The classical model of capitalism is that profits are a side effect of some socially beneficial activity
No, the "invisible hand" as stated by Adam Smith, which is presumably what you mean, states the EXACT opposite causality order.
No, the "invisible hand" as stated by Adam Smith, which is presumably what you mean, states the EXACT opposite causality order.
And then Enclosure happened -- precisely to create a landless "working class" who could not participate in the market as free actors!
https://newrepublic.com/article/141663/united-states-work
http://www.nakedcapitalism.com/2012/04/yasha-levine-recovere...
Is that a fair interpretation of Smith's work? The concept of economies of scale (dated back to Adam Smith) combined with laissez-faire approach advocated by Smith seems to imply a large corporate endeavor (Sears catalog, Wal-Mart, Costco, Amazon.com) would inevitably overpower any small-scale operation.
Now it turns out (with-hindsight-20/20) that Adam Smith did not fully understand the "mind" behind the "invisible hand". It indeed does arrange for social benefits... except when it doesn't[0]. A good contemporary analysis of this mechanism is the article by Scott Alexander, "Meditations on Moloch".
http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
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[0] - For instance, a lot of those social benefits are in fact signs of market inefficiency, and those eventually get "corrected" as more and more people compete in a given sector and the margins dwindle.
Except for when you can get the government to step in and grant you rental rights preferable exclusive rights. Land, property, spectrum, licenses, copyright, patents, trademarks.
I guess there's a net win now that I think about it. I could have protected with a club. good for me, good for you because I didn't club you in the head.
instead of protecting it yourself, you delegated the job to the government.
libertarians will argue "why not delegate to a private company?"
because we all learned from past experience. it is better for one entity to have a monopoly on violence than multiple small organizations.
Yes, that's how it actually works. You have rights to some piece of land, I have rights to another, we don't step on each other's toes, and if we don't like the split, there are blood-free procedures to resolve disputes. More importantly, neither of us has to invest in clubs and constant vigilance, because we've outsourced that job. So we all save time, resources and effort.
It's not perfect, but it's a useful tool in our toolbox for building societies.
There are others with different views of capitalism, such as Marxian economists, Proudhon, neo-Ricardians, post-Keynesians etc. Marxian economists in particular with interesting things to say about the origin of profit, alienation, commodity fetishism and classes within capitalism.
Every individual... neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.
You can read more about it here, including the (exactly three) specific passages in which Smith used the term: https://en.m.wikipedia.org/wiki/Invisible_hand#Other_uses_of...
The specific point of the phrase is that the individuals produce a net benefit to society through no intention of their own, it just happens to be a happy side effect of their work.
EDIT: Don't shoot the messenger, people.
But perhaps there are other laws within capitalism. The law of value, for instance, which its recognition by capitalists and relative ignorance of it by wage labourers leads to Marx's theory of surplus value - this is the side effect of this self-interested activity of labour.
> If you encourage capitalistic self-interest enough, it will create benefit?
Yes. Look around. I don't discount the role government has played when it does do good things, but the wonders of the world today are largely driven by the desire to do some work in order to gain some measurable economic benefit. Period.
You can't just create "this benefit directly". How would you do that?
I also think your general perspective on business is being warped by your obvious bias. Competition in industry does not necessarily lead toward mean-spirited relationships, or destructive competition. It can, but look at the tech industry, if anything, the opposite has happened.
Also, the wastage of resources is almost laughable. I say this not to be condescending, but because if there is one entity on the planet that is inefficient, it's government. Businesses go out of business if they don't use resources in the most efficient possible way. A government just prints more money, or if worse comes to worse, passes laws or regulations that distort the economy.
There are countries that do better when it comes to private-public cooperation, namely Scandinavian countries, but even those companies are capitalist countries and recognize that government does not have the capacity to guide economic development as a whole compared to the free exchange of goods and services. It's helpful once in awhile to jumpstart an industry, like solar/wind power in the United States, but government should largely stay out of business (aside from obvious regulation and protection).
For starters, in such discussion I'd ignore money, because as good as it is for being a proxy for everything, it's still ultimately an arbitrary, abstract quantity. Printing money, in a way, is fine. We should talk about waste in terms of real resources - like energy and human time.
> Businesses go out of business if they don't use resources in the most efficient possible way.
Except often there are more businesses than strictly needed, and the surplus production is a waste. But more importantly, in a saturated market every bit of fuel, paper, metal, every kilowatt-hour and every man-hour spent on advertising is a waste of resources. Simple as that. The companies play zero-sum games on such markets, where every action is meant to cancels out effects of actions of other companies. Governments don't advertise, because they don't play the competition game (at least not internally).
Point being, there's lot of waste, public and private alike. Some is probably unavoidable thanks to thermodynamics alone, but it would be worth our time to consider how to build systems that waste less energy and human time just to operate.
But in lesser way, this applies to a lot of our social and commercial systems - we're spending energy to enforce large-scale coordination between people. That spending could be entirely avoided if we could trust one another more. I doubt that in the nearby future we'll be able to make humans more cooperative by default, but I think it's worth stopping to consider just on what exactly we're spending energy, and maybe if there are ways to avoid that.
In particular, I shake my head when I see people excited about new "trustless" systems that replace inter-personal trust with cryptography. It's not a victory, it's a defeat. Maybe necessary, but still a loss.
I get the sense that this homogeneity is no longer seen as a benefit (for both good and bad reasons) and so expect that we are going to expend even more energy on coordination in the future.
Happier people are less angry, and thus less likely to hate the other, especially if the other has a similar quality of life to you. Not to mention economic background is a major aspect of cultural differences.
Also, pockets of cultural homogeneity would be less of a concern if people still had similar opportunities regardless of which one they fit into.
I'm not arguing for government, at least not necessarily. Although there are cases of the government forcing commodity producers to destroy their excess commodities, businesses by themselves also engage in these practices to maintain a favourable price with regard to supply and demand of their commodity.
>You can't just create "this benefit directly". How would you do that?
Workers working for themselves, receiving the product of their own labour, without engaging in the tedious exchange of commodities for money. Democratic decision as to how excess product is allocated and whom it is given to.
>government does not have the capacity to guide economic development as a whole compared to the free exchange of goods and services
I don't think we should be saying this as fact; it's useful to remember that central planning does not only come in the form of fixed five-year plans, nor is central planning necessary to rid ourselves of wage labour.
My "bias" may be that I am a Communist (which I find I am freuently downvoted for even mentioning) though I doubt any of us can say we are free of some bias. Having a position on a certain mode of organisation of society is by no means having a bias, in my opinion anyway.
https://www.wsj.com/articles/americas-dairy-farmers-dump-43-...
The reason I mentioned this bias was because the statements you were making appeared to be standard talking points of somebody who has already drawn a conclusion. I celebrate differences in opinion for political philosophy and didn't mean to imply that your stance meant anything bad.
> Workers working for themselves, receiving the product of their own labour, without engaging in the tedious exchange of commodities for money. Democratic decision as to how excess product is allocated and whom it is given to.
There is nothing to stop this right now. In fact, co-ops are becoming more regular, and bartering has been enabled by online systems. The US government allows people to buy products using Bitcoin, create worker-owned shops, and freely barter goods. Central planning means you can only do one of those three, and historically it has been done poorly.
>I don't think we should be saying this as fact; it's useful to remember that central planning does not only come in the form of fixed five-year plans, nor is central planning necessary to rid ourselves of wage labour.
I hate to state this as a matter of fact, but I think it is. Government cannot foresee the needs of the people beyond perhaps making sure everybody has a ration of energy or food or something like that. Central planning is just far too complicated and harsh. I think your only hope for a more communistic society is through technological innovation that drives the prices of goods so low that profit simply cannot be made.
The idea is that this "roundabout" way is in fact more natural to individuals. People want to actively take care of themselves and their families first - you may say that "capitalistic self-interest" is actually rooted in our biology. Some forms of market economy seem to be the default, "lowest-energy-state" form of human self-organization. It has an added benefit of being heavily self-regulating through feedback loops implicit everywhere in trade.
Now, it would be wrong to pretend it all worked out perfectly and everyone is happy. It didn't and people aren't happy. Yet capitalism has the neat quality of aligning with a lot of basic human needs[0], and that's why while seemingly "roundabout", it's still[1] much easier than top-down management of social goodness.
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[0] - Perceived autonomy would be another one of such needs.
[1] - I do wonder if in an interconnected reality of "information age" we couldn't pull off central management driven by algorithms. Someone on HN pointed out to me though that this would still lose an important feedback channel, namely preferences of customers as expressed by purchasing decisions.
I hold such deep issue with this. Sure, there's an aspect to all living beings that they "self-preserve." But you seem to be implying here that it's part of human nature to be primarily self-interested, and if that's a correct assumption, it's one I believe to be deeply incorrect.
We can look around and see people acting in self-interested ways all of the time, but we can also see people doing lots of benevolent, good, supportive things for other people. In addition, it's no surprise many people go around day-to-day acting this way, given that they live in a system which encourages (née requires) them to do so.
Just because people can conform and act within a system, does not mean it is part of their nature. A system that actively encouraged and promoted the common good and communal caring among individuals would likely produce more of that behavior as well. Just because we see one type of behavior or another is not enough to decide that it's human nature.
That doesn't mean people don't give a shit about anything outside their closest clique! It only means that groups have different relative importance to an individual; for instance, when your family member is sick, you might temporarily stop attending the soup kitchen and spend that time helping the sick kin.
My point is that such "ordering of care" is part of our firmware, and because capitalism is compatible with that, it's easy to implement by humans - in the same way the basic concept of private property seems to be also a part of our firmware, and more extreme parts of communism being incompatible with that meant people started to work against the system.
Basically, if your system aligns well with natural tendencies of humans, it's easier to make it work. Corollary to that is that you should design your systems to work with natural tendencies of humans, instead of trying to change those tendencies directly.
Anecdotally, the US is a nation with more than enough food and shelter for all its inhabitants. Yet many people live on the streets, often because they were born into poverty. This goes against most people's "firmware." Yet capitalism takes no account of that part of human nature (I'd argue those parts that make us 'better than animals.').
Though honestly, it's also easy to forget all the benefits capitalism brought us when criticizing it, and IMO it's worth to have them in mind when discussing alternatives.
I have to also admit that capitalism is indeed very good to make sure that those who have needs have them met, provided that they are able to find the right person to sell their labour-power to, not too cheaply, and the rate of surplus isn't too high as to discourage the worker and alienate him even further from the things he makes.
Unfortunately though, I figure it's an unjust system because of the structural inequality of the trade itself; by far the biggest trade happening is that of the labour-power commodity for wage (starting off the M-C-M chain). But this trade is grounded within an unfair position of one over the other; the wage labourer needs that wage in order to survive, it is his means of sustenance, how he replenishes his ability to work (along with sleep and rest, which is also a desirable quality) and how he ensures future flow of people into the labour-power market by means of reproduction.
Although it would seem as though the worker "values" his wage more than his labour-time, the reality is that in many cases (pushed to the extreme in some developing nations) is that the worker values his life more than death; thus the only way to live is by selling labour (unable to by risk of death or lack of capital or social situation or having a family to feed to become bourgeois himself in most cases).
Now I'm not arguing that people don't need to work in a society free from wage labour - that wouldn't be much better than capitalism. It would require that the products of at least someone's labour are appropriated (which is what's happening now). Rather, the workers democratically decide what to make and in what quantity, and democratically decide what to do with the products afterwards, and what to do with any surplus product. With increased automation (used of course for workers to mean they work less rather than for more short-term profit). This sets up a voluntary system of exchanges, no one person oppressing another. Of course management, engineering etc. are also jobs that apply labour too.
With regard to [1], you may be interested in "Towards a New Socialism" by Paul W. Cockshott. He's written about this topic of cybernetic central management. He has other works too in the same vein. There are also alternatives such as decentralised planning and market socialism too, though I'm not really here to argue in favour of any particular one.
In another comment you say:
>My point is that such "ordering of care" is part of our firmware, and because capitalism is compatible with that, it's easy to implement by humans - in the same way the basic concept of private property seems to be also a part of our firmware, and more extreme parts of communism being incompatible with that meant people started to work against the system.
Capitalism (in the sense of the production of commodities) requires the division of labour, though the division of labour does not require capitalism. Besides, this, as Marx writes, humanity had existed for thousands of years with people doing the job of tailoring and weaving, yet there was no specific job for them. On the other hand, other primitive societies had division of labour but no production of commodities. Internal capitalist organisations also take advantage of the division of labour without commodity production (the sectors of a firm do not trade and barter or engage in M-C-M, despite the division of labour).
With regard to private property, I must disagree; I do not think it is natural at all. Personal property, the right of possession, may be considered a natural phenomenon, but to cordon off an area of land and engage wage labour upon it is not natural; the concept of property is a relatively recent one, having different but distinct forms under feudalism and the mester-slave society that preceeded that. Kropotkin and Proudhon have written about this in The Conquest of Bread and What is Property? respectively. Even if one will claim it is natural, Proudhon makes the case that it is founded in barbarism, and private property is incompatible with the ideals of freedom, equality and justice within a society. For this, he says "Property is impossible."
We should be cautious to decleare things as part of our firmware, especially given that studies on our 'firmware' take place in these modern capitalistic societies in which people are forced, so much that it is ingrained, to engage in wage labour unless lumpen or petit-bourgeois or bourgeois.
Apologies for the long comment, the moderators of Hacker News have put some kind of flag on my account which means that I'm not allowed to post too quickly, probably beacuse I get into heated discussion. I had to respond to your other point lest it happen again when I make a second post.
Because people always act within their own self interest for the most part. One may take more than their fair share of the benefits of society while others will attempt to get out of paying theirs. Don't forget the officials whom will attempt to push those monies one direction or another in order to enrich themselves.
Capitalism is the only system that takes this into account as far as I can tell, everything else is either predicated on people willingly giving to help society on the large scale (counter to human nature) or forcing others to do so at the end of a gun (that tends to lead to dictatorships and suppression of freedom as it requires near total government)
That's not really true. People are, roughly speaking, reinforcement learners. This means that, yes, they respond to rewards by seeking further such rewards, but there are multiple kinds of reward. Financial profit is only one of those, and it actually has a declining marginal happiness once personal income goes over a certain level.
Other major rewards for real humans include being useful to other people, acting with personal autonomy, and exercising mastery (or learning towards mastery) in a domain of skill.
When we talk about economic value, what we really care about is the intersection: good work is useful to others (meets the customer's needs), and it lets the worker autonomously exercise mastery over a skillset (or otherwise, save their energy for domains in which they can do so), and it's profitable or self-sufficient with respect to resources. That's the psychologically real self-interest of the person doing the work, combined with the psychologically real self-interest of the person who needs the work done.
When you start disregarding working conditions and customer needs in the process of maximizing profit, your profit-maximization system has become useless for human purposes.
understanding why people make the decisions they do and how they all fit in a large system remains a work in progress.
we certainly know more now to simply call it the invisible hand