Re-Framing Capitalism

[rousseau]

I have a bit of time to kill this morning so I'm going to draw out a few of my thoughts on this topic.

If we take the textbook definition of capitalism we get:

an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state

The way many of us tend to look at this is that we have ownership of land and property controlled by a few, to the exclusion of many who don't have access to direct profit generated by that land. Fair enough, but is there any other way of looking at capitalism as an economic model?

Lets backtrack a bit and recognize that the survival of any member or group of our species is contingent on the control of land. At no time in our history have we not been in competition for resources, except maybe when our population was so small that we were rarely in direct conflict with each other. IOW, conflict for resources is intrinsic to what it means to be a living thing in a world where those resources are finite. Put yet another way, property 'ownership' has been a thing long before capitalism as an economic model, but up until recently it wasn't quite as legalized, with no corresponding state apparatus.

This is where I like Max Weber's concept of rationalization. That is, the defining feature of our history is that we tend to increasingly rationalize, routinize, and organize how our cultures work. The routines we undergo throughout everyday life, more and more, become subject to calculation. What this can mean is that, in another light, capitalism as an economic model can also be seen as a new stage of rationalization in the organization of property. When there are an overwhelming number of people on the planet, we have to somehow devise a system that approaches fairness in who has access to property and who doesn't. Note, I'm not claiming that the current system is completely fair, but that our current economic model is an attempt at making it more meritocratic. And yes, there are a huge number of exceptions and gotchas and things that don't seem right when we talk property.

Put another way, now the fruits of our labor, market skills, and property can be protected, and accumulated toward the end of owning property. That doesn't mean that all of us are going to have an easy go at it, but at this point in history many are at least entrenched in a system where, in theory, we just have to gain some skills and everything we earn and own can be secured for us. This makes many of our lives more safe and secure, even if we aren't rich business owners.

Going back to the common way of looking at capitalism - that it concentrates power in the hands of the few - I have to wonder if economically we need to recognize that ideals only work in theory, and as a goal, and can't actually exist in practice. I believe Marx, fundamentally, had the right intent and the right (somewhat malformed) idea - that we need to increasingly work towards our communities working for everyone. However, I believe it's more realistic to let go of the idea that a 'perfect society' can actually be achieved. Rather than a hyper-focus on where we ought to be, we need to hyper-focus on knowing how things actually work in the present, so we can guide our economies into the future in a realistic way.

The Marxist stream of thought is what I'd call an 'equalization' philosophy, thought held by those who would benefit from an inversion of current power structures. It's a line of thought that's going to be present in an unequal world, but doesn't necessarily indicate a pragmatic way forward, and may just signify or symbolize current inequality.

That's about all I have for now. I'd love some critiques.

 

[Swammerdami]

Two comments.

(1) Private ownership of real estate precedes the first use of the term "capitalism" by thousands of years. The term refers to private ownership (not necessarily in few hands) of invested capital. e.g. ships, factories, machinery.

(2) It's wrong to think of a strict either-or dichotomy between capitalism and socialism. Most modern thinkers favor a capitalist structure but with government acting (e.g. via progressive taxes and a safety net) to reduce — NOT eliminate —income inequality.

 

[rousseau]

Two comments.

(1) Private ownership of real estate precedes the first use of the term "capitalism" by thousands of years. The term refers to private ownership (not necessarily in few hands) of invested capital. e.g. ships, factories, machinery.

(2) It's wrong to think of a strict either-or dichotomy between capitalism and socialism. Most modern thinkers favor a capitalist structure but with government acting (e.g. via progressive taxes and a safety net) to reduce — NOT eliminate —income inequality.

I have a hard time separating the two - private ownership of any property, and private ownership of property that produces explicit profit. Because really, any form of legal ownership confers some type of benefit to the holder. Owners of real estate, for example, have a huge material advantage over non-owners. People who can afford rent have a huge advantage over the homeless. People with a car .. etc. When you get past the blurry boundary the economy boils down to legal protection of private property, which makes a 'capitalist' possible. But maybe the conversation is more useful if I stick to your definition.

On the second point, I'm with you. I don't only not look at it as a dichotomy, but also a false dichotomy.

 

[steve_bank]

I think the prime distinction is private ownership of the means of production vs common ownership.


Riutines are more effcent and aid group survival. Specialization vs one person ding many tings, Higer productivity.

One guy makes bows and arrows well, another makes shoes. A hunter trades meat for shoes and bows. Free market capitalism is born.

The 19th century American wetward exapnsion.

 

[Politesse]

A "perfect society"? Have you actually read Marx? I would not describe him as a social optimist. He believed that a transition away from capitalist ideology would be necessary, as its central paradoxa gradually ripped society apart, and that it would be advantageous to the state to embrace this transition rather than trying to hold off the inevitable. As indeed nearly all nations now have to one degree or the next.. But he did not expect paradise to result, and indeed often clashed with the Utopian Socialists.

 

[rousseau]

A "perfect society"? Have you actually read Marx? I would not describe him as a social optimist. He believed that a transition away from capitalist ideology would be necessary, as its central paradoxa gradually ripped society apart, and that it would be advantageous to the state to embrace this transition rather than trying to hold off the inevitable. As indeed nearly all nations now have to one degree or the next.. But he did not expect paradise to result, and indeed often clashed with the Utopian Socialists.

It was more of an attribution to his followers than Marx himself (although it's true, I've mostly only read Marx via secondary sources). Many seem to believe that we're currently living in the 'wrong' type of economy, and that with the right effort we can consciously construct the 'right' one.

On some level my argument isn't fundamentally different than what Marx supposed himself - that there would be a transition - but I'm more-so addressing the fall-out from Marx, and the current belief that we're living in some kind of dystopia that urgently needs to be fixed. Followers of Marx often see nothing but downside and problems, rather than all the positives historical 'rationalization' has accomplished. And they also seem to grant Capitalism historical agency, rather than it being an arbitrary place-holder between the past and future.

 

[Politesse]

There's a tendency to refer to more or less any socialist ideas as "Marxist" but I feel this is not the most productive habit. He was just a man, and his theories had their strengths and weaknesses like anyone else's. You can't use Marx's theories alone to analyze the modern world; whether he was right or wrong in his own time, many technological advances and social innovations have appeared since his time that greatly altered the field as we now view it. But many of his theoretical concepts have survived and retain their utility regardless, as Weber himself well knew.

 

[steve_bank]

The capitalism Marx was immersed in is nothing like what we call free market capitalism today. Henry Ford and the way he ran his company was more in line with 19th century capitalism.

Today if you have a 401k you are invested in corporations. I doubt there arr many privately held non public major companies today.

Companies have shareholders. Musk IMO is a throwback to the 19th century.

 

[bilby]

Capitalism isn't about ownership of land, it's about ownership of productive resources - obviously that can be land that is exploited in one way or another, but it can also be machinery, vehicles, and a whole range of other things.

And of course, it's possible to own land that you don't use as capital. Indeed, much of the land claimed by various rulers in the past had been wilderness, with little or none of its productive potential being exploited by humans. And often the productivity of land is low until it is somehow 'improved', for example by clearing trees to make way for crops.

There are two major problems I see with capitalism. One is that it starts with a wildly unequal distribution of productive or potentially productive property, and tends to maintain or exacerbate that inequality, rather than to reduce it; The other is that its adherents see it as a universal panacea. It an excellent system for managing allocation of scarce resources in societies with low corruption, and in industries and activities that allow ready competition with few barriers to entry for new competitors. But it's woeful at managing natural monopolies, or at allocating resources in societies with weak (or weakly enforced, or inequitably enforced) laws to prevent corrupt practices.

 

[Swammerdami]

I have a hard time separating the two - private ownership of any property, and private ownership of property that produces explicit profit. Because really, any form of legal ownership confers some type of benefit to the holder. Owners of real estate, for example, have a huge material advantage over non-owners. . . .

I don't really disagree; I was just quibbling about terminology.

Land owners typically acquired their wealth because their ancestors served as knights in the King's army. Beginning in the 16th century, wealth was acquired by entrepreneurs. The rise of craftsmen's guilds, shipping, and banking contributed to this. (Kings contributed also, steering power away from "noble" landowners to entrepreneurs and the general public. Kings used their wealth to hire professional soldiers, thus reducing their dependence on land-owning knights.)

The biggest economic changes didn't come until the 19th century.

 

[Bomb#20]

I have a bit of time to kill this morning so I'm going to draw out a few of my thoughts on this topic.

Pretty good thoughts.

If we take the textbook definition of capitalism we get:

an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state

The way many of us tend to look at this is that we have ownership of land and property controlled by a few, to the exclusion of many who don't have access to direct profit generated by that land. Fair enough, but is there any other way of looking at capitalism as an economic model?

There are always other ways of looking at things.

Exclusion from the use of a resource such as a piece of land is not caused by private ownership; it's caused by incompatibility between alternate uses. If you want to use some land to sit on and sew shirts for trade, and another person wants to use that same land to house some pigs he'll eat in the future, one of you will necessarily have to yield and be excluded. That will be the case regardless of culture or law or economic system. Either you'll fight it out, or you'll agree on a convention for one of you getting his way while the other volunteers to be excluded from it, or else some third person will choose which of you to exclude from the resource and will impose his choice by force. Most populations have settled on the third option for obvious reasons of practicality.

Capitalism is an economic and political system in which a country's trade and industry are controlled by private owners, which is to say, the power to exclude and to choose whom not to exclude from the use of a resource is divided up among thousands or millions of individuals, with some owner initially assigned to each resource by some arbitrary formula. To do away with capitalism, then, is to have a country's trade and industry controlled by the state rather than by private owners, which is to say, it is to assign to the state the power to exclude and to choose whom not to exclude from the use of every resource. I.e., it is to combine all the power to exclude from every resource in a single unitary exclusionary body -- one single chooser making all the exclusion choices.

Those who don't "own" much or anything, i.e., those with little power to exclude others from resources, will of necessity have to make a deal with somebody who has power over more resources, doing something for him in exchange for access to the resource -- typically, work. From that point of view, "capitalism" is just another word for separation of powers. Why so many of the poor workers and their representatives expect they will get a better deal from a resource exclusion monopoly than they currently get from thousands or millions of separated resource excluders is a great mystery.

Lets backtrack a bit and recognize that the survival of any member or group of our species is contingent on the control of land. At no time in our history have we not been in competition for resources, except maybe when our population was so small that we were rarely in direct conflict with each other.

Anyone who thinks there was ever a population so small we didn't conflict over resources needs to watch Gangs of Lemur Island.

IOW, conflict for resources is intrinsic to what it means to be a living thing in a world where those resources are finite. Put yet another way, property 'ownership' has been a thing long before capitalism as an economic model

Bingo.

This is where I like Max Weber's concept of rationalization. That is, the defining feature of our history is that we tend to increasingly rationalize, routinize, and organize how our cultures work. The routines we undergo throughout everyday life, more and more, become subject to calculation. What this can mean is that, in another light, capitalism as an economic model can also be seen as a new stage of rationalization in the organization of property. When there are an overwhelming number of people on the planet, we have to somehow devise a system that approaches fairness in who has access to property and who doesn't.

We don't have to. We choose to, but that involves trade-offs between competing feelings of what constitutes fairness, as well as trade-offs against other considerations we may value as much or more than fairness. Organizing our culture to make assignment of property more rational involves guarding against economic creationism, i.e., magical thinking. An awful lot of proposals for fairer organization of resource exclusion patterns take for granted that some resource will continue to exist after the culture chooses to torpedo whichever mechanism causes it to exist, much the way IDers take for granted that organisms would exist even in a world without natural selection.

Note, I'm not claiming that the current system is completely fair, but that our current economic model is an attempt at making it more meritocratic.

This is unrealistically teleological. Our current economic model isn't an attempt at anything; it's an emergent phenomenon arising from millions of individual decisions, very few of which are attempts at any system-level revision, creating meritocracy or anything else. To whatever extent our current economic model is trending toward becoming fairer and/or more meritocratic, that's a side effect of various mechanisms in it that exist for independent reasons.

The Marxist stream of thought is what I'd call an 'equalization' philosophy, thought held by those who would benefit from an inversion of current power structures. It's a line of thought that's going to be present in an unequal world, but doesn't necessarily indicate a pragmatic way forward, and may just signify or symbolize current inequality.

Yes. It's very tempting to think a significant improvement in society can be computed -- that we can analytically calculate what society would be better and then just trade ours in for it. But anyone familiar with multi-variable optimization knows the way to get improvement is by incremental change, measurement, and undoing steps that are observed to make things worse; and that the process of convergence to the optimum goes faster when the individual steps are smaller.

 

[bigfield]

Yes. It's very tempting to think a significant improvement in society can be computed -- that we can analytically calculate what society would be better and then just trade ours in for it. But anyone familiar with multi-variable optimization knows the way to get improvement is by incremental change, measurement, and undoing steps that are observed to make things worse; and that the process of convergence to the optimum goes faster when the individual steps are smaller.

We seem to have that kind of incremental change, but the direction of this change is contested, particularly between those who want greater redistribution of property and those who want less. We're a multi-variable optimisation with two conflicting definitions of the optimum.

 

[rousseau]

This is unrealistically teleological. Our current economic model isn't an attempt at anything; it's an emergent phenomenon arising from millions of individual decisions, very few of which are attempts at any system-level revision, creating meritocracy or anything else. To whatever extent our current economic model is trending toward becoming fairer and/or more meritocratic, that's a side effect of various mechanisms in it that exist for independent reasons.

This is a good point but it does raise an equally good question: what is rationalization driving at, even if only sub-consciously and instinctively?

I would think that progressive forces are generally driving at fairness for all, with a by-product of increasing meritocracy.

 

[Harry Bosch]

Two comments.

(1) Private ownership of real estate precedes the first use of the term "capitalism" by thousands of years. The term refers to private ownership (not necessarily in few hands) of invested capital. e.g. ships, factories, machinery.

(2) It's wrong to think of a strict either-or dichotomy between capitalism and socialism. Most modern thinkers favor a capitalist structure but with government acting (e.g. via progressive taxes and a safety net) to reduce — NOT eliminate —income inequality.

Well, the owners of real estate keep the profit (sometimes loss) that it generates. It doesn't go to the collective.

Very much agree with #2. Also want government to regulate and put down monopolies. Secondly, income inequality isn't all bad. Income is simply a means of directing demand (I'm not an economist so excuse me if I'm slightly off). People are generally paid more in higher demand occupations.

 

[steve_bank]

In colonial and 19th century America land meant you had your own food and water supply. Wood for fuel. Crops for trade.

Western economics is based in the supremacy of the individual. Any serious change to economics would reuqire not just a political chage but a fundamntal cultural change. The individual is responsible for him or her self vs the state provides personal economic security.

 

[bilby]

Western economics is based in the supremacy of the individual.

American economics might be. The rest of the west? Nope.

 

[Elixir]

Western economics is based in the supremacy of the individual.

Western economics wouldn't even exist without collective interests.
The "rugged individual" American stereotype was an embellished memory by the 1950s. As the high of "winning" WWII wore off, rugged individuals became a less and less relevant voting block. Now, "rugged individuals" are basically terrorists outliers, not any kind of predominant trait among Americans - if it ever was.

 

[Politesse]

I don't see how the "supremacy of the individual" could even be considered an economic topic. Your beliefs about your self worth or whatever are your own to keep, but economics is the study of the production, consumption, and redistribution of wealth through social systems. Individuals by themselves are only a tiny component of economic analysis, and indeed rarely are individuals (as opposed to households) even the basic unit of analysis in this field. Your rugged pioneer farmers generally acted as whole families, and even these were only individual economic agents until they needed to actually sell those goods, or negotiate water rights, or fight a war to maintain political control of their stolen land.

 

[steve_bank]

As someone who snt my adult lofe in technology which included marketing, it is all about the individual with a right to freely choose between alternatives. Without that theer is no free market competition.

The constitution

1. Sets up a bank
2. Protects intellectual property
3. Protects personal/business property

Under the British crown the crown could take a good idea if it was proftable.

The country was founded on the principle the govern mt existsto protect individual rights. The opposite of a tribal culture or communism.

Todat=y we hear peole say 'I am am an American and nobody tells me to wear a mask or get vaccinated'. The opposite is China where the group or state overides individul freedoms in the cause of the group.

If you do not unsertand American rugged individualism based in the 19th century then you do not understand American culture. Self promotion, personal initiative is rewarded along with personal entrepreneurship.

The opposite was the Soveit culture.

Someone I knew from Norway said in Norway it is culturaly bad form to elevate or promote yourself above the group.

We are the most individualistic culture in the world. A positive is the delopemnt of things like comupters through agreeive competition. That competition goes down to indviduals in companies. A negative is a Musk who can take joy rides to the ISS in space because he can afford it.

For me as an engineer the idea was aggressive personal competition leads to the best reults.

It can't all be the rigged indvidual and tere is usualy but not always a balabce between the individual and the group. That is what is giving us a lot of our polucal problwens today. A lack of recognition on the right that the groupb has rights as well. It can't all be wide open free marjet capitalism going forwrd.

The old paradigm was a risng tide raises all boas. Musk makes obscene wealth but it trckles down as jobs and risng standards of living.

Here in Seattle a 19 year old kid was signed by our new hockey team. If he performs as expected he will get rich knowing a puck into a net. Meanwhile around the stadium that cost upwqrds of a billion dollars to renovatec homless camp on the streets.

 

[Swammerdami]

It's very tempting to think a significant improvement in society can be computed -- that we can analytically calculate what society would be better and then just trade ours in for it. But anyone familiar with multi-variable optimization knows the way to get improvement is by incremental change, measurement, and undoing steps that are observed to make things worse; and that the process of convergence to the optimum goes faster when the individual steps are smaller.

Nitpick: I am familiar with multi-variable optimization. The process of incremental improvements will find a local optimum but generally not a global optimum. 'Simulated annealing' is one technique to escape from a local optimum: make a plausible change even though it reduces performance, and hope that incremental improvements from that new state will lead to a better optimum.

Does this have any relevance to human society? Maybe. Revolutions often reduce productivity in the near term, but provide a new starting point that MIGHT eventually lead to higher performance than achieved by the old regime.