Arnold Kling  

The Tug-of-War over Capitalism

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From my latest essay.


Those of us on the pro-capitalist (P) side tend to approve of the price system, because we think it helps send signals. Those on the anti-capitalist (A) side see prices as corrupt. For example, when the price of gasoline goes up, P's say that this tells people to consume less and to produce more. A's see gouging. Where P's address the problem of pollution with taxes, A's want to regulate and punish polluters. Where P's see no problem with using a market for organ transplants, A's would view such a market as inhumane.

The essay lists other views that tend to "clump" together on the P and A side.


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CATEGORIES: Political Economy



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The author at Economic Investigations in a related article titled News of the World #37 writes:
    I haven’t done one of these in a while… I’m in j00 metric spaze Cntractin’ j00 mappingz Austro-Athenian Empire Do Not Overestimate the Power of the Dark Side, Roderick T. Long on the portrayal of self-confidence in fiction, in a... [Tracked on June 8, 2007 3:04 PM]
COMMENTS (6 to date)
Randy writes:

Well done. One point that particulary caught my eye was the A's response to business failure. It struck me as odd that those who are otherwise so routinely anti-business, who's policies are almost designed to contribute to business failure, nonetheless consider a business failure to be a disaster, but that is exactly how it is. I imagine that it just throws their whole world view into a tailspin to be confronted by a situation that they do not have the ability to control.

Brad Hutchings writes:

Arnold, I really like this essay. What you are trying to do here is very important, which I see as delineate the irreconcilable differences in the debate over capitalism. But I'm gonna give you a B+ and ask that you rewrite the essay to incorporate a little more of Taleb's The Black Swan. You come close here:

For any one individual, it may represent luck, but overall business success is correlated with the introduction of innovations that improve our lives.

It's really more than that. Taleb says we ought to look at the expected value of a person's or company's gambles over the whole range of alternate universes. For example, the serial entrepreneur who bats .250 on his way to amassing a multi-million dollar fortune is different (and "better") than someone who wins a state lottery. That entrepreneur will likely perform similarly in other imaginable lives, the lottery winner will be a loser in most others. Even a staunch A has to admit there is a difference.

Taleb is also pretty useful in explaining the A bias of historians. Historians need cause and effect. They are uncomfortable with randomness, aka "the unexplainable". If you could get extra smug in your rewrite and differentiate Ps from As on willingness to deal with ambiguity and unexplainables, I'd give you an A+ (or a P+ if you prefer).

Buzzcut writes:

Some argued that there were no new technologies in sight for consumers to buy. Others feared that natural resources were nearing exhaustion, or that slowing population growth translated into a lack of consumer demand. Such assumptions lay behind Roosevelt's 1932 campaign address...

Wow, that's how I feel about today! Slowing population growth, natural resource scarcity, and an end to the tech boom all seem to be risks in the current environment.

N. writes:

Now, the $64,000 question is, how do you change an A into a P? Isn't that really what it's all about?

Has anyone here actually succeeded in ever changing an A's world view? I've won arguments, but I don't think I've ever changed a single mind.

Randy writes:

By giving them a degree in Business or Finance, or a job in either area. This is the only way to make the theories congeal into a practical reality.

P.S. I was about to put down Economics as well, but I can think of too many exceptions - not naming names. Too much theory in economics. Too much wiggle rooms for the As to discuss how reality could be different if it were different.

Cat Pierro writes:

Arnold, I would like to convince you not to immediately distrust all people who favor equity. It's not a given that they are ignorant of the value and volatileness of efficiency (that they assume the acquisition of wealth is a zero-sum game). The loss of efficiency may sometimes be worth the gain, because wealth as a function of happiness has diminishing returns. A poor person's purchase often changes his circumstances to solve real problems in his life. A richer person's purchase has two functions: 1) It tweaks his circumstances to eliminate minor annoyances, and 2) It elevates his social status. If all richer people are forced to tweak one thing fewer, this will not be a huge loss. If all richer people are forced to buy one fewer status-raiser, this will not be a loss at all, because social status is in fact a zero-sum game.

Consider stoner Jake, proud owner of eight pretty pipes and bongs. Sure, it may be that each additional pipe gives Jake great pleasure because of its unique color, shape, and personality. However, I think that a large part of Jake's pleasure comes from the fact that he has the largest and most beautiful collection in his dormitory. If all of the wealthy stoners in residence were to give up one bong, this fact would still hold, and the surplus could be distributed amongst all the lesser stoners who just want one goddamn hit to relieve the real problem of exam-week stress.

When you consider productivity not as the end goal but rather as the means to an end (happiness), equity becomes something worth considering.

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