Krugman:"In the end, then, capitalism triumphed because it is a system that is robust to cynicism, that assumes that each man is out for himself. For much of the past century and a half men have dreamed of something better, of an economy that drew on man's better nature. But dreams, it turns out, can't keep a system going over the long term; selfishness can."
Monday, February 25, 2008
The Robustness of Selfishness
Economist Paul Krugman provides an argument for the moral basis of capitalism that at first blush might remind one of Ayn Rand's. But it contains a important difference; whereas Rand tried haplessly to transmute "selfishness" into a virtue in order to justify capitalism as a moral system, Krugman argues that the very brilliance of capitalism is that man does not have to be virtuous in order for the system to function successfully.
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11 comments:
Maybe it functions so well because self-interest isn't such a terrible thing after all.
Shame we can't have a system of buying and selling without war though.
Or a system that can feed, clothes and house the entire population of the world but doesn't.
What does war have to do with buying and selling? Name one case in history that two open, free market, democracies declared war on each other.
Damien
Um...nothing? So if war doesn't have anything to do with buying and selling, what difference does it make if the countries at war are free market democracies?
The fact that systems that assume humans will act stupidly, selfishly and chaotically, and assume that everything can go wrong will, work far better than those that assume humans will be kind and altruistic, does not mean those traits are good. It simply means that those traits are, for now at least, an inexorable aspect of human nature (and probably will continue to be).
You got it, MM.
Meg,
You're just packaging "stupid" and "selfish" together to make them seem inseparable. If the majority of selfish actions were really "stupid" the free market system would not work. If the massive allocations of capital and resources taking place across hundreds of industries were "stupid" decisions the people making them would lose money and be forced to change course.
Instead, on net, this does not happen. Capitalism continually demands the best of you, if you are to succeed.
Yo Jay
Don't worry too much about teh stupid. I think Meg's point is backed up by the Austrian economists. Take the following deductive argument:
1) While what we know is vast, what we don't know is far vaster
2) Humans are therefore more ignorant than not
3) Therefore humans will err
4) Error therefore is more likely than success.
5)Therefore if error is more likely than success we should first seek to limit our errors.
6)Central planning, esp uncritical (eg Stalinism) will centralise error, thus minor mistake can become catastrophic
7)Capitalism on the other hand distributes error over a wider area, thus the errors are smaller and more survivable as a result.
C:Capitalism will be a more robust system for coping with human ignorance/stupidity
Dan,
Nothing wrong with that argument. Here is one that also works.
1) What we know is not as vast as what we don't
2) However, on net each generation leaves the next with more knowledge.
3) Therefore, knowledge will broaden
4) However, it will only broaden if freedom exists
5) Therefore, freedom is vital to applying our newfound knowledge to problem solving and successful living
6)Central planning, esp uncritical (eg Stalinism) will prioritizes the status quo over progress
7)Capitalism on the other hand rewards only success and, when allowed to function, leads to mass flourishing
C:Capitalism will be a more robust system for maximizing human success and flourishing
I guess we're saying the same thing, but I'd like to think that capitalism unleashes the best in us rather than just copes with the worst.
Hope for the best.
Plan for the worst.
;-)
I agree with the posted article.
I would also like to add that I have noticed that most books about capitalism are really about how to make money for yourself rather than ideology. Not a bad thing, it means that capitalism can be discussed in purely practical terms. Socialism doesn't seem to have this property (Although Keynesian economists do have reasonable seeming recommendations for how to run finances for a government)
However Selfishness may not be infinitely robust. It seems these days that everyone wants a bailout due to the housing bubble. Banks want a bailout, borrowers want bailouts, real-estate agents want to be bailed out. Congress has voted to give one time welfare checks to people who make $60K. Selfishness may work only so long as people nevertheless decide to limit themselves to what can be accomplished fairly.
I said all three adjectives stupid, selfish and chaotic separately to make distinctions between them as distinct concepts and not "packaged together". There are many instances in which the free market does not work, and government intervention is beneficial. Without appropriate safeguards, there would be nothing to protect consumers from being scammed by unsafe or bogus products. Also utilities and transport systems are most amenable to a monopoly because of massive economies of scale, and government involvement can facilitate that. When water and electricity were provided by private companies at the turn of last century, the service was very poor unreliable.
As great as free markets are, they aren't perfect. I also fail to see how you (and Ayn Rand) can equate the robustness of capitalism with a moral imperative. It is true that an advantage of capitalism is that it tends to be more efficient and responsive to market demand, but I don't see how that makes it moral. If one's ability or lack thereof to respond to market pressures is "the best in you", you're missing out on a lot.
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