own judgement.

You are right about the poorest in western countries being much better off. The problem with using this truth to defend LF capitalism is it is NOT a result of some pure LF capitalist mechanism, but rather mixed economies. I sympathize with you in that there are no real life examples to draw from to make your case that LF capitalism is the cause of this or anything else. When you say "giving up wealth for equality is poor economics" I agree in most cases. But economics doesn't exist in a vacuum. It goes back to what I was saying about the sustainment of a middle class and social/economic stability.

[softwareNerd]

But what about price fixing and market collusion by oligopolists? Its notoriously difficult to thwart this now even in a much more regulated system.

There is nothing intrinsically wrong with sellers deciding to fix a price for some good. It is no different from a single person deciding not to sell something unless he gets a certain price. So, you have to explain why this is a problem. [Economist Frank Knight is largely responsible for creating a concept of "free competition" that has ended up undermining freedom and competition.]

Yes, people have a right to be irrational. That wasn't the point. The larger point is that when large numbers of people behave in an irrational manner, then the market forces so sacred to laissez-faire capitalism are not working efficiently.

It's similar to the reason why laws against an adult doing drugs are not legitimate, even though such behavior is often irrational. Allowing him to shoot drugs is "inefficient", in the sense that he should be out there working hard and earning more than what he does today. The point is, it is no skin off my nose. Yes, if I were to make a fine point of it, it would be good for me if this drug-addict were to become a producer and make good stuff to trade with me. However, it is immoral for me to force him to be "efficient" in order to serve my purposes. As long as he earns whatever he earns, I have no right to insist that he not waste his life away.

And when large numbers of irrational actors get crushed by economic realities, then the historical evidence shows they will move to challenge the system.

Actually, there is no such historical evidence. However, even if there were, it has little to do with the virtue of a free-market. All you are saying here is that if a significant number people in a country do not want a free economy, then we probably won't get one; i.e. the only route is if a significant number of people see that it is the moral and practical choice for them.

And advertising has long since evolved past simply educating consumers. In fact you often find very little factual information in commercials these days, but just blatant appeal to emotion. And it works.

This is hyperbole. There are a large number of people who are very careful and thoughtful about how they spend their money. There are significant numbers, who are careful in most areas of spending. Either way, it goes back to the drug-addict example: if they want to buy something it's their money, and no loss to me.

You are right about the poorest in western countries being much better off. The problem with using this truth to defend LF capitalism...

I did not use that to defend Capitalism, but in reply to your point about inequality. Systems like the monarchical ones or the Soviet one resulted in tremendous concentration of wealth, along with extreme inefficiency and poverty (bread lines for the middle class), along with rampant disregard for the "environment". However, that was not my point. It is clear that Capitalism is the road to wealth. Your claim is that the difference between the wealth of a Bill Gates and a regular Joe is huge. My point was that -- even if this were true -- the regular Joe is still better off than under alternative systems.

The essential factor is that wealth is not a static quantity. It is something that is created. Capitalism creates wealth at an incomparable rate, with everyone getting richer.

It appears, Rourke, that you do not trust people. I mean, in the sense that you appear to think that most people are irrational. Of course people will make mistakes and be irrational in this or that endeavor; but, all said and done, people do act rationally, when one considers their their knowledge and principles as the starting point. I will concede this: if one starts with the metaphysical assumption that large majorities of men as mostly incapable of rationality, or that they would rather plunder than figure out how to live a moral, peaceful life, etc., then one would not reach Capitalism as an ideal system.

[Thomas M. Miovas Jr.]

I think one has to be careful in what one is attributing to capitalism as being bad for people and what one attributes to a mixed economy as being good for people. Rourke seems to think that things like price stability, market stability, wage parity, and controls are good -- good for whom and by what standard?

When it comes to prices of goods and services and trying to determine if they are moving up due to inflation or moving up due to supply and demand of the product or services, the price in and of itself does not tell the whole story. The means of production, even in our mixed economy, have steadily improved many goods and products -- computers, for example, have steadily come down in price between late 1980's and today, so it would be difficult to assess the effects of inflation on that segment. Instead of dropping, say, 10%-20% year after year, it might have been decreasing by 30% every year. For some other goods and services, the price most definitely has doubled over the past twenty years -- gasoline and apartment dwellings are two good examples. I used to be able to fill up my tank for about $10, now it takes $25 for the same car; likewise, when I first moved into my apartment in '87 after graduating, it cost me $300 per month, and it now costs me almost $600 per month. That's why the price of gold is a very good indicator of the value of the dollar. And inflationary pressures due to the increase in M1 printed (the quantity of greenbacks) is delayed in certain sectors by up to six months to a year, so we may not have seen the effects, yet; though the market coming down by over 1000 points this year alone is indicating that investors are very wary of what is to come.

Market stability and wage parity are canards. In a free market for goods and services, there is no such thing as market stability or wage parity. In those businesses that succeed in the market place, outdated or inefficient businesses go under -- such as horse and buggy based businesses at the turn of the last century. The theory of market stability and wage parity would say that those business have to be supported, including the factory workers getting their wages, even though there is no longer widespread demand for those products. Theses day we have the Internet, which is certainly causing market instabilities -- i.e. a shift from store bought items to Internet bought items -- but why is this intrinsically bad? By the standard of man's life and the right to trade freely, the Internet markets are very good in that products are gotten to whoever wants them much more efficiently and at a better price. And if Mark Cuban or Bill Gates can find ways of making billions of dollars taking advantage of these new efficiencies while those who are working for them still only making their hourly wage, well good for them -- they have earned it. The wage earner must decide how much he is willing to work for and the business owner has to decide to decide how much he wants to make to run that business, it is mutual trade for mutual benefit, each deciding what their production is worth. So long as force isn't involved, then each man benefits according to his productiveness in the field he decides to go into. The factory workers did not build those factories, and they don't own them; they are their at the discretion of the owners or operators to do a certain task for a certain wage; which they freely decide to work for.

When it comes to controls, they basically come down to the initiation of force on the part of the government, which is evil. A free market means that producers can produce to their ability without the threat of force or fines incurred by breaking a law trying to uphold some sort of market stability or wage parity or price stability or whatever.

For example, we could be having much less expensive gasoline if the oil manufacturers were permitted to drill for oil on US territory without the threat of force, such as off the coast on in Alaska. However, if they do this, then they will be fined or thrown in jail -- the initiation of force -- and so we become dependent upon foreign oil at a high price.

Again, I refer you to Capitalism: The Unknown Ideal, along with Atlas Shrugged, both written by Ayn Rand.

[adrock3215]

Yes, people have a right to be irrational. That wasn't the point. The larger point is that when large numbers of people behave in an irrational manner, then the market forces so sacred to laissez-faire capitalism are not working efficiently. And when large numbers of irrational actors get crushed by economic realities, then the historical evidence shows they will move to challenge the system.

You keep saying this about irrationality and I disagree with you. I believe you should rethink this point, because I believe that it is the source of your frustration over capitalism. Since this thread is about economics:

"From praxeology Mises derived the idea that every conscious action is intended to improve a person's satisfaction. He noted that praxeology is not concerned with the individual's definition of end satisfaction, just the way he sought that satisfaction and that individuals will increase their satisfaction by removing sources of dissatisfaction or "uneasiness".

An acting man is defined as one capable of logical thought — to be otherwise would be to make one a mere creature who simply reacts to stimuli by instinct. Similarly an acting man must have a source of dissatisfaction which he believes capable of removing, otherwise he cannot act.

Another conclusion that Mises reached was that decisions are made on an ordinal basis. That is, it is impossible to carry out more than one action at once, the conscious mind being only capable of one decision at a time — even if those decisions can be made in rapid order. Thus man will act to remove the most pressing source of dissatisfaction first and then move to the next most pressing source of dissatisfaction.

In human society many actions will be trading activities where one person regards a possession of another person as more desirable than one of his own possessions, and the other person has a similar higher regard for his colleague's possession than he does for his own. This assertion modifies the classical economic view about exchange, which posits that individuals exchange goods and services that they both appraise as being equal in value. This subject of praxeology is known as catallactics."[...]

[Chops]

And when large numbers of irrational actors get crushed by economic realities, then the historical evidence shows they will move to challenge the system.

People revolt when their lives have become intolerable, ala French Revolution, Soviet Downfall, etc.. People don't just revolt because some people are massively richer than them.

You imply that there is something inherently wrong with income inequality, that inequality in itself is bad "pragmatically." There is nothing wrong with it, as long as the methods used to acquire that wealth was done so legitimately, that is, without the use of force. Income inequality, where the wealth was EARNED, is very much a good thing. It means that there are producers who are selling lots and lots of their goods to people who feel they are worth the value being charged, and both lives are therefore better.

Henry Ford was massively rich. Did he not earn it properly? Everyone's lives were made better by his innovation of the auto industry. Bill Gates is enormously wealthy for providing easy-to-use computer software to the masses (Apple is gaining ground though). He filled a need, and people gladly pay Microsoft for it. Again, the lives of those involved are made better. Our lives are overall better for the same reason the massively rich are massively rich: voluntary trade for voluntary benefit.

Every time a voluntary trade occurs legitimately (not fraudulently), the parties involved improve.

Objectivism holds that the moral is the practical: Morality is that which rationally furthers your life, and that that is inherently practical. There is no moral-practical dichotomy.

A lot of your pragmatism is outright pandering to irrationality (which is really what pragmatism is, hence our political leaders), in the same vein as paying a bribe to your assailant so he doesn't shoot you.

Edited January 20, 2008 by Chops

[adrock3215]

And advertising has long since evolved past simply educating consumers. In fact you often find very little factual information in commercials these days, but just blatant appeal to emotion. And it works.

Your method of thinking is completely incorrect and Marxist in nature. Read my post above. After reading Rand's work on the subject, I highly recommend Ludwig von Mises economic work titled Human Action. There are several points on advertising. Here are a few I quickly found:

It is a widespread fallacy that skillful advertising can talk the consumers into buying everything that the advertiser wants them to buy. The consumer is, according to this legend, simply defenseless against high-pressure advertising. If this were true, success or failure in business would depend on the mode of advertising only.

The tricks and artifices of advertising are available to the seller of the better product no less than to the seller of the poorer product. But only the former enjoys the advantage derived from the better quality of his product.

[agrippa1]

But I don't follow your reasoning on GDP being pegged to gold to understand inflation.

It's a little more complicated than the price of gold under fiat currency, but inflation is related to the gold standard. Once we depegged the dollar from gold, the government could start deficit spending without having to sell gold. Turns out that the cumulative GDP loss due to inflation is based on federal debt. Inflation is expected deficit divided by GDP. This relationship is not explicitly apparent in the short term, but it becomes evident over a long period. As Greenspan wrote:

The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.

Alan Greenspan, "Gold and Economic Freedom,"

Capitalism: The Unknown Ideal, 101.

[Thomas M. Miovas Jr.]

It's a little more complicated than the price of gold under fiat currency, but inflation is related to the gold standard.

The quote you gave from Greenspan explains the mechanism of inflation -- basically, as there becomes more printed dollars chasing goods and services, those prices will start to rise due to supply and demand, and the Feds get those extra dollars into the economy using various means that come down to paying for things with printed money hot off the press. But that is a little abstract.

When you write someone a check, you had better have assets in your bank account to cover it, otherwise it is fraud. However, you are not permitted to just print out an few dollars and put them into you account via a deposit, that's called counterfeiting. Without someone there to tally your account and pay out assets, you could write $100,000 on any ole piece of paper and hand it to, say, a Lamborghini dealership. And that is basically what the Feds do, since the printed money is printed money -- I mean, what do you mean by assets if the person handing you a check can print out money at his sole discretion? Only the Feds don't call it fraud or counterfeiting, they call it controlling the dollar or regulating the economy.

In an economic system whereby the medium of exchange is itself a real asset -- i.e. gold -- and in which the dollar could be converted into gold at the owner's discretion, they wouldn't be able to do that. Each dollar out there would represent a certain quantity of gold, and if the bank did not give you gold for your dollar, that would be fraud. If the Feds began to print out too many dollars, some bank somewhere would be running out of gold, which would indicate that someone had committed counterfeiting somewhere (assuming the bank itself had not done something wrong). In other words, the Feds are attempting to create something of value not based on anything.

Fortunately or unfortunately, depending on how you look at it, stores and other suppliers of goods and services will accept the dollar as legal tender -- they are actually forced to do so by law -- so the whole system doesn't just collapse as people realize that their dollars are nothing but numbers printed on a piece of paper. What happened to the gold that used to back up those dollars? The government stole it by demanding by law that people turn over gold for greenbacks. And they don't plan on giving any of it back any time soon.

[Rourke]

There is nothing intrinsically wrong with sellers deciding to fix a price for some good. It is no different from a single person deciding not to sell something unless he gets a certain price. So, you have to explain why this is a problem. [Economist Frank Knight is largely responsible for creating a concept of "free competition" that has ended up undermining freedom and competition.]

Well I thought you said you were for capitalism. In capitalism, market forces (e.g. supply and demand) force efficiencies and the minimal price for a good or service. Market collusion among oligopolies subverts competition, eliminating efficiencies fixing a higher price than the market would otherwise dictate. So this is why I think this is a problem.

It's similar to the reason why laws against an adult doing drugs are not legitimate, even though such behavior is often irrational. Allowing him to shoot drugs is "inefficient", in the sense that he should be out there working hard and earning more than what he does today. The point is, it is no skin off my nose. Yes, if I were to make a fine point of it, it would be good for me if this drug-addict were to become a producer and make good stuff to trade with me. However, it is immoral for me to force him to be "efficient" in order to serve my purposes. As long as he earns whatever he earns, I have no right to insist that he not waste his life away.

Well you are taking a microeconomics view of it, while my point was based on a macroeconomics view. When you look at aggregate data, it is clear large numbers of people put themselves into severe debt in order to secure "stuff" they don't really need, but that the culture (e.g. media and advertising) pressures them to buy. We all know these people, who put their futures at risk in order to buy a bigger house, new tech gadgets, cars, etc.

Actually, there is no such historical evidence. However, even if there were, it has little to do with the virtue of a free-market. All you are saying here is that if a significant number people in a country do not want a free economy, then we probably won't get one; i.e. the only route is if a significant number of people see that it is the moral and practical choice for them.

Well the evidence is the rise of communism/socialism/anarchism in the 19th century.

This is hyperbole. There are a large number of people who are very careful and thoughtful about how they spend their money. There are significant numbers, who are careful in most areas of spending. Either way, it goes back to the drug-addict example: if they want to buy something it's their money, and no loss to me.

Again, microeconomics vs macroeconomics. Another point about advertising is that there is a huge amount spent on targeting children in order to establish brand loyalty before adulthood. There are literally billions of dollars spent on this every year by corporations with good reason to believe it works. From here we could go into a whole range of discussions on the baggage children carry with them into adulthood and how it affects their future ability to act rationally.

I did not use that to defend Capitalism, but in reply to your point about inequality. Systems like the monarchical ones or the Soviet one resulted in tremendous concentration of wealth, along with extreme inefficiency and poverty (bread lines for the middle class), along with rampant disregard for the "environment". However, that was not my point. It is clear that Capitalism is the road to wealth. Your claim is that the difference between the wealth of a Bill Gates and a regular Joe is huge. My point was that -- even if this were true -- the regular Joe is still better off than under alternative systems.

We're not really talking about the Soviet system though, but rather mixed economies vs laissez-faire capitalism. Capitalism is the road to wealth, and I don't think anyone would dispute that. The point of contention here is whether LF capitalism is better than a mixed economy for long-term growth, stability and maintenance of a middle class. The economic/social/political instability of the pre-Great Depression era, as well as the GDP chart I linked to earlier here, is evidence that the latter is the better choice.

[Thomas M. Miovas Jr.]

We're not really talking about the Soviet system though, but rather mixed economies vs laissez-faire capitalism. Capitalism is the road to wealth, and I don't think anyone would dispute that. The point of contention here is whether LF capitalism is better than a mixed economy for long-term growth, stability and maintenance of a middle class. The economic/social/political instability of the pre-Great Depression era, as well as the GDP chart I linked to earlier here, is evidence that the latter is the better choice.

A mixed economy is evil to the extent it uses the initiation of force to "stabilize" the economy. There is no right to stability. What that usually means is that some innovator is prevented from selling his product because it will displace some segment of the population -- i.e. as I pointed out earlier, the idea that the horse and buggy manufacturers are important to the economy (because they had been for so long) and therefore those segments need to be protected from the economic development of the automobile.

Likewise, there would be the argument that someone needs to be prevented from making a huge profit by improving his means of production so that he can "beat the pants off his competition," selling not only at a cheaper price but making more money in the process.

Neither you nor your cronies nor the government have a right to control the economy.

Capitalism is perfect by the only standard that is appropriate for economic activities: Man's life as the standard. To the extent that someone wants to control an economy is the extent to which he wants to initiate force due to stability or other concerns. You have no right to do that; not by an objective standard.

Besides, there is no way to account for those inventions and other improvements that would not arise due to their being controls. The recent Internet struggle is a good case in point. A lot of people screamed for "stability" -- especially newspaper and TV producers -- and when the Feds manipulated the money supply to the point where the dot coms went bust, there is no way of knowing just how much better the Internet would be if it had just been left alone. All controls do is to make better ideas stillborn. Without controls, for example, we would have oil flowing out of every source in the United States, but that is forbidden by law for the sake of "stabilizing" the environment.

An advocation of a mixed economy is an advocation of putting thugs in control of the economy.

[fletch]

The point of contention here is whether LF capitalism is better than a mixed economy for long-term growth, stability and maintenance of a middle class. The economic/social/political instability of the pre-Great Depression era, as well as the GDP chart I linked to earlier here, is evidence that the latter is the better choice.

If the mixed economy of the post-depression era is preferrable to LF capitalism, you might want to pinpoint which admixture of state and economics you prefer: The 1948 variety? The 2008 variety? Or does what you consider the best example of a mixed economy lie somewhere in between? You also might want to explain how you plan to stop the state from going too far in its control over economic freedom. One of the problems with allowing the state to meddle with economics in the first place is that the level of interference can only grow.

[Rourke]

In those businesses that succeed in the market place, outdated or inefficient businesses go under -- such as horse and buggy based businesses at the turn of the last century. The theory of market stability and wage parity would say that those business have to be supported, including the factory workers getting their wages, even though there is no longer widespread demand for those products.

Inefficient business should go under. However when certain industries that employ large numbers of people go defunct in a very short period of time, it creates a lot of economic turmoil. This is why you see so much talk about "re-training" for Americans employed in manufacturing jobs that are being moved overseas. What's troubling about globalization is that it is occurring at a speed that is making it difficult for our citizenry to adapt effectively. Then the question is, what do millions of middle-age people who have lost their jobs at manufacturing plants do when they are forced to take service sector jobs at half the wage? Call them irrational if you want, but what they certainly aren't going to do is sing the praises of the forces of capitalism. It's at times like these that the government, in my opinion, should provide a social safety net for the economically distressed to help maintain broad political support for free markets.

Theses day we have the Internet, which is certainly causing market instabilities -- i.e. a shift from store bought items to Internet bought items -- but why is this intrinsically bad? By the standard of man's life and the right to trade freely, the Internet markets are very good in that products are gotten to whoever wants them much more efficiently and at a better price. And if Mark Cuban or Bill Gates can find ways of making billions of dollars taking advantage of these new efficiencies while those who are working for them still only making their hourly wage, well good for them -- they have earned it. The wage earner must decide how much he is willing to work for and the business owner has to decide to decide how much he wants to make to run that business, it is mutual trade for mutual benefit, each deciding what their production is worth. So long as force isn't involved, then each man benefits according to his productiveness in the field he decides to go into. The factory workers did not build those factories, and they don't own them; they are their at the discretion of the owners or operators to do a certain task for a certain wage; which they freely decide to work for.

This passage made me think of unions in relation to capitalism. It is my understanding that Objectivism does not oppose unions, that they are a legitimate organization by workers who pool their resources (labor) in order to secure better wages, working conditions, etc. However, in the LF capitalist world, actually trying to form one would be close to impossible I would think. Even with all the laws ensuring the rights to organize and to limit management pressure on workers who are contemplating it, it is very rare that union drive is successful today. Businesses have become experts at subtle threats, manipulations and intimidation to essentially make union formation too risky to even attempt in many cases. Unless your skills are in high demand, the worker is always ripe for exploitation or abuse by the business owner. Think of Asian sweatshops. Sure, workers can tell the exploitative management to go screw themselves and refuse to work 12 hour shifts in oppressive heat with only one bathroom break. But the alternative is going back to the family farm and work for subsistance, because ALL the factories are like that.

For example, we could be having much less expensive gasoline if the oil manufacturers were permitted to drill for oil on US territory without the threat of force, such as off the coast on in Alaska. However, if they do this, then they will be fined or thrown in jail -- the initiation of force -- and so we become dependent upon foreign oil at a high price.

In this example, you didn't address the strong empirical data that drilling in the Arctic Wildlife Refuge would disrupt the ecosystem, and that it is in our (mankind's) interest to preserve intact ecosystems. So the value of ecosystem preservation must be weighed against the value of US energy independence, so its not so cut and dry.

[Rourke]

People revolt when their lives have become intolerable, ala French Revolution, Soviet Downfall, etc.. People don't just revolt because some people are massively richer than them.

You imply that there is something inherently wrong with income inequality, that inequality in itself is bad "pragmatically." There is nothing wrong with it, as long as the methods used to acquire that wealth was done so legitimately, that is, without the use of force. Income inequality, where the wealth was EARNED, is very much a good thing. It means that there are producers who are selling lots and lots of their goods to people who feel they are worth the value being charged, and both lives are therefore better.

Henry Ford was massively rich. Did he not earn it properly? Everyone's lives were made better by his innovation of the auto industry. Bill Gates is enormously wealthy for providing easy-to-use computer software to the masses (Apple is gaining ground though). He filled a need, and people gladly pay Microsoft for it. Again, the lives of those involved are made better. Our lives are overall better for the same reason the massively rich are massively rich: voluntary trade for voluntary benefit.

Every time a voluntary trade occurs legitimately (not fraudulently), the parties involved improve.

Objectivism holds that the moral is the practical: Morality is that which rationally furthers your life, and that that is inherently practical. There is no moral-practical dichotomy.

A lot of your pragmatism is outright pandering to irrationality (which is really what pragmatism is, hence our political leaders), in the same vein as paying a bribe to your assailant so he doesn't shoot you.

In this world, and especially in the Objectivist world it would seem, wealth equals power. Its not so much that people decry the inequality, although that is a problem. Rather its the "golden rule", he who has the gold makes the rules. I still haven't seen anyone dispute (with data preferably) that the LF capitalist world, and thus the Objectivist world, would lead to massive wealth concentration among relatively few people, and a severely diminished middle class, a recipe for plutocracy. The wealthy would in my view be buying up increasingly larger amounts of property and resources. I could envision whole communities/regions where only a handful or even one person who owns property, everyone else being a renter. All the jobs or business opportunities in that community/region could conceivably be controlled or subjected to influence by this small group, who might see it to their benefit to make a less than welcoming environment for non-obedient competitors.

[Rourke]

Your method of thinking is completely incorrect and Marxist in nature. Read my post above. After reading Rand's work on the subject, I highly recommend Ludwig von Mises economic work titled Human Action.

Unfortunately the writings of Mises were done at a time before the advent of modern advertising. The simple ads of his day were nothing compared to the amount of research that goes into producing a 30 second ad on tv. And I would definitely say that children, the target of so much advertising, are not the rational actors he is talking about.

The marketplace will eventually figure out if your product is truly bad, but a product of only marginal inferiority can win out given a large enough marketing budget, or brand identity.

One of the things I don't think Mises fully understood was the importance of the free flow of information in a LF capitalist society. And to continue on my earlier point, when wealth is concentrated in the hands of the few, those few individuals would have tremendous control of the information flow (control of the media, for example) in society, limiting people's abillity to make rational choices.

[Rourke]

A mixed economy is evil to the extent it uses the initiation of force to "stabilize" the economy. There is no right to stability.

Capitalism is perfect by the only standard that is appropriate for economic activities: Man's life as the standard. To the extent that someone wants to control an economy is the extent to which he wants to initiate force due to stability or other concerns. You have no right to do that; not by an objective standard.

Well you are focusing on "rights", but the point of this thread was to put that aside for the moment, and just figure out if this whole LF capitalist economy/society could pragmatically work. I mean, its all well and good if the philosophy is pure. Relying on a philosophy based only on the preservation of individual rights, and having nothing but a minimal afterthought to the consequences of its application on a grand scale is madness. The whole thing is squaring the circle if in fact it can't sustain itself as a system.

Neither you nor your cronies nor the government have a right to control the economy.

I don't have any cronies

[Thales]

Well you are focusing on "rights", but the point of this thread was to put that aside for the moment, and just figure out if this whole LF capitalist economy/society could pragmatically work. I mean, its all well and good if the philosophy is pure. Relying on a philosophy based only on the preservation of individual rights, and having nothing but a minimal afterthought to the consequences of its application on a grand scale is madness. The whole thing is squaring the circle if in fact it can't sustain itself as a system.

Rights are derived from nature inductively. They are not a deductive floating construct. History provides unbelievable powerful evidence in favor of capitalism. In fact, Andrew Bernstein wrote an excellent original work "The Capitalist Manifesto", which will provide you with a great deal of evidence presented in a compact and efficient manner. The insane thing to do is to not support capitalism in the face of the evidence.

The engine of production is the free human mind. To sustain that, you protect a man's right to his life, his liberty, fruits of his labors and the pursuit of his happiness. If a man is secure in both his person and property then he can prosper, because his engine of production is unleashed to the fullest. The principle of rights is the central means of securing our freedoms, and it's far and away the most important political principle ever devised. Nothing else is close. Let me emphasize, individual rights is the most important political concept every devised. It informs us how to treat others in all contexts except emergencies and wars.

If a man is secure in his person and property he is more able to plan long range ambitious projects, and he will be far more likely to do so. When a man's person and property are threatened, he will be far less likely to take on long range ambitious projects. Now that's true of just one man, multiply that by a million, a hundred million, three hundred million. The productive innovations we're missing out on are astounding, all because there are socialists and other statists out there that want to chain mankind down, something for which there is no excuse any longer, since the lessons of freedom should have long ago been learned.

Now, if you don't think freedom means productivity and innovation and a better standard of living, then just compare the less free countries of the world to the freer countries. Look at the Sudan and compare it to Hong Kong. Why can't the Sudan be like Hong Kong? Answer, it could if they had full freedom there.

All that socialists and other assorted anti-capitalists have ever done for man is hold him back from succeeding. In essence, socialists are killers and destroyers of quality of life, but their victims are often unseen, unless you compare the Sudan (the Soviet Union, etc.) to Hong Kong (America, etc.), then you can see what their ideas really mean, and how their sweet words are truly deadly. Today we are suffering because of socialist in ways we can not imagine, because innovators are being kept from innovating.

Rights are the determiner of law, the foundation that allows a proper legal system to be created. This means that every law has that principle as the criterion by which laws are judged as good or bad, right or wrong. This results in freedom, which results in capitalism, which results in a level of survival not yet seen, but very much fore seeable going by prior evidence, prior evidence being freer countries and how well they have done.

[Thomas M. Miovas Jr.]

Well you are focusing on "rights", but the point of this thread was to put that aside for the moment, and just figure out if this whole LF capitalist economy/society could pragmatically work. I mean, its all well and good if the philosophy is pure. Relying on a philosophy based only on the preservation of individual rights, and having nothing but a minimal afterthought to the consequences of its application on a grand scale is madness. The whole thing is squaring the circle if in fact it can't sustain itself as a system.

I'm sorry, but I can't let you get away with that. No, this thread is not just about "economics" divorced from a political system which is divorced from morality which is divorced from epistemology which is divorced from metaphysics. When Objectivists talk about capitalism, they mean a political-economic system of freedom based upon man's factual nature and his need to be free to use his own mind to his own advantage, which leads to individual rights (including property rights) -- not "rights" but rights.

There can be no capitalism without the underlying philosophic base, as witness what is happening to the world right now and especially the advent of controls and regulations in the United States. We are this far > < away from being socialistic, which means rights abrogations across the board.

You are projecting a whole host of ills cast upon society at large if we have capitalism, including the idea that only a few people will wind up owning everything or that only a few people will wind up wealthy. History has shown us otherwise, and even today, in one of the least regulated sectors in the economy, computer software, there isn't just one person who controls all computer programs, and the ones who do "control them" know that if they slip and do not provide good programs, they will go out of business. Bill Gates actively wonders when that next guy in a garage will come up with something better than Windows, and so he continues to improve it. IBM used to "rule" computers, but not any longer; thanks to capitalism.

All of these so called ills and all of the fallacies that you are casting at us are answered in the books I mentioned several times. Please read them, and then get back to us.

[Chops]

In this world, and especially in the Objectivist world it would seem, wealth equals power.

Wealth = Purchasing power. If wealth = political power (the power to use force), then the government has failed. This is a problem in America with interest groups all trying to "buy" votes to support their cause, which at each core is usually a rights violation of some sort. The government doesn't respect the right to property, and as a result, people vying for power can spend lots of money to get the power they request.

But this is not the failure of capitalism, but the failure of a government that fails to respect property rights as absolute.

I still haven't seen anyone dispute (with data preferably) that the LF capitalist world, and thus the Objectivist world, would lead to massive wealth concentration among relatively few people, and a severely diminished middle class, a recipe for plutocracy.

One thing you're failing to consider though, is that wealth is not a pie. That is, if someone has a lot of wealth, then there's little left for everyone else.

Wealth is created. If I harvest a bunch of sticks and build a hut, I've created wealth. If I invent a machine, and mass-produce it, I've created wealth. If, in some unlikeliness someone succeeds in purchasing all the land, that would mean that EVERYONE would have had to sell the land VOLUNTARILY to that individual. It simply wouldn't happen though, on the verge of impossible.

Money represents some degree of wealth, and if one individual owns ALL of the money, then that money will mostly likely lose it's value altogether. The people will create their own means to trade, even if it means creating their own money form (which is perfectly moral, as long as the money represents something tangible).

The core of my argument, though, is that wealth is constantly being created, and nothing except the application of force (governmental intervention) can stunt that. As long as someone is turning resources into something of value that someone else will want, there will be trade. The idea that someone, in a free society, can own all the wealth, or "the majority" of the wealth, is nonsense. For someone to own something, something else of value must be traded for it. Both parties benefit, otherwise there would be no trade.

[Chops]

History has shown us otherwise, and even today, in one of the least regulated sectors in the economy, computer software, there isn't just one person who controls all computer programs, and the ones who do "control them" know that if they slip and do not provide good programs, they will go out of business. Bill Gates actively wonders when that next guy in a garage will come up with something better than Windows, and so he continues to improve it. IBM used to "rule" computers, but not any longer; thanks to capitalism.

You make an excellent point there. A classic example of what happens when the government gets out of the way is the explosion of the internet. Yes, the internet started as a military thing, then a university thing, but since then the internet has been privatized, and anyone can put a server online and create a website.

Paul Graham regularly writes about the success of garage programmers, and the efficiency with which those independent programmers can produce software when compared to the lumbering corporations with their meetings, surveys, and focus groups. Pure internet companies are creating wealth, yet their products are not tangible. But, even in the face of something as massive as Yahoo, MSN, and Excite, Google created the superior product and (without ANY ADVERTISING) has succeeded in become the uber-giant that it is.

The closest thing we have to an experiment of Laissez Faire is the Internet.

Edited January 24, 2008 by Chops

[Rourke]

I'm sorry, but I can't let you get away with that. No, this thread is not just about "economics" divorced from a political system which is divorced from morality which is divorced from epistemology which is divorced from metaphysics. When Objectivists talk about capitalism, they mean a political-economic system of freedom based upon man's factual nature and his need to be free to use his own mind to his own advantage, which leads to individual rights (including property rights) -- not "rights" but rights.

Okay Thomas, I can't believe that in your mind you can't separate out and put under a microscope the concept of laissez-faire capitalism without bringing morality into it. For example, I can analyze the National Socialist government of Germany under Hitler in the 1930's and see that his policies turned that country around economically. Was it moral? Certainly not, but we don't have to get in to that to study its effectiveness, at least over the short term.

You are projecting a whole host of ills cast upon society at large if we have capitalism, including the idea that only a few people will wind up owning everything or that only a few people will wind up wealthy. History has shown us otherwise, and even today, in one of the least regulated sectors in the economy, computer software, there isn't just one person who controls all computer programs, and the ones who do "control them" know that if they slip and do not provide good programs, they will go out of business. Bill Gates actively wonders when that next guy in a garage will come up with something better than Windows, and so he continues to improve it. IBM used to "rule" computers, but not any longer; thanks to capitalism.

Interesting choice for an example. There already is something better than Windows, its called Linux and its free. Only about 1% of computer users use it for an operating systems though, due to lack of support for certain hardware and application programs designed exclusively for Microsoft Windows, which has a 90% market share, a virtual monopoly. Due to this marketshare dominance, Microsoft software carries a high level of vendor lock-in, which is a big deterrant to switching from it as an OS. Vendor lock-in makes a customer dependent on a vendor for products and services, unable to use another vendor without substantial switching costs. Lock-in costs which create barriers to market entry for competitors. A government-induced monopoly? Hardly.

All of these so called ills and all of the fallacies that you are casting at us are answered in the books I mentioned several times. Please read them, and then get back to us.

I would not expect anyone to read a book I recommended without first enticing them with some juicy nugget of wisdom with which to whet their appetite for it, which you have not provided. There are just too many good books to read first that I know on good authority are worth the time. If you have in fact read this book, have internalized it, you should be able to regurgitate at least some relevant passages from it here to refute my arguments. Then I will consider it.

In fact, Andrew Bernstein wrote an excellent original work "The Capitalist Manifesto", which will provide you with a great deal of evidence presented in a compact and efficient manner.

I just read the Amazon review for this book that stated "In fact, nowhere in the book are there any graphs, analysis, or data that would support the author's thesis, in spite of his claim that capitalism is the optimal economic arrangement for human agents." Despite Bernstein's assuredly formidable powers of inductive reasoning, the lack of empirical data is going to force me to take a pass on this one.

The insane thing to do is to not support capitalism in the face of the evidence.

Still waiting on that evidence to refute the points I've made. All you've given me here is conjecture.

One thing you're failing to consider though, is that wealth is not a pie. That is, if someone has a lot of wealth, then there's little left for everyone else.

Yes, I do understand this. It is economics 101. More relevant to my argument is that disproportionate wealth distribution leads to disproportionate power and influence. Take for example a company such as Walmart. It can place enormous demands and pressures on its suppliers because of its dominance in retail over its competitors. It forces suppliers to offer a lower price on products than to say Target or Kmart, and the suppliers have no choice but to accept. They have virtually no bargaining power because to not sell through Walmart is suicide.

[Thomas M. Miovas Jr.]

Rourke continues to advocate that the initiation of force on the part of the government is good, so long as it leads to stability and working markets. He then asserts that I have not presented any factual evidence for my position and refuses to read books and articles that present the case much more clearly than can be done on a debate forum. Each one of your so called fallacies against the free market are answered in Capitalism: The Unknown Ideal, such as the idea that one can have a monopoly in a free market. If someone creates goods and services that are so good and in so much demand that people want them from that vendor, then that vendor is a "monopoly" only in the sense that it's products or services are far better than the competition or in higher demand.

For Windows and Microsoft, would it be expensive to switch over to some other operating system and would such a switch lead to less programs that work on that format operating system? Yes, that's one reason people are not doing that. For Windows, it is very easy for me to go on-line and get any program that I want at a reasonable price, so why should I or anyone else complain that Microsoft has such a large market share? You are creating a problem out of whole cloth -- i.e. imagining a problem where none exists. And if people would prefer to use the Mac or Linux, they are free to do that; all they have to do is to reformat their computer or buy another computer with that operating system on it. The choices are there and people freely choose to use Windows. No force is involved; it is not as if Microsoft holds a gun to someone's head and says, "Buy Microsoft or we will blow your head off." However, with controls, the law basically says, "Do this or that or we will blow your head off, or fine you, or throw you in jail!" and this is evil.

So, there is no separation of economics from morality, and any attempt to do so is immoral, because one is advocating the initiation of force into voluntary agreements. If a vendor voluntarily agrees to use Microsoft and only Microsoft products because due to volume they get a really good deal out of it, no one, not even the government, has the right to tell that vendor or Microsoft that they will be forced -- quite literally -- to do something against their will. Such an arrangement may "work" in the sense of "creating stability", but I have already pointed out numerous times that stability means the initiation of force against the innovators, which is evil.

Rourke might be willing to drop context and to advocate the use of force to bring about the policy of the rights abrogating bureaucrats, but I contend that this is evil and is a crucial part of the understanding of economics and capitalism. Capitalism is not just numbers on a paper, it is a real political economic system and has to do with real people who have individual rights.

[Thales]

I just read the Amazon review for this book that stated "In fact, nowhere in the book are there any graphs, analysis, or data that would support the author's thesis, in spite of his claim that capitalism is the optimal economic arrangement for human agents." Despite Bernstein's assuredly formidable powers of inductive reasoning, the lack of empirical data is going to force me to take a pass on this one.

So, you pick one of the few low rated reviews from Amazon, posted by a hack who happens to live in my area, and present it as your assessment of the book. I've noted this is your style on every subject. Cherry picking Rourke. That's your new nick name.

The book is jam packed full of facts to support the thesis.

[Chops]

Yes, I do understand this. It is economics 101.

That is my fault for not explaining this clearly. My point in that statement is that it is FALSE.

The belief that if someone has a lot of wealth, that there's little left for everyone else is a commonly held falsehood. This is because wealth is created... (fill in the rest of my post)

It forces suppliers to offer a lower price on products than to say Target or Kmart, and the suppliers have no choice but to accept. They have virtually no bargaining power because to not sell through Walmart is suicide.

It doesn't force anyone to do anything. They CAN chose not to distribute to Walmart for the prices Walmart is demanding. They may make less money, but they don't have a right to get paid X dollars, they have the right to earn that money through voluntary trade. Snubbing Walmart may not be a good business decision, but that has nothing to do with force (guns, knives, tanks). Those who choose to distribute to Walmart do so on their own free will, without coercion, because they realize that it will drive their OWN profits up. They sell to Walmart for their OWN good. Whether or not Target and others are effected is irrelevant. Target does not have a RIGHT to purchase products by Acme Distributor at the price negotiated between Acme and Walmart - that contract is irrelevant to the agreement between Acme and Target. Acme and Target set their terms, and Acme and Walmart set their terms, and those terms do not necessarily have to be the same. There is no force at all in those exchanges.

And there's absolutely nothing morally wrong with that.

Edited January 24, 2008 by Chops

[Chops]

Interesting choice for an example. There already is something better than Windows, its called Linux and its free. Only about 1% of computer users use it for an operating systems though, due to lack of support for certain hardware and application programs designed exclusively for Microsoft Windows, which has a 90% market share, a virtual monopoly. Due to this marketshare dominance, Microsoft software carries a high level of vendor lock-in, which is a big deterrant to switching from it as an OS. Vendor lock-in makes a customer dependent on a vendor for products and services, unable to use another vendor without substantial switching costs. Lock-in costs which create barriers to market entry for competitors. A government-induced monopoly? Hardly.

I too am a linux fan (though, more of an OpenBSD fan). But again, no one is forced to use Windows. Windows is a regular default because it comes with most pre-packaged systems, and it also happens to be what end-users know. Of course, Dell, one of the (if not the) biggest computer vendor in the country sells systems with Linux on them. No one is forced to use Windows. Apple is a good example of that. It's gaining ground against Windows and its users border on fanatical (just like Linux users).

But, whether or not Linux is superior is up in question (without arguing that Linux is just the kernel, and the distro is what makes it usable). To simplify things, Ubuntu is the current top desktop linux distro (in it's various forms, including Xubutu, Kubuntu). It is rather easy to use, and comes with mostly everything. But it still has its issues. I've had software database corruptions, which make certain program unusable, and while I can troubleshoot it, imagine your grandmother trying.

There are still somethings that need to be done in the terminal, which is completely foreboding to non-techies. And then, of course, customer support is non-existant. A customer can call Microsoft for help. One must almost exclusively resort to googling the answer to their problems, and even those answers are so strewn with techie jargon, that the average user will have no idea what they are recommending.

Linux is a techy OS. Microsoft does do some things better with their OS, namely making it easier to use for non-techies. But their OS is pretty much their only thing left. Office usage is dwindling due to OpenOffice, IE usage is regularly dwindling, MS has nothing on Apple and Adobe in the graphic design market. Microsoft is the current top-player because it produced a superior product years ago and got people used to it. Over time, some will take up the time (either for price, or curiosity) and move onto Linux.

Look at Microsoft vs other OSes for servers. Microsoft has nothing on the major players. Off the top of my head, eBay is about it.

Like I said, no one is FORCED to use Windows. As an example, I'll be giving an older computer to an elderly neighbor of mine (one who's never used a computer before) with a copy of Ubuntu as the OS. She won't notice a difference, and she won't care, because she'll have the internet. If I was FORCED to use Microsoft, then this action would be a violation of law. It is not.

Edited January 24, 2008 by Chops