A survey on … capitalism in 34 countries. In only 6 of these countries – led by Poland & the United States – do pro-capitalist attitudes dominate. (More) That survey gave these four statements as most often endorsed re capitalism:
Oct 23, 2023·edited Oct 23, 2023Liked by Robin Hanson
The question I pose to professed anti-capitalists is: What is the viable alternative? Let's say we have a risky business proposition requiring the up-front investment of a lot of capital. (Building a new factory, say.) Under a capitalist system the owner of that money makes the decision, and as you point out in this piece that gives them skin in the game and a strong incentive to take the decision seriously.
What other viable decision-maker is there in this instance? A government committee? That's bound to get mired in politics and virtue-signalling. A worker collective? This will probably focus on short-term thinking (worker wages, etc.). I have never gotten a real answer from an anti-capitalist on these practical decisions at the root of everything.
I find myself aligning with your priorities, Robin, particularly your focus on a world that 'works.' However, I'd argue that the scope of what makes a world 'work' extends beyond commerce and economic efficiency. In 1973 when I worked in New Jersey across from Staten Island, the Arthur Kill was dead. DuPont operated a chemical plant that became a superfund site. DuPont was an industry leader in safety and environment; how long would the cleanup have taken without regulations?
The current climate crisis appears to be the result of regulatory failure. In today's complex information landscape, the need for thoughtful regulation is urgent, albeit in different forms.
A world that 'works' should also consider ethical, social, and environmental factors, creating a balanced ecosystem where commerce is just one aspect of a thriving community.
I agree that capitalist competition is a powerful force for good most of the time, for the reasons you stated. It provides accountability for decision-makers: if their choices lead to less profit (which as you say is *usually* correlated with less good for society), the decision-makers often make less money themselves. But I don't think you are accurately describing the problems that can arise with it.
Monopolies are a problem that you casually dismiss because you say that repairing the problem of private monopolies must lead to an equal or greater problem of government monopolies. But there is a difference between a private monopoly and a government monopoly: the government monopoly is accountable to the voters. We see this in healthcare, where the countries with the best healthcare outcomes and lowest costs have single-payer systems. The USA has per-capita healthcare costs two to three times that of other Western countries, with worse health outcomes.
What we want is a system that maximizes the *useful* part of capitalism - which is ideal competition - and minimizes the harmful parts of capitalism: causing suffering for the workers to get more output from them, polluting the environment, selling products with dangerous defects the consumer is unaware of, creating monopolies, capturing the regulators.
Remember that in the limit of no regulation, corporations hire their own armies and effectively become small (or large!) governments themselves, setting whatever laws they please, without democratic accountability to the voters except the wealthy shareholders. They become the government regulators that were removed.
We can also take a lesson from the tale of the "paperclip optimizer." The paperclip optimizer is an AGI supervising a paperclip factory that was told to maximize production. As a result, it converts Earth into paperclips. The point is that even *slight* misalignment between the goals of a very powerful entity, and the general public, can lead to very bad outcomes. Now, in the short term, producing more paperclips is correlated with public good, just as producing more profit is correlated with greater public good. But if you take either to the extreme, the correlation no longer holds. Slaves are profitable, child workers are profitable, pollution is profitable, barely giving workers enough to live on is profitable, replacing all workers with robots is profitable, buying out the regulators and competitors is profitable.
Capitalism is the ONLY system but it requires vigorous regulatory attenuation and financial attribution to support the system itself. The sheer volume of ultra-wealthy voices (and their sycophants) criticizing various examples of bad (or good) regulation that might disproportionately affect their own happiness or competitive potential destroys the dialogue between normal, otherwise good people. It gets complicated when people don’t know what they are talking about, especially when influencers get involved as proxy messengers of policy.
Technically I agree with all the criticism of capitalism I just don’t immediately agree that it’s inherently bad. At the end market intervention is only as good as the innovation it contributes to. Like taxes to limit consumption is good if it leads to innovation of some sort. In the sense of funding schools and universities to some extent.
"...most of our most important decisions are made by a small elite strongly selected for success..." Wrong. Many and even most capitalist enterprises fail; those terribly clever elites turn out to be not so very clever. The enterprises that succeed do so as the result of millions of decisions made every day by non-elites aka consumers, average people, who vote with their wallets. And that, the power of free markets, is the strength of capitalism. Clever ideas that don't get votes go to the wall.
1) Yes, it largely is, but money is power under any system of governance.
2) Yes, it does, this is the main reason that anarchocapitalism with no redistribution at all is a miserable idea.
3) No, it doesn't. People are greedy, capitalism or not. Capitalism attempts to harness that greed by using it to encourage people to do things that other people want.
4) Certainly monopolies exist under capitalism, but they are guaranteed under its polar opposite. A government monopoly is still a monopoly and shares much of the same problems as a private monopoly. (In general competitive market >>> state monopoly > private monopoly.)
One of the drains on any systems' efficiency is narcissism and psychopathy. How can any system gain efficiencies by policing parasites and throwbacks who lack empathy and game off systems to suit themselves? Rent-seeking is one example. Reducing interactions to binary win-lose trades is another.
(1) I'm not so sure about this sentence: "Most probably realize that most any large social world we share will probably result in great inequality of status and influence (including over politics), with many high status folks selfishly pursuing even more status." I question whether most people actually *do* realize that. People tend to associate, over time, with others of similar status, ability, wealth, and interests, and lose track of the existence of people who are radically different in any of these dimensions. (This fact has been observed many times in the context of the poor or disabled et cetera being "invisible". They are -- but it is equally true that the rich and talented are also largely invisible to the average person, although less so than the poor and disabled of course.) It's also naturally difficult to understand the abilities of someone who is much more talented in some direction than you are: it's why occasional sports fans can observe a world champion and say "yeah he seems a bit better than average" while the avid well-informed fan (or gifted amateur) is shocked by the understatement.
For both reasons, I think there's actually a pretty good chance that most people, if asked to imagine the future of a world in which everyone is abruptly made exactly equal in power and wealth, would conclude that this world will persist in that state. They would *not* theorize that inequalities would rapidly arise anew, as those few people who were most talented and energetic along the axes rewarded in the New Order acquired greater influence than those who were less so. I mean, this is probably why historically people seem to imagine that one revolutionary act (land reform, an Affordable Care Act, whatever) will permanently remove some perceived inequality, and they don't imagine the effort must be repeated, over and over again, indefinitely.
(2) Arguably the use of "capitalism" as "a system of economic governance" is one of the brilliant sleights of hand of Marxism, because it portrays this set of ideas as some kind of choice -- an option we can select, one among many options. But I think there's a good argument that "capitalism" -- in the sense of a basic description of transactions, prices, the division between labor and capital, the accumulation of capital and its uses, et cetera -- is just a description of how the world naturally works. Any social system we impose on top of that by force just distorts the natural relationships. (One can certainly argue they are distorted in pro-social ways, of course.) Which means treating "capitalism" as a thing you can choose is akin to saying "Should we choose to live in a world where death happens to all? Maybe not! And while we're at it, maybe we should choose to live in a universe where entropy doesn't necessarily increase, there are all kinds of advantages to that, you know..."
Why is Poland pro-capitalist? The answer of 'capitalism makes you rich' seems insufficient, since that is true everywhere, but anti-capitalist attitudes do not dominate everywhere
"Capitalism" is an evolutionary newer ranking mechanism based on prestige status and in conflict with traditional dominance status hierarchies (such as monarchy, democracy or socialism).
The last point is very inaccurate. The US has a history of periods of strong anti-monopoly activity followed by periods of strongly allowing monopolistic techniques to run rampantly, and there are scholars such as Matt Stoller (https://www.thebignewsletter.com/) who show in richness of details how much the second attitude derail things by progressively causing more inefficiencies, not less, not the least of which are reduced markets, not broader ones.
Also, there's a conceptual confusion between free trade / free markets and Capitalism proper. Capitalism, as a specific mode of production, arose in the late 18th, early 19th century. There have been different economic systems before that allowed for free trade and free markets, at times even freer than in Capitalist proper, that however weren't Capitalist themselves.
The specific traits Capitalism brought to the broader set of free market systems were, first, a strong emphasis on progressively increasing the per capita productivity of work; second, a strong emphasis on the accumulation of Capital, in the technical sense of means of production. These two traits can be decoupled. Cooperativism, for example, can pursue the first trait with as much emphasis, while not pursuing the second. When done well the result are efficient businesses that interact via free market exchanges but that aren't Capitalist, a well-known example being the Mondragon Corporation in Spain.
When people criticize Capitalism then, they aren't criticizing the pursuit of efficiency or free markets, they're criticizing the distortions brought about by the accumulation of means of production and the incentives that accumulation in turn generate. Free markets themselves are, for most, with the exception of radical socialists, fine.
Capitalism will always be the only system that works. That’s because it mirrors the natural world. One has to exchange resources for other resources. The proportional value of that exchange is what makes it viable. Putting the opinions of others into play will just mess it up.
I looked into the study you linked. Interesting that Argentina ranks relatively high in their support for economic freedom (higher than Switzerland) but that doesn't seem to have influenced their actual policies that much in the last decades
The question I pose to professed anti-capitalists is: What is the viable alternative? Let's say we have a risky business proposition requiring the up-front investment of a lot of capital. (Building a new factory, say.) Under a capitalist system the owner of that money makes the decision, and as you point out in this piece that gives them skin in the game and a strong incentive to take the decision seriously.
What other viable decision-maker is there in this instance? A government committee? That's bound to get mired in politics and virtue-signalling. A worker collective? This will probably focus on short-term thinking (worker wages, etc.). I have never gotten a real answer from an anti-capitalist on these practical decisions at the root of everything.
I find myself aligning with your priorities, Robin, particularly your focus on a world that 'works.' However, I'd argue that the scope of what makes a world 'work' extends beyond commerce and economic efficiency. In 1973 when I worked in New Jersey across from Staten Island, the Arthur Kill was dead. DuPont operated a chemical plant that became a superfund site. DuPont was an industry leader in safety and environment; how long would the cleanup have taken without regulations?
The current climate crisis appears to be the result of regulatory failure. In today's complex information landscape, the need for thoughtful regulation is urgent, albeit in different forms.
A world that 'works' should also consider ethical, social, and environmental factors, creating a balanced ecosystem where commerce is just one aspect of a thriving community.
I agree that capitalist competition is a powerful force for good most of the time, for the reasons you stated. It provides accountability for decision-makers: if their choices lead to less profit (which as you say is *usually* correlated with less good for society), the decision-makers often make less money themselves. But I don't think you are accurately describing the problems that can arise with it.
Monopolies are a problem that you casually dismiss because you say that repairing the problem of private monopolies must lead to an equal or greater problem of government monopolies. But there is a difference between a private monopoly and a government monopoly: the government monopoly is accountable to the voters. We see this in healthcare, where the countries with the best healthcare outcomes and lowest costs have single-payer systems. The USA has per-capita healthcare costs two to three times that of other Western countries, with worse health outcomes.
What we want is a system that maximizes the *useful* part of capitalism - which is ideal competition - and minimizes the harmful parts of capitalism: causing suffering for the workers to get more output from them, polluting the environment, selling products with dangerous defects the consumer is unaware of, creating monopolies, capturing the regulators.
Remember that in the limit of no regulation, corporations hire their own armies and effectively become small (or large!) governments themselves, setting whatever laws they please, without democratic accountability to the voters except the wealthy shareholders. They become the government regulators that were removed.
We can also take a lesson from the tale of the "paperclip optimizer." The paperclip optimizer is an AGI supervising a paperclip factory that was told to maximize production. As a result, it converts Earth into paperclips. The point is that even *slight* misalignment between the goals of a very powerful entity, and the general public, can lead to very bad outcomes. Now, in the short term, producing more paperclips is correlated with public good, just as producing more profit is correlated with greater public good. But if you take either to the extreme, the correlation no longer holds. Slaves are profitable, child workers are profitable, pollution is profitable, barely giving workers enough to live on is profitable, replacing all workers with robots is profitable, buying out the regulators and competitors is profitable.
Capitalism is the ONLY system but it requires vigorous regulatory attenuation and financial attribution to support the system itself. The sheer volume of ultra-wealthy voices (and their sycophants) criticizing various examples of bad (or good) regulation that might disproportionately affect their own happiness or competitive potential destroys the dialogue between normal, otherwise good people. It gets complicated when people don’t know what they are talking about, especially when influencers get involved as proxy messengers of policy.
Technically I agree with all the criticism of capitalism I just don’t immediately agree that it’s inherently bad. At the end market intervention is only as good as the innovation it contributes to. Like taxes to limit consumption is good if it leads to innovation of some sort. In the sense of funding schools and universities to some extent.
"...most of our most important decisions are made by a small elite strongly selected for success..." Wrong. Many and even most capitalist enterprises fail; those terribly clever elites turn out to be not so very clever. The enterprises that succeed do so as the result of millions of decisions made every day by non-elites aka consumers, average people, who vote with their wallets. And that, the power of free markets, is the strength of capitalism. Clever ideas that don't get votes go to the wall.
My take on the four reasons capitalism is hated:
1) Yes, it largely is, but money is power under any system of governance.
2) Yes, it does, this is the main reason that anarchocapitalism with no redistribution at all is a miserable idea.
3) No, it doesn't. People are greedy, capitalism or not. Capitalism attempts to harness that greed by using it to encourage people to do things that other people want.
4) Certainly monopolies exist under capitalism, but they are guaranteed under its polar opposite. A government monopoly is still a monopoly and shares much of the same problems as a private monopoly. (In general competitive market >>> state monopoly > private monopoly.)
The market is more important than capitalism. The market will do away with capitalism when is it necessarily effective to do so.
One of the drains on any systems' efficiency is narcissism and psychopathy. How can any system gain efficiencies by policing parasites and throwbacks who lack empathy and game off systems to suit themselves? Rent-seeking is one example. Reducing interactions to binary win-lose trades is another.
An interesting essay. Two comments:
(1) I'm not so sure about this sentence: "Most probably realize that most any large social world we share will probably result in great inequality of status and influence (including over politics), with many high status folks selfishly pursuing even more status." I question whether most people actually *do* realize that. People tend to associate, over time, with others of similar status, ability, wealth, and interests, and lose track of the existence of people who are radically different in any of these dimensions. (This fact has been observed many times in the context of the poor or disabled et cetera being "invisible". They are -- but it is equally true that the rich and talented are also largely invisible to the average person, although less so than the poor and disabled of course.) It's also naturally difficult to understand the abilities of someone who is much more talented in some direction than you are: it's why occasional sports fans can observe a world champion and say "yeah he seems a bit better than average" while the avid well-informed fan (or gifted amateur) is shocked by the understatement.
For both reasons, I think there's actually a pretty good chance that most people, if asked to imagine the future of a world in which everyone is abruptly made exactly equal in power and wealth, would conclude that this world will persist in that state. They would *not* theorize that inequalities would rapidly arise anew, as those few people who were most talented and energetic along the axes rewarded in the New Order acquired greater influence than those who were less so. I mean, this is probably why historically people seem to imagine that one revolutionary act (land reform, an Affordable Care Act, whatever) will permanently remove some perceived inequality, and they don't imagine the effort must be repeated, over and over again, indefinitely.
(2) Arguably the use of "capitalism" as "a system of economic governance" is one of the brilliant sleights of hand of Marxism, because it portrays this set of ideas as some kind of choice -- an option we can select, one among many options. But I think there's a good argument that "capitalism" -- in the sense of a basic description of transactions, prices, the division between labor and capital, the accumulation of capital and its uses, et cetera -- is just a description of how the world naturally works. Any social system we impose on top of that by force just distorts the natural relationships. (One can certainly argue they are distorted in pro-social ways, of course.) Which means treating "capitalism" as a thing you can choose is akin to saying "Should we choose to live in a world where death happens to all? Maybe not! And while we're at it, maybe we should choose to live in a universe where entropy doesn't necessarily increase, there are all kinds of advantages to that, you know..."
Why is Poland pro-capitalist? The answer of 'capitalism makes you rich' seems insufficient, since that is true everywhere, but anti-capitalist attitudes do not dominate everywhere
"Capitalism" is an evolutionary newer ranking mechanism based on prestige status and in conflict with traditional dominance status hierarchies (such as monarchy, democracy or socialism).
Thank you for this post.
The last point is very inaccurate. The US has a history of periods of strong anti-monopoly activity followed by periods of strongly allowing monopolistic techniques to run rampantly, and there are scholars such as Matt Stoller (https://www.thebignewsletter.com/) who show in richness of details how much the second attitude derail things by progressively causing more inefficiencies, not less, not the least of which are reduced markets, not broader ones.
Also, there's a conceptual confusion between free trade / free markets and Capitalism proper. Capitalism, as a specific mode of production, arose in the late 18th, early 19th century. There have been different economic systems before that allowed for free trade and free markets, at times even freer than in Capitalist proper, that however weren't Capitalist themselves.
The specific traits Capitalism brought to the broader set of free market systems were, first, a strong emphasis on progressively increasing the per capita productivity of work; second, a strong emphasis on the accumulation of Capital, in the technical sense of means of production. These two traits can be decoupled. Cooperativism, for example, can pursue the first trait with as much emphasis, while not pursuing the second. When done well the result are efficient businesses that interact via free market exchanges but that aren't Capitalist, a well-known example being the Mondragon Corporation in Spain.
When people criticize Capitalism then, they aren't criticizing the pursuit of efficiency or free markets, they're criticizing the distortions brought about by the accumulation of means of production and the incentives that accumulation in turn generate. Free markets themselves are, for most, with the exception of radical socialists, fine.
Capitalism will always be the only system that works. That’s because it mirrors the natural world. One has to exchange resources for other resources. The proportional value of that exchange is what makes it viable. Putting the opinions of others into play will just mess it up.
I looked into the study you linked. Interesting that Argentina ranks relatively high in their support for economic freedom (higher than Switzerland) but that doesn't seem to have influenced their actual policies that much in the last decades