Why capitalism?

The problem is that everybody is having strong opinions about capitalism without even considering that it is not a "thing" but a category based on its definition, and there are multiple definitions of it.

The anti-capitalist, Marxist definition largely rests on private property (somehow) meaning you own more stuff you work with. Other people don't own the stuff they need to work with, so they need to "sell out" and become your employees. A typically capitalist company for a Marxist would be one guy owning 100 taxicabs and hiring 100 (or rather 300, in 3 shifts) drivers. Here the drivers, not having money to buy their own taxi cabs, must rent themselves out as employees. This is partially exploitative. Often Marxists propose it is not coming from free-market outcomes, but often it is more like some folks rob people with violence e.g. rob natives of their land then hire them when they have no other way of making a living. Another important aspect of a Marxist theory is alienation. The way I understand it, if the driver owns his taxi cab, he uses his own value system to work. Sometimes he is driven by the profit motive. Sometimes he gives rides to friends for free. When he is an employee, he runs the value system of the employer. This is IMHO what is understood as alienation.

I don't need to explain, hopefully, that pro-capitalist libertarians understand it completely differently. It is not about the size of your property, but a general legal framework for propertarian, exhcange-based relations.

The "wonderful part" is that there are setups that are capitalist for Marxists, but socialist for libertarians: such as Soviet type state capitalism. (Lenin was open about it, he said they must do state capitalism before they can go to socialism.) There are also setups that are non-capitalist for Marxists but capitalist for libertarians: such as homesteader farms, each working on his own, not employing employees.

Try to get this conundrum. Everybody thinks they know what capitalism is. They actually only know what their side of the debate defines as capitalism. One side defines it as a GENERAL propertarian legal framework, and the other side as a SPECIFIC setup where some own productive resource, some not, and the first employ the rest.

This is why it is such a huge mind-killer for about 150 years now. It is worse than is-Pluto-a-planet, it is more like are-planets-bad, without even knowing what we understand under planets.

It is really crappy if you think about it, how people can misunderstand each other. The worst part is this. People on the Marxist side tend to think libertarian, propertarian legal frameworks (so the other sides definition of capitalism) slide towards huge corporations and widespread employment (instead of working on your own gig) , they consistently tend to ignore the surprising survivability of self-employment and small business. If we would take Marx seriously, the small business owner petite bourgeoisie should have disappeared by 1900 or so. Instead, it still thrives. They think all private property tends towards this type of concentrated, corporate, exploitative type. On the other hand, libertarians have a tendency to ignore employment and the proletariat at that. Libertarian economics textbooks explain the basic theory on how the shoemaker barters shoes with the baker. The problem is the term "baker", is it someone who bakes, or someone who owns a bakery? To libertarians the distance between these two are small. They tend to ignore that such a thing as working class exists, with people who never break out from working for others for generations on and on.

So both sides tend to ignore phenomena that fits in the other sides definition. Marxists ignore self-employment and startups, libertarians ignore the perpetual working class who will never open as startup and depend on others for giving them jobs.

For information, there is a bunch of people called Distribustists who understand both sides. They may be wrong - they are very much a bunch of romantic Catholics - but at least understand both sides, while the sides themselves tend to talk past each other. Here is a decent series, third and fourth article. Again the point is not whether this is right, but the point is to show how both sides misunderstand each other, and these guys understand both sides. They get it property and market transactions are very important - but they also get that when lots of people (proletarians) have no productive property, their negotiation position will be low. They seem to be mostly following Adam Smith here.

You can 3D print plastic. You can't 3D print computer chips. There are economies of scale with creating computer chips. The same is true for creating batteries. Tesla builds it's gigafactory because the huge volume allows cheaper production.

If I look over the items in my flat no one that can be 3D printed by a makerbot springs out.

Owning a solar rooftop means owning capital that produces a return. It doesn't make that energy free. If energy costs would be near zero I would use much more energy. Having a market that sets prices on energy use prevents people from wasting it.

The question presupposes that capitalism is the only way we organize our society. That's far from the case.

Not every transaction of value happens the same way. When government tries to solve a problem it does it through huge bureaucratic hierarchies. If I ask a friend to help me move to another flat then I the default isn't monetary payment. When open source is distributed for free on the internet you have yet another framework for value exchange.

Our society mixes different systems of value transfer. Wikipedia doesn't work through market incentives and that's okay. It can assist alongside with Britannica. There's no need for either-or.

I used to view capitalism as an inherent part of the society we currently live in, with no real economic competition.

I think it's best to approach this by asking what capitalism is. I see it as a distributed computing resource allocation system.

That is:

1. Decision-making is decentralized. Each agent has private information and communicates with the market through 'prices.'

2. Actual decision-making / computing is going on; agents are choosing between alternatives, constructing portfolios, gathering information, and so on.

3. There are some scarce resources that could be used to satisfy multiple different desires, but there's not enough to satisfy all desires.

You can construct an alternative by flipping those descriptions. For example, rather than a decentralized system, you could have a centralized system. This is empirically worse off, because we don't have easily scalable centralized computing, and information transfer is hard. (If you've already got billions of biological computers running around, why not make use of them?)

A zero marginal cost society is one in which we can satisfy all desires, without ever having to face tradeoffs between those desires. While this could eventually be possible, it seems unlikely, and is more likely to be accomplished through editing our desires than editing our environment. What's more likely is that the sort of things that we consider costly will change.

For example, consider a moon colony where air has to be filtered, to process CO2 back into breathable O2. You either have a bottle exchange, pipe connection to a filtration facility, or pay for the cubic and wattage to have plants that do your filtration for you, but 'breathable air' is a thing you budget for and part of your utility costs. On Earth, breathable O2 is zero marginal cost, because there's so much of it lying around.

Water is only slightly more expensive--yes, bottled water isn't cheap, but tap water is two and a half gallons for a cent. (People in the US use about 80 gallons of water a day, or about 32 cents a day, but rare is the person who drinks over a gallon a day.) So water is 'minimal marginal cost'--people will typically turn a tap on without a second thought if they want some water, but people also only consume ~4 times their volume in water a day, rather than hundreds or millions of time their volume.

Food is again more expensive, but still cheap enough that it is rare (in the developed world) to not have enough to eat, and cheap enough for government programs to fund distribution programs with only mild taxation. Most don't think of food as being zero marginal cost; it's typically expensive enough to get mindshare along with the rest of the budget.

But suppose that everything physical becomes as cheap as water. You decide you want a cup of Earl Grey tea, hot, and so you 'turn on the tap' and there it is. You decide you want a motorcycle, and so you 'turn on the tap', and there it is. At that point, what is the scarce commodity that is wanted more than had?

Some obvious things come to mind: status, attention, time, and so on. Bits of information are already cheap enough to transfer that many websites generate elaborate content to attract eyeballs, because sometimes those eyeballs click on ads or buy t-shirts or donate money. We already live in a world where people make professional salaries by designing clothing for electronic avatars. Even in the world where everything physical is free, it seems that there will be things for 'capitalism' to operate on. (You can imagine the differences between a capitalist attention economy and a communist attention economy, for example.)

It seems unlikely to me that we will reach a point where the physical world is as cheap as water in the next several decades--I think that 3D printing will be roughly competitive with current manufacturing (factories can make a lot of things very cheaply, and precision 3D printing may be finicky enough to require factory-like conditions), and we already know that renewables aren't as cheap as non-renewable energy (that's why we're going to all the trouble of drilling that oil). If energy isn't zero marginal cost today, more of it coming from solar isn't going to make the costs any lower!

when you can get your goods, energy and communications for basically free, doesn't that undermine the whole capitalist system?

Goods that can be produced for zero marginal cost per copy but have a positive fixed/sunk cost (like software) pose a challenge for any economic system including capitalism because you need a way to pay for the fixed costs but you want to let anyone who gets any value from the good get it. But capitalism, I believe, offers to best hope in part because of capitalism's creativity. In the past advertising revenue was found to be a way to pay for the production of the zero marginal cost goods of television and radio shows. And Wikipedia, blogs, and open source software projects have arisen in the capitalist world.

Note there is a difference between price and cost. Even if costs=0 prices can, and sometimes should be positive.

Disclaimer: If I'm wrong about something, I appreciate corrections, but please don't be an asshole about them. I know myself not to understand economics very well.

When something is as ubiquitous, as pervasive, as well-supported, as institutionally-backed as capitalism, you have to make significantly better arguments against its use than the mere fact that it has some obvious inefficiencies in some branch of it. Capitalism can wreak ruin among large swathes of the world, for all people care about. That still wouldn't stop them for doing their damnedest to preserve the system.

As someone who's been working for a while at coming up with economically sane alternatives to capitalism, I'll do my best to share my understanding of why, as it were, "it's complicated".

One, capitalism is what emerges when an economy can make proper use of currency, and the state allows people to trade without monopolizing all economic activity within its territory. Wherever it is found, money obeys certain laws and trends, which have been codified into a fairly rigorous science called economics. In other words, you'd have to move beyond money and trade for capitalist economics not to apply. This is non-trivial. Take my word for it. I've dedicated a lot of brainpower to the matter and I have yet to find a factor as motivating as money that you can introduce into an economic system. Socialist states have attempted to run money economies on non-capitalist principles and got fucked over by economics -- the same economic laws which they rejected. It is far easier to invent capitalistic workarounds for disruptive technologies than to redesign the economic system of a country or of a planet.

Two, capitalism does not exist in a vacuum. It's not intellectually self-contained. You cannot uproot explicitly capitalistic ideas from people's minds, in ignorance of the implicit ideas they were founded on, and expect them not to grow back. This goes as deep as people's understanding of the idea of property or the necessity of trade. Take property, for instance. You can get a feeling of the fluidity of the concept by looking at the debates around intellectual property. Is piracy theft? Yes or no? In ye olde days, to steal something meant to forcefully and illegitimately transfer ownership from someone to yourself, depriving the rightful owner of his/her wealth. Piracy of digital products, however, does not deprive anyone of anything; you can make as many copies of something as your storage space allows, without anyone getting poorer; you only deprive some people (the author, the distributors) of potential wealth. With intellectual property, the concept of property gets redefined so as to allow capitalism to continue as normally. You could also take a look at the extremes of the ideological spectrum to see how they differ in their understanding of property. On the right side, you have the libertarians who say "taxation is theft". They draw the borders around the idea of property so as to include their gross income, as decided by the market forces, and view the state's claim to a share of that as illegitimate. On the left side you have those who say "(private) property is theft". They feel (not kidding here) entitled, as a class, to everything that came out of the hands of wage-workers, a.k.a. the proletariat, a.k.a. people who do not own other means of production than their own capacity for labour. When they speak of the revolution of the proletariat and the expropriation of the wealth of the bourgeoisie, they feel like they're taking back what was rightfully theirs from the start.

Or take trade. One of the most stupid... eh, I mean, frequently asked questions I get when I suggest the idea of a moneyless economy is, "but doesn't that mean going back to barter? How would you convince people to work for nothing?". It's a struggle to get people to simultaneously keep in their minds the ideas of working for nothing and of paying for nothing, and why, when taken together, they don't lead to the sort of disaster that they would if they were considered separately. With modern people, there's simply a trade-shaped hole in their minds. It's how they were raised to view an equitable acquisition of something -- as an exchange between two things of equal value.

These conceptualizations of the economic side of life are fundamental. They cannot be changed in a population within two or three generations, and they meaningfully impact the economic behaviour of people.

Three, it's quite the mistake for folks to focus so much on ordinary vanilla goods like food or water or various widgets, and to neglect the sorts of products that barely ever appear in non-capitalist economies -- the edge cases that prove the real challenges. You could be completely primitive and still not worry about the availability of food or clothing or shelter. This therefore has no important implications for capitalism. Consider instead other classes of goods or services. Benefiting from the time and skills of a good surgeon. Luxury goods. (Have you been around upper class people? It's one of those rare circles where the impact of prices over desirability deviates from ordinary intuitions -- goods get more desirable as they get expensive.) Exceedingly good service. Mercenary work. (It used to be a thing, you know.) The value of a good engineer. Basically everything that requires going that extra mile. There's no motivator quite like profit.

Four, people, and the powerful sort in particular, happen to very much like the status quo. For all the talk about eradicating poverty and income inequality, there's something that some people want, that you cannot get in a relatively egalitarian society: bargaining power. You cannot get a child who isn't starving to work in a sweatshop. You cannot have so much leverage against someone who can defend himself from your attacks. Without slaves, there are no masters. There are less cruel ways to talk about what I mean, as well: money is enmeshed in modern government, and states (whose income is overwhelmingly extractionary) demand for taxes to be paid in money. (After all, it would be inefficient for a government to demand payment in physical goods or in labour, for much the same reason as barter is inefficient.) Libertarians love to emphasize the antagonism between the government and the market, but in truth they're deeply interconnected, more so than they have opposing interests. The only category of people that do not directly have a vested interest in the preservation of capitalism comprises poor and powerless people, and even they may get used as cannon fodder if capitalism, when it eventually goes down, goes down in flames. (So they're indirectly interested in the general stability of the regime.)

Long story short, no, capitalism and the profit motive are not going anywhere, and no disruptive technology is going to change that. It doesn't matter how cheap basic goods become, or how easy everything is thanks to automation. If the maintenance of the system requires that producers tap into the endless bag of bullshit needs and jobs in order for us to still have something we call "value", then so be it. If you look at technology as some kind of way out of capitalism, ask yourself who produced the technology, and what their revenue is.

Capitalism is less truly an economic system and more truly an economic modeling language.

Natural fisheries versus farming provides an excellent illustration of this; if you followed the sames rules for "unregulated" natural fisheries (that is, anybody may catch any number of fish) in farming, whoever picked a vegetable would own it, and farming couldn't exist as it does today. But replace the fishery rules with the farming rules, and whether or not it is "capitalism" is determined wholly by the framing; if you charge for a limited number of "licenses" to people to take a certain number of fish, and you're "regulating", an "anti-capitalist" act, whereas if you sell "shares" in the natural fishery, again charging people to take a certain number of fish, and you're engaging in capitalism.

Likewise, "tax" people for property they "own", and you're being capitalistic. "Lease" people property the government "owns", and you're being anti-capitalistic.

Capitalism is just a way of framing the rules in terms of private ownership.

To demonstrate:

I propose a new system of non-transferable shares of our national resources owned by all members of the public through a national resource trust corporation; conversion of these resources, because of the opportunity cost involved, will involve paying a portion of the value of said resources into a national resource trust corporation. The national resource trust corporation will also oversee and enforce intellectual property rights for a percentage of the value of said intellectual property, to pay for enforcement and to compensate for the opportunity cost imposed. Dividends on the proceeds will be paid out to all shareholders.

What did I just propose? A "capitalistic" welfare system.

In it, the author states that we are in the midst of a third industrial revolution as a result of a new energy/production and communications matrix i.e. renewable energies, 3-D printing and the internet.

Even if Rifkin was right about manufactured products and energy becoming ~free, that leaves about 70% of the US economy that remains not-free, i.e. the service sector. You can't 3D print a dentist or plumber.

In any case I greatly doubt that 3D printing will be cheaper than current manufacturing. A 3D printer is not a nanofactory, and won't be anytime soon.

This is basically an argument that we are nearing a "post-scarcity" economy, and therefore we must transition to communism. This is an idea as old as Marx, if not older.

In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor, has vanished; after labor has become not only a means of life but life's prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly—only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!

The problem is that there is a massive amount of not-fun work which needs doing. Contra the marxists, most work is not fun--and will never be fun. Corey Doctorow tried to solve this problem in his Utopia by using a form of pseudo-money called Whuffie.

when you can get your goods, energy and communications for basically free, doesn't that undermine the whole capitalist system?

Ask me that when I actually would be able to get my goods, energy, and communications for basically free.

I'm not holding my breath.

By the way, the traditional name for this sort of arrangement is "communism".

There will always be ways to lower the marginal cost of a product. Even if this cost is measured in atoms, people will be looking for ways to reduce that cost.

There will also be art for a very long time. When everyone has a practically infinite supply of goods at their disposal, they will still want to create things for status, and this will be instantly transferable around the world. The internet increased the supply of art even as it reduced the marginal cost while leaving fixed costs mostly untouched.

There will be limits to transportation. Right now, that theoretical limit is the speed of light. People may compete for the right to travel to a far off world or to reach new worlds faster.

The biggest issue I see with unregulated capitalism is its poor handling of the tragedy of the commons. (in the shape of global resources)

The situation isn't so that we first had a theory of capitalism and then went to implement it. Instead we started doing stuff and found that it had ideological baggage. Capitalism is the only option because it's the only fleshed out option because we suck at (rigousrously) imagining alternative economic possibilities.

I have found the theorethical foundations to be pretty weak (as far as theorethical sense of elegancy goes) but here the proof is in the pudding. The theorethical constucts links to real world behaviours are a lot more stronger than the internal logic.

I have in my mind toyed with some alternative ideas but I am hesitant to actually talk about them. The act of publicly imagining on the possibility that gods are not real is really close to open revolt against theocrasy. Also history points out how dangerous halfthought alternatives are. A lot of the communist states did not do anything concrete that would be communist economy. Instead "for the people" became an excuse to have centralised elitist solutions. Therefore I think it's not enough to take steps into a new direction but actually able to run something different.

There are base level contradictions that are really unconfortable to have but most people somehow incorporate them into their thinking. If trade is exchange of like-for-like how can you make money off trading? If trading isn't like-for-like what are the conditions for it being acceptable? If you buy a luxury item at a high price or you buy the same luxury item at a lower price in which case are you more wealthy? If you buy the high price item your nominal value is more and you are richer. If you have a company that produces its services for a low price or high price which leaves the society more empowered? The high priced one has more room to propagate it's methods of production. However the lower priced one leaves its customers more richer. On one hand competition and driving prices down is looked as good effecf yet we speak highly of companies that make a big bottom line. That is competition is a mechanic of profit prevention in that the most modest profit claim wins. On one hand a customer buying for a higher price than neccesary is seen as stupid but the one that enables the biggest group of morons is seen as the smartest. Greating the latest frivoulous need makes you the "forward moving force of the economy" but people not affording healthcare defines healthcare not to be in the interest of the public.

I strongly suspect that the effectiveness of capitalism as a system of economic organization is proportional to how rational agents participating in it are. I expect that capitalism only optimizes against the general welfare when people in a capitalist society make decisions that go against their own long-term values. The more rational a capitalist society is, the more it begins to resemble an economist's paradise.

I've not read the Rifkin book, so it may have a response to the criticism I'm about to make of your rendition of the key idea.

"The margin" is a concept that is set in a temporal context. That is, the margin is about a decision being made. Historically, economists think primarily of the short term margin: changed to production that can occur without changes in capital (and so, prototypically only using variations in inputs such as labor, energy, and raw materials). This is where marginal cost can fall to zero.

But economists also recognize two further changes, which can be classified as medium and long term margins, but which is which often depends on the structure of the industry. One type of change is the application of additional capital. Typically, this is the medium term margin. The second is competitors entering or exiting the market. This is usually the long-term margin. At this margin, marginal costs never ever fall to zero.

Under a condition of zero short-term marginal costs driving prices below the long-term average cost, competitors will exit the market or differentiate themselves. In the former situation, you eventually arrive at a duopoly or monopoly. In the latter situation, you end up with monopolistic competition (which I think is a fairer description of most consumer goods, for example).

Thus, I think the idea of prices generally falling to zero because short-term marginal costs fall to zero is misplaced. To put it simply, marginal costs are not total costs.

It would be helpful to define terms first. Capitalism is the system of private ownership of scarce objects. People are scarce, land is scarce, resources are scarce. Even if energy becomes plentiful, the means of production of that energy will remain scarce (solar panels and other capital goods). Even if you can 3D print any object, the resources used as inputs are still scarce.

In short, scarcity will not go away, although it will continue to get significantly better, as more valuable and useful things can be produced with less (less labor, less energy, less resources, etc). Therefore private ownership and voluntary association, aka capitalism, will remain.

What is the demand for threads? Does it matter that none of us knows the answer?