Online debate with schoolmate in Govt. class

Economics Economics Questions
1

In my govt. class we post on a wiki type page to get ideas out and talk about things, its pretty neat how my teacher has set everything up.

However currently I am in a debate with a person in my class about Capitalism and its usefulness. I think that i’ve been doing pretty well so far but i’ve run into a bit of a wall. She keeps conflating feudalism with Capitalism and for some reason cannot see the direct change in the standard of living thanks to individual enterprise. Here is her last post so far, I want to convince her to love Capitalism.

"Capitalism and Communism share a flaw: although they work amazingly well on paper, in practice they break. Neither economic theory took into account human nature. Neither greed, nor any other emotion was addressed in these theories. Only taken into account were the facts of the distribution of wealth, the ownership of property, and the mechanics of how the economy should be. We know the story of why Communism failed. But Capitalism never broke, you say? Yeah, it kind of did. The Gilded Age, although amazing for those who made it to the top such as Carnegie, Rockefeller, and Morgan, really really sucked for workers. To promote unregulated capitalism is to promote the same basic practices as feudalism and serfdom, and to condemn many to the lives of misery. What can you attribute this decrease in price? Or more correctly, to whom might you address your thanks? During the Gilded Age, the fortunes of a few select men were built upon the frustrated toiling of millions of people unrepresented by strong unions. This trend is continued today, as it is in effect being relived as American business men inflict the same problems in other countries.

You say no one looses in this process- there’s only something to gain. And in theory, yes, you would be perfectly correct. However, the comparative wealth of the workers and the profiteers is glaringly disgusting. They make their money by keeping two things in mind. First, by keeping the expenses as low as they can finagle, which is to say by paying their workers as little as possible and by using the lowest quality materials they can, and second by selling the goods at the highest price they can. Walmart has nearly cornered the market on cheapest goods by following just such a business plan. They added a twist- keep the profits high by using cheap labour and materials, but keep the selling cost low in order to force their competitors into either going out of business or into copying their style of marketing. This is how Walmart has managed to corner the market on many consumer goods. Do you remember when our Walmart used to carry cloth? Well they did it until just after they forced the cloth stores to go out of business, and then they quit carrying it. In a way, the American workers were saved from this monstrosity sucking out our wealth- but only because of laws regulating capitalism in America. Minimum wage laws forces prices of goods produced in America up, however minimum wage is a barely-living wage- one I would be loath to be on. And I would loathe it, but that’s another story.

The current economic system is not simply comprised of individuals and their interactions, ours today is a global economic system. To claim that an individual affects the market is ridiculous. But a group of individuals will have an effect. It’s like the sampling in experiments- only with a large group are the results meaningful. Only with a large group of consumers can money be made, and trends be mapped. Me buying a ham sandwich does not necessarily entail a soon rise in the prices of ham sandwiches, but were I to get a billion ham sandwiches, maybe it would. Plus, as employers buy, sell, and employ in bulk, an employer constitutes a larger force than a single interaction between individuals would.

That’s what we’re arguing about, right?"

I want to try to point out any fallacies in her argument but i’m afraid they might go over her head.

Any help would be great.

2

Some thoughts:

  1. Compare the standard of living in 1910 compared to 1810 - or 1710! Despite a HUGE and historically unprecedented population increase in the most capitalistic countries, the standard of living is much, much higher. Not only did the new free market allow so many people who would have otherwise died to actually live, it raised the standard of living of the vast majority of the population. To compare this standard of living to that whcih existed under feudalism is absolutely ridiculous. Maybe have a look at Hazlitt’s ‘The Conquest of Poverty’: http://mises.org/resources/3086/The-Conquest-of-Poverty

  2. The income of employers as a % of GDP has stayed pretty much the same since the record begins.

  3. The Walmart section shows that the author doesn’t care what is most demanded by consumers. The consumer only cares for lowest price ceteris paribus. If Walmart can provide this, it will be successful. What’s the big deal?

  4. The ‘current economic system’ IS only comprised of individuals. Ask them to give an example of human action that is not undertaken by an individual. There is none. That a single individual may not effect price greatly is irrelevant to this point.

3

Capitalism and Communism share a flaw: although they work amazingly well on paper

Don’t let her get away with this. Tons of people say it while it simply isn’t true: Communism/socialism has been disproved numerous times! It does not look good on paper unless you simply look at the pretty parchment and not read the actual words. This is a typical rhetorical device: Hype up something and then say that simply, it’s not like that. Inflating your opponent’s argument and then rejecting it lightly with an air of superiority is super effective. A few others on here can better link you to resources with supporting evidence.

Neither economic theory took into account human nature. Neither greed, nor any other emotion was addressed in these theories

Again, false. Capitalism 100% takes human nature into account.

The Gilded Age, although amazing for those who made it to the top such as Carnegie, Rockefeller, and Morgan, really really sucked for workers.

Oh, that’s nice, she’s heard some vague idea mentioned in her history book and repeats it without looking up the facts herself.

Here is some analysis on the period:

On the topic of unions and capitalism’s “failure”:

  • Government used Sherman Antitrust to bust up unions, preventing capitalism from “fixing” itself. Unions were initially capitalistic constructs, with the leaders wanting to buy the means of production, not take them forcefully (see leader of Knights of Labor). The rapid rise of unions alongside big business in the US shows just how quickly a market can respond ot its own “ills.” The government, however, stopped this natural process. When looking to who has weakened customers and employees most, look to government. Like a domesticated animal used to ready food, the teeth and claws fade away.

On “predatory pricing”:

https://forum.freecapitalists.org/t/big-business-will-dominate-the-free-market/18749/9

paying their workers as little as possible and by using the lowest quality materials they can

And hey, if you don’t like their job or product, you don’t have to buy it!

To prove how absurd their logic is, consider a market. Suddenly, company X comes along. Company X offers low wages and low quality goods. Suddenly, everyone becomes their slave and must buy crappy goods!

Do you remember when our Walmart used to carry cloth? Well they did it until just after they forced the cloth stores to go out of business, and then they quit carrying it.

Oh man, now they’re selling cloth at such high - oh wait. They’re not selling it any more. Why would they “steal” a market and then drop it? It’s not like they enjoy simply wreaking havoc on people who buy cloth…

They added a twist- keep the profits high by using cheap labour and materials, but keep the selling cost low in order to force their competitors into either going out of business or into copying their style of marketing.

Why the hell are the consumers buying from them? In fact, I’d say it’s the consumers who “forced” the other businesses out of business. The consumers chose not to give money to others. Consumers aren’t machines which only take prices as input and produce cash as output. They have money needs, emotional needs, personal morals, etc. If you want to “blame” someone for kicking out competition, blame consumers. If Walmart undercuts prices, it doesn’t mean that everyone must automatically buy from them. Really, business could go on as usual if we decide to ignore the price decrease at all! Simply hand over an extra $2 per item bought. Why don’t you do that?

But maybe they argue this is a bit simplistic. Then let’s apply some numbers. In a democracy, you need 51% of the people behind your policy for it to get passed (theoretically). If 51% of people hate Walmart, they can decide to not shop at Walmart. Thus, they drop its market share by 51%! And it’s not like the other 49% simply love Walmart and want it to be a monopoly. Many of them simply don’t want the government to mess with private business. They could also actually be against Walmart.

For an example of capitalism at work, see Netflix’s recent price rise. Customers responded, and Netflix realized its mistake. OMG! How could it be?

Minimum wage laws forces prices of goods produced in America up, however minimum wage is a barely-living wage- one I would be loath to be on

If we didn’t have minimum wage goods would be cheaper… Plus, again, don’t wanna work for them? Don’t! Labor also follows supply and demand. When the supply decreases, people pay higher prices!

Me buying a ham sandwich does not necessarily entail a soon rise in the prices of ham sandwiches

Haha! Railing against big corporations and then assuming they’re all we have! This example she gives assumes she is buying it from, say, Walmart. Indeed, there you would not have much of an effect. But why not buy your sandwich at a family store? There you actually could affect prices. She accepts corporations as the only entity while simultaneously rejecting them.

I must reiterate: consumers suck nowadays because they’re sheep stamped with a USDA seal! If I put a man in front of a TV and give him chips and soda for ten years and then I ask him to get a job and run a mile in under 8 minutes he would think I’m the most insane person ever. But he doesn’t realize that letting me put him on that couch has caused his disability. Not the job or the 1 mile!

4

<<<Capitalism and Communism share a flaw: although they work amazingly well on paper, in practice they break. Neither economic theory took into account human nature. Neither greed, nor any other emotion was addressed in these theories. Only taken into account were the facts of the distribution of wealth, the ownership of property, and the mechanics of how the economy should be.<<<

On the contrary, a free market is the only system that is organically designed for humans as they are, not as some ivory tower intellectual believes the should be. In any planned economy, some people are given authority over the economic system and expected to be selfless, to eschew greed and self-interest, and to make decisions that benefit everyone instead of a few people. The free market simply allows free human beings to freely interact without violence. And without the threat of violence, the only way for greedy people to make money is to sell people things they want at a price they can afford. It is called voluntary exchange, or mutually beneficial interaction, or Liberty.

<<<We know the story of why Communism failed. But Capitalism never broke, you say? Yeah, it kind of did. The Gilded Age, although amazing for those who made it to the top such as Carnegie, Rockefeller, and Morgan, really really sucked for workers. To promote unregulated capitalism is to promote the same basic practices as feudalism and serfdom, and to condemn many to the lives of misery. What can you attribute this decrease in price? Or more correctly, to whom might you address your thanks? During the Gilded Age, the fortunes of a few select men were built upon the frustrated toiling of millions of people unrepresented by strong unions. This trend is continued today, as it is in effect being relived as American business men inflict the same problems in other countries.<<<

In the gilded age, as today, the state was quite active in supporting the interests of some to the detriment of others. Many people know about the labor wars, but fewer know that the government tended to side with the ownership class, and in some cases federal troops were deployed and ordered to fire on striking workers. That is certainly deplorable, but it is as far from a free market as you can get.

<<<You say no one looses in this process- there’s only something to gain. And in theory, yes, you would be perfectly correct. However, the comparative wealth of the workers and the profiteers is glaringly disgusting. They make their money by keeping two things in mind. First, by keeping the expenses as low as they can finagle, which is to say by paying their workers as little as possible and by using the lowest quality materials they can, and second by selling the goods at the highest price they can. Walmart has nearly cornered the market on cheapest goods by following just such a business plan. They added a twist- keep the profits high by using cheap labour and materials, but keep the selling cost low in order to force their competitors into either going out of business or into copying their style of marketing. This is how Walmart has managed to corner the market on many consumer goods. Do you remember when our Walmart used to carry cloth? Well they did it until just after they forced the cloth stores to go out of business, and then they quit carrying it. In a way, the American workers were saved from this monstrosity sucking out our wealth- but only because of laws regulating capitalism in America. Minimum wage laws forces prices of goods produced in America up, however minimum wage is a barely-living wage- one I would be loath to be on. And I would loathe it, but that’s another story.<<<

Ah yes, the argument from jealousy. “look at how much money those guys have!” as if the sheer amount of wealth SIMPLY MUST mean that someone got ripped off. This betrays unfamiliarity with industry and lack of critical thinking. It takes skill to make money. Obviously, people who are skilled at making money are going to make more money than those who are not. There have been rich and poor in every country and time, so the existence of poverty at some time and place cannot be blamed on capitalism. Rather, one should observe than in a true capitalist society, the only way to become rich is to provide a great deal of value to a considerable amount of consumers. And think how many trillions of times an American has purchased something they needed at wal-mart, who is able to offer a lower price than competitors because of economy of scale.

<<<The current economic system is not simply comprised of individuals and their interactions, ours today is a global economic system. To claim that an individual affects the market is ridiculous. But a group of individuals will have an effect. It’s like the sampling in experiments- only with a large group are the results meaningful. Only with a large group of consumers can money be made, and trends be mapped. Me buying a ham sandwich does not necessarily entail a soon rise in the prices of ham sandwiches, but were I to get a billion ham sandwiches, maybe it would. Plus, as employers buy, sell, and employ in bulk, an employer constitutes a larger force than a single interaction between individuals would.<<<

In truth, there is nothing in the economy but goods and individuals. There happen to be a great many individuals, and the quantity of goods is hard to abstractly define. It surely extends as far as the limits of the human imagination. In such a complex society, with all this wealth, the free market is the only way to process the information efficiently, because individuals know what they need. When your belly rumbles, it is you who needs to eat, not your neighbor.

Feel free to use any of that without accreditation. Have fun tearing your opponent’s pathetic worldview to shreds.

5

I feel for you. She’s burried so deep in illogical, irrational, and emotional dogma that only experts would have any chance of digging her out. I would only agree to debate her after she had: (1) read Hazlitt’s Economics in One Lesson, (2) presented his arguments and (3) presented a critique of them. Barring that, I’m afraid, the prognosis for your debate is to turn into an emotional trainwreck.

6

This is a common equivalence made by left-leaning types. With the abject failure of the “communist experiment” in Soviet Russia, the new narrative is that America is the corresponding failure of the “capitalist experiment.” Such an equivalence is absurd on its face and unknowable, irrelevant.

Well, there’s really nothing to rebut here. This is all highly speculative and unprovable historical revisionism. Even if she was right, she could never prove it, so it’s a futile line of argumentation.

Yeah, I think she’s marginalized her entire argument by implying that minimum wage helps poor workers. It is a well-established fact both “on paper” and through empirical observation that the minimum wage - far from helping the poor - hurts the poor more than anybody else.

Yes, the medieval system was not global. rolling-eyes Please ask her to specify what is uniquely global about today’s “system”.

I can discern no specific claims here to rebut except the above ridiculous and speculative assertions about history.

Clayton -

7

This person is taking what they have absorbed via osmosis, taking it as truth, and trying to run with it to logical conclusions. She obviously has never looked at the arguments for capitalism and the rebuttals to her claims. Does she think Friedman, Sowell, Rothbard, Hazlitt, Mises, Hayek, etc. has never heard nor attempted to rebut these arguments throughout their intellectual careers? Does she think she is the first person to have ever come up with these “refutations”?

8

"Capitalism and Communism share a flaw: although they work amazingly well on paper, in practice they break. Neither economic theory took into account human nature. Neither greed, nor any other emotion was addressed in these theories.”
-Adam Smith wealth of nations 1776 showed that greed motivates people to serve others in and fee market.

“The Gilded Age, …really really sucked for workers.”
-Standard of living rose much faster under capitalism than any other system.
Look at the data on the wealth & health of nations since 1800. www.bit.ly/cVMWJ4

“To promote unregulated capitalism is to promote the same basic practices as feudalism and serfdom, and to condemn many to the lives of misery.”
-The countries with the freest markets happen to be the wealthiest countries as well. http://www.heritage.org/index/topten

-Socialism was founded by the Saint-Simonians that were a reacting against the industrial revolution and capitalism because of the disruption it brought to the old feudal order. The industrial revolution brought opportunity for peasants to escape from serfdom and distroied the feudal order. The socialists were attempting to reinstate an order to take the place of feudalism. To blame capitalism for serfdom and misery, is to blame it for the things it ended.

“What can you attribute this decrease in price? Or more correctly, to whom might you address your thanks? During the Gilded Age, the fortunes of a few select men were built upon the frustrated toiling of millions of people unrepresented by strong unions. This trend is continued today, as it is in effect being relived as American business men inflict the same problems in other countries.”

“However, the comparative wealth of the workers and the profiteers is glaringly disgusting.”

-In America the rich get richer, and the poor get richer. http://youtu.be/vDhcqua3_W8

“They make their money by.. by keeping the expenses as low…and second by selling the goods at the highest price they can. Walmart has nearly cornered the market… on cheapest goods.”
-Is it bad to sell at a high price or a low price. If we condemn the capitalism for high prices and low prices then any other system with be condemned as well by the same criteria.

“Do you remember when our Walmart used to carry cloth?”
-The Walmart I go to still sells cloth. There may not be a market for cloth in your neighborhood.

“The American workers were saved from this monstrosity sucking out our wealth- but only because of laws regulating capitalism in America. Minimum wage laws forces prices of goods produced in America up, however minimum wage is a barely-living wage- one I would be loath to be on. And I would loathe it, but that’s another story.”
-It is the high cost of regulation and prevents factories from being built in the US.
http://news.cnet.com/8301-13578_3-20014563-38.html

“To claim that an individual affects the market is ridiculous.”
-The market responds to individuals better than government does. Just compare customer service between the two.

“..employers buy, sell, and employ in bulk, an employer constitutes a larger force than a single interaction between individuals would.”
-Marx argued that capitalism would immiserate the workers, so the revolution was inevitable. This had to be revised later by socialists because it never happened. The proletariat kept getting richer. Then they changed the argument to the wealth gap. That is, it is not absolute wealth that matters. So what if the poor are richer that before. The rich are even more richer than the poor. Because the rich are getting richer faster than the poor, then the poor feel poorer even though they are richer than before.

9

One thing that I’ve noticed everyone here seems to be doing is conceding the notion that capitalism is some kind of system written down on paper. Capitalism is basically a word to describe a market process that occurs when individual rights are respected. This was not “designed” by anyone.

I think your first task needs to be to actually define the terms you’re using in this debate. To say something like “capitalism doesn’t take human nature and greed into account”, just oozes ignorance. You might as well just say human nature doesn’t take human nature into account. Again, human beings have a general concept of private property and a wish to avoid conflict. They are also self-interested, and tend to do things because they gain satisfaction from doing them…more so than they would by not doing them. (Otherwise, they wouldn’t do them.)

Capitalism is not some “theory”…it is a description of what takes place when self-interested individuals come together and, while respecting individual rights (i.e. property rights…including your physical body), interact to fulfill their desires. To say that it has “forgotten” something, or “left something out” or hasn’t “taken something into account” is just asinine. It’s like saying “the concept of flying doesn’t take into account the laws of aerodynamics”. Flying is the laws of aerodynamics. Capitalism is human nature.

The only way anyone can say otherwise is if they have a faulty definition of the word.

See how she responds to this:

And this:

In A Theory of Socialism and Capitalism Hoppe asserts that there are only two possible archetypes in economic affairs: socialism and capitalism, and that all systems are combinations of those two types. Which, if you really break it down, is true…you either have freedom or you don’t. Of course, there are varying degrees of freedom, but all that means is there are different levels to which freedom can be oppressed.

In his “argumentation ethics”, Hoppe also breaks down the notion of human nature, and the reason a free society is the only logical one…hence, it is not by someone’s design, but rather it is what emerges when logic and reason are applied to the general human desire to (a) fulfill wants, and (b) avoid conflict. He even mentions how small children have a concept of private property and homesteading…They have an innate understanding of “I had this toy first” and they resist and have a natural feeling of discontent and “wrongness” when another child comes along and simply takes it from them.

While there are plenty of objections to Hoppe’s argumentation ethics, it offers a pretty decent foundation…See here. I know for a fact he mentions the children example in the “Law and Economics” lecture from 2005.

10

Take away her clothes, her car, her computer, anything that she didn’t transform herself from raw materials. Tell her that she may barter with individuals only so long as they made what they are trading from raw materials or simple machines which require minimal capital accumalation. She can get food from the farmers market, but not if the farmers drove it there. She can’t use her modern kitchen to cook, hell her whole house is made with factory produced parts.

Who cares what she says, I’m sure she loves capitalism already.

11

+1

Very eloquently stated.

Clayton -

12

Sounds familiar. I may be wrong, but I feel like she watched one of Zeitgeists. It is hard to imagine how many people were influenced by anticapitalist rhetorics of these movies.

Several months ago I had a week long debate with my former classmate, who is now a fan of Project Venera. It is horrible how much time I spent but didn’t convince him of anything. He never actually rebutted arguments that I gave, but threw out new and new socialist cliches. Finally I realized that we spoke different languages, so I suggested him to study a little economics. He replied (now I understand it was Ad Hominem argument) that I opposed socialist fantasy aka Project Venera because I studied (sic!) economics.

At last I begged him to read “Economics in one lesson” and “Road to serfdom”. Don’t think that he actually did it..

Conclusion: if your opponent does not possess minimal knowledge of the subject of a debate, it is useless to argue with him.

13

The problem with socialism is that we haven’t figured out how to do it properly.

14

Thank you JOhn James. I’ve been reading Hayek’s Law, Liberty, and Legislation. He goes into why it is a fallacy to think of capitalism as a “system” by using the analogy of language. No one invented language, it spontaneously arose over time.

15

The “man of system” from Adam Smith’s Theory of Moral Sentiments

“The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.”

16

+1

Beautifully simple, thus powerful.

17

No one invented language, it spontaneously arose over time.

http://en.wikipedia.org/wiki/Lojban

Maybe the original ones, but some are invented.

18

Oh excuse him. Perhaps he should have just said “No one invented a language that anyone uses”.

(higher quality, full version here)

19

Language is, by definition, something used by people. No one has ever invented a natural language because by definition no one can invent a natural language.

In a lecture by Steven Pinker he mentions lingual research that found that children raised without the benefit of speaking to adults who already know a language will invent their own rudimentary language de novo. So, we have to separate between the innate human capacity for language which is powerful enough that it is capable of simply inventing a language as-needed and natural languages per se which have emerged through use in day-to-day speech. The languages themselves are accretions of the innate lingual capacity of humans… the best innovations in language survive and spread while klunky turns of speech wither and die out if they ever even got off the ground to begin with. Nobody says “that’s the bee’s knees” anymore but the word “cool” is clearly an enduring idiom. As Outkast recently sang, “Alright now fellas, ‘YEAH!’ Now what’s cooler than bein’ cool? ‘ICE COLD!’ I can’t hear ya’ I say what’s cooler than bein’ cool? ‘ICE COOOOOOOOLD!’”

To reiterate: Humans can invent languages (formal mathematics or computer programming are invented languages) but no one has invented a natural language because what it means to be a natural language is, by definition, not inventable.

Clayton -

20

Oh alright, I was arguing a technicality, sorry. That is a nice video by the way. I’d like to get together a longer list of “systems” which have spontaneous order.