# What is Capitalism? **URL:** \ **Category:** Great Debates\ **Created:** [April 2, 2015, 5:51pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638 "2015-04-02T17:51:04Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![AHunter3](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ahunter3/32/368_2.png) [@AHunter3](https://boards.straightdope.com/u/AHunter3)\ **Post date:** [April 6, 2015, 5:57pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/21 "2015-04-06T17:57:02Z")
> [@Mosier](#): > > Of course it’s not “inherently stable.” People will not trade fairly if they don’t have to. They will (and do, during any point in history you care to point to) literally enslave you if they can get away with it. Capitalism only works when we force it to, with a legal system that punishes cheaters. I don’t consider myself a defender of capitalism by any stretch of the imagination. But if people will not play fairly with other people _if they don’t have to_, and will literally enslave you _if they can get away with it_, then devising a “legal system [with the authority to] punish cheaters” isn’t going to fix anything. Because the same built-in opportunistic adversarial advantage-taking instincts (the ones you seem to be saying are built in) would express themselves via the authority-weilders, the ones capable of punishing cheaters, and then _those_ people would enslave us insofar as they could get away with it. Marxism/socialist theory contains a very good critique of capitalism, but capitalism-apologists have also given a very good critique of marxism-inspired systems, especially their tendency towards a kind of tone deafness about inequality of _political power_ as if only inequality of wealth can possibly matter. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 6, 2015, 6:09pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/22 "2015-04-06T18:09:39Z")
> [@Mosier](#): > > Of course it’s not “inherently stable.” People will not trade fairly if they don’t have to. Actually, they do trade fairly, if they want to repeat the trade. I read about an experiment in which someone created a whole bunch of bots in a cyber-system. When they “encountered” each other, they would offer tokens to the other. Some bots were programmed to take the tokens and give nothing back. Others accepted the tokens and gave tokens in return. If they were just randomly exchanging, the winning strategy was to take and not give. Then they reprogrammed the system so that the bots “remembered” each other. The winning strategy was to first, offer an exchange, and then, on subsequent exchanges, do whatever the other bot did in the first exchange. The first round was socialism, and the second was capitalism. The second system was stable, because free exchange enhanced the winning strategy. Regards, Shodan ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 6, 2015, 6:19pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/23 "2015-04-06T18:19:45Z")
> [@BrainGlutton](#): > > Also, capitalism does not have a very good track record for stability. Recessions and depressions happen, and generally do not result from overregulation. I assume you know recessions [also happen in socialist countries](http://en.mercopress.com/2014/12/31/venezuela-admits-recession-in-the-last-three-quarters-and-inflation-of-63.6), and that the US has recovered faster than most of Europe from the last one. If the next step is the “no true Socialist” argument, then please provide a cite of a purely socialist country that has not suffered from recessions. Regards, Shodan ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [April 6, 2015, 6:39pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/24 "2015-04-06T18:39:06Z")
> [@Shodan](#): > > Actually, they do trade fairly, if they want to repeat the trade. > > I read about an experiment in which someone created a whole bunch of bots in a cyber-system. When they “encountered” each other, they would offer tokens to the other. Some bots were programmed to take the tokens and give nothing back. Others accepted the tokens and gave tokens in return. > > If they were just randomly exchanging, the winning strategy was to take and not give. Then they reprogrammed the system so that the bots “remembered” each other. The winning strategy was to first, offer an exchange, and then, on subsequent exchanges, do whatever the other bot did in the first exchange. > > The first round was socialism, and the second was capitalism. The second system was stable, because free exchange enhanced the winning strategy. > > Regards, > Shodan You’re thinking of the game theory experiment with Tit for Tat winning. The winning strategy was to do whatever the other bot idd on the last exchange, not the first exchange. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 6, 2015, 6:45pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/25 "2015-04-06T18:45:54Z")
> [@John\_Mace](#): > > You’re thinking of the game theory experiment with Tit for Tat winning. The winning strategy was to do whatever the other bot idd on the last exchange, not the first exchange. You are correct - I misspoke/typed. I Googled about but I couldn’t find a cite. But thanks for the correction. Regards, Shodan ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [April 6, 2015, 6:52pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/26 "2015-04-06T18:52:15Z")
> [@Shodan](#): > > You are correct - I misspoke/typed. > > I Googled about but I couldn’t find a cite. But thanks for the correction. > > Regards, > Shodan [Here you go.](http://en.wikipedia.org/wiki/The_Evolution_of_Cooperation) Very interesting book. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 6, 2015, 7:07pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/27 "2015-04-06T19:07:38Z")
Off to the library to put it on reserve. Thanks! Regards, Shodan ---
**Author:** ![Kropotkin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kropotkin/32/18045_2.png) [@Kropotkin](https://boards.straightdope.com/u/Kropotkin)\ **Post date:** [April 6, 2015, 11:23pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/28 "2015-04-06T23:23:26Z")
> [@BrainGlutton](#): > > However, modern economists reject the labor theory of value. If by modern economists you mean people with advanced degrees in economics who work and publish in the field, there are lots of modern economists who do not reject the labour theory of value. If you mean “non-Marxist economists,” that is more accurate. They do not so much reject the labour theory of value so much as ask and answer very different questions while ignoring the questions it sets out to answer. ---
**Author:** ![Kropotkin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kropotkin/32/18045_2.png) [@Kropotkin](https://boards.straightdope.com/u/Kropotkin)\ **Post date:** [April 6, 2015, 11:31pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/29 "2015-04-06T23:31:52Z")
It may be helpful to stipulate that “markets” and “trade” are not in themselves “capitalist.” They have existed in many kinds of economies. The question is what are the social arrangements under which goods are produced? Slavery? Feudalism? Independent commodity production, such as family production? Capitalism, wherein most people are not able to own the land, factories, etc. necessary for production and so must sell their labour to the few who do own them? That is, capitalism is a way of producing goods that uses wage labour, not slaves or serfs or communal production. Whether that’s good, bad, or indifferent is of course another question entirely. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [April 7, 2015, 3:37am UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/30 "2015-04-07T03:37:40Z")
> [@Shodan](#): > > No, capitalism is based on inherently balanced relationships based on free exchange. It’s inherently balanced, because in a genuinely capitalistic exchange both parties come out with more than they went into the deal with. > > I have a gadget; you have a widget. I want your widget more than my gadget; you want my gadget more than your widget. We trade, and both sides come out with something they value more than what they had going in. > > Since the trade is based on enlightened self-interest, on both sides, it is both inherently stable (both of us want to make trades by which we benefit), and also an exchange of equals. > > Regards, > Shodan That’s about division of labor and market transactions; it’s not about capital, and not a distinguishing feature of capitalistic societies in practice. In any case, balanced transactions are not universal, and a capitalistic society as defined by Marx is full of intrinsic imbalance. But I guess defending capitalism requires that kind of subject change. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 7, 2015, 12:41pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/31 "2015-04-07T12:41:00Z")
> [@foolsguinea](#): > > That’s about division of labor and market transactions; it’s not about capital, and not a distinguishing feature of capitalistic societies in practice. On the contrary - it has nothing to do with division of labor, and free market transactions are at the base of capitalist exchange. > [@](#): > > In any case, balanced transactions are not universal, and a capitalistic society as defined by Marx is full of intrinsic imbalance. They don’t have to be universal, as long as the tendency is to create equilibrium. And Marx was full of shit. Regards, Shodan ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [April 7, 2015, 1:43pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/32 "2015-04-07T13:43:31Z")
> [@Shodan](#): > > On the contrary - it has nothing to do with division of labor, and free market transactions are at the base of capitalist exchange. See post #29. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 7, 2015, 2:00pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/33 "2015-04-07T14:00:26Z")
See post #18. Regards, Shodan ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [April 7, 2015, 2:29pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/34 "2015-04-07T14:29:55Z")
> [@XT](#): > > …capitalism is simply an economic system whereby the means of production and distribution are privately owned. That’s the definition of capitalism. Mods should have closed the thread here, as some of the other responses were misleading or even quite incorrect. Ships were a major “means of distribution” long ago, and a major source of private wealth. The rise of industrial factories had a huge effect on the world. Obviously incentives due to private ownership sped prosperity hugely. > [@Shodan](#): > > … The first round was socialism, and the second was capitalism. :smack: Mods, please change the slogan to “It’s taking A LOT longer than we thought.” 😃 > [@John\_Mace](#): > > You’re thinking of the game theory experiment with Tit for Tat winning. The winning strategy was to do whatever the other bot idd on the last exchange, not the first exchange. Technical note: You’ll read of a later tournament where Tit-for-Tat was bested. In fact several clones entered that tournament, identified each other with handshakes, and deliberately sabotaged non-handshaking Tit-for-Tat bots! (Hardly seems like exciting computer science to me, but it did get headlines.) ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [April 7, 2015, 2:46pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/35 "2015-04-07T14:46:45Z")
> [@Mosier](#): > > Of course it’s not “inherently stable.” People will not trade fairly if they don’t have to. They will (and do, during any point in history you care to point to) literally enslave you if they can get away with it. Capitalism only works when we force it to, with a legal system that punishes cheaters. I agree. If you want a real world example of this, look at organized crime. The people in organized crime are capitalists looking to maximize their profits. And by definition, they’re operating outside the law. And you’ll see that organized crime does not support the free market. Freed of any regulatory oversight, they divide up into territories which each organization holds exclusive control of. They certainly do not allow competitors to work in their territory for the sake of their customers. There’s no reason to think other businesses wouldn’t follow the same principles if they were able to do so by a lack of regulation. A free market is not a natural result of a capitalist economic system. It has to be imposed and maintained by forces outside of the capitalist economic system - like the government. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [April 7, 2015, 8:16pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/36 "2015-04-07T20:16:55Z")
> [@Shodan](#): > > I have a gadget; you have a widget. I want your widget more than my gadget; you want my gadget more than your widget. We trade, and both sides come out with something they value more than what they had going in. > > Since the trade is based on enlightened self-interest, on both sides, it is both inherently stable (both of us want to make trades by which we benefit), and also an exchange of equals. > [@foolsguinea](#): > > That’s about division of labor and market transactions; it’s not about capital, and not a distinguishing feature of capitalistic societies in practice. In any case, balanced transactions are not universal, and a capitalistic society as defined by Marx is full of intrinsic imbalance. > [@Shodan](#): > > On the contrary - it has nothing to do with division of labor, and free market transactions are at the base of capitalist exchange. > They don’t have to be universal, as long as the tendency is to create equilibrium. > > And Marx was full of shit. Oh, I misunderstood the gadget/widget exchange as between a gadget-maker and a widget-maker. Gadget-making expertise and widget-making expertise resting in different persons and different factories is a function of division of labor. But you’re apparently talking about an exchange between two persons of the same skill set, neither of whom could make either a gadget or a widget if their lives depended on it. So you have a definition of capitalism where the actual laborers and resources without which gadgets and widgets would not exist _are not even contemplated except as a source of derivative products to trade._ That’s defective economic philosophy. But at least you have managed to purge yourself of any “shit” ideas about the nature of production, in favor of the incorruptible pure pureness of a market with entirely found objects and no imbalance of inherited wealth, investment capacity, or manufacturing expertise. It’s pretty, it’s idealistic, and it’s completely useless in the real world. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 7, 2015, 8:24pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/37 "2015-04-07T20:24:57Z")
> [@foolsguinea](#): > > But you’re apparently talking about an exchange between two persons of the same skill set, neither of whom could make either a gadget or a widget if their lives depended on it. No I’m not. If I were, the principle of [comparative advantage](http://en.wikipedia.org/wiki/Comparative_advantage) would not exist, and it does. > [@](#): > > It’s pretty, it’s idealistic, and it’s completely useless in the real world. Again, wrong - the principle of comparative advantage has predictive value. Whatever it is you are peddling does not. Regards, Shodan ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 7, 2015, 8:28pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/38 "2015-04-07T20:28:43Z")
> [@Little\_Nemo](#): > > A free market is not a natural result of a capitalist economic system. It has to be imposed and maintained by forces outside of the capitalist economic system - like the government. Of course it is, since it is the model by which countries deal with one another. But your organized crime model is a rather poor one. The reason they shoot each other is to eliminate free exchange, because smaller operators keep moving in and underselling them. That’s about as far from a free market or an exchange between equals as can be imagined. Regards, Shodan ---
**Author:** ![AHunter3](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ahunter3/32/368_2.png) [@AHunter3](https://boards.straightdope.com/u/AHunter3)\ **Post date:** [April 7, 2015, 8:45pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/39 "2015-04-07T20:45:52Z")
So the capitalist and the socialist take each other seriously (enough to engage with each other) and neither take me seriously, huh? \*\* looks for flounce smiley to post \*\* ---
**Author:** ![Thing\_Fish](https://avatars.discourse-cdn.com/v4/letter/t/ecb155/32.png) [@Thing\_Fish](https://boards.straightdope.com/u/Thing_Fish)\ **Post date:** [April 8, 2015, 11:24pm UTC](https://boards.straightdope.com/t/what-is-capitalism/716638/40 "2015-04-08T23:24:12Z")
I think the OP has it right. The essence of capitalism is private ownership of the means of production, with said production being organized primarily to maximize the profits being made by those private owners. There have historically been many different varieties of capitalism, and much variation in how the system works in various countries. Weavers in 14th century Florence and Monsanto may both fall into the category of “capitalists” (defined as an owner of means of production, not as an ideological believer in the virtue of the capitalist system), but they have very little else in common. Although capitalist markets have proven to be extremely efficient producers of wealth, the history of capitalism demonstrates that its natural tendency is to concentrate more and more of the wealth in fewer and fewer hands, and the chance that a person not born into an elite family can rise into that strata by his or her own merits becomes less and less. Another flaw of capitalism that is becoming more urgently relevant in our time is that there is no economic incentive for any producer to take the environmental damage its production does into account; this is known as “the tragedy of the commons”. So, the challenge is to find the correct balance of policies that enables reasonable growth of the economy while also preventing environmental degradation and preventing wealth inequality from becoming greater than we collectively decide is morally appropriate. [Previous page](https://boards.straightdope.com/t/what-is-capitalism/716638.md?page=1) [Next page](https://boards.straightdope.com/t/what-is-capitalism/716638.md?page=3)