If Capitalism is Immoral what System of Economics is Moral?

[Mentat]

Isn't that just an example of how a mixed system works though?

I guess, but it's more capitalism mixed with a social democracy than with communism.

[KAH]

Terra;

I think central planning as a political system for sure does not have successful historical data to support it. However, I think certain large corporations run in a very similar model, where planning is centralized and individual units do not have the autonomy to run its own ideas. Imagine, say, Ford. The department that design and make car doors found a new way of manufacturing that will improve yield and reduce waste. But to make the new door, the frame for the car would have to be re-tooled and the electricals need to be redone. So does the door department get to implement this, or do you think it'll have to wait for some sort of "central" planning committee to approve and implement? Which one would be more efficient?

Yes, it's argument by analogy, so the analogy will not be perfect. My point is that I am not getting a lot of argument against the scenario I proposed. It certainly isn't an outrageous or unrealistic scenario, imo. If we can assume rational consumer behaviors and expect mysterious self-correcting market forces, I think it's only fair to assume a rational central planning committee. The examples used to discredit central planning almost always rely on the assumption the central planning committee is out of touch with the need and resources of the situation. I just don't see why that must be a valid assumption. And I also see that if we put a rational committee in place that can use reasonable tools to assess need and demand, that they can act just as well as the market forces.

Centralized planning in society is the insufficient response to a self-imposed state of systematic information destruction. It does not help that a committee is rational when all information they receive are terminally skewed and incentives are destroyed.

There are a few facts that a central committee can more or less rely on, like the fact that the average person needs so and so many calories a day, clothing, housing and other basic necessities to survive. Also, known production procedures for these and other goods, statistics over available material and human input and other information can be put together into one big 'production recipe', by way of one vital tool - the price.

Prices are essential information carriers. Ideally, they will correctly transfer information about the needs of a populace, and the same populace' ability to meet those needs.

Alas, prices are subject to distortion in many forms. One form of distortion is distribution-related. Poor people do not have the ability to send the same information into the system compared to a situation where they have more resources, so their needs are comparatively underserved.

Another form is related to scarceness. Products or inputs which are subject to relative scarcity (which in reality pretty much all of them are) reflect this through prices...unless they are politically decided. Controlled prices reflect what a committee find politically expedient, wherein distribution matters very often trump the reality of scarcity. Also, it undermines prices innate ability to drive self-correction; a high level of relative scarcity would lead to higher prices, which will gravitate resources towards levelling out that scarcity. A politically set price that is lower than the correct one will pervert this information.

Take fuel. If you set this price artificially low in order to spare the poor, you're distorting information and thus hurting both the incentives to economize with fuel and the incentives to increase production of fuel.

A central committee setting all prices will thus find itself with an enormous information problem, as the situation accumulates over the entire production spectrum. A large corporation, in contrast, only has to deal with the information inefficiencies it has generated for itself, while retrieving reliable information from external sources in the form of prices.

The best way to deal with distortions relating to distribution is thus not to control prices, but to redistribute resources. While this will distort labour prices, this can to some extent be mitigated - and it is far less intrusive in the mechanics that make capitalism work out. Instead of setting the price of fuel low, you give the poor extra money to spend as they see fit. Vastly preferrable informationwise.

[Ser Scot A Ellison]

prod,

This simply isn't true. Capital maximization is precisely the main intrinsic feature and aim of capitalism, and as such personal morals are corrupted for the benefit of money. Capitalism is inherently immoral, as is any system where justice is not the goal.

Where is the idea that "profit must be maximized" is intrinsic to captialism coming from? All capitalists are attempting to do is make a profit in the first place. Do they tend to want to maximize, yes, but that's not intrinsic to capitalism. For example once profit is made the individual or group of individuals can do with that profit whatever they like, they don't have to plow it back into the business. They may want to but there is no requirement that the profit be used in any particular manner.

There are companies that do things like fund scholarships for inner city children. This is why I say captialism is amoral. Morality is outside the question of whether profit is achived. Further, it depends upon how society views the means by which profit was achived and the ends to which the profit is put.

I would be very suprised if you were to assert that the company making money to fund scholarships for inner city children is immoral given the goal to which the company's profits are being put appears to promote "justice". Or do you believe it is inheretly immoral to attempt to make a profit regardless of the means used to make the profit and the ends to which the profit is put?

[Dharma]

To attempt to reply to the initial question "If Capitalism is Immoral what System of Economics is Moral?", it is important to distinguish whether we are looking at the world as if it has limited resources or not. Nearly everyone, as far as I can see, has in this thread been working under the assumption that we have limited resources, and I will attempt to answer the question under those conditions futher down.

But to start with I think it is a good idea to look a little into the reality of that assumption.

The maximum potential for human society has always been limited by two main factors. One of these is the amount of natural resources made available to us from the earth. The other is mankinds collective technological knowledge at the time. Capitalism has driven us to a stage where the amount of natural resources is critically low; the policies of scarcity, waste, debt and inequality have proven to create more wealth for the elite than sustainable alternatives and have thus been favoured. But the level of technology and human ingenuity is at this time (logically, as it is always increasing at a faster and faster speed) at unparalleled heights. We have been dependent on oil for the last century or so because it has been beneficial to the oil industry that there be no readily available energy alternative. Yet we have the means to create renewable energy through tidal, wave, wind, and geothermal technology; enough to sustain the entire biosphere for thousands of years. What sense is there in maintaining an overarching system (capitalism) whose main goal is to produce wealth, capital, which is a means to an end, when that end is easily available to the people? If we lived in a logical system built on moral equality, our first priority would be to utilize our technology to prevent further harm to the earth and to create renewable energy, clean water, and food for every human on earth. If we take away any human motive save justice and look at the world exactly as it is today, what is there to stop us from using our time and resources to exactly that end? If we truly wanted to, the world could be renewable in a decade. But we don't, we want profit.

Will go into what alternatives there are for a moral economical system if we assume that the world is indeed lacking resources (which we shouldn't, really), later :)

[Mentat]

There are companies that do things like fund scholarships for inner city children. This is why I say captialism is amoral. Morality is outside the question of whether profit is achived. Further, it depends upon how society views the means by which profit was achived and the ends to which the profit is put.

Capitalism leads to an unequal distribution of wealth. It also rewards a selfish approach to business and the job-market centered on personal gain. It also has positive effects because it's efficient. It rewards the hard-working over the slobs and tends to augment the amount of wealth in a society and make consumer products cheaper and more readily available.

That a company, or a man, decides to spend their money on philantropy is not an effect of capitalism, since capitalism doesn't encourage it. It might be an effect of social policies that grant tax rebates to philantropists, though. Capitalism does give you the right to use your income in any way you want, but some ways are more efficient (like getting interest out of it or investing it) and that's what capitalism would encourage.

[Ser Scot A Ellison]

Mentat,

Capitalism leads to an unequal distribution of wealth. It also rewards a selfish approach to business and the job-market centered on personal gain. It also has positive effects because it's efficient. It rewards the hard-working over the slobs and tends to augment the amount of wealth in a society and make consumer products cheaper and more readily available. That a company, or a man, decides to spend their money on philantropy is not an effect of capitalism, since capitalism doesn't encourage it. It might be an effect of social policies that grant tax rebates to philantropists, though. Capitalism does give you the right to use your income in any way you want, but some ways are more efficient (like getting interest out of it or investing it) and that's what capitalism would encourage.

Yes, thus it is amoral. Is it your assertion that income or priviledge disparities don't exist in systems that purport to be socialist?

[Mentat]

Ser Scot,

Is it your assertion that income or priviledge disparities don't exist in systems that purport to be socialist?

Certainly not, though I would suggest that one of the aims socialist regimes have is to reduce income and priviledge disparities, while capitalism doesn't pretend to do this.

What capitalism does much better than socialism is produce quality consumer goods and offer them to the public at low prices, which has proved a better paliative to poverty than any socialist/communist state has ever come up with.

Efficiency doesn't equate morality, that much is clear. Do you think total disregard to issues such as wealth distribution is amoral or inmoral?

[Ser Scot A Ellison]

Mentat,

Amoral. Because individuals and groups within capitalist economies can and do use their profits to further the goals "capitalism" as an idea disregards.

[Tormund Ukrainesbane]

I think central planning as a political system for sure does not have successful historical data to support it. However, I think certain large corporations run in a very similar model, where planning is centralized and individual units do not have the autonomy to run its own ideas. Imagine, say, Ford. The department that design and make car doors found a new way of manufacturing that will improve yield and reduce waste. But to make the new door, the frame for the car would have to be re-tooled and the electricals need to be redone. So does the door department get to implement this, or do you think it'll have to wait for some sort of "central" planning committee to approve and implement? Which one would be more efficient?

The reason that capital markets function with greater efficiency than centrally planned markets is, essentially, feedback. Every time you make a purchase anywhere, of anything, you are in essence casting a vote. You are saying "I prefer choice a over all other choices for this portion of my labor." You buy gasoline instead of diesel from the fuel store, so do most other people. You have now elected the store owner as your rep to Chevron, who will in turn vote for gasoline over diesel. In turn, Chevron will make X amount of gas, and Y amount of diesel. This bottom up system of choice is extremely effective. In a centrally planned system, Chevron would chose to make R amount of gas and Z amount of diesel. It would then distribute them as best they could guess to various fuel stores. This almost invariably leads to shortages in some places, and surpluses in others, which again almost invariably lead to black (capitalist) markets as the demand attempts to even out across the board. This is seen everywhere centrally planned systems take place. You may argue that the central committee can solicit feedback, but they will not be able to obtain it with the efficiency or the accuracy that can be obtained simply by letting people buy what they want.

Capital maximization is precisely the main intrinsic feature and aim of capitalism,

This keeps getting stated, and it is false. The only aim of capitalism is to allow free exchange between parties. If parties choose to maximize their capital, they are allowed to do so. If parties choose to behave altruistically, they are also allowed to do so. Neither is in conflict with the principal of free exchange.

[TerraPrime]

Re: KAH

There are a few facts that a central committee can more or less rely on, like the fact that the average person needs so and so many calories a day, clothing, housing and other basic necessities to survive. Also, known production procedures for these and other goods, statistics over available material and human input and other information can be put together into one big 'production recipe', by way of one vital tool - the price.

But I don't see why a government committee's information is so inherently more flawed than the information from a corporation. Is it an issue of scale? That errors in information are amplified the more layers they have to travel between point of origin and decision making? If the central committee's distribution plan creates surplus in one area and scarcity in another, then that will be reflected and it can be corrected, much like if a company make a similar miscalculation.

Prices are essential information carriers. Ideally, they will correctly transfer information about the needs of a populace, and the same populace' ability to meet those needs.

Prices do not transmit the needs of the populace, imo. Rather, in a capitalist system, it transmits the localized distribution pattern of resources. Even if we step beyond basic living standard essentials such as food, shelter, medicine, and education, the pricing structure reflects more on the distribution of resources than it does needs. For instance, does the price of luxury sedans reflect the need of the populace for luxury sedans? Or does it reflect the social and economic privileges of those who managed to accumulate more wealth than the others?

Alas, prices are subject to distortion in many forms. One form of distortion is distribution-related. Poor people do not have the ability to send the same information into the system compared to a situation where they have more resources, so their needs are comparatively underserved.

Quite true. I see no way for a free-market system to correct for that without government intrusion. But right now I'm trying to stay focused on examining the thesis that capitalistic system is more "efficient," vis a vis central planning systems.

Take fuel. If you set this price artificially low in order to spare the poor, you're distorting information and thus hurting both the incentives to economize with fuel and the incentives to increase production of fuel.

First, why is increasing production of fuel (or anything) is a default goal? Sometimes, enough is enough. Do we really need 10,000 more wall-hanging singing bass or Obama-look-alike Chia pets, even if under the capitalistic system one can find buyers for these items? I'd contend, no. This is especially true for items like fuel. We should be striving for an equilibrium of fuel production and consumption, because under capitalistic system, the rise in supply will incentivise the use, which is partly how we get into the current problem with anthropogenic sources for global climate change. I'm not trying to focus on the example of fuel, but I'm trying to point out that part of the advantage of a central planning model is that we can avoid the situation of 10,000 units of wall-hanging singing basses and metric tons of carbon dioxide emission.

*Listens to the howlings over the trampling of individual rights echo from the libertarian and conservative corners*

Lovely music.

The best way to deal with distortions relating to distribution is thus not to control prices, but to redistribute resources. While this will distort labour prices, this can to some extent be mitigated - and it is far less intrusive in the mechanics that make capitalism work out. Instead of setting the price of fuel low, you give the poor extra money to spend as they see fit. Vastly preferrable informationwise.

But isn't central planning part of the redistribution of resources?

Re: Tormund

In a centrally planned system, Chevron would chose to make R amount of gas and Z amount of diesel. It would then distribute them as best they could guess to various fuel stores. This almost invariably leads to shortages in some places, and surpluses in others, which again almost invariably lead to black (capitalist) markets as the demand attempts to even out across the board. This is seen everywhere centrally planned systems take place. You may argue that the central committee can solicit feedback, but they will not be able to obtain it with the efficiency or the accuracy that can be obtained simply by letting people buy what they want.

If we accept that black markets are the natural consequences of central planning systems, and I see some sense in that, then must we not accept price-fixing and monopolization as the natural consequences of free markets? In that sense, we're trading a turd sandwich for a giant douche, no?

I will also point out that even capitalistic systems have wastes and shortages. Manufacturers create items/services based on anticipated needs, so there're plenty of times when the final demand falls short of anticipated need. Further, shortages are also common in the capitalistic system, when the needs are not met because there's no profit in meeting those needs.

[ljkeane]

But I don't see why a government committee's information is so inherently more flawed than the information from a corporation. Is it an issue of scale? That errors in information are amplified the more layers they have to travel between point of origin and decision making? If the central committee's distribution plan creates surplus in one area and scarcity in another, then that will be reflected and it can be corrected, much like if a company make a similar miscalculation.

The problem is that there are countless decisions on pricing, wages and output which must be made by the central committee which are automatically resolved in a market economy, this is already one additional layer of inefficiency. The communist economy also lacks the incentives to provide choice and innovation and efficiency that are present in the market economy.

You said that we can assume that the central committee will act in a rational manner and we already have historical examples of governments acting rationally to try and resolve these issues in a communist economy (I can't find any of my old notes on the mechanisms of communist economies or I'd go into more detail). These historical examples show that communist economies demonstrably have significantly lower productivity.

I'm not arguing that a Laissez Faire economy is a particularly good idea either but it's pretty much universally accepted by economists that market based economies are far more efficient than pure command economies.

[Tormund Ukrainesbane]

Prices do not transmit the needs of the populace, imo. Rather, in a capitalist system, it transmits the localized distribution pattern of resources. Even if we step beyond basic living standard essentials such as food, shelter, medicine, and education, the pricing structure reflects more on the distribution of resources than it does needs. For instance, does the price of luxury sedans reflect the need of the populace for luxury sedans? Or does it reflect the social and economic privileges of those who managed to accumulate more wealth than the others?

Anything you buy, you need. You are taking your own limited resources (you can only work 24 hours in a day and you can only obtain X dollars per hour of work), and spending on this and not that. Whatever this is, be it life-saving medication, or a Ferrari, you are declaring with your purchase that you "need" it more than any other thing you could have spent those resources on. All purchases are needs to the purchaser.

If we accept that black markets are the natural consequences of central planning systems, and I see some sense in that, then must we not accept price-fixing and monopolization as the natural consequences of free markets? In that sense, we're trading a turd sandwich for a giant douche, no?

I don't believe we have to accept that, no. It is the price fixing which leads to the black markets. You says that gasoline will sell for 1.00/gallon, despite the actual market price being 2.00/gallon. You have just created a shortage of gasoline, as people who wouldn't have bought it at the market rate (and thus, don't "need" 2.00 gas) are now buying it at your discounted rate. In this shortage, those who still need 2.00 gas are then going to buy it on the black market from those who purchased 1.00 gas outside their own need. This has actually been happening in Venezuela under Chavez for the last couple of years. In a free market, any "price fixing" is simply going to lead to new, unfixed markets.

Monopolies are a different matter. It doesn't help your case to say that they are inevitable in a capitalist market because they are by definition a part of the centrally planned market that you propose, so you can't really argue against them. Free market economics argues (at length) about monopolies. I can refer you to some of the literature if you want, but its practically a new topic.

[Mentat]

Mentat,

Amoral. Because individuals and groups within capitalist economies can and do use their profits to further the goals "capitalism" as an idea disregards.

I don't think a purely capitalist system can account for a sufficient amount of social justice for a true democracy to flourish. Those scholarships for inner city children can't be left to the whim of companies, a democratic state must ensure they exist by giving these scholarships itself and encouraging others to do so by offering tax rebates to philantropists. Capitalism might keep it's comfortable moral neutrality, but the democratic state within it exists can't.

If we accept that black markets are the natural consequences of central planning systems, and I see some sense in that, then must we not accept price-fixing and monopolization as the natural consequences of free markets?

Price-fixing and monopolies are anathem to a free market, surely you mean something else?

[Tormund Ukrainesbane]

In related news Michael Moore (the millionaire filmmaker) declares that "Capitalism has done nothing for me."

ETA: I'm enjoying the shit out of this discussion guys. Glad we got it back on a civil track.

[Ser Scot A Ellison]

Mentat,

I'm not saying a purely capitalist economy is the best way to facillitate economic "justice" however it may be defined. I'm simply saying that capialism is amoral as the people within the system can use it to achive ends that could be considered moral or immoral.

[Ser Scot A Ellison]

Tormund,

Michael Moore what a wanker. But he and his statement bolster my point about capitalisms amorality. Here is a man using capialist institutions and structures to make money that he uses to argue against capitalism. The "system" doesnkt care what it is used for. At the end of the day capitalism is a tool that can be used for whatever purpose the wielder conceives for it.

[WhiteHaven]

Geez,

Twelve Pages..well I have been away too long, damn the pneumonia. I am bit weak, still - but I will read the whole thread (I am at page 3 now) and reply to it in a couple of days. But this I want to throw into the room:

There is no System of Economics which is moral...unless we humans do make it so.

Thanks for the interesting thread Scott.

[Insert Edit]

Tormund,

Michael Moore what a wanker. But he and his statement bolster my point about capitalisms amorality. Here is a man using capialist institutions and structures to make money that he uses to argue against capitalism. The "system" doesnkt care what it is used for. At the end of the day capitalism is a tool that can be used for whatever purpose the wielder conceives for it.

Heh. I always get a kick out of how much people despise Moore. I actually went to see the movie the other day, and given what I'd heard people say about it (including Moore) I was expecting something very different. He wasn't really saying that Capitalism needs to be replaced. More that we have to take Capitalism back from where it's been going lately.

[Altherion]

Price-fixing and monopolies are anathem to a free market, surely you mean something else?

No, I'm pretty sure he means exactly what he said. The results of all truly free (in the sense of unrestricted voluntary exchange) markets in history have been price-fixing, monopolies and the concentration of capital in the hands of progressively fewer individuals. The only reason we currently have oligopolies instead is because governments around the world actively intervene to prevent all of the above.

Monopolies are a different matter. It doesn't help your case to say that they are inevitable in a capitalist market because they are by definition a part of the centrally planned market that you propose, so you can't really argue against them.

The argument is not against monopoly itself. A government can be either a monopoly or a monopsony or sometimes both, but this is acceptable because we all have a stake in it. The problem with the monopolies arising from free markets is that they are owned and controlled by a very small number of people.

[Tormund Ukrainesbane]

The results of all truly free (in the sense of unrestricted voluntary exchange) markets in history have been price-fixing, monopolies and the concentration of capital in the hands of progressively fewer individuals.

Show me an example of a truly free (in the sense of unrestricted voluntary exchange) market from history. I question your assertion on the basis that the conditions you describe have not existed.

A government can be either a monopoly or a monopsony or sometimes both, but this is acceptable because we all have a stake in it.

Wait, what? I'm sure that is a great comfort in North Korea, with the government's food monopoly. What with them all having a stake in it. Its really working well for them I hear.