improving capitalism--a lot

Economics Economics Questions
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1

Hello libertarians (and other strong supporters of liberty and–therefore–capitalism):

I contacted Jeffrey Tucker regarding the idea referred to below, and he suggested I put a post on this forum.

I stumbled upon a way to improve capitalism systemically and to accomplish everything any libertarian has dared to hope for–and more. The only thing that has to be changed is the approach to the money. This idea leaves the debate over having a metallic currency far, far behind. It actually harks back to the idea of neutral money, the concept that first attracted those who would form the Austrian School, and especially F.A. Hayek. It is impossible to summarize it in a post of this kind and do the idea, well, justice, but an essay of 3,000 words at www.ajustsolution.com presents a reasonably thorough introduction of it.

I must warn readers that the key to the idea is a money supply that is purely fiat money. Materially (as opposed to purely ideologically), the problem with fiat money has been that the supply of it can be manipulated–indeed, is designed to be manipulated–by a group of cloistered individuals making arbitrary decisions (thereby subjecting everyone else in the economy to their arbitrary wills–the very definition of injustice according to John Locke, and one that is consistent with my own account of justice). In my proposed approach to the money, the supply of it would be truly exogenously determined: No person, group, organization, or institution would have the means or the opportunity to alter the size of the money supply. Output would in turn be determined by that exogenous variable.

Again, the website is www.ajustsolution.com.

2

i dont get it. what are you on about?

3

‘It [ Capitalism ] is inherently unstable, and has always been dependent on governments and central banks to keep it from collapsing in on itself, which has in turn created a countervailing tendency towards inflation’

I’m sorry I only got that far in your work.

4

Welcome to Mises.org.

I skimmed your essay. I think you should perhaps take some time to bone up on Austrian positions about money, there is a great article from Menger on the front of the site today talking about the origins of money.

Every couple of months someone comes here with a “plan” for a “better” fiat money system, and almost always, they completely miss the point.

Then it is not market money.

We want the market to determine what is money, and if you insist it is one form of money, even if measured exogenously, then it is by definition fiat, which means it is by definition arbitrary.

A re-assessment of your first premises about money, perhaps starting with Menger, is in order.

5

What could anyone possibly say to that? Terribly sorry, but some effort on your part to read and understand a new idea is required. Perhaps focusing on what would be accomplished would help: stability, no involuntrary unemployment or poverty, yet no limit on how much income one could earn or how much property one could acquire, and no taxes–for starters. Open your mind a little.

6

Are you talking to Liberty or me?

7

Well, we are open to voluntary systems of money… so that if people only used fiat money if they agreed to, it would be legitimate both practically and morally. Though you are right that the gold debate is a little stale… most of us support using whatever currency would arise on the free market. It could be gold, silver, fiat money, poetry. Whatever. It will work so long as there is no monopoly power to keep everyone stuck on it.

But there is always a way around fiat money, even if you are forced to use it for actual transactions, which is to convert your fiat-money-assets into other liquid assets. Currently, only poor people keep all/most of their wealth in the fiat USD; everyone else converts their worthless cash into stocks/commodities/etc, and only converts back to fiat money when they need to make a transaction. So its almost as if fiat money is something only very poor people have to deal with, and anyone else can just circumvent it.

Things like inflation don’t really matter in free market money, because no one would ever choose a money supply that grew 10%/year and had no intrinsic value. I think its reasonable to assume that if there were competitive free market currency might be a combination of gold/oil/etc.

8

No intrinsic value?

9

The article smacks of central planning. The reasoning is flawed. I reject the premise that capitalism has the flaws indicated. The concept of “real justice” as presented has many unfounded assertions, and I disagree with the conclusions.

The so-called Flaws of Capitalism…

Assertion: Capitalism is unstable

Failure is a part of the free market. Government intervention is the primary cause of most failures under the current system, and turns small corrections into major problems.

Assertion: Involuntary unemployment is bad

Involuntary unemployment is a market correction on labor, which requires the individual to grow.

Assertion: Capitalism produces poverty

Quite the opposite is true. Free market capitalism enables all to share the benefits at a much lower cost than any other system.

Assertion: Capitalism is environmentally unsustainable

Utter nonsense - please provide your proof. Even if this assertion were true, capitalism does not require ever-expanding resources as the author suggests.

Underdevelopment of Capitalism in the World:

This assumes all nations being equal (like the common Austrian economist phrase: “all things being equal”). All things are not equal. All nations are not equal. Most importantly, all nations are not equal in terms of liberty. More precisely, the right to property, which is paramount. The right of property relates directly to capital, and thus capitalism. This is not a flaw in capitalism, it’s a flaw in governments.

Suggestion:

Why not actually try free market capitalism before declaring the need to change it? If you meant to say the U.S. economic system, which is not a free market capitalist system, then I can see where you are coming from. Of course, your recommendation is for even more socialism and less capitalism. Your concept of “real justice” further undermines your argument, especially to most libertarians - even minarchists.

Funny line:

“The ancient Greek city-states had such homogeneous cultures that every citizen in the community easily shared the same ideals—and anyone who seriously didn’t was invited to leave.”

  • Ever hear of Athens and Sparta? Two city-states that had a “really good” relationship…
  • Socrates? Ah, the taste of hemlock…

This wasn’t homogeneity, it was majority rule at the expense of the minority. It demonstrated the significant flaws with democracy, something you seem to hold as sacred based on your position.

10

I don’t see how more open minded anyone could get than accepting the market as the arbiter of what is acceptable. I am relinquishing any hold I claim on values, on outcomes, on my desires, and saying what is voluntarily chosen, will by process be correct and beneficial. I don’t even purport to know what that is, because if we knew market outcomes, then we could have socialism. The idea of a superior universal system is one that relies on a static, centralized idea.

That can all be accomplished with market money. With none of the consent issues of fiat. I don’t like to argue outcomes, or ends justify the means but the market can do everything the state can do except use aggressive force. So the only thing someone can bring to a discussion about fiat money vs. market money is that the use of aggression makes fiat money better by forcing everyone to use it against their will and perception of their own interest.

If that is true, then we’re back to arguing for a command system.

As I said, there are people who show up here every few months with a new monetary scheme that will solve all problems. But the truth of the matter is, unless the market accepts it freely where alternatives are present, then we really can’t make any claims as to its superiority. Oh sure individually we can cheerlead for certain ideas but if they don’t catch on without guns and threats, then they might not quite be all that and a bag of chips.

11

I scanned the article. The first problem is that you do not understand what capitalism or socialism is. The second problem is that your “solution” to the problem of fiat money is simply a compounding of the root problem with fiat money… coercive, state-guided, central economic planning. Your proposal is collectivist, not capitalist. You might think that your central plan will work where all the others have failed but you are wrong and Austrian economics can help show you the way to understanding why you are wrong. Please read this, it contains (almost) everything you need to understand why you should rip up your pet theory and go back to the drawing board if you, in fact, care about human welfare as you claim. All economic “systems”, except capitalism, are fundamentally anti-human. Whatever you do, don’t stop seeking the truth!

Clayton -

12

Just noticing that there are no citations in the article. Did any research take place? Did you make some attempt at noting previous similar ideas?

13

In a market economy, people qua producers use market prices of scarce resources to optimize allocation of those resources for the best servicing of themselves qua consumers. Wages are the price of the scarce resource known as labor. In your proposed economy, in which wages for “common labor” are abolished, how would people qua producers know how to best allocate labor?

14

Whoah! You come onto this board with two posts and then proceed to tell us that we need to extend some effort to understand your idea? Have you read up on anything about Austrian economics?

Most of us have already considered Socialism/Keynesian economics quite a bit. However, it is my experience that few people besides us have studied Austrian economics. How much effort have you put forth to understand Austrian economics?

15

I realize that I interjected a foreign idea into a community that is dedicated to a particular approach to economics. My intent wan’t to suggest that Austrian econmics is wrongheaded, only that this is another approach to the econmy that would accomplish certain goals that are consistent with libertarian thought, such as ending any reason/excuse for governments and central banks to ‘manage’ the economy, as well as ending any reason/excuse for transfer payments of any kind, while ending taxation altogether. All of that could be accomplished without having to defeat political liberalism because, at the same time, there would be no involuntary unemployment or poverty and a better chance, I’m saying, for environmental sustainability. Even if one doesn’t think those things are problems, doing away with them would hardly make the world a worse place. Perhaps for some people the only real goal is the defeat of political liberalism. At any rate, no onewho has responded took the time even to read a relatively brief essay, much less attempt to understand the full implications of the proposed change to the economy before arrogantly brushing it aside and even personally insulting me. Surely some people in this community can do better than that.

16

I just re-read this thread twice. I didn’t spot a single insult. Could you point out where the insult was?

It’s not a foreign idea however. It is an idea which isn’t economic, it is political.

It is important to understand why those are goals of libertarianism in order to fashion an appropriate solution. The reason for rejecting state involvement, is to get away from the political means, and closer to the market means. If we’re just applying the political means differently for a slightly different result (which is debatable how much of a change it will be) then we’re not really making libertarian gains.

It’s not brief though. It is very, very wordy. If you could generate an 800 or 1000 word concise breakdown of the mechanics of your system, it would be much easier to digest.

Also, please see Lilburne’s question. It’s an important one.

17

Well economics is a deductive a priori science. If you start off with misconceptions about the market place then everything falls apart. You have to have a solid foundation such as the action axiom.

Here is a basic work that I think will help you to understand how economic theory works. It is a simple to understand text yet really profound.

Introduction to Economic Reasoning by David Gordon

18

Stephen,

Your ideas are remarkably similar to those of C.H. Douglas. He came up with social credit theory: http://en.wikipedia.org/wiki/Social_Credit

His theory is one of socialism. The system you propose in your essay isn’t capitalism, it’s socialism.

This statement is wrong. I tried reading through more of the essay, but so many falsehoods are put forth as facts. I can only take that so much before I have to stop reading it.

By paying everyone the same in some scheme similar to Douglas’ national dividend is to manage part of the economy. By your definition, that is un-libertarian.

The environment is a resource. The market will allow society to sustain it’s condition even in the face of dwindling resources. The market allows for more efficient and productive means of production to emerge. These new ways that will be revealed by the market will be the best way forward in guaranteeing environmental sustainability. Free individuals absent the state don’t make the environment unsustainable. Activities of the state result in the unsustainability of the environment.

I read it, and knew the implications. The price mechanism for labor would be crippled if people were to continue working as they were. People would then take occupations that were easy, seeing as everyone was paid the same. That is if they were forced to work. If they weren’t forced to work, they just wouldn’t work, and would look to gain in the black market (ie. free market)

It’s because these are crackpot schemes we’ve seen before. I didn’t come onto this site with my crazy schemes and tell people that I was right, nor did I demand that people read any other things that I wrote. I read the introductory material here and followed the discussions before getting involved in any of these discussions.

It would have been easier for you, had you just asked “can’t we just pay everyone the same regardless of whether they work or not?” and left the body of your message at that. Instead, you wanted us to read your essay which doesn’t draw from any great works, and it clearly shows that there is a lack of research backing the work, and a lack of understanding of economics on your part.

From your site:

I call bullshit.

19

Again, have you read any of the Austrian works, by people with well established roots in economic theory and recognized as experts in the subject? If not, then how can you expect us to read something, using some of the precious little time we have on this planet, that was written by some author with unknown credentials? Something, by the way, that has no references.

20

I truly hope you do not take what I am to say the wrong way, because I really hope you will stay, ask questions, and genuinely learn from this community and the wonderful resources at mises.org. The idea that you are failing to grasp is that your proposal is not “another approach” but merely a repackaging of the same fallacies and solutions to non-existent and even strawman interpretations of capitalism that have been demolished many times over. It’s not that we are arrogantly brushing your idea off out of a sense of superiority or closed-mindedness, but it is rather that most people here possess an economic understanding that enables them to recognize when such fallacies in logic crop up. Based on your article, I sense in you a genuine willingness to overcome some of the economic problems that we have in our society today. Many here share your concerns. The best advice I can offer you is to seek out knowledge and learn about Austrian economics, so that you may understand where we are coming from with our criticisms. I also leave you with this bit of wisdom; do not allow your own personal investment into an idea to preclude you from inquiring about the knowledge of others, and do not be personally hurt if your ideas are rejected by others. Try to understand the reasons why others reject these ideas, and do not be afraid to relegate them to the trash bin when a better explanation presents itself.

Welcome to mises.org. I hope you find your stay fruitful and stimulating.