Comment by munificent | Hacker News Reader

Comment by munificent | Hacker News Reader

Somewhat tangential, but here's something I see to be a fundamental challenge with capitalism:

Two properties that significantly increase the value that an individual business can provide to users are economies of scale and network effects. The former lets them provide more user value for less cost. The latter gives users N^2 increasing value at only N cost.

But those two properties are also fundamentally anti-competitive. The fewer independent competing businesses there are, the greater these properties are maximized.

This doesn't mean capitalism should be completely discarded, but it means there is an unhealthy positive feedback loop where the system will trend towards consolidation and monopolies unless some other equally powerful force balances it out.

At the same time, going too far in the opposite direction and having many competing small companies may also be worse for consumers. You get more optimal pricing of more inefficiently produced goods because of the lower economies of scale and network effects.

Capitalism is built around competition and anti-monopoly, philosophically.

Unfortunately in reality people believe that the only good monopoly is the one they (think) they control. This leads them to pile more and more power into that institution -- Government. This makes the government a prize to win, ripe for abuse and takeover by special interest. In turn the government doesn't do the one thing it is supposed to do, which is ensure competition and prevent monopolies.

The basic premise of anti-trust is that you can't use your power in one area (say search) to gain marketshare in another area (say shopping, or videos). Google should have been broken up a long time ago. This doesn't go against any foundation of capitalism.

> Capitalism is built around competition and anti-monopoly, philosophically.

What the modern world has is corporatism, not capitalism, and so profit is the primary motivator. Competition gets in the way of profit by making production and pricing more efficient, so profit-seeking stifles competition and leads to monopoly.

Quite unfortunately there is no way to align the incentives of competition and self-interest; profit and self-interest are naturally strongly aligned.

> What the modern world has is corporatism

No, mostly not (China has corporatism, Mexico under the PRI one-party regime had corporatism, fascist regimes had corporatism; the modern developed world has capitalism with corporations playing a central role, but thats how capitalism has always been and was a feature of the concrete system for which the term capitalism was coined.)

Thanks for the correction. I think the proper term I was looking for was "corporate capitalism"

You're on the money.

Self-interest is an inherent human nature. Competition is the mechanism to keep self-interest in check. Everyone wants a monopoly. Our institutions and power structure have to be built to be anti-monopoly of all forms.

Rise of corporatism in America is highly correlated with concentration of power in the state. Corporations could not have achieved their scale and power w/o the state putting its foot on the scale to tilt it in favour of one particular outcome or the other. When you have a giant who can throw its weight around, all you need is a bit of smarts to use that your advantage.

> Capitalism is built around competition and anti-monopoly, philosophically

No, it's built around centralization and rent-extracting monopoly power moving from the feudal aristocracy to the mercantile (now “capitalist") class, motivationally and historically. The risible competitive and anti-monopoly argument that bears no resemblance to the facts (anti-monopoly controls were one of the major elements of reactions against capitalism once it had reached it's maturity) was a later post-hoc rationalization.

You're confounding American corporatism and capitalism. In which part of capitalist philosophy do you find "rent extracting monopoly power"? Is it in the free market? Is it in the competition? Is in the decentrlization?

> You're confounding American corporatism and capitalism.

No, I'm not.

> In which part of capitalist philosophy do you find "rent extracting monopoly power"

Capitalist “philosophy” is a post hoc rationalization for what was already going on that didn't even start happening until several centuries into the mercantile class using their growing clout to pull rent-extracting monopoly power away from the hands of the feudal aristocracy and into their own, and didn't kick into really high gear until needed as a defense after major critiques of the concrete reality of capitalism started appearing.

You are avoiding the actual question.

Furthermore what you keep repeating is not true. You're retconning history and economics based on your own knowledge and absolutely ignoring books and written history.

Capitalism is property rights and economic freedom. There's nothing inherent to it that requires monopoly. Natural monopolies can occur but are perpetually unstable provided there are no artificial barriers to entry. Of course, those barriers exist (one form is regulatory capture), but they are not capitalistic. Absent those artificial barriers, even natural monopolies must behave over the long term as though competitors exist, or they will be created.

> Capitalism is property rights Capitalism is property rights

Capitalism is a very specific model of property rights and economic freedom as far as consistent with that model, which was designed—incrementally, over a long time—to advance the power interests of a particular clases (mostly not collectively, but as the aggregate of individuals in that class leveraging their growing power to advance their personal interests.)

Confusing it with “property rights and economic freedom” more generally is just as wrong as doing the same with feudalism, which likewise featured a particular model of property rights and economic freedom so far as consistent with that model of property rights.

One could probably dream up a thousand theories about why capitalism was developed, but it really doesn't matter to me. What matters is what the theory is and whether or not it's true.

And history has borne it out: societies that adopt strong individual property rights coupled with economic freedom have delivered unprecedented wealth to their people at all levels, while societies that focus on the collective at the expense of the individual and upon outcomes instead of opportunities flounder and regress.

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