On the Many Failings of Capitalism

[Shodan]

@Enterprise

I think “my” (it’s not really mine, better minds that mine have thought it up) socialism would improve things, and it would do so without the emphasis on economic growth. I don’t think that would be a problem, either: just for starters, the U.S. economy has grown by a factor of seven since 1950 (roughly), while population has about doubled.

This makes no sense. The population has doubled, therefore we need a system wherein the economy does not grow.

How does the economy grow if anybody produces more pins? It grows the companies stock of pins, but unless they can realize a profit somewhere with those pins, they’re making a net loss; if they never sell those pins, they go bankrupt, and bankruptcies don’t grow the economy. So at the very least, you’ll have to admit that economic growth can only happen when the additional production of pins gets sold somewhere. And this is (one of the) fundamental problems of the system (check the link I provided Sam Stone).

This is not a problem in any sense of the word. Producing more pins from the same inputs, or producing the same number of pins from less input, grows the economy because it either meets the increased demand for pins at a lower cost, or meets the same demand and leaves more resources available for any other purpose. Suppose I produce a million pins for $100,000. Now I revamp my factory such that I can produce a million pins for $75,000. I can sell the same number of pins at the same price and have $25,000 available to buy whatever I want. Before, I spent $100,000 and the economy had a million pins. After, I spent $100,000, and had a million pins and $25,000 worth of whatever I chose.

Okay, let’s tackle the last one first: South Korea. A good example, because its economic rise has comparatively little to do with the workings of the free market and everything with five-year plans and what’s called “indicative planning” (as explained here).

Here, of course, you are merely wrong. Contrast North vs. South Korea and allege to anyone conscious that the difference between the two economies has nothing to do with capitalism vs. planned economies. Prepare to be laughed at.

For both the USSR and East Germany, I’d ask you to be a little more specific: what about the contrast am I supposed to take in?

You are supposed to take in the difference between the Wirtswunderschaft of West Germany with the road-kill of East Germany and the USSR.

It always feels like I’m supposed to say: oh, the outcome proves it all; is that it? If so, I think the point is more complicated than you make it out to be, and that, at any rate, I have already agreed that central planning is probably not the way to go anyway.

I am glad to see that you have been convinced by the evidence. Socialism and communism are failures; capitalism is not.

Without laying any onus on Sam, he has claimed that pricing is a more effective system for managing demand, without really establishing this. It’s difficult to establish, too, I admit, and I’d have a hard time disproving the claim. All I’d like to say is that it’s a claim only, not a fact.

We have already established that capitalism, and therefore pricing by the free market and not by planning, is the way to go, because it is more efficient. So either you recognize that it is a fact, or you were being other than factual above and you have not been convinced by the evidence. Which is it?

We could probably have avoided a major ebola outbreak in Africa if “needed” drugs had been available this time last year; they were made available only when a “market” of sorts arose (industrial nations willing to invest in helping quell the epidemic).

What drugs do you think are used to treat Ebola infection?

Or I say: you’re wrong, there’s of course a difference: think about the 2012 hurricane on the East Coast, where immense amounts of goods were made available to suffering people without demanding payment–without waiting for the market to step in and determine how much a gallon of clean drinking water should cost.

Sorry, I am not clear on what this is supposed to prove. Emergency aid shows a problem with capitalism? What does that mean?

If nothing else, your shorthand is not how the market works, even ideally. You’re describing essentially a demand economy–but I’d think most market advocates would agree (as I think Sam Stone does) that its supply and demand together that (somehow) determine price. A simply current example: demand alone cannot explain the low, low price of oil.

No one has suggested that supply does not work to determine price. And your suggestion that I have is ridiculous.

This is what was wrong, in part at least, with some command economies (it’s worked well for South Korea, as noted above), yes.

South Korea is not a command economy.

Which is why I’ll remind you of what communism is: the withering away of the state.

No, that doesn’t ever really happen. It’s just a lie that the Marxists tell the proles to justify their murder and oppression.

There’s no government in capitalism (nor in some forms of socialism) that isn’t the people. Again, I find this bit of the discussion distractive and don’t want to engage in it here, because it opens more fears again (no government! you’re a looney!) that aren’t helpful in a discussion of the economic system.

Don’t bring up topics if you are afraid to debate them, especially when they aren’t true.

Regards,
Shodan

[Shodan]

@Enterprise

One would wish it were possible not to reflexively shout “yeah, but THEY are much worse , and THEY are communists!”

I understand why you don’t like it when this is pointed out.

Communists can’t learn lessons?] Here: famines? World Hunger. Something like on eigth of all people live in hunger. And if you’re claiming that capitalism is what “freed” the third world economies–even accepting that, capitalism is also what bound those economies in the first place through imperialism.

Did you notice that, of your list of famines, in the 20th and 21st centuries how common were the following factors:
[ul][li]WWI[/li][li]WWII[/li][li]Being the USSR?[/li][/ul]
Regards,
Shodan

[Enterprise]

@Sam_Stone

Without economic growth, per-capita wealth declines as the population increases. Without economic growth, the only way to move capital to new ventures is to take it away from others. Zero economic growth is a recipe for poverty and civil unrest.

But you’ll note that in this argument, you’ve not left capitalism behind. I’m not disputing that capitalism needs growth (I’m not even disputing that socialism will need production growth if population growth persists: socialism does not, however, require it for its own perpetuation, but only to the extend actual human beings need it). But see below:

Sure, and one day the universe will die a heat death. The question is whether or not resources are significant limitation to growth for the foreseeable future. And the answer is no. Furthermore, it’s possible to have economic growth without increasing the consumption of resources. In fact, economic growth can cause a reduction of resource consumption.

Sorry, Sam, but that’s just not true. There’s plenty of people who believe we’ve hit peak oil; as someone else said in this thread, we appear to be running out of helium; there’s a more general resource problem. And yes, you can have growth without additional resource consumption–but again, even logically, all of this must end. You’d prefer to claim it will end way, way in the future, probably–but end it will.

Consider a factory that hires some engineers to come in, examine their production, and figure out how to improve efficiency. Sometimes that requires purchasing new capital goods, but sometimes it doesn’t. It can a procedural change, an addition of inspections at key point, re-arrangement of equipment on an assembly line, or whatever. So this company has invested in mental effort, the result of which was a change which improves its product yield from 95% to 98%. That extra 3% of production represents less waste and more output goods for the same inputs. Economic growth just happened, and resources were actually saved.

Yes. Good planning in the economy can help improce efficiency.

Consider the desktop publishing revolution, which exchanged real paper from trees with bits in a computer. Efficiency was improved, the cost of producing documents went down, and that causes economic growth while also saving resources.

It’s at least debatable that bits in a computer (requiring immense electric power, rare earths and metals, and producing considerable waste of plastics and electronics) are “saving resources” over paper, which is, after all, a perfectly renewable resource. It’s more efficient, that’s probably true. I don’t know that it saves resources.

But here’s a reason why Capitalism is good at resource management: If we do wind up with scarcities, the price will go up. This will stimulate more production and more research into alternatives. If the price goes up high enough, it may even be feasible to get those alternatives from other bodies in the solar system. Or we may learn how to synthesize them, or abandon the material entirely in favor of something else. But whatever we do, if we allow prices to reflect supply and demand, the economy will adapt.

Again, one of the problems that you are rather easily dismissing in this analysis is the question of resources that do not fall under supply and demand. Take the Amazon rainforest and deforestation. How does the market prevent its destruction? Is this a good usage of resources? Globally, certainly not: it’s incredibly short sighted. Locally, sure: the land’s free, the trees can be sold, and then we can grow some soy there that’s certainly going to fetch a higher price on the market than some rainforest.

[I’ve snipped the bit on NASA and other space programs because, once more, I’m not contrasting government programs with capitalism.]

Money is not wealth. These days, people seem to forget that simple fact. You can print all the money you want, and it won’t make us any wealthier.

I’m not sure what the point of this bit is, since I didn’t speak of either printing money nor of wealth (whyever money is not wealth, anyway). I said that financial speculation is capable of producing money that is not, in fact, produced by the production of value or even through exchange. It’s possible to make millions in seconds in financial speculation, and those millions could then be used to buy actually commodities–you don’t have to create, or have someone create, value anymore, in order to create more money. That’s…not a good thing, I’m hoping you’ll agree.

[I snipped the bit where you reflect on what we measure when we measure growth. I’m as stumped as you are.]

Economic growth happens when more value is produced for the same inputs.

Without that value being realized anywhere as exchange value or use value? Just by existing?

Cite? Can you give me one scholarly site showing that in the general case another economic system is more efficient at allocating resources and coordinating economic activity? Do not confuse this with social goals. The fact that your preferred group doesn’t get as much as it wants is not an example of lack of efficiency - it’s a value judgment.

Huh? I did not say “capitalism is terribly at allocating resources and coordinating economic activity”. I just said “it’s not particularly effective at doing so”. I gave you examples (and a cite for why and how capitalism isn’t very effective)–where do you think boom and bust cycles come from, or do you deny that they exist? This is the general case for capitalism. It’s a natural consequence of the way it operates. It’s not an outlier (unless you think a major crisis every twenty years or so is always an outlier).

[I’ve snipped a couple of the next bits again, because, as I’m happy to repeat, I don’t deny that the Soviet economic system was not ideal, that it produced its own shortfalls and had structural problems, nor am I denying that the Chinese economy isn’t working to the betterment of mankind, nor am claiming that Venezuela is paradise, or that all planned economies are always better than all non-planned economies. Nor I am I proposing to substite centralized government planning, top-down, for capitalism. So that’s a counter that henceforth I’ll just snip.]

So there will always be wealth inequality, no matter what your system is. The question is, how would you like that managed? You can either let people become wealthy because they are selling products that make the lives of many people better, or you can let them become wealthy because they are politically connected or have curried favor with the powers-that-be. Which one do you think is more fair?

But you’ve not shown that. You’ve shown that it has historically produced inequality (though perhaps less inequality than capitalism does?). The crucial difference is that capitalism structurally, that is, based on the way it is supposed to work, requires inequality, while socialism does not. Can we agree on that, absent disputes about whether socialism is possible?

Capital accumulating is not the goal of capitalism. Capital accumulation is the mechanism by which we manage our economy without central planning. Without capital accumulation private industry could not build large projects. Without capital accumulation you don’t have venture capital, which means people with good ideas can’t find funding. Without capital accumulation you can’t buy your own house or save for your own retirement. Capital accumulation is also efficient because it causes economic power to accrue to the people who have already demonstrated the ability to use it to help others as demonstrated by their ability to sell goods to many people.

Sam, sorry, but you’re breaking the bounds of a plausible argument. Are you seriously saying that selling goods to people equals helping people? If so, would you be willing to expand that to the hedge fund manager–making money on the stock market equals helping people? And if you’re not saying any of these things, would you mind paraphrasing this so I understand it? To my mind, success at selling goods to many people doesn’t say much except that you’re successful at selling goods.

Those harbors full of loaded containers had nothing to do with misjudging demand - they sat in the harbor because no one could figure out how to be paid because of the financial crisis, and without payment they refused to offload their goods to their customers. The minute the crisis ended and stable money was restored, that stuff cleared away.

And where did the financial crisis come from?

So capitalism is at fault because it’s not providing food to people who live in countries that aren’t capitalist? I assume you’re talking about the 3rd world, since no one is starving in any capitalist country I can think of. In fact, the poor in America tend to be more overweight than the rich.

Even assuming any of those places “isn’t” capitalist, yes of course: the world market is capitalist, or is it not? Food prices are brokered at exchanges in the industrial countries, are they not? Incidentally, as I noted in my reply to…somebody…it’s hardly a surprise that poor Americans are overweight, given that healthy foods are more expensive (perhaps not solely a failure of capitalism, given subsidies for corn sirup production; but then, nobody is forced to take subsidies).

You’re wrong. A market economy is not planned - it’s emergent. It’s the result of billions of choices being made every day under a system of consistent rules. No one decides what the price of something must be, what the national consumption of steel should be, what percentage of resources should be allocated to different areas of the economy. These things simply emerge from the interactions.

How is “I sold sixteen cans of tomatoes today, and four people asked me where the tomato cans had gone; I think I’d better buy twenty from the whole-seller tomorrow, since that seems to be daily demand” not planning? We may just have a terminological problem here, perhaps–it sure is planning to me.

And so it goes. No central planning. Looked at from a macro level, you will see what looks like a little industrial economy. Large food sources have lots of activity at them. Smaller food sources have fewer ants bringing food back. But it’s all nearly optimal. I would defy any central ant controller with a clipboard to devise a better way.

The analogy is neat, only you’d probably need to show that this is *really * how capitalism works, not how it would ideally work? I’m still fuzzy on where your “demand” comes from, if not from actual people buying actual goods and the numbers of these purchases being nodally tabulated and used to place future orders through extrapolation–i.e., planning for tomorrow.

You cannot discuss the problems of capitalism in a vacuum. I can say that one problem with capitalism is that it hasn’t gotten us sentient robots yet. That’s meaningless unless you can show how some other system could have done it. So I would really, really like you to describe, in as much detail as you can, how you would efficiently manage production and consumption in a society that does not allow profit. Feel free to start another thread if you think it’s necessary, but I think it’s relevant to this one.

Sentient robots, of course, aren’t a systemic feature of capitalism. It’s not a problem with capitalism in the sense that we’ve been using “problem” here. And as I’ve argued before, it’s not meaningless to argue the problems of capitalism to an audience that hasn’t even grasped them yet–because that’s clearly the first step to take. I’m making a note that you’d like me to outline this sometime, and I promise to do so–in a separate venue, and not just now (because time’s limited).

Now tell me - what checks and balances are in your socialist system to prevent bastards from using the power of government to their own ends, or against the wishes of the people? Did you know that noted socialist revolutionary Hugo Chavez died with a net worth of $2 billion dollars? He managed to extract that much from the Venezuelan economy in just a few years, despite that economy being only a tiny fraction of the size of the U.S.'s. How does your system prevent that from happening?

Again: in a socialist system, there is no government, so nothing can be co-opted. I realize this is both difficult to grasp and difficult to achieve. But since it would produce better life, it’s worth thinking about.

[QUOTE]
All you have to do is look around at all the goods that have quality higher than the government minimum standards, all the people with wages higher than the minimum wage, and you can see that SOMETHING is driving good behavior other than government. Why did car makers start putting ABS brakes in cars when they weren’t mandated by government? Software and web sites are totally unregulated. How come it all works so well?

[QUOTE]

Yes, certainly something is driving good behavior other than government (I’m not sure what this hangup over the government is all about). The problem you’re not seeing (I think is this): car makers put ABS brakes into cars because there’s a profit to be made doing so. If a profit were to be made taking them out, they would do so as well. And you’re really cherry picking your automotive example here: it works for neither airbags nor seat belts.

If you think hard about that, you might start to gain some understanding of how market forces push people ‘as if by an invisible hand’ into doing good for others if they want to do well for themselves.

Perhaps.

[Enterprise]

RickJay, can I assume that you’re conceding the points that you’re not replying to here? Because there are some points where I asked to clarifications.

@RickJay

But that is simply not true; it is, indeed, self-evidently not true, as people are getting wealthier by any reasonable measure, worldwide. The average human being is materially wealthier than they were in, say, 1960, by either mean, median, the percentage of people in absolute poverty, any way you want to measure it. How is that possible if what you’re saying is true?

In your last few posts you seem to be falling back into the economics-is-a-zero-sum fallacy. It indisputably isn’t. That is not even a remotely true statement, not under ANY economic system save “everyone just steals things.” Labor CREATES value, by your own admission. If you make something and trade it to me for something else, we are both wealthier and no one is poorer.

Yes, you’re quite right that it’s not a zero sum game (if by that you mean that there is a finite amount of wealth without the possibility of increasing it). That’s not what I’m saying. I’m saying that for some people to realize surplus value necessarily means that somebody must (even if total wealth increases) gain less than somebody else–down to gaining nothing at all, or indeed losing everything. I’m not sure why you are disputing that. I mean, your example doesn’t even work: if I make something and trade it to you for something else, we are exactly as wealthy as we were before–unless, of course, you have traded me something that is worth less than I traded you, in which case I’ve lost out and you’ve gained? I’m not getting it.

But that isn’t true. It’s beyond any rational argument that it is not true. People in all manner of economic systems are treated as cogs in a machine, and it’s here that your “let’s not discuss any other kind of system” can’t work because it’s a central part of your argument that this feature is unique to capitalism. People in socialist systems are treated the same way; in the Soviet Union coal miners were valued as coal miners by GOSPLAN. In Japan under the Tokugawa Shogunate, if you were a rice farmer, well, that was your purpose, to farm rice. Ancient Sparta treated people as their roles to an extent inconceivable to a modern person. That’s how the system saw you, valued you. It’s been this way basically forever. Modern free market capitalism didn’t create this concept at all. It didn’t even enhance it.

Okay, let me rephrase that, because you’re quite right: of the systems here under discussion (one of them introduced into discussion not by me), only capitalism would have you treated like that. I doubt we’ll find many takers of ancient despotism or medieval feudalism as alternative systems, so I’ll retract with apologies the claim that capitalism is the only system that would do so, and agree with you that it is perpetuating structures found in ancient despotism as well as medieval feudalism.

Indeed, the world’s capitalist countries appear to place far more value on human being just for being human beings than any other societies that have ever existed, at least amongst large civilizations. Capitalist nations have, for the most part, more social safety nets, more respect for individual rights, more freedom of expression, a wider range of forms of artistic expression, more progressive social outlooks and do a better job caring for those with limited economic value. than other societies. Of course, one can say that’s not the capitalist part of those societies, it’s the governmental part - but it is beyond doubt that those things seem to be rather strongly correlated. Correlation isn’t causation, but you must admit it’s a hel[l of a strong correlation. Honest question; why do you think that is? I have my own theory.

Here’s what I think: some of the good things about life in the West (pardon the shorthand) developed in step with the development of capitalism, they spring, as it were, from the same philosophical foundation of individual rights, and are part of the same emancipatory struggle against absolutism (Humean rationalism, Lockean natural-cum-human rights, etc) and organized religion. Some of the good things about life in the West are more complexly related to capitalism, such as Bismarck’s social legislation, involving both the intend to quell incipient social unrest and to advance national economic goals, all based largely in the industrial advances produced by capitalist enterprise. Some of the good things about life in the West (material things, mainly) stem directly from capitalist enterprise (though perhaps not because they could not otherwise have come to be, but because historically, that’s how they came to be).
A more traditional Marxist than I am would tell you, of course, that all those things that are good in life that do not immediately benefit capitalists were won through hard and long class struggle…

[Human_Action]

@Enterprise

I said that financial speculation is capable of producing money that is not, in fact, produced by the production of value or even through exchange. It’s possible to make millions in seconds in financial speculation, and those millions could then be used to buy actually commodities–you don’t have to create, or have someone create, value anymore, in order to create more money. That’s…not a good thing, I’m hoping you’ll agree.

Speculators are creating value, it’s just intangible. Here’s a simple overview, and here is another. In a nutshell, they prevent shortages and reduce volatility.

Also…how would a speculator make money without an exchange? They are buying or selling either commodities, or futures contracts on those commodities. There has to be a partner to all those trades.

[Enterprise]

@Shodan

This makes no sense. The population has doubled, therefore we need a system wherein the economy does not grow.

Yes, that truly doesn’t make sense, because it’s not a good paraphrase. I was merely pointing out that if economic growth were needed to cope with population growth, we could reduce U.S. economic growth almost four times over and still do well, thus reducing the emphasis on economic growth.

This is not a problem in any sense of the word. Producing more pins from the same inputs, or producing the same number of pins from less input, grows the economy because it either meets the increased demand for pins at a lower cost, or meets the same demand and leaves more resources available for any other purpose. Suppose I produce a million pins for $100,000. Now I revamp my factory such that I can produce a million pins for $75,000. I can sell the same number of pins at the same price and have $25,000 available to buy whatever I want. Before, I spent $100,000 and the economy had a million pins. After, I spent $100,000, and had a million pins and $25,000 worth of whatever I chose.

But only if you’re revamping your factory for free, or am I missing something?

Here, of course, you are merely wrong. Contrast North vs. South Korea and allege to anyone conscious that the difference between the two economies has nothing to do with capitalism vs. planned economies. Prepare to be laughed at.

Did you read the article on how South Korea managed to get to this economic difference? Because if I’m wrong, so is that economist guy…and then I’m probably within my rights to ask you for a cite on how South Korea is a paradigmatically capitalist economy (and was during its rise).

You are supposed to take in the difference between the Wirtswunderschaft of West Germany with the road-kill of East Germany and the USSR.

Yes, I know. What about that? The *Wirtschaftswunder *(Marshall Plan-fuelled) vs. the GDR’s “there’s no industry because the Soviets took it all” looks impressive, but it’s so much more than just capitalism vs. communism, especially as Germany rather prides itself on its *soziale Marktwirtschaft *(which is not planned, but heavily, heavily regulated, if less and less so, more’s the pity).

I am glad to see that you have been convinced by the evidence. Socialism and communism are failures; capitalism is not.

Do you genuinely believe that central planning is equivalent to socialism, or is this a cheap shot at the expense of the honest debater?

We have already established that capitalism, and therefore pricing by the free market and not by planning, is the way to go, because it is more efficient. So either you recognize that it is a fact, or you were being other than factual above and you have not been convinced by the evidence. Which is it?

I’m not getting this, sorry. I said the we’ve not established, only claimed, that pricing is the most effective means of getting anything done. What? What have I not been convinced of? Your easy equivalence between Soviet-style central planning and communism?

What drugs do you think are used to treat Ebola infection?

These? But if you’re worried about my claim that we could “probably have avoided” I’ll be happy to retract it and chalk it up to cheap hyperbole: the general point about pharmaceuticals stands.

Sorry, I am not clear on what this is supposed to prove. Emergency aid shows a problem with capitalism? What does that mean?

It merely shows a problem with the idea that the market ideally solves all concerns. Emergency aid in that sense shows the limits at which each and everyone of us (well, 99% of us) are willing to say “screw the free market, let’s socialize our response to this problem”. I’m just shifting that boundary slightly to the left.

No one has suggested that supply does not work to determine price. And your suggestion that I have is ridiculous.

Pace, Shodan. In a good discussion, if I make a mistake like that, show me the mistake, so I can admit it. You wrote:

Consumers are communicating what they want to buy by bidding up the price for it.

This seemed to me very much to say that consumers determine the price by bidding (as in an auction). If this was shorthand for a more complex conception, we’ll just agree that that’s not after all how it works, and everything’s good.

South Korea is not a command economy.

No, you’re right. It is/was a (partially) planned economy.

No, that doesn’t ever really happen. It’s just a lie that the Marxists tell the proles to justify their murder and oppression.

But that’s like, your opinion, man? You may not think it’ll happen, but if you’re debating the consistency of an idea, you can’t just ignore that that’s how it would work, if it could work. You can’t blame me for governmental oppression in my utopia when my utopia doesn’t have a government.

Don’t bring up topics if you are afraid to debate them, especially when they aren’t true.

You really only can debate things that aren’t true. I didn’t bring it up, either. Also, I’m not sure what isn’t true in that line.

Regards,
Shodan
[/QUOTE]

[Human_Action]

@Enterprise

It merely shows a problem with the idea that the market ideally solves all concerns.

Just a quick aside here: only a fringe minority believes that the market ideally solves all concerns. Economists spend a lot of time on market failures, such as externalities. For some reason, these sorts of discussions turn into people arguing against free-market fundamentalism, instead of what most capitalists actually believe in.

[BrainGlutton]

@Human_Action

Cite?

I was thinking of Objectivists and Libertarians.

For certain values of “serious.”

[RickJay]

@Enterprise

RickJay, can I assume that you’re conceding the points that you’re not replying to here? Because there are some points where I asked to clarifications.

No. I’m just not always fantastic at replying to things.

Yes, you’re quite right that it’s not a zero sum game (if by that you mean that there is a finite amount of wealth without the possibility of increasing it). That’s not what I’m saying. I’m saying that for some people to realize surplus value necessarily means that somebody must (even if total wealth increases) gain less than somebody else --down to gaining nothing at all, or indeed losing everything.

That is mathematically… well, possible, I guess, but if this is an argument against capitalism it’s a very strange one. If one person realizes $10 (I’ll use dollars as a shorthand) of utility and one realizes $7, then yes, one has gained more than the other, but is that a bad thing? It’s good for both, is it not?

It is of course possible that an exchange could result in one person getting negative value at the expense of another. A rather obvious example would be theft; that’s why theft is illegal. Others would be market failures, which is why some things need to be regulated or done collectively. That’s why universal sngle-payer health insurance works so well, but you don’t need a universal single-payer grocery distribution system; food is very effectively handled be the free market but health insurance isn’t. The aggregate impact of using the free market as the primary driving force of an economy is, however, clearly a positive one. People are way, way richer than they used to be.

And again, I must ask how this mathematical statement, such as it is, is a distinguishing feature of capitalism. All economic systems involve exchange and changes in value, and you will be hard pressed to show me one where every change in value is equal for all parties.

I’m not sure why you are disputing that. I mean, your example doesn’t even work: if I make something and trade it to you for something else, we are exactly as wealthy as we were before–unless, of course, you have traded me something that is worth less than I traded you, in which case I’ve lost out and you’ve gained? I’m not getting it.

Are you kidding?

Of course we’re not as wealthy as we were before. We’re BOTH wealthier. I am absolutely floored you’d say that; my jaw literally dropped. I had to read this several times to ensure I wasn’t misunderstanding you.

If I am a pig farmer and have more pork than I need, and you are a dairy farmer and have more milk than you need, and you trade me milk I want and don’t have for pork you want and don’t have, we are both measurably better off. You surely know that, right? Almost every trade makes both parties wealthier.

Here’s what I think: some of the good things about life in the West (pardon the shorthand) developed in step with the development of capitalism, they spring, as it were, from the same philosophical foundation of individual rights, and are part of the same emancipatory struggle against absolutism…

I think we partially agree here (and trimmed your reply just for space; assume I’m nodding along with the rest of the paragraph) but now I’m a little weirded out by your “we can’t both be wealthier by trading” statement, which is roughly analogous to discussing physics and having someone say the nucleus of an atom is made up of neutrons and Cheez-Its.

I am honestly not trying to be patronizing here, but I think you need to go back to some first principles. The very concepts of utility, the purpose of trade, and perhaps most importantly an issue raised several times and never really answered; the purpose of price. If you aren’t quite getting why both parties are gaining when I buy coffee, make a car payment, put in a day’s work, get a haircut, or get a new pair of winter boots, I can understand why you can’t see the benefits of a system largely intended to make those transactions as easy and as fair as possible.

[Enterprise]

RickJay, I’m just going to reply to one thing here quickly (water’s boiling and I need to check the pasta), but it seems like a major stumbling block.

@RickJay

Are you kidding?

Of course we’re not as wealthy as we were before. We’re BOTH wealthier. I am absolutely floored you’d say that; my jaw literally dropped. I had to read this several times to ensure I wasn’t misunderstanding you.

If I am a pig farmer and have more pork than I need, and you are a dairy farmer and have more milk than you need, and you trade me milk I want and don’t have for pork you want and don’t have, we are both measurably better off. You surely know that, right? Almost every trade makes both parties wealthier.

I think this is a question of words, really. You’re right when you say (in the latter part which I cut) that we’re both better off. But that doesn’t mean we’re both wealthier, at least not the way I would parse wealth (I hope I’m consistent here). My pork is exactly as valuable as your milk in this example; part of my pork has exchange value, as has part of your milk; once we’ve exchanged that value my milk now has use value, as does your pork, but their values remain the same otherwise.

…because otherwise, aren’t you creating infinite amounts of wealth without the slightest bit of profit?

[RickJay]

@Enterprise

I think this is a question of words, really. You’re right when you say (in the latter part which I cut) that we’re both better off. But that doesn’t mean we’re both wealthier, at least not the way I would parse wealth (I hope I’m consistent here). My pork is exactly as valuable as your milk in this example; part of my pork has exchange value, as has part of your milk; once we’ve exchanged that value my milk now has use value, as does your pork, but their values remain the same otherwise.

Sorry, no, that’s just not right for any rational analysis of economics. It is simply not possible to understand why economies, of any sort, function or do not function if you believe things have a fixed value.

Nothing has absolute value. Not pork, not milk, not labor, not water, not televisions or cars or airplanes or oil, nothing. The value of something is subjective. If I am trading excess pork for excess milk, the milk I am receiving is more valuable than the pork I am giving away, and so I become wealthier. Now I have something I can enjoy. I’m better off. Remember, I’m a pig farmer; I have more pork can I can eat. My pork is more or less as valuable to me as it is to you up to the point that I have as much as I can personally eat; beyond that, however, its use value to me is essentially nothing, but its value to YOU is quite considerable. You also become wealthier, since presumably the pork you receive is more valuable to you than the milk you traded away, which is - since you’re a dairy farmer - milk you can’t use yourself. When you say “their values remain the same otherwise” you are literally typing nonsense. There is no “otherwise.” The use value of the pork is its value to you. And it has more use value to you than your milk did, so now you possess more value. You are wealthier. So am I.

In economics, “better off” and “wealthy” are pretty much the same thing. (In truth, we should be using the term “utility” instead of “value,” but whatever.) Nobody who gets past the third week of Econ 101 things that wealthy just means accumulating money. You’d fail the midterm, that’s for sure, if you thought that.

…because otherwise, aren’t you creating infinite amounts of wealth without the slightest bit of profit?

I don’t understand how. I don’t have an infinite supply of pork, and you do not have an infinite supply of milk. Trading the pork and milk in reverse simply negates the value we gained by the first trade, so we can’t do that; I don’t need the damn pork, I already have lots, that’s why I traded it to you in the first place. I can only trade away so much, so the profit/wealth (in this simple case, they’re the same thing) I can generate by raising pigs, or that you can generate by milking cows, is limited. For that matter, if we only trade with each other, it’s VERY limited, since you will only want so much pork in exchange for milk. You’ll have little choice but to trade milk to other people in exchange for other things of greater value to you, like eggs, beer, vegetables, clothes, and so on.

[Enterprise]

@RickJay

Sorry, no, that’s just not right for any rational analysis of economics. It is simply not possible to understand why economies, of any sort, function or do not function if you believe things have a fixed value.

Let’s recap: commodities have two types of value form: use value, and exchange value. Use value is “subjective”, if you like–it depends on whether I can genuinely make use of what I have. Exchange value is determined, so to say, by relative use value: if you can make use of two liters of my milk, and I can make use of a pound of your pork, and we agree to exchange, then two liters of milk = 1 pound of pork in exchange value. My milk is exactly as valuable to me in exchange value as your pork is valuable to me in use value–otherwise, how would I determine if I should even trade? Once we’ve traded, my milk reverts to being use value for you, and your pork becomes use value for me; but their value as such must remain the same.

Where did value originally come from, though? Well, somebody had to milk the cows and somebody had to raise the pigs (you and me, respectively); so our labor is the source of the value that now “inheres” in these commodities, and which we’ve traded equitably. In point of theoretical fact, at least, we would exchange so much pork for so much milk that either commodity’s amount reflects the same amount of socially necessary labor time. This is (in a nutshell) the labor theory of value. You may disagree with it (people do; I find it eminently plausible), but not by simply positing that it is wrong.

And, just out of interest: how MUCH wealth did you think we have produced by our simple act of equitable exchange? And how would we go about monetarizing that wealth?

[Shodan]

@Enterprise

Yes, that truly doesn’t make sense, because it’s not a good paraphrase. I was merely pointing out that if economic growth were needed to cope with population growth, we could reduce U.S. economic growth almost four times over and still do well, thus reducing the emphasis on economic growth.

And if we implement your system that does not grow, we won’t do well.

But only if you’re revamping your factory for free, or am I missing something?

No, improving productivity increases the economy even when it isn’t free. I’m not why you would think so.

Did you read the article on how South Korea managed to get to this economic difference? Because if I’m wrong, so is that economist guy…

Yes, you’re wrong, and to the extent that your economist guy says SK boomed because of central planning, he’s wrong too, especially compared to North Korea whose economy is based on central planning and is a shithole where people die of starvation.

…and then I’m probably within my rights to ask you for a cite on how South Korea is a paradigmatically capitalist economy (and was during its rise).

Hoping against hope that you are serious, here you are.

South Korea has a market economy that ranks 15th in the world by nominal GDP and 12th by purchasing power parity (PPP).

A market economy is an economy in which decisions regarding investment, production and distribution are based on supply and demand,[1] and prices of goods and services are determined in a free price system.

Do you genuinely believe that central planning is equivalent to socialism, or is this a cheap shot at the expense of the honest debater?

Central planning is less efficient than the free market, as all the various examples given you show.

These?

These what? Did you read your own cite?

There are no proven treatments for people with the Ebola virus or vaccines to prevent infection in the first place.

But if you’re worried about my claim that we could “probably have avoided” I’ll be happy to retract it and chalk it up to cheap hyperbole: the general point about pharmaceuticals stands.

I am more worried about your general point being wrong. You seem to think that there are drugs that can treat ebola, and that they are not being used because of capitalism. There are no such drugs. So your general point is wrong.

It merely shows a problem with the idea that the market ideally solves all concerns.

Too bad no one is pushing that idea, or it might have been relevant.

But that’s like, your opinion, man?

No, it is an historical observation. No Communist/socialist state has ever withered away in the way that Marx said it would.

You may not think it’ll happen, but if you’re debating the consistency of an idea, you can’t just ignore that that’s how it would work, if it could work.

I am pointing out that it has never worked, is not working now, and is therefore unlikely to work in the future.

Because the Marxists don’t really think it is going to happen, when they try to take over a government. Read 1984 for a fuller explanation of the Marxist mindset.

You really only can debate things that aren’t true.

Then we shouldn’t have any problems debating your posts.

Regards,
Shodan

[Enterprise]

Okay, Shodan, thanks for trying. I am fully serious and immensely willing to debate, but I’m tired of your debating style of misquotations, insinuations, and random decisions as to what amounts to truth and what does not. So if you’ll just quickly post your “see, I knew you didn’t want to offer anything substantial, you lose like communism” and be on your way?

[John_Mace]

@Enterprise

Let’s recap: commodities have two types of value form: use value, and exchange value. Use value is “subjective”, if you like–it depends on whether I can genuinely make use of what I have. Exchange value is determined, so to say, by relative use value: if you can make use of two liters of my milk, and I can make use of a pound of your pork, and we agree to exchange, then two liters of milk = 1 pound of pork in exchange value. My milk is exactly as valuable to me in exchange value as your pork is valuable to me in use value–otherwise, how would I determine if I should even trade? Once we’ve traded, my milk reverts to being use value for you, and your pork becomes use value for me; but their value as such must remain the same.

Does anyone, outside of Marxist theory, use this idea of “exchange value” today?

Where did value originally come from, though? Well, somebody had to milk the cows and somebody had to raise the pigs (you and me, respectively); so our labor is the source of the value that now “inheres” in these commodities, and which we’ve traded equitably.

It’s not just labor. Suppose I invest heavily in a breeding program to increase milk production in my herd, while Joe down the road just keeps raising the same cows. We both put about the same amount of labor into keeping the herd, but my cows give more milk than his do, for the same amount of care and feed. I can sell my milk for less money and still make the same profit as Joe (or sell it at the same price as Joe and make more profit). Or, I can improve my herd so much that I can hire someone else to milk the cows, pay that guy a wage, and still make out as good or better than Joe.

Labor is great, and it definitely has value. But the real wealth generator is intellect. Doing things better than before through brainpower, not muscle power.

In point of theoretical fact, at least, we would exchange so much pork for so much milk that either commodity’s amount reflects the same amount of socially necessary labor time. This is (in a nutshell) the labor theory of value. You may disagree with it (people do; I find it eminently plausible), but not by simply positing that it is wrong.

Emphasis added. Not just people, but most economists.

And I have to say that for someone who isn’t proposing an alternative system, everything you’re posting screams of Marxism.

[WillFarnaby]

@Enterprise

“The valued means” and the “valued ends”? I’m even sure this is logically coherent. How could you possibly have “impoverished” society? Everything you’ve spent is still within society–even the fifty dollars you’ve failed to realize for yourself. You may be impoverishing yourself, by distributing your wealth elsewhere.

I have taken the inputs of the chair and made them less valuable. If I took The Card Players by Paul Cezanne valued at $259 million and cut it up into 10 $2 placemats using $20 labor, I have impoverished society. I have taken something someone valued at $259 milion and something someone valued at $20 and created something someone valued at $20 instead.

But you’re begging the question: first, by assuming that we need an entrepreneur to enrich society. If I build a chair and sell it for 400$ (thus recouping my costs), I have enriched society by a chair–a use value that didn’t exist before.

No you have taken $200 worth of wood and $200 in labor, exhausted them so that they no longer exist and replaced them with a chair. The chair did not exist, but the labor (time) and wood existed. Now they don’t. (of course the wood exists, but not in its original $200 dollar form)

As I have noted above, if you sell the chair for 450$, those 50$ need to come from somewhere. You’d say they come from the (still somewhat mystical) workings of the market; fine. What do you invest them in?

I buy more lumber and labor. My employee stays employed, living comfortably, and our outputs (chairs) are something of higher value than inputs (wood and labor).

You need to purchase some kind of actual value with them at some point, right? But where does value (not price, not money, not wealth) come from, if not from labor?

This is your key stumbling block. Value is subjective. It does not come from labor. It comes from the valuations of individuals. Digging a whole and filling it in is valuable from your perspective. Destroying crops is valuable in your perspective. Something is wrong here, right?

And if that’s the case, then you’ve just made yourself able to buy a quarter day’s worth of labor (actual value) with money that reflects no actual value.

No actual value? My profit first is a signal that I am doing something right by society. Secondly it could be described as the value of my forethought, and entrepreneurial expertise.

Does the obverse work, too? The person who makes the most profit must automatically be the person who best increases wealth in a society? If not, why not?

In a free market, yes. If you are making the most profit that means you are creating value for all of your customers. Without you, your customers would have the inputs, but lack the time, expertise, and/or forethought to create the outputs, which are the things they desire.

[Shodan]

@Enterprise

Okay, Shodan, thanks for trying. I am fully serious and immensely willing to debate, but I’m tired of your debating style of misquotations, insinuations, and random decisions as to what amounts to truth and what does not. So if you’ll just quickly post your “see, I knew you didn’t want to offer anything substantial, you lose like communism” and be on your way?

No, I think I will post as I please. If that bothers you, feel free to report the post. If and when you do, and when you find that nothing comes of it, then you can either debate further, or not, as you please.

Did you have any substantive response? For instance, now that we know that South Korea is a market economy and North Korea a planned one, and since SK’s economy makes NK look like a used rubber, would you like to discuss how this demonstrates the superiority of a market system and disproves your ideas of socialism?

Or perhaps we could discuss why famines seem so much more common in Marxist states compared to capitalist ones.

We could explore the ridiculousness of the idea that labor is all that creates value, but WillFarnaby and John Mace are doing a good job of that, and we don’t want you to feel piled on.

So, anyway, either debate or don’t. Don’t try to condescend before you have reason to do so - it makes it hard to suppress snickers.

Regards,
Shodan

[Sam_Stone]

@Enterprise

But you’ll note that in this argument, you’ve not left capitalism behind. I’m not disputing that capitalism needs growth (I’m not even disputing that socialism will need production growth if population growth persists: socialism does not, however, require it for its own perpetuation, but only to the extend actual human beings need it). But see below:

Capitalism doesn’t ‘need’ growth. Japan has a collapsing population, and it’s hard to see how they will be able to maintain economic growth in the face of that. But capitalism will still allow them to manage the situation better than any other system.

And if you think your system doesn’t need growth, you might like to ask the former Soviet Union about that. So long as your population is growing, you need economic growth. As your population ages or your social benefits increase you need economic growth to handle the additional costs. As the other countries of the world grow and their technology improves, you have to grow and improve your own to keep up, or you will start losing exports. Countries that do not grow economically do not survive.

Sorry, Sam, but that’s just not true. There’s plenty of people who believe we’ve hit peak oil; as someone else said in this thread, we appear to be running out of helium; there’s a more general resource problem. And yes, you can have growth without additional resource consumption–but again, even logically, all of this must end. You’d prefer to claim it will end way, way in the future, probably–but end it will.

Peak oil is a laugh. It’s hard to maintain that we’ve already hit it when oil reserves are increasing, major new discoveries are still happening, and the price of oil is lower than it’s been for decades.

The helium issue is a result of government mismanagement of a resource, not the market’s.

Yes. Good planning in the economy can help improce efficiency.

You need to look up the difference between microeconomics and macroeconomics. Yes, planning happens all the time - I plan for my retirement, I plan to go to the movies tomorrow, I plan to do lots of things. Those are micro decisions. When we are talking about planning at the national level, we’re talking macroeconomics, a completely different thing. You’re acting like central planning is functionally the same as the aggregate result of millions of micro decisions. That’s the core of the debate, and I have given you many reasons why this is not the case which you have failed to respond to.

I’ve asked you several times to give an example of how a central planner can know what needs to be known to make decisions. I’ve asked you to detail even a simple case so we can debate it. You refuse. Perhaps if you try it this time, you might get an inkling of understanding of how hard that really is.

It’s at least debatable that bits in a computer (requiring immense electric power, rare earths and metals, and producing considerable waste of plastics and electronics) are “saving resources” over paper, which is, after all, a perfectly renewable resource. It’s more efficient, that’s probably true. I don’t know that it saves resources.

And how much energy is used to make the paper? How many energy and labor was expended making the factory that made the paper? How much effort, capital, and energy is required to ship the paper to stores and warehouse it? How much energy does it take to recycle the paper?

There is no scenario in which you can reasonably claim that a digital representation of a document represents more resources than a paper document.

Again, one of the problems that you are rather easily dismissing in this analysis is the question of resources that do not fall under supply and demand. Take the Amazon rainforest and deforestation. How does the market prevent its destruction? Is this a good usage of resources? Globally, certainly not: it’s incredibly short sighted. Locally, sure: the land’s free, the trees can be sold, and then we can grow some soy there that’s certainly going to fetch a higher price on the market than some rainforest.

Yes, we’ve already said that there is a problem with the commons that requires some government intervention. But even here, the market can often help. For example, the problem of elephant poaching might be easily resolved by privatizing the preserves and allowing the owners to profit from the sale of the tusks. After all, cows are plentiful all over the planet, while the buffalo was hunted to almost extinction. Why? Because the buffalo were no one’s property, so no one had an incentive to protect them. Now that buffalo are privately owned and raised, the buffalo population is much larger and healthier.

But sometimes you can’t do that, and there is an honest role for government in that case. I don’t think I’ve seen a single person in this thread deny that. Yet you keep going back to this as if it’s some crucial difference.

[I’ve snipped the bit on NASA and other space programs because, once more, I’m not contrasting government programs with capitalism.]

Except you seem to do exactly that when you think it’s convenient to your argument (as you thought you did when bringing up South Korea). So really, you’re just cherry-picking what you want to respond to, aren’t you?

I’m not sure what the point of this bit is, since I didn’t speak of either printing money nor of wealth (whyever money is not wealth, anyway). I said that financial speculation is capable of producing money that is not, in fact, produced by the production of value or even through exchange.

You don’t know what you’re talking about. Hedge funds protect people from risk. Speculation and futures markets communicate information about the future value of goods, so that we can take steps to find alternatives or adjust business and consumption gradually instead of in a crisis.

Consider that I own a barrel of oil. It cost $20 to haul out of the ground, and $20 to refine. So you offer me $50 for it. At $50, you want to buy the oil so you can pour it on your gravel road. If it were more, you wouldn’t because there are cheaper alternatives. So I could sell it to you at $50. But then I look at the futures market and see that the 5-year price of oil is $100. That price represents our estimate of either increased demand or reduced supply of oil. So now I’ve been given information that oil will be more valuable in the future. If I sell it to you for $50 and put the money in the bank, in 5 years it might be worth $70. But if I ‘bank’ my oil, it’ll be worth $100. There’s a risk the futures price is wrong, of course, so I’ll account for that and decide that the net present value of my oil is not $50, but $75. So you don’t buy the oil and pour it on the ground.

That’s how futures markets give us information that allows us to conserve resources that will be more rare or valuable in the future. It’s a damned good thing we have those speculators working hard to suss out that information.

It’s possible to make millions in seconds in financial speculation, and those millions could then be used to buy actually commodities–you don’t have to create, or have someone create, value anymore, in order to create more money. That’s…not a good thing, I’m hoping you’ll agree.

I don’t agree in general, but I will agree that the playing field isn’t level, and that the companies that have bought special access to information, or twisted financial laws to their benefit, or who have otherwise managed to game the system are a bad thing. But these are also the kinds of people who have the most access to the corridors of government, so it’s pretty hard to stop it. Just ask President Goldman Sachs - the last four of them.

Without that value being realized anywhere as exchange value or use value? Just by existing?

I’m tired of having to debate using discredited Marxist terms. Value has nothing to do with labor. I can labor for a year on a painting, and it won’t be worth anything to anyone. I’ll actually destroy value by getting my paint on a perfectly good canvas.

Tell me - if I hire you to make that $400 chair, and then I hire someone else to chop it into kindling, where is the value? Is the kindling worth more than the chair? After all, it took labor to turn that chair into kindling. But what if there’s an additional pile of kindling right beside it in the form of the raw wood that could be used to make an identical chair? Which pile of wood has more value? One has a lot of labor behind it, the other none. But they are identical. So where did the value go?

‘Value’ is meaningless outside of the context of an individual. Your chair has a lot more value to a person with none than with someone with more chairs than he needs.

Consider ebay. Ebay creates tremendous value just by allowing people to trade goods that already exist. I have a TV I no longer use, and it has zero value to me. So I sell it on ebay for $50. The person who bought it values it more than $50, and I value the $50 more than the TV. My total value went up by $50 since the TV was worthless to me, and the other person’s total value went up by whatever he values the TV at minus the $50 he paid. Let’s say it was worth $100 to him. So he gained $50 in value, I gained $50 in value, and neither of us created a thing. We just engaged in a transaction that moved a good from a low-value purpose to a higher-value one.

Sam, sorry, but you’re breaking the bounds of a plausible argument. Are you seriously saying that selling goods to people equals helping people?

In a free market, absolutely. People wouldn’t buy my goods unless they thought they were going to help them in some way.

If so, would you be willing to expand that to the hedge fund manager–making money on the stock market equals helping people? And if you’re not saying any of these things, would you mind paraphrasing this so I understand it? To my mind, success at selling goods to many people doesn’t say much except that you’re successful at selling goods.

See my discussion of hedge funds above. And yes success at selling goods means you’re helping many people. Do you think all those people who have iPhones and iPads feel their lives are better for having them? If so, do you fault Steve Jobs for making billions by selling them? Do you not think he benefited society?

[Arch_Trout]

@Sam_Stone

I have a TV I no longer use, and it has zero value to me. So I sell it on ebay for $50. The person who bought it values it more than $50, and I value the $50 more than the TV. My total value went up by $50 since the TV was worthless to me, and the other person’s total value went up by whatever he values the TV at minus the $50 he paid. Let’s say it was worth $100 to him. So he gained $50 in value, I gained $50 in value, and neither of us created a thing. We just engaged in a transaction that moved a good from a low-value purpose to a higher-value one.

I disagree.
The value of something is what someone is willing to pay for it.
Just because you wouldn’t even want that TV for free it is still worth $50 because that is what the market value obviously is given that’s what you sold it for.

You gained nothing other than swapping a TV worth $50 for $50 in cash.
It may be worth $100 to him but that’s irrelevant now because if nobody else is willing to pay him $100 it’s not worth that.
You engaged in a transaction that created nothing of value but probably created utility.

[Sam_Stone]

i disagree with you. A better way to look at it is that all those used goods sitting in basements and storage lockers are like resources in the ground - eBay found a way to allow us to dig them up.

So I guess you could say they have value in the sense that there is value out there somewhere in undiscovered oil fields, but until someone goes out and gives out a way to find it and extract it and deliver it to market, its value is unavailable to us.