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.)
It's no wonder then that in Marx' analysis profit comes from the underpayment of workers. But it's a fundamentally flawed theory.
I found it very interesting that this was not widely understood during the times of Marx and is a relatively young insight.
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".
In my city Uber has inflated prices almost all the time, except for maybe after 22:00 at night.
And it seems unfair for one because they don't provide a good mental model of what's going on. If the standard pricing is never available between 7 and 22, then the standard pricing is a hoax. In fact, the standard pricing shouldn't be available at rush hours, because daily rush hours are normal. I can understand rainy, snowy or foggy conditions making traffic difficult, or upcoming holidays, but your regular Tuesday should not have surged prices at 9 o'clock in an area that's not the most crowded part of the city, because then the standard pricing is a hoax. Also, people that think Uber's pricing is unfair do so because taxis with much lower and stable prices still exist, even at rush hour. They even have apps now. And many cities have a working public transport system as well.
As for supply and demand, you have to remember that Uber is not a free market, because the drivers are not the ones that can set pricing ;-)
This is why I stopped using Uber, because they'll be very dangerous if they'll ever have monopoly. Now I'm using a local app for cabs (CleverTaxi in Romania, for those interested) and Taxify, which is like this European-made alternative from Estonia. They have the same surge pricing model, but are being more conservative in applying it for now.
Oh hello, San Francisco.
The problem with road pricing is usually not the pricing per se, but rather, that the government bodies doing the pricing just apply the revenues to something totally unrelated, breaking the connection between services and revenue. Road pricing can work if it is actually used for maintaining and building the road network - a genuine pay-for-service model.
Cool, we'll just do envy-based policy then. That'll work.
Again, my nerdy economics answer is to bid up the price of the tickets so that the people who really want to go pay more and all that extra profit goes to the performer. Yet, they explicitly fight against this, to their own detriment, because they don't want only the rich to be able to buy their tickets.
(I still think my solution has potential. Reserve some small amount of tickets for people with lots of money to buy at short notice. Don't make them Vips or anything, just convienient for busy people and to undercut touts reselling the standard tickets.)
I'm not really advocating that other people should adopt this point of view; I'm simply observing the fact that I have been responding this way, as further supporting evidence for ZeroGravitas' suggestion about surge pricing.
If I remember correctly, labour theory of value says that all value come from work, that is: you have nature, you have capital (that is work already done) and the only way to create more value is working. If after consuming the product of that new work, you have surplus, you have new capital available.
How is that related to supply and demand?
His theory however did not explain why the value of a good fluctuates over time, like the price of bread in times of bad harvests, and I have some fuzzy memories of weird corner-case explanations to maneuver around this issue.
Today we know that no matter how much human labour went into the creation of something, in the end the laws of supply and demand determine its price.
I could be wrong though and thats not what Marx goal was, after all.
I think I will spend some time looking into it.
It is my understanding that he was the first to predict economic cycles of boom and bust, too.
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.
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).
> 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.
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.
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.
Wouldn't it be ironic if all the energy directed to arguing Communism vs Capitalism had completely missed the fundamental principles on both sides?
What you're saying certainly makes sense though.
You didn't see West German border guards shooting people who were trying to get into East Germany.
You don't see people leaving Miami for Havana on rafts they've made out of trash bags full of styrofoam packing peanuts.
Why is that, do you suppose?
Capitalism uses the environment and when you mine something you use a resource. Capitalism was not really present in Nazi Germany and they were the cause of an unbelievable amount of destruction.
Human missery? Capitalism has almost eliminated all human missery, we are talking about it being a reasonable goal that by 2035 the should be no humans living at less than a dollar (adjusted for inflation) a day. In the last 15 years that number was cut in half, and it stayed mostly constant from 1900 to 1960 despite the fact that the worlds population grew massively.
The only reason you can even write that is that you have no idea what human missery was before Capitalism.
Interesting you say this, because (by a huge margin) the worst instances of all these things took place under non-capitalist governments. Here's a good rundown wrt destruction and human misery: http://necrometrics.com/20c5m.htm
The most incredibly flourishing of human potential has, around and since the renaissance, occurred in market environments. It looks like greed and destruction and misery are probably going to happen no matter what (at least, no one has figured out to prevent them yet), but they seem to actually be minimized in market societies.
Is it wrong for a poor person to earn more money?
What is "too much"? Do people here, who are mostly globally (and often nationally) rich, earn "too much" money?
You cannot ignore externalities inherent to a system and claim yourself absolved of the consequences.
Comments like this must come from a background of absolute ignorance of utility theory or quantitative economics. I can't think that anyone would make this complaint if they thought critically for a moment about what they were suggesting.
Whether you like it or not, we live in a universe with scarce resources. Humans have finite time, matter, and energy that we need to allocate.
As of today (or at least the very near future), it's probably possible to keep any individual human alive for arbitrarily long. We just might burn trillions of dollars doing it. Obviously, even to someone who can't multiply, this doesn't make sense. If we did our absolute best to keep everyone in the world alive, we would run out of resources immediately.
Now, let's say instead of trillions of dollars, it's millions. This is a plausible multi-year treatment cost. Now instead of running out of resources at 10 people, it's 10,000,000 people. This is still less than the number of people in the world who would plausibly rack up these kind of costs if we didn't "refuse life-saving assistance except in return for payment".
The unfortunate harsh reality is that everyone's life has a finite value. It doesn't make sense to spend more resources keeping someone alive than they're worth; as I said, you'd run out of resources very quickly, even if we pretend it makes sense to dedicate 100% of humanity's output to medicine. Additionally, some people's lives are worth more to everyone else than others. People revile this fact for many reasons, but that's how it is. The market, and most individuals, place a higher value on the life of, say, a surgeon than on that of a busker. The market is a way to (surprisingly accurately) stochastically approximate the value people place on things, including the time of other people. A surgeon gets paid more because (assuming the market is allowed to operate unimpeded) they are valued more, and it therefore makes sense that (through the indirection of money) they are able to pay for that expensive multi-million dollar treatment if they get some complicated disease. Common objections to this include "what about rich retired people who aren't productive anymore", and the answer is that if people knew they couldn't spend the money they were saving right now later on, this would induce even more drastic inefficiencies than that of rich retirees being able to afford medical care more than people still in the workforce.
I am not interested in how/why you rationalize it or the morale judgements you make on it.
You cannot simultaneously claim no harm and feel the need to rationalize the harm caused. The fact you did attempt to do so means you acknowledge the harm caused and consider it acceptable.
Calling me ignorant for pointing out the ugly reality you so verbosely attempt to distance yourself from is quite amusing.
You harm a plant when you eat it to gain the calories to live. The act of eating an apple does not directly cause the harm but the process by which it arrives at your table does. Pretending such use of force and harm is not inherent to human life is extremely dangerous as it is the product of doublethink.
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.
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.
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".)
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).
Too bad people, perhaps those in charge of those housing estates, seem not to read further in the same work:
You employ stone, wood and concrete, and with these materials you build houses and palaces. That is construction. Ingenuity is at work. But suddenly you touch my heart, you do me good, I am happy and I say: "This is beautiful." That is Architecture. Art enters in.