We forcibly allocate capital less efficiently; make markets less efficient and less responsive to innovation; with the sole aim of achieving a utopian worker-cooperative owned world?
Hrmmm, where have I heard that before...
I wish we didn't force capital to do things like that. Then it can run wild with Mandatory arbitration which bars access to the justice system, algorithmic manipulation of prices for rents / real-estate (1) and installing spyware on the customer's computers (2) and MITM attacks of your communication (3). They are all free market innovations. Very efficient at doing the wrong thing.
1 - https://rentalhousingjournal.com/fbi-searches-property-manag...
2 - https://www.pcmag.com/news/hp-accused-of-quietly-installing-...
3 - https://techcrunch.com/2024/03/26/facebook-secret-project-sn...
Efficiency with regard to what goal? The current allocation of capital in the US is quite inefficient if we're interested in the welfare of the public. Billionaires have far more capital than they know what to do with, and since they're unaccountable for their investment choices, they strongly tend to steer the economy toward vanity projects. Meanwhile, many families can't put food on the table, and infrastructure is falling apart.
Whatever it is about this system that you find "efficient," I don't find it valuable. The Chinese state takes a rather strong hand in allocating capital, and that has treated it fairly well over the past few decades. A mixed economy where private capitalists are not solely responsible for investment choices, and where ownership of that capital is more evenly distributed among the public, could fix a lot of problems.
The Chinese government has spent massive amounts on vanity projects. A lot of government funds have also been looted by CCP honchos.
Thanks but no. I’ll take American capital allocators over the Chinese any day.
Most importantly, I don’t want to live in a dictatorship.
Billionaires get to invest however they want because it's their property. What you see as a vanity project actually employs workers, feds families, and generates tax revenue. They are massively contributing to the economy.
I think it'd be good, is why. Non-intervention with private property is extremely low on my list of moral priorities. If someone's starving, I don't think you really have a right to keep food away from them.
> What you see as a vanity project actually employs workers, feds families, and generates tax revenue.
…and are they actually making anything useful? Or are they wasting everyone's time? Workers could be employed doing any number of things. For a rich person to "creating jobs" means nothing if those jobs are pointless. We could easily take that money away and create jobs doing something more important.
I believe in private charity, which would solve this. But I do not believe the state gets to steal from some people to give to others. The only reason for taxiation is to fund public goods.
> …and are they actually making anything useful? Or are they wasting everyone's time? Workers could be employed doing any number of things. For a rich person to "creating jobs" means nothing if those jobs are pointless. We could easily take that money away and create jobs doing something more important.
Who gets to define importance? This argument always devolves into state controlled economies which are charactetized by deadweight loss, corruption, and poor incentives. I'll take my access to private property every time.
As an aside, do you also believe in private knocking-you-on-the-head-to-take your-food-you-don't-think-they-deserve?
As an exercise, I invite you to trade without money: barter your goods or services with others. It's more work but completely doable. But remember the state is still expecting taxes on that transaction. And then ponder upon whether state-issued money is truly the source of private sector asset accumulation.
The public sector produces plenty of wealth - security, public goods, law and order, environmental protections, public health measures...
Nobody is obliged to accumulate state pegged money, yet most people do. Feel free to accumulate cheese if you wish.
Yeah, because they're corrupt and undemocratic. I certainly don't endorse China. But they do put to rest the idea that the freer the market, the stronger the economy.
China is strong because of its massive population combined with an economy that performs better than the only other country with a similarly massive population.
Unfortunately Xi is now focused on saber-rattling about national security and bullying neighbors. He has cracked down on free markets, and China’s economy is suffering due to his incompetence.
The thing is, people who pile up capital don’t have to be efficient with it. They can basically do whatever they want with their money. They can build giant vanity estates, which you could certainly call inefficient — who needs 20,000 square feet for a family of 3? But… we also care about freedom, so we let people do inefficient things. The only difference between rich people and poor people is they have more money so their inefficiencies are louder. But everybody spends money on senseless wants and vanity. Who needs manicures and hair extensions? Arguably nobody. The “poor” spend on vanity too. And we let them because we care about freedom.
If you wanted to implement a perfectly-efficient system, would that mean banning the fulfillment of any desire that wasn’t strictly a need? I don’t think anyone would want to live in such a system.
Holy mother of slippery slopes x) Do you think $current_economic_system can be improved? Ah so you want to ban fulfillment of any desire? Sheesh
What you see as vanity, such as hair extensions, may be a high utility item for others. Consider the hair extensions make them a more attractive mate and provide them the opportunity to breed with a better stock, for example.
Similarly, consider that 20k ft sq mansion in context: all the prior owner(s) of that property were traded revenue for the land. And the construction workers were paid. And now the gov gets taxes.
At every step, each contributor to the end product voluntarily participated and maximized their outcomes. That is maximally efficient, economically speaking.
It is not. The resources which went towards that mansion would be (by your definition) much more efficiently spent elsewhere. The utility which one wealthy person gets from a 20k sqft mansion is much smaller than the total utility which 20 homeless people would get from a 1k sqft apartment.
My answer is economically efficient. Yours is utilitarian. I believe in private property.
Yes. Their inefficiencies are deafeningly loud and have a massive impact on the rest of us. This is why I am suggesting that we intervene to get rid of the ultrawealthy as a class.
> If you wanted to implement a perfectly-efficient system
Stop right there. Don't pretend that "what if we got rid of billionaires" is a slippery slope towards a society of perfect clones where all individuality is suppressed. You don't really believe that—you're just fishing for gotchas, and it's beneath you.
The welfare of the public today is not the same as the welfare of the public for all time. The Soviet Union couldn't compete on the development of computers, because the USSR was trying to optimize towards what could computers be used for then and there. It turned out that computers could be used for a lot more than what people thought of at the time.
Drug R&D and patents lead to enormous profits for companies, because they can charge outrageous prices for the drugs. But the benefit to the public is that now those drugs and the knowledge about them exist. That's going to have a cumulative positive effect for hundreds of years in the future.
There was a great video on this: https://www.youtube.com/watch?v=dnHdqPBrtH8 Asianometry - "Why the Soviet Computer Failed" (18m56s) [2022-07-07]
So you see, I'm actually radically in favour of R&D.
Without the possibility of this outrageous profit we would just get less drug research done. That money would then be invested in something else. Drug prices wouldn't be so outrageous (probably), but we probably also wouldn't have as many treatment options. They might be too expensive now, but there's a chance they won't be in 50 years.
A massive amount of research is funded by public grants. iPhones are a famous example of a private-sector product almost entirely created off the back of public research. It is absolutely not true that private investment is required for pharmaceutical R&D.
YCombinator is billionaires investing in startups.
> Billionaires tend to steer the economy toward vanity projects.
Musk's only meaningful contribution to SpaceX was money. We could just have raised NASA's budget instead, but we didn't. There are lots of things that we need to spend money on. Space is not our top priority.
Musk, however, is independently wealthy and can spend his money on whatever he wants. So he spent it on rockets, as a vanity project. Yes, some useful innovations came out of that. But what was the opportunity cost? Was this where the money was best spent? I have no reason to believe so.
It was a heck of a lot more than that. See "Elon Musk" by Vance.
> We could just have raised NASA's budget instead
He did it for a tiny fraction of NASA's budget.
> So he spent it on rockets, as a vanity project
He's reached cash flow positive.
> Was this where the money was best spent? I have no reason to believe so.
Becoming the richest man in the world through his investing is a whopper of a reason that it was well spent.
NASA does a lot of things. If they'd been given SpaceX's capital and a mandate to build reusable rockets, I'm sure they could. They're world-class engineers.
> It was a heck of a lot more than that. See "Elon Musk" by Vance.
I'm not going to read his biography for the sake of your post. Rich people like to act as if they're uniquely good leaders, but it's easy to take credit from a room full of people when they're all on your payroll. If Musk had something to contribute other than fame and cash, name it.
> Becoming the richest man in the world through his investing is a whopper of a reason that it was well spent.
Not at all. Him becoming rich benefits nobody but himself. Funnelling money toward one individual's personal wealth is an extremely poor allocation of resources.
> He's reached cash flow positive.
Barely. And so what? Pet rocks were profitable. Did we actually need SpaceX? Is this really best the direction that so many billions of dollars worth of economic activity could have been directed? Is Elon Musk, the buffoon who ruined Twitter, really the person who should be making that choice?
The ones that were overcharging consumers?
Yeah it is great for customers when prices go down.
That's a benefit, not a drawback.
Those cabbies should have offer better service at a lower price if they wanted to compete.
Consumers are the judge of what's best. And they vote with their wallet and feet.
I call this the "Jr. developer fallacy." Start a job, encounter some bugs, suggest rewriting the entire codebase from scratch on [insert-trendy-framework].
The many systemic market failure modes of capitalism are well documented and written about at great lengths.
That "by any metric" is just plain wrong. There's several metrics by which the US healthcare system is among the best--in general, if the metric you are tracking is largely covering the success rates of medical procedures (sibling comment mentions 5-year cancer survival rates, for example), then the US generally scores high. If the metric you are tracking is instead covering general population health or things easily caught with preventative medicine, then the US scores abysmally in those metrics.
In other words, the US healthcare system actually turns out to be very good (if perhaps not on a per-cost metric)... but access to the good healthcare system is extremely poor. And that's kind of what you'd expect for a market-driven system: good healthcare if you can afford it, shit healthcare if you can't.
US Healthcare is expensive, but the quality is better than most other countries.
The American pharma companies also don't do the research, a lot of it comes from scientific institutions funded by public money.
What pharma companies do is provide capital for drug trials which are absurdly expensive, they are more alike investment companies than actual research institutes...
That's certainly not true. Of course compared to pretty much every highly developed country if we factor in relative spending per capita you'd be right.
But yeah, purely market/profit driven systems (with extremely poor and inefficient regulation) certainly don't work in certain sectors like healthcare.
Also it depends on what do you mean by 'socialized medicine', if you're specifically talking about single payer, your point is only valid if you ignore all other countries which don't have single payer besides the US. The Swiss and (as far as I can tell) to a lesser Dutch healthcare systems are 'privatized' to a much higher degree than the one in US i.e. effectively fully, there are no Medicare/Medicaid equivalents there. Instead they are very strictly and relatively efficiently regulated. They pretty much have Obama/Romneycare++.
If you mean something else than single-payer then the US system is arguably heavily 'socialized', both through insurance polling (just like in the countries I mentioned) and because the US government itself spends more on healthcare than most industrialized countries even relative to GDP. e.g. if we exclude all private spending (both individual and insurance) government health spending per capita in the US is significantly higher than in Britain and more than 2x higher than in Spain (and still significantly higher if adjusted by PPP GDP per capita)
https://data.worldbank.org/indicator/SH.XPD.GHED.PP.CD?locat...
I feel that the USA's education system has indoctrinated students so deeply into the red scare that real terms have become meaningless to discuss political and economical systems with the larger American audience, the words simply don't mean the same, they mean what you've been indoctrinated to believe they mean.
What other forms of semi-stable functional "socialism" are there?
> have become meaningless to discuss political and economical systems with the
Discussing hypothetical pseudo-utopian systems like "socialism" or "communism" isn't particularly meaningful either (from the economics perspective, not philosophical).
IMHO the problem with socialism is that it will pretty always be outcompeted by private ("capitalist") enterprises which can provide goods and services which are both higher quality and cheaper (yes by "underpaying" their workers but also they tend to be much more efficient). Therefore you can't really allow both in the system/country.
So realistically "socialism" can only exist if the state suppresses any alternatives using various degrees of coercion and force. Since no real competition and by extension dissent can exist (i.e. nobody has enough resources to challenge the state without significantly damaging their career/status/wellbeing) the state ends up becoming more and more oppressive/controlling and unavoidable corrupt. I'd love to see any empirical evidence disproving this but as far as I can tell historically that's what always ended up happening.
Cooperatives. This article we're discussing here is advocating for socialism, it's just not using that word.
However I'm not sure cooperatives are strictly a "form" of socialism, they have been a part of capitalist societies since pretty much the very beginning. I guess it depends where we draw the lines between partnerships etc. and cooperatives, I guess hiring additional workers who don't have an equal stake/share in the enterprise or subcontracting any sort of labor (let's say on a significantly meaningful scale, but still very hard to avoid) would be it.
Never mind the heavy leftward tilt of teachers, students, and universities.
Innovation is also becoming a meaningless word to defend the system, the innovations have their foundations fostered with public money, through funding of scientific research which is then later captured by the industries to develop products. The innovation is productionalising another innovation, the foundation is built mostly on public funding. Very few companies actually do ground-breaking research that innovates, they're pretty risk-averse in this sense, the productionalisation of those discoveries has its own value, not questionign that, but it only gets traction afterwards when the brunt of the work of discovery was done.
Efficiency of markets is a hypothesis of financial economics with much better written criticism than I can write here, Warren Buffet doesn't believe in it, for example. It's not a given whatsoever, nor proven empirically.
This post is precisely about a free market economy where the (imo unnatural) disconnect between working in an enterprise and owning the products of that enterprise doesn't exist. That's all.
Not sure what "command economy" has to do with it.
If you hire a landscaper to redo the landscaping of your property, is he thereby entitled to own a share of your property? How about the guy you hired to fix your water heater? Does he get a share, too? Is that natural?
Hiring a worker to help your business is employment
I'm sure I don't have to explain the differences between a transaction and employment?
And if so it could be considered a (very) generous decision more often than not.
At no point I advocated for a command economy, once more you reply to a strawman to one of my comments, Walter.
The government funded Langley with $60,000 to build a working airplane. It fell into the Potomac "like a sack of wet cement".
The Wrights spent $3,000 and build a working, flying airplane.
The jet engine was invented and developed with private funds. The US government told Lockheed to stop working on jet engines and develop better piston engines instead.
AI, the biggest tech revolution in a couple decades, seems to have been privately funded.
Compilers, which you work with your whole life, came from research done by public funds.
Most medical research has been done with public funds.
Radios, modems, every single piece of networking we currently use was first researched by public funds.
We can keep cherry-picking examples if you wish go down this road, it doesn't foster much of a deeper discussion though if you are going to keep your dogma.
Public funding is necessary, private funding is necessary, what kind of system we can create that enables the best out of both worlds to evolve and be better? That's a discussion I'd like to see, this end of history bullshit is too boring, and tiring to discuss.
Capitalism as it is has empirically shown it's not the best system humanity should rely on, it has its advantages, it has major flaws, admitting that is a pretty good first step into trying to look what's next, how do we go from here. It's destructive, it's inhumane, it's simplistic, it will become a relic just like any other system that came before.
Being dogmatic about it doesn't take us anywhere, it just conserves a status quo which is not the best we can achieve.
As usual, I think you are a bright person, Walter, you've done tons and achieved a lot more than most, but keeping this dogmatic narrow-view of the world certainly pains me, exactly because you are the kind of mind that should be able to see through the bullshit...
It was an incremental step, followed by other incremental steps. There have also been many, many internets along the way: AOL, Prodigy, BYTEnet, MCI, Gopher, RBBS, etc. Every organization that had more than one computer soon figured out how to connect them. Even I did that.
BTW, Ethernet was invented by Xerox. I use it every day.
Compilers appeared shortly after computers that were capable enough to run them appeared. This suggests an inevitability, not a discontinuous invention. Jet engines were a discontinuity, too.
What I see is that if invention X is derived from inventions A,B,C,D,E,F, and D was funded by the government, the government gets all the credit.
> Capitalism as it is has empirically shown it's not the best system humanity should rely on,
How has that been shown?
> it has its advantages, it has major flaws, admitting that is a pretty good first step into trying to look what's next, how do we go from here. It's destructive, it's inhumane, it's simplistic, it will become a relic just like any other system that came before.
Show an example of any system working better.
Free markets are a chaotic system of creative destruction. There have been endless attempts at "fixing" that. None have worked better.
I tend to take a step back and keep in mind that Free Enterprise is not inherently a part of Capitalism and vice-versa. They've gone together pretty well but each might do better with a different partner or different arrangement altogether.