What would you change about Capitalism?

[Dragline]

For me the answer is simple, an actual free market system. That is far from what we have today.

As it happens, my birthplace was the same town as that of Adam Smith, often referred to as the 'Father of capitalism' or the 'Father of the free market system'. I don't think anyone can discuss capitalism or the free market system without having read his book, "An Inquiry into the Nature and Causes of the Wealth of Nations. (often shortened to just 'Wealth of Nations.')

You forgot the other half. Adam Smith viewed his work "The Theory of Moral Sentiments" as more important and fundamental to the understanding of his later work, the "Wealth of Nations", which dealt more with the mechanisms of trade. This is why both works are referenced on his tombstone, per his instructions.

The former is actually the better book. Smith understood that humans are not automatons driven by self-maximizing programming, but have natural inclinations to empathy (which he referenced as "sympathy", since the word "empathy" was not invented until the next century.) He was well ahead of his time.

Except for the labor theory of value, which culminated in Marxism. But most theories end in dead ends. Hence, the adage, "the dustbin of history".

[jennypenny]

Russ Roberts wrote a book on Smith and has several good podcasts on this topic (search econtalk.org). I recall one that discussed Smith and how people act one way in social interactions and another in impersonal transactions, and how that affects economic systems.

I think many of the ills attributed to capitalism actually stem from excessive consumerism. We used to define "good" in relation to the consumer in terms of value, but now we define it in terms of cost. I suspect the shift occurred because cost is easier to measure, but I think the system is a little soulless without those immeasurable components.

[steveo73]

To paraphrase Winston Churchill, its the worst economic system ever invented -- except for all the other ones.
....
So I also think that searches for perfect economic systems are a waste of time at best, and a utopian nightmare at worst.

I think that this is exactly how I feel. I'd love to see the price of a good accurately reflect its true cost but that requires government intervention and its what happens now anyway. It doesn't happen perfectly but it never will.

Capitalism also doesn't work perfectly - who would pay for roads and hospitals and research and all sorts of stuff that is required but isn't necessarily profitable.

We need a form of modified capitalism. It will never be perfect.

Who would pay for roads etc? Well, i recommend you read the book "The privatization of roads and highways" by Walter Block

I don't think it would work. There are certain items with society that people in general won't pay for or don't value and that is why some government intervention is required.

[BananaMangoSmoothie]

I think that this is exactly how I feel. I'd love to see the price of a good accurately reflect its true cost but that requires government intervention and its what happens now anyway. It doesn't happen perfectly but it never will.

Capitalism also doesn't work perfectly - who would pay for roads and hospitals and research and all sorts of stuff that is required but isn't necessarily profitable.

We need a form of modified capitalism. It will never be perfect.

Who would pay for roads etc? Well, i recommend you read the book "The privatization of roads and highways" by Walter Block

I don't think it would work. There are certain items with society that people in general won't pay for or don't value and that is why some government intervention is required.

Sounds like a personal incredulity to me. Afer all, toll roads do already exist. Not to mention people already pay private companies for electricity, internet, security etc.

[steveo73]

Who would pay for roads etc? Well, i recommend you read the book "The privatization of roads and highways" by Walter Block

I don't think it would work. There are certain items with society that people in general won't pay for or don't value and that is why some government intervention is required.

Sounds like a personal incredulity to me. Afer all, toll roads do already exist. Not to mention people already pay private companies for electricity, internet, security etc.

I get your point. I just don't believe that a capitalist system without government intervention would lead to the best outcome for society. I think you need some intervention.

[OldPro]

" Smith understood that humans are not automatons"

Good point Dragline. The problem is that people today are not the same as people were in Adam Smith's day and some of his thinking is dated because of that. People today behave differently than they did in the past which makes Smith's ideas of how they would behave no longer true. https://www.veraworks.com/sites/default ... k=_sg0z_j5

I think today, the balance between a desire to serve others vs. self-serving behaviour, is not the same as it was in the past for the majority of people. We live in the world of the 'ME generation'.

I've been to his grave in Edinburgh several times by the way Dragline. I follow the custom of leaving a small pebble on his gravestone even though it is a borrowed (for me) custom. There are always quite a few pebbles on it which indicate to me that there may be a surprising number of people who visit every year.

Re consumerism jennypenny, I agree and that does lead me to one change I would like to see (but won't since it isn't going to happen, it's just wishful thinking). Before Edward Bernays (sometimes referred to as the Father of Modern Advertising as Smith is the Father of the free market), people actually bought things based primarily on need. In the 20th century advertisers invented 'mass marketing' based on being able to get people to buy based on wants rather than needs. Consumerism has never stopped growing since then.

Imagine if such advertising were illegal. Now there is a change I would love to see but never will. You could advertise that 'these jeans are hard wearing and will last longer than inferior material in a work environment.' You could not advertise, 'these designer jeans will make you look sexy and get you a boyfriend/girlfriend.'

[OldPro]

This: http://i.nordstromimage.com/images/Stor ... _ads_8.jpg

Not this:https://s-media-cache-ak0.pinimg.com/73 ... 096f42.jpg

https://s-media-cache-ak0.pinimg.com/73 ... 096f42.jpg

[BananaMangoSmoothie]

" Smith understood that humans are not automatons"

Good point Dragline. The problem is that people today are not the same as people were in Adam Smith's day and some of his thinking is dated because of that. People today behave differently than they did in the past which makes Smith's ideas of how they would behave no longer true. https://www.veraworks.com/sites/default ... k=_sg0z_j5

I think today, the balance between a desire to serve others vs. self-serving behaviour, is not the same as it was in the past for the majority of people. We live in the world of the 'ME generation'.

I've been to his grave in Edinburgh several times by the way Dragline. I follow the custom of leaving a small pebble on his gravestone even though it is a borrowed (for me) custom. There are always quite a few pebbles on it which indicate to me that there may be a surprising number of people who visit every year.

Re consumerism jennypenny, I agree and that does lead me to one change I would like to see (but won't since it isn't going to happen, it's just wishful thinking). Before Edward Bernays (sometimes referred to as the Father of Modern Advertising as Smith is the Father of the free market), people actually bought things based primarily on need. In the 20th century advertisers invented 'mass marketing' based on being able to get people to buy based on wants rather than needs. Consumerism has never stopped growing since then.

Imagine if such advertising were illegal. Now there is a change I would love to see but never will. You could advertise that 'these jeans are hard wearing and will last longer than inferior material in a work environment.' You could not advertise, 'these designer jeans will make you look sexy and get you a boyfriend/girlfriend.'

I loved the book 'Propaganda' by Edward Bernays.

I'm a bit confused though, on what moral basis would you make such advertising illegal? It seems as though it's just an aesthetic preference rather than something linked to any moral first principles. Arbitrary laws based on preference rather than moral principles is what's hurting society imo.

[Dragline]

Yes, Bernays's techniques combined with mass media fairly well "creates" the backdrop of the society we live in. Here's an amusing recent podcast about him -- kind of superficial, but entertaining: http://www.stuffyoushouldknow.com/podca ... ons-works/

I disagree with this statement of OldPro: "The problem is that people today are not the same as people were in Adam Smith's day and some of his thinking is dated because of that. People today behave differently than they did in the past which makes Smith's ideas of how they would behave no longer true."

I don't humans have actually changed very much in thousands of years. Unless they make a real conscious effort, people are still driven by primarily primate behaviors, especially the desire to have what other people have (or at a more abstract level, to desire what others desire and become them), which drives consumerism. This is why ancient stories like Aesop's fables still make sense to us. (And Oedipus.)

What has changed is our technology and the manner in which people live -- we now know a hell of a lot more about what other people have or at least what we think they have, which often proves to be a bad environment for humans due to the anxiety and irrational desire to accumulate it provokes. Great genetic strategy when food is scarce -- not so great these days when you can literally hoard yourself to death.

[Bismarck]

One thing I'd change about capitalism as it is in the US is allowing failure. Actual capitalism allows for this, but we've moved away from it. Certain banks and GM should have been allowed to die. Newer, better companies would have filled the void, likely a little more cautious.

"Capitalism without losers is like Catholicism without hell. It doesn't work"

[Dragline]

I thought this was an interesting take on this subject: https://www.youtube.com/watch?v=Yh_hRS15n_8

Although I don't know that capitalism, or any other economic system for that matter, could address the higher needs on the Maslow pyramid.

[BRUTE]

Although I don't know that capitalism, or any other economic system for that matter, could address the higher needs on the Maslow pyramid.

if humans didn't have to spend their entire lives working for survival (shelter, food), they would have plenty of time to pursue creative endeavors and climb the maslow pyramid. hang out with friends, family.

brute thinks the contribution of capitalism could be to make people so productive and rich that they could spend less of their time surviving, and more doing stuff they actually want to do. like ERE does, in a way.

[Dragline]

brute thinks the contribution of capitalism could be to make people so productive and rich that they could spend less of their time surviving, and more doing stuff they actually want to do. like ERE does, in a way.

This was a popular theory of economists back in the 1920s. (Can't remember the principal proponent of it at the moment -- might have been Keynes, but the idea was well-accepted). It was thought that as it became easier to meet basic needs, people would start working less and spend more time on other pursuits. But it did not work out that way -- instead people tend to sieze the opportunity to work more, make more and buy more shit. And excess consumption was encouraged by marketers and became the norm, creating this really weird idea of "a duty to consume", among other really weird modern ideas.

The fact that it didn't pan out the way as forecast really tells you two things: (1) on an individual level, the rational actor assumption underlying most economic theories is of dubious validity and the theories themselves are of limited usefulness when it comes to individual satisfaction with life; (2) the anthropological theory of mimises -- that left to their own primitive yearnings, humans are prone to copying one another down to copying what other people desire (keeping up with the joneses and envy about what others have on display). This makes a lot of sense, because the trait is shared with other primates and mammals, and is favorable in terms of survivorship/evolutionary characteristics.

It takes conscious effort to avoid falling into the trap of (2) which is the unconscious inclination. This is fundamentally what we are talking about here (ERE).

The idea is ancient and incorporated into many old teachings -- consider the Buddhist idea that desire is the root cause of suffering and the Judeo-Christian rule that "thou shalt not covet". Yet predictably quite difficult for most people to follow, as it is not their natural inclination.

[BRUTE]

most people covet indeed.

but brute disagrees with your 1). this does not show that the rational actor assumption is wrong, because this assumption wasn't even there. in brutes opinion, the critique of the rational actor theory has always been a straw man. no economist brute has read ever claimed that humans were hyperrational, or rational at all.

what it might show is that people were thought to value leisure more than consumption, but they don't. to no small degree influenced by the mimises effect as you call it, and the marketing/consumerism mechanisms you mentioned.

what it does show in brutes opinion is that humans are not individuals to the degree they often believe they are. sure, each one is a bit of an individual, but statistically, humans often behave like herd animals.

but this isn't a failure of capitalism, in brutes eye. capitalism is about the distribution of resources and efforts in society by means of a pricing system, as opposed to other methods (central planning in communism, expert knowledge in a technocracy, voting in a democracy). an economic system by itself usually does not tell people what to want. while we do definitely have a system in place that tells people what to want (consumerism), brute does not think this is directly resultant of capitalism - while it is definitely built on top of it, and the current economy is completely based on it.

[Dragline]

but brute disagrees with your 1). this does not show that the rational actor assumption is wrong, because this assumption wasn't even there. in brutes opinion, the critique of the rational actor theory has always been a straw man. no economist brute has read ever claimed that humans were hyperrational, or rational at all.

Not sure which ones you have been reading or what assumptions they have implied -- but every economic theory has assumptions built into it and if you don't know what they are, you don't understand the applications or limits of the theory. Without the assumptions, mathematical models cannot be constructed. Most economists freely acknowledge this limitation and many have focused upon this problem within the subject matter.

For good critiques of the subject of assumptions in economics, I would suggest "Debunking Economics" (S. Keen) and "Quasi-Rational Economics" (R. Thaler 1994) or "Misbehaving: The Making of Behavioral Economics" (R. Thaler 2015). [Also "Thinking, Fast and Slow" (D. Kahneman),although its not strictly on topic.]

Summary of the 1994 book: "Standard economics theory is built on the assumption that human beings act rationally in their own self interest. But if rationality is such a reliable factor, why do economic models so often fail to predict market behavior accurately? According to Richard Thaler, the shortcomings of the standard approach arise from its failure to take into account systematic mental biases that color all human judgments and decisions." http://www.amazon.com/Quasi-Rational-Ec ... 331&sr=1-4

The assumption is there. Attempting to deny it or casting it off as a straw man is not a rational argument, but perhaps a symptom of cognitive dissonance.

Happy to consider any authorities in response, but your ipse dixit ("it is, because I say it is and is what I know") is exhausted.

[BRUTE]

on the contrary. brute never mentioned that humans are rational, so it's up to Dragline to prove brute made this assumption.

[Dragline]

no economist brute has read ever claimed that humans were hyperrational, or rational at all.

My critique was of this statement. My point was the fact that you have not read these things means that you have not read into the subject very much yet, because they are endemic to the subject matter. And the fact that you have not found them does not mean that they do not exist.

If you google "HIstory of Economics" and Schumpeter, you will find his great work and more recent others in searchable form where you can then search the word "rational" and see how economists have used it going all the way back to Aristotle, who is the originator of the axiom that "Man is a rational animal" that underpins much of the thought in this area.

Or for a quick hit on one branch, search von Mises and/or Rothbard with praxeology and rational, and you will see that there is an assumption embedded in Austrian economics that all human action is rational by definition.

[7Wannabe5]

Dragline said: Although I don't know that capitalism, or any other economic system for that matter, could address the higher needs on the Maslow pyramid.

Fascinating clip. When I was 8 years old, I was given a test and labeled as gifted. We were bused to a central location and provided with a vast array of materials and resources and a journal in which to keep notes on our activities, and we were told to "Be creative!" So, I learned at a very early age that it doesn't work that way. One obvious flaw in the model of Maslow's pyramid is that human needs/desires are not created or built and secured in linear hierarchy. They are created in varying cycles and always and everywhere in relationship to cultural norms. Human beings and human desires aren't engineered. They are grown in chaotic, complex process.

I would argue that leisure time is not even strictly necessary for self-actualization. For instance, consider MacGyver locked in a box with a ticking bomb and 3 simple tools. He will self-actualize as he fights for basic survival with no time to spare, because the creative resources he is able to bring to solving the problem are unique. It's more like the way leisure time and/or affluence aids self-actualization is through providing better opportunity for independent (or liberal!!-lol) education and experience. Of course, there is also some level of need for structure or discipline. Once I processed the trauma of being instructed to be creative in a vacuum, I settled down and engaged myself in the independent studies of learning folk songs in Hebrew and watching speed-reading slides. I only remember one folk song, but I still read way too fast.

One of the most self-actualized individuals I ever met grew up with no father in an extremely grim part of Detroit. Chaos and creativity occurs at the edge or intersection of living systems, in his case the very thin dividing line between the terrible school system he might have attended and the relatively affluent, primarily conservative Jewish school system he did attend, but there is a limit to how much stress will prove productive. If his mother had used crack or alcohol extensively while she was pregnant, that would have likely been endgame for not only any possibility of self-actualization, or even survival without the support of society. Another friend of mine adopted a child born with fetal alcohol syndrome and addicted to crack, and the child still ended up in prison as an adult, in spite of being given every advantage of affluence and much love and support.

Self-actualization has something to do with flow. Flow occurs when both the challenge and the skill level is high. Therefore, if I was to put myself in the business of selling self-actualization in a box, what I would have to package together would be both a problem and the resources necessary to solve it, and each box would have to contain some unique components towards maximization of edge, but it couldn't be completely random. For instance, I wouldn't ship somebody a box containing the challenge of "Find cure for cancer." without first providing them with "Resources to master skill of solving algebraic equations." but I might ship somebody who already had all the necessary resources and skills to do some work towards finding a cure for cancer a very different sort of problem, maybe something like "Design a book of elegant paper structures." or "Perform 500 push-ups in 5 minutes." or "Take care of 10 toddlers in rural Libya without assistance for a month.", so that different "muscles" would be worked and new connections formed. Something like that.

[Dragline]

Self-actualization has something to do with flow. Flow occurs when both the challenge and the skill level is high. Therefore, if I was to put myself in the business of selling self-actualization in a box, what I would have to package together would be both a problem and the resources necessary to solve it, and each box would have to contain some unique components towards maximization of edge, but it couldn't be completely random. For instance, I wouldn't ship somebody a box containing the challenge of "Find cure for cancer." without first providing them with "Resources to master skill of solving algebraic equations." but I might ship somebody who already had all the necessary resources and skills to do some work towards finding a cure for cancer a very different sort of problem, maybe something like "Design a book of elegant paper structures." or "Perform 500 push-ups in 5 minutes." or "Take care of 10 toddlers in rural Libya without assistance for a month.", so that different "muscles" would be worked and new connections formed. Something like that.

Your box would have three components: Autonomy, Mastery and Purpose. Flow (as defined by Mihaly Csikszentmihalyi, usually pronounced "Mee-high Chik-sa-mee-high) becomes possible when you are working/acting in an environment with some combination of those.

[BRUTE]

Or for a quick hit on one branch, search von Mises and/or Rothbard with praxeology and rational, and you will see that there is an assumption embedded in Austrian economics that all human action is rational by definition.

brute has read all of mises and almost all of rothbard, and did not walk away with the idea that either of the two ever assume humans to be very rational.

brute has not read schumpeter. but a quick search on schumpeter's wikipedia page only brings the word "rational" up in some references, never in anything about him.

rest assured that brute has read A LOT of economics, and still doesn't believe that "hyperrational man" was ever anything but a metaphor.

in addition, the fact that many humans chose to work more and consume more, instead of working less and leisuring more, is not at all proof that humans are not rational. it's a sign that dragline and keynes misjudged the preferences of those humans.