7 ms·

I just wanted to take a moment to thank Capitalism - an overwhelmingly positive system of resource optimization that's oft-maligned by the econ-shallow, which d

I just wanted to take a moment to thank Capitalism - an overwhelmingly positive system of resource optimization that's oft-maligned by the econ-shallow, which drives creativity and human advancement through entrepreneurship and the desire to succeed.

chillwaves 10y ago
This doesn't seem like the place to pledge allegiance. Maybe I am wrong.
Aloha 10y ago
Communism is well suited to giving people a better horse instead of a car - when the whole system is collectively planned and owned - there is no incentive at all for creative destruction.
- onion2k 10y ago
  There is an incentive for creative destruction - failure. If you can't continue innovating (eg you can't make a better horse) you have to take a different approach.
- zkms 10y ago
  Collective planning is not inherent to communism and communism doesn't inherently restrict the sort of market forces that enable "creative destruction".
  - mseebach 10y ago
    It's important to remember in these kinds of debates that there are two kinds of communism: The practical communism, the one actually tried dozens and dozens of times, despite implementing a pretty fair range of possible combinations of parameters, yet returning a the same pretty narrow range of failures pretty invariably -- and then the theoretical communism, as read and understood by contemporary western intellectuals for whom practical communism (or, as it's often known, "not real communism") is mostly irrelevant. With that, your observation is entirely correct, but it pertains to theoretical communism. The GP was likely referring to practical communism, and in that context, yes, practical communism most definitely inherently restricts market-driven creative destruction. (Cool side-anecdote: Karl Popper invented the scientific method partly in response to Marxist "science".)
- mseebach 10y ago
  What you're describing is an instance of the knowledge problem or the economic calculation problem. Centralism (to which communism belongs) is good at many things -- including huge endeavours such as space travel or going to all-out war. The immense power unleashed during the two world wars was a major inspiration for centralism in the following decades, in the shape of trying to apply this power towards societal good, rather than destruction. It even worked, in some form, for a bit. Millions of people were homeless or living in very poor conditions, they were relatively quickly re-housed in housing estates build on an unprecedented scale and with unprecedented speed. But it didn't work at scale. While certainly better than not having anywhere to live at all, many of the housing estates were awful places, they simply weren't built to live in, they were almost militaristic "machines for living in" rather than "homes". Which brings us back to the knowledge problem: All-out war has the ability to align almost everybody's interest in the same direction - crush the germans. Individual happiness, even liberty, is basically optional, because if you don't win the war, you will have neither happiness or liberty. With this knowledge, it's reasonably easy to organise the economy both on both the micro and macro levels: I need to mine ore for steel for tanks. I need to grow cabbage because we can't import food and cabbage has the highest calories-output per input (taste is not a factor). At every level, you can get a very reasonable approximation of the right course of action by consulting a very small set of shared objectives. But in peace-time, things start falling apart. You no longer as a society have a short list of shared objectives, the best you can do is something vague like 'maximising happiness' (and even that is debatable). Even if you could identify a big, shared goal, and you might achieve it by suspending liberty, loosing their liberty will make people unhappy and so the means ends up mattering more than the ends (see: war on drugs). How do you figure out whether growing cabbage or wheat or carrots or raising beef-cattle in such conditions? Different people prefers different kinds of houses, so do you farm trees for wood, mine coal and dig clay for bricks or whatever it is you do to make concrete? In both cases, you need some combination of all, depending on an extremely complex, inherently unknowable, continuously shifting combination of desires in the population -- and the formation of prices in a free market is perhaps not the best (for some value of 'best'), but it's the only known actually functional mechanism to communicate these desires. Anyway, bottom line: I don't agree that centralised economic systems can even give people better horses, or better cars. If the need is clear and broad enough, it can give people a horse or a car, but it doesn't implement the feedback mechanisms required to continuously incrementally improve it outputs (cutely captured in this meme: http://9gag.com/gag/4298226 http://9gag.com/gag/4298226).
- mtrn 10y ago
  > when the whole system is collectively planned and owned It's funny. It is not that capitalism does not tend towards central planning. When companies fuse and get bigger, they want to reap the profits of centralization and unified control. To exaggerate a bit: the ultimate way to deal with the competition is to absorb or to kill it.
  - digi_owl 10y ago
    Or form a cartel where the prices and features from each member is decided as a group. That said, i don't think even Marx considered central planning as more than a transitional stopgap. Thing is that he expected socialism to rise from industrialized nations like England or Germany, not near-agrarian Russia. Also, his primary motivation was for workers to have more say in the factories they worked in. But then few people even know volume one, where as in volume two and three he rails against the rentier capitalists. And lament how in the long run it would be better for industrial capitalist to side with the workers against the rentiers, but that they rarely do so until it is effectively too late.
- willyt 10y ago
  Sputnik
  - dashoffset 10y ago
    Innovation during the Space Race was driven by the competition between USSR and USA.
mesh 10y ago
Capitalism also drives greed, destruction and human misery as well as some other pretty evil things.
- visarga 10y ago
  Also, the tragedy of the commons. Companies pollute our environment externalizing costs on society. They collect the profits, we pay for the damage. The weakest point of capitalism is the same as its greatest advantage - greed.
  - wyager 10y ago
    > Companies pollute our environment externalizing costs on society. Interestingly, historical experiments in communism have led to vastly increased rates of environmental destruction as compared to market economies. The reason is fairly obvious if you have a some economic background and think about it for a bit; in a market economy with resource ownership, people who own resource rights (e.g. to fell the trees in an area) will notice that they can make a lot more money if they spread the resource sales over time; if they sell all their trees now, they'll push down the market value of lumber and have decreasing marginal returns on each tree they fell. In the presence of a rich market system including market mechanisms like futures, market participants make a lot more money planning for the future than just trashing the environment as fast as possible. Compare this to a communist state. The people in charge of resource management don't make money anyway, so they don't really care about the same optimization a capitalist would. Of course, they can buy political favor at little cost to them by pushing way down the diminishing marginal returns curve and exhausting a resource way faster than a self-interested capitalist would. Great job, commissar, look at all this wood! After all, if you can make your peers happy for a few years you'll get a promotion to a better government position (or retire early on your pension) and the fact that this area is now barren is someone else's problem.
    - Someone 10y ago
      That doesn't always work. If you expect demand for lumber will go down in a few years, as far as you can tell forever, it's better for you to take out your trees as fast as possible. I think that's part of what's happening with oil, where renewable sources are going to replace them as a bulk good. If you have lots of it like Saudi Arabia, your capitalism-optimal strategy may be to pump up oil now, even if it significantly drives down prices. It also may be rational to destructively mine lumber if that's the only way you can produce it competitively. Your competition might own woods closer to rivers, for example, making it cheaper for them to transport their wood to the customer.
tehwalrus 10y ago
Etymological nit pick: Capitalism was defined by Marx. It is the political movement to give power to people with financial resources, and it's principal consequence is exploitation (in Marx' analysis, every penny of profit comes from underpayment to your workers. This analysis is a mathematical one, about as rigorous as any theory of economics is possible to be.) I prefer the term Market Economics or Market Forces to describe the positive effect you mean, which was discovered and described much earlier by Adam Smith. (If you would like to read a decent history of economic ideas, I recommend The Worldly Philosophers, which is a very good book.)
- bad_user 10y ago
  Not sure what mathematical rigor you're talking about and I must admit I never had the patience to fully read his work, but Marx also promoted the "labor theory of value", saying that the value of a product or service is determined by the labor necessary to produce it and not by the value the owner gets from using it. It's no wonder then that in Marx' analysis profit comes from the underpayment of workers. But it's a fundamentally flawed theory.
  - tehwalrus 10y ago
    The description in the Worldly Philosophers is my main source: that in Das Kapital he flips between ranting and precise mathematical language quite sporadically. It is my understanding that he was the first to predict economic cycles of boom and bust, too.
  - MrBuddyCasino 10y ago
    Exactly. For anyone wondering why "labor theory of value" is flawed, the currently accepted theory is "supply and demand". I found it very interesting that this was not widely understood during the times of Marx and is a relatively young insight.
    - ZeroGravitas 10y ago
      And one that still most people reject. See for example the reactions to "surge pricing" from Uber. Standard economic theory suggests that by letting prices rise (or indeed fall), supply will adjust to match demand and overall utility will be increased. But paying more for a cab when lots of people want to use the available cabs strikes people as unfair. As a nerdy fan of economics, I believe the underlying problem is inequality which humans are apparently very sensitive to and surge pricing makes it explicity that rich people are getting the benefit. If there was less inequality then it could be reframed as "the people who really value a cab ride right now".
fictioncircle 10y ago
It is also a system with some very dangerous externalities that should not be ignored simply because you dislike admitting all philosophies have blemishes. Capitalism, alone, requires all participants to be omnscient in regards to present and future circumstances to be correct. It is a deep flaw you likely ignore along with the externalities involved in the process when such omnscient power is denied to most market participants.
- logicchains 10y ago
  >Capitalism, alone, requires all participants to be omnscient in regards to present and future circumstances to be correct. This is incorrect; even basic economic theories of risk/investment account for uncertainty. A key concept in economics is that people are economically rewarded for investing the value they've created (as opposed to consuming it all), as compensation for taking on the risk involved in investment. Or to put it another way: part of the returns people get from investing is economic compensation for the risk involved in investing (as opposed to spending the money immediately, which entails no risk of losing that money).
  - fictioncircle 10y ago
    > This is incorrect; even basic economic theories of risk/investment account for uncertainty. > A key concept in economics is that people are economically rewarded for investing the value they've created (as opposed to consuming it all), as compensation for taking on the risk involved in investment. Or to put it another way: part of the returns people get from investing is economic compensation for the risk involved in investing (as opposed to spending the money immediately, which entails no risk of losing that money). So you view insider trading as an acceptable behavior accounted for in unrestricted capitalism? If not, you misunderstood my meaning.
    - logicchains 10y ago
      Actually I do; it brings information into the market faster, meaning more-accurate prices are realised more quickly.
ordbajsare 10y ago
Hope you have an flame retardant suit.
TeMPOraL 10y ago
I second this. While I still will keep pointing out flaws of the market economy, there's no doubt it pretty much lifted us to this age of prosperity most humans enjoy today. It's, I think, something often forgotten. It's easy now to point out problems with capitalism, because we're all used to the parts where it works well and for the benefit of humanity. We should not forget about that, but we also shouldn't stop trying to correct the market in areas it fails.
syrrim 10y ago
I was enlightend once to finish reading an article in a business magazine, and realize that everything discussed benefitted me. The executives in the article had made decisions in order to improve the state of their company, and in doing so were trying to more efficiently deliver products and services to society at large. They get well compensated for what they do, of course. But they also take formidable risk, and must make decisions with only a guess of the consequences. All in order to stay competitive and continue to provide products at a low price.

chillwaves 10y ago

This doesn't seem like the place to pledge allegiance. Maybe I am wrong.

Aloha 10y ago

Communism is well suited to giving people a better horse instead of a car - when the whole system is collectively planned and owned - there is no incentive at all for creative destruction.

onion2k 10y ago
There is an incentive for creative destruction - failure. If you can't continue innovating (eg you can't make a better horse) you have to take a different approach.
zkms 10y ago
Collective planning is not inherent to communism and communism doesn't inherently restrict the sort of market forces that enable "creative destruction".
- mseebach 10y ago
  It's important to remember in these kinds of debates that there are two kinds of communism: The practical communism, the one actually tried dozens and dozens of times, despite implementing a pretty fair range of possible combinations of parameters, yet returning a the same pretty narrow range of failures pretty invariably -- and then the theoretical communism, as read and understood by contemporary western intellectuals for whom practical communism (or, as it's often known, "not real communism") is mostly irrelevant. With that, your observation is entirely correct, but it pertains to theoretical communism. The GP was likely referring to practical communism, and in that context, yes, practical communism most definitely inherently restricts market-driven creative destruction. (Cool side-anecdote: Karl Popper invented the scientific method partly in response to Marxist "science".)
mseebach 10y ago
What you're describing is an instance of the knowledge problem or the economic calculation problem. Centralism (to which communism belongs) is good at many things -- including huge endeavours such as space travel or going to all-out war. The immense power unleashed during the two world wars was a major inspiration for centralism in the following decades, in the shape of trying to apply this power towards societal good, rather than destruction. It even worked, in some form, for a bit. Millions of people were homeless or living in very poor conditions, they were relatively quickly re-housed in housing estates build on an unprecedented scale and with unprecedented speed. But it didn't work at scale. While certainly better than not having anywhere to live at all, many of the housing estates were awful places, they simply weren't built to live in, they were almost militaristic "machines for living in" rather than "homes". Which brings us back to the knowledge problem: All-out war has the ability to align almost everybody's interest in the same direction - crush the germans. Individual happiness, even liberty, is basically optional, because if you don't win the war, you will have neither happiness or liberty. With this knowledge, it's reasonably easy to organise the economy both on both the micro and macro levels: I need to mine ore for steel for tanks. I need to grow cabbage because we can't import food and cabbage has the highest calories-output per input (taste is not a factor). At every level, you can get a very reasonable approximation of the right course of action by consulting a very small set of shared objectives. But in peace-time, things start falling apart. You no longer as a society have a short list of shared objectives, the best you can do is something vague like 'maximising happiness' (and even that is debatable). Even if you could identify a big, shared goal, and you might achieve it by suspending liberty, loosing their liberty will make people unhappy and so the means ends up mattering more than the ends (see: war on drugs). How do you figure out whether growing cabbage or wheat or carrots or raising beef-cattle in such conditions? Different people prefers different kinds of houses, so do you farm trees for wood, mine coal and dig clay for bricks or whatever it is you do to make concrete? In both cases, you need some combination of all, depending on an extremely complex, inherently unknowable, continuously shifting combination of desires in the population -- and the formation of prices in a free market is perhaps not the best (for some value of 'best'), but it's the only known actually functional mechanism to communicate these desires. Anyway, bottom line: I don't agree that centralised economic systems can even give people better horses, or better cars. If the need is clear and broad enough, it can give people a horse or a car, but it doesn't implement the feedback mechanisms required to continuously incrementally improve it outputs (cutely captured in this meme: http://9gag.com/gag/4298226 http://9gag.com/gag/4298226).
mtrn 10y ago
> when the whole system is collectively planned and owned It's funny. It is not that capitalism does not tend towards central planning. When companies fuse and get bigger, they want to reap the profits of centralization and unified control. To exaggerate a bit: the ultimate way to deal with the competition is to absorb or to kill it.
- digi_owl 10y ago
  Or form a cartel where the prices and features from each member is decided as a group. That said, i don't think even Marx considered central planning as more than a transitional stopgap. Thing is that he expected socialism to rise from industrialized nations like England or Germany, not near-agrarian Russia. Also, his primary motivation was for workers to have more say in the factories they worked in. But then few people even know volume one, where as in volume two and three he rails against the rentier capitalists. And lament how in the long run it would be better for industrial capitalist to side with the workers against the rentiers, but that they rarely do so until it is effectively too late.
willyt 10y ago
Sputnik
- dashoffset 10y ago
  Innovation during the Space Race was driven by the competition between USSR and USA.

mesh 10y ago

Capitalism also drives greed, destruction and human misery as well as some other pretty evil things.

visarga 10y ago
Also, the tragedy of the commons. Companies pollute our environment externalizing costs on society. They collect the profits, we pay for the damage. The weakest point of capitalism is the same as its greatest advantage - greed.
- wyager 10y ago
  > Companies pollute our environment externalizing costs on society. Interestingly, historical experiments in communism have led to vastly increased rates of environmental destruction as compared to market economies. The reason is fairly obvious if you have a some economic background and think about it for a bit; in a market economy with resource ownership, people who own resource rights (e.g. to fell the trees in an area) will notice that they can make a lot more money if they spread the resource sales over time; if they sell all their trees now, they'll push down the market value of lumber and have decreasing marginal returns on each tree they fell. In the presence of a rich market system including market mechanisms like futures, market participants make a lot more money planning for the future than just trashing the environment as fast as possible. Compare this to a communist state. The people in charge of resource management don't make money anyway, so they don't really care about the same optimization a capitalist would. Of course, they can buy political favor at little cost to them by pushing way down the diminishing marginal returns curve and exhausting a resource way faster than a self-interested capitalist would. Great job, commissar, look at all this wood! After all, if you can make your peers happy for a few years you'll get a promotion to a better government position (or retire early on your pension) and the fact that this area is now barren is someone else's problem.
  - Someone 10y ago
    That doesn't always work. If you expect demand for lumber will go down in a few years, as far as you can tell forever, it's better for you to take out your trees as fast as possible. I think that's part of what's happening with oil, where renewable sources are going to replace them as a bulk good. If you have lots of it like Saudi Arabia, your capitalism-optimal strategy may be to pump up oil now, even if it significantly drives down prices. It also may be rational to destructively mine lumber if that's the only way you can produce it competitively. Your competition might own woods closer to rivers, for example, making it cheaper for them to transport their wood to the customer.

tehwalrus 10y ago

Etymological nit pick: Capitalism was defined by Marx. It is the political movement to give power to people with financial resources, and it's principal consequence is exploitation (in Marx' analysis, every penny of profit comes from underpayment to your workers. This analysis is a mathematical one, about as rigorous as any theory of economics is possible to be.) I prefer the term Market Economics or Market Forces to describe the positive effect you mean, which was discovered and described much earlier by Adam Smith. (If you would like to read a decent history of economic ideas, I recommend The Worldly Philosophers, which is a very good book.)

bad_user 10y ago
Not sure what mathematical rigor you're talking about and I must admit I never had the patience to fully read his work, but Marx also promoted the "labor theory of value", saying that the value of a product or service is determined by the labor necessary to produce it and not by the value the owner gets from using it. It's no wonder then that in Marx' analysis profit comes from the underpayment of workers. But it's a fundamentally flawed theory.
- tehwalrus 10y ago
  The description in the Worldly Philosophers is my main source: that in Das Kapital he flips between ranting and precise mathematical language quite sporadically. It is my understanding that he was the first to predict economic cycles of boom and bust, too.
- MrBuddyCasino 10y ago
  Exactly. For anyone wondering why "labor theory of value" is flawed, the currently accepted theory is "supply and demand". I found it very interesting that this was not widely understood during the times of Marx and is a relatively young insight.
  - ZeroGravitas 10y ago
    And one that still most people reject. See for example the reactions to "surge pricing" from Uber. Standard economic theory suggests that by letting prices rise (or indeed fall), supply will adjust to match demand and overall utility will be increased. But paying more for a cab when lots of people want to use the available cabs strikes people as unfair. As a nerdy fan of economics, I believe the underlying problem is inequality which humans are apparently very sensitive to and surge pricing makes it explicity that rich people are getting the benefit. If there was less inequality then it could be reframed as "the people who really value a cab ride right now".

fictioncircle 10y ago

It is also a system with some very dangerous externalities that should not be ignored simply because you dislike admitting all philosophies have blemishes. Capitalism, alone, requires all participants to be omnscient in regards to present and future circumstances to be correct. It is a deep flaw you likely ignore along with the externalities involved in the process when such omnscient power is denied to most market participants.

logicchains 10y ago
>Capitalism, alone, requires all participants to be omnscient in regards to present and future circumstances to be correct. This is incorrect; even basic economic theories of risk/investment account for uncertainty. A key concept in economics is that people are economically rewarded for investing the value they've created (as opposed to consuming it all), as compensation for taking on the risk involved in investment. Or to put it another way: part of the returns people get from investing is economic compensation for the risk involved in investing (as opposed to spending the money immediately, which entails no risk of losing that money).
- fictioncircle 10y ago
  > This is incorrect; even basic economic theories of risk/investment account for uncertainty. > A key concept in economics is that people are economically rewarded for investing the value they've created (as opposed to consuming it all), as compensation for taking on the risk involved in investment. Or to put it another way: part of the returns people get from investing is economic compensation for the risk involved in investing (as opposed to spending the money immediately, which entails no risk of losing that money). So you view insider trading as an acceptable behavior accounted for in unrestricted capitalism? If not, you misunderstood my meaning.
  - logicchains 10y ago
    Actually I do; it brings information into the market faster, meaning more-accurate prices are realised more quickly.

ordbajsare 10y ago

Hope you have an flame retardant suit.

TeMPOraL 10y ago

I second this. While I still will keep pointing out flaws of the market economy, there's no doubt it pretty much lifted us to this age of prosperity most humans enjoy today. It's, I think, something often forgotten. It's easy now to point out problems with capitalism, because we're all used to the parts where it works well and for the benefit of humanity. We should not forget about that, but we also shouldn't stop trying to correct the market in areas it fails.

syrrim 10y ago

I was enlightend once to finish reading an article in a business magazine, and realize that everything discussed benefitted me. The executives in the article had made decisions in order to improve the state of their company, and in doing so were trying to more efficiently deliver products and services to society at large. They get well compensated for what they do, of course. But they also take formidable risk, and must make decisions with only a guess of the consequences. All in order to stay competitive and continue to provide products at a low price.