Russ Roberts

James Otteson on the End of Socialism

EconTalk Episode with James Otteson
Hosted by Russ Roberts
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James Otteson of Wake Forest University talks to EconTalk host Russ Roberts about his new book, The End of Socialism. Otteson argues that socialism (including what he calls the "socialist inclination") is morally and practically inferior to capitalism. Otteson contrasts socialism and capitalism through the views of G. A. Cohen and Adam Smith. Otteson emphasizes the importance of moral agency and respect for the individual in his defense of capitalism. The conversation also includes a discussion of the deep appeal of the tenets of socialism such as equality and the impulse for top-down planning.

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0:33Intro. [Recording date: November 25, 2014.] Russ: I want to start with a longish quote from the book, which I thought sets it up very nicely, and I get you to add anything to that before we get started into the substance. Here's what you say. And this, in a way, is--it's not the way you phrase it, but this in a way is an explanation for why you wrote a book called The End of Socialism. Some people would say, 'Well, there really aren't any socialists any more.' And you have the following point very early on. It goes like this:
Although few people call themselves socialists, a large proportion of policies, and indeed a political worldview, that is what I will call "socialist inclined." Socialist inclined policy is that which tends to prefer centralized over decentralized economic decision making. It also tends to distrust granting local people or communities a wide scope to organize themselves according to their own lights, especially when they decisions conflict with larger corporate or social goals. It tends to prize material equality over individual liberty, and is willing to limit the latter in the service of the former; and it tends to hold that self-interest is either morally suspect or can be eradicated from or at least diminished in human behavior by the proper arrangement of political, economic, and cultural institutions. A great number of people regardless of party affiliation fall somewhere along those continua in the directions of socialism. The argument of this book applies therefore to all those policies, beliefs, and positions that are socialist inclined even if not avowedly socialist.
So your book is an attack not just on socialism per se, but this socialist inclination. Which I do agree with you, I think is very widely held. In fact, I would suggest it's in many ways perhaps the dominant viewpoint of most Americans. Guest: Yeah, I think that's a good point. I mean, it's true that not many people call themselves 'socialists.' And people define 'socialism' in various ways. They define 'capitalism' in various ways. But I was trying to look for a way to understand both of them such that, first of all, they are opposed--and they are in a deep sense opposed--but also in a way that adherence to sort of both systems of political economy would accept. And I thought that the key to understanding the difference between the two systems of political economy really was this question of who makes the decisions. So, who is making the relevant economic decisions? Is it a third party, a person, group, agency who is making it on behalf of others? That's what I'm calling the impulse toward centralism. Or, is it principally individuals or communities, localized communities, themselves? That's what I'm calling decentralized decision making. And that is a spectrum. There's a spectrum between, at the limit--on the one hand of the centralized version you have a view that might be complete or full socialism where all economic decisions are make by a centralized group of people. On the other hand, you have at the limit where all economic decisions are made by individuals. But understanding the two systems in this way as endpoints along this continuum I think is constructive in placing our political landscape today and locating where policies or positions or individuals are on exactly this spectrum. Are they inclining more toward centralized decision making or decentralized decision making? Russ: And you set up a comparison that really focuses on that--and I think of it the same way: I think it's the central way to think about it--is it top down, or is it bottom up? And I think you are also more of a bottom up person. You identify though, in the book, each of these views with two different champions. For the socialist inclination, you use G. A. Cohen. And for the capitalist inclination, the bottom up one, you use--your friend and mine--Adam Smith. Why those two? And, of course, when I emphasize, as you just did implicitly--Adam Smith is not a hard-core libertarian. We'll talk later about his views on government. But he's definitely capitalist-inclined. So, why did you chose those two? Guest: Well, for a couple of reasons. Take the easy one first. I think Adam Smith is the natural person to select for the decentralized or the capitalist political economy, not only because history has--and I think rightly--conceived of him as being sort of the father of a market economy, a commercial society, but also in many ways, I think--and I think you may share this judgment--his analysis is perhaps the most sophisticated, both on the level of moral philosophy and on the level of what we now think of as pure economics. So I think he's the natural choice. And people associate him and his tradition with the capitalist tradition. So I think he was the natural choice for that. For the centralized system of political economy, you might initially think that the counterpoint to Smith might be Karl Marx. I considered Marx. But the problem with Marx, I think, for this purpose-- Russ: It's too easy. It's not fair. Guest: Well, he has a lot of metaphysical baggage, as I would call it. There are a lot of metaphysical assumptions that are somewhat complicated and difficult to sort through that would, if I took him as my paradigm, I'd have to spend a lot of time sorting through a lot of his rather tortuous prose. And I thought that would distract from the point of the discussion. G. A. Cohen, whose book that just came out a few years ago called Why Not Socialism?--with a question mark--in some sense, his--so he was a lifelong, he's recently deceased--he was a lifelong socialist. He spent a lot of his career defending in one way or another socialist or socialist-inclined political philosophy against market- or capitalist-inclined political philosophy. And he's a sophisticated thinker and quite an influential one. So, I thought he would be a good counterpoint and a good paradigm to take. Russ: Yeah; I didn't know his work until I read your book. As well as another book you recently edited, called What Adam Smith Knew. Which is a reader of both defenders and opponents of capitalism. And Cohen--you excerpt from that book; you mention Cohen's-- Guest: Right. Russ: And it's quite provocative. And we'll talk a little bit about Cohen's approach. And I'm sorry to see that he passed away--obviously because it's always sad to see when someone dies, but also because I was hoping to interview him on EconTalk. So, that's not going to happen now. So we're going to have to have a conversation about some of his claims.
8:00Russ: I'm going to start with one that you quote. You say he claims that socialism envisions human life as based on "communal reciprocity." Which he defines as an "anti-market principle according to which I serve you not because of what I can get in return by doing so but because you need or want my service; and you, for the same reason, serve me." It's a lovely idea. What's wrong with it? Guest: It, in some ways--and at first blush, maybe even at second blush--doesn't sound all that different, actually from what goes on in market exchanges as might be conceived by Adam Smith. When you think about the famous passage from Smith about the butcher and the baker, that we address ourselves not to their humanity--we don't ask them to take pity on us or for purposes of charity to trade with us, but rather we address ourselves to their self-love, to their self-interest. What that means for Smith is that when you are going to exchange with another person who has the right and opportunity to say 'No, thank you' if they would like to go somewhere else, you really have to focus yourself not on what you want, but on what they want. And that notion of a kind of communal reciprocity, to take Cohen's term, is built in, I think, properly understood, into the kind of market exchange Smith is talking about. But for Cohen, what he envisions is what I call, or what I would call, a criterion of mere need. So, if I need something, or if I want something, and if you have that thing--whatever it is that I need or I want--now for Cohen that suffices as a justification for your not only giving it to me, but maybe even being required to give it to me. And the problem that I see with that--one of the problems; there might be others--is that I don't think that that gives proper respect to you. Because you after all have limited, like everybody else, you have scarce resources; you have various things that you might put your resources toward; you have your own schedule of value, your own purposes in life. And if my need or my want is sufficient to trigger, maybe even to demand that you provide for me something that you have, then that disrespects, and indeed doesn't even pay any attention to whatever other needs, goals, purposes that you yourself are serving. So it's as if my needs trump yours. Which in my view makes it not an equality of human agency, but rather mine being superior to yours. And I think that runs afoul of a very deep moral principle that I see in Smith, which is an argument in favor of an equality of moral agency. Each person deserves respect as a moral agent. And part of what that means is that each person has the right to sometimes say 'No, thank you' and go somewhere else. If all that's required in order to demand or command an exchange is for one person to need or want something, then that really subjects the other party to the whims or needs or wants of the first party. And that I think violates that moral principle of equality of moral agency.
11:19Russ: So, the challenge, of course, and let's get to one of the harder cases right away--let's take my children. So, my children have certain incredible advantages that are well above the average person's. Some of those are genetic--they have some genetic handicaps, too, of course. But they have a lot of advantages. They have grown up in a house that has lots of books. They've grown up in a house where parents pushed education. They've grown up in a house that's well above the median and so they have certain expectations for their own financial success. Some of that I think is unfortunate; but they are there. So my children are likely to be--they may not be--but they are likely to be very successful in the financial sense. They may not be happy; they may have all kinds of challenges. But they are unlikely to be poor. They have a natural advantage that just came from being born in my house. They didn't choose it. They didn't earn it. They still have to earn some of course of what they do with their life. They have to work hard and there's a limit to what I can help them with, but from the natural advantages I am giving them, they have certain advantages. Now, contrast that with a child growing up in a different house--maybe growing up with a single parent, going to a horrible school as opposed to the school my kids have been lucky enough to go to. And that child is going to grow up--some of them will succeed despite those disadvantages, but it's likely that my children will be more successful than the children growing up in that household with poor school and difficult family life. So, to what extent then is the moral agency of my children--my children may choose to help those folks who are less well off than they are. I hope they do. But let's suppose they don't. Suppose they are selfish: they don't want to help anybody else, they are very self-[?] self-interested, but selfish. And G. A. Cohen would say, and many others would say they have not earned the financial success that they have and will have, and therefore it's okay, it's appropriate, it's moral for the state to trump their moral agency, their decision not to aid poorer people and to take some of the income that they have--I was going to say 'earned' but in fact much of it they did not earn: it just came luckily to them. What's wrong with that argument? Guest: Well, there are a lot of assumptions built into that argument that I think need to be parsed out. First, a couple of things that you mentioned but I want to emphasize. One is that one's background does not necessarily determine one's achievement or outcome in life. So there are plenty of stories of people who had very privileged backgrounds and turned out not to be particularly successful in life; and the reverse is true, too: there are plenty of people who didn't have very privileged backgrounds but turned out through dint of some combination of hard work or luck to achieve very highly in life. So, the first thing to emphasize is that one's background doesn't necessarily determine what happens to a person, although to your point, which is really the strongest part of this objection: it certainly at least arguably has a large effect. So, when we get to evaluating people's relative success in life, some portion of that certainly--and I think this is your point--is attributable not to the actual agency, work choices, that individuals made, but to circumstances that they had lucky or unlucky. Russ: And you mention this throughout the book. I'm not suggesting you didn't--that you are blind to it, of course. It's a major issue. Guest: It is a major issue. And no book on evaluating the merits of socialism would be complete without addressing that squarely. So, that's the first point to make, that one's background doesn't necessarily determine outcomes in life. But there's a practical and a moral issue that I would raise. First, the practical issue. The practical issue is, the conclusion of the way you stated the objection is: shouldn't the state step in, maybe even in fact is the state morally required to step in, to try to equalize maybe the starting point of people, so that the unchosen background--whether that's genes, education, family life, etc.--the unchosen part of their life outcomes, that that's equalized to some extent? Shouldn't the state step in? Well, the practical issue that I would raise with that is that there is a very large assumption built in there, and that is that the state can do that. So, it's one thing to say, 'Wouldn't the world be better if people started off with something like a relatively equal footing?' It's an altogether separate question to say, 'Well, what can third parties, including government parties, do to actually effectuate that?' And a lot of the argument that I make in the first half of the book is really exploring that in detail. Because it turns out that there are a lot of difficulties involved in going from the intention to the result, and trying to actually get from--this intended result of we would like people to have relatively equal starting points, to, what's the political machinery that we have at our disposal and how likely is it that it will actually effectuate this? And in fact what you see--you don't have to look very hard--is a lot of the actual programs, agencies, policies that are proposed or that are in existence now attempting to satisfy some of these intentions, oftentimes are not very effective; and in fact many times are very counterproductive. So, there's a very large question about what we're actually able to do aside from what we might intend to do. But the other part about it--what I said is a moral point that one might raise about this--one of the consequences I would say of the Adam Smithian or the capitalist worldview of political economy, is that if you have a state--the state is, at least arguably, although some will argue against this--the Smithian position is that the state is able to do some things very well, but a whole lot of things it can't do very well. And one of the things it can't do very well is collect the knowledge that's required to know exactly what kinds of things would be good for you. Knowing what kinds of help a particular person or particular family need in order to give their children, let's say, a good chance in life--that requires an intense personal familiarity with the person or the situation involved. It's very difficult to gather that information from afar. Now, when I call that a moral consideration--that sounds like a practical consideration. But it becomes a moral one in the following way: What that means on the Smithian view and what I'm calling the capitalist-inclined system of political economy, is that moral obligation falls on precisely the people who do have that knowledge. And that's typically localized individuals. In other words, on you and on me. So, when you and I see people, individuals, families, local communities, we become aware of people who could use some help. If we have some ability to provide some help, that obligation falls on us. It doesn't fall on a distant third party that arguably does not have the relevant knowledge to know what kinds of help would actually be help, as opposed to what kinds of policies or redistributions or programs might be helpful, might not be helpful, might be counterproductive, etc. So, the moral obligation--it's not that it goes away and that there's no moral obligation; indeed there is. In fact that I would argue that it becomes more robust because it falls on us as individuals.
19:39Russ: So, I'm going to agree with half of that; I want to disagree with half and let you respond. So, the part I disagree with is--well, it's a subtle point. I think it's not such a big knowledge problem as to what people need. Especially if you take the socialist agenda on its face. One of the strangest things to me about the socialist inclination is its materialist focus. It's focus on material equality, as opposed to flourishing. So, what I find depressing about American life today isn't so much that there are a lot of people who struggle to succeed--although that's depressing. It's that their ability to enjoy life, to express oneself, to use one's talents is so limited among so many parts of the population, because of the failure of the school system, because people have been unfortunately have spent 10-15, well, some length of time in the American school system without it encouraging flourishing, is what depresses me. It's also true that it doesn't help people get jobs and it doesn't help make them more productive. But that's not, to me, the main thing. But on the socialist claim--there's different flavors of it, of course--but one of the socialist claims is just pure material inequality. It seems to me that that's pretty easy to fix. You don't need a lot of localized knowledge. You do need localized knowledge for what people really care about. You do need localized knowledge for what skills people need. But, reading and writing? That's pretty basic; we don't do such a good job on that. So, while I accept the argument, the socialist argument, that say public provision of schooling, on an equality argument, is compelling. I don't agree that it should be publicly done, but I accept the logic within the logic of their own argument. But it's a failure. So to me, that suggests on purely practical grounds--forget the moral question for now, which I also agree with you on. But putting the moral question aside, the public schools are poorly run; they should be, to me, disbanded and replaced by private schools that are supported for charity and scholarships and other things, and designed by using local knowledge on what people really need, etc. So I totally agree with the thrust of your point. But it seems to me, within the socialist agenda, pure redistribution of income is something government is very good at and has done fairly successfully. If you asked, how successful has it been? Does the purely redistributive part of government today have an impact? And I think it has a huge impact. And I think when you look at the studies that people have done, when you do pre- versus post-transfers of the distribution of income, it's significant. So, I don't understand that second point, that there's some knowledge problem with redistributing income within the socialist agenda. It seems to me it's a straightforward thing. The U.S. government does it pretty well; European governments do it very well. They have definitely boosted up the bottom and created a safety net, financed mostly by people of higher income. And I don't like that because I'd rather, like you, I'd rather see it done privately. But it seems to me on its own terms it's pretty successful. Guest: Yeah. And I'm going to agree with your argument--on its own terms. So, if what we're measuring is material equality or relative rates of material equality, yeah, that's pretty easy to do. And it's pretty easy to set up a system of mechanisms, political mechanisms, that will do that. The larger question I think--you put your finger on the right one--and that is: To what end and to what effect? What exactly is the effect of doing that? And the results are not all that good. So if the only thing you are measuring is, is there greater inequality of wealth or less inequality of wealth, well, that the state can manage. But it seems to me that that's a pretty poor proxy for the kinds of policies we should have in a humane and just society. What we want in a humane and just society is what Aristotle called eudaimonia. This is the full flourishing of humanity, leading a life well and truly lived with the cognizance of having done well, exploiting and exploring one's possibilities. That's something that the state can't do, or at least has a much harder time doing. And if the only thing that were necessary for that were the distribution of wealth, the redistribution of wealth, well, then the state would do it. But what we've seen in the United States and what we've seen in Europe and elsewhere is that even if you have increasing levels of redistribution of wealth, that doesn't mean that you have increasing levels of human flourishing. That doesn't follow. Now, some of the--you said the knowledge problem is not maybe as big a problem at least at the fundamental level. So, does everybody need to know how to read, write, and account, as Smith puts it? Yah. It seems like those are some necessary--those are not sufficient, but it seems like they are necessary elements of human flourishing. Well, it doesn't take very much to be able to get a child to be able to read, write, and account. It certainly doesn't take 12 years of schooling for that. It would take a fraction of that. But that's an element that's--so even on that fairly low level, we don't always succeed very well in the public schooling system in the United States. But even at that low threshold, that's not telling you any of the details about what's required for any individual human being about what's required for leading a fully flourishing human life. And as you know, what we get in the United States and through a lot of its social programs and a lot of what I would more generally call social-inclined policy, is an attempt not just to give a sort of floor below which, a minimum threshold below which no one will fall. But really to sort of capture and engineer a full life for people. And a lot of what goes on in Washington today, where all the action is, is not just what are the basic minimums. But instead, what are all the aspects of human life that we can engineer centrally so that we can ensure that human beings lead the kind of lives we would like to lead? So it's a much more ambitious agenda than the one you are describing. And I think that's when the knowledge problem really comes to the fore.
26:06Russ: You've opened up quite a Pandora's Box; you are getting us toward the nanny state, which is something you deal with in the book in some detail. My inclination is to say that the glass right now is half full. I worry about the future of the nanny state. I think at it's current level, it's fairly modest. You know, it might keep me from getting a large soda in New York City; it makes it hard for people to advertise cigarettes for me. But the social engineering part of government is modest compared to what its potential could be. So I'm not quite as worried, at least at the current level. But let me play G. A. Cohen for a sec. Wouldn't he respond to your point about flourishing and eudaimonia by saying, 'Yeah, that's all true, but if you are hungry you can't really flourish?' So, if we could provide that minimum--which we don't, exactly; we have this complex welfare system; Europe is a better model for what G. A. Cohen is talking about. But wouldn't he argue that by removing the worries of hunger and giving people a basic level of income it gives them a much better chance of flourishing than a more laissez faire model? Guest: Oh, I'm sure he would argue that. And I think there's a lot to say about that. First of all, to the question, which I think is implicit in what you are arguing: Is wealth all that matters? And I think the answer to that is obviously, 'No. Wealth is not the only thing that matters.' But what wealth does do is it enables the things that do matter. So, if I have to worry about whether my children can eat today, then I can't very well be spending time contemplating the highest good or what virtue is, etc., or contributing time, talent, and treasure to my church. I'm just worrying about feeding my children. So, a minimum--below a certain minimum level of wealth, none of these other questions matter. Now, if you take a bit of an historical perspective on the human condition, not just as it appears today but as it appeared throughout a longer stretch of human history, in the vast majority of the recorded human history, the average person was quite poor. As Thomas Hobbes described in 1650 in The Leviathan, Hobbes said that the life of man was nasty, poor, brutish and short. Well, in the 17th century and basically everything up until the 17th century, he had that right. That was true. It was in contemporary dollars the average worldwide GDP (Gross Domestic Product) if you just take the total amount of production of wealth and divide it by the number of people on the planet, it's something like $1-$3 dollars per day that almost all human beings in human history lived on. At that level of wealth, which is really a level of poverty, there's not a whole lot of other things that people can worry about. That's all they are worried about. But what happened historically is that around the 18th century or so, overall levels of wealth began to increase, to the point where today, worldwide, we enjoy unprecedented levels of wealth. Now, there are lots of interesting questions about that: What exactly caused it? What could we do to maintain it? Those are interesting questions. But the way they relate to the argument I think you are making is that once we begin to rise out of humanity's historical norms of poverty, it's then that these kinds of questions about our obligations to one another really take force. Because now we are in a position to actually make a difference. And if you ask, 'What is it that caused that rise in wealth?'--well, it wasn't redistribution of wealth. So, there's a lot of redistribution of wealth going on and all sorts of zero-sum wage[?] throughout all of human history. And although the Pharaoh was wealthy and the Roman Emperor was wealthy and in the Song Dynasty the Chinese Emperor was wealthy, everybody else wasn't. So, what began to happen in the 18th century and moving forward to the 19th, 20th, and 21st century, is that more and more of human exchange, human association, began to be informed with the Smithian model of understanding other people as peers and having the right to say 'No, thank you.' And that's really what's transformed and enabled us to have the levels of wealth we have today. Now, getting back down to brass tacks. If there is a child alive today--and there are many, maybe a billion or so in the world today that are still living at those historical norms, a). what's our obligation to them, and b). what's the best way to execute that obligation? I think the obligation from outside a kind of institutional level is to figure out what the what the institutions are that have enabled the other 6 billion or so other people to rise out of those historical norms and to spread those institutions or figure out some kind of way to encourage the growth of those institutions in the other places that are yet to enjoy their benefits. And then on a personal level, I think it does place a personal obligation on us to help where we can. Enjoying wealth, the kinds of wealth that we in the United States enjoy today, is far beyond what previous generations could have imagined. And that's not an end in itself. But that gives us all sorts of tools that we can use to help others achieve similar levels, so that they can begin to enjoy some of the good things in life that are similar, that our wealth has enabled us to achieve. Russ: Yeah. For me it's mostly a practical issue. I just don't think we know how to help people very well. And it's possible--I'm not going to conceded this--it's possible that helping itself is part of the problem. Obviously, giving people things is different from them earning them. And I think that suggests that the ideal is to help people find ways to earn prosperity rather than to receive it from others. Guest: And I think also, Russ--excuse me for interrupting--I think that's in large part, not exclusively, and institutional question. I think sometimes we have--and this is part of what I in the book argue is an aspect of the socialist-inclined mindset--is that you have some people, like us, who have been lucky enough to enjoy the existence of certain institutions and have succeeded in them or are living a kind of life that is well above historical norms of poverty; but we think of other people who are still at those historical norms as people who need us to do something for them. Oftentimes, I think that's a dangerous mindset to have. One of the great insights that Smith brought to the fore, right at the beginning of the Wealth of Nations was that human beings are pretty much the same all the way around the world. So, if you give them the opportunity and let them face the rewards for success and also face the consequences of making bad decisions, they figure out for themselves how to better their own condition. So, a lot of times I think, you know, the socialist world view thinks that there are some people who just can't figure it out for themselves and we're going to have to do it for them. And that, I think, is often not the case. And maybe never the case, or almost never the case. Most people can figure out how to improve their own conditions, if just given the right opportunity and allowed to do so.
34:06Russ: I want to go to the G. A. Cohen camping example. So, G. A. Cohen tells the story of a camping trip where we take a bunch of stuff, all kinds of gear and food and we load it up in our cars and we head off into the wilderness. And the idea is we are going to have a little vacation together. There's going to be a lot of community; we're going to do a bunch of stuff together; we might go hiking together, we might cook together--with a bunch of friends. And it's a very idyllic image that he conveys. And then he talks about how unpleasant that trip would be if we used the capitalist norms that we're accustomed to. So, he suggests that if one of the members of the party knows about, say, a special source of water in the wilderness that his father had told him about and he proceeds to offer to sell it to the other people because his father had endowed him with this knowledge, people would be offended. He talks about somebody's a better fisherman than the others, so he decides he wants the better-tasting fish, he wants to make the other people eat the less tasty fish because after all he caught them. And he has a couple other examples. These are all--it's a very clever example and it taps into a deep emotional response that we have, that we would not want to go on a trip with those folks. Most of the time. Or the person who is, say, the best cook of the group who decides to sell his services to the rest of the group. So, what's wrong with G. A. Cohen? What's wrong with that example? Guest: Well, there are a couple of things. Just on its own terms, it's a highly stylized scenario. Let's put it that way. I mean, there are all sorts of restrictions and assumptions built into it. Which are instructive. Russ: And he concedes that--to be fair to him. Guest: Yes. But they still have to be explored. So, for example, all of the things that we bring with us to the camping trip, those just sort of appeared out of nowhere. So, there's no sense of those having to have been produced or traded for, exchanged, created. This is the tents and all the tools, pots and pans, all the things he describes. So those just came out of nowhere. But okay, we can concede that to him. But more important I think is the idea that there's a fairly narrow range of purposes that people have on a camping trip. You have a relatively small number of people, all of whom either know each other in advance or are going to get to know each other very soon, very quickly, because they are all together in this joint project. But the sense of a single, joint project, with a single, one or two purposes for the joint project, for a limited duration--camping trips don't go forever; they go for a weekend or something, or maybe a week at most. If you are bringing your kids and family it's probably not going to be more than a week. That's a very stylized kind of scenario, a very unusual scenario. We might be willing to say to Cohen is, 'If you have that kind of scenario, yeah, maybe you're right. That's the best way or maybe that's a way to organize a camping trip.' The problem is, a society is not like that scenario. Because what we have in a country, like the United States, with over 300 million people, we don't have people who know each other; we don't have people who all have the same schedule of value and the same hierarchy of purpose. We don't have the ability to look each other literally in the eyes and say, 'Do you mind if my kid rides your kid's bicycle?' or not. We can't do those things on a larger scale. It's not just that scale makes things more difficult. It's that once you get out of a very small group, that kind of scenario is just no longer possible. We have to find alternative ways of associating with one another, of exchanging, trading, partnering; and relying on that kind of deep personalized knowledge where you actually look each other in the eye is simply not going to be transferable to a large scale society. Maybe another way of looking at that is, look at a typical family, or sort of a stereotypical family where you have parents and kids. Would you want, within that family, within that household, would you want people bidding and offering and making exchanges for, 'I'll charge you this much to sit on the couch,' etc. and 'this is my half of the room,' and you've got to get a ticket to come into my half of the room or something. No. That's absolutely not going to work. But what works in a family or in a very small community is not necessarily something that's transferable to a larger community. In fact, it's pretty demonstrable that it won't work. The only way that you'd be able to get that kind of cooperation is if you completely regiment the entire society along the lines of a military or something, where you have some clear leaders who give orders and everybody else just follows them. And in fact that's actually the historical pattern that socialist communities have taken. They start out, they can often start out as small communities. But if it's more than just people in a family or a very small group, well then they're going to become regimented very quickly. And the tradeoff you will then begin to see, the forgone prosperity, the forgone wealth, the forgone innovation, entrepreneurship, and ultimately prosperity is exactly the pattern that socialist communities have taken. Russ: Yeah, so, I was fascinated by this. I want to--I'll go back to the quote that Cohen had earlier--"I serve you not because of what I can get in return by doing so but because you need or want my service; and you, for the same reason, serve me." Now, I have to confess--I don't have to confess it; I'm proud of it, actually--that's how I teach my children to behave toward each other. And I would argue that--and I've mentioned it many times on this program, I think--Walter Williams points out that a family is a socialist enterprise. It's top down. The parents, sometimes the mother, sometimes the father, sometimes they act in concert--but they run the lives of the children to a certain extent, up to a certain point, certain age. And I would argue--and I'm trying to give Cohen his due and I'm bending over backwards here to give socialism its due. I think it's not just that the family works better when I just say to one of my children, 'Well, you get the last piece of chicken,' instead of auctioning it off--an example I've used before. So, I don't auction off the last piece of chicken; I don't auction off the bedrooms; I don't give the kids points or allowances and let them bid on these different things, and allocate their incomes accordingly to their own preferences. I decide who gets what room. For a while two of my sons roomed together, and then eventually one got their own room. So, those are made by fiat, by my wife and myself. One argument is it works better because there's lower transactions costs, you can't do the bidding and keeping track of the money and all that. But I think that's the wrong argument. I think the reasons we run our families that way is because it's better, not on efficiency grounds, because it's more rewarding. It's more pleasant. There's something deep inside us that wants to live that way. And I think Cohen's problem--this is a Hayekian insight from The Fatal Conceit--is that that really nice urge which works great in a family and works usually pretty well on a camping trip, although some camping trips end with some families squabbling and in disarray. But extending them to a large area--it's a lovely idea; it doesn't work. In fact, more than it doesn't work-- Guest: It's a romantic ideal. Russ: But it's a good ideal. I want to see if you agree with me that it is a good ideal, even though we don't--and so we do feel uncomfortable that people have certain advantages, say, which Cohen points out on the camping trip that they are able to exploit. We might decide that we shouldn't let the state enforce, reduce those advantages; but the idea that, the emotional response that the camping trip provides I think really explains why we are so deeply attracted to the socialist inclination. Guest: Yeah. And that is the Hayekian point. We are a small-group species. And we've developed certain psychological and social instincts that have served us well in our evolutionary history, which was largely a very small group evolutionary history. The ones that survived are the ones that had a very small, but extremely cohesive and also in many ways an equal status in the community, more along the lines of what you were describing about the socialist family. You had a leader, but wealth and resources tended to be shared within very small margins. And those instincts we carry with us today.
43:27Guest: But I want to part with you on one aspect of that. So you asked, is that a kind of a good ideal? It certainly has captured and continues to capture--I think it resonates with us on a deep and almost psychological level. And that's been present throughout a lot of recorded human history. People have talked about golden ages, where human beings existed in these kind of spontaneously harmonious small groups where everybody's needs were met and nobody had much more than anybody else, and people spontaneously wanted to give to one another only because the other needed it--in other words, to serve one another. And that's a very powerful idea. But that works in the family. I think the reason that works in the family is not only because it's a small group, although that's one big part of it. But another reason is that children aren't yet fully adults. And that's a very important distinction. So, one reason why we think it's appropriate for a parent to establish the overall mission and purpose of their lives as a family is because the children aren't yet equipped to do that. You mentioned almost fleetingly--you said, the adults make the decisions, 'up to a certain point.' Precisely right. At a certain point, what we do is we recognize that our children are now transitioning into becoming adults. And at that point, their lives become their own. They are now the captains and authors of their own lives, with all the good and bad that comes with it. They are free to make decisions for themselves and also accountable to be held responsible for those decisions. So, the argument that I make in the book about socialism and capitalism, part of it hinges on this distinction between being a child and being an adult. The socialist model, I think, is exactly captured by this idea that there are some adults in the room who need to run the show for the children. And it takes that model of differential hierarchy and applies it to all of society. And what I say is, hold the horses for a second. Because in society in general what we're talking about is millions of adults who are not only capable but who are morally responsible for their own lives. Not one group of people who know how to run a life and then a bunch of people who are incompetents. And I think that's precisely the aspect of the argument that we miss. That holds for a family and that's why we think it's right--the parents, yeah, you decide who gets the chicken and who doesn't get the chicken. But in a larger society, that's made up of competent adults, free people, the same amount of authority that the parent assumes on his or her own behalf is exactly the same amount of freedom and authority and responsibility that we should grant to all of the other normally functioning adults in society. Which is almost everybody else in society. Russ: That's a great point. Actually, it reminds me of a different problem with my point. So, let me critique my point in a different way, which is I thought you were going to say, which is that it's not just a small group; and it's not just a small group of adults and children. It's a small group of people who have chosen to care about each other. So, my wife and I aren't just thrown randomly together. We fell in love and chose to get married. We care deeply about our children. So, it's true we don't know exactly what they're thinking and we may make mistakes in thinking about what's best for them. But we clearly--our interests are very much aligned through emotional and genetic ways. If you take the next level up, which is the camping trip, or the kibbutz is an example you use in your book a few times, kibbutzim--kibbutzes--struggle. It's not clear they're a successful model, even though they are a small group. Because it's very hard for people to make those decisions, to share and be egalitarian in a setting where they don't love each other. It's much easier for me to tell my son, 'Don't exploit your younger brother when you swap that baseball card.' Which I do, by the way. My oldest son, when he was younger, unfortunately would often try to get a good deal. And my youngest son, who was ignorant--there was an asymmetric information problem, "market failure" in the language of-- Guest: That's why we don't allow a market there. Russ: Yeah. And so I don't. I'd stop it. I was the commissioner. Eventually, I had to approve all trades of cards, to defend the interests of my youngest, uninformed, often uninformed son, because I didn't want him to look back later and realize he'd been taken advantage of. And I wanted my older son to take that into account when he proposed trades. But doing that with people you do not love, don't have a family connection with, is much more challenging. And certainly as it gets larger it gets increasingly difficult. Guest: And if you don't have a stake in the outcome. In a family, you have a biological, psychological, emotional stake in the outcome of your children's lives. And for people who don't know each other--take any two random people in the United States--they don't have a similar sort of stake in one another's outcomes of their lives--you just can't rely on the same kinds of motivations. Russ: Yeah. I just--you can argue it's an ideal that such a person would want to serve a stranger for what the stranger needs. But to count on that seems like a model that certainly Adam Smith would not agree with. Because he understood that love falls off as distance increases.
49:13Russ: Let's talk a little bit more about Smith. You talk about Smith's ideal vision for the role of the state. What is it? Guest: Well, he says peace, easy taxes, and a tolerable administration of justice. Which is not much. So, Smith was not what I would call an a priorist philosopher. So, he was not like John Locke, say, trying to deduce the principles of government from natural law. He was an empirical, more pragmatic investigator: Let's look and see what kinds of societies succeed and what kinds of societies don't. And the conclusion he reached, on an inductive basis, looking throughout history and data, the data he was able to assemble, suggested to him that, first of all, you didn't need a government. But it had only a few duties. So, it needed to provide against foreign invasion. So, that's something like an army. It needed also to protect citizens against aggression from their fellow citizens. So, it needed something like a police and port system to adjudicate disputes. And then Smith had his third category, which is a bit more amorphous. He said, there are certain public works that he thought the government could also be justified in providing. But they had to meet two criteria. And they are actually surprisingly stringent criteria. The two criteria something would need to meet in order to be justified for public provision, were, first of all, it had to benefit the entire great society, as he said, not just one group of people at the expense of another. And second, it had to be something that couldn't be provided by private enterprise. That private enterprise couldn't get a profit for providing. And now--what falls into that third category is a matter of some dispute. And maybe even speculation. But he thought it was things like, elementary education; maybe roads, bridges, canals, so infrastructure, things like-- Russ: Sewage. Guest: Yeah. Maybe some aspects of public health. So, he was not an anarchist. He was not even, if you like, a Randian, Ayn-Randian limited-to, almost limited-to-zero government sort of person. That's not him. He was willing to allow for there to be some flexibility. But the way I think--it was a small government, but in the few things that the government did, he thought it should be, have the powers and be robust enough to actually satisfy those particular goals, that it should rightly have. Russ: So, what was his, what would you say his view on redistribution was? Those people have made claims for him, so I'd like to hear it from--you're closer to the horse's mouth, in my mind, than others. So, go ahead. Guest: Yeah. No. I think redistribution for the sake of redistribution would have been alien to him. He was interested in endorsing the institutions that allowed people 'to better their own conditions'. That's his phrase--but, better their own conditions. Smith had, actually, really a robust, large faith that people, given the opportunity, would be able to figure out what would constitute bettering their own condition and to figure out ways to improve their condition. You just needed to give them the institutional security to give them that opportunity. So, there's a whole lot of what goes on today under the name of 'redistribution.' I think Smith would have thought, is, 'Could I be counter-productive,' so that's an empirical matter. But then in many ways it's just unnecessary. Once you secure basic protections of life, liberty, property and contract--voluntary contract or voluntary promise--then that gives people the conditions they need in order to flourish all on their own.
53:13Russ: So, let me step away from these issues of equality and socialism just for a sec, because you've raised an interesting [?] here I want to get into, which is: you and I have talked about this before. And I've talked about it recently in some recent EconTalk episodes related to my recent book. But one of the interesting questions is, you said people would better themselves; and I'm thinking: Yes, Smith talks about the propensity to truck, barter, and exchange, which is definitely[?] an urge to get a better deal, to find something or improvement. But it's fascinating to me that Smith, in the Wealth of Nations is focused on material prosperity, more or less. There's human flourishing in there. But he's also worrying about starving to death versus not. In The Theory of Moral Sentiments he was very discouraging of the urge to better yourself, in the material sense. He, of course, says, 'Man naturally desires not only to be loved and to be lovely,'--and by loved, he means respected, admired, paid attention to, praised. And he says the wrong way to do that is to make money. And we have this impulse to do that because rich people get more attention than poor people; and poor people are pitiful because no one pays any attention to them--says Smith. It raises the question whether Smith would accept this idea, that people won't even get better off, or if it's even worth doing. Guest: Yeah. I mean, that's a complex question with a lot of different parts. It sounds like a simple question or a simple issue, but it really isn't. It goes back in some ways to something we talked about at the beginning of our conversation, which is that if there are people who aren't sure whether they can eat or whether they can feed their children today, whose children are actually in danger of starving, well then none of the rest of this really matters. That's what matters. But once you reach a certain threshold, which is actually pretty low by contemporary Western standards-- Russ: And in Smithian standards, very low. Guest: Yeah, by Smithian standards, extremely low. But once you pass that standard, a potential danger--and I think this is what Smith was trying to envision--I mean, remember, he was writing at the cusp of commercial society. So, he could have had no idea about what kinds of things markets could produce or a market-based society could produce. There's no way he or anybody else could have had any idea. But one of the things I think he may have been worried about is that, in a commercial society, that could generate the wealth that could enable people to ascend above this threshold. Whatever that minimum threshold is, they can ascend above the threshold. Which would have the great, good benefit for humanity that a). they are no longer worried on a day-to-day basis, 'Can I eat today?' And this would be true for their children; and it would also enable them to turn their attention to other kinds of, actually call forth the powers and the imagination of human beings, that otherwise would have just been left afoul[?] of, because they couldn't exploit those higher powers, in the service of higher ends. On the other hand, there is the worry that if you have a commercial society, people can begin to become--I think he was worried--they can be confused about what the actual goals of the society are. And what I mean by that is that, is begin to think that the generation of wealth can become an end in itself. And that having the wealth is already everything you need to have to be happy, to have a fully flourishing eudaimonic life. And Smith thought that would be a mistake. And I think he's right about that. That is a mistake. And I think he thought that that was a worry and a potential danger. Now, he thought it was worth the bargain--that bringing people out of those historical norms of poverty was worth running this risk--but nevertheless it was a risk: that people would begin to conflate wealth with happiness. So, instead of seeing wealth as a tool to enable them to achieve, and others around them to achieve what true happiness might be, that it could stand in place of the happiness itself. And that was a real worry. And I think that brings us back to another aspect of our conversation which we've already had, which is education. What becomes the goal of education, then? Well, part of the goal of education is not just teaching each new generation as they come along about what the institutions are that enable wealth generation, but also what the components of a life well lived really are. And the relation between those two. So, education, then, can really take on a much deeper and more important role in human society, once we've reached a certain level of wealth. Russ: Yeah, it's ironic I think that at our university level education at least, to some extent our K-12, is becoming increasingly focused on the job market as opposed to a life well lived. Which--it's easy to get on a soapbox about that; I'm not going to do that right this second. Guest: Well, it's a confusion of what's necessary with what's sufficient. It's like asking: what's the purpose of a firm, a business? Is it to make a profit? Well, that's necessary for the success of a firm, but that's certainly not sufficient for why we should want to have firms in the world. I think it's similar to the institutions that enable wealth generation. That's necessary for leading a flourishing life, but it's certainly not sufficient.
58:50Russ: So, I want to close with an observation you make that I found quite striking. You were talking about the contrast between the socialist emphasis on classes, different types of individuals, versus the capitalist focus on the individual him or herself and the importance of the individual. And you write the following:
I argue that it has in fact been one of the great triumphs of human civilization to conceive of human beings not as members of classes but as individual and unique centers of moral agency. It is that which has enabled the moral principle that each of us possesses, a unique dignity that demands respect. That single simple insight, individual dignity demanding respect, is what has enabled us to condemn humanity's formerly ubiquitous slavery, to condemn genocide and ethnic cleansing, and to work out and endorse a notion of universal human rights. We should not underestimate the transformative and epochal significance of that, nor the dangers attendant on weakening our commitment to it.
So why don't you close us out and talk about the socialist impulse to think about classes versus the capitalist focus on the individual and why that's such an important--why do you make that distinction as one of the important ones between the two? And then come back to your conclusion. Guest: Well, I think that's really one of the central parts of the moral argument against socialism and in favor of this decentralized notion of capitalism. Once you start thinking about human beings as members of classes--so, even if it's classes that sound initially plausible or neutral, like the rich and the poor, immediately what you begin to do is to see human beings within those classes as being more or less interchangeable. They're like marbles or poker chips and one is just as good as another. But the danger that has actually issued real and horrible consequences in human history--once you begin to see people as being interchangeable, at least among classes, this religion, this nationality, this ethnicity, then you begin to dehumanize them. They don't seem to you like individual centers of human dignity. And I think, looking at a lot of the horrible episodes of human history, that's what you see. You see one group of people looking at another group of people as mere members of a group, mere members of a class. But by contrast, when you see instead human beings as being individuals--which, by the way, I think is the correct way to view this, individual centers of human agency, individual centers of human dignity--that completely transforms our relationship to one another. So, I no longer view you as interchangeable, as fungible, as a poker chip. I view you as an irreplaceable and precious asset, precious commodity, precious human being. Someone who brings something to the world that nobody else ever has or nobody in the future ever will. That completely transforms our relationship to one another. And I think that's captured by the individualism that you see in capitalism: that what we do is we see people, all people, any person as being unique, having dignity, and being uniquely precious in exactly this way. And when we see it that way--and this is what I call this triumph of human moral agency--that's really a transformation in how we view other people. That is what will debar us from labeling a whole population of people as a certain kind of group and then devaluing them because they are in the wrong kind of group. We can't do that. Because each member of that group is unique; each member is different from all of the others; and each one of them is irreplaceable.

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COMMENTS (95 to date)
netsp writes:

I found the framing of this discussion very disingenuous, almost propagandist. Surprisingly so, given the intellectual honesty that is the norm on econtalk. it

First we start be defining the views of many to most people as essentially socialist, basically taking a definition that most people including both those being described as socialists and the people who do describe themselves would reject.

Then, we go one to use a propagandist tool of framing the discussion entirely in the reference frame of the opposing theory. Socialism and capitalism are defined by their place on the centralisation-decentralisation axis. Again, a framework that socialists would reject considering tangental to socialism. This is basically misrepresenting

I didn't listen through until the end, but the discussion seems to have gone on basically discussing centralisation vs decentralisation rather than socialism. Using "Socialism" as a stand in for centralisation is disingenuous.

First, in the context of the US socialist is an accusation and the associations is bread lines and gulags. Capitalism is in other places an accusation associated with corruption and kleptocracy. Using these terms in these contexts is a sort of inflammatory populism that is orthogonal to actual discussion on the point. It's good for reaffirming ones position in a cosy echo chamber.

Self defined socialists (especially today) don't consider centralisation a goal, and many do not even consider it a good method. In fact, many modern socialists would argue that the problems with capitalism is the centralisation of resources (means of production if they're old school) and socialism's goal is to decentralise into self governing entities. In any case, they (though there are actually very few of them left) certainly wouldn't define their position this way.

If this podcast was in Bizarro World where the Russ & James were talking about the End of Capitalism they could have done the exact same thing.
"The majority of people today are Corporatists (or Fascists if they wanted to be really inflammatory) wether or not this is how they define themselves. Corporatism vs Egality can be defined by wether or not we support policies to maintain and expand the wealth of the wealthy" or somesuch disingenuous caricature of a liberal capitalist perspective.

In any one side only debate, it's easy to go Intellectual honestly is consciously avoiding that. In a discussion where the topic literally is one's opposing view, well... being intellectually honest is hard. The effort wasn't made in this episode.

Greg G writes:

I have to agree with netsp. This one came off the rails early with a transparently prejudicial framing of the issue.

If "not many people call themselves socialists" then how can you argue that most people are "socialist inclined"? Easy. You start by rejecting the bottom up conventional word meaning for "socialist" that has emerged through countless individual free choices. You decide you know better than those people what "socialist" means.

Then you choose a dead foreign Marxist who very few Americans have ever heard of to represent this straw man world view that you claim is so prevalent. And you claim that Adam Smith would support the views you have about the modern American economy. Yes, Adam Smith was a pragmatist who was interested in "what succeeds." You got that right. That just might mean he would prove of the most free and prosperous society in human history.

----"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

That's what Adam Smith said about the economy of his day. Exactly how much regulation would he view as maximizing competition in today's radically different economy? We don't know.

I support taxpayer funded K-12 education precisely because I believe it results in more competition than the alternative. I support some regulation of the financial industry because I think it results in more competition than the alternative. That doesn't make me "socialist inclined." I ran my own private business for 35 years. My father owned his own business. My four siblings and my daughter all run their own businesses. Today's American economy is fiercely competitive.

We don't need tenured university professors to explain it to us in order for us to know how capitalism works. We get it. We are enthusiastic capitalists. Just because we think that more government than you do is optimal doesn't make us "socialist inclined." And it sure as hell doesn't mean that G.A. Cohen represents our views whoever the hell he is.


Chambana writes:

On many levels this episode may have been one of the weakest in the entire Econtalk series.

First, the main argument was a blatant example of a straw man, which suits well college freshmen debates on capitalism and socialism, but not a serious program such as Econtalk.

Second, speaker’s arguments are entirely divorced from the reality or any empirical evidence. I actually stopped listening after this quote: ”...one's background does not necessarily determine one's achievement or outcome in life. So there are plenty of stories of people who had very privileged backgrounds and turned out not to be particularly successful in life; and the reverse is true, too...”

Yes, we are all aware of Tea Party slogans “I built it” and “Gov’t stands in the way”, but my guess is that Econtalk crowd is probably above such pandering.

Third, I was hoping Otteson would give credit for his title to Francis Fukuyama and his earlier works “The end of history and the last man”. I guess I was wrong...

Russ, now may be a perfect opportunity to invite Jean Tirole. As with any serious problem, the devil is in the detail when it comes to balancing of government intervention and he may the perfect person to shed light.

Miles Skidoo writes:

Here's some evidence that the late GA Cohen had a great sense of humor: https://www.youtube.com/watch?v=Eb1R3mjyZqc

Nathan writes:

Three points--

1. One ground for redistribution might be to keep the poor from falling before a certain level, another reason for redistribution might be to prevent the super rich from working to destroy the institutions of democracy and the rule of law. Thomas Piketty made a good argument for the second role of redistribution here. James Otteson worries about political economy leading a socialist state into tyranny. He should worry equally about political economy leading a capitalist state toward tyranny.

2. Giving someone money (as opposed to entangling them in a bureaucratic and paternalistic web) does not curtail their freedom per se. If the marginal utility of this money is higher for the poor than the rich, then redistribution can itself lead to more freedom and individual agency.

3. The idea that the free market recognizes individuals as ends in themselves more than a socialist state does is totally absurd. I do not feel recognized for my unique and precious individuality when I am put on hold for an hour with a company, after twenty minutes of struggling with an automated switchboard. A company (quite rightly) treats its consumers as substitutable poker chips, and does not offer a different price or terms and conditions to each consumer as a recognition of his individuality. The point Otteson should have made is that it is safer for an individual to be treated like a pawn by an organization that does not have legal recourse to violence than by one that does.

Lio writes:

It seems that some French economists become more and more popular here in the United States: Piketty and Tirole. Unfortunately, these are not the right economists to highlight, in my mind. The former is a Marxist who pursues a specific political goal and is not taken very seriously in France at the moment while the latter is more respected as an economist even though few people know his work. It is fascinating for me as a french to see that many americans slowly turn socialist. For once, more and more americans embrace the current way of thinking of the french about Economics and not the reverse. Yet there was a time when the most famous and most celebrated French economists were Bastiat, Say or Turgot! It makes me think about "the anti-capitalistic mentality", a book written by Mises, and Schumpeter's forecast that, due to its very success, capitalism is doomed to death!

Shayne Cook writes:

To: netsp, Greg G, and Chambana:

I agree with you all that the definition of socialism, or "socialist inclination", used here is/was possibly a fairly narrow and perhaps an erroneous, self-serving one.

What is your definition of "socialism" or even "socialist inclination", and how is it different from that described here?

(A Note here: I'm fairly old [60 years], fairly well-traveled [several years in various parts of Europe, Asia as well as most years in North America], and fairly well educated [several graduate management degrees]. But I've never heard or seen two alike definitions of "socialism" ever - even from those who proudly proclaim themselves to be "socialist".)

Greg G writes:

Lio,

>---" and Schumpeter's forecast that, due to its very success, capitalism is doomed to death!"

Great example there of how failed predictions never ever seem to damage anyone's reputation in economics. Ideology reigns on all sides no matter what.

If Schumpeter was alive today he would be amazed to see Communism virtually extinct, state ownership of the means of production totally discredited and American and Western European economies vastly more productive and efficient than they were before the he made his prediction - which was followed by a big expansion of the social safety net.

Of course, like everyone other economist with a failed forecast, he would likely claim things would have been better in some untestable counterfactual.

Greg G writes:

Shayne,

That's a good point and a fair question. Here's one I like from the first page of Google results:

Socialism | Define Socialism at Dictionary.com
dictionary.reference.com/browse/socialism
Dictionary.com
socialism definition. An economic system in which the production and distribution of goods are controlled substantially by the government rather than by private enterprise, and in which cooperation rather than competition guides economic activity.

Obviously we have a mixed system to some extent. We don't live in a world of pure Platonic forms. It seems obvious to me that competition is clearly the dominant element in our system.

Erik writes:

I like the wikipedia definition better:

Socialism is a social and economic system characterised by social ownership of the means of production and co-operative management of the economy as well as a political theory and movement that aims at the establishment of such a system."Social ownership" may refer to cooperative enterprises, common ownership, state ownership, citizen ownership of equity, or any combination of these

As many others, I have listened to more or less every episode of Econtalk - and it is generally my favourite podcast - but I had to quit this one after 10 minutes.

Floccina writes:
Now, contrast that with a child growing up in a different house--maybe growing up with a single parent, going to a horrible school as opposed to the school my kids have been lucky enough to go to.

I think that the evidence is that there are few horrible schools in the USA and that what we call horrible schools are mostly schools with bad students. So to me it seems that the schools are not cause nor cure. Thinking back some of my teachers where pretty bad but that is the condition everywhere. Now I do think schools could be a little better that it will change little. IMO we invest too much hope in schooling.

netsp writes:

@Shayne Cook

For the purpose of this discussion, I think term socialism should have just been avoided entirely. If they want to discuss the faults of centralization so I think that's how they should have framed it. I would be interested in hearing arguments for radical implementations such as discontinuing public schooling. It might be best avoided generally, for the reasons you provide. Socialism is more the legacy of a once important political movement that and actual current one. The label is assumed in places where it is positively associated by the left centre. Where it carries negative connotations, it is assumed by radicals.

I am not a socialist, so my definitions are more of an observational one, but here goes:

Oldschool Marxist Socialists
Ideas emanating from (1) Historical determinism: in the modern context, the belief that the current "capitalist" model is internally self destructive and unsustainable. (2) Class conflict: the idea social classes are determined by shared political interests & that the main dynamic of politics revolves around class conflicts. Class solidarity is the determinant of who wins. There are various complicated interactions between these.

This is largely a defunct movement.

Western Labour-Socialism
(1 - mostly defunct) greater role for unions + strict layout laws and (2) stronger welfare institutions like public medical care, education and means tested wealth transfers and smaller such programs. (3- distant 3rd) Strengthening of democratic institutions, referendums and such. They are looking for a replacement for #1.

Radical "campus socialists" also found as minor parties in Eurpoe
A diverse and inconsistent bunch. I don't know of any specific policies that they are proponents of. To be generous, I would say that they are looking for ideas that will lead to more wealth equality, more power wielded by small community based institutions and less power (financial and political) in the hands of corporations and rich individuals. Politically, they are more opponents than proponents. Radical opposition politics is by nature hard to pin down.

The thread running between all these is equality as a value. Equality of wealth, power and opportunity. This equality is a fundamental value in socialism like liberty is fundamental to Libertarians. The fundamentalists refer everything back to this ultimate principle. The magical thinking fundamentalists, often expect that all other values and goals (freedom, wealth, democracy, justice, good governance) are products of how closely the fundamental principles are adhered to. They think straying from the principle poisons everything.

It's fascinating to me how this thread runs through fundamentalists of all creeds: libertarians, socialists, Islamists, nationalists. Just stick to the fundamental value of freedom/equality/obedience-to-god and everything else will follow: wealth, health, justice... All bad things are being cause by nonadherence to the fundamental principle.

Bas Hamer writes:

I don't understand the following line:

"But another reason is that children aren't yet fully adults"

where is this cutoff point where it becomes "ok" to make decisions for others? Is there some magic at 18 years, because that 18 number is relatively recent.

In criminal law they put the cutoff at 11 years old, and under roman law it seems to have been as high as 30.

So what is the definition of "fully adult" in this context?

Shayne Cook writes:

To Greg G and Erik:

Thank you for your responses - and hence at least part of my continued confusion.

Erik ...
The wikipedia definition you referred to describes what I could consider "capitalism", rather than "socialism" - as long as "citizen ownership of equity" is emphasized, AND "ownership" is defined as Rights to Control as well as Rights to Proceeds.
(A definition of "ownership" unique to the United States, by the way.)

Greg G ...
The definition you provided is closer to what I thought "socialism" to be, until the the last phrase, "... and in which cooperation rather than competition guides economic activity."

Cooperation seems more a prerequisite of "capitalism" than of what I understand "socialism" to be.

Consider that, in a "capitalist" environment, I only have to compete with those who are like-talented and offering a like product or service to my clients. With ALL others, I have to cooperate, and cooperate especially with the needs and wants of my clients and suppliers.

Conversely, in a "socialist" society - in which the means of producing wealth, and the distribution of wealth is controlled by "government" - I am inherently in "competition" with everyone for "my share" of that wealth. Irrespective of who I am or what I do or what contribution I make to the wealth of others, I have no greater claim to anything than anyone/everyone else.

Or did I miss something?

Shayne Cook writes:

To netsp:

I agree with you - the term "socialism" (and various derivative terms) have acquired such negative (or holy) connotation over the years, that arguing its flaws/merits in any context is futile.

I would argue that the same is true of the term "capitalism" and all of its derivatives.

Jim Otteson writes:

I appreciate very much the time people took to listen to or comment on the podcast. I wanted to say a word about the definition of socialism I use in my book.

I argue in the book for a definition of socialism that involves (1) its conception of human nature, (2) its central values, and (3) the policies implied by (1) and (2). I contrast it in each case with capitalism. So the definition is considerably richer than merely centralism vs. decentralism, though I focused on the latter for the purposes of the podcast.

That said, because so few people call themselves "socialist" (or "capitalist"), talking about those very small minorities would neither be very interesting nor capture the key differences that animate competing systems of political economy today. The extent to which economic decisions are made centrally or decentrally does capture, I believe, an important difference between competing systems.

And it also captures what is really at stake in the traditional definition of socialism as "public ownership of the means of production." What, after all, was the purpose of proposing to have public ownership of the means of production? It was to enable the achievement of certain specific moral values given a certain specific conception of human nature; and its proposed means to effectuate those ends was to grant economic decision-making to a centralized group. Thus although socialism cannot be defined merely as centralism, nevertheless without centralism there is no socialism.

For that reason I use "centralism" and "decentralism" as necessary but not sufficient conditions, and then evaluate socialism in terms of its ability to achieve its desired results given the means it has available.

Greg G writes:

Shayne,

Again, you make good points. I agree that the definition problems are endless. The word "socialism" has become useful mainly as an insult which is most often substituted for real arguments. That is why I agree with netsp that it would be much more constructive if everyone argued for the policies and principles they favor without the labels.

One reason I am a big fan of EconTalk is that I think it almost always moves us in the direction of a more constructive debate on these issues. I had such a strong reaction against this episode because I thought it did the opposite, encouraging more reliance on labels.


Jim,

Thanks for being part of the discussion. I hope my strong criticism did not come across as rude. One reason I am so frustrated with this episode is that you clearly do have the skills and knowledge to advocate for the principles and policies you favor without encouraging the use of tired labels.

Chambana writes:

@ Lio,

Tirole or Picketty’s nationality is a red herring. I could care less if Tirole’s nationality were French, Indonesian, or American. (By the way, his graduate training and most productive time were spent at MIT.) But more importantly, he is a thoughtful economist who worked on profound theories and had extraordinary insights into the economics of regulation.

Tirole opus is not easily digested, but can be summarized in one idea. Conventional (or classical) economic theory does not lead to optimal normative prescriptions if one accounts for game theory and informational asymmetry. The outcomes are a mixed bag: sometimes regulation leads to higher welfare, sometimes it doesn't.

Left alone, finance, healthcare and various kinds of utilities produce skewed outcomes that benefit interest groups at the expense of consumers.

Jim Otteson writes:

@Greg G: I don't mind spirited disagreement at all! I take your (and others') points that reducing a rich and robust position to a mere label will inevitably distort it. In the book, I do my best not only to give full pictures, but to give them in a way that proponents of both sides--i.e., socialism and capitalism--would accept the characterizations. Otherwise there's no chance for a meaningful conversation. (If you have a look at my characterizations in the book, I would be glad to hear your thoughts.)

But one place we might disagree is whether "centralism" or "decentralism" are moral terms. I don't think they are; I use them merely as terms of description, not evaluation. So I strongly disagree with what @netsp says above that the discussion is disingenuous (let alone propagandist). It is true that I argue that what I call "socialist-inclined" policy faces significant practical obstacles that its proponents do not always appreciate, and I further argue that the main moral values it champions--equality, fairness, and community--are not served well by the means it advocates to realize them. But that is not, or at least I do not see it as, disparaging of socialism. Indeed, I offer the argument of the book as a sign of my respect for the position. I take it seriously, and I try to evaluate it on its own terms. I think it fails on its own terms, but that is something I argue for, not something I merely assume or assert. And, unlike some other treatments of socialism, I try very hard to avoid denigrating socialism or setting it up as a straw man.

Greg G writes:

Jim,

I'm sure your book goes into this all with a lot more subtlety than is possible in a one hour interview and I realize that you acknowledge that these tendencies exist along a spectrum.

Even so, I feel that what I heard in the interview is a way of thinking about these issues that encourages thinking in terms of a polarizing dichotomy, regardless of what was intended. I think that is evident from the comments. I am not questioning your intent.

I am a fairly mainstream American Democrat. If the "socialist inclination" is nearly as widespread as you say it is, then I'm pretty sure your classification system would put me in the Cohen camp rather than the Smith camp. I think I have pretty solid credentials as a capitalist and Smith guy for the reasons I stated above.

How would you feel if I proposed a dichotomy where I was represented by Adam Smith and you got to be represented by Jay Gould? Much better to do away with the device of dichotomies altogether.

Do I favor centralization or decentralization? I think decentralization should be the default and the burden of proof should be on those favoring centralization but I can think of quite a few cases where I think that burden is met. I do agree these are not moral terms and don't even think the question is that interesting without being attached to a specific issue.

I take your point that your spending so much effort arguing against socialism is paying it respect by acknowledging that its arguments need to be taken seriously and answered.

Even though it was not your intent, your basic framework here feels a lot less respectful to those of us who get shoehorned into an "inclination" represented by someone we never would have chosen to represent us.

The point you make above about the results of policies often being different from their intentions is a good one and would have been a more productive framework than Smith vs. Cohen.

Hayek provided us with a refutation of socialism that really doesn't need to be improved on.

Mort Dubois writes:

Only a few minutes into the discussion, but I'm surprised that Russ picked out the American public school system as an example of the failure of central planning. I would call it the opposite: Google tells me that there were 98,817 school districts in the United States in 2009. There couldn't be a much better example of how local communities come up with their own ways of doing things, and the wide variation in quality of public schools is a pretty good indicator of the downside of distributed decision making. Some decision makers will do a good job, some will do a very bad job. Same thing with individuals: some will do well, some won't. The value of some kind of redistributive system is that it can soften the harsh sorting effects of pure capitalism.

Most people like the idea that there's some kind of lower bound to human suffering, and that desire takes many forms once it's passed through a complicated political system.

Mort Dubois writes:

Correction: I confused the number of schools districts with the number of schools. Apparently there are only 13,588 school districts. I don't think that the smaller number invalidates my point.

Greg G writes:

Mort,

Good point about how decentralized American schools really are. Russ's comments about that were a big part of why I felt shoehorned into an absurdly caricatured category of socialist centralizers.

Floccina makes a good point above about how problem schools are often the result of problem kids rather than the other way around. Broken homes and poverty and bad parenting cause problems that we often have unrealistic expectations about schools being able to fix.

Mark writes:

Jim is a great guest. It was a very enjoyable show, and I hope to hear more from him on future episodes.

Russ Roberts writes:

Mort Dubois,

You misunderstood my point.

I was not saying that schools are an example of the failure of central planning.

I was making the point that there are kids in this country who operate under incredible handicaps and I understand the urge to do something about that unfairness. That's all. I was trying to defend the socialist inclination toward equality as a measure of fairness.

Greg G writes:

>---"I was not saying that schools are an example of the failure of central planning."

" But it's a failure. So to me, that suggests on purely practical grounds--forget the moral question for now, which I also agree with you on. But putting the moral question aside, the public schools are poorly run; they should be, to me, disbanded and replaced by private schools that are supported for charity and scholarships and other things, and designed by using local knowledge on what people really need, etc. So I totally agree with the thrust of your point."

That sure sounded to me like a claim that the schools are a failure and the cure for that failure is radically more decentralization. That strongly implies to me that the cause of the problem was too much centralization aka "central planning" which is to be cured by the proposed "disbanding" and reliance on "local knowledge" aka "decentralization."

Russ Roberts writes:

Mort Dubois,

Fair enough. But I wasn't bringing up the mediocrity of the public school system to score a point against socialism or centralization. I brought them up because they have failed so many poor people and are part of the reason the world we live in is unfair. I was trying (unsuccessfully obviously) to admit that there is indeed something unfairn in the prospects and opportunities of some children in America vs. others.

Greg G writes:

Russ,

That was me who pulled the quote from the transcript. I think we are still talking past each other.

You WERE successful in conveying your genuine concern for the unfairness that kids in poor schools experience. That was very clear to me and I think it was clear to other commenters.

What we disagree on is how best to fix the problem and how much the consequences of various policy options would vary from the intentions of those policies.

And we disagree about the value of debating this question in terms of a framework that focusses primarily on who has more general "socialist inclinations" or "top-down inclinations."

Mark K writes:

Wow, I was surprised by the first comments. As someone moderate, who was prepared to disagree with Russ and James, I thought this was enlightening and one of the best podcasts in a long time.
As an aside, I wonder if it's because I'm relatively young. Full "socialism" has never been a serious idea to me, and while socialism can be a pejorative, they don't use it as such. I felt they respected what I would agree are "socialist inclinations" on my part.

I thought Russ addressed what is one of the central sticking points in the libertarian framework for me, that privilege and ability are very unequally distributed. They took it very seriously (James quickly moved past "the rich work for it") and came up with intelligent objections. I'm interested in reading the book.


However, I think the choice of avatars for socialism and capitalism was poor. Cohen seems a staunch socialist while Smith is a much more measured capitalist. The "absurdity" of some of Cohen's arguments seems much more parallel to someone like Rothbard, Rand, or Nozick than to Smith.

I also feel Smith was done injustice by what Jame's said about his feelings on redistribution.
Would he have designed an economy like Finland? Probably not. However, he said:

"The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion"

The modern right would certainly label that position socialist.

Mark Crankshaw writes:

@ netsp and GregG

You've missed the essential problem with socialism and socialists: socialism is not an intellectually coherent, clearly defined system, but largely exists as described by its adherents (as equitable, "re-distributive", fair, just) only in the imagination of the said adherents. Like nailing jello to the wall, it is impossible to pin socialists to a coherent set of means. Socialists never have clearly defined their means (quite intentionally, from my view) and only describe the nebulous, emotionally-laden ends. Socialists have never been intellectually honest.

If there is anything at all that binds the socialist faith together it is a enforcing a directed plan rather than allowing individuals to act as they would left undirected. If everyone does as they please--without the enforced "cooperation" the socialist favor--it stops being socialism. Unenforced "cooperation" (and socialists of many stripes have not hesitated to use guns and death threats to achieve this "cooperation" over the past century) is been rarely achieved in self-described "socialist" states, and I have no problem with it. I despise socialism and socialists precisely because their political means invariably require individuals to submit to their "cooperation" whether they like it or not. While I agree that what kind of "cooperation" a socialist might favor is as varied as the numerous fantasies that socialists might imagine, this is to me the danger to this faith. You never know what they might do until they do it, by which time it might be too late (as countless millions of Russians, Chinese, Cambodians, and North Koreans can attest from their graves).

The pursuit of equality has never been what has bound the various socialist faiths together. North Korea is a doctrinaire socialist country and it is one of the least equitable countries on Earth. A small cadre of communists in Pyongyang own everything, live in luxury that only a few extremely wealthy Westerners enjoy, while a vast number of North Korean landless peasants live in desperate grinding poverty. The Soviet Union--the Union of Socialist Soviet Republics--ran on the same model, as did Maoist China. Under the banner of Socialism, the political elites in Moscow, Sankt Peterburg and Beijing lived very well, the provincial masses absolutely did not.

Socialism in the West fares no better. While Western governments spend money on the "poor", this amount is dwarfed by the amount that they spend on farm-subsidies for wealthy farmers, defense spending that enriches disproportionately wealthy defense contractors, social "insurance" systems that tax the young and wealth "poor" to pay the old and wealth "rich". Most government social spending in Western Democracies does not go to the poor-- it instead, again not surprisingly, goes to those most likely to vote. Equality to the "con" card used to justify the "re-distribution" that results in high-paid sinecures for upper middle class academics and bureaucrats, generous subsidies to wealthy Olympic "athletes", and generous corporate subsidies to political campaign donors.

Our public schools couldn't be better designed to ensure the wealthy and politically powerful have their children inherit their economic and political position. Wealthy children go, at great public expense, to the best public/private schools, which ensures that they will numerically dominate positions in the best universities (also at great public expense), while enjoying the best networking and contact opportunities. Socialism in action. Conversely, poor children go to the worst schools (also at great public expense!), ensuring that their numbers in the best universities are few and far between. Not surprisingly, those poor children, many who drop out of high school and never acquire the academic or social skills to compete in the job market, will not subsequently be competing for high paying jobs against the children of the wealthy. Works like a charm.


The socialist "con" has always and everywhere consisted of equivocating on the means while promising a hazy, nebulous end ("an egalitarian society", "the new socialist man", or, in its tamer form, simply a "step in the right direction"). Just give the socialist the political power to enact "the plan" (whatever that might entail) or the power to enforce "cooperation" (with the "how" that cooperation is to be enforced left to the imagination). And hope.

It is clearly a "faith-based" system, which is quite clear to me since I don't share this faith. I have little faith in the political system and no faith in the dreamers, planners (aka schemers), and fantasists who tend to call themselves "socialist".

Russ Roberts writes:

Greg G,

Sorry about misattributing your comment to Mort Dubois. It was late at night and I was hurrying...

Mark K writes:

Mark Crankshaw,

I believe you're making exactly the characterization of socialists that Greg and netsp were concerned about, perhaps they were right. One can worry about equality, be skeptical of government's ability to help, and still believe some form of welfare state is for the best..

I think the continuum that Jame's drew is essentially correct. However, it seems you'd like to throw in anyone who shares the concerns of the socialists into a group with Lenin and Mao. Social security does not put us on the road to serfdom.

Greg G writes:

@Russ----No problem regarding the misattribution. I saw the time stamp and I appreciate how hard you work to make these podcasts and this forum available to us...and all free to us!


@Mark K----My objection was NOT that Russ and Jim were disrespectful to socialists. It is that they were unintentionally disrespectful to those who are not socialists but who got lumped in with socialists in the Smith/Cohen dichotomy. I felt it was disrespectful to be assigned someone to represent my "inclinations" who really doesn't represent my inclinations. I am sure this was inadvertent and not the result of some deliberate failure in politeness.

By the way, great job pulling a Smith quote that supports your point (and mine).


@Mark Crankshaw---I agree with many of your criticisms of socialism (even though I stand a bit to the left of you). That is why I object to being lumped in with socialists, not because I think the term is some kind of horrible insult.

Of course you are right that concepts like social justice, fairness and equality are hazy and nebulous. As we have seen above, so is the term socialist.

Having a lot of pie-in-the-sky fantasies about how much better the world could be is a tendency socialists share with libertarians in my opinion.

Mark Crankshaw writes:

@ Mark K

Not surprisingly, I completely disagree with you. I have stated that the ends/means of socialists are as varied as the socialists themselves. The only thing that binds socialism together and separates it from political "non-socialism" is the willingness to use of coercion to politically enforce a "plan". Political socialism is not inherently egalitarian, fair, just or whatever "beneficial" attribute the socialist claims it to be, nor is it necessarily precluded from being any of those things. It is a Rorschach test-- you can see any end what you want in it and propose any means to achieve it (actually achieving those goals through those means is another matter entirely).

However, political socialism is always and everywhere and by its very nature coercive. One can always form a non-political and hence non-coercive form of "socialism" with my blessing. As discussed in the podcast, the family unit is, by nature, perhaps such a non-political socialist system. My wife and I love our children, but since they are 3 and 5, our family is centrally planned (by the parental central committee) and coercively administered since our children are incapable of doing planning for and administrating themselves.

You are free to believe that the welfare state is for the best. You are not free, however, of the charge of coercion for politically implementing a "welfare state". The Welfare State is both political and coercive. The political is not animated by love, care, or concern. It is power, force, and exploitation. The welfare state is exclusively financed through forcible confiscation of income and, ultimately, the threat of lethal force. I do not pay taxes out of love, a sense of obligation, or because I think the money will be well spent (since emphatically I do not). I pay mainly because I don't have any choice (withholding taxes takes care of any ability to decide for myself), and because I know, through direct experience, that if I don't pay what the government wants, when the government wants it, they will get quite nasty about it. Whether the welfare state achieves the alleged "re-distributive" goals is highly debatable; whether the welfare state is coercive is not.

Whether Social Security has put us on the road to serfdom is also debatable (that said, I would argue that we are not "on the road" but that I am actually a serf already--throughout most of human history it was only the serf class that paid taxes to the ruling class--and I pay taxes and I am clearly not in the ruling class). It is even more debatable that social security is egalitarian: it is merely a tax on young asset-poor Peter to enrich old asset-rich Paul. What is not debatable is that it is political and coercive. You can "share the concerns of the socialists" to your hearts' content--empty your own wallet any way you wish. However, the second you insist that this concern be politicized, and that political force is enacted to achieve some dubious goal through even more dubious means, forcing me (and millions of others) to do things I disagree with and violently oppose, your bedfellows are indeed Lenin and Mao.

Like the overwhelming majority of humans throughout history, I am completely politically powerless. The politically powerless have always been, throughout human history, pushed around by the politically powerful. The existence of the welfare state is yet another example of that pushing around. The system is impersonal, uncaring, beyond even the slightest of control. I just don't share the fantasy that pushing me around in this way is done in my interest; it is done to primarily benefit the politically powerful.

Netsp writes:

@Mark Crankshaw

You're right. So is Mark K. This is all the more reason not to use the term. Socialism has got 100+ years of history everywhere in the world. There are no specific policies to refute or champion. This isn't intellectual dishonesty on their part any more than the radically different versions of Christianity that have existed in history is intellectual dishonesty. Taking some flavor of Christian doctrine and standing it as a representative of Christianity is. No political "philosophy" is consistent, especially as it spreads over time. Libertarianism is more concise, less widespread and has had a lot fewer people in charge claiming the label.

How would Professor Roberts feel about being represented by Ayn Rand and also being bundled in with the Libertarian inclined George Bush?

BTW, there is also ambiguity the other way, which is where "Socialist Inclined" comes in. The concept of public schools, for example, is not uniquely socialist. It really goes back to ancient days. A lot of the British system comes from their Empire philosophy. A lot of European public schools systems are evolved from Church managed schools and date to the days when the Church held government-like powers. Similarly ambiguous philosophical background to public hospitals.

Mark Crankshaw writes:

@ GregG

Having a lot of pie-in-the-sky fantasies about how much better the world could be is a tendency socialists share with libertarians in my opinion

I agree about the socialists and some libertarians but one need not hold pie-in-the-sky fantasies and arrive at the libertarian philosophical position.

I have a very sober assessment of humanity: all human beings are inherently self-serving, in-group (in Marxist terms "class") conscious, and largely exploitative (among other flaws too numerous to mention). If all human beings are pre-disposed to self-serve and exploit their fellow man and governments are populated by human beings, then it follows that governments are, by nature, inherently self-serving and willing, eager and able to aid in-group members at the expense of out-group members. Since all humans are rotten to the core, a government of humans will be rotten to the core.

One can take this further. The NFL is a concentration of American football talent. Those with relatively high levels of talent in the high school level move on to the college level to compete, and the best talent in college go to the professional level (NFL). Likewise, in politics, those most skilled at demagoguery, ruthless manipulation, violent control, those least held back by ethics, conscience, or morals, those willing and able to do whatever it takes, move up the political hierarchy. The political mechanism is thus populated through competition by the most reptilian of humanity. That alones explains the likes of Hitler, Stalin, Mao and Pol Pot. Political will is largely the will of the most hideously rotten of a rather rotten bunch.

Given that the most rotten will rule, it follows (to me at least) that I would like that rotten group of reptilian exploiters to have as little power as possible. I certainly wouldn't like those in power to be massively armed, empowered to do and take whatever they want, and use that power to rig the game of life in their (and their progenies) favor. However, this is precisely what you get with a nation State and especially so in a socialist nation State.

Would the diminution or elimination of the State usher in an age of peace and tranquility? Of course not. Humans are inherently rotten and therefore a society of humans will be inherently rotten. However, if you are being kicked and pushed around, threatened and robbed on a daily basis, by an political apparatus run by armed thugs (aka the State) the elimination (or even diminution) of that political apparatus sounds pretty good. All the other political philosophies just offer more of the same (or even more, in the case of socialists). I am not a libertarian who believes that the political process will bring that about. It won't. Perhaps this muck is as good as it gets. I just think the world would be a better place without mass belief in the false gods of religion, the State and the necessity of a "ruling class". I hope, one day, that the belief that there are some "good", "wise", "well-meaning" humans fit to rule the rest of us will die.

Mark K writes:

@Mark Crankshaw

I'd like to have this argument out because it's always seemed a very odd one to me.

State enforcement of tax collection is certainly coercive. It'd be just as coercive in a night-watchmen state where my taxes are collected for a military budget I think is bloated. So do you stop anywhere short of anarchy? How can you?

For me, the ability for the state to coerce me to do whatever it may is implicit in the social contract I accept by living here. I don't think there's anything close to "tyranny" unless my freedom to choose to move away and live in one of the other 195 available political systems is hampered.

The ability to tax, for whatever purpose, is a basic consequence of the belief in a social contract. This puts me in a camp with Lenin and Mao?

Also, I don't live in a fantasy land where politicians have my best interests at heart. I actually think aligning politician's interests with our own is a major issue, one which we're doing a terrible job with.

One point of agreement, society would certainly be better off if people accepted more agency and suffered from fewer delusions.

Mort Dubois writes:

@Mark Crenshaw: "I would like that rotten group of reptilian exploiters to have as little power as possible." Beautifully put. But doesn't this desire extend to non-governmental operators as well? Do you think that corporate CEOs are any better than politicians?

I think that many of the tendencies being called "socialist" in this debate aren't so much driven by a desire to take stuff from others, as much as a desire to not let others take stuff from them. People don't like to be exploited, and most of us have plenty of examples of private-sector operators digging into our pockets, or worse. Who will defend the masses from exploitation by the private sector? Government.

I just finished reading Steven Pinker's "The Better Angels of our Nature", which documents the fall in violence and general rise in standard of living over the last 4 centuries. He makes a persuasive case that countries with weak governments are bad for their citizenry - people, free to operate without fear from punishment, quickly turn on each other. Government, for better or worse, has been effective in lowering the rates of citizen-on-citizen violence. Democratic governments have lowered the rate of government-on-citizen violence as well.

There seems to be a tight correlation between the wealth of a society and the size and complexity of its government. This may be a natural feature of modern democratic government. It might easily be called a form of socialism by those with an agenda. I'm not sure that this label is a good description of what's going on.

Still have another 20 minutes of the podcast to listen to, but so far I'm with those who say the argument being presented is facile and relies on straw men.

Mark Crankshaw writes:

@Mort DuBois

Who will defend the masses from exploitation by the private sector? Government.

Excuse me? Are you serious? The relationship between big business and big government is deeply incestuous. The corporate elite and the politicians are drawn from the same political ruling class, corporations and organized big business labor are the primary funders of political campaigns, politicians routinely move from corporate lobbyists and corporate elites routinely become politicians. Expecting government to protect us from corporate exploitation is like putting the Big Bad Wolf in charge of home security for the Three Little Pigs.

I'm not so sure about the level of violence being curtailed. The 20th century was one of the most bloody and violent in human history. Government-on-citizen has at its historic height in the mid-20th century-- a quarter of a billion mass murdered by the worlds governments.

I will concede that there has been some abatement of citizen-on-citizen violence in more recent decades. However, I do not ascribe this to democratic government, but rather that the world's governments finally have concluded (rightly) that the pickings are greater when the masses have limited freedom and there is a certain level of "order". Gulags, death camps, repression and lawless disorder are bad for the business of the extraction and plunder of the wealth of the subject masses.

The ends of government haven't changed much ever, the ruling class wishes to live without having to economically produce by skimming off the economic productivity of the subject classes (as described as the "political means" by Franz Oppenheimer in his masterpiece Der Staat). Only the means have changed since the time of Louis XIV.

The reptilian elite have, at long last, concluded that a lighter touch, order and public spending (at the expense of the economically productive classes not the political elite, of course), yields greater political plunder for the ruling class. If they still believed that the ruling elite (those who both run our corporations and bankroll and control all the political parties) would get more lucre through violent repression, we would be getting a large dose of that, the pretense of democracy would be dropped in short order. Luckily, they don't. The current sham democracy keeps the money flowing so the political/corporate elites can keep living at their accustomed level of opulence without actually having to economically produce, so they won't rock that boat anytime soon.

Greg G writes:

Mark Crankshaw,

So then, you don't think that the tax funded nation state is legitimate. This is a fundamental principle for you.

The first thing to note about that is that it means you don't get Adam Smith as a representative for your views. But I do. Smith did think that governments and taxation were legitimate and taxpayers had a lot fewer rights in his day than ours.

You say, "Since all humans are rotten to the core, a government of humans will be rotten to the core." Well, if I accepted the first part, the second part would follow...but it would also follow that all non-government human activities would also be "rotten to the core."

We had a lot of human history that preceded the modern nation state and it was a lot more violent and coercive existence then than it is now. I suppose I'm a lot more cheerful than you are about living in the most free and prosperous country in human history.

The idea behind constitutional democracy is not that its political leaders will be some superior kind of humans. It is that having to stand for election will limit their power and produce a better result than any of the alternatives. And history shows that it has.

I'm starting to think I prefer cheerful pie-in-the-sky libertarians to depressing, mad at the world libertarians.

Mort Dubois writes:

"Expecting government to protect us from corporate exploitation is like putting the Big Bad Wolf in charge of home security for the Three Little Pigs."

So who do you suggest we turn to when we need protection?

Mark Crankshaw writes:

@GregG

We had a lot of human history that preceded the modern nation state and it was a lot more violent and coercive existence then than it is now

I have spent a lot of time studying human history and I am afraid my assessment of human history does not accord with your commonly held view with respect to State coercion.

On violence, however, I think we are in accord. This world has always been a staggeringly violent place, and for the past 50 years or so, violence has been abating. There are still plenty of modern nation states (Iraq, Syria and Afghanistan immediately spring to mind) with very high levels of violence, but on the whole, agreed, the world is less violent. However, violence is down precisely because coercion is up.

As far as control and coercion are concerned, however, we do not agree. I do not know where people get their view of history from (I suspect most Americans get theirs from Disney films), but contrary to the commonly held view, the State has in the past had very little control of the day-to-day lives of most human beings. Without modern transportation modes and infrastructure the States of the past were very limited in their contact with and control of the masses. States of the past were indeed monstrous, but their monstrosity was limited by physical distance, slow transport, and by the ability of subjects to move to uninhabited or inaccessible places.

The Orwellian totalitarian State is, on the contrary, a very modern phenomena. It was virtually impossible to construct such a State without the technology necessary to easily monitor and quickly access subjects to punish them. Only the modern nation state has the ability and resources to monitor every phone call, have every e-mail recorded, have every entry/exit from the country closely monitored. Passports are a very modern invention. The modern nation state has greatly increased its ability to coerce and clearly vastly expanded the areas of life in which the state intrudes and controls. Coercion is exercised by the modern nation state to cover just about every economic, financial and personal decision one can possibly make. The modern State can limit even the mundane: the size of the soda you can purchase and tightly regulates home improvements. It can also restrict exit, can "freeze" or seize assets in seconds and on and on and on. Louis XIV didn't much care about some of that and couldn't have done so even if he wanted, the modern nation state routinely can and does. The modern nation States of the USSR (and, of course present day Russia), China, North Korea and a host of others were totalitarian in their control in ways that pre-modern States couldn't even imagine. The entire globe is now under the control of one political regime or other, so one no longer can "get away" as was the case for most of human history.

If having political leaders stand for election will limit the political power of the State, then that has clearly failed. The State is more powerful, intrusive, and controlling than it has ever been. Are the results better? Sure. Not exactly a high bar, since for most of human history the State has delivered results were that ranged from abysmal to catastrophic. I am not "mad at the world", rather justifiably wary. I don't know where you live, but the USA is hardly the freest and most prosperous country in history. That malarkey has been pushed on me since grade school; having lived in other countries I know what a load of tripe that is.

Mark Crankshaw writes:
So who do you suggest we turn to when we need protection?

I would suggest that such protection is politically not on offer. In my view of history, the growth of corporations (a creature created by the nation State) has clearly mirrored the growth of the State. I can not with certainty conclude there is a causal relationship though I think the evidence is suggestive of that. Perhaps a smaller less powerful State would entail smaller and less corporations and less concentrated economic power. Perhaps. A larger more powerful State, however, I am certain will not deliver that protection.

jw writes:

I disagree with the term "socialist inclined". There is great debate above about what socialism is or isn't, which I believe socialists use to their advantage. There are almost no examples of a purely socialist system left per the classical, mid-19th century definition: "public ownership of the means of production." However, if you own a business, as soon as you walk through the front door you are subject to tens of thousands of pages of regulations (think "Three Felonies a Day" on steroids) and pay 25% of your profits to the government (double that on dividends). This is substantial control and ownership.

Mr. Otteson redeems himself above (and probably in the book) by stating that without centralization, socialism is impossible, which is true. So redefining it as decentalization vs centralization is simply getting back to Hayek's road to serfdom, which has always held, IMHO.

As for the corporation bashers above, "crony capitalism" is a nice, alliterative and pejorative phrase, but is totally inaccurate. "Crony socialism" is far more realistic. Without centralization, crony socialism cannot exist as well.

So if you want to describe your continuum as socialist vs capitalist or centralization vs decentralization, why bother? It still comes down to socialist vs capitalist, whether people don't want to self identify as socialist or not, a rose is still a rose.

And I had a verbal outburst (luckily, alone in my car) when Russ stated that the government is good at redistribution. WHAT! C'MON MAN! Just because the government does it on the unimaginably large scale of trillions of dollars a year does not mean that they are doing a good job of it. Could it be done more efficiently, more honestly and without unseen and unintended effects without government? Absolutely!

(And Russ, don't backpedal, socialist are doing a horrible job with education, the number of school districts notwithstanding. The number of colleges has no correlation to the ideological purity within them.)

So I agree that the end of the classical definition of socialism is upon us, but as usual, envy and greed has allowed socialism to morph into a much more pernicious form - rampant regulation and taxation, that achieves much of the same end. With socialists (or centralists...) in control of the media and education, I do not see an end to the eternal struggle.

If they ever get talk radio and podcasts, all is lost.

Dave N writes:

Greg G beat me to quoting Russ’s point about public schools being disbanded and replaced by private ones but I’d like to take the chance to ask Russ (or anybody else of similar view) to expand on this view.

I’ve just gone round and round with a friend on this issue where as part of the discussion I did some reading on public vs. private funding of schools and was somewhat surprised by the current amounts involved (showing my age I suppose). So for example, the New York school system spends on the order of 20K per student per year, varying somewhat by region. Now that’s a heck of a lot of money, but private schools don’t seem to be able to do it significantly cheaper. Certainly not while providing a similar level of services (i.e. food, transportation, outings, supplies etc.) or with a model that doesn’t screen admissions. And if you want more qualified teachers then you’re going to have to pay extra for that like the BASIS school in Brooklyn NY which is quoting 24K/year in tuition (no idea what they’re actually spending per student).

So how would a society look with only privately funded education? In what sort of range do you think actual tuitions would end up? Perhaps a choice between a very cheap/free religious group sponsored education or a super expensive secular high quality one? Do you really think that if scaled up, there will be enough charity and scholarships to bring costs down in any significant way? How would families with say 3 children and an income around the median fare? I suppose if most of the discretionary spending now devoted to housing were redirected to education then a family where the worker is making 50K could manage 15K for education but what about that second child?

Finally, what does society do with all those kids whose parents cannot afford to send them to school? Are we counting on one parent to stay home full time and home school or do they run loose in the streets? Do we lower the working age so we can get those 12 yr olds to be productive? Seriously, what do you propose will happen to the hundreds of thousands (probably talking millions since there’s something like 50 million school age kids nationwide) of 5-14 yr olds who won’t be in school because the family can’t afford it? And perhaps more importantly, what will happen to society when those kids become the workers (unemployed) of tomorrow?

If nothing else then, it seems like one unintended consequence of private schooling would be to further drive down the fertility rate as more parents would find themselves devoting many more resources to that first child. Or choosing not to have children at all. (I guess this would also impact on the the current immigration/citizenship debate as we would need to keep all those illegal immigrants as well as enticing many more to come in order to make up the numbers to sustain population growth levels so crucial to driving economic growth as we know it. Basically outsource the cost of education to other countries.)

I’m no fan of the current US model to say the least. Getting rid of funding by property taxes would be a good first step for example. But I just can’t for the life of me imagine how a completely private school system would overlay onto current US society.

Christian Larsen writes:

I would just like to point to the part of the discussion where Russ and James get into comparison of what happens in small groups (families) vs broader economy.

This difference in dynamics may be explained by Dunbar’s social brain hypothesis.

http://psych.colorado.edu/~tito/sp03/7536/Dunbar_1998.pdf

Basically Dunbar proposes that humans have the brain size we do so that we can interact in groups. Groups are maintained by our ability to predict the intentionality of other members of the group. Unfortunately groups are networks so the cognitive load for predicting behaviour of individuals in the group increases exponentially with group size. Typical cognitive capability of humans allow for 5 degrees of intentionality. Typical example Dunbar gives of 5 degrees of intentionality is:

““I intend that you believe that Fred understands that we want him to be willing to [do something]…”

At 5 degrees we get to group sizes of 150 (commonly known as Dunbar’s number).

Once we are beyond that level then our ability to predict intentionality (trust) goes away. In which case humans have evolved institutions such as money, government, contracts etc that allows us to over come trust issues and complete valuable transactions.

Cohan, Janes and Russ all make the same error in believing that transactions are not occurring at the small group or family level. Its just that in small groups the transactions are hard wired into our brains and basically invisible to us. In comparison monetary transactions is such a blunt and inexact instrument compared to what evolution has put into our skulls.

So the Cohen quote “I serve you not because of what I can get in return by doing so but because you need or want my service; and you, for the same reason, serve me." Basically implies people will do things for no return.

Why would socialist think the way Cohen indicated? Once possible answer also from Social Brain hypothesis is that interacting or transacting in a trusted small group comes with an endorphin kick. It makes us feel good. Transacting with money with people who we can’t predict does not give us the same endorphin kick.

Socialism is therefore the desire for all society to work in small group manner. All we need is for each of us to augment our brains with more computing power than currently exists on this planet.

cjc writes:

The G. A. Cohen camping trip was illuminating for me. It showed clearly how biased and asymmetric thinking works. Cohen would have us believe the wonderful camping trip would be ruined by capitalist actions. The haves would start to exploit the have nots. But as survivors of camping trips like this well know, this is not what really happens. What happens is that the have nots start to free load on the haves. The generous fisherman finds that he is spending all his time fishing while his well feed camp mates spend time discussing philosophy around the fire. The water carrier finds his arms getting tired while the rest of the campers happily raise their mugs.

Chris writes:

Just a quick comment from that horrible place, Europe. Three (out of many) questions the conversation chose to casually skip.

Who or what was responsible for letting the (publicly funded) U.S. system of secondary education that was once (40s, 50s) the envy of the world degenerate to its present state?

I strongly reject policies aimed at (material) equality but consider myself a fierce proponent of equality of opportunity.

What does Otteson make of the fact that upward social mobility is now much more likely in countries that actively pursue more socialist policies aimed at “equality of opportunity” in education like Norway/Danmark/Finnland/Sweden? (Corak, M. (2013) Income Inequality, Equality of Opportunity, and Intergenerational Mobility, Working Paper, Institute for the Study of Labor IZA Paper, IZA DP No. 7520)

Finally, Americans themselves appear to have lost their confidence in the American Dream. In a recent NYT survey only 64% (down from 75%) believed that a Horatio Alger career was still possible (NYT Dec 10 2014, Many Feel the American Dream Is Out of Reach, Poll Shows by Andrew Ross Sorkin and Megan Thee-Brenan)

SaveyourSelf writes:

James Otteson nailed it. I could find no flaws in his definitions, logic, assumptions, or predictions--which is why I was caught completely off guard by the strength of feeling and volume of objections against his analysis in the comments section. Some people really did not like having their ideals associated with someone with whom they are not familiar. Netsp disliked having Socialism and Capitalism, “defined by their place on the centralisation-decentralisation axis” as well as the negative connotation associated with the word “Socialism”. Greg G and Chambana thought the set up was “a straw man world view”. I had to look up strawman. This website explains:

By exaggerating, misrepresenting, or just completely fabricating someone's argument, it's much easier to present your own position as being reasonable.
Now that I know what it means, I can kind of see where they are coming from. James Otteson set the stage as an argument between two different men's ideas but then made a lot of generalizations independent from the ideas of either man. Perhaps his argument would have been stronger if he'd just stuck with generalizations or restricted his arguments to those made by the two men he contrasted. I'm not sure since I liked his approach, given it supported my confirmation bias in every way possible.

Greg G wrote, “If 'not many people call themselves socialists' then how can you argue that most people are 'socialist inclined'?”

  • At first blush I thought you were correct but now that I reflect more about it, how you think of yourself and how your actions lead others to think about you are unrelated.
Greg G wrote, “I support taxpayer funded K-12 education precisely because I believe it results in more competition than the alternative.”
  • Good show, Greg. That is a clear and testable hypothesis, provided you specify what you meant by “the alternative.”
Mark Crankshaw wrote, “The only thing that binds socialism together and separates it from political "non-socialism" is the willingness to use of coercion to politically enforce a ‘plan’.”
  • I imagine there are other philosophies, in addition to Socialism, that prescribe government intervention as the cure for some kind of illness in the world. Perhaps a proper definition of Socialism requires more than “the willingness to use coercion to politically enforce a ‘plan’.”
Mark Crankshaw wrote, “I have a very sober assessment of humanity: all human beings are inherently self-serving, in-group conscious, and largely exploitative…Since all humans are rotten to the core, a government of humans will be rotten to the core.”
  • I agree with your assessment of people, which is depressing. But I think there are ways to neutralize the negative aspects of human behavior, which is inspiring.
Mort Dubois wrote, “People don't like to be exploited, and most of us have plenty of examples of private-sector operators digging into our pockets, or worse. Who will defend the masses from exploitation by the private sector?”
  • I believe it was Milton and Rose Friedman in “Free to choose” who said that it is the competition of the businessman who protects the consumer from the businessman.
Mort Dubois wrote, “There seems to be a tight correlation between the wealth of a society and the size and complexity of its government.”
  • Yes, but the causality is in the other direction. It is not large Governments that lead to wealthy societies. Wealthy society => more to take => larger government.
Greg G wrote, “You [Mark Crankshaw] say, 'Since all humans are rotten to the core, a government of humans will be rotten to the core.' Well, if I accepted the first part, the second part would follow...but it would also follow that all non-government human activities would also be "rotten to the core."
  • In the presence of competition, the negative aspects of human behavior are largely neutralized. In an absence of competition, the non-governmental activities—as you say—would also be “rotten”. [Greg, I know you are a proponent of competition, so I suspect you understand this point and agree with it. I comment on it here only for its educational value to others.]
Mark Crankshaw wrote, “In my view of history, the growth of corporations (a creature created by the nation State) has clearly mirrored the growth of the State.”
  • That’s a fascinating association. I suspect the purpose of a firm is to shield the individual steps in a manufacturing process from government tax and regulation so as to reduce transaction costs [Ronald Coase]. It makes sense, therefore, that a large state would require large taxes to maintain itself so firms would have more incentive to form and grow large so as to protect as many activities from taxes and regulation as possible. It is also likely, therefore, that in the setting of a low tax, low regulation government firms would be smaller and more numerous.
Christian Larsen wrote, “Cohan, Janes and Russ all make the same error in believing that transactions are not occurring at the small group or family level.”
  • Interesting point. Thanks for the link to Dunbar. I'm looking forward to reading it.
cjc wrote, “The generous fisherman finds that he is spending all his time fishing while his well feed camp mates spend time discussing philosophy around the fire. The water carrier finds his arms getting tired while the rest of the campers happily raise their mugs.”
  • HA! I have been camping too. It is just as you say, but only if you let them. “Don’t be a doormat,” is my moto.
Mark K wrote, “For me, the ability for the state to coerce me to do whatever it may is implicit in the social contract I accept by living here…The ability to tax, for whatever purpose, is a basic consequence of the belief in a social contract.”
  • This is really important, Mark. The social contract is not between you and the state. It is between you and your neighbor. The social contract exists before the state. In fact, the state derives its utility—and therefore its justification to tax—by specializing in the fulfillment of the terms of the social contract. Any taxes taken for purposes outside of the terms of that social contract reduce the productivity of society for the benefit of the specialists in government.
  • The social contract has only two parts: 1) Agree not to harm the other members of the social contract [Citizens] 2) Agree to aid, in any way possible, other members of the social contract who are harmed or under threat of harm.
  • You can easily derive, from these two commitments, the first two of Adam Smith’s responsibilities of government. 1) Protect citizens from foreign invaders and 2) protect citizens from each other and administer fair accounting when citizens are harmed by one another.
  • You can have a society without a government, which is why I say the social contract exists before the state. Society without a government is NOT Anarchy, BUT it is more efficient—up to a point—to have specialists perform the activities of government and then trade with all the other specialists in society for those specialized government services than it is to keep the all activities of government generalized among all citizens.
  • That said, ultimate power is ultimately corrupting. The specialists in government, once they realize their monopoly power, will ultimately exercise that power at the expense of everyone else in society. It is quite possible that the only way to limit this negative, predictable outcome is to have no government. That gets tricky because of the presence of foreign invasion. A standing army is rather necessary, it seems to me, to deter theft on a national scale—invasion. Thus a government may be unavoidable in present-day human societies. The best compromise, therefore, is probably the one envisioned by the original framers of the US Constitution that kept states small and largely independent. The resulting competition between the states prevent any one of them from realizing too much monopoly power. Thus, the best solution is probably not “small government”. It is “many governments, with activities defined by and restricted too the Social-contract, in competition with each other under a common, defensive arms treaty." That arrangement, I think it is worth noting, is precisely the same arrangement as the social contract between free individuals that underpins government in the first place. Truly fascinating.

nethy writes:

I was discussing money in politics with right leaning american friends a couple of years ago. I came to the following characterization of the positions (advocating for reform).

The hard right think that rich corporations will inevitably corrupt powerful government institutions with money and therefore, the institutions need to be disempowered so that there is no benefit in corrupting them. Of course we'll have corruption if bureaucrats and legislators have $100m rubber stamps in their pocket. What did you think would happen?

The hard left think that corporations will inevitably corrupt government institutions with money and therefore, the corporations cannot be wealthy so that they don't have the ability to corrupt. Of course we have corruption when there are corporations the size of small countries running around trying to maximize profit. What did you think would happen?

The pragmatist-centrists think they should enforce the "no bribery" rule, even if the law causes some philosophical inconsistencies and the requires long hairy stipulations.

To me, this is a nice example reaffirming my own biases. Fundamentalism in these matters has a strong modernist characteristic, striving for something like scientific elegance. They hate the complexity of deciding things on a case by case basis. They want a big "truth" solution that takes care of both the moral judgments and all the outcomes, a 'Principia Politica'. All we need is the right constitution, basic principles. Everything else is maintenance and paperwork. Taken to an extreme, legislators can be replaced with high court judges.

Mort Dubois writes:

@Saveyourself: very interesting analysis. I'll only comment on one of your statements:

"I suspect the purpose of a firm is to shield the individual steps in a manufacturing process from government tax and regulation so as to reduce transaction costs [Ronald Coase].... It is also likely, therefore, that in the setting of a low tax, low regulation government firms would be smaller and more numerous."

I have run a factory for 28 years, now employing 19 people. The vast majority of our transactions, and their associated costs, happen between workers within a firm. Even in a company as small as mine, there are thousands of interactions a day between workers. The number, complexity, and cost of our interactions with government pale to insignificance in comparison.

It's interesting to me that the basic building block of a modern capitalist society, the corporation, so closely resembles a socialist demand economy. It is centrally directed. Its workers have clearly defined roles, and aren't free to change them without permission from superiors. It can, in practice, be run in order to enhance the welfare of all of its employees, or just those at the top. Information may or may not flow freely from bottom to top. Management makes every effort to control the cost of interactions between workers, often by fiat, and on the basis of little or no pricing information. (The alternative, allowing each worker to dicker with co-workers over the cost of each interaction, using an internal payment system, would be utter chaos and bring operations to a screeching halt.)

As for hoping that small government leads to small firms, please explain the rise of US Steel and Standard Oil, or Japanese and Korean industrial conglomerates.

Mark Crankshaw writes:

@Mort Dubois

It's interesting to me that the basic building block of a modern capitalist society, the corporation, so closely resembles a socialist demand economy

Only with one massive and key distinction: working for a corporation is largely voluntary while membership in a socialist demand economy is not. If you are a North Korean, and the socialist demand economy isn't to your taste, you can try to leave, of course. But your fate is likely to be similar to that of many East Germans who attempted to defect over the Berlin wall.

If your employee doesn't like the working environment of your company, they can serve you notice effective immediately. You have no legal recourse to forcibly employ them without their consent. The individual employee is in direct control of the employment relationship-- they don't have to hope that the election, rebellion or revolution might go their way.

Defecting from a socialist command economy comes with a very high price tag (death, imprisonment, appropriation of all of your property, retaliation on relatives). Terminating your employment in a corporation is not costless, true, but the potential costs pale to insignificance compared with defecting from a socialist state.

If that were not the case, if the cost of leaving a corporation was as high and corporation had the legal ability to conscript employees, then I would indeed see corporations as repellent on par with socialist states. Likewise, if a socialist state could be dispatched as easily and costlessly as a job with a corporation, then my fear of socialism would be reduced considerably. Not the case, however. I don't like having to depend on the undependable (my fellow man) doing the "right" thing.

Greg G writes:

SaveyourSelf

>---"how you think of yourself and how your actions lead others to think about you are unrelated."

Don't you really want to say that they are not necessarily the same? I think they tend to be very much related. One of the things that always surprises me about human nature is how much we tend to accept the way that others define themselves and be influenced by the level of confidence they show regardless of whether or not that confidence level is justified.

>---"In the presence of competition, the negative aspects of human behavior are largely neutralized"

And this is precisely why constitutional democracy gets better results than any other system of government. You have to compete to get into office and to stay in office.

Seth writes:

@ netsp - You wrote: "socialism's goal is to decentralise into self governing entities."

What level do these SGE's exist? Neighborhood associations? Cities? Corporations? Churches? Trade unions? Sports leagues?

How would these SGE's be different than the SGE's that have emerged in today's society?

How do they interact with each other and who resolves conflicts between SGE's?

@ Greg G - You ask a good question: 'If "not many people call themselves socialists" then how can you argue that most people are "socialist inclined"?'

I think Jim and Russ does a good job of answering this and you are doing yourself a disservice by not considering it.

How do you get people to respond to your desires?

Their answer is that you do this in a family through motivations that are what socialists would like to see in larger society -- 'communal reciprocity', rather than prices -- and that's what makes many folks 'socialist inclined' without even knowing it.

It's not because they like the word or view themselves as practicing socialists in their families. It's that a good deal of their daily interaction with others falls into this 'socialist' category without ever even knowing it.

Mark G Steinberger writes:

While I rarely agree with Russ Roberts, I often find his conversations interesting ad challenging. This week's conversation with James Otteson on the End of Socialism, was an unfortunate exception. I felt the two of them set up a straw dog of centralized state socialism and then proceeded to knock it down. Along the way, there were opportunities for interesting lines of discussion which, unfortunately, were missed.

The two of them seem to agree that there is a human impulse towards fairness, but that government is not the way to do it. I would like to have asked why not. Is the objection logistical or moral? Early in the conversation Russ Roberts opines that government is pretty good at redistribution but is bad at knowing what you need. I would agree. In that cotext, can the government do stuff that it is good at (redistribution) that would increase fairness?

For example, Roberts talked about the advantages his kids had. Some of them were financial, while others were cultural, social and educational. He conceded that the governent could do a pretty good job at removing the financial advatage. Should it? Would a large estate tax be anti-capitalist? Tax is something the government is good at. It does not hamper an individual's entrepeneurial spirit because it only kicks in after the spirit is no longer alive. And finally, it increases the level of fairness by lessening the financial advantage of the progeny of the very wealthy.

They discussed that Adam Smith believed that people should be given the tools to better their own condition and then explored what tools Smith believed government should provide. Smith lived in the eighteenth century. I would have been much more interested in a discussion of what tools a twenty first century Smith might have advocated. For example, Smith argued that elemetary schools should be run by the government. Does that translate to college today? He advocated roads and canals. Does that translatye into mass transit and high speed data?

I would have also liked to ask about the impact of Big Data on the ability of government to know what individuals want/need. It may be scary, but Google ay know more about you than you do. What might a Big Data informed socialism look like? Is it something we would want?

Greg G writes:

Seth

I don't really think that any significant number of people fail to know that their family relationships and their friendships and charitable work are based on a communal reciprocity model rather than a more straightforwardly for profit business model.

But I take the point that people can, and often do, have unrealistic expectations about extending that family model into the business and political world. But I reject the idea that my support for taxpayer funded K-12 education (for example) represents some kind of failure to understand this.

It occurs to me that when Keynesian economics is the topic, it is the Keynesians who fault the Austrians for thinking that the Federal budget is too much like the family budget, rather than something with more different properties. These analogies can cut both ways.

Simon writes:

I find myself in mostly solid agreement with Mark Crankshaw. Focusing on labels such as "socialist", "capitalist", "Marxist", "fascist" etc. really misses the point. The only valid distinction is whether one man is coercing another. All forms of the state involve coercion in collecting taxes and issuing regulations: they are designed to change behavior relative to what people would otherwise do in the absence of such legislation (otherwise, why pass the legislation?) and are backed up by force, in that non-compliance results in involuntary incarceration (or worse) and more property seizure. The idea of the "social contract" is a fallacy: if you believe in it, then you are probably consenting to the state, but what happens if you don't? Voting doesn't offer a real choice: you are simply choosing your coercer. There is no choice to opt-out of coercion. It is coercive to impose the so-called "social contract" on those who don't want it.

The biggest mistake people make is to think of the "state" as this magic machine, all-knowing and acting selflessly. It is, instead, just a bunch of people who have arrogated to themselves the power of coercion over those who don't agree with their actions. You don't suddenly become wiser or selfless once elected to office. You suffer from the same foibles as all humans (some are evil, all are incompetent at running strangers' lives, all are self-interested). Therefore, we should never want humans to be at the state, since through their coercive powers they can force their foibles on millions at once. Humans in the private sector can only adversely impact those with whom they interact directly. We should want to decentralize foibles, not centralize them.

The world is imperfect because humans are imperfect and we have scarce resources relative to wants. Having a small group of humans act coercively over others doesn't remedy either of those defects and, in fact, makes it less likely we'll use the scarce resources efficiently given the knowledge and incentive problems inherent in government. Those who believe in the state often speak out against monopolies, but the state is the biggest and only sustainable monopoly.

There is a very rich body of intellectual libertarian writings with which anyone who wants to argue in favor of statism ought to first familiarize themselves before arguing that statism is preferable to no state. There is no way to perfect the world, but we should be in search of the least imperfect solution. The argument that "Well, without a state how would [ACTIVITY] be done?" is not a moral argument but a utilitarian one. And just because a person cannot conceive of how something would get done doesn't mean it won't get done. Look at what human ingenuity has developed over the centuries in response to problems, and the vast prosperity that has been created by those who have risked their time and capital to think up ways to satisfy our wants. Yes, they have been self-interested, but the wealthiest entrepreneurs are those who have figured out a way to serve the masses (by developing products in demand at affordable prices), not the rich, since that's where the money is. We should reserve our opprobrium for those who have improved their lot by renting the state's coercive powers (special interest groups such as big business, unions, environmental lobbyists, the defense industry, etc.).

I disagreed with the framing of the camping example. It's not because it was a small group or a short project that makes the difference, but rather because (I assumed) it was a voluntary trip undertaken by the participants. If someone on that trip sought to coercively seize some key resources and auction them off (a) people could just leave the trip, (b) people could ostracize him and re-group without him and/or (c) people could forcibly resist on the basis that he had no greater right to those resources than they do (if that were true). This is unlike the state, where you can't leave, you can't avoid the policy those at the state prescribe for you and you are likely outmatched when it comes to resisting. Similarly with the family example. The family, like a firm, is a voluntarily-formed unit. The parents, or the CEO, as the case may be, run these units centrally on the grounds of efficiency to achieve their stated ends, but the participants are free to leave or stay (families break up when there is insufficient support for the edicts handed down). By the way, the reason for central planning when it comes to children cannot be because they are not of full mental capacity; if that were the key factor, that would suggest it would be fine for the individuals at the state to centrally plan our children's lives!

I also disagreed that it is somehow moral for the individuals at the state to seize property from someone who currently has more ("A") and give it to someone who currently has less ("B). That means these individuals are claiming a greater right to A's income than A himself has, but what is the source of that superiority? Surely A must have the best title to the product of his labor? Also, these individuals at the state can't know A's true circumstances (or B's true needs)? Further, what if A later suffers a drastic reduction in wealth, due to injury, family needs, bankruptcy, etc. and what if B goes on to succeed; won't the historic transfers look immoral? No one knows how their or another's life will unfold, and so to say that those who currently have more must be forced to give to those who currently have less is to say that one can play deity, weighing all the various needs and knowing the future. There is nothing compassionate about helping someone in need by forcibly taking from someone else; if you identify someone in need, compassion means helping them yourself and trying to convince others to help too, but if you don't have enough of your own money, and/or can't persuade others, why on earth do you have the right to default to forcibly taking from someone else (either personally or asking your agent, the individuals at the state, to do this)?

Matt B writes:

I've only skimmed the comments, but I was surprised at the fairly negative tone...

The problem people seem to have with the word "socialism" seems to be related to the specific political and economic program that accompanied 30's style socialism... This avoidance of anything related to this "hot socialism" is a consequence of its spectacular failure wherever it was tried... And it is precisely because of how spectacularly bad socialism has been for so people that it should continue to be applied - not as a pejorative, but as a description of fact - to those ideas that are hostile to true individualism as a principle of social organization...

While Russ and Jim referred to Hayek's Fatal Conceit, my mind was brought first to an important chapter in The Constitution of Liberty, "The Decline of Socialism and the Rise of the Welfare State"... I think it's fair to say that anyone familiar with Hayek would have heard this podcast as a restatement of Hayek's criticism of the collectivist point of view...

Seth writes:

@Greg G: "I don't really think that any significant number of people fail to know that their family relationships and their friendships and charitable work are based on a communal reciprocity model..."

That's not the point. The point is they don't recognize this as socialism nor their inclination to want to extend these interactions beyond the family as socialist-inclined, even though that's exactly what they are.

"But I reject the idea that my support for taxpayer funded K-12 education (for example) represents some kind of failure to understand this."

Who said it did? "-inclined" isn't all-inclusive. I'm sure you have other good reasons for your desire to remove a price signal from the market, which may be correct or incorrect.

Jonathan G writes:

I have no idea what the family life of the two gentlemen is like, but I must protest when they talk about how rooms and privileges and such are not auctioned off. In my household, my children constantly negotiate with each other and with me and my wife and while it doesn't often take the form of an auction, my children certainly take advantage of a relatively free market whose fairness is enforced by the parents.

I think it likely that if Messrs Otteson and Roberts take some time to observe their families and reflect on the number of occasions for family members to engage in decentralized trade-like behavior rather than centralized socialist-like behavior

Mark Crankshaw writes:

@GregG

So then, you don't think that the tax funded nation state is legitimate. This is a fundamental principle for you.

The first thing to note about that is that it means you don't get Adam Smith as a representative for your views. But I do. Smith did think that governments and taxation were legitimate and taxpayers had a lot fewer rights in his day than ours.

This is a particularly interesting notion that you have raised, and I have given it some thought. While I deeply respect Adam Smith, it may not be too surprising that I differ from Adam Smith philosophically with respect to the legitimacy of the state and its ability to tax (seize the wealth) of its subject classes. I differ from Adam Smith in several fundamental ways: first, I live in the 21st century, Smith lived in the 18th century. Second, Smith remained a loyal subject to the British Crown until he died. Last, Smith, living in the 18th century had a world view deeply influenced by Christian thinking,

"some other authors argue that Smith's social and economic philosophy is inherently theological and that his entire model of social order is logically dependent on the notion of God's action in nature."
None of these differences are a condemnation of Smith, nor a manifestation of any superior attribute for myself. Those differences, however, can certainty impact one's world view dramatically.

Let's be honest here, the legitimacy of the State is merely an opinion, purely a mental construct. If you think any State is legitimate, then it is to you. If you want others to hold the same opinion, you can beg or plead, but generally speaking, you need guns. The State attains and maintains this legitimacy (a mere opinion) through violent force. The legitimacy of the State is thus an opinion down a barrel of a gun.

There is a contemporaneous example of this in Syria. Who is the "legitimate" head of State in Syria? Bashar Assad? ISIS? Someone else? There is currently a difference of opinion about that. Eventually it will be decided on the ground (but probably not in the UN where the debate may drag on and on), as it has always been done, when one claimant has enough military force to crush all other claimants.

Americans with a Disney view of history might retort: "We are different. We chose our government". Oh, really? Who is this "we"? In 1776 the vast majority of present day America was inhabited by Native Americans. For about a century, the American government, with the full blessing of the American people, engaged is a spree of ethnic cleansing, confiscating the land of the original habitants by military force and forcibly relocating Native Americans onto distant reservations. American "Manifest Destiny" differed from Hitler's brutal quest for "Lebensraum" only in it's duration. How about all those slaves forcibly imported for a couple centuries? State legitimacy right down the barrel of a gun.

If you can't see that the American governments legitimacy (and right to tax) is just an opinion with a gun, then you don't want to see it.

A lot has changed since Adam Smith died in 1790, particularly so in the philosophical landscape. Consider the theological underpinnings of Smith's day. Christianity teaches that the Universe was created by a deity, and the world around us is the unfolding of "his plan". The monarchical system that Smith lived under contended that the King was anointed by the deity, and was therefore given "legitimacy" to rule (and therefore tax). The crown is merely a halo, a symbol of divine sanction. Under this framework, the entire Universe is a top-down socialist centrally-planned enterprise.

I am, however, an atheist. In accordance with Christopher Hitchens, I contend that "religion poisons everything" and this worldview is no exception. I reject the Christian world view, the existence of a deity, and "Universe run by a plan" framework. The Universe is, in my worldview, unplanned by any "being", evolving in unforeseen ways to achieve no goal in particular. There exists no divine being(s) to grant temporal leaders sanction to rule. The Universe isn't socialist, it is libertarian.

The dominant political view today, while on the surface secular, in fact has retained the older theological underpinning. One need only substitute the mental abstractions "the majority" or "the people" for the deity, and the argument is identical. The democratic system that we live under contends that the elected officials of the State are appointed by "the people", and is therefore given "legitimacy" to rule (and therefore tax). However, this legitimacy is still being pulled from the same bodily orifice as the older theocratic version. You can believe that if you want, but there is no logical basis by which one must.

Contrary to the mythology promulgated by the US educational system, the first shot across the bow of unlimited monarchical power was shot in 1648 with the English Civil War rather than 1776. As a result of the English Civil War, the English monarch, Charles I, was deposed and executed. A limited constitutional monarchy, the first of its kind in the World, was thus established after a period of Republican government under Oliver Cromwell. The English Civil War and the events that occurred afterwards (particularly the Glorious Revolution of 1688) greatly influenced Adam Smith and the "Founding Fathers" in America. Limited government was what they were familiar with, and therefore, not surprisingly what they advocated.

But in the 21st century, need we be satisfied with that? Humans society has finally evolved to the point where we can imagine a world without fictitious gods and the bogus "rulers" they supposedly appoint. Maybe we can dispatch the antiquated notion of the hierarchical "might-makes-right" State, and evolve to higher forms of human regulation. Maybe we can't--there are still a lot of primitive thinking morons on the planet.

I am not in the slightest disturbed that Smith had a view of the legitimacy of government (and taxation) that differs from my own. Considering the gulf that exists in the philosophical worlds we live in, that should not be too surprising.

Greg G writes:

Mark Crankshaw,

I really don't know how much Adam Smith's economics and politics was dependent on his religious beliefs. I suspect that it wasn't that dependent on them. Smith strikes me as a pragmatist who was a keen observer of the world as it really was and more than willing to think independently. This would be a great question for our host to weigh in on. Russ just happens to be one of the world's leading experts on Adam Smith. How about it Russ?

I am a non-believer but one who is a lot less hostile to religion than you and Hitchens. Let's face it, if you reject religious causes, the next best explanation on offer is evolution and evolutionary psychology. Evolutionary psychology is based on the idea we should not trust people to understand their own deepest motivations. These motivations are understood to be driven by whatever genetic heuristics contribute to survival and reproduction most economically.

So why then believe every Jihadi who claims he is motivated by religion? Most of them are sociopaths who would quickly find some other reason to hurt people if religion wasn't on offer. I am one of the few people who think that a world without religion wouldn't be nearly as different from the one we have as people think.

We are a social species and it could hardly be more obvious that evolution has led us to form governments and nation states over and over again and anarcho-capitalist states not ever. If human nature is in half as ugly as you say it is, you should be overjoyed to live in one of the least bad in human history.

Of course it is true that nation states ultimately depend on the potential use of lethal force. But not any more so than the existence of private property.

Mike Laursen writes:

So, when is the G. A. Cohen vs. Adam Smith rap video coming out?

Simon writes:

Greg G says "We are a social species and it could hardly be more obvious that evolution has led us to form governments and nation states over and over again and anarcho-capitalist states not ever. If human nature is in half as ugly as you say it is, you should be overjoyed to live in one of the least bad in human history."

First, there have been anarcho-capitalist societies in history as the Roman Empire broke up and monarchies had yet to control vast swathes of land. In addition, Medieval Ireland and Iceland operated on this basis. The international trading community operated on this basis, which led to the development of the Law Merchant. There are societal subsystems today that operate on a purely voluntary basis (businesses, associations, Disney World, gated communities, shopping malls, etc.). Most obviously, the world operates on this basis: there is no world government lording over each nation state, so nation states exist together in political anarchy (those at the state claim anarchy for themselves as regards their peers at other states, but won't allow it for their domestic populations).

Second, at any point in history one can say, as Greg G did, that whatever hasn't happened yet was clearly not part of evolution, but so what? It doesn't mean things can't and shouldn't change. Imagine back in the days when slavery was a global institution and abolitionists were in a tiny minority. Someone may have written ". . . it could hardly be more obvious that evolution has led us to institute slavery over and over again and freedom for slaves not ever."

Greg G also writes "Of course it is true that nation states ultimately depend on the potential use of lethal force. But not any more so than the existence of private property."

There is a world of difference between a third party using or threatening force against someone else's property (as those individuals at the state do when they tax and regulate) and someone defending his own property against trespassers.

SaveyourSelf writes:

Mort Dubois
>-- “As for hoping that small government leads to small firms, please explain the rise of US Steel and Standard Oil, or Japanese and Korean industrial conglomerates.”

I concede this point to you.

Some other possible associations I thought of to explain corporate growth are: 1) create, maintain, or exploit monopoly power 2) reach a large number of customers over a large area. I also seem to remember something called “economies of scale” being talked about in my undergrad econ courses but that concept always struck me as a wastebasket term--at best--or a subtle way of saying monopoly power--at worst.

>-- “It's interesting to me that the basic building block of a modern capitalist society, the corporation, so closely resembles a socialist demand economy.”

I have never thought of the corporation as the building block of a capitalist economy. Now that your sentence made me consider the possibility, I am leaning towards individuals being the building block of the capitalist economy since all that is required for a trade is two people and trade is the Sine qua non of capitalism.

That said, your comment about firms being centrally planned is interesting. I think it is important to note that not all firms are centrally planned. For example, a firm may consist of two lawyers, each an equal partner. Many, perhaps even most, are centrally planned, however. I have often thought that is a detrimental design flaw in that it does not--usually--reward innovation, independent motivation, or even success at any but the highest pay tiers. Is it any wonder the people at the top earn so much given that they work such long hours. It is any wonder they work such long hours given they experience the extra rewards when their work pays off.

Mark Crankshaw wrote, “Only with one massive and key distinction: working for a corporation is largely voluntary while membership in a socialist demand economy is not.”

Outstanding point. You have really been on fire, Mark.

Greg G wrote, “And this is precisely why constitutional democracy gets better results than any other system of government. You have to compete to get into office and to stay in office.”

That is a strong argument!

Seth wrote, “It's not because they like the word [Socialism] or view themselves as practicing socialists in their families. It's that a good deal of their daily interaction with others falls into this 'socialist' category without ever even knowing it.”

That might also explain why so many firms are “centrally planned".

Mark G Steinberger
>--“The two of them [Russ Roberts and James Otteson] seem to agree that there is a human impulse towards fairness, but that government is not the way to do it. I would like to have asked why not.”

Monopoly.

>-- “Is the objection logistical or moral?”

Both

>--“In that context, can the government do stuff that it is good at (redistribution) that would increase fairness?”

Redistribution = Harm one group to help a second group. I propose that sort of arrangement could only ever seem “fair” to the second group.

>--“He [Russ] conceded that the government could do a pretty good job at removing the financial advantage [of his kids].”

The examples Russ gave--in particular good schooling and a home life that supports scholastic achievement--are not financial advantages. They are academic advantages that seem associated with increased productivity later in life. Increased productivity is what leads to greater financial rewards. This is an important point, because redistribution changes incentives. They punish productivity and reward its opposite.

>--“Tax is something the government is good at. It does not hamper an individual's entrepreneurial spirit because it only kicks in after the spirit is no longer alive.”

I am in a relatively high tax bracket. I often have to decide whether to work extra shifts. When I run the question by my wife she usually says, “Why bother, the government is just going to take it away as taxes.” So I don’t work extra shifts, and I am less productive because of it.

>--“And finally, it increases the level of fairness by lessening the financial advantage of the progeny of the very wealthy.”

"Capitalism is unequally divided riches while socialism is equally divided poverty." Franklin D Roosevelt.

Seth writes:

@SaveyourSelf: You wrote: 'That might also explain why so many firms are “centrally planned".'

I don't think firms are centrally planned because a good deal of our daily activity is 'socialist' and we don't know it.

I think it's because in small groups of people the incentives and motivations of what looks like socialism and/or central planning work reasonably well as a way for humans to interact, cooperate and get along.

Steven Landsburg explained this well in his book the "The Big Questions." I wrote about that here.

Greg G writes:

Simon

You are using a vastly larger definition for anarcho-capitalism than I have ever seen before. You are using it to describe any geographic area where there is not a central government AND and any voluntary interactions between individuals or groups of individuals.

Both in the past, and today, what we see in areas where there is no central government is a big expansion of the authority of the tribe or clan. Such systems provide fewer, not more, rights for the individual. In such societies the kin group is considered primary, not the individual. The medieval period was a time of much violence and coercion at the local level.

Ever notice how all the great anarchist philosophers have written under the protection of modern nation states? Where are all the anarchist philosophers produced from an-cap regions?

Supporters of anarcho-capitalism insist that it offers both a competitive advantage in efficiency and a greater opportunity for human flourishing. If that was true it would provide a huge evolutionary advantage. Where then, is the evolution in that direction? What I hear over and over is the few an-caps that we do find complaining that things are evolving in the wrong direction.

I take your point that we should be open to the possibility of improvements never before realized. I don't believe that the removal of the nation state would produce the results you expect. I think it would result in a reversion to the rule of the clan which the world has seen many times. We are seeing it now in much of the Muslim world.

As for slavery, there has never been a time when it was universal in the world and there has never been a time when it has been extinct in the world.

And yes, there is a world of difference between violence used for aggressive purposes and violence used for self defense. The problem is, when you get down to actual real world disputes, it is almost always the case that each side views the other as the aggressor. This is why we need a relatively more disinterested system of policing and deciding judicial issues than would result from having everyone being authorized to use violence every time they personally perceived the other guy was the aggressor.

Simon writes:

Greg:

When asking which is better, statism or anarcho-capitalism, you have to control for culture. In other words, it's not reasonable to compare a stateless society in area X, that may be particularly violent, and a statist society in the U.S. Anarcho-capitalism argues that, for any particular culture, the absence of the state is more moral and economically efficient. Even in a particularly violent society. Besides, it is popularly taught in school that there was uncontrollable violence before the state but that is not necessarily true. Often times it was kings themselves waging private wars and private citizens were caught in the crossfire. For something closer to home, check out Anderson's and Hill's book "The Not So Wild, Wild West".

The Hobbesian view is that, absent a state, A and B would be in conflict with one another, and thus C at the state must intervene with force to prevent this. But what stops C from acting with force against A or B? All you've done by creating a state is relocate the source of the coercion from one person to another. When C at the state confiscates A's and B's income to "protect them" from unspecified threats, how is that different from the Mafia moving into a neighborhood and collecting protection money? When C launches a war on another state and requires A and B to fight and fund this war, how has the situation improved for A and B? When C launches a war on A and B themselves if they want to ingest specific substances, how have things improved for A and B?

I'm not sure I follow why the fact that anarcho-capitalist philosophers have written from within nation states is dispositive. First, they don't have the choice of protection agencies; the state coercively imposes a monopoly on "protection", tells them what they'll pay for it and threatens to imprison them if they don't pay up. Second, if one is looking to change society, why can one not work from within? Why should one have to leave?

Your question about evolution misses the point. Speaking very broadly, first there were tribes, then monarchies, then the nation state. Who says we've reached the end of societal evolution?

A disinterested system of conflict resolution doesn't require a monopoly. Well before the state there were peaceful means of resolving property right disputes developed by different societies (the Law Merchant being one important example). The difference is the state claims a monopoly on this service within an artificial geographic area, including in disputes with itself(!) and tells you what you'll pay for it. As monopoly theory teaches, the result is an ever increasing price (taxation) and ever decreasing quality of service. Anarcho-capitalism simply argues for competitive conflict resolution systems to ensure, as in any other area of life, that the service providers keep prices down and innovation up.

Anarcho-capitalism also has a unique theory of property rights which would more clearly articulate boundaries, thus reducing disputes. The statist view of property rights is simply that you can keep whatever those at the state allow you to keep. There are no limits on what they can take or make you do. This in fact brings more conflict, as all that happens is that special interests lobby state personnel to rent their coercive powers to take others' property. Why should we tolerate that?

Greg G writes:

Simon,

I am not claiming we have reached the end of societal evolution, just that societal evolution has moved, and will continue to move, away from your anarchist vision.

I am familiar with Anderson and Hill's work and I am not claiming that there would be no form of order without the nation state - just that the form of order that would result, and often has resulted, would have more violence and coercion - not less.

You should read "the Rule of the Clan" by Mark S. Weiner. In it he shows with real world examples, not "unique theory" why the absence of government consistently results in less individual freedom. Feuds, vendettas and honor killings do establish a form of order that is not chaos.

There are many limits on state power in a constitutional democracy. You should "tolerate that" because it has provided the best results in human history.

We are social animals. It is not possible to avoid the problems of collective decision making. You may not realize it but you are forced to choose among the "voluntary" associations you make just as surely as you are forced to choose among the nations of the world. In neither case do you have the option to choose none of the above. You are in the wrong species for that.

Bob K writes:

The common denominator between the institution of the family and the commercial market seems to be one based on reciprocity. A commercial reciprocal relationship is usually based on more than price alone relatively speaking when all factors are considered, while family and friends are based dramatically less on price per se. Reciprocity would seem a more comprehensive and inclusive term. We are all getting something out of the relationship, even when it is strictly altruistic. If, in either case, reciprocity ends, the relationship eventually becomes attenuated. Reciprocation can take many forms, even from an unborn child by being just who they are. Reciprocation would seem to incorporate a moral dimension, an element of obligation. This would be related philosophically to the good. Reciprocation is a sustaining value, a transmission mechanism to the future. Might one talk then in terms of property value relative to reciprocal obligations, and the ability to enhance or diminish those values? Individuals can be in a reciprocal relationship with the state. Social justice to the degree in which it takes without permission seems to break this reciprocal relationship. It can thus have a demoralizing effect on the recipient of the largesse in terms of dependency as well as a demoralizing effect on the person who's property is taken without permission. So recognizing property rights, broadly understood, supports all reciprocal relationships, and with it human flourishing. Whether giving Triple A ratings unjustifiably on derivative bonds or not sending daughters to school, reciprocity is broken. Starting there, whether at the individual level or macro level, might help inform a humane economics. That's my obviously first draft untutored speculation. I offer it just in case it might add to the conversation. Please excuse its amateur level.

Mark Crankshaw writes:

We are a social species and it could hardly be more obvious that evolution has led us to form governments and nation states over and over again and anarcho-capitalist states not ever.

I quite agree about the evolutionary biology part of your argument. Survival and reproduction is indeed what primarily motives the human animal.

This is precisely why I believe that those who advocate social or economic "equality" are completely disingenuous. They are merely attempting to play the "equality" con to turn the reproductive battle, somehow or other, to their advantage. Some play the equality card because the know they can game the system to push others down. Others play the equality card because they fear they can't compete. They are all motivated by self-advancement at the expense of others.

History has amply demonstrated from time immemorial that the male of the species benefits genetically by having more and healthier offspring by having access to more resources relative to other males. Women choose males not an absolute standard, but on a relative one.

Historically, physically desirable women typically look to reproduce with the male with the most resources relative to other competing males, the male more physically attractive relative to other males. For most women, wealth and power are extremely attractive in they way that youth, health and beauty are attractive to men. The more a male can obviously display access to relatively greater wealth, power and privilege, the more women he can get reproductive access to. As Mel Brooks put it: "It's good to be the King..."

"We" haven't chosen governments as a collective at all. Governments have been forced on most men by other men precisely due to evolutionary biology. Slavery has been ubiquitous in human society not because people chose to be slaves, but because the slave-holder held power over them. Governments formed on the same lines. The concentration of wealth and power is what the State can offer to a relatively few men. The less actual work that needs to be done to get the wealth display, the better. The State is great at fattening the wallets of playboy dictators (and playboy presidents too) who don't have to do any hard work for their money.

Power in the State is hierarchical, a pyramid shape, with a few wealthy and powerful men at the top, and the next lower tier full of men vying to push those on the top down so they can take their place on top of the reproductive heap. The State is also designed to keep the men on the base of the heirarchy in their place, the bottom.

The power and wealth that the State concentrates to the ruling class is, on a psychological level, merely a means to an end. That end is, I'd bet my bottom dollar, sexual. Anarcho-capitalism has, is, and always will be fiercely resisted by those men, the type disproportionately in positions of power, who don't have looks, a winning personality, and who have more than a few psychological problems and a propensity towards psychopathy. Money and power is all they got.

emerich writes:

From modern France to Soviet Russia and Maoist China, socialistic or socialist states have run the gamut from enfeebled nanny states to mass-murdering tyrannies. Public choice helps explain why governments and government programs tend to grow, but the wonder is that serious advocates of socialism still exist. Otteson's arguments, and the empirical evidence, make an open-and-shut case that socialism fails and will always fail. How to explain its persistent attraction? I think the most convincing explanation was touched on--we evolved in small enough bands where market institutions were unnecessary and impractical, and we spend our formative years in quasi-socialist families. Socialism attracts so powerfully because its pull is subconscious.

Mads Lindstrøm writes:

Mark G Steinberger writes:

... Should it? Would a large estate tax be anti-capitalist? Tax is something the government is good at. It does not hamper an individual's entrepeneurial spirit because it only kicks in after the spirit is no longer alive. And finally, it increases the level of fairness by lessening the financial advantage of the progeny of the very wealthy. ...

I think Milton Freidman had a good answer for you.

Mads Lindstrøm writes:

There has been some comments on Adam Smith and taxation. If you read this regarding Adam Smith and taxation, then you will find that Smith was against most of the taxes we have today. Smith would mostly tax luxury goods and land value. No tax on labour, no tax on profits, no customs taxes, ...

So it seems to me, that while Smith would approve of taxation on luxury mansions (and therefore some level of progressive taxation), the level of taxation we see today in the western world would never have been possible with the taxes Smith did approve of. Looking at the level of taxation, Smiths policies would be a lot more right wing than left wing. On the other hand, taxing land, tobacco and other luxury goods is properly more popular on the left - I guess.

Halvard writes:

Ottoson

After this podcast I have some questions I hope you can answer.

Do you find it ironic that you are using the Internet, developed by socialistic inclined organizations and government money to promote your views?

You said:
Guest: It is a major issue. And no book on evaluating the merits of socialism would be complete without addressing that squarely. So, that's the first point to make, that one's background doesn't necessarily determine outcomes in life.
I am sure this is not just an assumption and that you have strong data that support your position. Can you please guide me in the right direction regarding data sources.

Setting up the opposite view of what you favor with a broad definition and they use an almost unknown person as the main speaker for that view is a good rhetorical technique, I have to applaud you for that. Even better from a rhetorical point of view when you support your view with a philosopher that lived under a total different time. I would like to know what Adam Smith though about gender equality, if he was an anti racist. Those are values today, but maybe not so much on 1775. So why did you chose those two?

Do you have some actual examples to support your view. Just talking about the other side is like creationists and anti science people (many of those are free market people for some reason) use. What countries follow your ideal closest.

Since you are a fan of decentralization. Are you as many free market fans are OK with schools teaching fake science (look at what Texas wants to do, or AEI, Heartland, Cato etc)?

A decentralized system or the system you like if I understand you correctly is a system where you you focus on contracts between two parts. As a result we will need a lot more lawyers and spend a lot more time in court. Do you think spending time and money on court, lawyers is a good investment for a society and if so why?

SaveyourSelf writes:

@Christian Larsen

I read your Dunbar Article

Wow…WOW wow WOW..wow WOW...Holy cow!

If Dunbar is correct, then humans would have to imagine and treat groups that are larger than about 150 as infinity—literally beyond comprehension—because human brains are only big enough to manage and anticipate that many personalities. So Socialism, which could also be called, Familyism, or, Hierarchically structured groups [pg 187], is the method of association passed on to us genetically. And Socialists are simply trying to apply their understanding of small group dynamics to, essentially, infinitely large groups, without understanding or acknowledging the limitations of the information processing power of human brains!

Carrying it further, Dunbar’s hypothesis also has a lot to say about the last podcast in which Nick Bostrom was worried about a singularly—a super smart computer--taking over the world. Dunbar’s paper suggests that this is not likely because 1) the brain—and probably an equivalent computer—is a very energy intensive machine and 2) species evolution appears to favor brains that expand functional group size over raw computational power when determining the dominant species.

“. . . there is no intrinsic reason to suppose that memory per se is the issue. The social brain hypothesis is about the ability to manipulate information, not simply to remember it.” Pg 185.
So, extrapolating the trade off between these two elements to the Nick Bostrom podcast, evolution appears to favor diffuse information gathering and processing systems over singularly smart ones. Nick aught not to fear the singularity. The threat will come when some other life form can manage, efficiently, information gathered by larger groups than 150. It’s the BORG from Star Trek!

Simon writes:

Greg:

In terms of the direction of societal evolution, my sense (and I could be wrong) is that you are implicitly assuming democracy is a step forward relative to monarchy. Hans-Hermann Hoppe makes a compelling argument against this in "Democracy -- The God That Failed".

As regards violence pre-nation state among clans, tribes and families, at least that was localized violence and, because the individuals fighting personally suffered loss, it was limited. What has happened in modern times is that the nation state has become the new clan or tribe, so that violence is now waged on a massive, global basis, and the leaders who start and wage this violence do not suffer personally and thus don't bear the costs of their decisions. Millions have died or become maimed just in the 20th and 21st centuries alone due to this new level of "clan" violence by nation states. It's not just dictator-led states, like Stalinist Russia, Mao's China and Pol Pot's Cambodia, which have ramped up this clan violence on their own people; look at the federal government's violent war on its own people in the so-called "War on Drugs" (which should really be called the "War on People Who Think They Own Their Own Bodies"). Then look at the clan violence waged by democratically-elected leaders of nation states on people in other states who had not attacked them: the U.S., Britain and France in World War I, the U.S. and Britain in World War II, the U.S. in Korea, Vietnam, Iraq, Afghanistan, Libya, Syria, etc. The individuals at the state many times also forced their own citizens to wage their wars through conscription. The advent of the nation state has meant that the civilian population gets conflated with the individuals at the state, so no distinction is drawn in this violence. For instance, just in WWII, Truman dropping two atomic bombs on Japanese civilians, and the Germans bombing civilians in London and the Allies fire bombing Dresden. Give me pre-nation state clan violence any day!

What effective limits on state power are there in a constitutional democracy? State personnel can kill with impunity (by declaring wars, using drones and bombings, "no-knock" SWAT raids related to victimless crimes, etc.); they can take property through the act of passing legislation (via taxes, eminent domain, civil asset forfeiture, etc.); they can regulate thousands of aspects of your daily life (is there anything one can do that isn't somehow regulated by some level of the state?); and their courts get to decide things when you dispute their actions. The federal Constitution has proven to be no limit on the federal government: I challenge you to line up each piece of federal legislation with the plain wording of Article I Section 8 and the Bill of Rights; if the argument is that the Supreme Court has blessed this expansion of legislative power, that just makes my case that the state's courts help itself; if the argument is that we have a "living Constitution", I'd like to ask in what other area of life can we just vary a contract because we think it's out of date (I can't wait to tell the bank holding my mortgage that it's a "living document" and circumstances dictate that I reduce my payments)? Elections are no limit on power: the expansion of state powers has continued inexorably regardless of which party or person is in office (only their favored sectors are different).

Finally, I'm not sure what you mean when you say "We are social animals. It is not possible to avoid the problems of collective decision making. You may not realize it but you are forced to choose among the "voluntary" associations you make just as surely as you are forced to choose among the nations of the world. In neither case do you have the option to choose none of the above." First, anarcho-capitalism is not against collective decision making and social interaction (no man is an island, and to prosper everyone must trade to get what he wants but cannot produce for himself); it is only against coercive collectivism and interaction. Which voluntary association I join and how long I stay is my choice. You get no such choice with the state. Second, there is a big difference between reality compelling a decision and another man compelling a decision. If I am destitute I might be "forced" by reality to do things I might not otherwise want to do, but it is still my choice whether to do them or not, to tailor them to my own circumstances, and to cease doing them if things change. That is very different from another man (at the state) arrogating to himself the right to compel me to do something I don't want to do. From where does he get the moral right to this superiority?

Libertarians have only one principle for organizing society: we are against the actual or threatened initiation of aggression. But we hold every single person to that standard (which therefore leaves no room for the state). It's seems odd that so many people want to argue against this principle (they are FOR the initiation of aggression?). We've all been educated in school to believe that if you can't get your way then it's OK to resort to coercion (through the agency of the state). Yet as young kids we were told not to hit the other kids and not to take their stuff. That's still good advice, even for adults.

Donald Rudolph writes:

I feel there were three issues at question here.

1.Should the state/community be involved in giving its citizens the basic skills they need need to survive/thrive in the system that state/community presides over?

2.What level of skill enhancement should the state/community be responsible for?

3.What is the most efficient way to provide these skills.

On another topic
Russ, I often hear you suggest that education health and general economic well being should be taken care of by charities. I never hear that roads and defense be funded by these means. I haven't heard why the source of funding should be different.

In a country like north Korea where huge sums are set aside for defense and little set aside for basic human needs we can see how wrong headed this can be. Billions to assure the failed system stays in control with little concern as to whether it is contributing anything to the well being of its people.

Donald Rudolph writes:

Russ:
Where I feel you make your strongest argument in all
questions in individual versus state issues is in your distrust in the states wisdom and motivation. Theoretically the state could provide some service to it's citizens but in reality there are just to many barriers in the way of that money achieving its intended purpose.

The level in which government is used as a tool would depend on its competency. It would be reasonable for the citizens of Denmark to give its government more responsibility than the citizens of the Congo.

Greg G writes:

Simon,

In real life disputes, the non-aggression principle is hardly more useful than saying: "Always do the right thing."

For the last three years I have volunteered with a local non profit Dispute Resolution Center. We mediate all types of disputes but I mostly do Small Claims Court. In all that time I have yet to see a case where each party didn't think the other one was the aggressor. If it ever does happen in the future that both sides agree on who the aggressor is I promise to recommend relying on the non-aggression principle.

Having "only one principle" for organizing a complex world is not something you should be proud of. Are you really unaware that the overwhelming majority of self identified libertarians are not anarcho-capitalists?

SaveyourSelf writes:

@Donald Rudolph

>-- “1.Should the state/community be involved in giving its citizens the basic skills they need to survive/thrive in the system that state/community presides over?”
This question is not answerable because it is far too non-specific. Does the word, “giving,” in the question mean “proving free of charge” or is it just a synonym for “providing”? What are the “basic skills” the question refers too? Also, the word “need” is a relative term, not a concrete one. Its meaning is different for every person that reads it. It can even change its meaning for a single person from moment to moment. In addition the words, “Survive” and “Thrive,” are very different concepts. Is this actually two questions or are both terms supposed to refer to a single concept? And finally the phrase, “presides over,” sounds very paternalistic. Not everyone will agree that a proper government, no matter what functions it is performing, is a parent-like figure that “presides over” citizens.

>-- “2.What level of skill enhancement should the state/community be responsible for?”
Before this question can be answered you had better determine what “skill enhancement” the state is capable of. And then, if you find any, you must then demonstrate that the state is better—higher quality or lower price—at providing that service than someone else, say a private business or many private businesses. Also you have appended, “State,” to “Community”. These are two very different concepts. So is this really two questions [one for each concept] or are you assuming the two are somehow similes?

>-- “3.What is the most efficient way to provide these skills.”
This is a better question than the other two, but first you have to define the “skills” in question, prove that the government is capable of providing them, and finally prove that private enterprise could not do a better job for lower cost. All that before it is even possible to contemplate a decent answer.

John Foster writes:

Dr. Roberts' praise for redistribution seems short-sighted. Sure, you can take from A and give to B, but has that "boosted the bottom"? And has it boosted the bottom to a greater degree than the bottom was being boosted before the government intervened?

I would say no. Public schools for the bottom are far worse, the family structure is far worse, crime, illegitimacy, etc., all worse (see Murray's Losing Ground). If that weren't enough, these programs are bankrupting the countries using them. How can programs that cause so much damage while saddling future generations with unpayable debt be something "done pretty well"? It almost feels like saying that the soviets ran gulags pretty well because they managed to intern a very large number of people there...

Russ: The U.S. government does it pretty well; European governments do it very well. They have definitely boosted up the bottom and created a safety net, financed mostly by people of higher income. And I don't like that because I'd rather, like you, I'd rather see it done privately. But it seems to me on its own terms it's pretty successful.

John Foster writes:

Thanks to Mark Crankshaw for crystal clear logic. You saved me a lot of typing and said it all far better than I could have. Dr. Roberts, I'm nominating Mr. Crankshaw as your next guest!

Russ Roberts writes:

John Foster,

You misunderstood me. I did not praise redistribution. I objected to Otteson's objection. Not the same thing. Here's the relevant quote:

But it seems to me, within the socialist agenda, pure redistribution of income is something government is very good at and has done fairly successfully. If you asked, how successful has it been? Does the purely redistributive part of government today have an impact? And I think it has a huge impact. And I think when you look at the studies that people have done, when you do pre- versus post-transfers of the distribution of income, it's significant. So, I don't understand that second point, that there's some knowledge problem with redistributing income within the socialist agenda. It seems to me it's a straightforward thing. The U.S. government does it pretty well; European governments do it very well. They have definitely boosted up the bottom and created a safety net, financed mostly by people of higher income. And I don't like that because I'd rather, like you, I'd rather see it done privately. But it seems to me on its own terms it's pretty successful.
Girish writes:

Great conversation.However I would have personally liked to see three other points being mentioned.

Firstly socialism is against the natural tendency of humans.When I did not own a house of my own,it pinched me whenever I saw others who owned beautiful houses.Why?Because it is a human tendency to feel the pinch at not being able to have or enjoy something that others can.Similarly, if I buy the most modern and a novel model of a car that no one in my neighboring community has, that would satisfy my ego--because I will own something that others don't have. Thus feeling a pinch at not owing something that others have and a feeling of elation at owning something that others don't have are parts of human tendencies.By artificially trying to enforce equality, socialism effectively attempts to kill the innate tendency among humans, which of course cannot succeed.

Secondly,is equality at all desirable?Suppose all of us are running in a race and I am at the last position.I want to see myself as the winner and therefore have lot of incentive to give my best, try really hard to overtake others.It is only through this struggle that inherent qualities among individuals come to the fore and in the process whole society benefits.If all are running at the same pace at the same rank, nobody would have an incentive to run any faster than others.If everybody is lethargic and has no incentive to show agility,the group as a whole cannot benefit.So inequality to some extent is not only desirable but is required for this reason.

Thirdly,even if equality,as envisioned by socialism is enforced,how long will it sustain?There is a lot of noise against 80-20 rule.But it is a fact that not too many people in the society have a whole package of qualities that include burning desire to succeed,patience, perseverance and hard work, that are absolutely essential to go places. As a result, 80-20 rule follows what is dictated by nature.Even if 50-50 distribution is artificially imposed,sooner or later, it will degenerate to 80-20 or even 90-10 because only handful of people have that package of qualities with them in the first place and have ability to implement it.

Thank you very much Dr.Otteson.

Don Rudolph writes:

SaveyourSelf:

I purposely set my three questions up to be non specific. They were meant as a point of departure around which a discussion could take place. If the words I used were intended for a legal document they would be a very inappropriate choice. Yes the words survive and thrive are two very different concepts, that is why I picked them. I think you could of written an essay around any one of my questions so they did the job I intended them to do.

don Rudolph writes:

All things are a matter of degree. We all fall somewhere between the total socialist and total libertarian. I doubt any of us are ready to move to North Korea or join the Borg and likewise few of us want no government at all.

Simon writes:

Greg:

Just because there is only one principle doesn't mean it is inferior to having multiple principles; principles should be judged on their substance and implications, not their quantity.

I think you misunderstand anarcho-capitalism. The principle of non-aggression is a very rich principle if you apply it consistently. It does not mean that no person will aggress, it simply allocates liability based on WHO aggressed (and the reason it doesn't leave room for the state is that, by definition, state personnel can ONLY aggress in carrying out their stated functions). Where there are disputes, dispute resolution procedures will be used (as they have been forever outside the state apparatus). It makes sense that you personally (at the DRC) only see situations where both parties believe the other was the aggressor, since that's why there's a dispute in the first place! If the parties agreed with each other on the matter at hand, they wouldn't bring the matter to the DRC. It's the 99.9% of human interaction that is not brought to courts or the DRC or places like it that shows that humans can work things out for themselves, peacefully.

Contrary to your admonition, I am proud of believing in a principle that eschews aggression -- not in the sense of preventing it, but in the sense of allocating liability based on it -- and in applying it consistently to every single person in society. Pray tell, by what other principle(s) should we organize society that does not involve coercion and that we can apply universally to every person, or do you believe that one or both of those concepts is immoral?

Jim Otteson writes:
Halvard writes: Ottoson

After this podcast I have some questions I hope you can answer.

Do you find it ironic that you are using the Internet, developed by socialistic inclined organizations and government money to promote your views?

I am not sure why I should find this ironic. Can you elaborate?

You said: Guest: It is a major issue. And no book on evaluating the merits of socialism would be complete without addressing that squarely. So, that's the first point to make, that one's background doesn't necessarily determine outcomes in life. I am sure this is not just an assumption and that you have strong data that support your position. Can you please guide me in the right direction regarding data sources.

There is indeed plenty of evidence of this. In some ways, the entire story of America is this: people rising above the stations to which they were born--as well as others sinking below the station to which they were born. As the first person in my family to graduate college (let alone get a PhD), I am proud to be part of this quintessentially American story.

But for evidence, you might start with Stanley and Danko's The Millionaire Next Door (2010).

Setting up the opposite view of what you favor with a broad definition and they use an almost unknown person as the main speaker for that view is a good rhetorical technique, I have to applaud you for that. Even better from a rhetorical point of view when you support your view with a philosopher that lived under a total different time. I would like to know what Adam Smith though about gender equality, if he was an anti racist. Those are values today, but maybe not so much on 1775. So why did you chose those two?

I don't think I entirely see your point here, but the definitions I use of "socialism" and "capitalism" are logical complements to one another--so neither should be any narrower or broader than the other.

As for Smith on gender relations or racism, he was against slavery; and in The Wealth of Nations he argued for a rough equality among all humans--regardless of race.

Do you have some actual examples to support your view. Just talking about the other side is like creationists and anti science people (many of those are free market people for some reason) use. What countries follow your ideal closest.

Yes, the book contains discussion of many examples, including quoting people's own defenses of their positions.

Since you are a fan of decentralization. Are you as many free market fans are OK with schools teaching fake science (look at what Texas wants to do, or AEI, Heartland, Cato etc)?

I am not OK with schools teaching fake science, if by that you mean that I would approve of that. In a free society, many people would engage in many behaviors that I would not approve of. On the other hand, there is an awful lot of nonsense in public school curricula right now, as I presume you are aware.

A decentralized system or the system you like if I understand you correctly is a system where you you focus on contracts between two parts. As a result we will need a lot more lawyers and spend a lot more time in court. Do you think spending time and money on court, lawyers is a good investment for a society and if so why?

No, I do not think spending "a lot more time in court" would be a good thing. But the question is not what system of political economy is perfect, since there is no such thing as a perfect system given the fallen nature of human beings. The question is, rather, what system is relatively less bad; under what kinds of systems are the transaction costs, the costs of conflict, the costs of adjudication lower than they would be under other systems? Here I think the empirical evidence is compelling.

Halvard writes:

Otteson

You are using yourself as an example of social mobility in the USA. That you getting an education is a typical example of the story of America.

So why does the USA have less social mobility than the Nordic countries??

Or is the American story and dream to have less social mobility than more socialistic inclined countries.

SaveyourSelf writes:

@Halvard wrote, "So why does the USA have less social mobility than the Nordic countries?"

  • This statement does not match the world I see around me--in the USA. Perhaps I am naïve, though. Can you a cite a source for me?
Halvard writes:

Here you have some data.

OECD is considered a source with good reputation. These results are well known and not disputed as far as I know. When it comes to social mobility the USA is not doing that great.

http://www.oecd.org/centrodemexico/medios/44582910.pdf

http://ftp.iza.org/dp1938.pdf

SaveyourSelf writes:

@Halvard

To begin: Thank you for posting your sources.

I read all of the OECD article [article 1] and the first several pages of the “American Exceptionalism in a New Light” [article 2]. I have nothing positive or constructive to say about the OECD article. The American Exceptionalism article, on the other hand, comes across as someone’s lifetime-work. It is enormously ambitious yet appears highly disciplined—statistically speaking—, nuanced, and transparent.

Before your comments, I had never heard of any study of “income mobility”. The introduction to article 2 explains, “The extent to which socio-economic outcomes depend on family background is an issue of great interest to both social scientists and policy makers” (pg1). It does not mention economists, so perhaps that is why I haven’t heard of it. In any case, since I am new to the concept, I hoped that the articles would explain why income-mobility might be important to study. Unfortunately, neither did. So I will infer, for the sake of this discussion, that income-mobility is important with the caveat that I don’t know exactly why it is important.

It looks like article 2 is a statistical comparison of the means of incomes between fathers and sons at approximately the same ages between 1956 and 2000 in several different countries. It is a regressive study of survey data. I think, based on this crude understanding, that it is not sufficient to establish causality but may give some fair ideas about correlation.

With that in mind, article 2 states, “the difference between the U.K. and the Nordic countries is to a large extent caused by the low downwards male mobility from the very top to the bottom end of the earnings distribution in the U.K.. An even lower long-distance mobility from the top is found for the U.S.. However, what distinguishes the pattern of male intergenerational mobility in the U.S. most from that of all the other countries in our study is the low upwards mobility for sons from low income families in the United States” (Pg 2).

I wonder if this is a different way of looking at the unemployment problem for the poor in America. According to www.BLS.gov, In November of 2014 seasonally adjusted unemployment rate in the US was 5.8%--for whites it was 4.9%; for blacks it was 11.1%. For 16-19 year olds, the overall unemployment rate is 17.7%--for whites it was 15.6%; for blacks it was 28.1%. Why is the unemployment rate for blacks double that for whites? That looks, to me, like a BIG PROBLEM.

I think the fact that Article 2 makes special mention of the “low upwards mobility for sons from low income families in the US”, which I am certain is a BIG PROBLEM because of the BLS data, suggests, to me, that “social mobility” may be a valid alternative approach for considering the cycle-of-poverty problem in America.

Thank you for introducing me to this concept.

Ron Crossland writes:

Nearly all the remarks I considered making while listening to the podcast have been made, sometimes in triplicate.

Comparing and contrasting political/moral philosopher's from two distinctly different eras always invites difficulties. It is similar to how people argue about what "Thomas Jefferson" would say if he were alive today (or what he meant when his writing was vague) about some contemporary topic (we have no idea how he would regard GMOs, for instance).

If Smith or early Greek philosophers (since the discussion sourced eudaimonia) were old men living today, their philosophical outlooks would be informed by a very different amount and kind of intellectual information, let alone history.

Today's moral/philosophical/economic arguments cannot be well advanced by relying upon those distinctive and beloved thinkers of previous centuries. While many of them are still worthy to be studied and their thoughts are informative because they start a heritage of thought processes - they are bereft of any modern understanding of the human enterprise.

Neuroscience, the various psychological literature (think Kahneman or Ariely), and the advances of economic and political understanding would undoubtably alter Smith's conclusions.

A more contemporary discussion of eudaemonia in a material, contemporary world, would be had by interviewing a modern neurologist/philosopher like Owen Flanagan.

Lee writes:

I thought this was an excellent discussion and it's a great example of why I love Econtalk. The discussion was well formed and very cordial while covering a topic that can tend to escalate emotions and dissolve intelligent conversation quickly.

I particularly enjoyed his closing point about the unique nature of people as individuals. I could not agree more, and I think Mr. Otteson did a great job articulating so well such a profound perspective that I count as invaluable to the wealth of humanity. People who act in such a way as prescribed by Mr. Otteson, I believe, serve to improve the world we live in. All too often people are reduced to categories and generalized, and it can lead very quickly to prejudice and oppression of people based on a tag that was placed on them. The more we're reminded that we are all people, and we are all the same, just trying to thrive, the better off we'll be.

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