Peter Leeson’s superb article Two Cheers for Capitalism avers that there is simply no empirical argument against capitalism. I, undoubtedly, agree with the evidence Dr. Leeson provides. But, with such overwhelming evidence for capitalism what sustains its critique?
A close reading of Karl Marx engenders my belief that economists sustain the critique. Economic science studies the economic facts and laws of supply, demand, production possibilities, utilities, etc. which manifest, in Marx’s language, the “social form” (i.e., its price or exchange value). Hence, strictly speaking, use-value lies outside of economic science. In Grundrisse, Marx remarked that use-value is of “purely physical interest, … expressing no more than the relation of the individual in his natural quality to an object of his individual need.”
But, in the same work, Marx critiqued Ricardo’s diminishing marginal fertility of land due to Ricardo pontificating about the declining rate of profit due to material reasons (i.e., Ricardo’s pessimism about what would be physically possible). We all know that Marx was not always consistent, but in highlighting material processes he was, of course, no different than many classical and contemporary economists who use material and empirical arguments (i.e., arguments that suggest that capital accumulation and “quality of life” are improved under capitalism) in favor of capitalism. Unwittingly, economists sustain the revolutionary critique of capitalism because people come to believe that, with science and technology, anything is possible – even planning an economy.
Economists probably do not believe this to be the case, but each time they resort to material and empirical arguments in favor of capitalism, they invite revolutionary critiques of the capitalism.
Brian A. Pitt
There’s no evidence that most people who are anticapitalist believe in “planning an economy.” And the massive evidence against it is that they support only piecemeal interventions in the economy to address perceived social problems. This applies to economists and to most other people, too.
You can attribute to them some implicit belief in “planning” but that is not good Verstehen. What you consider to be a logical implication of their piecemeal views does not constitute an attitude, even at the subconscious level, because they have not thought the thoughts that make you think “planning” is a logical implication of their views. Therefore “a planning mentality” is not a legitimate dependent variable if you take Verstehen seriously. If you asked them if they were motivated to support a given piecemeal intervention for the reasons you suggest, they would say “no.” And it would be the truth.
The only reason you, in contrast, might not favor these interventions is that your knowledge of economics teaches you that they would be counterproductive. But most people do not have that knowledge, so favoring interventions comes naturally to them–it certainly doesn’t require that somehow they have absorbed obscure assumptions from Marx or even that they favor the “planning” that you attribute to them. Meanwhile, most economists believe there are many market failures, so intervention”ism” comes naturally to them, too.
Excellent points Dr. Friedman.
Sure, economic ignorance certainly helps sustain the critique of capitalism. That is a claim that I would not dispute. And I certainly do not believe that most anti-capitalists, whether or not in the economics profession, possess a planning mentality. Many folks, and especially many so-called macro economists have faith in economic “interventionism.”
My point, rather, is that many contemporary problems, which economists are typically consulted about, simply have an economic and, what Marx calls, a material component. Take the issues of the rising prices of gasoline and health care. These issues have both a material aspect and an economic aspect. Pro-market folks, inter alia, will claim that “material scarcity” contributes to the rising prices of oil and health care. And anti-market folks, who simply cringe at the concomitance of rising prices and record profits for these industries impute both to capitalism. It seems to me that both issues call for attention. And that is why economists call attention to both issues. However, in calling attention to both, they invite the critique of capitalism.
The point that I was hoping to make, though I did not do a very good job of it, is that because economists sorts out these issues via the price mechanism, and speak to improved material standards (e.g., improved health care and more plentiful oil) since its advent, they invite the critique of capitalism. That oil and health care, for example, are scarce products are material facts that have to be confronted by pro and anti-market folks alike. But, because the price mechanism is, by and large, used to allocate both oil and health, for example, it may exacerbate the material problem of scarcity. Hey, if you have the money and the insurance coverage, why delimit how much gasoline you consume, the number of times you consult a physican, and the amount of medication you use? (Now, this should not be taken to mean that I do not believe the law of demand. Certainly, people will respond to rising prices.)
By economists using both material (e.g., improved quality of life) and economic (e.g., allocative and communicative properties of prices) arguments, in support of capitalism, they invite the critique of capitalism on both material (e.g., rising price of health care and gasoline) and economic (e.g., market failures) grounds.
Thanks for the comments.
Why would we care about the allocative and communicative properties of capitalism if these did not lead to an improved quality of life?
We wouldn’t care about the allocative and communicative properties unless they served as proof positive (or negative) of an improved quality of life. Emphasizing them, however, always leaves the door open for countervailing evidence.
1.) I just want to say that I proudly posted all the graphs from Pete’s paper on my office door and it caused a little bit of a stir in the department, but I don’t think it changed any minds. (I even found a post-it note asking “Is this according to the top 10% that own 70% of the national capital, or the bottom 40% who only own 1%?” Ha!)
2.) I don’t think people’s opposition to capitalism stems from their belief that it’s bad for society as a whole. Rather, it is a (mistaken) belief that it’s bad for women, racial minorities, gays, the poor, or some other group. This is why I think work in these specific areas is so important.
3.) The other argument is that there are diminishing marginal returns to capitalism. They accept capitalism, but oppose “unfettered markets.” This is why public choice and studies of anarchy are so important.
Good point Josh. And I believe that your point bolsters mine. With free-marketeers making material and empirical arguments in favor of capitalism, an ant-market person can simply make material and empirical arguments opposing it – with the references you just mentioned. Hence, empirical support itself, sustains the critique. (And this is why, as you note, studies of anarchy, public choice, and other spontaneous order studies are downright inescapable. Thanks for helping me make that point.)
It would seem to me that departing from an empirical and material argument for captialism would doom the advocates of markets even further. The emotive rudiments of political philosophy inherent to most people (excepting autistic libertarians, ala Cowen?) does not take kindly to a positive evaluation of an extended order of anyonymous market actors just somehow managing to produce, in the aggregage, a more attractive world to live in.
Good point Dain. I will add, however, that I do not suspect that departing from empirical and material arguments for capitalism is desirable – or for that matter possible! But, everyone needs to be aware that, regardless of whether s/he is making an argument pro or anti-capitalism, empirical and material claims only invite additional empirical and material counter-claims.
I really don’t get your point, Brian. Are you saying that the fact that free-marketeers have tried to ground their arguments on facts is bad, because it leads to counterarguments based on facts? If so, that is just tough luck. I think that is your position, right? I.e., there isn’t much we can do about it.
However, I think we’re in a far worse position than that because in reality, our arguments are all too often *not* grounded in facts. Public choice theory is just one example of pseudo-factual “findings” that are either trivial or false, but that just happen to point toward libertarian conclusions. And then of course there is the libertarian conflation of “liberty” with “modern private property rights.” What I’m getting at is that we have the reputation for being ideologues who embrace any “findings” or theories that buttress predetermined conclusions. We are seen as “market fundamentalists,” a la religious fundamentalists.
IF ONLY the problem were that we’d presented such fabulous airtight empirically based arguments that, just in the nature of things, are always open to rebuttal! But that isn’t the actual situation, IMHO; it is a situation we should strive to make happen. But the only way to do that is to find out what people’s actual objections to capitalism are–which don’t have to do with its lack of “spontaneity” etc., but that it causes poverty and insecurity and racism and sexism and imperialism–and then go investigate these claims with an open mind.
“I really don’t get your point, Brian. Are you saying that the fact that free-marketeers have tried to ground their arguments on facts is bad, because it leads to counterarguments based on facts? If so, that is just tough luck. I think that is your position, right? I.e., there isn’t much we can do about it.”
1. This is, by and large, my point. I do not, however, think that because they base their arguments on facts is either “bad” or “good.” (I happen not to like either/or reasoning.) I just believe that one piece of evidence (whether pro or anti-capitalism) will invite another piece of counter-evidence (either pro or anti-capitalism).
2. I agree that “what people believe are the facts of the social sciences.” However, many people believe, especially economists who study “multiplier effects,” e.g., that minimum wages improve the quality of life of minimum wage earners. And this is true – for minimum wage earners. But what about those who cannot obtain minimum wages – e.g., grandmothers who would like to be paid for baby sitting their grandchildren, but reside in subsidized housing, which calls for employment or a “work activity” outside the home or minority teens. Many minority teenagers, for example, who are not employed, will be happy to obtain the opportunity to obtain (minimum wage) employment. But, the minimum wage decreases the likelihood that these folks will obtain the ability to be employed because they cannot be remunerated at their “marginal productivity.” That many folks who support the minimum wage have never heard this does not make it trivially true or false. It is simply a “fact of the social sciences” that leads to government to support minimum wages – and members of the Congressional Black Caucas, in particular.
3. Bryan Caplan, I would argue, makes Virginia public choice arguments that do not lead to libertarian/classical liberal conclusions: e.g., the anti-market bias. My understanding of Virginia Public Choice, rather than Chicago or Rochester Public Choice, leads me to focus on the intentions and plans of situated actors (or actors operating within institutional contexts.) Public Choice findings too, in my opinion, are neither trivially true nor psuedo-factual.
Thanks for the feedback.
What is an example of a Virginia public choice finding that is neither trivially true nor false?
“What is an example of a Virginia public choice finding that is neither trivially true nor false?”
Its focus on the purposive action of situated actors.
Seriously, I will attempt to answer your question in interrogative form.
Choice in an any context (e.g., market choice or government choice) confronts the perennial conflict between potentially unlimited demand and limited supply. Government, as opposed to the market, however, dispenses with the rationing tool of the market, i.e., prices, and thus, other rationing methods emerge to combat this limited supply. So, without the rationing device of prices, how do government actors combat limited supply? (Learning how rules influence choice in government is what is fascinating about public choice – something sociologists, I will add, will benefit from becoming familiar with.) To me, this is the value-added component of public choice.
And to me, this is neither trivially true nor false. Given that Elinor Ostrom was recently awarded the Nobel in Economic Science suggests that public choice findings are neither trivially true nor false.
Brian, you have listed characteristics of “the choice situation” that are neither universally nor exhaustively true. (For instance, limited knowledge is IMHO usually far more important in politics, but this is outside the purview of all forms of public “choice,” because choice is a conscious process. Most ignorance is not a deliberate choice; it is not rational but radical ignorance.)
But you have not given a single public-choice “finding” that is both important and true without being trivial. You’ve just given a priori public-choice assumptions.
Recall that your point was that what sustains the critique of capitalism is its defenders’ alleged reliance on empirically based arguments that are, as such, open to empirical rebuttal. My response was, “If only it were so!” Instead, I suggested, the defenders of capitalism rely on apriorisms like you have just given, and pseudo-”findings” like those of public choice–all of which opponents of capitalism RIGHTLY see as little more than ideology dressed in social-scientific garb.
“Recall that your point was that what sustains the critique of capitalism is its defenders’ alleged reliance on empirically based arguments that are, as such, open to empirical rebuttal.”
Yes, and it is for this reason that I, which I have learned from the Virginia Political Economists, James Coleman, the classical sociologists, etc., think focusing on the institutional context is so important. Data are always influenced by any number of variables such as time, place, situation, history, etc., etc.
The long-lived critique of capitalism is due to, inherently flawed, empirical investigation. There is nothing wrong with that. I only wrote this post to make known that, I believe, empirical investigation, itself, sustains the critique.
I think Brian is wrong that empirical investigation sustains the critique of capitalism. I believe a theoretical arguments are also necessary in discussing policy or political philosophy but I don’t see how the empirical arguments take away from the theoretical ones. They are both important. If one is dropped, people will think that much less of capitalism.
I also differ from Jeffrey Friedman in that I would not label public choice economics trivial. It is not trivial in the sense that lots of people don’t get it, in fact I’m sure I have more to learn. Its also not trivial in that, the difficulty of getting a public choice paper published in a prestigious journal is not all that much different than getting a human capital article published.
Finally, though I often find myself defending capitalism to non-economists, Peter and Brian seem to downplay to the point of ignoring the importance and subtlety of good government, and good culture.
Michael,
I am not sure that our positions differ as much as you claim. I, too, consider empirical and theoretical arguments to be requisite for any position – pro or anti-capitalism. I simply believe that arguments that rely heavily on data invite counterarguments that rely on data. And round and round we go!
Seriously, a finding, for example, that reveals rising wages under capitalism will only spur someone else to adduce a finding that reveals the long-lived lower wages of blacks as compared to whites under capitalism. No datum will be definitive. This is both the beauty and the bane of the social sciences.