Why does socialism fail?

In the same radio discussion that I mentioned in my previous post, I heard the radio talk show host say that socialism — and variants of it — has been responsible for millions of deaths and has proven over and over to be a failure. He encouraged the self-described socialist to read some history.

I hear this point made on occasion. I find it frustrating because rarely is it mentioned why socialism fails.

Why does it?

I believe it’s for a couple main reasons.

There’s the knowledge problem. A free market of prices communicates vastly more and better information to allocate resources better than any small group of people can.

I also believe it stifles risky experimentation, which is the source of most innovations, large and small. Without risky experimentation, society rots. I’m not sure, but I think this may actually be a subset of the knowledge problem.

 

Greed is not unique to capitalism

A discussion I heard on the radio today between a self-described socialist and a radio talk show host reminded me of this post about greed.

It also brought into a focus an important point that many people miss and may even be a source of dislike or distrust for capitalism.

The point is that greed is not unique to capitalism. Many people seem to think it is. Or maybe they mistake any money-making endeavor for capitalism.

There are greedy politicians, greedy not-for-profit chairmen, greedy welfare recipients and greedy welfare administrators. There were greedy kings, greedy socialists, greedy communists and greedy fascists.

When a corrupt politician sells his vote, that’s not capitalism. That’s corruption. And it’s greed.

What is unique to capitalism is its ability to harness greed for the greater good, as Walter Williams discusses in the post I linked to.

It does this by encouraging people to produce something of value — using what is rightfully theirs’ — for others to satisfy their greed.

David Henderson Has Balls

On EconLog, David Henderson answers my question, why he reads Paul Krugman. I am the Seth he refers to in that post.

I thank David for taking the time to answer. His answer was better than I expected. More on that later.

There are several reasons I don’t pay much attention to Krugman.

Mark Twain sums up the main reason:

Never argue with stupid people, they will drag you down to their level and then beat you with experience.

Also, it’s unproductive.

I know. Who am I? I must be crazy to think that a Nobel Prize winner and successful New York Times columnist is stupid. But, I do. And, maybe I am crazy. I’m open to that argument. But, for the few times I’ve tried to read Paul Krugman, I’ve found it difficult to get past his first logical fallacy, which usually comes in the form of a straw man or ad hominem. Logical fallacies are markers of poor arguments.

I expect more of a Nobel winner. If he can’t be careful enough to state his opponent’s position accurately, I’m done. I have much better uses for my time.

His apologists stretch to overlook these transgressions to productive dialogue. For example, they point out that ‘technically’ some whacko holds the view that Krugman constructed, but we all know that doesn’t address the real issues or the actual disagreements, so it’s not productive. Waste of breathe.

Which brings me to another reason I don’t pay attention to Krugman. Henderson laid it out well in the post that started this topic, Krugman Kontradiction:

 …when he [Krugman] appears to contradict himself, without ever admitting it, which he often does appear to do, he can usually get out of it because when you go and read him carefully, you find that he didn’t really contradict himself but, instead, misled his audience into thinking that he said something that he didn’t quite say.

Or, it’s like 9-year-olds arguing. You said that. No, I didn’t. Yes you did. No I didn’t. Again, not productive. I don’t have much time for people who express thoughts just so. It’s adolescent. I coach a youth sports team. I get enough of that level of discussion at practices.

In his book, Antifragile: Things That Gain From Disorder, Nassim Taleb expresses another reason I don’t pay attention to Krugman (which this post clearly violates): There’s no such thing as bad publicity. Taleb explains that the success of Ayn Rand’s books is owed, in no small part, to her intense critics. I don’t wish to be responsible for Krugman getting any more attention.

Another reason I don’t pay attention to Krugman is that he’s never wrong, or at least he doesn’t seem to think so. I have enough know-it-alls in my life who squirm their way out of being wrong by using their clever intellects. In my view, these people have lived their whole lives with others telling them how smart they are. Their ego depends on it. When they are wrong, they kick their smarts into high gear and go into ego-protection mode.

The last reason (that I’ll mention) why I don’t pay much attention to Paul Krugman is that his job is easy. It doesn’t take a lot of balls to convince people that elites and government can solve their problems. That seems to be what they want to believe anyway. So, if a Nobel Laureate is telling you what you want to hear, it seems, there’s really no reason to check him or think about it too deeply.

It’s much more challenging to convince people that they can and should solve their own problems and that they will be better off if they do so.

Now, why was Henderson’s answer better than I expected? Because Henderson didn’t bow at the altar of Krugman. Henderson said because Krugman is one of the most important economics bloggers, which I take to mean that he is widely followed, not that he is the most talented or even deserving of being followed. Just that he is widely followed.

I am interested in economics. But, I prefer to learn from economists like David Henderson — not because I like Henderson’s biases (which I do), but because he has the balls to take on the fundamental disagreements directly, rather than construct straw men. He admits when he’s wrong, and doesn’t get blinded by his own ego and desire to be right. He encourages his students to think deeply and challenge him, rather than depend on him as the tea-leave-reading expert.

Economists like Henderson don’t expect you to take their word for it. They want to move the dialogue forward, not distort it.

“I promise a chicken in every pot (chicken not included)”

Tyler Cowen was ‘somewhat surprised‘ to find out that a higher percentage of the uninsured disapprove of Obamacare. I’m not sure whether his surprise was that the disapproval wasn’t higher or lower.

I wasn’t surprised that more disapprove.

As I wrote in my “Wait…What?” post in July of 2012, Obama won votes by promising to solve the problem of the uninsured. Those voters didn’t realize that his solution would be to penalize the uninsured for not buying insurance.

It’s like the old Doctor joke.

Patient: Doc, it hurts when I do this. Can you fix it?

Doc: Yes I can.

Patient: Really? Great! How?

Doc: Stop doing that.

In July 2013, I didn’t think many people had made that connection, yet. I predicted they might when they had to pay the fine. They haven’t paid the fine yet, but are discovering that Obama’s solution was the same as the Doc’s above. Stop not buying insurance.

I offered what I think is a better medical mandate in this post (edited slightly).

If you choose not to purchase insurance and you need medical care, you will be expected to pay for your medical care.

Mine isn’t that much different than Obama’s. But, it doesn’t require government intervention.

Update: James Taranto, at the Wall Street Journal, does a great job of making my first point:

In short, what ObamaCare means to the uninsured who were not uninsurable is higher prices for a product they already were disinclined to buy, along with a punitive tax on not buying it. That seems more like a mugging than a benefit.

A million dollar question

Thanks to Mike M for posting the following Youtube clip (audio) in the comments of this post. It features a discussion between a caller, Lucy, and hosts on a radio talk show.

In many discussions on welfare I’ve run into the argument from supporters that nobody would choose the paltry sums and stigma of welfare over working. I didn’t realize it before, but they were arguing from their personal preference bias. What they really meant was that they would not make that choice.

They failed to account that not everyone is like them and everyone doesn’t face the same opportunity costs.

Lucy says she and her family live off welfare. According to her, she receives various forms of welfare totaling about $1,300 per month. Her parents were on welfare. She doesn’t begrudge those who work, that’s their choice, and she doesn’t see herself as a bad person for depending on the system that is there to help her.

She mentions that if she takes a job, she’d have to pay for daycare for her three kids and lose some of her welfare benefits. She’d be worse off. Incentives matter.

Lucy also does us a favor by asking an insightful question.

What if someone offered you a million dollars, no strings attached?

Lucy’s question gets us over the hump of the personal preference bias. Suddenly the unimaginable situation where somebody chooses welfare over work is replaced with something that my discussion partners can more readily identify with.

A million dollars would be hard to turn down, even if it was coming from other taxpayers. It probably wouldn’t be too hard to convince yourself of the good you could do with it. And, maybe you could. Who knows?

But, that’s not the point. The point is that incentives do matter. We should NEVER forget that.

Saying that you believe nobody would ever choose something that you don’t think you would choose (though you might if you faced similar incentives) isn’t a good argument. It just shows that you haven’t thought about it beyond your current situation.

Near the end of the audio, one of the hosts also makes an insightful comment about incentives. Lucy’s million dollar question sinks in for him. He asks, If your money was cut off, would you go to work? Lucy replies, Yes, I’d have to.

He then says:

…the government puts a gun to my head with the promise of imprisonment if I don’t pay taxes. Does anybody put a gun to your head to take that money?

Lucy answers, Nope. With this he brings the distorted incentives of punishing producers and rewarding non-producers to life.

I would have asked a follow-up questions. Are there any expectations attached to receiving this money? Likely answer: Other than having low or no income, nope.

Which gets to a subtle and unhealthy incentive distortion in society.

There seems to be a condoned attitude where the producers can be roughed up. Pay your taxes. Don’t complain. Complainers are greedy and soul-less.

But, as Lucy, confirms, such treatment of the recipients on the other side of the transfer payment is not condoned — even when they happen to be in situations like Lucy’s where they appear to be smart and capable, but unwilling to carry their own weight.

It’s as if expecting them to be grateful and to say thank you is too much to ask. As if saying ‘thank you’ would be demeaning.

Pity to folks on the bunny slopes of writing

Megan McArdle says that she tries not to write bad reviews to avoid the lack of substance of ‘snotty putdowns’, by making…a snotty putdown (HT: Instapundit):

But if you’re basically pretty good at snotty putdowns — and most bloggers have at least an apprentice-level facility with this art — it’s almost too much fun. It’s too easy. It’s the writing equivalent of skiing the bunny slope.

I’m not a fan of McArdle’s writing. Credit to her for building an audience that can pay her bills (partly off her snark), but I’m not one of them. I tried. But, I find her to be a bit too full of herself.

I sometimes think she makes good points and helps advance discussions. But, more often I’m turned off by her snotty and elite attitude.

When I saw the link to this article on Instapundit, I thought perhaps she decided to turn over a new leaf. Like maybe the reason why she decided to try not to be snarky was that she realized that she could be wrong.  That while she didn’t find much use in something that she reviewed, her opinion may be proven wrong.

But, no such luck. Now, it appears, that she now believes she has graduated from “bunny slope” of writing. Good for her.

There are parts where I agree with her. Like here:

…it seems to me perfectly adequate to say “This person is wrong, and here’s why.”

Though, I’d edit that to say “I think this person is wrong, and here’s why”, because it’s good to leave open the possibility that I’m wrong and that I don’t nearly have as much figured out as I think I might.

This can allow you to get past the window dressing of who is more clever in their comebacks and get to the heart of the disagreement.

But, I think I would be misdirected to say any snark is bad. Glenn Reynolds’ Instapundit, for example, is snarky, too. But, his snark is different. It’s not about, as McArdle writes, “Look at me! I am so smart and funny! Not like this stupid person I am making fun of! You should think less of them and more of me!”.

He doesn’t use snark to elevate himself above others, as one example illustrates. When linking to articles of the IRS audit scandal, Reynold’s likes to remind his readers that Obama joked about auditing his enemies in 2009.