Adam Smith Capitalism: The Best Form of Capitalism?

[dominatr]

Its hard to have a completely free market without having corruption because people will always find shortcuts and mold the game to suit their desires. Besides that, scarcity is built into the system and does not serve everyone. I don't think it's a bad system, i just think it's a bit outdated and we can definitely come up with something better, capitalism isn't the "last stage" at all, it's another step.

 

[Masada]

Ehhhh peeps need to read The Theory of Moral Sentiments. It goes to show that Smith isn't the poster child for what most people seem to think he was all for.

 

[Traitorfish]

The collectivists have solved the calculation problem?

You're not familiar with market anti-capitalism? (I mean, beyond the plentiful criticisms that can be made of the calculation problem, the dichotomy of capitalism and collectivism you're employing is basically spurious.)

An omnipotent, benevolent government, that can enforce universal slave labor, is the best form of government/economy.

For many, benevolence and slavery are by definition mutually exclusive. So I don't think that you can just make this sort of claim as if it was self-evident.

 

[Tahuti]

You're not familiar with market anti-capitalism?

I never really liked the term. Hell, I hate the term capitalism as well, hence anti-capitalism won't be much better off either. The name implies that it involves capital, but I have yet to see an economic way of thought that doesn't involve capital. Markets are markets, and it's as simple as that.

 

[Traitorfish]

I never really liked the term. Hell, I hate the term capitalism as well, hence anti-capitalism won't be much better off either. The name implies that it involves capital, but I have yet to see an economic way of thought that doesn't involve capital. Markets are markets, and it's as simple as that.

That depends on how you understand "capitalism". For Marx, at least, it's more complicated than that, and he was after all the theorist responsible for the modern form of the term into being. In his model, and in derived models, capital is understood as a specific form of social relationship, taking form only alongside and in combination with alienated labour, so political tendencies that seek to retain a market while dissolving this relationship (I'm mostly thinking in terms of left-wing market anarchism here) would constitute a market anti-capitalism. Goodwill market theories, a novel but interesting set of idea which attempt to revive the essential character of a gift economy in a complex industrial society, further complicate things.

 

[Antilogic]

I'm fortunate in that I'm not the one that had to refute it: Menger and Bohm-Bawerk refuted it over 100 years ago. Nor is it picking on Marx, as Smith and Ricardo were also wrong.

The collectivists have solved the calculation problem?

Could you elaborate a little more on these statements? It's insanely difficult to follow this conversation when half of it is unsaid.

 

[Tahuti]

Could you elaborate a little more on these statements? It's insanely difficult to follow this conversation when half of it is unsaid.

One of the cornerstones of Austrian theory (and one of the few parts of Austrian economics that Keynesians and Friedmanites could agree with) is the calculation problem. Austrians assert that planned economies do not seem to have a viable way to deal with scarcity and oversupply because the lack of market dynamics do not award responding to supply and demand. So any form of economic planning is bound to fail, because it will lead to extreme oversupply or scarcity.

 

[Traitorfish]

Worth noting, mind, that the "calculation problem" specifically addresses central planning, rather than post-capitalist economies. Describes post-war Britain as much as the USSR (not that the USSR was post-capitalist , mind you), but doesn't tell you anything about decentralised socialist economies.

 

[Crezth]

One of the cornerstones of Austrian theory (and one of the few parts of Austrian economics that Keynesians and Friedmanites could agree with) is the calculation problem. Austrians assert that planned economies do not seem to have a viable way to deal with scarcity and oversupply because the lack of market dynamics do not award responding to supply and demand. So any form of economic planning is bound to fail, because it will lead to extreme oversupply or scarcity.

So what if (big if) one could build a machine that would calculate the common good - that solved the calculation problem? Where would the objection be then?

 

[Antilogic]

One of the cornerstones of Austrian theory (and one of the few parts of Austrian economics that Keynesians and Friedmanites could agree with) is the calculation problem. Austrians assert that planned economies do not seem to have a viable way to deal with scarcity and oversupply because the lack of market dynamics do not award responding to supply and demand. So any form of economic planning is bound to fail, because it will lead to extreme oversupply or scarcity.

And here I was thinking it was the transformation problem given another name, since we were talking about labor, etc.

Since when is central planning or a planned economy a tenant of Marxism, socialism, what-have-you anyway?

 

[Terxpahseyton]

So what if (big if) one could build a machine that would calculate the common good - that solved the calculation problem? Where would the objection be then?

Why that futuristic? Let's introduce online voting, there you could also market new products. Sure, people would vote stuff they in the end may not actually buy or couldn't effort in its sum, but I am optimistic that given the necessary experience and data, a mathematical solution could be found. Like it has been mathematically determined how much reserve a bank needs in ordinary times. And that could only make the core of a planned economy, which is surrounded by a free-market-economy. That could also be used to establish a healthy competition between planned and free-market, giving both systems further initiatives to improve.

Or, you know, some other idea.

 

[Antilogic]

Even if you had online voting, etc. you still couldn't solve that kind of a problem. You can model humans in aggregate, but you can't model individuals based on a preset list of preferences. For whatever reason, we seem to defy those rational expectations.

I would argue that the determination of bank reserves is much more of a correspondence-based rule of thumb than some kind of coherent theoretical model spitting out some ratio.

 

[Terxpahseyton]

Well that's what also I am suggesting, a correspondence-rule of thumb. A model predicting patterns allowing to assess how likely a voting choice actually translates into a purchase. It is my impression that when the sample is big enough, people can be remarkably predictable. You wouldn't need to accurately model the individual (which surely would fail).
And for niche markets a free market could surround this system. There one could also place more exotic/luxurious and expensive products and when things are exceedingly successful, the planned economy could take over.

But Jeez, that's just one immature and spontaneous idea of many more that surely are out there. I am only trying to illustrate that IMO we already have the means to make a planned economy work, just not the horribly designed ones we already had, but by thinking in new and innovative ways.

 

[Antilogic]

Well that's what also I am suggesting, a correspondence-rule of thumb. A model predicting patterns allowing to assess how likely a voting choice actually translates into a purchase. It is my impression that when the sample is big enough, people can be remarkably predictable. You wouldn't need to accurately model the individual (which surely would fail).
And for niche markets a free market could surround this system. There one could also place more exotic/luxurious and expensive products and when things are exceedingly successful, the planned economy could take over.

But Jeez, that's just a crackpot idea, really. I am only trying to illustrate that IMO we already have the means to make a planned economy work, just not the horribly designed ones we already had, but by thinking in new and innovative ways.

Nothing we have can extrapolate too far, though. Look at likely voter models in politics, which change on an annual basis. It's not just the data inputs to the models that are changing, but the rules governing the models themselves.

The argument I am positing in short: I think there are far too many externalities or shocks that can occur for this kind of population-wide system-design-type modeling to be successful.

 

[Terxpahseyton]

Good point, I am sure the system would never work perfect and it would probably need a lot of time of refining to be vaguely useful to begin with. But my gut tells me that it can be done. Only way to know is to have some research, but - in contrast to what I think it should do - economic research is totally uninterested in experimental economic models.

 

[amadeus]

So what if (big if) one could build a machine that would calculate the common good - that solved the calculation problem? Where would the objection be then?

Socialists have already made the claim that there is sufficient computing power to do this. These claims actually date back to the 1960s.

Why that futuristic? Let's introduce online voting, there you could also market new products.

That's filled with problems. All votes are weighted equally and with an unlimited supply of votes, there would be nothing stopping people from up-voting every new product. The biggest problem I would see is that very little is invested in voting: you log on to your computer, click what you like, and that's that. But when you're at the store, you are faced with spending real money and that changes your behavior.

...a mathematical solution could be found.

There is a mathematical solution: the price system! A company will either experience a profit or loss, and if the losses can't be absorbed, production of unwanted goods will stop. In the reverse situation where there are profits, production will increase.

 

[Traitorfish]

I don't see why this is so difficult for people: the best way to allocate goods is through a set of elaborate guessing-games which have as their goal not the effective distribution of goods, but the accumulation of little bits of paper with numbers on them. In ever other walk of life, we solve our problems by doing something else entirely- if I'm hungry, I go swimming, for example- so why not in this one?

 

[Terxpahseyton]

@Amadeus
Yeah, I see those problems you mention, too, that's why I summed them up in the first place by referring to actual purchase choices differing from voting behavior. But who says voting shall proceed unrestricted? Surely, a different system can be applied.

But you know, it is easy to talk down any system which hasn't been tried yet by just randomly naming problems one sees and then jumping to the conclusion "Can't work!", especially in such a complex matter as economics. That you do so IMO isn't so much a reflection of the unbelievable awesomeness of the free capitalistic markets but your faith in this awesomeness and your resulting absolute unwillingness to seriously consider alternatives/meaningful modifications. In German we call this "ideological blinders".
Sadly, it seems to me those blinders are pretty much worn by the vast majority of people nowadays.

 

[Tahuti]

Worth noting, mind, that the "calculation problem" specifically addresses central planning, rather than post-capitalist economies. Describes post-war Britain as much as the USSR (not that the USSR was post-capitalist , mind you), but doesn't tell you anything about decentralised socialist economies.

True enough. Market socialism for example wouldn't be a planned economy but sure as hell would be a form of socialism (if we define socialism as "from each according to his ability, to each according to his need"). Municipality sized planned economies may also come into contact with market mechanisms as well, considering they are probably unable to be self-sufficient. Thus, the calculation problem wouldn't apply for these.

 

[Antilogic]

True enough. Market socialism for example wouldn't be a planned economy but sure as hell would be a form of socialism (if we define socialism as "from each according to his ability, to each according to his need"). Municipality sized planned economies may also come into contact with market mechanisms as well, considering they are probably unable to be self-sufficient. Thus, the calculation problem wouldn't apply for these.

Thanks! Somebody finally addressed that question I asked above.