Why socialism doesn’t work

From the comments of another blog:

Perhaps this is one of Socialism’s great appeals: the hope of unifying an entire nation behind a single vision.

I think that is socialism’s main appeal.  People are familiar with how we interact with one another in small groups — with our families, with our close friends — and we think that’s how we ought to behave with the extended order of people around us.

What we put into and get out of relationships with family and friends is not based on dollar prices.  It’s based on commitment, emotion, bonding, reciprocation and many other things.

The commenter continued:

Sadly, people insist on living their own lives with their own aims and ambitions – some petty or tawdry, some trite – unworthy of philosopher kings.

Sadly…for the philosopher kings and socialists.

Those more observant might realize that what binds us as family and friends doesn’t translate well to the extended order of people, no matter how much we want it to.

It doesn’t translate well because of two constraints — time and brain capacity.  We don’t have enough of either to get to know and develop feelings for everyone in the extended order like we do with our families and friends.

At some point, the opportunity cost of getting to know everyone is less than the what it’s worth to eat and put a roof over our heads.

My Mom may bake a loaf of bread for me to be nice.  As much as she may want to, she won’t bake a free loaf for everyone. She doesn’t have the time or the resources to do that.

The baker will bake a loaf for everyone, not because he’s nice (which he may be), but because people are willing to trade him something of value for it.

We don’t often use dollar prices to get our family and friends to do things for us.  But, it’s the limits of time and brain capacity and opportunity cost that cause us to use prices to get billions of other folks to do things for us.

The desire to have everyone behave like a big, happy family — acting toward a common goal without a set or prices — is why some folks have a hard time accepting and realizing what the price system does for them and why.

The commenter closes with:

Only existential threats, it seems, are capable of rousing an entire country to strive for the common good. And so, the socialist must, in the end, resort to force.

Actually, in a free market most of the country is already working for the common good.  That’s a fundamental oversight made by free market critics.

Prices, among other cues, help us coordinate our activities to the common interest.

But, to the philosopher king, the chaotic, seemingly disjointed and inevitable failures that occur within a free market do not appear to serve the common good — at least not his or her vision of that common good.

Also, many may disagree with their vision of what the common good is.  That is when the philosopher king becomes a socialist and resorts to force to impose his or her vision, for the greater good.

The Fatal Conceit

Why are there are more of us humans now than 100, 300 or 10,000 years ago?

Some reasons are external and beyond our control.  For example, we benefited from the Earth not having collisions with large asteroids or comets recently.

Other reasons are in our control.  It’s those reasons that F.A. Hayek writes about in his book, The Fatal Conceit.

In the book, he explores the idea that over time, through many trials and errors, humans discovered ways of interacting with one another that result in more of us.  Those ways of interaction that produce more of us aren’t necessarily right or wrong and were not developed by design.  They just happen to work or not.

We naturally use those ways in our daily interactions.  Why did you give a friendly wave to the driver that let you merge into traffic?  Why did you stop at the stop sign?  Why did you pay for the coffee?  Why did the coffee shop sell it?  Why did you leave a tip for the waitress?  Why did you not take the tip that was still on the table from the previous customers?

We know those interactions as law, tradition, social norms, human rights, beliefs, etiquette, prudence, respect, benevolence, propriety and property rights.  These interactions evolve over time based on what works and what doesn’t.  We each learn these standards from trial and error and socialization with older generations and sometimes we contribute to their evolution when we try something different and it works.

Those ways of interacting have allowed each of us to live a more prosperous life as we benefit every minute of every day from voluntary actions of an extended order — or a large number of people we don’t know, haven’t met and may never in our life time see.

Hayek’s Fatal Conceit is the belief by some that a small group can design and control the evolution of this thick and ancient web of human interactions to achieve intended consequences, without incurring negative unintended consequences.

The fatal conceit is why a politically and economically centralized Rome died out and centralized companies die off.

I recommend reading Hayek’s The Fatal Conceit.