Tuesday, September 08, 2009

Art Carden on Why Capitalism is Unpopular

Art Carden writes in The Market Oracle (HERE):

His article, “Why Is Capitalism So Unpopular?” [abridged drastically below – follow the link] is a tour de force, an imaginative explanation that fits the question with a literate, convincing, and an honest answer. Read the sample and then follow the link.

Henry Hazlitt once said that good ideas have to be relearned every generation. Among the intellectuals of our time, capitalism is wildly unpopular. This in spite of the fact that it is the only social system that has permitted prosperity and flourishing.

I think there may be a more straightforward explanation that plays a role in their dismissal of capitalism. To a "man of system," to borrow Adam Smith's terminology, capitalism just isn't that exciting. Participants in the market economy are wholly beholden to consumer wants. The academics envision a grand world, where Great Men fight Great Wars, periodically inventing Great Things or developing Great Ideas. Instead, the market provides us with incremental processes, which expend enormous piles of resources, in a quest to make better Triscuits. It is hardly the stuff of high drama, to say nothing of Great History.

The idea that great statesmen are not needed — to say nothing about being wanted — can no doubt be galling to many who decry capitalism for its excesses. For the people who derive their self-worth from being paternalistic, this is a sorry state of affairs indeed.

According to the do-gooders whom Adam Smith called "men of system," the average person is like a piece on a chessboard, to be arranged at the whim of a supervirtuous planner. The planner, who ignores the fact that each of the pieces has (as Smith put it) its own "principles of motion," does his best to orchestrate a game according to his own rules. Dissenters are not tolerated.

Yet people are not chess pieces, to be moved around at will. They are living, breathing, acting, thinking, rational beings with rights and dignity. Respect for their humanity rules out interventions by do-gooders, no matter what their intentions. The result of denying people their fundamental freedoms can be terrible, as the horrors of humanity's 20th-century experiments with collectivism have shown

There is much more in Art Carden’s article. I strongly recommend that you read it in full.

Market economies work better than their alternatives and better, in my view than so-called “free markets” where businesses are aided by friends (and, alas, sometimes by clients) in public office. Shutting down state departments of trade and industry, and all lobbying organizations, followed by barring all lobbyists, would be a start towards freer markets.

Of course there is an essential role for government where necessary; defence, justice, public works and public institutions, education and health funding (not always by public provision, but always by voucher schemes), necessary regulation aligned with justice and the separation of powers, and the promotion and defence of personal liberty.

Art Carden’s article deserves the Lost Legacy September Prize, with bar and oak leaf clusters. I for one am truly impressed.

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Blogger beezer said...

Somewhere between Stalin and you lies the answer.

The "man of system" you cite is the corporate CEO. His only goal is to make profits.

Private corporations have an unfortunate propensity to ignore exogenous costs in the pursuit of profits. In order to do so, those real costs are borne instead by governments, either explicitly or implicitly.

A question. What is the true price of energy? The correct answer is "that price at which energy is sustainable and clean (minimal exogenous cost)."

That is the true answer, but it isn't the one you'd give.

2:51 pm  
Blogger michael webster said...

Alvin Roth has a nice article about matching markets and some of the paradoxes of unfettered or choices that are no coordinated.


Matching people who are offering services seems harder that matching buyers and seller of goods, assuming that everyone has a known reservation value.

3:39 pm  
Blogger Gavin Kennedy said...

Hi Beezer

Stalin was never the answer to any problem; he had an unfortunate, and probably congenital, tendency to ignore the human costs of his imposed decisions.

Some private corporations and some governments ignore externalities; the former can be curbed by laws in a free society, but how do you curb governments, especially those ruled by Stalin's or Hitler's clones?

The history of pollution (especially nuclear) was far worse in old old-Soviet Russia than anywhere else.

I agree, set energy prices to cover all costs by imposing 'clean up' charges on them and consumers.


3:53 pm  
Blogger Gavin Kennedy said...


The reference you gave bounces back as unobtainable.

Please reset it.


3:57 pm  

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