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The Anti-Casino

Bret Wallach responds here to my two earlier posts written in reply to a comment that he left here at the Cafe.  Bret and I are in more agreement than I realized – but still not complete agreement.  Here’s his closing paragraph:

I’m only requesting that you occasionally consider and acknowledge some of the pain and despair caused by economic changes. I believe it would actually make your arguments more compelling to those beyond your avid followers and it might help your followers make more compelling arguments as well.

I have never denied – indeed, on occasion I have acknowledged explicitly – that losing a job or a business is painful.  No matter how wealthy someone is today because of the riches bestowed on the masses by innovative capitalism, the loss of a job (or a business, or value in a pension fund, etc.) remains painful.  Of course.

But when politicians, preachers, popes, pundits, and professors point to job losses they do so overwhelmingly in the context of calling for, or at least implying the desirability of, policies to prevent or reduce the number of such changes.  Because the prosperity of modern society is so enormous and, despite ups and downs, very reliable, most people fail to reflect on its source.  Most people, I think, believe that they can continue to have all, or most, of the benefits of modern capitalism while being protected from the consequences of one of its essential features: creative destruction.  This belief is mistaken.  Yet it is reinforced because government can, and does, successfully protect a relative handful of workers and producers from the downsides of change without noticeably diminishing the economy’s capacity to generate mass flourishing.

To counteract this mistaken belief requires pointing out that today’s pain is part of a larger picture – a picture that, if understood with sufficient fullness, reveals to each person that he or she would willingly endure the risk of the pains caused by creative destruction if the only alternative is to live in an economy in which everyone is protected from the downsides of creative destruction.  (Remember, the only way to protect everyone from the downsides of creative destruction is to eliminate creative destruction – an outcome that also denies to everyone the enormous upsides of creative destruction.)

Suppose a trustworthy someone offers you the opportunity to gamble in a special casino – a casino whose rules are such that the house losses over time but the players win.  Call it the anti-casino.  As in real casinos, the outcome of any one spin of the roulette wheel or toss of the dice might result in a victory for the casino or for the player.  But unlike in real casinos, over time the players will win.  The anti-casino’s rules, we might say, are stacked in favor of the playing public and against the house.

Because the more you play the wealthier you become over time, you’d be foolish to refuse to play in this anti-casino.  And while you feel undoubted pain on those particular plays when you lose rather than win, you should be mature enough to recognize the good fortune you enjoy by being able to play in this anti-casino.  You should be called out if and when, in an attempt to reverse any particular loss you suffer in this anti-casino, you demand a change in the rules of the anti-casino, or even if you merely moan that the anti-casino is detrimental to ordinary players because from time to time some of them suffer losses.

Innovative market capitalism is a great anti-casino.  Unlike in real casinos and lotteries, the more you play the more you really do win.  A job of the economist is to reveal this reality to the general public, because it is easy to lose sight of it when, on a particular play, someone does lose.  This economist’s job is especially important because the anti-casino is crawling with opportunists and saboteurs who are eager to take advantage of people’s ignorance of the value of the anti-casino by stoking the anger generated by particular losses into power for the opportunists – power that they’ll recklessly use to transform the anti-casino into, at best, a real casino in which only a select few win over time.


I’ve one more point to make in response to Mr. Wallach, but it is relatively minor and so I’ll make it in a later post.