An explanation for the failure of capitalism

KP, first off, good thread. Don't really agree with you, but good thread. This is why I like SRP!

Some thoughts:
1. you seem to think that the producer is, to some degree, screwing the consumer by getting more benefit from the trade. well, the consumer is BUYING it, so at some point he earned the money by being a producer of his own. so, even if the cobbler is screwing me when I buy shoes, I'm going to screw him right back when he buys something from my store, because I'm getting more benefit that him by selling him one of the countless widgets I produce that he needs. in essence, I am trying to say that all consumers are producers, at some level. no one is only a consumer, and no one is only a producer, so I would view your pebble game as oversimplifying the problem.
2. you say capitalism has failed; I say it never got a chance. true lassez faire capitalism, afaik, has NEVER been implemented in the modern world. the current system we have here (I am American) is a sad, socialist mockery of real capitalism, and furthermore, (boy, the other rabid libertarians are gonna love me for this) that the government's constant interference with free trade is what's ruining it, not the idea itself. I still believe true free trade would be far superior. we aren't likely to find out, though, the gov't seems to enjoy riding around snug and secure in the pockets of anti-competitive lobbyists.
3. assuming you are correct, and capitalism is doomed to failure, what would you propose as an alternative? (not being antagonistic, just curious)

Of course, the game I outlined is a simplified analogy or model of the workings of an economy based around free exchange. All models are simplified and distorted representations of some real thing or process. A map is a distorted representation of the geographical relationships between significant geographical features. The distances represented between things is greatly reduced, and the things that are represented are usually greatly enlarged so they can be seen. As long as the distortions are consistent, and the reasons for them are understood, the map and model can still tell us useful things about how the real thing works.

If I were to devise a trading game that completely represented the vast diversity and variability of the goods and services traded in the economy, the model would be too complex and unwieldy to be useful. In the end, this diversity of product, or the stimulation of diversity, is not what I intend to represent. Rather, since what matters to us about any product is the benefit we get from it, I all need to represent is some item that we stipulate is intrinsically valuable, and some some representation of the benefit we get from trading.

Furthermore, individual freedom in trading is not an important part of this model, because we're not interested in the exercise of freedom, but in the motivations that any individual has for engaging in trade. When thinking of the economy as a whole, it doesn't matter that some individual has the freedom to refuse to trade, even if that trade would net them a benefit, because at this macro-level, trading will occur. The freedom of the individual to set the price for the product they sell is also eliminated for this reason, and because we've generalized the diversity of products and services into a single representation. Once again, at the macro-level, the prices of goods and services are not set so much by the whims of the producer, but by the vagaries of supply and demand. Supply and demand are represented in the second game by the ability of producers to add more candy to the game and the requirement that each player eat one piece every ten turns. Therefore, the price of a piece of candy, which is a representation of a quanta of the entirety of goods and services produced in an economy, is determined by the supply of candy (the total number of pieces) divided by the ability of the players to demand candy, which is represented by the total number of pebbles at play in the game. Mandating that players not refuse to trade, and that can always trade pebbles for candy (if they have enough pebbles) from someone that has more than one piece, is the way of representing that, at the macro-level, trades will occur and the goods and services that can be bought with money will be available.

Your point that everyone is a producer, and that's how they get money in the first place, is a good one, and I was hoping someone would bring it up, so thank you for that. It is true that everyone is a producer, but, as you note in your point about the diversity of goods and services, not everyone produces the same things. The benefit one gets from trading one kind of good is going to be different than the benefit one gets from trading another kind. Consumers in this game represent individuals that only or primarily trade their labor in order to get money. As I noted in my original post, those who trade their labor will always get less of a benefit from that trade than those who produce consumable goods and services in a quantity greater than what they can themselves use. That's because you can always use your time to do a great many other valuable things. This great use-value of time means that whenever you trade it for something that has a limited use-value, such as shoes or computers, you will get less of a benefit than someone who trades these more limitedly valuable things for other things. This is why those players designated as "producers" in the game get to draw two pebbles from the pot for every trade they make while players designated "consumers" only get to draw one. The fact that production also requires labor explains why a producer must give a pebble to some consumer in order to bring a new piece of candy into the game.

While you may not like inflation, by itself, it isn't necessarily bad, whether it is moderate or not, as long everybody in the game has enough to buy the goods and services they require. The main point of this game is to show that, over time, inflation and inequality are unavoidable consequences of a system of free trade where the benefits of trade are consistently unequal, yet still positive for both sides. You can not like it all you want, but, unless some mechanism of periodic redistribution is included, it's unavoidable. I agree that control of the money supply is an important function of the Federal Reserve. By restricting the creation of new money, (in the game, reducing the number of pebbles players can draw from the pot for each trade) they can slow the onset of this problem, but this also limits productivity. Increasing the money supply (letting people draw more pebbles, while retaining the inequality of benefit) can alleviate the problem once it's beginning to occur, but only in the short term. Eventually, the problem will catch back up with a vengeance, and inflation will be even greater.


And Tim, while I agree with you that cultural redistribution can alleviate the problem, in order for this feature to be relied upon, we would have to control the culture, in effect, mandating religious belief of a certain sort. This would be a violation of the first principles of liberalism (in the traditional, philosophic sense, not in the conservative vs. liberal sense). We have to preserve the freedom of people to believe, or not believe, as they think is best, or any other freedom they may or may not possess will be meaningless. And while I could disagree with you that a strong moral character requires religious belief, that's an argument for another day, and one we would likely not be able to resolve to our mutual satisfaction.

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Originally Posted by jockeys

KP, first off, good thread. Don't really agree with you, but good thread. This is why I like SRP!

Some thoughts:
1. you seem to think that the producer is, to some degree, screwing the consumer by getting more benefit from the trade. well, the consumer is BUYING it, so at some point he earned the money by being a producer of his own. so, even if the cobbler is screwing me when I buy shoes, I'm going to screw him right back when he buys something from my store, because I'm getting more benefit that him by selling him one of the countless widgets I produce that he needs. in essence, I am trying to say that all consumers are producers, at some level. no one is only a consumer, and no one is only a producer, so I would view your pebble game as oversimplifying the problem. Nobody's screwing anybody, everybody benefits from trade, but some people will benefit more. There's nothing morally (or in any other way) wrong with that. The point of this game is that everyone can do what is best and right, and we can still not get a good solution. Furthermore, not everybody produces countless "things" they could never use themselves to trade. Some people trade labor. Trading labor will always get you less of a benefit than trading something else.
2. you say capitalism has failed; I say it never got a chance. true lassez faire capitalism, afaik, has NEVER been implemented in the modern world. the current system we have here (I am American) is a sad, socialist mockery of real capitalism, and furthermore, (boy, the other rabid libertarians are gonna love me for this) that the government's constant interference with free trade is what's ruining it, not the idea itself. I still believe true free trade would be far superior. we aren't likely to find out, though, the gov't seems to enjoy riding around snug and secure in the pockets of anti-competitive lobbyists. No pure economic theory has ever been implemented, from pure capitalism to pure communism, or even pure feudalism. There have always been elements of other organizations that are retained from historical periods, and advancements from other systems that have been added on in a more or less ad hoc way. But more or less free exchange systems have been tried. It was prevalent Great Britain before and during the Irish Potato Famine, and it was prevalent in the US in the era of the robber barons. And I agree with you that it is better than any other pure economic theory that has been tried before. That doesn't mean it is perfect.
3. assuming you are correct, and capitalism is doomed to failure, what would you propose as an alternative? (not being antagonistic, just curious)

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To answer your third question, because apparently, I have to put something outside the quotes, the only change I would add is a periodic redistribution of wealth. If you want me to be more specific in terms of a concrete policy, than I would suggest we eliminate the standard tax deduction on income tax forms, and replace it with a non-wastable tax credit equal to $15000 per adult individual, and $5000 per dependent child.

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Originally Posted by Kantian Pragmatist

And Tim, while I agree with you that cultural redistribution can alleviate the problem, in order for this feature to be relied upon, we would have to control the culture, in effect, mandating religious belief of a certain sort. This would be a violation of the first principles of liberalism (in the traditional, philosophic sense, not in the conservative vs. liberal sense). We have to preserve the freedom of people to believe, or not believe, as they think is best, or any other freedom they may or may not possess will be meaningless. And while I could disagree with you that a strong moral character requires religious belief, that's an argument for another day, and one we would likely not be able to resolve to our mutual satisfaction.

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No control at all is needed and as usual is contraindicated. Those who don't chose to be a part of the religious structure simply lose the benefit of the safety net it provides, unless the structure of some religion allows them that protection due to its own tenets. That way you will over time see the growth and wider distribution of the most altruistic religion especially in times of greatest weakness in the economic structure, and a general waning of religion in the times of greatest prosperity, and the stingiest most restrictive religions will die out over time. It is a self regulating structure, as most parts of a truly free society are. In conclusion as you might expect those who chose to completely remain apart of the religious safety structure and then fall afoul of the economy will be left to their own devices by their own choices.

You see by your assertion that you MUST control the culture you assert that all MUST be protected. Part of freedom is allowing ALL to win success or pay for failure based solely upon their own choices. There is no need to protect everyone those who desire it will find protection and those who chose to do without it do so be their own choice.

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Originally Posted by Kantian Pragmatist

To answer your third question, because apparently, I have to put something outside the quotes, the only change I would add is a periodic redistribution of wealth. If you want me to be more specific in terms of a concrete policy, than I would suggest we eliminate the standard tax deduction on income tax forms, and replace it with a non-wastable tax credit equal to $15000 per adult individual, and $5000 per dependent child.

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while that sounds appealing to me personally, and appeals to my decidedly libertarian way of thinking, what, specifically, would you hope to accomplish with that? or is it just a general way of favoring the individual over the conglomerate?

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Originally Posted by Wildtim

No control at all is needed and as usual is contraindicated. Those who don't chose to be a part of the religious structure simply lose the benefit of the safety net it provides, unless the structure of some religion allows them that protection due to its own tenets. What happens when that religion is also racist or misogynistic? The effects of this are that whole groups of people will be left out, for no other reason than that they have a certain color of skin, or were born without a willy. Either they become a permanent second-class, or they are forced into extinction. Christianity is well known for being misogynistic, and Islam is both misogynistic and racist. Those are the two most popular religions in the world. That way you will over time see the growth and wider distribution of the most altruistic religion especially in times of greatest weakness in the economic structure, and a general waning of religion in the times of greatest prosperity, and the stingiest most restrictive religions will die out over time. Rather, you will see the growth of the most popular religion of the region, whether it is the most altruistic or not, as long as it is altruistic enough to satisfy its adherents. Secular humanism advocates far more generosity than most formal religions, yet it is among the least popular faiths. It is a self regulating structure, as most parts of a truly free society are. In conclusion as you might expect those who chose to completely remain apart of the religious safety structure and then fall afoul of the economy will be left to their own devices by their own choices.

You see by your assertion that you MUST control the culture you assert that all MUST be protected. Part of freedom is allowing ALL to win success or pay for failure based solely upon their own choices. There is no need to protect everyone those who desire it will find protection and those who chose to do without it do so be their own choice.

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Freedom, as both a metaphysical and a moral principle, has nothing to do with consequences. Freedom is the ability to control one's actions, to control what you do, not to control the whole range of effects of what you do. Success and failure are too influenced by the vagaries of providence to be reliable indicators of individual worth. You can be the hardest working and most intelligent person in the world, and yet still fail. An excellent example of this fact is Nicolai Tesla. He is responsible for the adoption of alternating current in our electrical infrastructure. By all accounts he was a brilliant man. He was also among the most prolific inventors of his time, so he was very hard working. Yet he died in poverty and misery, believing himself to be a failure. By periodically redistributing wealth, we could have prevented this sad end, and allowed him to keep inventing and working well into his latter days. Who knows what innovations we do not now have because of the way Tesla ended up?

Survival of the fittest is a fine description of the way natural evolution occurs, but it is a poor substitution for a moral socio-economic theory.

Your horns are starting to show.;)

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Originally Posted by jockeys

while that sounds appealing to me personally, and appeals to my decidedly libertarian way of thinking, what, specifically, would you hope to accomplish with that? or is it just a general way of favoring the individual over the conglomerate?

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It would counter the effects of inequality that builds up in such a system of free exchange as I have described. It wouldn't return things to their initial, absolutely equal state, but it would prevent individuals from being priced out of participation in the economy. I would think it would also be important to index the tax credit to inflation, once the credit has been established. And there are a lot of other reasons to favor this. It would let single mothers stay home with their kids, and lessen the pressure on parents to constantly work, so they could check homework, and encourage their socialization. It promotes personal freedom in that it would give the individual the option of "opting-out" of being someone else's laborer in a job they dislike. It gives them some capital they can use to form their own small business. It wouldn't require us to promote some religion or any religion at all in order to alleviate these inequality effects, preserving the freedom to believe. This is actually an idea I've been thinking about for some time, and I haven't found a downside to it yet, other than a possibility for a short-term spike in inflation. But as I said, inflation isn't necessarily a problem, unless it leaves some group of people out.

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Originally Posted by JMS

Your horns are starting to show.;)

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Surely, you're not insinuating that I'm evil incarnate.

Kant

In every post you make it becomes more clear that your only solution for anything is government intervention. Any and every idea that doesn't lead only to greater power for your idealized government ivory tower utopia will be rationalized away with the weakest of arguments bolstered only by a volume of words. I'm done playing now. Once you sit down read a deffinition of FREEDOM perhaps we can discuss thing in the future.