I am currently debating a fellow on the merits of free markets vs socialism, and he claims that free markets are an impossibility because capital accumulates, forcing operational costs to go continually go up, resulting in the monopolization of market forces.
How can I argue this?
Point out that it is rhetorical nonsense.
Cool, we get to play crush the socialist. This is an easy game but I never get tired of it.
The essence of this fellow’s problem is that he’s thinking in terms of a fixed level of production. If I’m making a certain number of units of a product and the sales of the product are profitable than what will I do with the extra money? If I just go out and spend all of it on personal consumption goods, and if everyone else is doing the same with all of their income, then of course prices will rise. However, if I use some of it to hire additional workers or to buy more machines so that I can produce more of my profitable product then I will increase the production of the economy. I can also invest it in someone else’s profitable business so that they can increase their production. If everyone else is doing this then there will be more products and less money will be chasing those products so prices will go down. If your socialist will buy me a few beers, I’d be happy to hammer him all night until he finally resorts to “but I just feel like socialism is better” (or some variation). An important thing to keep in mind is that you will rarely, if ever, convince a socialist of the error of his ways. So, while it’s a lot of fun to reveal the socialist for the fool that he is, if you want to actually convince anyone, make sure you involve some more open minded people in the conversation.
It really doesn’t make any sense. Capital accumulation leads to higher worker productivity, which leads to higher wages (if workers were paid any less than their productivity another firm could profitably offer them a higher wage; if they were paid more than their productivity, the firm would go out of business) and more wealth in the world. The new wealth and higher wages can be invested, and any firm or potential start-up that convinced a group of investors that it would be profitable to invest in them could compete in the market place. And then even if one firm out-competed all the others, it would always have to worry about new entrants to the industry and if it got too large, it would start to run into the same calculation problems that plague governments.
I have no idea what that’s supposed to mean. Why should capital accumulation force operational costs higher, instead of being used to increase production and thus lower operational costs? And if one company starts having higher operational costs, what would prevent newer companies from entering the market with lower operational costs, instead of “monopolization of market forces”?
In short, the sentence makes no economic sense.
Higher salaries lead to higher time preference, which lowers productivity.
Um, what? Which direction is “higher time preference”? More savings, or less? If it’s more savings, then those savings would be used to increase productivity. If it’s less savings, why would higher salaries lead to less savings? They would be more likely to save, not less.
What I am talking to is if everyone was super rich which would lead to less investment.
No, I am not advocating progressive taxes. Progressive taxes would lead to underinvestment (rich would not have the incentive to become rich in the 1st place if they know they have to pay taxes)