McCloskey on capitalism and the virtues

The axiom which stresses correlation does not prove causality is applicable here. The idea that all the benefits of modern society are a result solely of capitalism is over simplified. The Renaissance and The Age of Enlightenment were not just about capitalism. Capitalism is a significant factor in the advancement of the human condition but by no means was the sole factor nor could it be. This internet, this computer are not the sole result of capitalism.

In the excellent interview Professor McCloskey states, " When people have the choice people they choose a capitalist life." No I say, in fact when "People" are given a choice they choose well regulated capitalism and democracy. It is a false argument to assume this is simply a choice between unregulated capitalism and communism. Why do we always pretend these are our only options? The world is so obviously grey why do we only talk of black and white? Why is the choice assumed to be between only unbridled capitalism or communism. Neither succeeds or arguably even exists in its pure state in the real world. The fact that people choose grey every time is shown by every degree of social pluralistic democratic nations that exist and succeeds in the modern real world. None are purely capitalistic and none are communistic.

Yeah, neither exist. But the point is what did the good, not what people chose. People can be, and are irrational at times.

One obvious counter to your point is that over time MOST people in the world have chosen lesser regulation to capitalism.

Would you agree with me when I say that when people 'choose' regulation, they are in fact choosing regulation over others, and given a choice they would choose less regulation for themselves? Think about yourself as a person and then answer me that.

A few questions come to mind. Would people choose less regulations over more regulations? If they could get zero personal regulations whilst others got more regulation would they choose this over less regulations?

"Would you agree with me when I say that when people 'choose' regulation, they are in fact choosing regulation over others, and given a choice they would choose less regulation for themselves? "

Abhi

To some degree I think basic human nature makes your claim true. But that is the whole purpose of democracy. So no one person is dictating the rules and ideally, whilst still imperfect the best we may be able to do.Ideally they/we are choosing the same rules and regulations for everyone.

So yes while banker robbers might prefer laws that didn't hinder bank robbing and bankers might favor laws that allow for more predatory lending such uneven laws need to not be allowed. Most people would oppose such rules and most would argue for rules that prevent bank robbers and bankers from robbing.

Muirdiot,

I sincerely hope that when you are next in desperate need of a loan to start your own practice, buy a home, or pay for your kid's education, no banker will prey on you and victimize you by extending you the credit you desire.

But, regulation is good for some people!!! As a good thing, regulation is strikingly peculiar, in this, that it is the only good thing which no man ever seeks the good of, for himself.

(a quote from Abraham Lincoln: substituting regulation for slavery)

Muireo consistently ignores the incentives created by a regulatory government and the infallibility of the regulated to seek relief from or modification of regulation for their own benefit.

Please, the justification for 'special' regulation that only applies to certain factors in society as opposed to a universal prohibition against force and fraud.

"Muireo consistently ignores the incentives created..."

Can be more accurately written:

"Muirdiot does not understand what an incentive is and is incapable of learning. Muirdiot, doesn't seem to quite grasp that we live in a republic, not a pure democracy and can never seem to read past "we the people" in the preamble to the constitution. In other words, muirdiot is not playing with a full deck.

Right methinks, and that is why the membership of the Libertarian party has about 72 people in it while the Democratic party has millions.... because most people think like you.

Right, Muirpid

Of course, all medical professionals used to think that bleeding people cured them of illness and that not washing their hands before surgery caused no ill effects. I guess since the majority of doctors believed those things, they must be true. Muirpidity at its finest.

BTW, it's useless to taunt me with the Libertarian party. I'm not a Libertarian.

Registering to vote as a Democrat or Republican does not make one a 'member' of that party.

But we already know the math.

Democrats promise to help people at the expense of other people, to help relieve people of their guilt for being better off than other people, etc.

Republicans promise to oppose new democrat programs while defending old Democrat programs.

Democrats promise to make the government bigger.

Republicans promise to make the government less bigger.

Each election cycle brings renewed propaganda that you must vote for the party, if only to keep/throw the other party out of power.

Your democracy is working so well.

It's all about getting/retaining power.

Democracy in its death throes.

The U.S. has historically embraced increased regulation rather than incentives. It is curious to see someone trying to justify regulations in terms of "incentives".

What is not acknowledged is that the regulations never seem to prevent the problems but are introduced after the horse has bolted. Think Sarbanes-Oxley or McCain-Feingold. Often regulations create an entirely different outcome by creating an incentive for people to "game the system".

Regulation is not necessarily the same as rule of law. It would seem that most people would chose rule of law, but it does not follow that all would choose increased regulation. How many would choose restricting cigarette advertising or making it a crime for a farmers to sell his own wheat rather than selling to the wheat marketing board monopoly. Why should parents who choose to home school their children be forced to become qualified teachers? Should there be a miliatry draft? Should marujuana be legal?

There are many areas of our lives that are heavily regulated. We either conclude that all of these regulations are necessary or we may question the extent to which free choice is restricted.

The tension would appear to be between public good and personal freedom and the degree to which the former impinges upon the latter.

Right, Muirpid

Of course, all medical professionals used to think that bleeding people cured them of illness and that not washing their hands before surgery caused no ill effects. I guess since the majority of doctors believed those things, they must be true. Muirpidity at its finest.

Posted by: Algore's poolhouse

My profession realized based on evidence that the above practices do no work or are harmful. We now use sterile technique in the O.R. and we use antibiotics to cure our patients.

I'm only here to suggest the classic liberal economist is still using leeches and not washing their hands before surgery.

Democracy in its death throes.

Posted by: Sam Grove

You may be right on this Sam and thus my passion. For the world is increasingly being run by a smaller and smaller contingent of powerful unelected leaders of Multinational Corporations with no allegiance to any people or country. There only allegiance is to more power and wealth which ultimately is the end game for any dictatorship. I see it as the new return to serfdom. There is no freedom or liberty in a world run by corporations that is actually devoid of choice, competition and fair markets (free markets).

The tension would appear to be between public good and personal freedom and the degree to which the former impinges upon the latter.

Posted by: Cassandra

That's as good a summation as any I've seen. The failure to recognize society will always have that tension is common and thus leads to unrealistic expectations of how best to minimize the tension. Saying government is always bad is wrong and saying it is always the answer is wrong. Recognizing the grey in between is the key and then finding the best way for 300 million to make decisions without coming to blows is next of importance. I vote for more democracy not less but am not convinced a still better way might not exist. I've just seen no other solutions that seem valid.

You see, muirgeo, that is the fate of democracy, even your 'more democracy'.

Why?

Because the only way 'the people' can be unified enough to manage government rather than the other way around is if government is restricted to those functions that enjoy near universal acceptance.

This is why the founders attempted to establish a republic, a government that is limited, rather than a democracy, which becomes unlimited government, because government ALWAYS becomes oligarchic.

Recognizing the grey in between is the key and then finding the best way for 300 million to make decisions without coming to blows is next of importance.

The way to minimize such conflict is to reduce the number and importance of decisions that are contingent upon the hundred some million voters (unless you want to extend the vote to children, 300 million is too high).

The more decisions that must be addressed collectively, the more likely that there will be conflict among the participants.

The more conflict, the more the outcome will be decided by some minority, especially by those who have any significant interest in the outcome. Then it becomes advantageous to maintain conflict, for it allows the power players to accrue power and manage the process.

I'm only here to suggest the classic liberal economist is still using leeches and not washing their hands before surgery. - Muirpid

You really are too stupid for words.

when you defend your position by saying idiotic crap like "I'm not the only one who thinks this way" and "most Americans think just like me", you are suggesting that you are correct because the rest of the herd of lemmings is of a like "mind"-set. In no way does this pathetic excuse of an argument suggest that you believe that economists (whom you have proven you are not competent to judge) are mistaken based on merit rather than on the lemming herd mentality to which you subscribe. Why do I have to teach you basic logic at your age, Dr. Death?

Progressives are most representative of the primitive perception that one can bypass reality via declaration.

This is evident in their hope to improve the world via armed might. Their intentions may vary from those of the barbarian conquerers, but their means are the same.

Unfortunately, it is the means and not the intentions that produce the ends.

I'm only here to suggest the classic liberal economist is still using leeches and not washing their hands before surgery.

May we quote you on that, or should we give attribution to someone else?

Sounds like an inferior moment.

Ad hominem from muigeo?

Looks like he's thrown in the towel on being above all that.

I think muirgeo is Marxist at heart and is chagrined that the communist experiments failed so spectacularly.

He has indicated that he thinks the USSR failed because it was totalitarian rather than because it attempted to quash the market. Of course, in order to make that attempt, totalitarian power was required.

It was a great example of market blow back.

Sam, this paper pushing Wall Street asshole, jerk, cocaine addicted monkey noticed that Muirdiot never even attempted being "above it all". He's got the same double standard for himself as he has for the market and the government and he always has. He's just pissed off that people here have his number and he's hoping he'll magically convince us that insanity is better.

Methinks, I know. I forgot the tag.

Dang, won't show with the brackets.

this tag: '/sarcasm'

I am sorry guys, my computer is screwed with a virus and I have been working from dawn to dusk so I can only slip in and out.

Her is a letter sent to "our government" that deserves consideration. Apologies to those who are sensitive to rough language.

I apologize to you ladies for the language, but the guy surely gets his point across, and I believe most of us can sympathize and feel his pain.

Reported to be an actual letter to the passport office. Who knows, but anyone who has done business with government will appreciate.

Dear sir:

I'm in the process of renewing my passport, and still cannot believe this. How is it that Radio Shack has my address and telephone number and knows that I bought a t.v. cable from them back in 1997, and yet, the Federal Government is still asking me where I was born and on what date.

For Christ sakes, do you guys do this by hand? My birth date you have on my social security card, and it is on all the income tax forms I've filed for the past 30 years. It is on my health insurance card, my driver's license, on the last eight goddamn passports I've had, on all those stupid customs declaration forms I've had to fill out before being allowed off the planes over the last 30 years, and all those insufferable census forms that are done at election times.

Would somebody please take note, once and for all, that my mother's name is Maryanne, my father's name is Robert and I'd be absolutely astounded if that ever changed between now and when I die!!!!!! SHIT!

I apologize, but I'm really pissed off this morning. Between you an' me, I've had enough of this bullshit! You send the application to my house, then you ask me for my fuckin' address. What is going on? You have a gang of Neanderthal assholes workin' there! Look at my damn picture. Do I look like Bin Laden? I don't want to dig up Yasser Arafat, for shit sakes. I just want to go and park my ass on a sandy beach. And would someone please tell me, why would you give a shit whether I plan on visiting a farm in the next 15 days? If I ever got the urge to do something weird to a chicken or a goat, believe you me, I'd sure as hell not want to tell anyone!




Well, I have to go now, 'cause I have to go to the other end of the city and get another fuckin' copy of my birth certificate, to the tune of $60. Would it be so complicated to have all the services in the same spot to assist in the issuance of a new passport the same day?? Nooooo, that'd be too damn easy and maybe makes sense. You'd rather have us running all over the fuckin' place like chickens with our heads cut off, then find some asshole to confirm that it's really me on the goddamn picture - you know, the one where we're not allowed to smile?! (fuckin' morons)

Hey, you know why we can't smile? We're totally pissed off! Signed - An Irate fucking Citizen.

P.S. Remember what I said above about the picture and getting someone to confirm that it's me? Well, my family has been in this country since 1776 . I have served in the military for something over 30 years and have had security clearances up the yingyang. However, I have to get someone 'important' to verify who I am - you know, someone like my doctor WHO WAS BORN AND RAISED IN COMMUNIST fucking CHINA!

"If we ever forget that we're one nation under God, then we will be a nation gone under" - Ronald Reagan

I posted a comment in the econ talk page for this podcast, I thank McClosky for the response. I would ask anyone else to chime in who might have an explanation to what I am about to emphasize in my following question.

I stress the fact that there is a direct correlation between the philosophical theories of free market economics, and Darwin's theory of natural selection. In allowing the market to decide from the ground up its natural path, and allowing the invisible hand to make corrections through adaptation we have the survival of the fittest market. When there is need for innovation to adapt to new situations or hindrances, the successful will evolve and adapt while the unsuccessful become extinct.

Let us use the housing market as an example. With growth in the construction, realty, and furniture business in the last fifteen years, we saw an emergence of a new species which I will call the flipper. When the flipper species encountered a natural ecological catastrophe (I will call adjustment), the species were forced to compete against each other. The successful adapted to the change in environment and natural selection fueled the emergence of a new variety I will call, the green retro fitter. The unsuccessful flipper slowly dwindled toward extinction.

This is my example of Origin of Species in a nutshell and challenges top down design. As an individual who always seeks motive or incentive, I had to come to the conclusion that intellectual thinking minds; (who subscribe to the liberal idealism of markets knowing that a top down design, fitted with regulation, only chains the wings of entrepreneurs) can only subscribe to the idea of intelligent design, or divine inspiration, or top down authoritative design in the "market of thought" for two reasons. The first reason is the ethics achieved from spiritual community, which when engaged in the parishioner must treat the irrational beliefs as necessary wasteful cost to achieve the ethics.(perhaps analogous to the inefficient waste of recyclers who burn more energy fueling their beliefs as well as the recycling itself) The second reason is Politics. As long as your peers are doing it, you will not look crazy for not doing it, maintaining your reputation which is vital to your credit for trade. Perhaps there is a third reason, innocent ignorance.

I am not an atheist. Atheism is as irrational a belief as divine inspiration, there is no doubt we need God, that is why we created the image of God. We cannot escape the reality of God, which is a euphemism for the unknown creator. I also would agree with Daniel Klein(poster on econ talk to this podcast) in his comments regarding "whatever Jill is into Jill's 'God' or 'religion.' " Whatever you are into is your passion, or perhaps dogma, but how often do free trade advocates hear the word dogma? Pat Buchanan rips Free Marketeers in his Day of Reckoning book as radical dogmatists. So I point out, how could someone be a free market dogmatist and a Christian or Judaic dogmatist? I would equate it to a Pro Lifer being gung ho for war.

I do not think anyone here is a complete irrational romantic, the podcast was proof of two intellectuals discussing complex material. I am of a younger generation, trying so very hard to understand the rationale of those before me who bring such enlightenment, I only see oxymoron and need clarity. This clarity is what I use to make serious decisions regarding faith and direction for my own new family, not for vindicating my own personal beliefs or my "dogmatic" satisfaction.

Sorry for the lengthy post. Thank You again Russ and Deidre, and Deidre I do not read the modern atheist rubbish.(most of its fame stems from rebellion, not reason) I believe time is the only factor in deciding what ideas or books were of significance. In my stray from Christianity, Bertrand Russell had the most impact.

Muirgeo: "The world is so obviously grey why do we only talk of black and white?"

Do you also wonder why, since the world is so obviously unprincipled, we insist on talking of principles?

But the world isn't JUST gray. There is a whole spectrum from black to white. To insist that the world is gray is just as 'off' as to insist everything is black and white.

In fact, gray is just a mix of black and white.

In fact, gray is just a mix of black and white.

Posted by: Sam Grove

Sam,

You made my point. All successful societies are not black or white . They are not classically liberal or communist. They are a mix; social democracies. That's a fact. That's what we have to work with. So when you claim I'm a communist you you're simply labeling to make yourself feel better while totally ignore the facts of how the world is. By your definition we live in a communist country and in fact every country is communist. Is that really honest or helpful to the discussion?

Oh, also- you said the world has the whole spectrum from black too white. where is the pure form of a classic liberal society Sam. I'm still waiting for one of you guys to show me that. Now that the Wild West has been ruined it seems you're still basing everything on faith rather then something that actually exist and has been shown to be successful.

Muirgeo, I can't help you with you lack of vision. You sound a bit like the patent office guy in the late 1800's who claimed it should be closed because there was nothing left to invent.

If you go back to the period after the successful war for independence from the British crown, there was a time when government was minimal in the U.S.

All you have to do is subtract slavery, add in technological development and the industrial revolution, then season with the insights of the free market economists. Then you might have a, very crude, mental model you can work with.

You made my point.

Your point seemed to be that everything was gray, was going to be gray, and that there's nothing to do but accept grayness.

My point is that making distinctions implies preference and the implication is that we prefer white to black. Unfortunately, the in between state of gray is not stable, and tends toward increasing black. So if we say gray is OK, then we get even darker gray until all is black.

As you have expressed your concern that our system is headed toward a crisis, if not doom, then I wonder that you are accepting of staying on that slope, which is where we are.

If you want to understand our thinking on WHY we are headed toward a 'crisis', then you have to comprehend our diagnosis (and the premises upon which it is based) from which follows our prescription.

If you are content with YOUR diagnosis, then there is little point in your participation here.

Brian-NJ,

I can see that you are genuinely interested in the nature of market capitalism and yet concerned about the deliterious effects of creative destruction.

Would highly recommend Freedom & Capitalism by Milton Friedman, Nobel economist or the TV series, Free to Choose by Milton Friedman. Another very useful work is Commanding Heights which has also been made into a television series which highlights the two economic views that dominated the twentienth century. Commanding Heights helps one to understand how different countries have developed variations on the mixed economy.

Often what one hears presented is the false premise that capitalism somehow implies the elimination of government and any form of social safety net. Government is essential providing property rights, a legal framework, rule of law, a means of military self defense, international trading agreements, management of the monetary currency, etc.

A government has by its very nature limited resources so it must decide what are the most important priorities, set objectives and determine the policies to that will be the most effective in achieving its goals with limited resources. A government generally obtains the majority of its revenue through taxation rather than revenue generating activities such as running a business.

While there are certain industries such as electrical power generation or postal delivery services that are government owned and controlled, the majority of wealth of a country with a mixed economy like the U.S. is created by the economic activities of individuals and businesses all pursuing their own interests as Adam Smith wrote in the Wealth of Nations. Government therefore does not create wealth but it depends on the economic success of others to fund its activities.

Those who favor market capitalism understand the importance of individuals and businesses in generating economic growth essential to fund government programs yet recognize that excessive levels of government can place an undue burden on growth. Additionally, public policy can have far reaching and often unintended consequences. For example, additional staff time may be required to collect and remit a sales tax or prohibition laws can lead to a rampant bootlegging industry.

One of the basic principles of economics is that people make trade-offs based on comparative advantage. One must balance those services of government that provide the optimal social good with the level of growth that provides for improvement in basic standards of living. Countries around the world have determined this balance based upon social and cultural norms. There are as many variations as there are societies.

I hope that this perhaps puts some of these issues into a more understandable framework. Right now, we are living during one of the most remarkable periods of history where the integration of the global economy and the advent of mass communication are creating greater economic opportunity than ever before in the history of mankind. It makes studying economics even more interesting because we are in a living laboratory.

Some of the things people need to understand about government.

1 Government does not create wealth.

2 Printing money does not create wealth.


3 Government cannot stimulate the economy except by reducing its burden.


4 Self interest is a feature of people...even those working in government.


5 A system featuring excessive rules rewards cheaters.


6 The tendency is for government to grow. See #4.


7 Partisanship is usually opposed to the common good.


8 Governments that exceed minimal functions become oligarchical.


9 The power to manage the economy creates incentives to influence that power for the benefit of special interests.

Would add to your list that

1. government very often "manages the economy" with far less efficiency that Adam Smith's invisible hand.


2. the greatest technological innovations are not created by government; government doesn't do innovation any better than it runs businesses

1. government very often "manages the economy" with far less efficiency that Adam Smith's invisible hand.

That would suppose that government can manage the economy at all.

Sam,

I was not suggesting that the government can manage the economy merely the reality of varying degrees of government intervention that are the norm.

Just as there is no example of a pure market capitalism (Hong Kong gets close to economic freedom but has little political freedom), there does not appear to be any example of a government that does not intervene in the economy. The methods of intervention vary...regulation, tax policy, price controls, government monopolies, nationalization, government subsidization of favored industries, income redistribution, eminent domain, punitive legislation (ie. anti-Walmart laws) etc.

Historically, the U.S. has tended to embrace regulation as the means of "managing" the economy whereas European countries seem to have gravitated towards nationalization of great swaths of the economy. The Great Depression was seen as a market catastrophe and the idea of managing the economy became the standard that dominated economic thinking for the next 60 years. It was only years later that Milton Friedman's work uncovered the role played by the Federal Reserve in the disaster.

Like you say, the assumption that one can "manage" an economy represents a fairly substantial leap of faith. The reality of our society is that most people favor government intervention to one degree or another to assure the protection of the most vulnerable members of society and during any time of market upheaval such as the current housing crisis and liquidity crunch.

Those of us who are concerned about the degree of government intervention understand that government attempts to "do something" about a problem can very often make a bad situation far worse because public policy can drag out the necessary market correction.

The recent idea floated of allowing bankrupcy judges to change the terms of signed contracts for example has the potential to raise interest rates for all borrowers penalizing those with good credit ratings for the actions of speculators and highly leveraged, irresponsible borrowers. Edward Glaeser, an urban economist at Harvard wrote a good piece on this recently which was posted on Greg Mankiw's blog.

So what else is new?

Not a thing.

I realize that this is pretty basic stuff to you. Was really directing my remarks primarily at Brian-NJ, the new kid on the block who appears to have some misconceptions about market capitalism.

If I am taking his meaning correctly, isn't he asking how one can believe in free markets and still be a christian? One could also argue that Darwin was not a christian (although we know he was) if he thought up his theory. The fact that he came to the most logical conclusion based upon an impartial observation of thousands of pieces of evidence makes him neither good nor evil. Such labels are irrelevant in science and economics.

Personal beliefs shape what we choose to do with our lives and what we value but they do not effect the planets or the stars in their progress across the heavens....nor the outcome of the markets or decisions made by millions of people pursuing their own interests.

-"The reality of our society is that most people favor government intervention to one degree or another to assure the protection of the most vulnerable members of society and during any time of market upheaval such as the current housing crisis and liquidity crunch."

My argument against supernatural philosophy. If people continue to be sensitized to the idea that you must fear everything, especially death, then you promote the dependency of big brother. Shake the fear, and you shake this reality you have sited. The clear development of these religions was in response to the fear of the unknown. How can you expect societies to trade with each other on the invisible hand theory when they clearly latch onto the dependency model.

Darwin was a Christian, it was his work and the death of his daughter that made him realize he was living a falsehood. He did what every religiously entrapped being does when faced with clear contradiction, questioned and investigated, and when the evidence became clear he made his decision, and never looked back. We have no logical reason to believe in the rumors of his death bed conversion, he was ill a long time, he would have converted earlier and less ambiguously.

You have assumed that those who believe in God are more afraid of death/unknown but it is equally possible that they are less afraid. Since neither of us believes in the existence of God, we would appear to be ill-qualified to comment on the experience of those who do. The use of the phrase "religiously entrapped" seems to reflect a certain lack of objectivity on this subject.

I would disagree with you on the linkage of government intervention with christianity.

Are we not speaking more correctly of Fabian socialism and Keynesian economics? As I recall, the proponents of Fabian socialism in Britain and marxism in Russia generally rejected organized religion. Most communist countries have banned religion just as they have all other political parties or forms of public assembly.

If one looks at American history, the founding fathers valued thrift, self-reliance and hard work. Government intervention on a massive scale was a 20th century phenomenon. Over the past 40 years, those on the left who favor in massive government intervention have tended to share Senator Obama's disdain for Americans who "cling to guns and religion".

I believe that government intervention and christianity as well as darwinism and market economics are fundamentally different concepts.

For myself, my belief in a higher God has never been dependent on my belief/rejection of market economics. I fundamentally find it difficult to believe that a supreme being would accept me without reservation when I cannot do so myself. Perfectionism not economics has led me to that conclusion.

Well said. I do see the error in my analysis.

Thanx