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Capitalism: Awesome or Deplorable? (1 Viewer)
- Thread starter Maurile Tremblay
- Start date
A billionaire who is in favor of capitalism.
https://www.vox.com/recode/2021/3/20/22335209/sam-bankman-fried-joe-biden-ftx-cryptocurrency-effective-altruism
https://www.vox.com/recode/2021/3/20/22335209/sam-bankman-fried-joe-biden-ftx-cryptocurrency-effective-altruism
-jb-
Footballguy
At some point I'd like to go back and discuss the two Yglesias essays I posted (and fatguy's comments on them) as well as the social benefits of price discrimination.
For now, I have a random thought.
Capitalism plus redistribution seems to fit human nature pretty well. I've been reading a bit about human evolution recently. What separated us from the non-human apes like chimps and bonobos? It wasn't tool-making. The other apes did some of that as well. (They didn't do it as well, but if tool-making itself was what led to an intelligence spiral, they would have kept improving along with us.). It wasn't hunting, which they also did a bit of. It seems to have been sharing. Other apes almost never share their food with each other (apart from mothers sharing with their children, but even that is surprisingly infrequent). The Hadza in Tanzania -- an imperfect but semi-decent proxy for humans of very long ago -- share their food with each other without thinking twice about it. There's a word in their language -- "za" -- that basically means "give me some." There's no "please" or "thank you" or "you're welcome" because sharing food is like refraining from spitting at someone. It doesn't have to be negotiated; it's just recognized as the obvious thing to do upon request. The hunter who makes the kill gets a bit more meat for himself and his family than the rest, but it's shared with everyone.
This was a brilliant evolutionary innovation. Because chimps don't share food with each other, each chimp has to spend all day foraging for low-risk food like leaves. They can spend a little time, occasionally, trying to hunt down a monkey; but any large game that requires a lot of time and effort to obtain isn't worth it because if you come up empty, you starve. There's no backup plan, so leaves it is.
A bunch of humans, however, can go ahead and try to catch large game. If they fail, they can eat whatever was foraged by the rest of the group. It will be shared with them. And if they succeed, everybody eats well. It's a system that improves everyone's shot at high-quality calories, supporting the energy-consumption required to grow bigger brains and whatnot.
The two points here are that: (1) sharing enabled group members to pursue high-risk, high-reward hunting strategies unavailable to other (non-sharing) apes; and (2) those high-risk, high-reward strategies had really good payoffs for the group as a whole.
I'm not going to argue that modern social organization should definitely be analogous to that of our hunger-gatherer ancestors. But some of the same general principles seem to apply. We want people to engage in risky, entrepreneurial strategies because the payoff to society is great. We want to tell people that they should take a shot at founding Tesla because (a) if it succeeds, they'll be rewarded way more than if they hadn't tried, and (b) if it fails, they won't starve to death because whoever did succeed will share enough to provide an agreeable safety net.
That general framework -- risky entrepreneurialism along with redistributive sharing -- apart from just being an effective path to economic progress, seems to fit our natural human inclinations. Humans are, compared to other mammals, remarkably generous toward each other. The desire to share runs deep in us. But it runs deep only under some circumstances. If we all lived in bands of 10 or 20 close associates, we'd help each other out freely, constantly, abundantly. In that situation, we wouldn't need government redistribution; our charitable impulse would suffice. But in big city-states where most people don't personally know each other, that impulse gets abstracted away. Government redistribution seems like a good corrective.
For now, I have a random thought.
Capitalism plus redistribution seems to fit human nature pretty well. I've been reading a bit about human evolution recently. What separated us from the non-human apes like chimps and bonobos? It wasn't tool-making. The other apes did some of that as well. (They didn't do it as well, but if tool-making itself was what led to an intelligence spiral, they would have kept improving along with us.). It wasn't hunting, which they also did a bit of. It seems to have been sharing. Other apes almost never share their food with each other (apart from mothers sharing with their children, but even that is surprisingly infrequent). The Hadza in Tanzania -- an imperfect but semi-decent proxy for humans of very long ago -- share their food with each other without thinking twice about it. There's a word in their language -- "za" -- that basically means "give me some." There's no "please" or "thank you" or "you're welcome" because sharing food is like refraining from spitting at someone. It doesn't have to be negotiated; it's just recognized as the obvious thing to do upon request. The hunter who makes the kill gets a bit more meat for himself and his family than the rest, but it's shared with everyone.
This was a brilliant evolutionary innovation. Because chimps don't share food with each other, each chimp has to spend all day foraging for low-risk food like leaves. They can spend a little time, occasionally, trying to hunt down a monkey; but any large game that requires a lot of time and effort to obtain isn't worth it because if you come up empty, you starve. There's no backup plan, so leaves it is.
A bunch of humans, however, can go ahead and try to catch large game. If they fail, they can eat whatever was foraged by the rest of the group. It will be shared with them. And if they succeed, everybody eats well. It's a system that improves everyone's shot at high-quality calories, supporting the energy-consumption required to grow bigger brains and whatnot.
The two points here are that: (1) sharing enabled group members to pursue high-risk, high-reward hunting strategies unavailable to other (non-sharing) apes; and (2) those high-risk, high-reward strategies had really good payoffs for the group as a whole.
I'm not going to argue that modern social organization should definitely be analogous to that of our hunger-gatherer ancestors. But some of the same general principles seem to apply. We want people to engage in risky, entrepreneurial strategies because the payoff to society is great. We want to tell people that they should take a shot at founding Tesla because (a) if it succeeds, they'll be rewarded way more than if they hadn't tried, and (b) if it fails, they won't starve to death because whoever did succeed will share enough to provide an agreeable safety net.
That general framework -- risky entrepreneurialism along with redistributive sharing -- apart from just being an effective path to economic progress, seems to fit our natural human inclinations. Humans are, compared to other mammals, remarkably generous toward each other. The desire to share runs deep in us. But it runs deep only under some circumstances. If we all lived in bands of 10 or 20 close associates, we'd help each other out freely, constantly, abundantly. In that situation, we wouldn't need government redistribution; our charitable impulse would suffice. But in big city-states where most people don't personally know each other, that impulse gets abstracted away. Government redistribution seems like a good corrective.
fatguyinalittlecoat
Footballguy
This part seems to be unsupported by your hunter-gatherer analogy. You said the successful hunters there only got a little more meat than everyone else.
I think this is nice segue into a discussion of downside risk v. upside risk. In my view, we can encourage smart risk taking much more by telling people they won't starve if they fail than by telling them they will become billionaires if they succeed.
djmich
Footballguy
I can't agree at all with the last part. Brilliant entrepreneurs options are not limited to succeed or starve. Elon Musk wouldn't be homeless if Tesla busted (and certainly not for long). In terms of actual capital at risk...the bulk of it is usually coming from somewhere else besides the entrepreneur. There's risk for sure, but not starvation risk. Not starving is most important to people who otherwise don't have much in the way of marketable skills...not the geniuses.
But on your first point, other than eating I'm guessing the second biggest reward for successful hunter-gatherers was the ability to procreate with the female with the best evolutionary traits (which is maybe slightly behind eating
).Are you confirming that's what we have now and/or arguing that we're not far enough on one side of the spectrum?
IvanKaramazov
Footballguy
fatguyinalittlecoat
Footballguy
I think there are a lot of brilliant people working regular jobs because they want to make sure that their kids have health care and a good education. If everybody got health care and a good education from the government, I believe a lot more of them would try to build something of their own, because the risk of failing wouldn't be as great.
fatguyinalittlecoat
Footballguy
I don't disagree that this is true in theory. But when liberals talk about jacking up taxes on the wealthy to strengthen the social safety net, critics usually say that it will stifle innovation because there's less incentive for rich people to take risks or to work hard at all. I think they have it backwards. Whatever stifling it does among the rich is vastly outweighed by the freedom to take risks afforded to the rest of us.
I wasn't commenting in that post on whether current safety nets in the U.S. are adequate, but I think a walk through any major U.S. city reveals that they are not.
Homelessness should be a lot rarer than it is, for example. As rich as we are compared to hunter-gatherers on the whole, that's one metric where they handily beat us.
Stealthycat
Footballguy
I think its pretty simple
if a person works hard, makes good decisions and choices .......... capitalism is the foundation they use to build a better life
if a person doesn't work hard, makes bad decisions and choices .... they find themselves blaming everyone else for where they are in life and capitalism seems unfair to them
if a person works hard, makes good decisions and choices .......... capitalism is the foundation they use to build a better life
if a person doesn't work hard, makes bad decisions and choices .... they find themselves blaming everyone else for where they are in life and capitalism seems unfair to them
The Commish
Footballguy
Bottomfeeder Sports
Footballguy
Communism has always worked great.
Until you ask it to scale up.
Bottomfeeder Sports
Footballguy
@fatguyinalittlecoatalready addressed this a bit, but I think looking at existing entrepreneurs is the looking the wrong way. Its those that are oh so close to running with a brilliant idea but they have a sick child and can't quit their job and its health coverage, or they have been poor their whole life up to now and are just too afraid to go back, or - I think you get the idea. There are some people that are just able for whatever reasons to take the risks to make a good idea a reality. And there are other that have good, even great ideas but just lack something to take that chance. We need to enable this second group of potential entrepreneurs and stop worrying so much about thwarting the first group of existing. The first group is going to "go for it" no matter what else we do even if God forbid we tax them a bit more. The risk aversion to upsetting the first group seems indicative of the very fears that keep the second group on the sidelines.
Shula-holic
Footballguy
I'd say as someone who has started multiple businesses you don't have to risk it all to take a risk to innovate. I had one temporarily successful idea that ended up not being viable long term before I found the one that worked for me. I can only speak for my case, but I managed the potential downside by being somewhat more conservative while the upside and potential reward drove me like crazy. While eventually that first business failed, it didn't break me because I never leveraged it to the point I'd lose everything from a failure. People who truly leverage everything, often times are more hoping for success than planning for it. They don't have to do it, people choose to do it. Nobody should take that risk without working and saving a bit to try and get that startup capital. If you have an investor willing to fund the idea, go for it. But that's so rarely the case.
I started my current business almost 22 years ago now, and I'm still hungry for the rewards. I can remember those days of scraping 0% credit cards together to buy inventory and doing the math on if I had to liquidate inventory and fire sale it all, what I could survive and not lose my house. Just being assured I won't starve if I fail has never been compelling but the thought of what the upside could be made me work 18 hour days at two jobs to get it started. The upside is what keeps me going today. I'd suggest most businesspeople are of similar mindsets. When I meet others in industry today or during my former days as a CPA meeting successful clients that mindset was apparent. Those who built their own companies are driven by them and their success 24/7. 22 years later, when I make a good decision that leads to a large profit, it's every bit as euphoric as it was during year 1. That hunger is necessary to keep driving innovation and success.
djmich
Footballguy
I think its helpful also to talk about upside. I'm assuming you are not thinking you'll be Elon Musk or Mark Zuckerberg? I think often they are the face of "capitalism" argument and "who needs all that". Generally speaking "making it" is mostly Shula's who I'm assuming are looking at upside in the 100's of thousands or millions. Sure, everyone aspires to 100's of millions. Its other people who decide that maybe they're not going to risk their life fortune or the stability of a salaried job to pay bills for their kids...but they're going to be COO of a startup or of a early stage company. They make bank, they are the engines of creation, but they're not Zuckerberg wealthy and they also have no risk of starving.
Smart people find ways to contribute in a capitalist society. They may not be able to take ultimate risk because they have obligations to feed themselves and their family. If the argument is that we need to set everyone up to be able to take these risks and essentially move the moral hazard from those individuals to other individuals (via government redistribution)...I understand that argument but would need a lot of convincing to think it works well and doesn't overly infringe on individuals that are the targets of redistribution (again talk to me about Shula not Zuckerberg...go ahead and take half of zucks money).
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fatguyinalittlecoat
Footballguy
For what it's worth my focus is primarily on the Zuckerberg types. Maurile made the argument somewhere in this thread that Elon Musk would have never started Tesla unless it provided him the opportunity to earn billions of dollars. I don't find that argument convincing and that's what I've tried to push back on. And that's the focus of a lot of the progressive proposals -- Elizabeth Warren's wealth tax only hits people with over $50 million in wealth, there are still plenty of opportunities for Shula types to get rich. I recognize that there has to be a payday at the end of the road as an incentive, I just think many people would still engage in the same ambitious activities even with a smaller potential payday.
Also, the first sentence of your second paragraph stuck out to me. I think that smart people can often find ways to enrich themselves in a capitalist society, I don't agree that's the same as finding ways to "contribute."
Dinsy Ejotuz
Footballguy
This is a big chunk of the case against Libertarianism IMO.
Agree with almost all of it.
Bottomfeeder Sports
Footballguy
I think the arguments that there would not be a Zuckerberg if the taxes were much harder is easily dismissed with the Gates and Jobs and other entrepreneurs we celebrate today that began pre Reagan tax cuts. I don't think we will be infringing on many of these at all. I'm not going to say none because few things are all or nothing but I am pretty sure for everyone that is willing today to "go for it" there are many more on the sidelines. Again I think that all that we are doing is shifting the line a bit where more will be willing to take the risk. I doubt that we will ever create an environment where everyone is "all in" pursuing their creativity to the fullest, but I think we should identify that world as a "more perfect union" and actively pursue moving as close to it as possible. Even that means in tiny relatively safe steps because we fear upsetting the apple cart.
Shula-holic
Footballguy
Most entrepreneurs will never be Zuckerberg, and that's more than ok. It can be as simple as someone who always wanted to work for themselves all the way up to a Zuckerberg. But the vast majority of what I'd call successful business owners may end up with the upside of a few hundred thousand to a couple million over time. But it is those rewards that drive them. I don't think any of us are well off enough to snub our nose at that, but you don't have to risk it all to start a business with that kind of goal. What you do need is a valid business plan, and so many people who want to start businesses don't actually have that. It's often a flaw in plan or idea that leads to something never getting off the ground or growing broke. That will happen much more quickly than failure due to lack of funding.
Global poverty-reduction over the past few decades is real, but maybe not because of capitalism?
Noah Smith:
https://noahpinion.substack.com/p/against-hickelism
Noah Smith:
https://noahpinion.substack.com/p/against-hickelism
timschochet
Footballguy
Isn’t the MLB boycott of Georgia what capitalism is all about?
I think it's more what activism is all about, but they're not necessarily inconsistent.
IvanKaramazov
Footballguy
I think it's good that we live in a society in which private firms enjoy many of the same rights as the individuals who make up those firms, like freedom of speech, freedom of association, and the freedom to petition the government for the redress of grievances. But, not that's not really what capitalism is. You could have private ownership of the means of production, no central planning, etc. while still greatly restricting civil liberties. That would be fascism, but it's also capitalist.
Back-of-the-envelope calculation by Jeff Bezos of how much value Amazon produced in 2020 for different categories of persons.
Shareholders: $21 billion
Employees: $91 billion
Sellers: $25 billion
Customers: $164 billion
Total: $301 billion
https://twitter.com/Austen/status/1382700464412753941
Shareholders: $21 billion
Employees: $91 billion
Sellers: $25 billion
Customers: $164 billion
Total: $301 billion
https://twitter.com/Austen/status/1382700464412753941
fatguyinalittlecoat
Footballguy
What does “value produced” mean exactly? Is the employee number the sum of all employee salaries or something?
It's calculated differently for each group. The details are here.
For employees, yes, it's the sum of employee salaries ($80 billion) and benefits (another $11 billion). (They're including the employer's contribution to payroll taxes as a "benefit," which seems lame.)
That doesn't seem like a good way to do it for employees since if Amazon didn't exist, presumably many of those employees would get jobs at whatever companies would fill the hole left by Amazon.
For customers, they at least try to do the comparison on the margin -- time saved by shopping at Amazon vs. shopping at a mall. But even there, it ignores other online retailers, so it's not necessarily the right margin.
Now that I've looked at this more closely, those numbers about value don't seem to have much value.
Bottomfeeder Sports
Footballguy
Yes, but thanks anyway. However my favorite part was this buried in the 1997 letter -Maurile Tremblay said:
- We established long-term relationships with many important strategic partners, including America Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, @Home, and Prodigy.
I suspect it's true that many would-be entrepreneurs are dissuaded from acting on their ideas because they don't have a practical way to recover from a failed venture. If they have nothing to fall back on, they can't afford to take a risk.
That's getting lost in some commentary I've seen about Biden's plan to raise capital gains taxes: "Under the Biden proposal, the capital gains tax on wealthy individuals would rise to 43.4%, which would mean net rates well over 50% for individuals in high-tax states such as California and New York. Overall, that change would send the message that the U.S. is not such a great place to accumulate and cash in wealth."
It seems correct that increasing the capital gains tax would make the United States a marginally less attractive place to start a business and succeed wildly. But if the increased revenue is used to provide a safety net that allows would-be entrepreneurs to take more risks, it might make the United States a marginally more attractive place to start a business, factoring in both the chance of succeeding and the chance of failing. If that's true, there will be more successes (owing to more attempts).
It's not a given that higher capital gains taxes with a more robust safety net would be good for the entrepreneurial spirit -- but it's not a given that would be bad, either. It depends on a lot of specifics at the particular margins involved, depending on various elasticities and whatnot. I.e., it seems more complicated than any hot takes from either side.
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fatguyinalittlecoat
Footballguy
Yup, agreed with all of this.
I was thinking about this thread the other day when I read this post from IK about vaccines:
It seems to me that this is a pretty significant argument against the free market economy if people are genuinely poor at assessing risks.IvanKaramazov said:
IvanKaramazov
Footballguy
Central planners aren't any better at assessing risk than individuals. There's a good argument to be made that they're actually worse, because of herd behavior and CYA tendencies. I'm not sure I would go that far, but I would definitely not want to turn the levers of economic production over to the type of people who run the FDA.
Edit: It is a good argument for a safety net, though.
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An essay favoring the combination of free markets with robust welfare benefits: https://symposium.substack.com/p/the-case-for-a-free-market-welfare
dgreen
Footballguy
This seems like a good place to have a discussion about shortages with the current gas situation.
Are people seeing skyrocketing prices at gas stations? Where I am, I don't see it. Gas stations near me are only about $0.10 more per gallon that what they were last week. (I'm just going off the signs I can see from the road driving by. I haven't purchased gas.) Yet, many are now out of gas and others have long lines and will likely soon be out of gas.
A free market/capitalism approach would be to have prices adjust upwards which would then decrease the amount of gas purchased by each individual making some available to more people and reduce the likelihood that gas completely runs out. With prices staying low, people are filling up (and even doing more than that by filling up gas cans and other things so they can have extra) which is leading to empty gas stations.
So, I assume we have a quite a few people who would be opposed to gas stations jacking up the price right now.
Discuss.
Are people seeing skyrocketing prices at gas stations? Where I am, I don't see it. Gas stations near me are only about $0.10 more per gallon that what they were last week. (I'm just going off the signs I can see from the road driving by. I haven't purchased gas.) Yet, many are now out of gas and others have long lines and will likely soon be out of gas.
A free market/capitalism approach would be to have prices adjust upwards which would then decrease the amount of gas purchased by each individual making some available to more people and reduce the likelihood that gas completely runs out. With prices staying low, people are filling up (and even doing more than that by filling up gas cans and other things so they can have extra) which is leading to empty gas stations.
So, I assume we have a quite a few people who would be opposed to gas stations jacking up the price right now.
Discuss.
Bottomfeeder Sports
Footballguy
dgreen
Footballguy
What do you mean by "gas thwarting market dynamics"?
I assume you mean government price controls?
Regardless, I doubt I know the answer. I just think it would be interesting to think about how capitalism operates in this scenario and the discuss whether that's awesome or deplorable.
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Bottomfeeder Sports
Footballguy
Right I mean is there something to stop the gas station with limited supplies and high demand to raise prices. Either government price controls or possibly price controls governed by the franchise agreement. I don't know either.
I guess the scarcity of a product that is to a varying degree a necessity and while maybe not the strongest of correlations, I'd suspect that those that need the most gas are those the most sensitive to price changes mean It seems deplorable any way it shakes out. Either it is deplorable that the gas station prices gas out of reach of those likely to need it most and make it a luxury item for those less likely to need to get to a specific work place. But it is also deplorable for the owner of a product in demand to not get maximum dollar for it. Problem here with blaming capitalistic reactions to market changes is it would also be deplorable if we had some form of rationing system, even if the product itself was free.
urbanhack
Fight The Power!
This doesn't seem to be helping the average american making the american dream come try by owning a home.
https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
quick-hands
Footballguy
The rental economy is coming.
urbanhack
Fight The Power!
Unregulated American Capitalism
The only system were your company can be directly responsible for the deaths of thousands of people, you are forced into bankruptcy, no one goes to prison, and then they hand out million dollar bonuses.
https://www.stamfordadvocate.com/business/article/Judge-approves-up-to-7M-in-bonuses-for-Purdue-16457563.php
The only system were your company can be directly responsible for the deaths of thousands of people, you are forced into bankruptcy, no one goes to prison, and then they hand out million dollar bonuses.
https://www.stamfordadvocate.com/business/article/Judge-approves-up-to-7M-in-bonuses-for-Purdue-16457563.php
