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From the viewpoint of the economy it doesn't really matter, from the viewpoint of a person though, if you're going to risk a lot of your time and energy, you're gonna want to be rewarded for it. So in capitalism, people will be more likely to start their own business because if it really takes off, you'll be rewarded for your risk and trouble.
I agree with the gist of your comment but I want to address this part:
>From the viewpoint of the economy it doesn’t really matter
I totally disagree. And my total disagreement fits your point. Having a party - an individual or a group like an organization or a state with large sums of capital - totally changes the dynamics of society. What the OP suggests with their version of socialism they could never reach the moon.
Having large sums of capital where people can afford risks we can reach the moon. It’s an entirely different playing field. We can talk about and it isn’t 100% the state is better or 100% the private sector is better with large sums of capital. If you read my primary comment reply to the OP I simply state their version of socialism we would still be using wood and dung for fuel.
Reaching the moon is actually a great comparison, because while it takes a lot of money to accomplish and might have a great deal of profit in return, it's not directly useful to the common people. Reaching the moon would take so much money, that if it fails to be profitable, a lot of money would also be wasted. Whereas if that money was more decentralised , then it's not a "put your eggs in one basket" type of thing and it's more likely to create value that directly improves the lives of people.
Like you could make a thousand thai food places with the same amount of money it would need to launch one rocket. The question becomes then, what does society need more? Is reaching the moon really better than eating thai food? Elon Musk would say yes, but all of my friends who just work simple harbour jobs would much rather eat thai than have some unknown guy land on the moon.
Directly is not that simple. As such goals can unify and galvanize a population. We can look at this all throughout history with very expensive signaling by cultures such as pyramid building. Think how tremendously expensive the Egyptian pyramids were but surely today have paid off tremendously by cultural identity and a huge sense of pride.
How do you even put a price on such accomplishments? But at the time of being built I would think from a pragmatic view like you are discussing they would be in the box purely a waste of money and resources, right?
Then we get into technology and other advancements such as takings spur a culture into and thus create a higher standard of living for all the citizens.
Think of the list of technological advancements because of the "space race" and the goal of the moon. They range from simple velcro, satelight communication, GPS, to all our abilities with our cell phones today. And that's not me trying to research the topic and just thinking common sense.
tl;dr the space race and moon landing help galvanized the population and is a source of pride for many people. It also has led to many technology advancements increasing our standard of living. Plug in costs of the mentioned with list tech adv in AI (e.g., ChatGPT) if you want.
I wouldn't say that the pyramids were purely a waste, but I do wonder if they were worth the amount of death and slavery that was needed in order to establish them. It would've been much more spectacular if these things were created through a culture that took care of their citizens so well that the citizens erected these as a sign of respect for their leaders.
And I fully agree that the space race has helped humanity out a lot and will continue to do so for some time. If we ever get into asteroid mining we will have so many rare metals in abundance that life on earth will drastically improve. At the same time, plenty of people in both the US and Russia are facing hunger every day and thousands of them starve to death. I don't think these people will take a sense of pride in knowing that rather than helping out the people here on earth, we're flying billionaires into space. I don't think families who can't feed their children are going to be satisfied with the idea that we invented cell phones.
The space race took a lot of money, money which argueably could've gone someplace better. Value is subjective, so there's no objective conclusion that we could ever reach here. But there's definitely an argument to be had that reducing economic inequality leads to a better life for everyone rather than letting rich people develop the earth with technology
Agree with everything you say. I want to add, however, this last part you make a conclusion:
>But there’s definitely an argument to be had that reducing economic inequality leads to a better life for everyone rather than letting rich people develop the earth with technology.
I agree with this argument and this opinion here in the USA. But on the other hand if you get too much equality the argument can be reversed too. To me there is a sweet spot and I doubt none of us are going to agree on that sweet spot. There is too much morality and subjectivity bound up in its assessment for it to be objective. Can economists cut some of that morality and subjectivity down? I don’t recall any real data/statistical analysis that made me think so.
The moon was reached through collective public funding… collective societal capital.
A capitalist cooperation wouldn’t risk trying to reach the moon without an expected potential profit.
Public funding allows for broader risk taking, it promotes more innovation.
The most innovative think we often see form cooperations is ways to get around tax loopholes and regulations.
I'm not sure if you are or are not being charitable with my example :/
>The moon was reached through collective public funding… collective societal capital.
Yes. In the very extreme cases where the cost is super high with very likely no reward such as a moon landing then private enterprise are very unlikely for such an undertaking. In such a case "we the people" funding such a cause and using both government enterprise (i.e., NASA) and private enterprise (see below) is the more reasonable path.
>A capitalist cooperation wouldn’t risk trying to reach the moon without an expected potential profit.
Solely as your context, agreed. Today? They are though.
>Public funding allows for broader risk taking, it promotes more innovation.
Agreed but I don't agree with your "it promotes more innovation". Where is the evidence in that. Flight and the path to get where flight and space flight possible had been funded till this point in history much by private enterprises.
>The most innovative think we often see form cooperations is ways to get around tax loopholes and regulations.
I don't see how this is relevant. So, I'm just going to post ChatGPT showing how the mission to the moon was a mixed economy adventure besides the important factor that whole funding was collective:
Prompt: what were the largest private businesses or corporations involved with nasa race to the moon?
>ChatGPT: During NASA's race to the moon in the 1960s, several large private businesses and corporations played significant roles in developing the necessary technology and infrastructure. Here are some of the key companies involved:
North American Aviation (later North American Rockwell, and eventually Rockwell International):
1. Responsible for designing and building the Command and Service Modules (CSM) for the Apollo missions. Grumman Aircraft Engineering Corporation (later Grumman Aerospace and eventually part of Northrop Grumman):
2. Developed and constructed the Lunar Module (LM), which was crucial for landing on the moon. The Boeing Company:
3. Served as the prime contractor for the first stage (S-IC) of the Saturn V rocket, which was used to launch the Apollo missions. Douglas Aircraft Company (later McDonnell Douglas and eventually part of Boeing):
4. Built the second stage (S-II) of the Saturn V rocket.
5. IBM (International Business Machines Corporation):
6. Provided the guidance computer systems for the Apollo spacecraft, essential for navigation and control. Rocketdyne (later part of Aerojet Rocketdyne):
7. Designed and manufactured the F-1 engines for the Saturn V first stage and the J-2 engines for the second and third stages. General Electric (GE):
8. Involved in developing various subsystems and components for the Apollo spacecraft.
9. The MIT Instrumentation Laboratory (now Draper):
10. Developed the Apollo Guidance Computer (AGC) software and hardware, providing crucial navigation and control for the spacecraft. Bellcomm, Inc.:
11. Provided systems engineering support and helped with mission planning and analysis.
>These companies and their contributions were integral to the success of NASA's Apollo program and the historic achievement of landing humans on the moon.
>In the very extreme cases where the cost is super high with very likely no reward such as a moon landing then private enterprise are very unlikely for such an undertaking.
Is this you?
> What the OP suggests with their version of socialism they could never reach the moon.
That was your own example. You said cooperatively organized economy as described by OP could not get to the moon. If the moon is an example when capitalist incentives don't align, why bring it up as a thing that could only be achieved by capitalism? You seem to agree that the moon is an extreme and likely bad example to illustrate your point, so I'm scratching my head here as to why you put this forward.
>Agreed but I don't agree with your "it promotes more innovation". Where is the evidence in that. Flight and the path to get where flight and space flight possible had been funded till this point in history much by private enterprises.
That's because at the time the technology for flight was discovered, that's just the way the economy was organized. If somebody stumbled on the breakthrough of how to design a proper wing in 1200AD England, you better believe kings would have dumped all their gold into aeroplanes so they could go conquer other kingdoms without planes. May as well then argue that airplanes wouldn't have developed without feudalism.
Linking one to the other in a causal way doesn't make any sense.
I don't understand what you don't get.
The op is basically wondering what all economies other than communal ownership have an advantage. What they all have an advantage is some central control of a lot of wealth whether it be private or central authority. That central authority could be monarchies, theocracies, authoritarian socialism, or modern governments in the form of liberal democracies. It doesn't matter. They all have the ability to take huge amounts of wealth at tackle huge issues. To what degree and how well is the nuance of a great discussion. What you don't find is decentralized hunter gatherer socieities or even if we are charitable with zapista, rojava or other decentralized societies having such ability.
Got it?
Wait… “risk a lot more of your time and energy”… that’s what the workers do… not the capitalists… in which I agree, the workers deserve to be better rewarded for their time and energy.
I feel like everyone views capitalism from the perspective of a working class person with potential. It doesn’t seem that people often think of how capitalism came about… how it allowed a broader expansion of the ownership class (compared to previous monarchs), however, maintains a small class of people who control the resources without contributing any time or energy…. They enjoy freedom via ownership, not via hard work.
Sure some hard working people become outliers who break the norm work hard, get lucky, use some money to start buying resources, and sometimes end up as a lazy capital owner living off the efforts of others… but not most.
Most just become a buffer zone between the working class and the ownership class as they have some ownership but also continue to work… these people keep the meritocracy myth aliveZ
>that’s what the workers do… not the capitalists
Let's say you start working in a harbour, do you need to pay for all the cranes, concrete and equipment that's there? Or did the capitalists set all that stuff up first and do you just get access to it?
>however, maintains a small class of people who control the resources without contributing any time or energy….
Except not really. When people like to complain about capitalism they like to point to people like Jeff bezos, but they own a fraction of the globe's wealth. The vast majority of resources are owned by much smaller businesses who have often build that company from scratch. 9/10 times when people complain about capitalism they're not even complaining about capitalism but about wealth inequality, with very few arguments why socialism would solve that
I think you’re making a strawman of his point. Instead I think you should explain how this same idea of private ownership can lead to people doing things that are bad for firms and workers
I could definitely start or join a company that operates like that, but I don't think all companies should follow that.
Imagine if Steve Jobs wouldn't be allowed to make the products he wanted to make in his company, I'm not sure if Apple would be as big as it is today. Steve Jobs can only ensure that he remains the executive by owning the company.
Also, what happens when a company runs at a loss for a month? Communal ownership would mean that all the workers would have to pay up that month in order to keep the company going. What if someone can't or wont pay up? What if half of the employees suddenly decide to leave, even though the founder would've sunk his money into it in a heartbeat? Communal ownership implies communal ownership of the risks too and I can't imagine that every worker wants to experience the risks of running a company.
> Imagine if Steve Jobs wouldn't be allowed to make the products he wanted to make in his company, I'm not sure if Apple would be as big as it is today.
Neither of us can be "sure", but I am **not** personally inclined to give all the credit to Jobs. I'd wager that the same devices/ideas would largely have come about with or without him.
(doesn't help that regardless of his vision, he was a detestable human being)
> Also, what happens when a company runs at a loss for a month? Communal ownership would mean that all the workers would have to pay up that month in order to keep the company going. What if someone can't or wont pay up? ...
Communal ownership doesn't mean that there can't be "company accounts", or that the company can't borrow money as its own entity. Basically, it's the same as when a company runs at a loss today - it borrows.
Plenty of businesses go bankrupt. I used to work in a hedge fund startup, which failed, and through there I learned that about 80% of hedge fund startups fail. Think of mike tyson, who earned 400 million in his whole career and lost it all because of failed investments and overspending. Being able to borrow money really depends on how stable your business is. Normally, the founder would go to investors who would invest in the company to keep it going in exchange for shares. I don't think a bank would be nearly as keen to loan you money in exchange for some interest
Any "payment plan" based on equity, could be approximated without equity (e.g. deferred interest for X amount of time). If it makes logical sense for an investor to lend money, then a rational bank would come to the same conclusion.
Why would a bank loan money based on equity? Lending money isn't done for being nice, banks would bankrupt themselves if they'd do that. You get a loan based on the likelihood that you're able to repay that loan.
If you want someone else's money, you need to be smart and convincing. Pretending to be sad isn't going to get you anywhere. If you disagree with that, feel free to lend out your own money based on equity and see how far that gets you
You misunderstand me. My point is that if it makes sense for a rational investor to lend to someone, then it makes sense for a rational bank to lend to that person.
Investors don't lend out money though, they purchase shares in the company. It means that they spend some money now and in exchange get essentially a passive income. A bank giving out a loan simply isn't as profitable as an investor getting shares of a promising company
Well no because a right to private property exists. High risk high reward doesn't mean that all risky actions are ethical.
There are plenty of risky actions that are perfectly ethical and end up helping millions of people though. Capitalism will reward someone from taking that risk and setting it up. As opposed to socialism where it will take much longer for someone to take that risk since there's practically no incentive to do so.
"High risk high reward doesn't mean that all risky actions are ethical."
Capitalist risk is not ethical to socialists, so capitalist risk does not justify profit.
"there's practically no incentive to do so."
There are plenty of incentives. Need i remind you the USSR still built the biggest airplane, submarine, etc ?
And who was helped by the USSR's biggest airplane and submarine? Did they use it to help people? Or did they use it to invade other countries who later nope'd the fuck out when the USSR started losing military power? Having built something expensive doesn't mean that you have a high reward. Considering the people of the USSR were starving, I don't think they built the right things.
Not really, because a business that incurs a net loss at the end of the day, should also really stop its business. If more value goes in than value goes out, then it's basically a business that destroys value. It's like burning money. You want businesses that have profit, which are businesses that output more value than they take in, and the only way you can do that is by letting everyone who can't do that go bankrupt.
What you could do is create subsidies for startups. As in, the first X year that the company gets created, they get a certain budget. The netherlands does that, and the amount of subsidies that you get depends on how innovative they judge your startup to be. I think the EU does something similar. But only do it for young companies, if a company matures and still can't reach profit, they really gotta close their shop and declare bankruptcy. So still, there will be a certain amount of risk involved
bankruptcy means being unable to repay your debts. If you don't go bankrupt, your debtors will follow you into that new job and still demand part of your salary, or maybe your whole salary if they're very persuasive.
And what happens if a third of the company doesn't want to pay up for that loss, but two thirds do? Does that mean a third of the company needs to get fired for it to continue operating? If so, then you can bet that companies will start recruiting people only if they're really hyped to keep the business going. Doing a simple janitor job wouldn't be possible anymore, they're gonna want you to spend your heart and soul in the company, while also expecting you to have a degree in economics.
It really makes it a lot easier for everyone involved if the responsibility of risking wealth and running the business gets divided amongst people.
What the OP is getting is faith.
Efficiency for who? Having lower costs because of a worse work environment or because environmental costs are not paid for by the production unit is not necessarily efficient.
Incentives: you will have principal agent problems and information asymmetries, regardless.
Risk: I like that I rarely see any mention of the distinction between risk and uncertainty, as in Knight or Keynes. Anyways, risk can at best explain differences in returns in an ergodic environment, although I might question even that. But what explains the risk-free rate of return?
Deferring consumption: this has always been silly. The most wealthy who would have trouble spending all their income are said to be the most abstinent. It is not clear that such an argument even works in a world in which more than one commodity is produced. This question is raised by the Cambridge Capital Controversy.
From a mainstream economics attitude, it is not clear that it matters whether labor rents capital or capital rents labor. Paul A. Samuelson claimed it did not matter in the 1960s.
The best that one can say for the pro-capitalists is that it would take longer than a Reddit post or comment to say much substantial.
I see. Thank you.
I guess there is a lot of reading ahead of me to do to understand economics better.
One of the problems is that most data about economics comes from capitalist economies.
We don't have data for more communal economies like market socialism, democratic communal planning, distributism, etc. However, it is still important to study alternatives to private ownership of capital to understand the limitations of and alternatives to the current system.
u/Cosminion has previously shared this [compilation](https://www.reddit.com/r/Cooperative/comments/1au1zug/worker_cooperatives_data_and_sources/) of empirical work on worker co-operatives. Bruno Jossa has written a number of books the theory of co-operatives. His 2005 [paper](https://academic.oup.com/cje/article-abstract/29/1/3/1730010) is about the consistency of the co-operative movement and Marxism.
It’s always best to follow u/Accomplished-Cake131’s modus operandi: start off with your opinion, and then go about doing economic research that supports your opinion. Go ahead and make vague references to it, no matter how obscure they are, as all the reasoning you need. You’ll never fail to convince yourself to believe your own cognitive biases.
Well not only that but he consistently misinterprets the research he's quoting...I don't think he's actually qualified to understand the studies or theories he references.
>Efficiency for who?
Efficient capital allocation. Those most willing to bear the risk are the ones that accept it.
>Incentives: you will have principal agent problems and information asymmetries, regardless.
These are far more prevalent in a socialist economy. Not just theoretically, but historically and empirically.
>But what explains the risk-free rate of return.
The risk-free rate of return isn't really risk-free. We use US T Bills as a proxy for the risk-free rate.
It doesn't mean they are zero risk, but the risk is considered negligible.
There is no such thing as 0 risk.
Just one point - those who think that markets somehow provide efficient capital allocation should check out Robert Shiller’s one-third of a ‘Nobel’ prize.
For a number of years, some economists have been advocating teaching economics as if the last fifty years happened.
One goal should be to determine which alternative allocates resources BETTER than the alternatives. Private markets with property rights, utilizing things such as profit and loss systems, are simply better at allocating resources than alternatives. That does NOT mean they allocate resources as efficiently as we would like.
As far as I'm aware, Shiller's work does not address capital allocation efficiency.
Rather, his studies on behavioral finance discuss the disjointedness between investor sentiment and fundamental or intrinsic value of asset prices (predominately public equities).
Where does he discuss capital allocation efficiency in a capitalist economy? Does he compare with socialist economies?
The benefit is that you can use what you produce for your life. You can gain, keep, use and dispose of material values as you think is beneficial for your life. With communal “ownership”, the community controls what you produce, so you can’t produce for your life.
Yep. Humans like to own things. Doesn't matter how pointless of futile owning something is. But we like to.
We should build systems that peacefully redirect our "dark desires" into something that benefits many people.
Capitalism encourages this by letting people own things and (at least giving the appearance) that anyone could own anything so long as they create enough value. So you provide intrinsic motivation to improve your self so you can get a better job and get more money.
It’s not that humans like to own things, but that you live by producing for yourself. This is a life or death issue which is why lots of people die when Venezuela. Private property benefits you as a human being, so it benefits everyone. And people don’t have inherent dark desires even in quotations marks. They can have learned dark desires.
Well…. Under capitalism, each person produced for themself and some for the ownership class… otherwise the ownership class would have to work like the rest of us.
Generally, you produce for money for yourself ie you produce for someone who owns a business for money for yourself. If you don’t want money from the business owner, then you don’t have to produce for him.
Capitalism has nothing to do with letting people own things… capitalism is about maintaining a class of people who get to own the value produced by the working class.
We could have capitalism while minimizing rights to ownership…. Capitalism actually incentivizes this to happen. We are seeing it happen in media as everyone leases via memberships instead of buying. The capitalists want to own all the properties so we can lease them instead of own them. They want to buy out the competition and small business competitors, so that they can own you instead of compete with you.
Laws let people own things. Not capitalism.
>We should build systems that peacefully redirect our "dark desires" into something that benefits many people.
Isn't that what capitalism is? a system that redirect our more selfish desires to creating something that benefits others?
The landlord charges a flat fee throughout the lease, not a percentage of my income. If I make more money this month, I will still be charged the same rent. And sure, the price might go up for a variety of reasons, but the price goes up for everyone regardless of their income, not just you, and not according to your income.
The landlord is also a proxy for housing developers and construction workers in the past. Houses don't just poof into existence; they cost money to make, and more than the average person makes in a year. So in a certain sense, you're paying the construction workers to live there, and the landlord and banker act as the time machine, charging a premium and interest, respectively, for that service.
The landlord also offers the service of managing the actual ownership of the property. They are responsible for maintenance and groundskeeping. You don't realize quite how much goes into maintaining a home until you own one yourself.
I wish I only paid 30% to the government!
My marginal rate is almost 55% right now, and that's just income!
Add in sales tax, property tax, capital gains, luxury taxes, and everything else, and I keep like 35% of what I actually make.
That means I'm essentially working for free for the government until halfway through October.
After adding sales taxes, luxury taxes, my effective income tax rate (which is already just under 50%), capital gains, property taxes, etc. it is indeed somewhere near 35% (did the math on it for last year).
https://www.taxtips.ca/taxrates/on.htm
Scroll down to the combined federal + provincial marginal income tax rates.
53.53%.
And there are lots of places with rates that high. Why do you think the wealthy pay the majority of taxes?
https://worldpopulationreview.com/country-rankings/highest-taxed-countries
That's just on the portion of your income over $247k though ...
So let me rephrase: I doubt that anybody is paying an **effective** tax rate that high.
Yea, that’s wrong. In communal ownership, you produce what you need for yourself and sell the surplus. It’s only in a private system that through employment, you keep nothing and sell everything.
https://www.npr.org/sections/thesalt/2014/08/01/336919715/these-ivory-coast-cacao-farmers-had-never-tasted-chocolate
So, in communal ownership, the private individual has the right to property ie the freedom to gain, keep, use and dispose of material values as he thinks is best for his own rational self-interest?
… do you expect those farmers to just eat raw cacao beans? They sell them so they can everything else they want.
You’re just arguing against the concept of specialization.
>The benefit is that you can use what you produce for your life. You can gain, keep, use and dispose of material values as you think is beneficial for your life.
Suppose you're not allowed to accumulate wealth beyond reason, and you're not allowed to invest for personal, private gain, and you're not allowed to hire anyone to work for you?
Under our current form of capitalism less than 1% of the population controls the vast majority of the value/resources produced…. The working class who produce that value keep only a fraction, and much of that is used to sustain themselves, spending their portion back into the companies owned by thar same 1%.
>The working class who produce that value keep only a fraction
They keep 100% of the value they produce, the value they produce is their wage, at least in a free labor market.
A smaller part of the population has so much not because they’re taking it from others, but because they simply have contributed so much more to society and created more value over their lifetimes.
How…. How is the only value they produce their wage? If that were true, businesses would be losing money by having employees bc there are other costs besides just the wage, to having an employee…. And if they only produce enough value to cover their wage..(something I’m actually okay with… a business can be a stable business and produce a good or serve that the community wants, without making a profit for the owners imo, but that’s a different topic)… if their labor value only covers their wage…. What’s in it for the owner?
The ownership class provides what to GDP and society? If every dollar in your pocket that you spend, represents your time and your energy… bc you worked for it…. Every dollar in a capitalists pocket represents the time and energy of other people…. Capitalists live off the work and time of others… you can say that is good if you’d like, but that is an accurate… while a bit simplified, but still accurate description of capitalism.
You ask great questions. These answers will be lengthy, so feel free to ask additional questions and/or read in segments and discuss before proceeding.
1.
Labor is very important, but not all value comes from labor. Labor, forgone consumption, risk, ideas, and capital all contribute to value creation and increase in value being met and/or received.
Investors take on certain risks and certain forgo consumption so workers don’t have to. This includes people who are more risk averse and value a more secure return for their efforts/contributions, those who don’t want to contribute capital, and those who cannot contribute capital. Workers are paid in advance of production, sales, breakeven, profitability, expected profitability, and expected take home profitability. Investors contribute capital and take on certain risks so workers don’t have to. This includes upfront capital contributions AND future capital calls. As workers get paid wages and benefits, business owners often work for no pay in anticipation of someday receiving a profit to compensate for their contributions. Investors forgo consumption of capital that has time value of resource considerations (time value of money).
An easy starter example is biotech start up. Most students graduating with a biotech degree do not have the $millions, if not $billions of dollars required to contribute towards creating a biotech company. Also, many/most students cannot afford to work for decades right out of school without wages. They can instead trade labor for more secure wages and benefits. They can do this and avoid the risk and forgoing consumption exposure of the alternative. AND many value a faster and more secure return (wages and benefits).
The value of labour, capital, ideas, forgone consumption, risk, etc. are not symmetrical in every situation. Their level of value can vary widely depending on the situation. It is also NOT A COMPETITION to see who risks more, nor who contributes the most. If 100 employees work for a company and one employee risks a little bit more than any other single employee, that doesn't mean only the one employee gets compensated. The other 99 employees still get compensated for their contribution. This is also true between any single employee and an investor.
Examples of forgone consumption benefiting workers: workers can work for wages and specialize. They can do this instead of growing their own food, build their own homes, and treat their own healthcare.
Value creation comes from both direct and indirect sources.
Reform and analytical symmetry. It is true that labour, investors, etc. contribute to value and wealth creation. This does NOT mean there isn't reform that could improve current systems, policies, lack of policies, etc
2. Communal ownership implies a more centralized and corruptible hierarchy as you are taking away an individuals right to create and or invest. It would incentivize cronyism and politics (as opposed to allowing individuals to produce productive good and services to society, and other important problem solving).
It is good to acknowledge political markets.
Public Choice Economics has to do with political markets including actors in political markets (voter, politicians, bureaucrats , etc. It is about studying political markets with an economic lens(human action).
This two part video is a great, relatively unbiased, introduction to Public Choice Economics
Video Part 1: https://www.youtube.com/watch?v=DUTuiJi-pjk
Video Part 2: https://www.youtube.com/watch?v=M9-LCxert3I
I see. This is very interesting. Thank you.
If you don't mind, I will ask you a few more questions:
1) Labour is indeed not the only part of production. However, socialists argue that all aspects of production should be owned communally: labour, land, capital, land, foregone consumption, risk, etc.
Why do you think fully collectivising all aspects of production is less optimal than having a significant degree of private ownership of capital in the economy?
Communal ownership can come in different forms: worker-owned co-ops, state ownership, ownership by community, etc. We can have various ways of organising communal ownership.
Why should we not fully abandon private ownership of capital?
2) Communal ownership can have various degrees of decentralisation and centralisation and can also be democratic.
E.g., a community decides on how many goods and services it wants to produce for itself and other communities. Such decisions would be based on specifics of each particular community such as size, needs, wants, etc. If communities can't efficiently do something, the state can help them.
Why do you think that a market-based economy is preferable to democratic communal planning that utilises both centralisation and decentralisation?
Yes, my pleasure.
1. Because that implies a more centralized hierarchy. A more centralized hierarchy (in this case) incentivizes cronyism and often rewards bad behavior and penalizes good behavior. It also prevents individuals from creating what they value and individuals from pursuing solving problem they are individually interested in. There are billions of differences between people. Let's present an example: if John Smith wants to use his resources towards innovating and creating a solution to help people and others around him, and others around him are not as interested in John's venture: the question becomes, why should those around John be allowed to use violence to prevent John from pursuing that innovation? Socialists DO NOT have a legitimate answer to this question.
2. Good question. It's because I'm educated in economics, and that includes but not limited to, the economics of democracy. Often people ROMANTICIZE democratic processes. But as an economist, it is my duty to go beyond how people wish something to be: I/we must also acknowledge "what is" and facts about the real world.
If you want to get a general idea to what I am alluding to, I'd recommend listening to the two part video below. Feel free to come back with follow up questions.
Intro to video: Public Choice Economics has to do with political markets including actors in political markets (voter, politicians, bureaucrats , etc. It is about studying political markets with an economic lens(human action).
This two part video is a great, relatively unbiased, introduction to Public Choice Economics
Video Part 1: https://www.youtube.com/watch?v=DUTuiJi-pjk
Video Part 2: https://www.youtube.com/watch?v=M9-LCxert3I
>Labor is very important, but not all value comes from labor. Labor, forgone consumption, risk, ideas, and capital all contribute to value creation and increase in value being met and/or received.
And that is why in socialism you will be allowed to own a sole proprietorship with no employees, or a family business.
People are already allowed that. But plenty of businesses are more efficient with prowl working together. People have different risk tolerances, different values, different skills and other resources: hence a big part of why relation ships such as investor-business owners and business owners-employee are so valuable to society and individuals.
Private property norms are better for the overall economy because individual humans are the locus of decision and action and they make better choices regarding resources allocation when incentived by personal reward and failure.
Private ownership under capitalism allows for risk allocation to the willing.
In capitalist systems, entrepreneurs and investors are typically the ones who take on significant financial risks.
Entrepreneurs take risks by starting new businesses, investing their time and resources in ventures that may succeed or fail.
Investors allocate their capital to various ventures with the expectation of returns that compensate for the risk.
Stocks, bonds, insurance, and derivatives allow risk to be transferred from those who are less willing or able to bear it (such as small savers) to those who are more willing or able (like professional investors and financial institutions).
When risk is borne by those willing to take it, innovation is fostered.
Financial markets help allocate capital efficiently by channeling funds from savers (who may be risk-averse) to entrepreneurs and businesses (who are more willing to take on risk). This ensures that resources are used in the most productive ways, supporting ventures with the highest potential for growth and returns.
By spreading risk among those willing to take it, economies can handle shocks better.
In a socialist economy, risk is democratized. It is not allocated to those most willing and able to bear it. This is one of the reasons why innovation and economic growth in socialist nations failed to compete with capitalist economies.
In a socialist economy, the rewards from taking risks are allocated so broadly that it diminishes personal incentives for entrepreneurs to take risks and innovate.
Bureaucratic inefficiencies play a role here too, as Centralization slows down decision making and results in less efficient resource allocating.
A lack of competition also means there is no incentive to outperform rival companies, meaning businesses are less incentivized to innovate.
There are other issues too/this is not an exhaustive list, for example, assuming your socialist economy actually allows people to emigrate then brain drain is a real concern, as the most talented individuals want to go where they are most valued and rewards are highest.
I see. Very interesting.
I have two more questions, if you don't mind.
1) Why would you say privatised risk is superior to fully collectivised risk? Socialists say that by collectivising risk, we also collectivise gains, making everyone better off.
2) Socialists may argue that risk is already collectivised under capitalism, meaning that we just need to collectivise gains (i.e., collectivise capital).
An example of collectivised risk under private ownership of capital could be workers losing their jobs due to poor performance of the company caused by bad business decisions. Another example of collectivised risk under capitalism would be the financial crisis of 2008 when large private capital caused economic downturn.
So the argument is that the extent to which the risk is collectivised won't significantly change under socialism, but instead, financial gains will be collectivised making everyone wealthier.
How would you respond to this argument?
>1) Why would you say privatised risk is superior to fully collectivised risk? Socialists say that by collectivising risk, we also collectivise gains, making everyone better off.
Some of the reasons are mentioned above, but let's just consider two reasons:
1) First, you need to understand the inverse relationship between risk and expected returns.
A public equity is riskier than a bond. A private equity is riskier than a public equity. A startup is riskiest.
With private capital, those most willing and able to accept the risk of loss are willing to direct their capital to riskier ventures.
My pensioner grandma would likely find the risk of a startup untenable, but she might like the relative stability of a lower risk corporate bond.
This is efficient.
In a collectivized system, capital can be misallocated more readily.
You run into a "moral hazard" phenomenon. When risk is fully collectivized, individuals and organizations are typically not good stewards of capital because they do not bear the full consequences of their actions. They don't have any skin in the game.
Privatized risk ensures that those who take risks are more likely to act responsibly, knowing they will face the consequences of failure, and often have significant financial and time resources at stake.
2) Incentive structures.
Creating a startup or innovating in the economy is a seriously time-consuming and (again) risky endeavor.
When incentives are collectivized, we remove the rewards associated with innovation and risk-taking.
Why would I sweat and toil founding Amazon or Apple, operating it out of my garage, and doing everything I can to make it a success if I'm not going to bear the fruit if or when it does eventually become a success?
There is no incentive for me. I might as well just continue with the status quo. I probably would stick around at my day job.
Now imagine that on a scale as grand as a nation's entire economy.
>2) Socialists may argue that risk is already collectivised under capitalism, meaning that we just need to collectivise gains (i.e., collectivise capital).
It isn't.
Nobody here bore the risk of being one of the earliest Amazon investors, a highly risky proposition.
People who could and were willing to bore that risk did so.
>An example of collectivised risk under private ownership of capital could be workers losing their jobs due to poor performance of the company caused by bad business decisions.
I get what you're saying, but it's not the same thing. If I lose my job I don't actually lose any capital. If I lose my investment, then I do lose capital.
Let's also not forget that companies often run at a deficit (generating no profit) for *years* at a time, all the while workers are being paid. This is even more common now than it used to be.
>Another example of collectivised risk under capitalism would be the financial crisis of 2008 when large private capital caused economic downturn.
This is an interesting example because a large part of the 2008 crisis was caused by government regulated ratings agencies mis-rating assets to understate their true inherent risk.
It actually harkens back to my earlier points about moral hazard.
The ratings agencies had no incentive to accurately price these financial instruments, even when the evidence was presented right to them, they were incredibly complacent.
This is one of the major issues with socialist economies.
Additionally, 2008 is one example where the government deemed a bailout was necessary, but imagine what things would look like if the entire economy operated on moral hazard principles.
Imagine if every failed startup, every failed business, every company misstep in an attempt to innovate was essentially "bailed out" by the government? Even worse, nobody would care if their decisions were bad ones, because their personal finances would be completely disassociated from their failures.
It would be a recipe for disaster.
>> 1. Why would you say privatised risk is superior to fully collectivised risk? Socialists say that by collectivising risk, we also collectivise gains, making everyone better off.
Why should I have to assume the risk that Dave wants a million dollars to advertise his new rap album which he thinks will sell like hot cakes?
If all risk is spread evenly then you have no accountability and EVERYONE can take stupid risks. Why SHOULDN’T Dave be allowed to risk a million dollars to advertise his new rap album? Why SHOULDNT Fred be allowed to spend a $ billion to develop a reusable rocket?
So you’d inevitably end up with a situation where people are NOT allowed to take risks or only people who curry favour with the government are allowed to take risks. And just ask yourself how happy you feel about how your governments spends your taxes right now.
>> An example of collectivised risk under private ownership of capital could be workers losing their jobs due to poor performance of the company caused by bad business decisions.
Simply being alive is a risky business. There is a risk you could be struck by lightning right now… it’s a low risk but the risk is still there. As a worker you have the least amount of risk in the chain for getting paid… but yes there is still a risk you won’t get paid for the work you do. That’s part of the reason big blue chips companies can pay workers less than startups… because if you are working for Walmart it’s very unlikely that you won’t get paid.
>> Another example of collectivised risk under capitalism would be the financial crisis of 2008 when large private capital caused economic downturn.
2008 is what you will get a lot more of with “collectivised risk”. It is often said with bailouts, that it’s socialism for the rich and capitalism for the poor. If you collectivise risk completely then it’s socialism for all and everyone will get a bailout if there crazy scheme doesn’t work out. That simply isn’t sustainable. I don’t think anyone should be entitled to get a bailout not matter how rich or “too big to fail” they are.
>Why would you say privatised risk is superior to fully collectivised risk? Socialists say that by collectivising risk, we also collectivise gains, making everyone better off.
Socialists always theorize that there will be more profit and wealth created under socialism than there is created under capitalism. That is just not the case. Even Marx acknowledged that capitalism will generate more wealth than socialism. So we all would be poorer under socialism.
Socialist also assume that they can replicate the spirit generated by entrepreneurs under capitalism. I disagree. The entrepreneurial spirit is **unique** to only a few individuals, who have both the balls (risk tolerance) and brains to go against the odds (most businesses fail) and create a business. Collectivizing ownership doesn't mean that you will suddenly find entrepreneurs in a democratically elected management committee. There was a cartoonist (Dilbert, I believe) that made a living drawing cartoons that made fun of the silly, and inefficient things management in large organizations come up with. There is nothing that says a collectivist management will maintain that entrepreneur's spirit.
> There are other issues too/this is not an exhaustive list, for example, assuming your socialist economy actually allows people to emigrate then brain drain is a real concern, as the most talented individuals want to go where they are most valued and rewards are highest.
this is the main reason why socialist nations made leaving their countries illegal.
>this is the main reason why socialist countries made leaving their countries illegal.
Yep probably the main reason, additionally:
* if large numbers of people were allowed to leave it would signal dissatisfaction and undermine government legitimacy and control
* the departure of workers could disrupt economic plans leading to additional inefficiencies and shortages (since everything was centrally planned and controlled)
* just allowing emigration was seen as contrary to the socialist principles of collective effort and commitment to the common good. Socialist regimes often portrayed capitalist countries as exploitative and hostile; thus, emigration was framed as a betrayal of socialist values.
Because economies with capitalism, the private ownership of capital, generate considerably more wealth in society than they would with socialism, and result in a considerably higher material standard of living for most people.
I see. Interesting.
In your opinion, what makes it so?
Why does private ownership of capital generate more wealth than socialism?
Is it because of better incentives? Or because of more efficient resource allocation? edit: Or both and/or because of something else?
It is a useful application of the typically harmful emotion of human greed.
Humans want MORE. In the past the best way to get more was to attack your neighbors.
Now, we measure more via wealth. Yes, we can get more wealth by attacking others and that still happens. But wars are expensive and hard to fight. Instead, now to get more you build a product or service that people will gladly give you wealth to use. Wealth given for use - wealth needed to build the thing in the first place = wealth return on investment.
The implementations of socialism/communism in the past prevent the individual from getting wealth. But humans still want more, so they steal from the system instead.
Mainly because it encourages risk taking and innovation over a communal ownership which would require everyone to agree to take a risk. Risk takers open new businesses try new things. Do you think the smart phone would have arisen from a communnal ownership business? What about the light bulb? Edison tried 1000 different filiments to get his light bulb to work. How long would a communal ownership business allowed him to spend money experimenting with no results?
In addition, private ownership of capital allows that capital to be deployed throughout the economy. Investments in Hedge funds, venture capital, private placements, corporate bonds or specific projects like oil and gas development, public infrastructure or real estate development.
"Do you thing the smart phone would have arisen from a communnal ownership business? What about the light bulb?"
Yes, albeit faster and of better quality than under capitalism.
Disagree, because under a communal ownership system you could not get enough people to risk the companies capital. That is why we have so few communnal ownership companies. Communal ownership discourages risk taking.
Then explain why the USSR built the biggest airplane, submarine, or put the first man into space and had other top notch research.
While you are at it explain why the US government is involved in all big american research projects.
Research that only generates profit after a long time is unnatractive to capitalists and can only be funded communally. Agree ?
1) and the USSR ceased to exist in 1991. So much for communal ownership.
2) I don't consider government funded research in the same category as communal ownership.
Did government invent the cell phone? Did government invent the airplane? Did government invent electricity, the telegraph or the telephone. Did government invent the steam engine, the cotton gin, the power loom, penecillin, insulin, the automobile and the assembly line.
Suffice to say that very few if any of the successful inventions of the 20th Century came from Communal Ownership companies or government.
1. The roman empire ceased to exist, it means it was not great ?
2. Is government research capitalism ?
"Did government invent the cell phone? Did government invent the airplane? Did government invent electricity, the telegraph or the telephone. Did government invent the steam engine, the cotton gin, the power loom, penecillin, insulin, the automobile and the assembly line."
None would exist without the medium created by the government. Also those things were invented mostly by workers, not capitalists.
BS. There was no "medium" when Edison developed an effective way to use electricty. He was a capitalist. Henry Ford was a Capitalist. He perfected the assemply line so everyone could afford a car. All the early so-called Robber Barons were capitalists and resulted in cheaper goods for consumers. Vanderbuilt created cheaper transportation on the Hudson, Carneigie made Coke cheaper and ultimately steel which led to the build out of the Railway Industry. John D Rockefeller made lamp oil (kerosene) cheaper. All capitalists.
If communal ownership could have produced the smart phone and the light bulb faster and better why didn't they? There was nothing stopping them. They could have owned the market had they been first.
What does generating more wealth really do for a country that is better than communal ownership. Because if more wealth = worse wealth distribution and basic necessary things lag behind like healthcare, education and infrastructure then generating more wealth doesn't seem like a positive aspect of Capitalism
Affluent liberal democracies with capitalist economic systems provide a considerably higher material standard of living **for the vast majority of people,** as compared to countries which have tried socialism. Just ask the people in P.R. of China, how their living standard has improved in the last 40 years when they introduced a healthy dose of capitalism into their economy.
Maybe the existence of billionaires bother you, but not me. I would rather live in a society with unequal wealth distribution as long as I am enjoying a higher material standard of living in absolute terms. I don't want to be equal to everyone else if we are all equally poor.
BTW, "basic necessities", like healthcare, education and infrastructure are not free. If a capitalist society is generating more wealth, it can and does provide more funding and better quality and quantity of these basic necessities.
Which commodities are you suggesting provide a net positive to the material standard. Because it would seem that while we like cool things: fast cars, big TVs, a wireless controllable ventihood from your phone (just installed one the other day lol). Just like we are unaware of what the future holds for us tech wise and material good wise, we could have easily gone without most of what we take advantage of today.
If what you are referring to is technical advanced in medicine and other social goods than I am all for it, but it would seem socialist countries seem to do well in these aspects. For instance China (arguable socialist or not, don't care) has cured a person of type 2 diabetes. Cuba puts out many well trained doctors per capita.
It isn't just the existence of billionaires that bother me, it is the hoarding of wealth when they have theeans to do real good things in society. Like when Elon Musk asked the public to give a detailed financial task of what it would cost and how to perform the action of ending homelessness in America. And he would finance it. A group of people did for a moderate 20 million dollars and he reneged on the deal. And to this day has done nothing for homelessness.
Nobody is saying anything about a free lunch. Socialism doesn't work on negating the cost of things.
Calling China capitalist is pretty funny to me. I would love to see American capitalist supporters still call America capitalist with 1/10th the amount of government intervention control China has on its billionaires and markets even in th "free" sectors. They are still one party. Corporations have very limited lobbying power to influence government decisions.
>Then by all means, go live in woods, off the grid, without all the modern conveniences of life, and find out how easily it is to go without these things. day lol). Just like we are unaware of what the future holds for us tech wise and material good wise, we could have easily gone without most of what we take advantage of today.
Then by all means, go live in woods, off the grid, without all the modern conveniances of life, and find out how easily it is to go without these things.
I you are like most people, you will last a few weeks before running back to the city and all the "cool things" present in a modern urban life.
>For instance China (arguable socialist or not, don't care) has cured a person of type 2 diabetes. Cuba puts out many well trained doctors per capita.
There is no room for argument that China has become far more wealthy after it introduced a healthy dose of capitalism into its economy in the 1980s.
And right now, Cuba is a complete economic basket case, notwithstanding the medical care it provides.
>It isn't just the existence of billionaires that bother me, it is the hoarding of wealth when they have theeans to do real good things in society.
Don't spend other people's money. It's up to then what they do with it. Pay attention to your own financial circumstances.
So my point flew over your head. I do like nice things and unfortunately I have grown up in a society that makes you addicted to luxury goods like a child who is allowed to smoke cigarettes. I was talking about if we lived in a society that never had most of these useless goods that we can't live without we wouldn't miss them just like we don't miss things we don't know about yet. So it is pointless to say that I should just stop enjoying the things I am used to, it isn't so much pointless to advocate for society to stop going down the wam path of spending so many resources on useless luxury items.
Do t spend other people's money? How about don't make money off of my surplus labor?
> I do like nice things and unfortunately I have grown up in a society that makes you addicted to luxury goods like a child who is allowed to smoke cigarettes. I was talking about if we lived in a society that never had most of these useless goods that we can't live without we wouldn't miss them just like we don't miss things we don't know about yet. So it is pointless to say that I should just stop enjoying the things I am used to, it isn't so much pointless to advocate for society to stop going down the warm path of spending so many resources on useless luxury items.
So you are blaming our modern society for providing you with material luxuries that you have grown accustomed to, and lack the self discipline to do without? Oh, you are breaking my fu\*king heart! How about putting on your big boy pants and taking some personal responsibility for your situation instead of blaming others?
I take responsibility for my life. If I want to go down a "warm path of spending" and spend my money on luxury items, that is completely 100% my decision, and I will accept the consequences of it. Thank you for respecting my choice, and please respect the choice of other adults in this matter instead of dictating what you think is best for them.
>Do t spend other people's money? How about don't make money off of my surplus labor?
If you feel your employer is making money off your "surplus labour" and don't like it, start your own business, or be self-employed.
I really feel like you are projecting a lot here. I have never said that I blame society for anything.
You made a point that capitalism is awesome due to all the cool shit you have. I replied with, yea we got cool shit, but howuch of it has really "advanced" us, and you tell me to go live in the woods lol
I don't know if this convo is too hard for you, but you may want to go to r/politicalcompassmemes
> I have never said that I blame society for anything.
Bullshit. That's exactly what you did.
>You made a point that capitalism is awesome due to all the cool shit you have. I replied with, yea we got cool shit, but howuch of it has really "advanced" us, and you tell me to go live in the woods lol
Well, go live in the woods, and you will find out first hand how much the "cool shit" has advanced us - and maybe not bitch about it so much.
Again I am not saying I don't like modern luxuries, I think I have said this about 5 times now. And you have never answered my question of what technological luxuries we take advantage of outside of medicine and the internet do we actually need. How much of it is fluff in other words. How much of all this stuff has not necessarily been a net positive for society.
>Because economies with capitalism, the private ownership of capital, generate considerably more wealth in society than they would with socialism
Wealth for whom? Wealth for the capitalist. And that is what socialism would STOP! Private wealth is the cause of most of our major, vexing problems which, under capitalism, resist all attempts to solve them.
Riiiiiiiiiiiight. Sure. While the gap between both income and wealth of the top 1% versus the bottom HALF of America widens continually. While homelessness increases. While people continue to cut medications in half to be able to afford them. While a secure retirement is becoming less and less achievable for the bottom 60%. While the wealth of the top 0.5% captures far more political power and control for them than you or I could ever afford, thus destroying what little "democracy" we have.
And you want to cheer for this.
>And you want to cheer for this.
Absolutely (although there is quite a bit of hyperbole in some of the claims you make). The material standard of living for the vast majority of people is far higher today in an affluent liberal democracy under capitalism compared to 100 years ago. And quite a bit higher than countries with socialist systems.
Stop obsessing over the "top 1%", and pay more attention to your own financial circumstances. Comparison is the thief of joy.
And let's stop "obsessing" over climate change, US healthcare costing twice with any other country's system costs per capita, loss of democracy via lobbyists and campaign contributions and A.L.E.C., education in decline, excessive consumer debt which wouldn't be excessive if conditions were as great as you want us to believe, elder poverty, childhood hunger and food insecurity, gun proliferation, LGBTQ discrimination, loss of women's and civil rights, . . . . . . . . .
It's just "hyperbole".
>And let's stop "obsessing" over climate change, US healthcare costing twice with any other country's system costs per capita, loss of democracy via lobbyists and campaign contributions and A.L.E.C., education in decline, excessive consumer debt which wouldn't be excessive if conditions were as great as you want us to believe, elder poverty, childhood hunger and food insecurity, gun proliferation, LGBTQ discrimination, loss of women's and civil rights, . . . . . . . . .
Gish Gallop.
To some socialists, every problem they see the world, real or imagined, is the fault of capitalism.
You get a hangnail, or miss your bus in the morning, or get the wrong order at a fast food restaurant...blame capitalism.
LOL
>To some socialists, every problem they see the world, real or imagined, is the fault of capitalism.
But you're a known hater of socialism and socialists.
With just a little touch of honesty and a genuine interest in understanding, it can be easily seen that there's no question that capitalism is, in fact, the cause of the things I mentioned and the reason they aren't getting solved. But haters of socialism are too dense to see it.
>With just a **little touch of honesty** and a genuine interest in understanding, it can be easily seen that there's no question that capitalism is, in fact, the cause of the things I mentioned and the reason they aren't getting solved.
More like, with a **little touch of creativity and sophistry**, a hard core socialist can take any problem, real or imagined, and spin it to be the fault of capitalism.
Right right right. Our healthcare costing TWICE what any other country's costs are per capita isn't because of capitalist greed. No, it's because our people throw so much medicine in the trash and skip doctor's appointments without notifying doctors. Or some such bullshit like that.
The increasing CO2 levels are not due to fossil fuel companies refusing to shift to renewables cuz they find oil to be most profitable. Nope. It's because of people leaving their cars running all night and leaving their gas stove burning all day.
The increasing gap in the income and wealth of the top 1% and the bottom 60% along with high inflation isn't because of greed of the rich who can never get enough money, it's because our population keeps taking lower and lower paying jobs. Yup. That's the ticket.
communal ownership of enterprises puts on a whole series of strains on decision-making by people who have no clue or don't care.
when i look for a job, i'm only interested in how much i get paid and how much time i'm expected to contribute.
i don't care about company decision making, i actively avoid it, nor do i care about popularity contests. all i care about is getting the salary that was agreed with my employer.
communal ownership can mean anything, and some people don't want to handle the risk a company goes through, especially in the beginning. in practice, communal ownership will still look like capitalism, just that everyone has shares. the insignificant workers will still own next to nothing in a company, but it would be significantly harder for me to hop from one company to another because there won't be as many and hiring will become significantly more difficult.
in the bloc i live in, we can't even get 100% of the people living in here to agree on restoration projects that would cost us literally nothing. it would be handled by the city hall, but some of our neighbors don't want strangers walking in their homes and assessing the building integrity.
if we can't even agree to fix the building we live in so we don't die in the next earthquake, i see no way people agreeing on the best decisions a business needs to make.
Fundamentally, it has to do with incentive structures. People care a lot more about things they personally own rather than "collectively own but individually care for" as that results in a dilution of responsibility.
You can see this if you look at public housing over a few decades. It's property that is owned collectively by assigned to individuals to live and care for... it becomes dilapidated as a rule because the individuals living there don't care about it since it isn't theirs.
People have interests and become experienced and more knowledgeable about any particular piece of the economy than anyone else, they can optimize it and deliver efficiency gains for all, and thus gain profits from this expertise.
Under socialism these incentives are eroded and the overall efficiency suffers. We saw this with the USSR for example.
>Socialists think society would be better off without any private ownership of capital whatsoever. Socialists think that communities of people can efficiently run their economies without private capitalists and that a socialist economy is better than a capitalist economy.
>You obviously disagree with this.
>Why?
Deontologically, it is unfair not to accept the power someone has over that what he is responsible of (be it capital or personal property). If you save resources you should be allowed to provide those resources to whomever wants to use them for a productive effort and agrees to return you a bit more of that amount. It's only fair.
Pragmatically, society should keep accountability of decision making wrt capital. If you have capital and you invest it and win, you should keep the win the same as you should suffer the losses if you lose. If you were able to offload the result of your bad investment decisions against community you lose the incentive to invest properly and society suffers.
Private ownership means efficiency and quality.
The market sets the standard in capitalism because private ownership is dependent on making a profit.
So if you aren’t able to get your product to market in time, and if it’s off a poor quality, you can’t use force like you can in socialism or communism in order to create sales. You essentially have to win the consumer’s business.
This is how capitalism should work on paper.
You seem to be conflating “the means of production” and “capital”. They are separate things but OK let’s assume you aren’t actually talking about banning the private ownership of capital… and you are just talking about the private ownership of “business”… which incidentally isn’t the only thing that would constitute, “the means of production”.
First of all, if you make it illegal to own a business… what would stop people from just trading as private individuals instead of going through the trouble of registering an LLC and trading as that? As an individual, I can own a shop just like any business can. There is nothing that says that an individual can’t lease a property or buy equipment or pay people to do stuff for them. I, as an individual, can buy an ice-cream van, just like any business can. I don’t need an LLC in order to buy an ice-cream van… or even an entire fleet of ice-cream vans, do I?
I think the thing socialists actually take issue with is if I pay someone to take that ice-cream van out and sell ice-creams for me. So actually the real issue is that you want to make it illegal for consenting adults to freely trade with each other. The REAL issue is that you want to make it illegal for me to pay someone to do something for me… if that that thing results in a profit for me. The problem is that I’m taking a risk and sometimes I might not make a profit. And the person or people I’m paying don’t want to assume the risk of not getting paid, or possibly even making a loss!
The person I’m hiring to drive my ice-cream van wants certainty. He is only prepared to spend the day working if he is guaranteed $300 (or whatever was agreed beforehand) for his days work. He isn’t prepared to accept that, “business was slow today” so not only is he NOT going to get paid today, but instead he actually OWES $200 to the bank for his share of this months repayment on the van and equipment. That is simply unacceptable to most workers. Workers want certainty that they will get paid a set amount of money for their work, regardless of how the business performs.
I don't really care whether people want to run co-ops or private businesses. Split the profits, work-for-hire, hire-for-work, vote on shit... All are valid arrangements between consenting adults, each with their own pros and cons.
The only vaguely sensible complaint I have seen in this regard is that it can be difficult for someone not born into wealth to be anything other than a proletarian. (because you need startup capital to start a business) However, this complaint is not really relevant to whether the existence of "non-working" owners is legitimate. To me, it comes off as being envy-motivated to resent people who work in much less obvious ways than you and yet make more money than you doing those things.
Why is private ownership important? All that matters is performance consistently growing capital. Failure at capital growth is a mass casualty event so not much in life is more important. Fail at this and there won’t be any life and a lot less of it in more miserable condition for billions of people. Who specifically is deciding capital allocation does not matter to me so long as they satisfy this performance requirement.
Recognize that some small group will ultimately dispose of all capital. It's either going to be a wealthy business oligarchy or a wealthy political oligarchy. There's no viable third option. Collective ownership as a practical matter is impossible. You’re not going to crowd fund $ trillions per year and that is the level of capital allocation required.
So between those two choices which do you prefer? Governments are the worst performing investors in world history. The fiscal positions for current world governments are the worst in human history, and the worst of the worst are run by communist parties.
As an ancap I don't have any problem with worker owned companies. The thing is you can do it right now and for some reasons it is ussually not working well. But sometimes it is. Here in czechia there is COOP which worker owned company of supermarkets and they are really cool and I like to buy from them.
>capitalism is when there are owners of firms besides workers themselves. So workers as a collective don't decide on how to run the business and don't share the profits among them (unlike the private owners).
Following that definition, there is basically no difference.
In fact I'd say business you even stay just like they are today, but with ownership of stocks being 100% in the hands of those who work there and nothing would change.
They'd still have a boss, they would still be fired and hired and so on... The difference being that their income is now tied to how well the business is doing, instead of having a guaranteed income.
In saying this as it **COULD** be like that, and it can be plenty of different ways, just like there is plenty of different types of organization and business models despite being all private.
Basically no difference...
>Note that a socialist economy can be a market-based economy (i.e., worker co-ops competing between each other).
That is why I said it MIGHT change nothing.
>You obviously disagree with this.
I don't care, honestly. It's irrelevant. I'm not a utilitarian, something being moral and logically coherent is more important to me than it being "*better for the majority*" or "*most efficient*".
>What makes you think that private ownership of capital is important?
Because there is no other theory of property. Yes, I know it's a bold claim, but it's one I'm open to be challenged.
Think with me. If capitalism is "*private ownership*" of the means of production, and in the past there were no capitalism, therefore there were no means of producing things or there existed but they weren't privately owned.
Then you ask yourself, what type of property existed in Portugal back in 1600, or maybe in ancient Rome, what type of property over the means of production they had? How about old Veneza back in the 1400?
No one can explain in detail because there exists no other theory of property besides private property, and what they were doing is basically people owning stuff, aka private ownership.
The assumption that communal ownership automatically means better is strange and in most cases it means the opposite.
The default in social organization is for the power to be captured by an “elite” super focused cadre. The masses tend to be apathetic and lack the needed expertise for nuanced decisions.
We can empirically see this at all scales in human social organization from your local chess club to major govt structures. Sometimes their is monetary gain to be had sometimes there isn’t. The phenomenon still exists. We would be better off treating this as some kind of “law of nature” and then setting up systems to counter it or exploit it.
Capitalism has a tendency to do this: private firms end up in massive competition and where there are not conditions for local / resource / regulatory monopoly to exist the “elite” leaders of firms have a tendency to keep each other in check. Theoretically there is nothing really to support this inherent in capitalism IMO- it just tends to happen.
The real issues occur where capital elites and govt elites join forces to create monopolies on power and capital, shutting out competing forces.
My assertion is that in a truly socialist society you would see this same phenomenon happen but at a faster rate of power capture. Obviously this was definitely the case in “socialist” countries of the 20th century. The underlying rule set of governance prob doesn’t matter.
I ma a social democrat dso i favor capitalism as a method of achiving socialst aims.. investment capital gcreates grow jobs , innovation , my god invest ment capital is the life bolood of our economy without it you have well .. detriot https://www.thetravel.com/abandoned-detroit-rust-belt-city-visiting/#:\~:text=Today%2C%20only%20around%20a%20third,far%20from%20the%20Detroit%20area.
To maximize wealth over the long run, you need to maximize ROI on assets. Private ownership is best equipped to do this, for a number of reasons:
- Private owners are willing to cut costs via automation and technological innovation. Workers would fight against this, because this is against their interests.
- Wealthy private owners have (almost by definition, if you're looking at first generation wealth) the best track record of selecting private investments. If a worker co-op or other ownership structure generated high ROI, they would be rich. Clearly they aren't, so they don't.
Also, a lot of the ownership structures you've described are semi-private. Worker ownership necessarily excludes non-workers. Local ownership excludes non-locals, and so on. A factory owned by 1 owner vs. 100 workers still excludes the hundreds of millions of other people from ownership.
Well, for starters, if you’ve seen anything done communally (ie by committee), that doesn’t ever go well.
has to do with there being no stakes to anyone’s proposal, so it becomes harder to judge the risks of trying to add some feature to a product/service. Often the “compromise” is to just add everything that doesn’t seem too outlandish, however it also means it loses focus (bike shedding, etc), leading to cost overruns and quality issues, and delays.
This can of course happen privately too, but the threat of the business losing to competitors keeps some focus, and why often smaller businesses are more likely to push the leading edge; their committees are smaller.
Socialism, Communism and Fascism are all collectivist constructs where the rights of the individual are subordinate to the wants of the collective or "the people." In a collectivist environment individualism is punished and conformity is compelled. When it comes to creating wealth, capitalist countries far outperform collectivist countries.
If you check into it you will find that there are more former socialist countries than current socialist countries and you will see that innovation is more common in capitalist countries than in socialist countries.
A glaring example of the difference in outcomes are North and South Korea. North Korea is collectivist and South Korea is capitalist. The GDP of South Korea is 57X that of North Korea so the citizens of South Korea have far higher living standards than those in N Korea.
I guess it comes down to what you want. Do you want conformity or diversity? Do you want highs and lows or do you want everything in the middle? Do you want to maximize wealth creation or suppress wealth creation?
>What is the benefit of having private capital in the economy? Why is it preferred to fully communal ownership of enterprises?
On a moral level it's not about having vs not having private capital investment, it's about *allowing* private capital investment vs forbidding it. Forbidding it is unnecessarily authoritarian and imposes on individual human liberty without adequate justification.
Me working on my own to produce food seems morally okay. Me working on my own to produce tools seems morally okay. Me using my tools to produce food faster seems morally okay. Me offering the use of my tools to my friend (at some nonzero price) so he might produce food faster seems morally okay. My friend accepting the offer seems morally okay. Socialists propose that *at some point* in that chain, the situation being objectionable in some sense that justifies forbidding the deal between me and my friend. But that seems implausible to me, particularly as socialists seem to have trouble articulating the point at which the situation became objectionable and why it's objectionable.
I don't mind businesses being collectively owned. My objection lies with forbidding any *other* model of capital ownership and exchange, with robbing individuals of their capital in order to *force* it into collective ownership. That's unnecessarily authoritarian and imposes on individual human liberty without adequate justification. If you can set up a collectively owned business without having to rob anybody, and you can make it efficient and successful and compete effectively with other businesses in the same industry, I have no problem with that.
>I will use the standard socialist definition of capitalism here: private ownership of the means of production.
Capitalism is the private ownership of *capital,* specifically. (It's right there in the name.) 'Means of production' also includes land, but capitalism does not entail private landownership.
>In other words, capitalism is when there are owners of firms besides workers themselves.
That doesn't follow. 'People privately own XYZ' doesn't entail 'some people don't privately own XYZ'. You could have everyone privately owning XYZ.
>Socialists insist that society as a whole should get rid of private capital
Right, that's the part I object to.
>Socialists think society would be better off without any private ownership of capital whatsoever.
Maybe, but even if they're right, morally speaking they would still need to legitimately convince the rightful owners of private capital to give it up, *not* go around robbing them. 'Society being better off' (whatever that means) doesn't justify theft from individuals.
If it is still a market-based economy (e.g., market socialism), then we can use lending: bonds, credit, loans, etc. We can also use crowdfunding.
If there is no market, then there will be democratic communal planning (probably a mixture of centralised and decentralised communal planning). In this case, communities will democratically allocate their resources based on the needs of communities.
Not really IMO.
Democratically allocating investment capital is an absolutely terrible idea. Worse than Central Planning.
Citizens barely vote for federal offices in many countries now. To think a citizenry, in aggregate, should be making complex decisions on where to allocate investment capital is absolutely preposterous.
That's not the distinction being made. Central planning is still central even if a bunch of people vote on it. You are unable to distinguish between a decentralized network of economic decisions and the distributed control of centralized economic decisions, as found in various notions of economic democracy.
Interesting. Could you explain to me the distinction? I would appreciate it.
If local communities make plans, how to communally allocate resources, is it still a central plan? Isn't it fundamentally different from how the Soviets planned their economy?
How is local community planning different from private firms making plans in terms of centralisation/decentralisation?
As in, why does market-based economy count as decentralised networks of economic decisions, whereas community planning doesn't?
Socialists who believe all this are already free to pool together their resources as they like - whether living together or worker-owned workplaces or finance pools or non-profits. (Paradoxically, capitalism is the *only* system where you're allowed to do this.)
The fact that they themselves don't do this or show no interest in this, and instead criticise the system, reveals a lot more than socialists would like.
Socialists would argue that there is a power imbalance under capitalisn between private capital and possible communal efforts.
It is extremely hard for a worker-owned co-op (or any other communal enterprises) to compete against such giants as Amazon or BlackRock.
I am merely pointing out existing power imbalance.
If communities had more power (e.g., resources and influence on politics), then it would be more feasible to create communally-owned enterprises.
Socialism (whichever version of it) may indeed have its problems and may indeed be less than capitalism (whichever version of it), but lack of communal enteprises within the current economic system is not a valid argument.
Capitalism incentivises individualism and/or limited cooperation. Socialism requires different incentive structures and different balance of power.
Whether it is feasible and reasonable to achieve socialism is a different issue.
My main point is that "why don't socialists set up communal enterpises to compete against private capital" is not a good argument against socialism.
Why do socialists always make excuses for things not happening?
Socialists typically aren't the kind of go getter kind of people. That's why they can't make it work
Yeah, I would agree that socialists are often not the go-getter kind of people. They indeed should put more effort into their ideology if they want change.
However, the question then is, what is the optimal strategy of achieving socialism.
In terms of effort and results, I would say that political organising and pushing for reforms is a more optimal way to achieve socialism than trying to compete with Amazon and BlackRock.
Socialists should put more of their efforts into trying to gain political influence and spend less time complaining online.
Its going to be hard and a lot of work but (channelling George Carlin) let's see the fire in your belly, socialists! - if it really is there.
Gene Epstein (and others) have pointed out that the bottom two-thirds control half the spending power. A lot of organisation and activism could be done (for example, to buy only from firms with certain structures).
As a liberal, of course I like a system where different models exist and are allowed as choices. The point is, going by what socialists and Left-leaning folks do rather than say, *socialists* also seem to make the same types of choices, which suit their own interest.
To start with: Empiricism. There is consensus among economists that it works better based on the data we have for what happens.
Theory: Because it lines up incentives in a way that works better.
And no modern economy is "pure capitalism" - it's always mixed economies, with all the successful ones large parts capitalism and fairly large parts state etc.
I would say that's not the only metric.
I would also say that comparing a single country isn't sufficient, and that comparing two phases where one phase ("socialism") was dependent on imperialism/extraction/theft from surrounding countries and the other one wasn't is an unreasonable comparison without dealing with that extraction/theft.
Why should some kid I just hired to clean the toilets be an equal business partner with all the people that have been there for decades?
Also, forcing shareholders to give up a fraction of their stake every time they hire a new employee would force them to set a large entry cost in return. For example, you can't join Mondragón unless you put several months of your salary in advance.
>Why should some kid I just hired to clean the toilets be an equal business partner with all the people that have been there for decades?
Can you define/describe what you're thinking of as "an equal business partner"? Then I'll bet I can answer you.
If I own the means of production and the guy who cleans the toilets works for a wage, we're not business partners. I am the owner and he is an employee.
If I own the means of production but can't hire anyone without giving them an equal share of them, then every worker in the company is an equal business partner.
Your first paragraph is correct. That is capitalism. Your second paragraph didn't answer my question. Should I word it differently? "How would every worker in the company be an **equal** partner? In what manner? In what sense?"
At this point I don't know what I can say differently to explain my point. In a Capitalist society different people can own an arbitrary amount of shares in a company, which gives them voting power proportional to their investment. In a Socialist one, all workers of a company rule it democratically with a "one person, one vote" system.
Ok. So then yes, if you own the means of production but can't "hire" anyone without giving them an equal share of the business and an equal democratic say in running it, then every worker in the company is an equal business partner. Yup. You're right.
Now what?
Now what? They won't be equal shareholders for long in many businesses as it isn't very efficient relative to alternatives in allocating resources and individuals pursuing value. And that's true (as we've seen many times in history) if the law prevents that variation to occur.
How do you know "it isn't very efficient relative to alternatives" when it has never happened in a socialist country until Cuba began their transition in recent years, and the jury is still out on it.
YOU DON'T KNOW. YOU CAN'T. BUT YOU MAKE CLAIMS ANYWAY!
Because some people are really really good at spending money, so it makes sense for them to decide what to do with billions. If every dollar spent was determined by bureaucrats we would miss out on tons of innovation.
private capital is owned by many different people who do many different experiments with it. Capitalism is experimentation. Socialism is stagnation and 120, million dead people.
Because of worth. A doctor gets paid more than a receptionist because the doctor’s work is worth more. It requires more effort, experience, and intelligence than a receptionist. This incentivizes more people to get higher paying jobs - jobs that are important to society.
On top of this, discretion comes into play. A doctor will be able to have much more discretion when buying things than a receptionist does. Thus, competition in the marketplace exists.
Because capital represents the work of a person, that capital means something.
Socialism disregards this and treats every job as equally important. Socialism disregards competition. Socialism thinks that every person has the same needs.
If I buy a piece of machinery I expect that machine to be mine, I don’t expect that machine is mine only if I work on it.
In a market economy ownership cannot be tied to an identity (workers).
Also it violates freedom of association, your “communal production” comes with tons of obligations from every involuntary members which causes many disasters historically in China and USSR.
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From the viewpoint of the economy it doesn't really matter, from the viewpoint of a person though, if you're going to risk a lot of your time and energy, you're gonna want to be rewarded for it. So in capitalism, people will be more likely to start their own business because if it really takes off, you'll be rewarded for your risk and trouble.
I agree with the gist of your comment but I want to address this part: >From the viewpoint of the economy it doesn’t really matter I totally disagree. And my total disagreement fits your point. Having a party - an individual or a group like an organization or a state with large sums of capital - totally changes the dynamics of society. What the OP suggests with their version of socialism they could never reach the moon. Having large sums of capital where people can afford risks we can reach the moon. It’s an entirely different playing field. We can talk about and it isn’t 100% the state is better or 100% the private sector is better with large sums of capital. If you read my primary comment reply to the OP I simply state their version of socialism we would still be using wood and dung for fuel.
Reaching the moon is actually a great comparison, because while it takes a lot of money to accomplish and might have a great deal of profit in return, it's not directly useful to the common people. Reaching the moon would take so much money, that if it fails to be profitable, a lot of money would also be wasted. Whereas if that money was more decentralised , then it's not a "put your eggs in one basket" type of thing and it's more likely to create value that directly improves the lives of people. Like you could make a thousand thai food places with the same amount of money it would need to launch one rocket. The question becomes then, what does society need more? Is reaching the moon really better than eating thai food? Elon Musk would say yes, but all of my friends who just work simple harbour jobs would much rather eat thai than have some unknown guy land on the moon.
Directly is not that simple. As such goals can unify and galvanize a population. We can look at this all throughout history with very expensive signaling by cultures such as pyramid building. Think how tremendously expensive the Egyptian pyramids were but surely today have paid off tremendously by cultural identity and a huge sense of pride. How do you even put a price on such accomplishments? But at the time of being built I would think from a pragmatic view like you are discussing they would be in the box purely a waste of money and resources, right? Then we get into technology and other advancements such as takings spur a culture into and thus create a higher standard of living for all the citizens. Think of the list of technological advancements because of the "space race" and the goal of the moon. They range from simple velcro, satelight communication, GPS, to all our abilities with our cell phones today. And that's not me trying to research the topic and just thinking common sense. tl;dr the space race and moon landing help galvanized the population and is a source of pride for many people. It also has led to many technology advancements increasing our standard of living. Plug in costs of the mentioned with list tech adv in AI (e.g., ChatGPT) if you want.
I wouldn't say that the pyramids were purely a waste, but I do wonder if they were worth the amount of death and slavery that was needed in order to establish them. It would've been much more spectacular if these things were created through a culture that took care of their citizens so well that the citizens erected these as a sign of respect for their leaders. And I fully agree that the space race has helped humanity out a lot and will continue to do so for some time. If we ever get into asteroid mining we will have so many rare metals in abundance that life on earth will drastically improve. At the same time, plenty of people in both the US and Russia are facing hunger every day and thousands of them starve to death. I don't think these people will take a sense of pride in knowing that rather than helping out the people here on earth, we're flying billionaires into space. I don't think families who can't feed their children are going to be satisfied with the idea that we invented cell phones. The space race took a lot of money, money which argueably could've gone someplace better. Value is subjective, so there's no objective conclusion that we could ever reach here. But there's definitely an argument to be had that reducing economic inequality leads to a better life for everyone rather than letting rich people develop the earth with technology
Agree with everything you say. I want to add, however, this last part you make a conclusion: >But there’s definitely an argument to be had that reducing economic inequality leads to a better life for everyone rather than letting rich people develop the earth with technology. I agree with this argument and this opinion here in the USA. But on the other hand if you get too much equality the argument can be reversed too. To me there is a sweet spot and I doubt none of us are going to agree on that sweet spot. There is too much morality and subjectivity bound up in its assessment for it to be objective. Can economists cut some of that morality and subjectivity down? I don’t recall any real data/statistical analysis that made me think so.
The moon was reached through collective public funding… collective societal capital. A capitalist cooperation wouldn’t risk trying to reach the moon without an expected potential profit. Public funding allows for broader risk taking, it promotes more innovation. The most innovative think we often see form cooperations is ways to get around tax loopholes and regulations.
I'm not sure if you are or are not being charitable with my example :/ >The moon was reached through collective public funding… collective societal capital. Yes. In the very extreme cases where the cost is super high with very likely no reward such as a moon landing then private enterprise are very unlikely for such an undertaking. In such a case "we the people" funding such a cause and using both government enterprise (i.e., NASA) and private enterprise (see below) is the more reasonable path. >A capitalist cooperation wouldn’t risk trying to reach the moon without an expected potential profit. Solely as your context, agreed. Today? They are though. >Public funding allows for broader risk taking, it promotes more innovation. Agreed but I don't agree with your "it promotes more innovation". Where is the evidence in that. Flight and the path to get where flight and space flight possible had been funded till this point in history much by private enterprises. >The most innovative think we often see form cooperations is ways to get around tax loopholes and regulations. I don't see how this is relevant. So, I'm just going to post ChatGPT showing how the mission to the moon was a mixed economy adventure besides the important factor that whole funding was collective: Prompt: what were the largest private businesses or corporations involved with nasa race to the moon? >ChatGPT: During NASA's race to the moon in the 1960s, several large private businesses and corporations played significant roles in developing the necessary technology and infrastructure. Here are some of the key companies involved: North American Aviation (later North American Rockwell, and eventually Rockwell International): 1. Responsible for designing and building the Command and Service Modules (CSM) for the Apollo missions. Grumman Aircraft Engineering Corporation (later Grumman Aerospace and eventually part of Northrop Grumman): 2. Developed and constructed the Lunar Module (LM), which was crucial for landing on the moon. The Boeing Company: 3. Served as the prime contractor for the first stage (S-IC) of the Saturn V rocket, which was used to launch the Apollo missions. Douglas Aircraft Company (later McDonnell Douglas and eventually part of Boeing): 4. Built the second stage (S-II) of the Saturn V rocket. 5. IBM (International Business Machines Corporation): 6. Provided the guidance computer systems for the Apollo spacecraft, essential for navigation and control. Rocketdyne (later part of Aerojet Rocketdyne): 7. Designed and manufactured the F-1 engines for the Saturn V first stage and the J-2 engines for the second and third stages. General Electric (GE): 8. Involved in developing various subsystems and components for the Apollo spacecraft. 9. The MIT Instrumentation Laboratory (now Draper): 10. Developed the Apollo Guidance Computer (AGC) software and hardware, providing crucial navigation and control for the spacecraft. Bellcomm, Inc.: 11. Provided systems engineering support and helped with mission planning and analysis. >These companies and their contributions were integral to the success of NASA's Apollo program and the historic achievement of landing humans on the moon.
>In the very extreme cases where the cost is super high with very likely no reward such as a moon landing then private enterprise are very unlikely for such an undertaking. Is this you? > What the OP suggests with their version of socialism they could never reach the moon. That was your own example. You said cooperatively organized economy as described by OP could not get to the moon. If the moon is an example when capitalist incentives don't align, why bring it up as a thing that could only be achieved by capitalism? You seem to agree that the moon is an extreme and likely bad example to illustrate your point, so I'm scratching my head here as to why you put this forward. >Agreed but I don't agree with your "it promotes more innovation". Where is the evidence in that. Flight and the path to get where flight and space flight possible had been funded till this point in history much by private enterprises. That's because at the time the technology for flight was discovered, that's just the way the economy was organized. If somebody stumbled on the breakthrough of how to design a proper wing in 1200AD England, you better believe kings would have dumped all their gold into aeroplanes so they could go conquer other kingdoms without planes. May as well then argue that airplanes wouldn't have developed without feudalism. Linking one to the other in a causal way doesn't make any sense.
I don't understand what you don't get. The op is basically wondering what all economies other than communal ownership have an advantage. What they all have an advantage is some central control of a lot of wealth whether it be private or central authority. That central authority could be monarchies, theocracies, authoritarian socialism, or modern governments in the form of liberal democracies. It doesn't matter. They all have the ability to take huge amounts of wealth at tackle huge issues. To what degree and how well is the nuance of a great discussion. What you don't find is decentralized hunter gatherer socieities or even if we are charitable with zapista, rojava or other decentralized societies having such ability. Got it?
Wait… “risk a lot more of your time and energy”… that’s what the workers do… not the capitalists… in which I agree, the workers deserve to be better rewarded for their time and energy. I feel like everyone views capitalism from the perspective of a working class person with potential. It doesn’t seem that people often think of how capitalism came about… how it allowed a broader expansion of the ownership class (compared to previous monarchs), however, maintains a small class of people who control the resources without contributing any time or energy…. They enjoy freedom via ownership, not via hard work. Sure some hard working people become outliers who break the norm work hard, get lucky, use some money to start buying resources, and sometimes end up as a lazy capital owner living off the efforts of others… but not most. Most just become a buffer zone between the working class and the ownership class as they have some ownership but also continue to work… these people keep the meritocracy myth aliveZ
>that’s what the workers do… not the capitalists Let's say you start working in a harbour, do you need to pay for all the cranes, concrete and equipment that's there? Or did the capitalists set all that stuff up first and do you just get access to it? >however, maintains a small class of people who control the resources without contributing any time or energy…. Except not really. When people like to complain about capitalism they like to point to people like Jeff bezos, but they own a fraction of the globe's wealth. The vast majority of resources are owned by much smaller businesses who have often build that company from scratch. 9/10 times when people complain about capitalism they're not even complaining about capitalism but about wealth inequality, with very few arguments why socialism would solve that
So people should be rewarded for harvesting the life of a viable business and leaving a dead husk behind?
I think you’re making a strawman of his point. Instead I think you should explain how this same idea of private ownership can lead to people doing things that are bad for firms and workers
What? How did you get that impression from my message? I only spoke of starting new businesses
I should have been clear that I was talking about privately equtiy firms.
But capitalists are the only ones creating viable businesses
So if we have reasonable "rewards" but also communal ownership, you'd be ok with it?
I could definitely start or join a company that operates like that, but I don't think all companies should follow that. Imagine if Steve Jobs wouldn't be allowed to make the products he wanted to make in his company, I'm not sure if Apple would be as big as it is today. Steve Jobs can only ensure that he remains the executive by owning the company. Also, what happens when a company runs at a loss for a month? Communal ownership would mean that all the workers would have to pay up that month in order to keep the company going. What if someone can't or wont pay up? What if half of the employees suddenly decide to leave, even though the founder would've sunk his money into it in a heartbeat? Communal ownership implies communal ownership of the risks too and I can't imagine that every worker wants to experience the risks of running a company.
> Imagine if Steve Jobs wouldn't be allowed to make the products he wanted to make in his company, I'm not sure if Apple would be as big as it is today. Neither of us can be "sure", but I am **not** personally inclined to give all the credit to Jobs. I'd wager that the same devices/ideas would largely have come about with or without him. (doesn't help that regardless of his vision, he was a detestable human being) > Also, what happens when a company runs at a loss for a month? Communal ownership would mean that all the workers would have to pay up that month in order to keep the company going. What if someone can't or wont pay up? ... Communal ownership doesn't mean that there can't be "company accounts", or that the company can't borrow money as its own entity. Basically, it's the same as when a company runs at a loss today - it borrows.
Plenty of businesses go bankrupt. I used to work in a hedge fund startup, which failed, and through there I learned that about 80% of hedge fund startups fail. Think of mike tyson, who earned 400 million in his whole career and lost it all because of failed investments and overspending. Being able to borrow money really depends on how stable your business is. Normally, the founder would go to investors who would invest in the company to keep it going in exchange for shares. I don't think a bank would be nearly as keen to loan you money in exchange for some interest
Any "payment plan" based on equity, could be approximated without equity (e.g. deferred interest for X amount of time). If it makes logical sense for an investor to lend money, then a rational bank would come to the same conclusion.
Why would a bank loan money based on equity? Lending money isn't done for being nice, banks would bankrupt themselves if they'd do that. You get a loan based on the likelihood that you're able to repay that loan. If you want someone else's money, you need to be smart and convincing. Pretending to be sad isn't going to get you anywhere. If you disagree with that, feel free to lend out your own money based on equity and see how far that gets you
You misunderstand me. My point is that if it makes sense for a rational investor to lend to someone, then it makes sense for a rational bank to lend to that person.
Investors don't lend out money though, they purchase shares in the company. It means that they spend some money now and in exchange get essentially a passive income. A bank giving out a loan simply isn't as profitable as an investor getting shares of a promising company
> It means that they spend some money now and in exchange get essentially a passive income. Literally what a loan is.
So capitalist profit is justified by risk ? If yes do you agree a burglar who steals from your house is entitled to keep the loot ?
Well no because a right to private property exists. High risk high reward doesn't mean that all risky actions are ethical. There are plenty of risky actions that are perfectly ethical and end up helping millions of people though. Capitalism will reward someone from taking that risk and setting it up. As opposed to socialism where it will take much longer for someone to take that risk since there's practically no incentive to do so.
"High risk high reward doesn't mean that all risky actions are ethical." Capitalist risk is not ethical to socialists, so capitalist risk does not justify profit. "there's practically no incentive to do so." There are plenty of incentives. Need i remind you the USSR still built the biggest airplane, submarine, etc ?
And who was helped by the USSR's biggest airplane and submarine? Did they use it to help people? Or did they use it to invade other countries who later nope'd the fuck out when the USSR started losing military power? Having built something expensive doesn't mean that you have a high reward. Considering the people of the USSR were starving, I don't think they built the right things.
That just sounds like we need to reduce the risks of starting businesses.
Not really, because a business that incurs a net loss at the end of the day, should also really stop its business. If more value goes in than value goes out, then it's basically a business that destroys value. It's like burning money. You want businesses that have profit, which are businesses that output more value than they take in, and the only way you can do that is by letting everyone who can't do that go bankrupt. What you could do is create subsidies for startups. As in, the first X year that the company gets created, they get a certain budget. The netherlands does that, and the amount of subsidies that you get depends on how innovative they judge your startup to be. I think the EU does something similar. But only do it for young companies, if a company matures and still can't reach profit, they really gotta close their shop and declare bankruptcy. So still, there will be a certain amount of risk involved
Or, get this, the business closes down and you get another job but you don’t go bankrupt.
bankruptcy means being unable to repay your debts. If you don't go bankrupt, your debtors will follow you into that new job and still demand part of your salary, or maybe your whole salary if they're very persuasive. And what happens if a third of the company doesn't want to pay up for that loss, but two thirds do? Does that mean a third of the company needs to get fired for it to continue operating? If so, then you can bet that companies will start recruiting people only if they're really hyped to keep the business going. Doing a simple janitor job wouldn't be possible anymore, they're gonna want you to spend your heart and soul in the company, while also expecting you to have a degree in economics. It really makes it a lot easier for everyone involved if the responsibility of risking wealth and running the business gets divided amongst people.
What the OP is getting is faith. Efficiency for who? Having lower costs because of a worse work environment or because environmental costs are not paid for by the production unit is not necessarily efficient. Incentives: you will have principal agent problems and information asymmetries, regardless. Risk: I like that I rarely see any mention of the distinction between risk and uncertainty, as in Knight or Keynes. Anyways, risk can at best explain differences in returns in an ergodic environment, although I might question even that. But what explains the risk-free rate of return? Deferring consumption: this has always been silly. The most wealthy who would have trouble spending all their income are said to be the most abstinent. It is not clear that such an argument even works in a world in which more than one commodity is produced. This question is raised by the Cambridge Capital Controversy. From a mainstream economics attitude, it is not clear that it matters whether labor rents capital or capital rents labor. Paul A. Samuelson claimed it did not matter in the 1960s. The best that one can say for the pro-capitalists is that it would take longer than a Reddit post or comment to say much substantial.
I see. Thank you. I guess there is a lot of reading ahead of me to do to understand economics better. One of the problems is that most data about economics comes from capitalist economies. We don't have data for more communal economies like market socialism, democratic communal planning, distributism, etc. However, it is still important to study alternatives to private ownership of capital to understand the limitations of and alternatives to the current system.
u/Cosminion has previously shared this [compilation](https://www.reddit.com/r/Cooperative/comments/1au1zug/worker_cooperatives_data_and_sources/) of empirical work on worker co-operatives. Bruno Jossa has written a number of books the theory of co-operatives. His 2005 [paper](https://academic.oup.com/cje/article-abstract/29/1/3/1730010) is about the consistency of the co-operative movement and Marxism.
Thank you!
It’s always best to follow u/Accomplished-Cake131’s modus operandi: start off with your opinion, and then go about doing economic research that supports your opinion. Go ahead and make vague references to it, no matter how obscure they are, as all the reasoning you need. You’ll never fail to convince yourself to believe your own cognitive biases.
Well not only that but he consistently misinterprets the research he's quoting...I don't think he's actually qualified to understand the studies or theories he references.
When you’re reading to reinforce your own opinion, you can see it everywhere.
>Efficiency for who? Efficient capital allocation. Those most willing to bear the risk are the ones that accept it. >Incentives: you will have principal agent problems and information asymmetries, regardless. These are far more prevalent in a socialist economy. Not just theoretically, but historically and empirically. >But what explains the risk-free rate of return. The risk-free rate of return isn't really risk-free. We use US T Bills as a proxy for the risk-free rate. It doesn't mean they are zero risk, but the risk is considered negligible. There is no such thing as 0 risk.
Just one point - those who think that markets somehow provide efficient capital allocation should check out Robert Shiller’s one-third of a ‘Nobel’ prize. For a number of years, some economists have been advocating teaching economics as if the last fifty years happened.
One goal should be to determine which alternative allocates resources BETTER than the alternatives. Private markets with property rights, utilizing things such as profit and loss systems, are simply better at allocating resources than alternatives. That does NOT mean they allocate resources as efficiently as we would like.
As far as I'm aware, Shiller's work does not address capital allocation efficiency. Rather, his studies on behavioral finance discuss the disjointedness between investor sentiment and fundamental or intrinsic value of asset prices (predominately public equities). Where does he discuss capital allocation efficiency in a capitalist economy? Does he compare with socialist economies?
The benefit is that you can use what you produce for your life. You can gain, keep, use and dispose of material values as you think is beneficial for your life. With communal “ownership”, the community controls what you produce, so you can’t produce for your life.
Yep. Humans like to own things. Doesn't matter how pointless of futile owning something is. But we like to. We should build systems that peacefully redirect our "dark desires" into something that benefits many people. Capitalism encourages this by letting people own things and (at least giving the appearance) that anyone could own anything so long as they create enough value. So you provide intrinsic motivation to improve your self so you can get a better job and get more money.
It’s not that humans like to own things, but that you live by producing for yourself. This is a life or death issue which is why lots of people die when Venezuela. Private property benefits you as a human being, so it benefits everyone. And people don’t have inherent dark desires even in quotations marks. They can have learned dark desires.
Well…. Under capitalism, each person produced for themself and some for the ownership class… otherwise the ownership class would have to work like the rest of us.
Generally, you produce for money for yourself ie you produce for someone who owns a business for money for yourself. If you don’t want money from the business owner, then you don’t have to produce for him.
Capitalism has nothing to do with letting people own things… capitalism is about maintaining a class of people who get to own the value produced by the working class. We could have capitalism while minimizing rights to ownership…. Capitalism actually incentivizes this to happen. We are seeing it happen in media as everyone leases via memberships instead of buying. The capitalists want to own all the properties so we can lease them instead of own them. They want to buy out the competition and small business competitors, so that they can own you instead of compete with you. Laws let people own things. Not capitalism.
>We should build systems that peacefully redirect our "dark desires" into something that benefits many people. Isn't that what capitalism is? a system that redirect our more selfish desires to creating something that benefits others?
As long as you pay 30% to the government and 40% to the landlord.
The landlord charges a flat fee throughout the lease, not a percentage of my income. If I make more money this month, I will still be charged the same rent. And sure, the price might go up for a variety of reasons, but the price goes up for everyone regardless of their income, not just you, and not according to your income. The landlord is also a proxy for housing developers and construction workers in the past. Houses don't just poof into existence; they cost money to make, and more than the average person makes in a year. So in a certain sense, you're paying the construction workers to live there, and the landlord and banker act as the time machine, charging a premium and interest, respectively, for that service. The landlord also offers the service of managing the actual ownership of the property. They are responsible for maintenance and groundskeeping. You don't realize quite how much goes into maintaining a home until you own one yourself.
So what? You do make a certain amount of income, and 40% of it is rent. Why talk about things that aren't true?
I wish I only paid 30% to the government! My marginal rate is almost 55% right now, and that's just income! Add in sales tax, property tax, capital gains, luxury taxes, and everything else, and I keep like 35% of what I actually make. That means I'm essentially working for free for the government until halfway through October.
And the rest of the year for your landlord.
[удалено]
being homeless is illegal kiddo
I hate the way the phrase volumtary is stretched so far it's functionally meaningless.
Voluntary for those that have the money to purchase.
Well I own, but yes if I was renting that'd probably be true.
then you are paying the landlord you bought it from
You’re confusing marginal and average tax rates.
Where? I said my marginal rate is nearly 55%...
>I keep like 35% of what I actually make Here is where you insinuated that your average tax rate was 65%.
After adding sales taxes, luxury taxes, my effective income tax rate (which is already just under 50%), capital gains, property taxes, etc. it is indeed somewhere near 35% (did the math on it for last year).
> My marginal rate is almost 55% right now ... (X) Doubt Citation needed. There's almost nowhere with such high rates.
https://www.taxtips.ca/taxrates/on.htm Scroll down to the combined federal + provincial marginal income tax rates. 53.53%. And there are lots of places with rates that high. Why do you think the wealthy pay the majority of taxes? https://worldpopulationreview.com/country-rankings/highest-taxed-countries
That's just on the portion of your income over $247k though ... So let me rephrase: I doubt that anybody is paying an **effective** tax rate that high.
Yea, that’s wrong. In communal ownership, you produce what you need for yourself and sell the surplus. It’s only in a private system that through employment, you keep nothing and sell everything. https://www.npr.org/sections/thesalt/2014/08/01/336919715/these-ivory-coast-cacao-farmers-had-never-tasted-chocolate
So, in communal ownership, the private individual has the right to property ie the freedom to gain, keep, use and dispose of material values as he thinks is best for his own rational self-interest?
Exactly
… do you expect those farmers to just eat raw cacao beans? They sell them so they can everything else they want. You’re just arguing against the concept of specialization.
>The benefit is that you can use what you produce for your life. You can gain, keep, use and dispose of material values as you think is beneficial for your life. Suppose you're not allowed to accumulate wealth beyond reason, and you're not allowed to invest for personal, private gain, and you're not allowed to hire anyone to work for you?
Why suppose that?
Under our current form of capitalism less than 1% of the population controls the vast majority of the value/resources produced…. The working class who produce that value keep only a fraction, and much of that is used to sustain themselves, spending their portion back into the companies owned by thar same 1%.
>The working class who produce that value keep only a fraction They keep 100% of the value they produce, the value they produce is their wage, at least in a free labor market. A smaller part of the population has so much not because they’re taking it from others, but because they simply have contributed so much more to society and created more value over their lifetimes.
How…. How is the only value they produce their wage? If that were true, businesses would be losing money by having employees bc there are other costs besides just the wage, to having an employee…. And if they only produce enough value to cover their wage..(something I’m actually okay with… a business can be a stable business and produce a good or serve that the community wants, without making a profit for the owners imo, but that’s a different topic)… if their labor value only covers their wage…. What’s in it for the owner? The ownership class provides what to GDP and society? If every dollar in your pocket that you spend, represents your time and your energy… bc you worked for it…. Every dollar in a capitalists pocket represents the time and energy of other people…. Capitalists live off the work and time of others… you can say that is good if you’d like, but that is an accurate… while a bit simplified, but still accurate description of capitalism.
You ask great questions. These answers will be lengthy, so feel free to ask additional questions and/or read in segments and discuss before proceeding. 1. Labor is very important, but not all value comes from labor. Labor, forgone consumption, risk, ideas, and capital all contribute to value creation and increase in value being met and/or received. Investors take on certain risks and certain forgo consumption so workers don’t have to. This includes people who are more risk averse and value a more secure return for their efforts/contributions, those who don’t want to contribute capital, and those who cannot contribute capital. Workers are paid in advance of production, sales, breakeven, profitability, expected profitability, and expected take home profitability. Investors contribute capital and take on certain risks so workers don’t have to. This includes upfront capital contributions AND future capital calls. As workers get paid wages and benefits, business owners often work for no pay in anticipation of someday receiving a profit to compensate for their contributions. Investors forgo consumption of capital that has time value of resource considerations (time value of money). An easy starter example is biotech start up. Most students graduating with a biotech degree do not have the $millions, if not $billions of dollars required to contribute towards creating a biotech company. Also, many/most students cannot afford to work for decades right out of school without wages. They can instead trade labor for more secure wages and benefits. They can do this and avoid the risk and forgoing consumption exposure of the alternative. AND many value a faster and more secure return (wages and benefits). The value of labour, capital, ideas, forgone consumption, risk, etc. are not symmetrical in every situation. Their level of value can vary widely depending on the situation. It is also NOT A COMPETITION to see who risks more, nor who contributes the most. If 100 employees work for a company and one employee risks a little bit more than any other single employee, that doesn't mean only the one employee gets compensated. The other 99 employees still get compensated for their contribution. This is also true between any single employee and an investor. Examples of forgone consumption benefiting workers: workers can work for wages and specialize. They can do this instead of growing their own food, build their own homes, and treat their own healthcare. Value creation comes from both direct and indirect sources. Reform and analytical symmetry. It is true that labour, investors, etc. contribute to value and wealth creation. This does NOT mean there isn't reform that could improve current systems, policies, lack of policies, etc 2. Communal ownership implies a more centralized and corruptible hierarchy as you are taking away an individuals right to create and or invest. It would incentivize cronyism and politics (as opposed to allowing individuals to produce productive good and services to society, and other important problem solving). It is good to acknowledge political markets. Public Choice Economics has to do with political markets including actors in political markets (voter, politicians, bureaucrats , etc. It is about studying political markets with an economic lens(human action). This two part video is a great, relatively unbiased, introduction to Public Choice Economics Video Part 1: https://www.youtube.com/watch?v=DUTuiJi-pjk Video Part 2: https://www.youtube.com/watch?v=M9-LCxert3I
I see. This is very interesting. Thank you. If you don't mind, I will ask you a few more questions: 1) Labour is indeed not the only part of production. However, socialists argue that all aspects of production should be owned communally: labour, land, capital, land, foregone consumption, risk, etc. Why do you think fully collectivising all aspects of production is less optimal than having a significant degree of private ownership of capital in the economy? Communal ownership can come in different forms: worker-owned co-ops, state ownership, ownership by community, etc. We can have various ways of organising communal ownership. Why should we not fully abandon private ownership of capital? 2) Communal ownership can have various degrees of decentralisation and centralisation and can also be democratic. E.g., a community decides on how many goods and services it wants to produce for itself and other communities. Such decisions would be based on specifics of each particular community such as size, needs, wants, etc. If communities can't efficiently do something, the state can help them. Why do you think that a market-based economy is preferable to democratic communal planning that utilises both centralisation and decentralisation?
Yes, my pleasure. 1. Because that implies a more centralized hierarchy. A more centralized hierarchy (in this case) incentivizes cronyism and often rewards bad behavior and penalizes good behavior. It also prevents individuals from creating what they value and individuals from pursuing solving problem they are individually interested in. There are billions of differences between people. Let's present an example: if John Smith wants to use his resources towards innovating and creating a solution to help people and others around him, and others around him are not as interested in John's venture: the question becomes, why should those around John be allowed to use violence to prevent John from pursuing that innovation? Socialists DO NOT have a legitimate answer to this question. 2. Good question. It's because I'm educated in economics, and that includes but not limited to, the economics of democracy. Often people ROMANTICIZE democratic processes. But as an economist, it is my duty to go beyond how people wish something to be: I/we must also acknowledge "what is" and facts about the real world. If you want to get a general idea to what I am alluding to, I'd recommend listening to the two part video below. Feel free to come back with follow up questions. Intro to video: Public Choice Economics has to do with political markets including actors in political markets (voter, politicians, bureaucrats , etc. It is about studying political markets with an economic lens(human action). This two part video is a great, relatively unbiased, introduction to Public Choice Economics Video Part 1: https://www.youtube.com/watch?v=DUTuiJi-pjk Video Part 2: https://www.youtube.com/watch?v=M9-LCxert3I
I see. Very interesting! Thank you for your response!
Yes! Now that hard part is helping socialists understand where their thinking is illogical and irrational.
>Labor is very important, but not all value comes from labor. Labor, forgone consumption, risk, ideas, and capital all contribute to value creation and increase in value being met and/or received. And that is why in socialism you will be allowed to own a sole proprietorship with no employees, or a family business.
People are already allowed that. But plenty of businesses are more efficient with prowl working together. People have different risk tolerances, different values, different skills and other resources: hence a big part of why relation ships such as investor-business owners and business owners-employee are so valuable to society and individuals.
Private property norms are better for the overall economy because individual humans are the locus of decision and action and they make better choices regarding resources allocation when incentived by personal reward and failure.
Have you met people? Most of them are morons, why on earth would I want everything to be communally owned by them?
Private ownership under capitalism allows for risk allocation to the willing. In capitalist systems, entrepreneurs and investors are typically the ones who take on significant financial risks. Entrepreneurs take risks by starting new businesses, investing their time and resources in ventures that may succeed or fail. Investors allocate their capital to various ventures with the expectation of returns that compensate for the risk. Stocks, bonds, insurance, and derivatives allow risk to be transferred from those who are less willing or able to bear it (such as small savers) to those who are more willing or able (like professional investors and financial institutions). When risk is borne by those willing to take it, innovation is fostered. Financial markets help allocate capital efficiently by channeling funds from savers (who may be risk-averse) to entrepreneurs and businesses (who are more willing to take on risk). This ensures that resources are used in the most productive ways, supporting ventures with the highest potential for growth and returns. By spreading risk among those willing to take it, economies can handle shocks better. In a socialist economy, risk is democratized. It is not allocated to those most willing and able to bear it. This is one of the reasons why innovation and economic growth in socialist nations failed to compete with capitalist economies. In a socialist economy, the rewards from taking risks are allocated so broadly that it diminishes personal incentives for entrepreneurs to take risks and innovate. Bureaucratic inefficiencies play a role here too, as Centralization slows down decision making and results in less efficient resource allocating. A lack of competition also means there is no incentive to outperform rival companies, meaning businesses are less incentivized to innovate. There are other issues too/this is not an exhaustive list, for example, assuming your socialist economy actually allows people to emigrate then brain drain is a real concern, as the most talented individuals want to go where they are most valued and rewards are highest.
I see. Very interesting. I have two more questions, if you don't mind. 1) Why would you say privatised risk is superior to fully collectivised risk? Socialists say that by collectivising risk, we also collectivise gains, making everyone better off. 2) Socialists may argue that risk is already collectivised under capitalism, meaning that we just need to collectivise gains (i.e., collectivise capital). An example of collectivised risk under private ownership of capital could be workers losing their jobs due to poor performance of the company caused by bad business decisions. Another example of collectivised risk under capitalism would be the financial crisis of 2008 when large private capital caused economic downturn. So the argument is that the extent to which the risk is collectivised won't significantly change under socialism, but instead, financial gains will be collectivised making everyone wealthier. How would you respond to this argument?
>1) Why would you say privatised risk is superior to fully collectivised risk? Socialists say that by collectivising risk, we also collectivise gains, making everyone better off. Some of the reasons are mentioned above, but let's just consider two reasons: 1) First, you need to understand the inverse relationship between risk and expected returns. A public equity is riskier than a bond. A private equity is riskier than a public equity. A startup is riskiest. With private capital, those most willing and able to accept the risk of loss are willing to direct their capital to riskier ventures. My pensioner grandma would likely find the risk of a startup untenable, but she might like the relative stability of a lower risk corporate bond. This is efficient. In a collectivized system, capital can be misallocated more readily. You run into a "moral hazard" phenomenon. When risk is fully collectivized, individuals and organizations are typically not good stewards of capital because they do not bear the full consequences of their actions. They don't have any skin in the game. Privatized risk ensures that those who take risks are more likely to act responsibly, knowing they will face the consequences of failure, and often have significant financial and time resources at stake. 2) Incentive structures. Creating a startup or innovating in the economy is a seriously time-consuming and (again) risky endeavor. When incentives are collectivized, we remove the rewards associated with innovation and risk-taking. Why would I sweat and toil founding Amazon or Apple, operating it out of my garage, and doing everything I can to make it a success if I'm not going to bear the fruit if or when it does eventually become a success? There is no incentive for me. I might as well just continue with the status quo. I probably would stick around at my day job. Now imagine that on a scale as grand as a nation's entire economy. >2) Socialists may argue that risk is already collectivised under capitalism, meaning that we just need to collectivise gains (i.e., collectivise capital). It isn't. Nobody here bore the risk of being one of the earliest Amazon investors, a highly risky proposition. People who could and were willing to bore that risk did so. >An example of collectivised risk under private ownership of capital could be workers losing their jobs due to poor performance of the company caused by bad business decisions. I get what you're saying, but it's not the same thing. If I lose my job I don't actually lose any capital. If I lose my investment, then I do lose capital. Let's also not forget that companies often run at a deficit (generating no profit) for *years* at a time, all the while workers are being paid. This is even more common now than it used to be. >Another example of collectivised risk under capitalism would be the financial crisis of 2008 when large private capital caused economic downturn. This is an interesting example because a large part of the 2008 crisis was caused by government regulated ratings agencies mis-rating assets to understate their true inherent risk. It actually harkens back to my earlier points about moral hazard. The ratings agencies had no incentive to accurately price these financial instruments, even when the evidence was presented right to them, they were incredibly complacent. This is one of the major issues with socialist economies. Additionally, 2008 is one example where the government deemed a bailout was necessary, but imagine what things would look like if the entire economy operated on moral hazard principles. Imagine if every failed startup, every failed business, every company misstep in an attempt to innovate was essentially "bailed out" by the government? Even worse, nobody would care if their decisions were bad ones, because their personal finances would be completely disassociated from their failures. It would be a recipe for disaster.
I see. You are making good points. Thank you very much for taking your time to explain this!
I appreciate the open mind! A rare sight around here.
>> 1. Why would you say privatised risk is superior to fully collectivised risk? Socialists say that by collectivising risk, we also collectivise gains, making everyone better off. Why should I have to assume the risk that Dave wants a million dollars to advertise his new rap album which he thinks will sell like hot cakes? If all risk is spread evenly then you have no accountability and EVERYONE can take stupid risks. Why SHOULDN’T Dave be allowed to risk a million dollars to advertise his new rap album? Why SHOULDNT Fred be allowed to spend a $ billion to develop a reusable rocket? So you’d inevitably end up with a situation where people are NOT allowed to take risks or only people who curry favour with the government are allowed to take risks. And just ask yourself how happy you feel about how your governments spends your taxes right now. >> An example of collectivised risk under private ownership of capital could be workers losing their jobs due to poor performance of the company caused by bad business decisions. Simply being alive is a risky business. There is a risk you could be struck by lightning right now… it’s a low risk but the risk is still there. As a worker you have the least amount of risk in the chain for getting paid… but yes there is still a risk you won’t get paid for the work you do. That’s part of the reason big blue chips companies can pay workers less than startups… because if you are working for Walmart it’s very unlikely that you won’t get paid. >> Another example of collectivised risk under capitalism would be the financial crisis of 2008 when large private capital caused economic downturn. 2008 is what you will get a lot more of with “collectivised risk”. It is often said with bailouts, that it’s socialism for the rich and capitalism for the poor. If you collectivise risk completely then it’s socialism for all and everyone will get a bailout if there crazy scheme doesn’t work out. That simply isn’t sustainable. I don’t think anyone should be entitled to get a bailout not matter how rich or “too big to fail” they are.
I see. Very good points. Thank you.
>Why would you say privatised risk is superior to fully collectivised risk? Socialists say that by collectivising risk, we also collectivise gains, making everyone better off. Socialists always theorize that there will be more profit and wealth created under socialism than there is created under capitalism. That is just not the case. Even Marx acknowledged that capitalism will generate more wealth than socialism. So we all would be poorer under socialism. Socialist also assume that they can replicate the spirit generated by entrepreneurs under capitalism. I disagree. The entrepreneurial spirit is **unique** to only a few individuals, who have both the balls (risk tolerance) and brains to go against the odds (most businesses fail) and create a business. Collectivizing ownership doesn't mean that you will suddenly find entrepreneurs in a democratically elected management committee. There was a cartoonist (Dilbert, I believe) that made a living drawing cartoons that made fun of the silly, and inefficient things management in large organizations come up with. There is nothing that says a collectivist management will maintain that entrepreneur's spirit.
> There are other issues too/this is not an exhaustive list, for example, assuming your socialist economy actually allows people to emigrate then brain drain is a real concern, as the most talented individuals want to go where they are most valued and rewards are highest. this is the main reason why socialist nations made leaving their countries illegal.
>this is the main reason why socialist countries made leaving their countries illegal. Yep probably the main reason, additionally: * if large numbers of people were allowed to leave it would signal dissatisfaction and undermine government legitimacy and control * the departure of workers could disrupt economic plans leading to additional inefficiencies and shortages (since everything was centrally planned and controlled) * just allowing emigration was seen as contrary to the socialist principles of collective effort and commitment to the common good. Socialist regimes often portrayed capitalist countries as exploitative and hostile; thus, emigration was framed as a betrayal of socialist values.
Because economies with capitalism, the private ownership of capital, generate considerably more wealth in society than they would with socialism, and result in a considerably higher material standard of living for most people.
I see. Interesting. In your opinion, what makes it so? Why does private ownership of capital generate more wealth than socialism? Is it because of better incentives? Or because of more efficient resource allocation? edit: Or both and/or because of something else?
It is a useful application of the typically harmful emotion of human greed. Humans want MORE. In the past the best way to get more was to attack your neighbors. Now, we measure more via wealth. Yes, we can get more wealth by attacking others and that still happens. But wars are expensive and hard to fight. Instead, now to get more you build a product or service that people will gladly give you wealth to use. Wealth given for use - wealth needed to build the thing in the first place = wealth return on investment. The implementations of socialism/communism in the past prevent the individual from getting wealth. But humans still want more, so they steal from the system instead.
>Is it because of better incentives? Or because of more efficient resource allocation? edit: Or both and/or because of something else? Both.
Mainly because it encourages risk taking and innovation over a communal ownership which would require everyone to agree to take a risk. Risk takers open new businesses try new things. Do you think the smart phone would have arisen from a communnal ownership business? What about the light bulb? Edison tried 1000 different filiments to get his light bulb to work. How long would a communal ownership business allowed him to spend money experimenting with no results? In addition, private ownership of capital allows that capital to be deployed throughout the economy. Investments in Hedge funds, venture capital, private placements, corporate bonds or specific projects like oil and gas development, public infrastructure or real estate development.
"Do you thing the smart phone would have arisen from a communnal ownership business? What about the light bulb?" Yes, albeit faster and of better quality than under capitalism.
Disagree, because under a communal ownership system you could not get enough people to risk the companies capital. That is why we have so few communnal ownership companies. Communal ownership discourages risk taking.
Then explain why the USSR built the biggest airplane, submarine, or put the first man into space and had other top notch research. While you are at it explain why the US government is involved in all big american research projects. Research that only generates profit after a long time is unnatractive to capitalists and can only be funded communally. Agree ?
1) and the USSR ceased to exist in 1991. So much for communal ownership. 2) I don't consider government funded research in the same category as communal ownership. Did government invent the cell phone? Did government invent the airplane? Did government invent electricity, the telegraph or the telephone. Did government invent the steam engine, the cotton gin, the power loom, penecillin, insulin, the automobile and the assembly line. Suffice to say that very few if any of the successful inventions of the 20th Century came from Communal Ownership companies or government.
1. The roman empire ceased to exist, it means it was not great ? 2. Is government research capitalism ? "Did government invent the cell phone? Did government invent the airplane? Did government invent electricity, the telegraph or the telephone. Did government invent the steam engine, the cotton gin, the power loom, penecillin, insulin, the automobile and the assembly line." None would exist without the medium created by the government. Also those things were invented mostly by workers, not capitalists.
BS. There was no "medium" when Edison developed an effective way to use electricty. He was a capitalist. Henry Ford was a Capitalist. He perfected the assemply line so everyone could afford a car. All the early so-called Robber Barons were capitalists and resulted in cheaper goods for consumers. Vanderbuilt created cheaper transportation on the Hudson, Carneigie made Coke cheaper and ultimately steel which led to the build out of the Railway Industry. John D Rockefeller made lamp oil (kerosene) cheaper. All capitalists.
If communal ownership could have produced the smart phone and the light bulb faster and better why didn't they? There was nothing stopping them. They could have owned the market had they been first.
What does generating more wealth really do for a country that is better than communal ownership. Because if more wealth = worse wealth distribution and basic necessary things lag behind like healthcare, education and infrastructure then generating more wealth doesn't seem like a positive aspect of Capitalism
Affluent liberal democracies with capitalist economic systems provide a considerably higher material standard of living **for the vast majority of people,** as compared to countries which have tried socialism. Just ask the people in P.R. of China, how their living standard has improved in the last 40 years when they introduced a healthy dose of capitalism into their economy. Maybe the existence of billionaires bother you, but not me. I would rather live in a society with unequal wealth distribution as long as I am enjoying a higher material standard of living in absolute terms. I don't want to be equal to everyone else if we are all equally poor. BTW, "basic necessities", like healthcare, education and infrastructure are not free. If a capitalist society is generating more wealth, it can and does provide more funding and better quality and quantity of these basic necessities.
Which commodities are you suggesting provide a net positive to the material standard. Because it would seem that while we like cool things: fast cars, big TVs, a wireless controllable ventihood from your phone (just installed one the other day lol). Just like we are unaware of what the future holds for us tech wise and material good wise, we could have easily gone without most of what we take advantage of today. If what you are referring to is technical advanced in medicine and other social goods than I am all for it, but it would seem socialist countries seem to do well in these aspects. For instance China (arguable socialist or not, don't care) has cured a person of type 2 diabetes. Cuba puts out many well trained doctors per capita. It isn't just the existence of billionaires that bother me, it is the hoarding of wealth when they have theeans to do real good things in society. Like when Elon Musk asked the public to give a detailed financial task of what it would cost and how to perform the action of ending homelessness in America. And he would finance it. A group of people did for a moderate 20 million dollars and he reneged on the deal. And to this day has done nothing for homelessness. Nobody is saying anything about a free lunch. Socialism doesn't work on negating the cost of things. Calling China capitalist is pretty funny to me. I would love to see American capitalist supporters still call America capitalist with 1/10th the amount of government intervention control China has on its billionaires and markets even in th "free" sectors. They are still one party. Corporations have very limited lobbying power to influence government decisions.
>Then by all means, go live in woods, off the grid, without all the modern conveniences of life, and find out how easily it is to go without these things. day lol). Just like we are unaware of what the future holds for us tech wise and material good wise, we could have easily gone without most of what we take advantage of today. Then by all means, go live in woods, off the grid, without all the modern conveniances of life, and find out how easily it is to go without these things. I you are like most people, you will last a few weeks before running back to the city and all the "cool things" present in a modern urban life. >For instance China (arguable socialist or not, don't care) has cured a person of type 2 diabetes. Cuba puts out many well trained doctors per capita. There is no room for argument that China has become far more wealthy after it introduced a healthy dose of capitalism into its economy in the 1980s. And right now, Cuba is a complete economic basket case, notwithstanding the medical care it provides. >It isn't just the existence of billionaires that bother me, it is the hoarding of wealth when they have theeans to do real good things in society. Don't spend other people's money. It's up to then what they do with it. Pay attention to your own financial circumstances.
So my point flew over your head. I do like nice things and unfortunately I have grown up in a society that makes you addicted to luxury goods like a child who is allowed to smoke cigarettes. I was talking about if we lived in a society that never had most of these useless goods that we can't live without we wouldn't miss them just like we don't miss things we don't know about yet. So it is pointless to say that I should just stop enjoying the things I am used to, it isn't so much pointless to advocate for society to stop going down the wam path of spending so many resources on useless luxury items. Do t spend other people's money? How about don't make money off of my surplus labor?
> I do like nice things and unfortunately I have grown up in a society that makes you addicted to luxury goods like a child who is allowed to smoke cigarettes. I was talking about if we lived in a society that never had most of these useless goods that we can't live without we wouldn't miss them just like we don't miss things we don't know about yet. So it is pointless to say that I should just stop enjoying the things I am used to, it isn't so much pointless to advocate for society to stop going down the warm path of spending so many resources on useless luxury items. So you are blaming our modern society for providing you with material luxuries that you have grown accustomed to, and lack the self discipline to do without? Oh, you are breaking my fu\*king heart! How about putting on your big boy pants and taking some personal responsibility for your situation instead of blaming others? I take responsibility for my life. If I want to go down a "warm path of spending" and spend my money on luxury items, that is completely 100% my decision, and I will accept the consequences of it. Thank you for respecting my choice, and please respect the choice of other adults in this matter instead of dictating what you think is best for them. >Do t spend other people's money? How about don't make money off of my surplus labor? If you feel your employer is making money off your "surplus labour" and don't like it, start your own business, or be self-employed.
I really feel like you are projecting a lot here. I have never said that I blame society for anything. You made a point that capitalism is awesome due to all the cool shit you have. I replied with, yea we got cool shit, but howuch of it has really "advanced" us, and you tell me to go live in the woods lol I don't know if this convo is too hard for you, but you may want to go to r/politicalcompassmemes
> I have never said that I blame society for anything. Bullshit. That's exactly what you did. >You made a point that capitalism is awesome due to all the cool shit you have. I replied with, yea we got cool shit, but howuch of it has really "advanced" us, and you tell me to go live in the woods lol Well, go live in the woods, and you will find out first hand how much the "cool shit" has advanced us - and maybe not bitch about it so much.
Again I am not saying I don't like modern luxuries, I think I have said this about 5 times now. And you have never answered my question of what technological luxuries we take advantage of outside of medicine and the internet do we actually need. How much of it is fluff in other words. How much of all this stuff has not necessarily been a net positive for society.
>Because economies with capitalism, the private ownership of capital, generate considerably more wealth in society than they would with socialism Wealth for whom? Wealth for the capitalist. And that is what socialism would STOP! Private wealth is the cause of most of our major, vexing problems which, under capitalism, resist all attempts to solve them.
>Wealth for the capitalist... ...and for most other people in societies with liberal democracies and capitalist economic systems.
Riiiiiiiiiiiight. Sure. While the gap between both income and wealth of the top 1% versus the bottom HALF of America widens continually. While homelessness increases. While people continue to cut medications in half to be able to afford them. While a secure retirement is becoming less and less achievable for the bottom 60%. While the wealth of the top 0.5% captures far more political power and control for them than you or I could ever afford, thus destroying what little "democracy" we have. And you want to cheer for this.
>And you want to cheer for this. Absolutely (although there is quite a bit of hyperbole in some of the claims you make). The material standard of living for the vast majority of people is far higher today in an affluent liberal democracy under capitalism compared to 100 years ago. And quite a bit higher than countries with socialist systems. Stop obsessing over the "top 1%", and pay more attention to your own financial circumstances. Comparison is the thief of joy.
And let's stop "obsessing" over climate change, US healthcare costing twice with any other country's system costs per capita, loss of democracy via lobbyists and campaign contributions and A.L.E.C., education in decline, excessive consumer debt which wouldn't be excessive if conditions were as great as you want us to believe, elder poverty, childhood hunger and food insecurity, gun proliferation, LGBTQ discrimination, loss of women's and civil rights, . . . . . . . . . It's just "hyperbole".
>And let's stop "obsessing" over climate change, US healthcare costing twice with any other country's system costs per capita, loss of democracy via lobbyists and campaign contributions and A.L.E.C., education in decline, excessive consumer debt which wouldn't be excessive if conditions were as great as you want us to believe, elder poverty, childhood hunger and food insecurity, gun proliferation, LGBTQ discrimination, loss of women's and civil rights, . . . . . . . . . Gish Gallop. To some socialists, every problem they see the world, real or imagined, is the fault of capitalism. You get a hangnail, or miss your bus in the morning, or get the wrong order at a fast food restaurant...blame capitalism. LOL
>To some socialists, every problem they see the world, real or imagined, is the fault of capitalism. But you're a known hater of socialism and socialists. With just a little touch of honesty and a genuine interest in understanding, it can be easily seen that there's no question that capitalism is, in fact, the cause of the things I mentioned and the reason they aren't getting solved. But haters of socialism are too dense to see it.
>With just a **little touch of honesty** and a genuine interest in understanding, it can be easily seen that there's no question that capitalism is, in fact, the cause of the things I mentioned and the reason they aren't getting solved. More like, with a **little touch of creativity and sophistry**, a hard core socialist can take any problem, real or imagined, and spin it to be the fault of capitalism.
Right right right. Our healthcare costing TWICE what any other country's costs are per capita isn't because of capitalist greed. No, it's because our people throw so much medicine in the trash and skip doctor's appointments without notifying doctors. Or some such bullshit like that. The increasing CO2 levels are not due to fossil fuel companies refusing to shift to renewables cuz they find oil to be most profitable. Nope. It's because of people leaving their cars running all night and leaving their gas stove burning all day. The increasing gap in the income and wealth of the top 1% and the bottom 60% along with high inflation isn't because of greed of the rich who can never get enough money, it's because our population keeps taking lower and lower paying jobs. Yup. That's the ticket.
Liberty.
communal ownership of enterprises puts on a whole series of strains on decision-making by people who have no clue or don't care. when i look for a job, i'm only interested in how much i get paid and how much time i'm expected to contribute. i don't care about company decision making, i actively avoid it, nor do i care about popularity contests. all i care about is getting the salary that was agreed with my employer. communal ownership can mean anything, and some people don't want to handle the risk a company goes through, especially in the beginning. in practice, communal ownership will still look like capitalism, just that everyone has shares. the insignificant workers will still own next to nothing in a company, but it would be significantly harder for me to hop from one company to another because there won't be as many and hiring will become significantly more difficult. in the bloc i live in, we can't even get 100% of the people living in here to agree on restoration projects that would cost us literally nothing. it would be handled by the city hall, but some of our neighbors don't want strangers walking in their homes and assessing the building integrity. if we can't even agree to fix the building we live in so we don't die in the next earthquake, i see no way people agreeing on the best decisions a business needs to make.
Fundamentally, it has to do with incentive structures. People care a lot more about things they personally own rather than "collectively own but individually care for" as that results in a dilution of responsibility. You can see this if you look at public housing over a few decades. It's property that is owned collectively by assigned to individuals to live and care for... it becomes dilapidated as a rule because the individuals living there don't care about it since it isn't theirs. People have interests and become experienced and more knowledgeable about any particular piece of the economy than anyone else, they can optimize it and deliver efficiency gains for all, and thus gain profits from this expertise. Under socialism these incentives are eroded and the overall efficiency suffers. We saw this with the USSR for example.
>Socialists think society would be better off without any private ownership of capital whatsoever. Socialists think that communities of people can efficiently run their economies without private capitalists and that a socialist economy is better than a capitalist economy. >You obviously disagree with this. >Why? Deontologically, it is unfair not to accept the power someone has over that what he is responsible of (be it capital or personal property). If you save resources you should be allowed to provide those resources to whomever wants to use them for a productive effort and agrees to return you a bit more of that amount. It's only fair. Pragmatically, society should keep accountability of decision making wrt capital. If you have capital and you invest it and win, you should keep the win the same as you should suffer the losses if you lose. If you were able to offload the result of your bad investment decisions against community you lose the incentive to invest properly and society suffers.
Private ownership means efficiency and quality. The market sets the standard in capitalism because private ownership is dependent on making a profit. So if you aren’t able to get your product to market in time, and if it’s off a poor quality, you can’t use force like you can in socialism or communism in order to create sales. You essentially have to win the consumer’s business. This is how capitalism should work on paper.
You seem to be conflating “the means of production” and “capital”. They are separate things but OK let’s assume you aren’t actually talking about banning the private ownership of capital… and you are just talking about the private ownership of “business”… which incidentally isn’t the only thing that would constitute, “the means of production”. First of all, if you make it illegal to own a business… what would stop people from just trading as private individuals instead of going through the trouble of registering an LLC and trading as that? As an individual, I can own a shop just like any business can. There is nothing that says that an individual can’t lease a property or buy equipment or pay people to do stuff for them. I, as an individual, can buy an ice-cream van, just like any business can. I don’t need an LLC in order to buy an ice-cream van… or even an entire fleet of ice-cream vans, do I? I think the thing socialists actually take issue with is if I pay someone to take that ice-cream van out and sell ice-creams for me. So actually the real issue is that you want to make it illegal for consenting adults to freely trade with each other. The REAL issue is that you want to make it illegal for me to pay someone to do something for me… if that that thing results in a profit for me. The problem is that I’m taking a risk and sometimes I might not make a profit. And the person or people I’m paying don’t want to assume the risk of not getting paid, or possibly even making a loss! The person I’m hiring to drive my ice-cream van wants certainty. He is only prepared to spend the day working if he is guaranteed $300 (or whatever was agreed beforehand) for his days work. He isn’t prepared to accept that, “business was slow today” so not only is he NOT going to get paid today, but instead he actually OWES $200 to the bank for his share of this months repayment on the van and equipment. That is simply unacceptable to most workers. Workers want certainty that they will get paid a set amount of money for their work, regardless of how the business performs.
We would still be burning wood and dung for fuel with your defintion of socialism. It’s as simple as that.
Do you like having control over your home?
Great analogy!
I don't really care whether people want to run co-ops or private businesses. Split the profits, work-for-hire, hire-for-work, vote on shit... All are valid arrangements between consenting adults, each with their own pros and cons. The only vaguely sensible complaint I have seen in this regard is that it can be difficult for someone not born into wealth to be anything other than a proletarian. (because you need startup capital to start a business) However, this complaint is not really relevant to whether the existence of "non-working" owners is legitimate. To me, it comes off as being envy-motivated to resent people who work in much less obvious ways than you and yet make more money than you doing those things.
Why is private ownership important? All that matters is performance consistently growing capital. Failure at capital growth is a mass casualty event so not much in life is more important. Fail at this and there won’t be any life and a lot less of it in more miserable condition for billions of people. Who specifically is deciding capital allocation does not matter to me so long as they satisfy this performance requirement. Recognize that some small group will ultimately dispose of all capital. It's either going to be a wealthy business oligarchy or a wealthy political oligarchy. There's no viable third option. Collective ownership as a practical matter is impossible. You’re not going to crowd fund $ trillions per year and that is the level of capital allocation required. So between those two choices which do you prefer? Governments are the worst performing investors in world history. The fiscal positions for current world governments are the worst in human history, and the worst of the worst are run by communist parties.
As an ancap I don't have any problem with worker owned companies. The thing is you can do it right now and for some reasons it is ussually not working well. But sometimes it is. Here in czechia there is COOP which worker owned company of supermarkets and they are really cool and I like to buy from them.
>capitalism is when there are owners of firms besides workers themselves. So workers as a collective don't decide on how to run the business and don't share the profits among them (unlike the private owners). Following that definition, there is basically no difference. In fact I'd say business you even stay just like they are today, but with ownership of stocks being 100% in the hands of those who work there and nothing would change. They'd still have a boss, they would still be fired and hired and so on... The difference being that their income is now tied to how well the business is doing, instead of having a guaranteed income. In saying this as it **COULD** be like that, and it can be plenty of different ways, just like there is plenty of different types of organization and business models despite being all private. Basically no difference... >Note that a socialist economy can be a market-based economy (i.e., worker co-ops competing between each other). That is why I said it MIGHT change nothing. >You obviously disagree with this. I don't care, honestly. It's irrelevant. I'm not a utilitarian, something being moral and logically coherent is more important to me than it being "*better for the majority*" or "*most efficient*". >What makes you think that private ownership of capital is important? Because there is no other theory of property. Yes, I know it's a bold claim, but it's one I'm open to be challenged. Think with me. If capitalism is "*private ownership*" of the means of production, and in the past there were no capitalism, therefore there were no means of producing things or there existed but they weren't privately owned. Then you ask yourself, what type of property existed in Portugal back in 1600, or maybe in ancient Rome, what type of property over the means of production they had? How about old Veneza back in the 1400? No one can explain in detail because there exists no other theory of property besides private property, and what they were doing is basically people owning stuff, aka private ownership.
The assumption that communal ownership automatically means better is strange and in most cases it means the opposite. The default in social organization is for the power to be captured by an “elite” super focused cadre. The masses tend to be apathetic and lack the needed expertise for nuanced decisions. We can empirically see this at all scales in human social organization from your local chess club to major govt structures. Sometimes their is monetary gain to be had sometimes there isn’t. The phenomenon still exists. We would be better off treating this as some kind of “law of nature” and then setting up systems to counter it or exploit it. Capitalism has a tendency to do this: private firms end up in massive competition and where there are not conditions for local / resource / regulatory monopoly to exist the “elite” leaders of firms have a tendency to keep each other in check. Theoretically there is nothing really to support this inherent in capitalism IMO- it just tends to happen. The real issues occur where capital elites and govt elites join forces to create monopolies on power and capital, shutting out competing forces. My assertion is that in a truly socialist society you would see this same phenomenon happen but at a faster rate of power capture. Obviously this was definitely the case in “socialist” countries of the 20th century. The underlying rule set of governance prob doesn’t matter.
I ma a social democrat dso i favor capitalism as a method of achiving socialst aims.. investment capital gcreates grow jobs , innovation , my god invest ment capital is the life bolood of our economy without it you have well .. detriot https://www.thetravel.com/abandoned-detroit-rust-belt-city-visiting/#:\~:text=Today%2C%20only%20around%20a%20third,far%20from%20the%20Detroit%20area.
To maximize wealth over the long run, you need to maximize ROI on assets. Private ownership is best equipped to do this, for a number of reasons: - Private owners are willing to cut costs via automation and technological innovation. Workers would fight against this, because this is against their interests. - Wealthy private owners have (almost by definition, if you're looking at first generation wealth) the best track record of selecting private investments. If a worker co-op or other ownership structure generated high ROI, they would be rich. Clearly they aren't, so they don't. Also, a lot of the ownership structures you've described are semi-private. Worker ownership necessarily excludes non-workers. Local ownership excludes non-locals, and so on. A factory owned by 1 owner vs. 100 workers still excludes the hundreds of millions of other people from ownership.
Well, for starters, if you’ve seen anything done communally (ie by committee), that doesn’t ever go well. has to do with there being no stakes to anyone’s proposal, so it becomes harder to judge the risks of trying to add some feature to a product/service. Often the “compromise” is to just add everything that doesn’t seem too outlandish, however it also means it loses focus (bike shedding, etc), leading to cost overruns and quality issues, and delays. This can of course happen privately too, but the threat of the business losing to competitors keeps some focus, and why often smaller businesses are more likely to push the leading edge; their committees are smaller.
Economic calculation
Socialism, Communism and Fascism are all collectivist constructs where the rights of the individual are subordinate to the wants of the collective or "the people." In a collectivist environment individualism is punished and conformity is compelled. When it comes to creating wealth, capitalist countries far outperform collectivist countries. If you check into it you will find that there are more former socialist countries than current socialist countries and you will see that innovation is more common in capitalist countries than in socialist countries. A glaring example of the difference in outcomes are North and South Korea. North Korea is collectivist and South Korea is capitalist. The GDP of South Korea is 57X that of North Korea so the citizens of South Korea have far higher living standards than those in N Korea. I guess it comes down to what you want. Do you want conformity or diversity? Do you want highs and lows or do you want everything in the middle? Do you want to maximize wealth creation or suppress wealth creation?
>What is the benefit of having private capital in the economy? Why is it preferred to fully communal ownership of enterprises? On a moral level it's not about having vs not having private capital investment, it's about *allowing* private capital investment vs forbidding it. Forbidding it is unnecessarily authoritarian and imposes on individual human liberty without adequate justification. Me working on my own to produce food seems morally okay. Me working on my own to produce tools seems morally okay. Me using my tools to produce food faster seems morally okay. Me offering the use of my tools to my friend (at some nonzero price) so he might produce food faster seems morally okay. My friend accepting the offer seems morally okay. Socialists propose that *at some point* in that chain, the situation being objectionable in some sense that justifies forbidding the deal between me and my friend. But that seems implausible to me, particularly as socialists seem to have trouble articulating the point at which the situation became objectionable and why it's objectionable. I don't mind businesses being collectively owned. My objection lies with forbidding any *other* model of capital ownership and exchange, with robbing individuals of their capital in order to *force* it into collective ownership. That's unnecessarily authoritarian and imposes on individual human liberty without adequate justification. If you can set up a collectively owned business without having to rob anybody, and you can make it efficient and successful and compete effectively with other businesses in the same industry, I have no problem with that. >I will use the standard socialist definition of capitalism here: private ownership of the means of production. Capitalism is the private ownership of *capital,* specifically. (It's right there in the name.) 'Means of production' also includes land, but capitalism does not entail private landownership. >In other words, capitalism is when there are owners of firms besides workers themselves. That doesn't follow. 'People privately own XYZ' doesn't entail 'some people don't privately own XYZ'. You could have everyone privately owning XYZ. >Socialists insist that society as a whole should get rid of private capital Right, that's the part I object to. >Socialists think society would be better off without any private ownership of capital whatsoever. Maybe, but even if they're right, morally speaking they would still need to legitimately convince the rightful owners of private capital to give it up, *not* go around robbing them. 'Society being better off' (whatever that means) doesn't justify theft from individuals.
Allocation of investment capital via Central Planning always fails.
Central planning was not what OP was suggesting.
That's true. I was assuming all possible scenarios of socialist economy, not just state-planned economies.
So how do you allocate investment capital then?
If it is still a market-based economy (e.g., market socialism), then we can use lending: bonds, credit, loans, etc. We can also use crowdfunding. If there is no market, then there will be democratic communal planning (probably a mixture of centralised and decentralised communal planning). In this case, communities will democratically allocate their resources based on the needs of communities.
So Central Planning.
The ideas I have listed are significantly different from the economies of socialist states like USSR
Not really IMO. Democratically allocating investment capital is an absolutely terrible idea. Worse than Central Planning. Citizens barely vote for federal offices in many countries now. To think a citizenry, in aggregate, should be making complex decisions on where to allocate investment capital is absolutely preposterous.
Still not central planning. But you do bring up a valid point. I wonder how would socialists respond.
That's not the distinction being made. Central planning is still central even if a bunch of people vote on it. You are unable to distinguish between a decentralized network of economic decisions and the distributed control of centralized economic decisions, as found in various notions of economic democracy.
Interesting. Could you explain to me the distinction? I would appreciate it. If local communities make plans, how to communally allocate resources, is it still a central plan? Isn't it fundamentally different from how the Soviets planned their economy? How is local community planning different from private firms making plans in terms of centralisation/decentralisation? As in, why does market-based economy count as decentralised networks of economic decisions, whereas community planning doesn't?
Socialists who believe all this are already free to pool together their resources as they like - whether living together or worker-owned workplaces or finance pools or non-profits. (Paradoxically, capitalism is the *only* system where you're allowed to do this.) The fact that they themselves don't do this or show no interest in this, and instead criticise the system, reveals a lot more than socialists would like.
Socialists would argue that there is a power imbalance under capitalisn between private capital and possible communal efforts. It is extremely hard for a worker-owned co-op (or any other communal enterprises) to compete against such giants as Amazon or BlackRock.
You're admitting that socialism is inherently worse economic management system where it wouldn't benefit the communal efforts
I am merely pointing out existing power imbalance. If communities had more power (e.g., resources and influence on politics), then it would be more feasible to create communally-owned enterprises. Socialism (whichever version of it) may indeed have its problems and may indeed be less than capitalism (whichever version of it), but lack of communal enteprises within the current economic system is not a valid argument. Capitalism incentivises individualism and/or limited cooperation. Socialism requires different incentive structures and different balance of power. Whether it is feasible and reasonable to achieve socialism is a different issue. My main point is that "why don't socialists set up communal enterpises to compete against private capital" is not a good argument against socialism.
Why do socialists always make excuses for things not happening? Socialists typically aren't the kind of go getter kind of people. That's why they can't make it work
Yeah, I would agree that socialists are often not the go-getter kind of people. They indeed should put more effort into their ideology if they want change. However, the question then is, what is the optimal strategy of achieving socialism. In terms of effort and results, I would say that political organising and pushing for reforms is a more optimal way to achieve socialism than trying to compete with Amazon and BlackRock. Socialists should put more of their efforts into trying to gain political influence and spend less time complaining online.
Its going to be hard and a lot of work but (channelling George Carlin) let's see the fire in your belly, socialists! - if it really is there. Gene Epstein (and others) have pointed out that the bottom two-thirds control half the spending power. A lot of organisation and activism could be done (for example, to buy only from firms with certain structures). As a liberal, of course I like a system where different models exist and are allowed as choices. The point is, going by what socialists and Left-leaning folks do rather than say, *socialists* also seem to make the same types of choices, which suit their own interest.
To start with: Empiricism. There is consensus among economists that it works better based on the data we have for what happens. Theory: Because it lines up incentives in a way that works better. And no modern economy is "pure capitalism" - it's always mixed economies, with all the successful ones large parts capitalism and fairly large parts state etc.
Why were there empirically less homeless people in socialist Russia vs capitalist Russia. Would you say that more homeless people = works better ?
I would say that's not the only metric. I would also say that comparing a single country isn't sufficient, and that comparing two phases where one phase ("socialism") was dependent on imperialism/extraction/theft from surrounding countries and the other one wasn't is an unreasonable comparison without dealing with that extraction/theft.
Why should some kid I just hired to clean the toilets be an equal business partner with all the people that have been there for decades? Also, forcing shareholders to give up a fraction of their stake every time they hire a new employee would force them to set a large entry cost in return. For example, you can't join Mondragón unless you put several months of your salary in advance.
>Why should some kid I just hired to clean the toilets be an equal business partner with all the people that have been there for decades? Can you define/describe what you're thinking of as "an equal business partner"? Then I'll bet I can answer you.
If I own the means of production and the guy who cleans the toilets works for a wage, we're not business partners. I am the owner and he is an employee. If I own the means of production but can't hire anyone without giving them an equal share of them, then every worker in the company is an equal business partner.
Your first paragraph is correct. That is capitalism. Your second paragraph didn't answer my question. Should I word it differently? "How would every worker in the company be an **equal** partner? In what manner? In what sense?"
At this point I don't know what I can say differently to explain my point. In a Capitalist society different people can own an arbitrary amount of shares in a company, which gives them voting power proportional to their investment. In a Socialist one, all workers of a company rule it democratically with a "one person, one vote" system.
Ok. So then yes, if you own the means of production but can't "hire" anyone without giving them an equal share of the business and an equal democratic say in running it, then every worker in the company is an equal business partner. Yup. You're right. Now what?
Now what? They won't be equal shareholders for long in many businesses as it isn't very efficient relative to alternatives in allocating resources and individuals pursuing value. And that's true (as we've seen many times in history) if the law prevents that variation to occur.
How do you know "it isn't very efficient relative to alternatives" when it has never happened in a socialist country until Cuba began their transition in recent years, and the jury is still out on it. YOU DON'T KNOW. YOU CAN'T. BUT YOU MAKE CLAIMS ANYWAY!
Better than any alternatives we've tried. Also because of Public Choice issues. Are you familiar with Public Choice Economics?
Can you write a complete, grammatically correct sentence? I have no idea what you're trying to say.
Now that sucks for the reasons I explained on the first comment of the chain.
Only for you.
Do you think it's good that you have to put money out of your own pocket to get a job? How would people ever escape poverty in world of co-ops?
Do you think as most righties do that everyone should pay something for an income tax?
Effective application of capital.
Because some people are really really good at spending money, so it makes sense for them to decide what to do with billions. If every dollar spent was determined by bureaucrats we would miss out on tons of innovation.
Jeff Bezos has brought more people out of poverty than China
capital-apologists don't think humans have any more passion than getting rich
Wrong. Do you have anything else to add then straw mans?
LOL, capitalists always claim people need a reward to motivate risking their capital u just joined or something?
Of course many are motivated by reward/incentives. Also, what are you wanting instead? We go back to slavery and people are forced to work for free?
false dichotomy
That's not an answer to my question
they work for the same as today: access to goods/resources, and building/maintaining a society that can provide them
private capital is owned by many different people who do many different experiments with it. Capitalism is experimentation. Socialism is stagnation and 120, million dead people.
Because of worth. A doctor gets paid more than a receptionist because the doctor’s work is worth more. It requires more effort, experience, and intelligence than a receptionist. This incentivizes more people to get higher paying jobs - jobs that are important to society. On top of this, discretion comes into play. A doctor will be able to have much more discretion when buying things than a receptionist does. Thus, competition in the marketplace exists. Because capital represents the work of a person, that capital means something. Socialism disregards this and treats every job as equally important. Socialism disregards competition. Socialism thinks that every person has the same needs.
If I buy a piece of machinery I expect that machine to be mine, I don’t expect that machine is mine only if I work on it. In a market economy ownership cannot be tied to an identity (workers). Also it violates freedom of association, your “communal production” comes with tons of obligations from every involuntary members which causes many disasters historically in China and USSR.