Everything is Capitalism

Ronald Reagan once said:

All systems are capitalist.  It’s just a matter of who owns and controls the capital – ancient king, dictator or private individual.

Reagan equivocates on the definition of capitalist here, but for good reason, I think.

The definition of capitalism is a system where capital is privately owned, so technically if one person, a dictator or “state” (which some say is the people, and others correctly recognize as the decision-makers), owns the capital the system isn’t capitalism.

But, the reason Reagan stretches the definition of capitalism is to get to the real difference between capitalism and other systems on the political spectrum.

One attribute is responsible for the political spectrum: who makes decisions and how.  Take away that one attribute and all systems are about the same.

The argument isn’t which system is right.  The argument is who gets to make decisions and why.

I like a system that allows individuals to make decisions and deal with the consequences of those decisions for two simple reasons.

  1. It’s freedom. It seems morally correct because its based on the idea that we’re equal and free.  To me there’s no higher evolution of a species than making this self-aware recognition.  The idea that some are less equal or some or good enough to coerce others seems animalistic.
  2. It more consistently produces better results by any measure for nearly everyone (except, maybe dictator-wannabes).  That is, when you take an honest look at outcomes.

A common misunderstanding of freedom opponents (though many may be unaware that’s what they oppose or believe they oppose it for some good and noble reason), is that us supporters believe free markets are perfect.  We don’t.  Or shouldn’t.  They’re not.  Bad stuff happens.

But, less bad stuff happens more consistently to individuals in free markets than other systems.

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McCaskill Changes Her Tune Quickly

On Tuesday Senator Claire McCaskill said:

The White House has failed to follow the proper procedure in notifying Congress as to the removal of the Inspector General for the Corporation for National and Community Service.  The legislation which was passed last year requires that the president give a reason for the removal. ‘Loss of confidence’ is not a sufficient reason.  I’m hopeful the White House will provide a more substantive rationale, in writing, as quickly as possible.

Yesterday she said:

Last night, in response to my request for adequate information on the firing of Inspector General for the Corporation for National and Community Service Gerald Walpin, the White House submitted a letter to Senators Lieberman and Collins that now puts the White House in full compliance with the notice requirement in the law.  The next step for Congress is to use the 30 days provided by the notice to seek further information and undertake any further review that might be necessary. The reasons given in the most recent White House letter are substantial and the decision to remove Walpin appears well founded.

I’d be interested to know the reasons.

"We are a nation that has a government, not the other way around."

Thanks to Walter Williams for pointing me to this from Mark Steyn.  It’s a speech he gave at Hillsdale College, aka the Ford of higher education.

Lots of good stuff in both of the these links.  Highly recommended.

Steyn references a great Reagan quote: “We are a nation that has a government, not the other way around.”

Another great quote from a European writer:  “I have never learned to fight for my freedom. I was only good at enjoying it.”

Which brings this insight from Steyn into focus:

“Live free or die!” sounds like a battle cry: We’ll win this thing or die trying, die an honorable death. But in fact it’s something far less dramatic: It’s a bald statement of the reality of our lives in the prosperous West. You can live as free men, but, if you choose not to, your society will die.

The Fabric of Reality

A phone conversation this evening reminded me of this post on the different incentives of economic and political decisions.  As I become more aware of these difference, I realize they are what makes up the fabric of reality when it comes to human interaction.

When you or someone else makes decision, ask yourself if it was economic or political.  Then ask yourself what might be different it were the other.

Price of Text Messaging

What in the world?

Got home from work and saw a piece on ABC News about cell phone execs testifying to the Senate about the prices of text messaging. 

Bad enough the Senate wastes its time on this.  Even worse how ABC News presented the story. 

First, ABC News never mentioned that text messaging is an optional service that users voluntarily and willingly pay to use.  Rather, the cell phone companies “gouge” consumers, because it only costs $0.01 to send a text message vs. the $0.20 “typical” price.  Not once was it mentioned that customers don’t need to use the service.

ABC didn’t mention the fixed costs of building the network to support text messaging, the percentage of text messages that are built-in to service plans and generate no additional revenue and, most importantly, never considering the service in terms of its value to customers.  

They pointed to all the cell phone companies raising prices on text messaging within a short time frame, alluding to collusion, but never considering that it might have been a response to the high demand (Econ 101: High demand drives up price). 

Which, brings us back to the customers’ value.  Customers are perfectly willing to pay the going rate, which means they find value in the service at current rates.

So…. 

WHAT’S THE PROBLEM??? 

If ABC News thinks there’s such a fat margin in text messaging, maybe it should get into the business to increase supply and drive down costs.

Palin v Letterman Double Standard

I’ll give Letterman the benefit of the doubt that he made a dumb error.  I could be wrong.  Either way, he should give a straight-up apology – no excuses.

That being said, I could also be wrong about this too, but I don’t think the media would work too hard to get the facts straight if Palin said something stupid.

The Fatal Conceit

A co-worker and I were discussing the merits of government run anything – health care, education, you name it.

I think government programs aren’t effective over time because the incentive structure, or feedback loops, governing the evolution of such programs are bad.  He thinks government programs can be effective, but the programs need the “right” people in charge.

This is a great example of the fundamental divide in thinking that Thomas Sowell explores in Conflict of Visions.   I believe the incentives of the system will win out.  My co-worker thinks the right people can.  It’s as simple as, “if it’s not working, fix it,” he says.

I asked, “Do you think you can determine if program is successful or not?”  “I’m a smart, educated man.  Yeah, I can figure that out,” he said, “you just have to define what success looks like and see if you’re achieving it.” That’s the Fatal Conceit.

It sounds  simple and I bet a majority agree with him.  But that doesn’t make it true.

Most people don’t realize how often they poorly judge things.  I let my co-worker know about a personal habit of his that annoys his neighbors.  He showed embarrassment and said he would’ve fixed it had he known.  My point wasn’t to embarrass him, it was to show that even “smart, educated” people aren’t always the best judges.

When judging success, it’s not always clear cut.  Even within the confines of a relatively simple competition like gymnastics, judges don’t always get it right.  Outside those confines, our records are much worse.

Why?  What we think is important, isn’t always  important to others.  Often times, what is important is elusive, subtle and very tough to articulate.

If us smart, educated folk were such good judges of success life would be much easier.  We could feed ourselves by sitting at home and investing in the right companies.