Capitalism is Not…

Part six in a series of eight on the morality of capitalism.

Capitalism gets saddled with a lot of baggage that doesn’t properly belong to it. Some of this is the result of ignorance of basic economics, some of it a poor reading of history, but most of it is due to a bad definition of capitalism. In the first post in this series I defined what I mean by the term:

[A] system where individuals are free to keep, trade, use, or give away property that was peacefully acquired. This is merely a negation of the use of force in the use and exchange of goods. I do not mean a system that is pro-capitalist, or pro-business, or pro anything but freedom for the individual.

This definition does away with many of the accusations made against capitalism. They may be true of our current system, but not of a genuinely free market. Still, there are a number of claims about capitalism that remain, and I wish to clear up at least a few of the common errors.

Capitalism is not a zero-sum game. For someone to win, it does not require someone else to lose. It is easy to observe a person who has done well and assume that there must be persons elsewhere who had to lose something in order for this person to have gained. That is true of every political system and many simulated scenarios like sporting events, but nothing could be further from the truth in a market.

When exchange takes place in a free market, both parties trade something they want less for something they want more. Of course, either may change their mind later and regret the decision, but at the time of the trade both parties valued what they got more than what they gave, otherwise they would not have traded. It is easy to see how value is created on both sides (because economic value is subjective), and how there was no “loser.” Beyond this simple illustration, over the long run the wealth generation of capitalist trade grows the overall pool of valuable resources and increases choice for all involved. This means the potential for more and bigger “wins” as time goes on and specialization and trade increase. Wealth is created, not distributed.

Capitalism is not for the rich. If there’s any class or group that benefits more from capitalism than any other, it’s not the rich, but the consumer. Of course all of us, rich and poor alike, play the part of the consumer at various times. But it is an inescapable fact that in order to succeed in a market, you must create value for consumers. Ludwig von Mises sums this up nicely:

“The riches of the rich are not the cause of the poverty of anybody; the process that makes some people rich is, on the contrary, the corollary of the process that improves many peoples want satisfaction. The entrepreneurs, the capitalists and the technologists prosper as far as they succeed in best supplying the consumers.”

The rich do not live at the expense of the poor, nor do the rich feel particularly secure in a free market; they often seek government intervention to protect them from competition. But any gains to the rich not only are the result of creating value for the consuming public, they often lead to direct benefits for the poor over time by way of lower prices and access to new technologies.

Even the most selfish, peasant-hating rich person wants to buy fancy new luxuries. Whether they like it or not, being early adopters of such goods helps fund the continual production, research and development of new technology and can bring the cost of production down over time. There is not a modern convenience in existence that did not begin as a plaything of the super-wealthy. TVs, cars, washing machines, cell phones, etc., ad nauseam. If there were no wealthy customers around to purchase these impractical items, it would have been nearly impossible for producers to continue to refine them and lower the cost of production. Rich and poor can certainly dislike each other in a free market, but they cannot avoid helping each other.

Capitalism doesn’t concentrate power. Capitalism disperses power. If you look at the list of Fortune 500 companies 50 years ago vs. today’s list, you’ll notice some familiar names. You’ll also notice that the majority of top players 50 years ago don’t make the list today, and a great many of them don’t even exist. There was a time when Sears threatened to dominate the entire retail industry through its innovative catalog approach. The previous big players in the retail scene, themselves viewed by some as invincible, were put under by Sears. Is Sears a retail hegemon today? Neither will Wal-Mart be tomorrow.

Capitalism is relentless, and consumers want value. They may have brand loyalties, but those only go so far. At the end of the day, the dynamic process of creation, imitation and destruction constantly wreak havoc on the best predictions of who will control the market into the future. Were it not for massive government interventions—including things like anti-trust, which is purported to break-up vested interests but typically does the opposite—we would see even more dynamism and less concentrated power.

It may be a bit disconcerting to realize how dynamic the free market is. The good news is while corporations and products and methods of production are created and destroyed all the time, the human and material resources in the economy are redeployed. It may cause temporary dislocation, but the transition from buggies to Fords was very good for market participants, even though it killed some buggy companies.

Capitalism isn’t about taking advantage of people. In fact, it’s about people taking advantage of the opportunity it provides. I used the example in a previous post of price gouging. Higher prices after a disaster are sometimes seen as an example of people being fleeced by the market when they are the most vulnerable. But when we understand what’s actually happening when prices rise—those less desperate are encouraged to conserve so those who need resources most can get them; suppliers are signaled to deliver more goods to the affected area, etc.—we see that the market is doing more than any other system could to provide for those who need it most.

I’ve heard people talk about the way that businesses take advantage of employees and force them into subpar working conditions. Of course we all have to make choices, and we all wish our options were better than they are (which is why we work to improve them). But is it true that capitalism allows companies to take advantage of people’s needs? Possibly, but no more than people take advantage of companies’ needs.

If you’ve ever shopped at Wal-Mart, supposedly one of the worst offenders when it comes to taking advantage of employees, you’ve noticed that most of the employees are not very helpful. I once waited for 30 minutes to pick up something ordered online. The store was not busy and four or five employees saw me there and did nothing. A few said they were going on break and someone else would help me soon. Some said nothing and just walked past, even when I tried to get their attention. When someone did arrive she was discourteous and messed up the check-out several times. I am far less likely to order from Wal-Mart after this experience.

If Wal-Mart is so good at exploiting employees, why were they unable to make them shorten their break to help me, or treat me with basic kindness, or master the proper checkout procedure? The answer is that Wal-Mart is not any better at getting what they want out of employees than employees are getting what they want out of Wal-Mart. The ease and regularity with which employees quit in the retail business is staggering, and employers often have to tolerate a lot of behavior that is detrimental to their profits to keep needed workers.

I don’t like to moralize about who’s exploiting who, but if we’re going to play that game we ought to consider the many ways in which employees, consumers and shareholders take advantage of managers, investors and corporations. It happens in both directions, but in a free market both are difficult to sustain in the long run. You have to serve other market participants, not cheat or exploit them. It’s not perfect, but capitalism does a better job of generating cooperation and limiting exploitation than any other system.

Capitalism doesn’t corrode our souls. Sure, free markets give us more choice and make us wealthier, but don’t they also make us crude, materialistic and shallow? It is true; in a more abundant market with lower costs, a person can more easily indulge their materialistic impulses. It is also true that countries where few go hungry also have more obesity. The cure is not to restrict the food supply.

A free market forces us to become people of character or suffer the consequences. We have more choices, which means the option of choosing things that are bad for us. But being deprived of choice altogether does not make us better people, just weaker people.

A person who has never lied because their tongue is cut out is not what we hope to become when we strive for honesty. Capitalism cannot corrode your soul, but it can provide you more modes of cultivating and expressing what’s in your soul—good or bad. You can’t escape ultimate responsibility for your choices under any system. Capitalism is up front about that.

Capitalism is Responsible

Part five in a series of eight on the morality of capitalism.

“All things are subject to the law of cause and effect.”

The opening sentence in Carl Menger’s 1871 “Principles of Economics“ seems at first glance little more than a truism, but it is an idea so foundational and so often ignored that it deserves great attention. It applies not only to economic activities, but to all human endeavors. If we seek to live moral lives and promote what is morally good, we ought to heed these words.

What often passes for praiseworthy is any action, or cause, whatsoever that is taken with a sincere desire to achieve a noble effect. The relationship between cause and effect is wholly ignored. But is it moral to take uninformed action that has no causal relationship to the ends sought?

To whom much is given

If I told you that one sick child would get well for every window you smashed, would you be a person of high moral character if you spent the night naively smashing windows with a sincere belief you were doing good? While your heart may be pure as the driven snow, doing good requires at least a genuine effort to understand the world and the likely effects of your actions. As C.S. Lewis said of moral busybodies, “They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth.”

None of us has perfect knowledge, but to the extent that we are able, we are responsible for using sound judgment. In the age of the Internet it would be hard to claim you didn’t know better for taking actions that hinder rather than help the target of your good deeds. A valiant self-education effort is possible in almost every field. To whom much is given, much is required.

Capitalism works

Once we accept the fact that genuine moral good requires more than intentions, it becomes immediately apparent that capitalism has a leg up on every other economic system when it comes to the noble goals of poverty alleviation, peace and health.

The desire to help the poor is nearly universal. But when it comes to actual efforts to do so, there is a spectrum of outcomes ranging from absolute oppression to life-changing relief. We need to consider the outcome before we advocate a course of action. Capitalism is the most powerful force for the material betterment of humanity in the world. State interventions like minimum wages, price caps, foreign aid, immigration restrictions, and professional licensing and regulations do unspeakable harm to those of limited means.

Economic theory predicts better outcomes from markets than governments. Observation backs the prediction. The evidence is abundantly clear that economic freedom does more than government interventions (and private charity) for improving living conditions by every measure. This video gives a brief overview of some of the data.

Many people base their arguments for economic freedom entirely on the fact that it produces better material outcomes. But don’t let that fool you into thinking capitalism “delivers the goods” and ignores morality. I’ve addressed just a few of the ways in which capitalism promotes moral values in previous posts, but let’s not overlook the moral component of an improved quality of life for the least of these. If helping the poor is good, and if good intentions must be coupled with results, a free economy is in excellent moral standing.

Individual responsibility

In addition to achieving the ends of poverty reduction, capitalism also promotes responsibility in individuals. Since it is a negative system in which we can’t force people to do what we want, we must learn patience and peaceful persuasion. We have to be ready to accept the consequences of our decisions and learn to act prudently. Freedom allows us to become responsible.

Poet and theologian John Milton famously argued for free speech by saying that without it, the ability to become a morally responsible individual would cease. Milton said that without the freedom to choose wrongly what books to read or doctrines to believe, there would be no concept of choosing rightly. People would not become moral, but would be of a weaker character and less able to resist evil when they encountered it. There is no righteousness in not making bad choices that are not available to you. A truly free market leaves open the possibility of bad decisions, but any system that does not allow these decisions makes us less, not more, morally responsible.

Capitalism is Humble

Part four in a series of eight on the morality of capitalism.

In a previous post I talked about the honesty of capitalism; people are not angels. A capitalist economy recognizes this fact, and our greed doesn’t ruin the system. Closely related to the honesty about people’s motives is capitalism’s humility about people’s limits. Humans are not all-knowing, and if force is absent, a free-market is what emerges to deal with this fact and spread valuable and coordinating information the best way possible. Markets are a result of our lack of individual knowledge, and a constant reminder of how fallible we are.

Models vs. reality

It has been well documented, especially during the Socialist Calculation Debate that absent a free-market, there is no way to allocate resources effectively. If we believe that people (or at least some group of elite experts) have near perfect knowledge of what resources and finished goods are valued to what extent by whom at what time in what location, then certainly a centrally planned economy would be superior to the messy market with all its profit and loss. Every time an entrepreneur starts a new venture that ends up failing, resources are wasted. His incorrect knowledge about how much people would value his products cause losses. A ruthlessly efficient economy wouldn’t suffer any such waste.

Indeed, the classical (and still standard in most economics textbooks) model of the ideal economy is one in which “perfect competition” is reached. The condition exists when everyone has perfect knowledge of the availability and cost of all resources and the value to consumers of all goods. There is no profit, no loss, no shortages, no surpluses and no speculation in this idealized economy. Everything is in equilibrium.

Seduced by this economic model, many an economist, statesman, do-gooder, social-reformer and power-hungry despot has attempted to achieve it in practice, and with disastrous results as evidenced in places like the former Soviet Union. The model may be a useful tool for testing some economic theories, but only an ill-informed or incredibly arrogant person would see it as a desirable or possible end-state for the real world economy. No one has perfect knowledge. It is impossible to even imagine a world in which they could. Since economic value is subjective and changing all the time, how can anyone know how much another person will value one good compared to another at any given time, let alone millions of people in a constantly changing world?

A process, not an end-state

Capitalism is humble enough to realize our limited knowledge. It relies on the price system—a spontaneous, organic result of billions of free choices—to convey information. It relies on consumers, producers, entrepreneurs and capitalists to act on that information. When they get it right, value is created, and it generates new price signals that encourage more of the same. When they get it wrong, loss results and puts a quick end to the waste of resources and sends a signal telling others not to do the same.

The price system conveys so much information in such a small bundle that I can scarce think of an analogy to show just how valuable it is. It is the most sophisticated communication system the world has ever known. Leonard Read’s famous, “I, Pencil” details the way in which the price system coordinates the actions of thousands of individuals who don’t know each other and might not even speak the same language, to bring an item as simple as a pencil to the market.

Self-knowledge

Beyond merely helping us know the preferences of others, the market system can actually help us discover our own assets and abilities. A professor once told me of a Canadian man who played the bagpipes and made small metal replacement parts for other bagpipe enthusiasts as a hobby. One day he saw an ad in the classifieds for someone who could make small metal parts for an airplane manufacturer. He could use some extra cash, and it sounded similar to his handcrafted bagpipe fittings so he gave it a shot. He ended up making good money producing airplane components—an industry he knew nothing about and never fancied himself skilled enough to enter.

If a central planner was trying to make the best use of all the labor and resources in Canada, he might conduct a survey of the skills possessed by the people there. This man could not have made known his skill in airplane manufacture, because he didn’t even know he had it! The discovery process of the market revealed to him knowledge about a value he could create for others that was previously hidden. If we don’t even know our own economic value, how can we know the values of others?

Greater than the sum

We can’t produce what the capitalist system produces. It is greater than the sum of its parts. It conveys coordinating information that lets us each go about our business and produce end results that are beyond our own abilities and comprehension.

Capitalism’s features—the price system, failure and success, profit and loss, trade, specialization, even the hated speculator, middle man and advertiser—are the result of and cure for our ignorance. We need them to help us choose actions that are valuable to ourselves and others.

A capitalism system does not require perfect knowledge. Through it, we can produce what no planner ever could. This humble, dynamic, trial-and-error approach produces wealth and innovation like no other system. It also keeps us humble on an individual level. When you contemplate the production of a simple pencil, and how far beyond your own skill level it is, it certainly puts things in perspective. It reveals how much we need our fellow man, and how much more we can accomplish when we allow this organic market process to coordinate our activities.

Capitalism is Peaceful

Part three in a series of eight on the morality of capitalism.

Free markets are probably the greatest force for peace in history. There are three distinct ways in which capitalism promotes peace.

A negative system

The simplest way in which capitalism is peaceful is by its abstention from direct acts of violence. Free markets offer no positive prescription for what market participants must do. A genuine capitalist system is one of free trade and voluntary association. People are free to do, in the words of Leonard Read, “Anything that’s peaceful.” There are no “do’s,” and the only real “don’t” at bottom is, “don’t use force.” All else is permitted, but there is no guarantee the market will sustain or reward it.

Capitalism is not a master plan or a system created ahead of time by planners. It is really just the result of peaceful interactions. It is what emerges if force is only used in defense against force. The absence of violence results in secure property rights, contracts and all of the other institutional trappings that are commonly associated with capitalism.

Every other economic system requires a direct application of violence. Any regulation, fee, tax, trade barrier, licensing regime or mandate offered in any kind of “mixed” or corporatist or socialist or fascist regime is backed by the threat of violence.

Raising the cost of violence

Beyond the absence of force in individual actions, capitalism promotes a much broader peace between people groups from different regions and of different cultures and backgrounds. Self-interest begets trade; trade begets specialization; specialization begets cooperation. Ricardo’s law of association demonstrates how much more productive we are when we specialize and trade, which means that over time we come to rely on a vast network of trading partners for our own well-being. Some people find this state of affairs troubling and you hear things like, “What if X country decides to withhold good Y from us? We rely too heavily on imports!” There are plenty of natural and man-made things to fear in the world if you wish to worry, but the cutting off of trade in a truly free market ought not to be one of them. If a person genuinely wants to avoid all reliance on other people (not sure how this would work for a newborn), they are free to live as long as they can only eat what they can find or grow on their own. It’s not hard to see that that kind of “independence” is far more risky than being part of an interdependent trade network.

The more people rely on trade with others, the greater the cost to all parties of a conflict. If I grow apples and trade them to you for chickens, the last thing I want to do is tick you off and lose my chicken supply and vice versa. On the flip side, if you have a lot of chickens and I have none, and there is no trade between us, I will be tempted to try stealing some. Lack of trade builds enmity. There is a famous saying, attributed to Frederic Bastiat, “If goods don’t cross borders, armies will.”

In a free market, the cost of belligerence is very high. When governments come in and restrict trade or subsidize violence by building up large militaries, the cost of belligerence is lowered, and the benefits of peace are reduced. It is the state, not trade, which creates conflict.

Friends, not enemies

Pretend you live in a free-market economy. You are friends with your neighbor, who works at a small grocer in town. You find the selection to be limited and the prices high. A new supermarket chain is coming in to town, and you’re excited about it because the lower prices and better selection mean you’ll have better meals and money left over for leisure activities with your family. Your neighbor is unhappy about the new store because it may cost him his job. The store comes in. You shop there and save while also expressing your heartfelt empathy to your neighbor whose store may soon shut down. You maintain your friendship, even though in the economic sphere you cease to be trading partners.

Now pretend you live in a heavily regulated economic system much like ours today. You and your neighbor the grocer are still friends. This time the chain store is not free to sell in your town without a government permission slip. It goes up for a vote. Your neighbor actively campaigns to restrain the store from opening up, which will prevent you from buying better products for less money. He urges you to join his efforts and put a “No chain stores!” sign in your yard. You tell him that you won’t because you wouldn’t mind the chain store. It turns in to a bitter, possibly friendship-ending disagreement.

Politics makes enemies out of friends. In a market, you are free to express your varied preferences with your own actions and the expenditure of your own resources. If someone sells something you don’t like, you don’t have to buy. But the very anonymity and absence of compulsion in markets allows you to form community bonds quite separate from your trading choices. You can maintain friendships with all kinds of people whose goods and services you do not necessarily value. You can befriend an orchestral violinist without being a patron of the symphony. But when resources are allocated politically rather than in a free market, that friendship is hard to maintain when you would vote against a tax to fund the symphony hall, which she supports.

Capitalism allows our diverse tastes to be explored and expressed in a way that doesn’t restrict choices to zero-sum contests of your preferences over others. A cornucopia of choice exists in the market, and this not only means better products, but also the removal of artificially created conflict between choices A and B, such as those that inevitably spring from government management.

Three kinds of peace

Capitalism relies on voluntarism rather than violence in individual interactions. It also creates cooperative networks that dramatically increase the incentive to get along and raise the cost of conflict, while government intervention does just the opposite. Finally, capitalism allows us to live in harmony despite our different tastes and sometimes conflicting demands for limited resources, while political allocation always forces us to take sides and go to battle against each other. If you want a more peaceful world, promote capitalism.

Capitalism is Honest

Part two in a series of eight on the morality of capitalism.

Capitalism is honest because it accepts reality as it is.

Economist Thomas Sowell describes two ways of looking at the world, or two “visions:” constrained and unconstrained. Sowell’s book, “A Conflict of Visions,” is an application of many themes in the work of economist F.A. Hayek; especially Hayek’s views on the dispersed nature of information, the limits to what humans can know about each other, and the problems with attempts to replace organic and decentralized markets with top-down rational planning.

A constrained vision of the world recognizes some things as more or less unchangeable—scarcity and elements of human nature like the desire to better oneself and even frequent greed and nastiness. The best bet is to deal with these realities as best we can, rather than to wish them away. An unconstrained vision sees these as problems to be solved. Humans and our social systems are perfectible, if only we plan and direct our activities in a more rational way.

Regardless of the merits of each respective vision, it is to the great benefit of us all that a capitalist economic system is based on a more or less constrained vision. Even if it is possible that someday people may be better or scarcity may be gone, it’s here, and capitalism doesn’t need it to go away in order to work.

Honest about interest

Greed and self-interest are different. Self-interest is unavoidable. All people are self-interested, even when acting altruistically, because they believe the action will get them closer to where they want to be than inaction. Greed is unknowable to anyone but the greedy person. As Milton Friedman reminded Phil Donahue, greed can’t be prohibited by any system. Capitalism realizes this, and rather than wishing greed away, it provides an incentive structure that channels self-interest, whether greedy or not, to produce the least harm and the most good.

This is the fundamental insight of Adam Smith, that the butcher doesn’t provide meat out of love for his customers, but out of regard for his own self-interest. It’s not good if the butcher is greedy, but even if he is, good can result if he’s in a capitalist system. Capitalism is not harmed if he is a selfless person, nor is it harmed if he’s greedy. In fact, if he is a greedy jerk, it is likely to hurt his business because customers may not like buying from him. Bigots, jerks, scoundrels and greedy people won’t ruin capitalism, but capitalism might ruin them.

Contrast this to government, where officials and bureaucrats are supposed to do not what is good for them, but what is good for society. For government programs to achieve their goals, it would require people—voters, politicians, employees—to be always selfless. Voters don’t bear the cost of casting selfish votes; politicians can spread the costs of pork across millions of taxpayers and concentrate the benefits to a few; and the workers at the DMV or TSA don’t fear losing your business if they treat you poorly. Governmental solutions are not honest about human greed, and they cannot channel it to create benefits for all like the market can.

Honest about scarcity

Capitalism also recognizes scarcity and is honest about it. Love to save trees? Love to save children?

Say there is a forest that is highly valued by the environmental community. It is also the site on which some philanthropist wants to construct a children’s hospital. What’s more important? In government-run or managed economies, this becomes a bitter political question, and everyone is forced into the unenviable position of deciding whether they care more for trees and animals or sick children. In a market system, the property owner can accept offers for the land and a price will emerge. Those who truly value it most will place a higher bid and proceed with their plans for the forest.

To many people, this seems cold and calculating. It feels as though markets reduce children and trees to dollars and cents. In reality, it is an honest way to deal with scarcity, and it allows for the most valuable actions, as judged by the people involved, to be completed. What is the alternative? A system of price caps, regulations or government decisions about land use will not result in the best use of the land, but the one that is most beneficial to political interests. It prohibits caring people who might be willing to sacrifice great amounts of their own resources from doing so, in order to please other people who may only mildly care and aren’t willing to put any of their own resources behind their desires. “Price gouging” is another excellent example of the good that results from capitalism’s ability to deal honestly with scarcity.

Promotion of personal honesty

Capitalism is not merely a system that honestly recognizes and deals with scarcity and greed, it also encourages and breeds trust among individuals. When I go to the store to buy fish, I don’t really consider the possibility that the store may sell me rotten or poisoned fish. No conscious process takes place in which I analyze the incentives facing the store owners and employees and asses my probability of risk. And these are people I’ve never met, people who don’t care about me, and people who I may dislike if I did meet them. Yet the very anonymity and impersonal nature of markets require a tremendous amount of trust from all parties. And we do trust each other! I needn’t trust anyone’s motives or knowledge personally, but the market itself has proven to be so trustworthy that I don’t feel any suspicion.

Capitalist economies produce trusting people. Contrast that to dictatorships or heavily planned economies. If you’ve ever spent time in a country with a heavily controlled economy, you’ve probably experienced things like vendors holding your money up to the light to check if it’s fraudulent.

Dream of the real world

Dreams of a world without scarcity or greed are wonderful. But an economic system that is honest about the scarce nature of resources and people of less-than-stellar character, is an unheralded blessing for humanity. It helps us make better choices with what we have, it channels the otherwise destructive behavior of others for our good, and it makes us more trusting people which creates a more vibrant civil society.

The Morality of Capitalism

This is part one in an eight part series on the morality of capitalism.  Originally posted here

It is a common belief that capitalism “delivers the goods” and creates prosperity, but does so only at the cost of our souls, our dignity and our humanity. Many people doubt capitalism not because they fail to see its wealth-generating capacity, but because they believe it to be immoral. I wish to contest the idea that capitalism is immoral and present evidence to the contrary. Not only do I believe capitalism passes the minimum test by failing to violate basic moral standards; I believe it actively promotes a robust sense of morality in a way far superior to any other system.

Before I present my arguments, I would like to define what I mean by the word “capitalism.” I mean only a system where individuals are free to keep, trade, use or give away property that was peacefully acquired. This is merely a negation of the use of force in the use and exchange of goods. I do not mean a system that is pro-capitalist, or pro-business or pro anything but freedom for the individual.

In matter of fact, capitalists and established businesspeople have always been the most active enemies of capitalism. That is because capitalism is decidedly not pro-business. It allows for human creativity, competition and ceaseless challenges to vested interests as people continually innovate in order to better serve customers. It is a system that does not allow one to rest on their laurels long, and as such, those who have been successful frequently try to slow capitalism down and look to the state to find shelter from its dynamism.

If the word capitalism is distracting, I encourage you to substitute “free trade,” “free markets,” “voluntary exchange” or simply “freedom.” It will not change the meaning of my arguments in the least. I have chosen to use the term capitalism because it creates a more provocative title and because the term is embraced by the curators of this blog. There are good arguments both for and against the use of the term capitalism by advocates of free markets, but I wish to avoid this debate at present.

The titles of the next seven posts in this series provide a clue as to where I am going:

Through these posts I will attempt to briefly explain why a system of free enterprise is the best possible way to promote these virtues. I don’t think we should merely accept or “put up with” capitalism, but we ought to embrace it as the key to unlocking human potential—moral, mental, spiritual and physical. There is much more to be said on the morality of capitalism than I will say in this series, and I mean only to present some of the most basic arguments.

The Timeless Way of Being

I am currently reading Christopher Alexander’s The Timeless Way of Building on the recommendation of a friend.  It is one of those books that is so full of insight that it cannot be absorbed all at once, especially with the analytical part of the brain.  It is as intuitive as it is logical.  It’s the kind of thing that forces you to think outside of your paradigms, but in a way that is oddly comfortable.

Yesterday a section of the book stood out to me in particular.  It was about the patterns in building that are good at resolving conflicting forces, and those that are not.  Alexander maintains that there is near universal agreement on what patterns of, say, a window or a garden resolve conflicting forces.  He asks people how they feel in a certain window area vs. another, and 95% or more feel good in the same one.  It may seem outlandish to claim that there is so little disagreement about what makes for a good pattern in building, but the key for Alexander is the word feeling.

He does not ask what they think of flat windows vs. Bay windows.  He does not ask their opinion on window material or position.  He does not ask what a builder should do.  He does not ask anything that evokes a belief or idea or a connection to some overarching plan or policy.  These ought expressions get in the way of the is  of the forces at work within us.  It turns out it is incredibly hard to be honest with ourselves about what feels good.  It takes a lot of discovery, and shedding all the baggage and ideology we carry around.

It someone asked me what I thought of using locally grown ingredients in food, my mind would immediately leap to the idiotic and regressive political movements that seek to force economies into localism, drive up prices, drive down quality, get everyone too involved in everyone else’s business while self-righteously proclaiming the superiority of an absurd proximity bias.  In other words, my thoughts on the matter would probably be negative.

Because of this, it is possible that I would overlook an opportunity to bite into a delicious and juicy local fruit at a farmers market, for fear of giving credence to the food busybodies.  These thoughts – my view that no one ought to get preachy about local ingredients – might prohibit me from finding alignment with the genuine feelings within me.  It’s harder than it first seems to constantly stay in touch with what feels right – with who we actually are – in the face of all the things we think we should be and believe.

This is one of the reasons democracy is such a poor way of resolving collective action problems.  It not only seeks and allows our mere opinions, it rewards our proclamations of what we wish we thought, or what we pretend to want, instead of what actually make us fuller, happier people.  It rewards and glorifies the boring lies and spin we weave into our narratives, and vilifies our honesty about what really harmonizes with us.

It’s much more fruitful to dig down to the bottom and discover what you really do feel, and work with those forces rather than pretending they don’t exist.  This is why capitalism is such a powerful and beautiful system of social coordination; because it takes humans as they are, imperfect knowledge and motives and abilities, and the scarcity and difficulty the natural world presents, works with it, and channels it all in a harmonious and life-giving way.  Capitalism is honest.

This is why the economic way of thinking – the rational choice model – is so enlightening and useful in explaining human behavior and institutions.  It does not condone or condemn, it just accepts ends as a given and seeks to understand what means will and will not achieve them.

Certainly some goals or desires or feelings are better than others.  Certainly some are worth trying to change.  But playing pretend and building patterns around forces we wish existed in us and in others, instead of what’s actually there, doesn’t help.  There is no better way to express this insight than to quote The Timeless Way at length:

“But a pattern which is real makes no judgments about the legitimacy of the forces in the situation.

By seeming to be unethical, by making no judgments about individual opinions, or goals, pr values, the pattern rises to another level of morality.

The result is to allow things to be alive – and this is a higher good than the victory of any one artificial system of values.  The attempt to have a victory for a one-sided view of the world cannot work anyway, even for the people who seem to win their point of view.  The forces which are ignored do not go away just because they are ignored.  They lurk, frustrated, underground.  Sooner or later they erupt in violence: and the system which seems to win is then exposed to far more catastrophic dangers.

The only way a pattern can actually help to make a situation genuinely more alive is by recognizing all the forces which actually exist, and then finding a world in which these forces can slide past each other.

Then it becomes a piece of nature.”

Mr. Alexander is an architect and is here talking about patterns in rooms, gardens, buildings and towns.  He refers to things like the human desire to go towards the light in the room, and the desire for comfortable seating.  The patterns he seeks are those that bring into harmony such forces.  But read the above again, slowly, and consider how much broader this insight might apply; to institutions, to social coordination problems, and to our own lives.

Bitcoin – Because Everyone Has to Say Something

Whatever it is, whatever it will become, Bitcoin is pretty cool.

I’ve enjoyed watching it get a lot of attention, and draw attention to big ideas and questions like the role of money, decentralized orders, radical choice, polycentrism and the digital future.  It’s also a little depressing to read the flow of articles on Bitcoin coming from most journalistic outlets.  Not because they like or dislike Bitcoin, or because they describe it correctly or incorrectly, but because their grasp on the economics of money, from its origin to its uses and history, is shaky at best.

No one need be an expert on economics – especially the conceptually difficult arena of monetary economics – to write for a newspaper.  But when you are writing about money, and confidently, it behooves you to dig in and discover what this money is all about.  Rothbard’s famous quote applies here,

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

Thankfully, none of this economic ignorance matters as it regards Bitcoin itself.  Bitcoin doesn’t care what journalists think.  The always quotable and insightful Jeff Tucker summed up why very nicely in a recent Facebook post,

“It’s so strange how this how thing is becoming some kind of fight between pro- or anti-BTC, as if this were some policy thing. It’s not. This is a market technology. It either works or it doesn’t. It’s like being for or against email, for or against online media, for or against Skype. I mean, if you don’t like it, don’t use it. Whether it succeeds or not is up to any intellectual; it’s up to the market.”

The downside of journalistic economic ignorance is that it may result in confused ideas among the public, and therefore create incentives for confused policy from lawmakers.  I’ve heard journalists claim that government guarantees are the best and only sign of a sound money, (because, you know, hyperinflation never happens) and that the core purpose of a currency is price stability (because, of course, markets have been traumatized when trying to adjust to the rapidly falling prices in, say, the tech industry).  It’s sad to see such silliness, but it’s also great to see discussion everywhere about what makes a currency.

It can be helpful to compare money to language.  Both are spontaneous orders.  Both are tools that facilitate exchanges between people.  Both are wholly dependent on the individuals involved for their value and evolution; yet neither can be controlled by any one person.  Try introducing a new language, or even a single new word to an existing language.  Not easy.  Yet anyone is free to try, and new words emerge constantly.  They stick around only so long as they are perceived as valuable ways to facilitate an exchange of ideas.  It doesn’t really matter what experts think makes for a good word or language.  It matters what actually takes root in the world – a world where people face trade-offs and try to get the most value for the least effort.

Bitcoin kind of reminds me (as an admitted computer ignoramus) of programming languages.  Computer programmers have developed and become conversant in all kinds of languages that mean almost nothing to me.  These emerged out of nowhere in a relatively short period of time.  Some lived, some died.  Today, they provide an incredibly valuable function that serves not just programmers, but all of us, even though almost none of us speak the language.  Perhaps Bitcoin could evolve similarly.

Even if never the dominant currency “above the table” so to speak, it may find a powerful place in behind the scenes markets among niche experts, just as programming languages do all around us.  Maybe you or your friend or your uncle will never own Bitcoins – none of you probably write computer code either – but perhaps the crypto currency will be busy at work facilitating exchanges among many market participants you interact with.

I don’t really know, and I’d rather spectate than speculate.  It’s pretty fun to watch, and it’s even better to hear the chatter about a lot of topics I never expected to see in the public conversation.  Money is a mysterious and complex thing.  It’s prudent in such matters to refrain from confident proclamations.  I’m as likely to buy-in to someone’s prediction of Bitcoin as I am their prediction of which words will fall in and out of use in the next ten years.

Interview with an Optimist: T.K. Coleman

It’s not hard for any moderately observant person to see the oppressiveness of the state all around us. We are taxed, regulated, coerced, controlled, patted down, pulled over, censored, cited, and sued anytime we step outside of the ever-changing boundaries prescribed by the political and bureaucratic classes. Many take umbrage at these violations of our innate human freedom and dignity. We engage in all kinds of activities to push back against the state.

It doesn’t always work, and certainly not immediately. It’s all well and good to try to change the world, but how can we live fulfilling lives in the meantime? The world as it is is unfree. Today, I’m going to talk to someone whose focus is not on how to make the world freer, but on how to live free in the world as it is.

My good friend TK Coleman, creator of the blog Tough-Minded Optimism, has the audacity to claim that we can be free here and now, no matter what the world brings — and he practices what he preaches. TK has an amazing mind, is a lifelong learner, and somehow manages to maintain a mindset of freedom and optimism in some of the most oppressive circumstances. I have learned so much from him and look forward to my daily TMO emails. He’s going to share his philosophy and how he finds a state of freedom while surrounded by a state of oppression.

IMM: First, tell us just a little bit about yourself.

TKC: I currently live in Los Angeles, where I’m actively pursuing my dreams in writing, entrepreneurship, and media production. I’m originally from Chicago, where I grew up in the era of the Michael Jordan’s Bulls dynasty. I’m the son of a preacher man. My father is a pastor, and the majority of my childhood involved being immersed in church services and other related activities.

While I wouldn’t describe myself as religious, I’m one of the lucky few pastor’s kids who grew up in an environment of organized religion without being emotionally scarred or turned off by many of its negative aspects. My academic studies and professional experiences range from philosophy and theater to financial analysis and public speaking. My true love is philosophy. I have a real passion for learning and contemplation. I enjoy pretending that things are more complex than they really are.

IMM: You recently had a horrible run-in with the police. Can you walk me through that experience?

TKC: Sure. Basically, my wife and I were heading out to a Hermosa Beach comedy club for a date night. It was around 7 p.m. on a Friday. We were pulled over by a police car about two miles from where we live. Two cops got out of the car and one of them approached my window, while the other approached my wife, who was sitting on the passenger side. When I let my window down, he asked me if I had legit identification. I answered, “Yes, sir,” and in an unexpected turn of events, he asked me to step out of the car.

Because I know that police officers are very sensitive to how they’re spoken to, I always speak to them with the utmost respect and cooperation. I’m not interested in giving them any reasons to interpret my behavior as threatening. So I politely said, “Yes, sir,” and stepped out of the car as instructed. The officer then put me against my vehicle and started to search me. He grabbed my wallet out of my pocket and sat it on top of my car. He asked me if I had a record. I said no. He asked me if I had any drugs or weapons on me. I said no.

Then he said, “This is how we do it in Los Angeles.” At that point, he walked me over to his car and began searching me more thoroughly. After that, he threw me in the back seat of their car, and both officers started to question my wife. One of the officers went inside our car and started searching around. I had no idea what was going on. They never told me why they pulled us over. They never asked to see my license. They never asked to see registration. After questioning my wife for about 10 minutes, they came back to their car and did a background check on me.

After my record showed up as clean, they let us go. I won’t sugarcoat the experience and say they were kind and respectful. They were rude and vulgar. They were physically aggressive with me, and they harassed my wife. They acted like bullies. At the end of the experience, they gave us no tickets, no warnings, no apologies, and no explanations. Just another day at the office for those guys, I guess.

IMM: Aren’t you angry at the police? How do you live free when something like that happens, or can happen at any time? Did that incident challenge your worldview?

TKC: While I certainly don’t condone the manner in which those police officers treated my wife and me, I wouldn’t describe myself as being angry with them. My absence of anger, however, has nothing to do with the cops. I am not angry, because being angry at them simply doesn’t serve me in a constructive way. Everything that I want, can, and need to do about that situation is more effectively executed when I’m acting from a state of composure and self-control. Since being bitter at those cops offers me no incentives of the kind I would be interested in, I choose to focus my attention in a life-giving way. It not only feels better, but it’s also a more creative and practical approach for me.

This might be a good segue into discussing a critical component of my philosophy. It’s captured in the phrase “Never let anyone steal your fire.” The basic idea is that we are autonomous beings who hold the unconditional power to dictate our inner disposition. While external forces may have the ability to impose unwanted conditions on us, we ultimately get to decide how we perceive and process the data of our experience.

Some people, for reasons as small as a bad night’s sleep to factors as grand as being a victim of abuse, are out there carrying around all kinds of potentially harmful thoughts. When we interact with these people, it’s extremely easy to let them determine our mood and, hence, our quality of life. Refusing to let anyone steal your fire means you don’t become a sponge for other people’s energy. It means you don’t allow your inner spark, your enthusiasm, your passion for life to be snuffed out by someone who’s taking their unhappiness out on you. If you let them steal your fire, they win.

Those police officers took control of my body, but they can’t touch my mind. They had the guns and badges, but I have the dominant vibration because I won’t give them the permission to influence my attitude. I win. They may have issues going on inside themselves, but I don’t take ownership of their mess. They’ve probably ruined lots of people’s days with their behavior, but not mine. When it comes to how I feel, I hold all the badges and the guns.

IMM: What was your response? Did you register any protest with the police?

TKC: Because of the way the situation went down, I wasn’t focused on their badge numbers. I was watching my wife the whole time. My focus was on her safety. Once they let us go, we got out of there. So I didn’t have much information on them. But I did call my local police department and the sheriff’s department, and they responded very respectfully to my concerns.

IMM: There are a lot of people that seek legal or political action or try to educate others in order to fight back against state oppression. Do you think that’s the wrong approach?

TKC: I have no problem with people who aggressively fight against oppression through legal and political battles. Some people get really fired up by that approach, and they seem to be quite effective at it. I say go for it. No matter what your cause is, you have to adopt an approach that charges you up if you want to have an impact.

I don’t think there are “right” or “wrong” approaches in a legalistic sense. I think there are approaches that are more or less effective in relation to desired goals. So if you have a way of going about life or politics or whatever, then I really have no criticism to offer. It’s up to each person to do the cost-benefit analysis on their actions.

Those of us who consider ourselves advocates of freedom comprise a diverse community. Some of us like to get out on the front lines and fight as political activists, while others prefer a more indirect educational approach. I’m pretty nondogmatic about all of this. If you support freedom, I support you.

IMM: Isn’t your worldview just naive, fairy tale stuff? It can sound like feel-good mumbo jumbo to someone who’s got a boot on their neck. Are you too idealistic?

TKC: Well, I should begin by challenging the distinction between the guy who has the boot on his neck and the guy who doesn’t. Lots of self-help gurus let people get away with this, and I think the results are tragic because they allow people to frame messages of hope in a way that’s significantly disadvantaged. If by “boot on your neck” you mean the experience of pain and suffering, then we all have a boot on our neck in some capacity.

Who’s the guy that purports to teach you and me a lesson on what it REALLY means to suffer? One person has money problems, while another has health problems. One person can’t find true love, while another grieves the loss of their soul mate. One person has all the money they need, but can’t overcome the trauma of a lifetime of childhood abuse. Another person grows up with the perfect family, but is constantly harassed and teased because of the way they look. I could go on and on, but my point is this: It’s easy for one person to use their particular experience of difficulty as the definition of what it means to struggle, but no one has a monopoly on heartbreak and hardship.

My suffering is as real to me as yours is real to you.

Whether we share the same philosophy or not, we all share the human experience of being vulnerable to death and disappointment.

It’s unwarranted to assume that optimists are optimists because they don’t know what it feels like to have a boot on their neck. That basically assumes that we would all be pessimists if we were only smart enough to realize how bad the universe actually is. I think it’s the other way around. I’ve never seen a pessimistic belief that was capable of surviving a few well-thought-out questions. So I think pessimism is the fairy tale. I think pessimism is too idealistic.

I became an optimist not because I have a ton of evidence for how awesome life is, but because I lack sufficient evidence to make negative judgments. I arrived at an optimistic perspective through the back door of skepticism, rather than the front door of faith. The real enemy of pessimism, in my opinion, is not positive thinking, but critical thinking. For me, optimism isn’t about deluding yourself with positive BS. It’s about refusing to delude yourself with negative BS. It’s about subjecting the doom-and-gloom perspective to the same sort of scrutiny we apply to the Pollyanna perspective.

So no, this isn’t about feel-good mumbo jumbo. It’s about feel-good mental judo. It’s about using your intelligence in way that’s healthy, productive, and personally fulfilling. It’s not about throwing your brain out the door. It’s about throwing your BS out the door.

Here’s another point: Either an idea is useful to you or it’s not. If it’s useful, use it. If it’s not, throw it out. Forget the labels. Use what’s useful no matter what it’s called. This isn’t a religion. Nobody’s required to believe anything that doesn’t rub them the right way. I haven’t received any messages from beings who’ve come from outer space, so there’s no special reason why you ought to listen to me. Your experience is your authority. If something works, there you go. If not, don’t waste your time arguing with me. I’m just some random happy dude who found his own way. Go find yours.

IMM: Isn’t it kind of selfish to opt for this Zen-like retreatism for your own personal happiness while people suffer all around you? Shouldn’t you take action to help them be free in the physical sense?

TKC: I personally don’t advocate retreatism. I don’t think we should all just sit around drinking green tea 24 hours a day, but I also would hesitate to join the chorus of those who worship the gods of guilt-driven, duty-based, obligatory activism. I think Howard Thurman nailed it on the head when he said, “Don’t ask what the world needs. Ask yourself what makes you come alive and then go do that. Because the world needs people who have come alive.” I swear by that saying.

The real tragedy of charity in contemporary culture is not that too few people are helping out, but that too few people have an appreciation for the social and economic value of self-interest.

Now here’s another interesting point… I don’t think optimistic philosophy is causing the number of charity volunteers to decline. If anything, it’s the other way around. When you are afraid of the world, when you feel like a worthless drag, when you believe evil prevails over goodness, when you believe your life is harder than everybody else’s, what causes are you going to be signing up for? Who are you going to be a benefit to with that kind of mentality?

The people who are most likely to help others are the people with beliefs that reflect an inner sense of abundance. They see themselves as having something to offer (even if it isn’t money). They believe in their capacity to make a difference. They believe in the potential of those they help. Those are all the same ideals I advocate.

IMM: I’m a big fan of books and articles on economics, political philosophy, history and other areas that illuminate the problems of the state and reveal the power of markets. Do you think it’s unhealthy to spend so much time with these ideas? Would I be better off remaining uneducated about the problems of the state — in other words, is ignorance part of the “bliss” you’re trying to achieve?

TKC: I think it varies from person to person. If it gets you going in a constructive way to study those things, then study away. If it’s making you paranoid without adding benefits that offset the costs of your paranoia, then it might be time to find a healthier and more fulfilling hobby. A good analogy for this would be The Lord of the Rings. One character was able to carry the burden, while another was transformed into a demon by those same burdens. There’s nothing wrong, as a matter of principle, with putting your attention on so-called “bad news.” You just have to be your own judge and have a good feel for the burdens that you can handle.

If we’re going to say “Ignorance is bliss,” then we should be careful to define what kind of ignorance we’re talking about, because ignorance of one’s rights and possibilities, for instance, is certainly not blissful, in my opinion. I’m not actively pursuing ignorance as a spiritual path. For me, intelligence is bliss, understanding is bliss, and creativity is bliss, so those are the sorts of qualities around which I build my particular brand of optimism. Another way to put it would be this: Optimism is not the denial of truth, it’s the recognition that truth isn’t something we need to run from or be afraid of. When you take yourself seriously as a creative force, you can face the truth with confidence and composure.

IMM: So how do you balance being knowledgeable about the way the world works with not getting angry at its deficiencies?

TKC: For me, exposing my mind to the truth is not a discouraging exercise. If confronting the truth feels like you’re being whacked upside the head with a billy club, it may be because you’re beating yourself up unnecessarily, you’re communicating the truth to yourself in an unhealthy way, or you’re predominantly focusing on those parts of the truth that are most challenging to you.

People don’t feel beaten up and broken down because of the truths they discover. They feel beaten up and broken down because of the other truths they omit and overlook. If your encounters with truth are failing to increase your sense of personal freedom, the solution is not less truth, but more truth.

If you focus on the world’s deficiencies and stop there, then you’ll probably feel like crap. But why stop there? It’s intellectually dishonest to focus on what’s wrong with the world without acknowledging our rich history of overcoming incredible odds. It’s delusional to lie to yourself about all the crap that’s going on in the world, but it’s also delusional to lie to yourself about being unable to create positive changes. The truth is the truth, even when it’s not negative.

So for me, I find that balance by taking a holistic approach to my studies. I don’t limit myself to just one perspective. I study the problematic truths and the promising ones.

IMM: Any final thoughts?

TKC: My message to the world in a nutshell is quit trying so darn hard to be positive. Optimism isn’t about making positive assumptions, nor is it about forcing yourself to feel good. Optimism is simply the art of remaining open to possibility. In other words, what happens when we are no longer occupying the mind with our judgments, labels, and dogmatic opinions. When we are not trying to artificially make ourselves believe that life is great and when we are not busy assuming that it’s the end of the world, we are left with nothing but possibility.

That state of being open to possibility without judgment is the source of creative power, personal growth, inner peace, and pleasant emotion. Positive assumptions are needed only when you have negative assumptions that you’re trying to overcome. But when you drop your assumptions altogether, your soul stands naked in the open fields of possibility. And what you choose to create from that space is up to you.

A Few Quotes

On politics and government

“Aristotle said that some people were only fit to be slaves. I do not contradict him. But I reject slavery because I see no men fit to be masters.” – C.S. Lewis

“I am really sorry to see my Countrymen trouble themselves about Politics. If Men were Wise the Most arbitrary Princes could not hurt them. If they are not Wise the Freest Government is compelled to be a Tyranny. Princes appear to me to be Fools. Houses of Commons & Houses of Lords appear to me to be fools, they seem to me to be something Else besides Human Life.” – William Blake

“Politics is a dirty business, a ruse, an ideological cul-de-sac, a vast looter of intellectual and financial resources, a lie that corrupts, a deceiver, a means of unleashing vast evil in the world of the most unexpected and undetected sort and the greatest diverter of human productivity ever concocted by those who do not believe in authentic social and economic progress.” – Jeffrey Tucker

“Sed quis custodiet ipsos custodes?” – Juvenal

On tyranny

“Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive.[…] those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth.” – C. S. Lewis

“The struggle for freedom is ultimately not resistance to autocrats or oligarchs but resistance to the despotism of public opinion.” – Ludwig von Mises

“As long as the public identifies order with law, it will believe that an orderly society is impossible without the law the state provides. And as long as the public believes this, it will continue to support the state almost without regard to how oppressive it may become.” – John Hasnas

“I have sworn upon the altar of God, eternal hostility against every form of tyranny over the mind of man” – Thomas Jefferson

On freedom

“And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works.” – Frederic Bastiat

“Every man must have freedom, must have the scope to form, test, and act upon his own choices, for any sort of development of his own personality to take place. He must, in short, be free in order that he may be fully human.” – Murray Rothbard

“I freed thousands of slaves. I could have freed thousands more, if they had known they were slaves” – Harriet Tubman

“The only way to deal with an unfree world is to become so absolutely free that your very existence is an act of rebellion” – Albert Camus

Generational Wealth: Hesiod versus Aristotle

Originally posted here.

It is a great irony that prosperity affords posterity the luxury of forgetting its origins. Though not a hard-and-fast rule of societal evolution, generations who grow up wealthy often lack respect for or understanding of the values and ideas that generated the very wealth from which they benefit.

There is an honesty, realism, and practical virtue often accompanying generations that have to endure difficult labor that is sometimes lost on later generations that inherit a comfortable material life. This is not a new phenomenon but is present throughout history. Compare, for example, the life and work of the ancient Greek poet Hesiod with that of the great philosopher Aristotle some 300 years later.

Hesiod lived sometime around 700 B.C. in the region of Boeotia, which he described in his Works and Days as a “cursed place, cruel in winter, hard in summer, never pleasant.” Though little is known about his life, he was apparently a shepherd who claimed to have been given the gift of song by the Muses one day while tending his flock. Regardless of the source, Hesiod’s poetry is full of colorful mythology, practical wisdom, and sound ethics. The ancient poet wrote at a time near the end of the Greek Dark Ages and at the beginning of the Archaic period. Greece was a highly decentralized region made up of mostly small, self-governing societies, and the merchant class was just beginning to emerge.

It is in this context that Hesiod gives advice to his wayward brother Perses in his Works and Days. The poem is a very practical treatise on the value of hard work, the need to cultivate strong personal character and to focus on one’s own welfare rather than the affairs of others. There is a strong individualism throughout Works, and even a foreshadowing of Bernard de Mandeville’sGrumbling Hive and Adam Smith’s invisible hand, as Hesiod describes the value of self-interest and the ability of envy and strife to motivate hard work and wealth creation.

Hesiod makes no apologies for the pursuit of wealth. Indeed, he sees the hard work required to obtain it as a way of becoming virtuous:

But the immortals decreed that man must sweat to attain virtue.

And

If you work, you will be dearer to immortals and mortals; they both loathe the indolent.

No shame in work but plenty of it in sloth.

If your work brings you wealth, you will be envied by the slothful,

because glory and excellence follow riches.

Whatever your lot, nothing will be as good as work.

Ancient Greeks must have heeded Hesiod’s advice. Three centuries later, Greece had grown in power and wealth, and from it began to flower some of the greatest contributions to classical and modern art, science, law, and philosophy. It was into this culture that Aristotle was born.

Aristotle was the son of a royal physician and a member of the aristocracy. He enjoyed an excellent education at Plato’s academy, which allowed him to direct all of his energy to philosophic and scientific inquiry. There is no doubt that the product of his genius was tremendously important to the advancement of the sciences and to the advancement of liberty. However, several passages in his Politics stand in sharp contrast to the views of his Greek predecessor, Hesiod, regarding the value of work, wealth, and individualism.

Compare the passage above on work as a means of obtaining virtue and wealth as a precursor to “glory and excellence” to Aristotle’s description of those fit for citizenship in his perfect state:

Now, since we are here speaking of the best form of government, and that under which the state will be most happy (and happiness, as has been already said, cannot exist without virtue), it clearly follows that in the state which is best governed the citizens who are absolutely and not merely relatively just men must not lead the life of mechanics or tradesmen, for such a life is ignoble and inimical to virtue. Neither must they be husbandmen, since leisure is necessary both for the development of virtue and the performance of political duties.

Aristotle’s aristocratic upbringing leads to an arrogant view of not only who should be a citizen or leader but also how a state should be governed in general. Hesiod’s focus is on the individual and how he might improve his own lot and leave others alone, while Aristotle is more concerned with selecting the best men to plan and rule the rest. Like Plato before him, Aristotle thought those fit to rule were educated men like himself — men who had sufficient leisure and could stay out of “unnatural” businesses like retail trade and moneymaking.

There is no doubt that — probably thanks to the intellectual lifestyle afforded him — Aristotle provided one of the best defenses for private property, and his work in logic and metaphysics remains unrivaled today. However, Aristotle’s political and economic thought leaves something to be desired by those who value free-market capitalism, the role of the entrepreneur, and the positive power of self-interest and individuality.

The main difference between these two men was their wealth and status. Hesiod, perhaps due to necessity, was a practical thinker. Extolling the virtues of hard work was not mere speculation; I doubt Hesiod could afford to look down his nose at labor. Aristotle, on the other hand, could afford to disparage trade and labor. The wealth of Greece provided opportunity for full-time teachers and thinkers to ponder anything they chose. Indeed, the power of wealth to fund such speculative philosophy is one of its greatest advantages, and as one who spends hours studying, I would not wish to return to a poor agrarian society. Still, such generational wealth carries with it a certain danger.

Anticapitalist theories share in common an inability to take human nature as it is. Rather than analyzing man as a complex creature who will always act to achieve what he perceives as good, anticapitalist theories tend to focus on what the theorist wishes man to be and often overlook the necessity of market exchange for human improvement. From the vantage of a moneyed aristocracy, it is easy to be “above” the hustle and bustle of the marketplace, and to pursue higher ideals than material prosperity — forgetting that such prosperity is what supports the hours of speculation.

I do not believe one must be poor to understand and appreciate capitalism, nor am I opposed to generational wealth or inheritances. It does seem, however, that there is a certain danger in living a life completely detached from market processes and the pursuit of wealth through production and trade. Far worse than a physically lazy trust-fund baby is a generation that has become intellectually lazy. With wealth comes the temptation to rebel against existing institutions and ideas — after all, you can afford to. While iconoclasm and courage to question the status quo are cherished virtues and much needed in defense of liberty, they are not ends in themselves. There is no heroism in revolting against the existing order if the existing order is better than the ideals for which the revolutionaries stand.

In our age of plenty where “higher learning” is ubiquitous, it is imperative that we remain realistic in our assessment of human nature and not forget that the basic principles that produced our prosperity still govern human action. Teaching future generations the theories of individual liberty and capitalist production is important; perhaps letting them experience the theories in practice is as well.

The Neutrality of Everything

A hammer is neither good nor bad.  It is a tool.  It is useful.  It can be useful in achieving good things, and equally useful in achieving bad things.  It is valuable because it is useful, but the fact that it has value does not make it good or bad.

The same is true of an iPhone.  The same is true of money.  These are all morally neutral, inanimate objects (Siri notwithstanding) that become extensions of human will and volition, and act as a catalyst for whatever good or bad ends we intend.  They deserve neither vilification nor praise, except in regards to their usefulness.

Tools have their own qualities and characteristics; they have their own nature.  They will react in certain ways to certain conditions.  If you slam an iPhone down on a hard surface, it will crack.  It’s silly to get angry at the characteristics of the iPhone.  Part of growing up is learning to understand and work with the natures of the objects around us, rather than being surprised or angered by them.

So much for tools.  What about people?  Immanuel Kant, along with just about every decent person I’ve met, would bristle at the thought of people as morally neutral tools; useful if properly employed, but neither praise nor blameworthy in and of themselves.  For good reason.  People as objects is probably a terrible and incorrect notion.  People have wills and can choose right or wrong.  People don’t just react, they can act to thwart one another.  They have qualities that take them beyond the level of tools.  That may be their place in the cosmos, but what about in our day-to-day perceptions?

It can be incredibly enlightening and freeing to treat people with the same neutrality we treat our iPhones.  Not because they are the same, but because seeing them that way can help shed bitterness and accomplish more.  If, just like you would with an inanimate object, we try to learn the natures of those around us and get an idea of how they will react to conditions around them, we will be better equipped to cooperate for mutual benefit.

Sure, they have motives, but ascribing motives and assuming intentions are often hindrances to productive relationships.  Whether or not it’s for good reason, if you know a person gets angry every time you say X, rather than begrudge them this habit, adapt.  Learn to navigate the world of human relationships with the same judgement-free attitude you do the non-human world.  People have natures.  They’ll act in accordance with them.  Don’t hold it against them, learn it, know it, expect it, and work with it.

There are certainly times when some kind of confrontation or intervention is required.  There are times when working around a person’s modus operandi may be worse than trying to help them see the need to change it.  I think these times are rare, and only really worth it when a kind of standing invitation to do so exists in the relationship.

See how it works to view people as morally neutral, rational agents, rather than out to help or harm you.  It can turn even unpleasant interactions into a kind of interesting puzzle.  It may be untrue, but it is useful and in some ways makes it easier to appreciate people and treat them well.

(An alternative approach, much more bizarre and playful, is to treat everything like we treat people.  Ascribe will, motive and personality to your car, your iPhone and your coffee mug.  Perhaps I’ll discuss this another day…)

The Art of Science

A fascinating article in the Wall Street Journal this week claimed that great scientists needn’t be good at math.  E.O. Wilson argued that big ideas, not number crunching, are the source of major breakthroughs.  In other words, it’s the art of science, not the science, that inspires the game-changers.

I think there’s something here that applies beyond the physical sciences.  The social sciences, in particular economics, have been in a race of sorts to see who could mathematize fastest.  While complex modelling and statistical analysis can illuminate, they cannot generate.  Data is meaningless without a theoretical lens through which to interpret it.  Path-breaking work comes not from those with the best “hard” skills, but from those with the best paradigmatic innovations.  The best work seems to come from seeing the world differently, constructing theories from the new lens, then running some numbers to see how they look from the new vantage point.

This bit about seeing the world anew has never been more profoundly communicated to me than in a book by the novelist Arthur Koestler, The Act of Creation.  Koestler sets out to reveal general rules of creation that apply across media – from the creation of a joke, to a work of art, to a technological invention.  It is a stunningly informative and ponderous work.

Koestler describes worldviews as matrices of thought; well-worn knowledge and assumptions that we carry along with us and use as shortcuts for understanding our world.  The eureka moment – the burst of laughter in a joke, the flow in the making of a sculpture, the sudden insight that unlocks the innovation – comes when two separate matrices intersect.  Koestler calls this intersection “bisociation”, and sees it as a kind of relieving of tension as two paradigms moving in what appears to be unrelated directions suddenly converge.

A poignant example in the book is Archimedes’ discovery of how to measure the purity of gold in a crown.  Archimedes knew the weight per volume of gold vs. other metals, but he could not melt the crown down to figure out its volume.  The thought matrix relating to weights, volumes and metals was completely unrelated to Archimedes afternoon bathing.  Yet as he slipped into the tub and noticed the water level rise, matrices collided and the bath solved the measurement problem of the crown.  It was not new, fancy calculations that resulted in this breakthrough on determining purity in oddly shaped gold items.  Instead, it was a bisociation of existing knowledge on water displacement with that on metallic weight.

Not only is creation about seeing familiar facts in new ways, it’s about allowing oneself the time and mental play to do so.  Some of the greatest eureka moments have come upon waking from a dream, going on a long walk while the mind wanders, or taking an explicit break from the problem at hand.  It is true, the great innovators have been versed in the science of their craft.  But what separates creators from specialists is not better technical expertise, but new eyes that generate new ideas.

Think big.  Explore.  Don’t let a lack of mastery keep you from probing the mysteries that fascinate you.

Five Myths About NASA

Most people agree that government programs are wasteful, and many are unnecessary.  But even small government advocates have a soft spot for NASA.  It’s pointed to as an example of a worthwhile government program because, after all, not only does it have a really cool mission, but it’s also resulted in microwaves and memory foam!  These are valuable contributions that justify it’s value, even if space exploration itself hasn’t proven enough.

Not so fast.  Let’s put on our economist lenses and look a little closer to expose five common myths about the value of NASA:

Myth #1: It’s worth it.  This is a claim without a test.  Without a profit and loss model, how can anyone know the value of NASA inventions and spin-offs products compared to the cost of the program?  Why not let a voluntarily funded outfit do space exploration work and pay for it by selling usable discoveries they make in the process?  That would reveal the value of such inventions to consumers over and above the cost of research.

It’s impossible to judge the value of big expenditures absent a market.  Imagine a company that picked an ambitious effort, like digging the worlds largest, deepest pit, and continued to fund it to the tune of billions a year.  I’m sure some interesting and useful stuff would be found down there, and some new technologies would result from all the efforts to dig deeper.  But it’s hard to imagine these side benefits being sufficient to draw an entrepreneur into such a venture.

It’s not enough to simply point to cool gizmos as proof of the value of a program.

Myth #2: We’d never have a bunch of cool tech without NASA.  This is of course impossible to know.  But what we do know is that the existence of NASA attracts many great technological and scientific minds.  These are not minds that would otherwise be sitting idle.  They would likely be doing much the same thing – inventing, solving problems, and creating stuff.  Many of the spin-off technologies from NASA would certainly have come from other organizations.  Maybe even better things would have resulted.

It is also worth remembering that none of the NASA technologies were created in a vacuum.  Invention is an incremental and messy process, full of simultaneous discovery, back and forth modification, and adaptation.  Because NASA gets the credit for something doesn’t mean it emerged from the secret NASA chambers untouched by any other researchers in the world.  This was stuff that was being tinkered with the world over.  If it has commercial value, there’s a good chance it will be discovered and put to use.  Who has more incentive to do so; an organization that doesn’t need to make widespread use of its technologies to survive, or a business that does?

We can’t know what would and would not have been invented without NASA, but it seems pretty odd to grant the assumption that a government agency is more likely than a market institution to innovate.

Myth #3: It’s doesn’t cost that much.  Maybe $18 billion a year is not that much compared to all the other stuff taxpayers are being forced to pay for.  But the costs of NASA are not just monetary; there’s opportunity cost.  In high-tech areas with highly skilled workers, the opportunity cost is very high.  What else might those people be doing to create value for the world if they weren’t there?  What projects are not happening because NASA is?  Opportunity cost is a big deal.

Not only is NASA an attractive option for a lot of really smart people because it sounds cool, but the fact that every other industry has become so heavily regulated and restricted makes other options artificially less attractive.  We all lose as a result.

Myth #4: They can spend our money better than we can.  Economic value is subjective.  As such, it’s impossible to know whether someone is happier with how you spent their money for them than they would be if they spent it themselves.  The best proxy is behavior.  What people freely choose to do with their money reveals what they value most at the time of choosing.  The mere fact that government programs can’t get by asking for voluntary contributions reveals that people value the uses to which they would put their money more highly than what government does with it.

When people spend their own money not only do they put it to their highest valued use, but their actions affect prices, which in turn send signals to producers and entrepreneurs indicating what kind of stuff people want more of.  More effort goes into producing more and better of that stuff, which creates even more value.  As preferences shift, so do production patterns.  This is an important process with complex feedback mechanisms that help to continually create real value for individuals in society.

You can’t create progress for all by taking money from everyone and giving it to a small group with no requirement that they respond to the demands of the many.  If you try, not only do you rob people of short term value by taking away their first-best spending option, you mess with the signals and incentives in the system ensuring that less of what people value will be produced in the long run.

Myth #5: Those smart scientists will innovate rather than waste money.  This may come as a revelation, but scientists are people too.  People respond to incentives.  When your lifeblood is determined by the political process, you will cater to the demands of that process.  Public Choice reminds us that the political process results in irrational, uninformed, biased and downright silly decisions.  It rewards all the wrong things, and punishes all the right things.  NASA faces the same calculation, knowledge, moral hazard, and incentive problems every other bureaucracy faces.  Explore the boundaries of the laws of physics though they may, they cannot break the laws of economics.

Conclusion: Relax, I don’t hate space exploration and neither must you to oppose taxpayer funding for it.  You may counter these myths by saying, forget spin-offs, space exploration is so important it trumps any other consideration.  You may say, sure, non-government space exploration is happening now, but without NASA we wouldn’t have had it for the past 60 years.  If we didn’t put a guy on the moon back then, would that be such a loss?  Maybe all those resources could have produced better things in that time.  Maybe the demand for space exploration wasn’t high enough, or the costs not low enough, until recently.  Maybe NASA was crowding out other space exploration alternatives.  Who knows.  What we do know is that free people have proven, throughout all of history, to be far better at generating progress for humanity than government schemes and programs.

Life Inside the Bubble

I used to work in the state legislature.  There was an insider political newspaper that all the lawmakers, lobbyists, journalists, and staff read every day.  Among other tidbits, it included a “quote of the day” from the goings on the day before.  Every morning, the first thing every member of the political class did was look to see who got quote of the day – or more accurately, if they got quote of the day.  It was a big deal.  Except that it was not a big deal at all to anyone outside the political bubble.

Tons of other gossip and updates filled the newsletter, and every bit was important to the weirdly sheltered state political circuit.  All the buzz in this world was about this world.  “Can you believe the committee chair held all the members there until midnight?”.  “Do you think she’ll have a primary challenger after those comments about teachers unions?”  The fate of the state hinged on every detail according to the people involved.

Of course nothing of the sort was true.  The petty bickering, posturing, and drama had almost no bearing on the world outside the bubble.  It was like a reality TV show, where every little alliance is a big deal in the context of the show, but meaningless to the world outside the artificial construct of the set.  Occasionally, politicos would get crude reminders of this fact.  They would proudly set up meet and greet hours in their districts so the people could come before them and present their troubles.  They assumed this kind of access was demanded by their constituents, and would be greatly appreciated.  But no one came, save for a few rather senile members of society with too much time on their hands.  Part of the reason was that no one knew who their state representative was – most didn’t even know they had one.

The shock of reality was severe for lawmakers who had been in the bubble for many a week and emerged to find that no one knew their name or what bills they introduced.  No one even knew that they had made quote of the day last week!  In the bubble, they were important.  Every lobbyist, journalist and staffer knew their name and their favorite drink.  They were called “Honorable”.  But outside the bubble, they were just some guy wearing a bad suit and talking about boring things.

One particularly poignant reminder of the contrast between life in and out of the bubble took place at a basketball game.  I was in a luxury box with my boss who was a then well-connected lawmaker.  Food and drinks were free, and the lobbyists who’d provided the tickets were cheerfully chatting us up and flattering us.  I looked across the court to the other side of the stadium.  There in the cheap seats, all by himself, was a rather dejected looking fellow.  It was the former governor.  My boss noticed him too, and seemed a little troubled.  He leaned over and said, “That’s good for me to see.  I sometimes forget that, when I’m term-limited out next year, that will be me, not this.”  A rare moment of foresight for someone in the bubble.

It’s easy (and quite fun!) to point out the absurdities and perversions of the artifice of politics.  But there’s a broader lesson as well.  We all have bubbles.  We have them for good reason and they serve a purpose.  We find people and places we identify with and invest ourselves there.  In these bubbles, we are interesting to our friends, and our shared goals are the most important thing in the world.  In these bubbles, we belong.  That’s a good thing.  It’s good to have a social circle that cares about you and shares your worldview.  It can also create problems if you never step out.

It’s good to move beyond the bubble from time to time.  You gain perspective.  You stay humble.  You realize that all the debates you had in the bubble about various interpretations of that world-changing idea don’t matter to the outside world.  They don’t even know the idea exists in the first place.  You can be famous in your bubble, but it doesn’t mean you’re famous anywhere else.  You need to be reminded of this.

Find your niches, make your friends, dive in, get connected.  You need it.  But step out of your circles as well, into the great unknown where you are just another person.  You need it.  It’s useful to maintain a firm belief and a tacit understanding of two facts at the same time: you are a really big deal, and you are nothing.