What, if any, flaws do you think free-market capitalism has?
It wasn’t impressed upon man in stones written by God himself.
Um, that’s not a very specific question. It’s kind of like asking “What, if any, flaws do you think the heliocentric model has?” The correct answer: none that we know of.
Praxeological science is not normative - it doesn’t say “people ought to be capitalists” it says “here are the rules that determine the social outcomes when people behave this way or that way, respectively.” If you centrally-plan an economy with an iron fist, you will have under- and over-production, starvation and eventually population collapse. This has nothing to do with whether we ought to have capitalism or not. It’s like saying if you shoot a rocket at the right speed and angle, it will orbit the earth. That doesn’t tell you whether you ought to launch such a rocket, only what will happen if you do.
Clayton -
FoTH - Wow, you couldn’t recommend a worse source. I made it through all of three sentences in the first FAQ.
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It’s a strawman - most people on this forum don’t even self-identify as anarcho-capitalist
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It’s a non-sequitir - the OP asked about free market capitalism, not anarcho-capitalism (yes, they are different)
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It’s shit-for-brains - the author is seriously debating whether people who believe in property rights can merit the label “anarchist”. Srsly?
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I couldn’t take it any more, I’d rather watch 10 hours of Mr. Trololo:
http://www.youtube.com/watch?v=gkfVdrtLcRs
Clayton -
I actually sort of like that song.
The massive wealth it creates attracts parasites.
It’s strangely attracting. I’m quite sure I would go absolute bonkers after about 1 hour of it, though, let alone 10 hours. CIA could break me in no time with this combined with sensory deprivation and maybe a little truth serum. I’d be giving them the password to anything they wanted, even if I didn’t know it.
Clayton -
No, you’d just be telling them that you’re very glad, because you’re finally returning home.
Is it bad that I play the Trololo song in my head sometimes?
Imo this is the best 10 hour video on Youtube for interrogation purposes:
FoTH - Wow, you couldn’t recommend a worse source. I made it through all of three sentences in the first FAQ.
It’s a strawman - most people on this forum don’t even self-identify as anarcho-capitalist
It’s a non-sequitir - the OP asked about free market capitalism, not anarcho-capitalism (yes, they are different)
Maybe this section would be more approriate then. Though really criticisms of free-market capitalism are sprinkled across the FAQ.
Free market capitalism is certainly the fairest system. Is it perfect? That depends on the end result of perfection. In the sense that everybody would have enough to live, no; there will always be invalids, for instance, who need others, and there will always be cases where nobody will be willing to take care of them. However, thinking as a utilitarian, free market capitalism is the best way for the most people to become wealthy and be happy. However, if fairness is the only consideration for perfection, then yes, it is perfect.
If I had to detect a practical flaw, I would say that any form of currency could conceivably run out. Being that the dollar ought to be based on some tangible standard, the standard would eventually run out if society continues to expand. There is, after all, only so much precious metal on earth. Certainly the standard isn’t limited to gold, but thinking abstractly, I would say it’s a potential weakness. Otherwise, it would ultimately boil down to bartering, so it’s not an imperfection in the system, just in the way it is currently considered (involving currency).
As for a matter of identity, the link someone posted below sums something up very well about these proclaimed anarcho-capitalists: “Opposition to government is a necessary but not sufficient condition for being an anarchist – you also need to be opposed to exploitation and capitalist private property. As “anarcho”-capitalists do not consider interest, rent and profits (i.e. capitalism) to be exploitative nor oppose capitalist property rights, they are not anarchists.” http://anarchism.pageabode.com/afaq/secF1.html I never understood why so many people on here claim to be anarchists. I’m not one, and anarchy is a stupid idea, frankly. It can’t work for very long despite what the idealists on here claim.
lol Nevermind
Most critiques used in favor of statism are quite valid in that they are indeed “market failures” from the point of view of maximizing human welfare, the problem is that the state isn’t a proper solution to the problems.
- The problem of collective goods.
This is the biggest problem that capitalism inherently has. There are services which one cannot directly charge others for because the provision of these services cannot be excluded to non-payers. The basics of the problem are very simple and undeniable. A classic example is a road. Practically everyone has an incentive to see that a road (assuming that it’s actually a productive project) gets built because this will then decrease the prices of goods and services for pretty much everyone, but no one individual has the power to make any noticeable difference in the construction of the road, and therefore no profit seeking firm will produce the road unless they can then produce a tollbooth and charge a significant monopoly price for a long time. It would be cheaper for everyone to just chip in and then have the road be free to use or charge a very small toll, but no one has a direct incentive to do this.
The biggest problem, of course, is defense. This is the most important service on a free market, because only through large scale defense (so long as there are still predatory entities, statist or otherwise) can private property be upheld and the free market can sustain itself. The problem here is that no one person can affect the amount of defense provided, and so no one has a direct incentive to give money for this cause, and the defense agencies can’t really charge anything directly. This is not to say that there are not solutions to roads and defense, merely that it is much less certain that these things will be provided well as opposed to, say, cheese on the free market.
The reason why the statist examples don’t work here is this: Statism suffers from the collective goods problem. No one person has an incentive to be educated upon what is really going on, no reason be educated. NO ONE PERSON CAN AFFECT AND ELECTION, and therefore no one person has any incentive to actually know what is going on, and I think that the economic literacy and state of political education in the United States and indeed around the world makes this perfectly evident. The state is the biggest collective good of all, and it is the one that can cause the most damage because it can DIRECTLY affect EVERYTHING in the economy.
- Externalities.
Yes, externalities exist. Some things provide benefits to people or harm people and these things are not accounted for in markets. These things would be much rarer (especially negative externalities) if we had real property right protection instead of arbitrary property rights protection, but these things certainly are real.
Once again, however, the state is a perfect example of an externality. The existence of the state inherently leads to a huge amount of failures and losses of efficiency. So the real Marginal Social Cost (As the main stream economists call it) of the state, is far more than appears on the nation’s tax bill each year.
- Monopolies.
Yes, monopolies exist on a free market, and they do decrease general welfare then they would if they were under more competitive conditions. Natural monopolies tend to be especially heinous because they are even more insulated from competition and usually surround much more essential goods. Prices will be much higher for these goods and services than they would otherwise have been and this decreases the welfare of consumers and everyone except the monopoly and associated industries.
Once again, however, the state acts as a monopoly, except that it has a ying yang component to it. It doesn’t have an incentive to restrict output, which is the negative aspect of a monopoly, but at the same time it doesn’t have any of the redeeming factors of a monopoly, such as the wish to increase demand for its services as much as possible which can only be achieved through higher quality services in one way or other, nor does it have the incentives to cut costs as much as possible. This leads to the existence of an incredibly inefficient institution which has no incentive to cut its own output, that is no incentive not to take up an increasingly large part of the market with wasteful spending.
These are the major problems of the system. I would also include human error, but that need not be expounded upon.
If the free market were to be born tomorrow then it would be the role of new technologies, social entrepreneurship, and the collective action of truly free people to solve the above problems inherent in free markets consisting of traditional profit-seeking firms.
The “Trololo” song is entirely non-verbal. It’s in a style called вокализ (vokaliz) in Russian, which was apparently popular back in the days of the Soviet Union. So the only subtitle you need is one for the title:
Я ОЧЕНЬ РАД, ВЕДЬ Я, НАКОНЕЦ, ВОЗВРАЩАЮСЬ ДОМОЙ
The subtitle would be something like this: “I’m very glad, because I, at last, am returning home.”
The phrase “maximizing human welfare” implies that “human welfare” can be measured, i.e. it’s an objective, empirical phenomenon. It’s no such thing, however.
I think you omit at least one other possibility - that some people (likely business owners IMO) do chip in and build the road, and they pass the costs of building and maintaining it onto their customers.
On another note, if the price charged for the use of a road that one owns is a “monopoly price”, then the price charged for my labor is also a “monopoly price”.
Finally, I disagree with the assertion that “no one individual [necessarily] has the power to make any noticeable difference in the construction of the road”. I don’t see how this is necessarily the case.
Again, I fail to see how it’s necessarily the case that “no one person can affect the amount of defense provided”. And whose standard of “well” are you talking about with regards to providing roads and defense?
It seems to me that an individual can affect the production of things like roads and defense much more than he can affect the outcome of an election by voting (which I assume is what you mean - there are other ways in which an individual could more significantly affect the outcome of an election).
This might be tangential or even moot, but aren’t externalities subjective?
How exactly is “Marginal Social Cost” measured?
Again, this implies that “human welfare” can be measured somehow. Where do you think monopolies (especially natural monopolies) would exist in a free market?
I’d say that depends on what you think the state is providing.