I wouldn't have big problem with the free market (as you describe), if the following big feedback loop of investing would be limited:
People can "cheat" (for example give incomplete information, or mislead about how much stuff they have really done, etc.) and then for that, they get more votes about what is socially useful activity? Of course they will reinvest those points into more what they are doing, and at the end of the day, you will end up with people like that controlling the economy.
And that's what actually happens - owners of capital decide by huge margin where to invest, because accumulation of capital gives you a leverage which just doing normal work doesn't. It also happens to a lesser extent between other social groups.
Now, I see two realistic solutions to this loophole:
- Limit personal wealth to some amount (say 100x average) and redistribute the rest.
- Limit amount of overall wealth (let's say GDP) than can be subject of competition to a certain percentage (say 50%) and redistribute the rest.
These are essentially proposals for having a mixed economy.
> any centrally planned system will be inefficient
Is democracy central planning or not? I don't think "central planning" is particularly useful category, to be honest. All larger-scale human activities have to be done by cooperation of many people, and this cooperation can be always viewed as central planning, or at least as place where individual values are suppressed.
Yes, those are some of the issues with 'Laissez Faire'. There are always winners and losers in any system and I feel that some redistribution to "take the edge of" is a good thing. (But perhaps not your specific policy suggestions).
Democracy isn't central planning. It has a similar basis to capitalism actually.
If you believe that morals are subjective then it makes sense to give everyone a say in what morals are codified as law. If on the other hand you believe in a single objective moral code, a dictator's for example' then you don't need to make any decisions.
Capitalism is the same but with morals switched with values/desires. It may not be the best "type 2" system, but in a subjective values universe any system that replaces it would need to be "type 2" as well.
> Democracy has a similar basis to capitalism actually.
I absolutely disagree with this statement. In democracy, you cannot trade or accumulate votes, and it is one of its tenets. In capitalism, you can trade and accumulate "votes".
This means, at the very least, what family you were born into influences your life. It's better than feudalism, for sure, but it's still far from the ideal of equal opportunities.
What I mean is that they're both consensus mechanisms to deal with subjectivity. For democracy, its subjective morality while for capitalism its subjective desires.
Its an interesting thought experiment to switch the mechanisms and predict the effects.
Well, since I'm making ready for the day unusually quickly this Saturday morning, I think I'll take the time to properly explain my deep disagreements with your position.
* Markets cannot be claimed to "beat" Arrow's Impossibility Theorem any better than any other method of preference aggregation.
* Economics does not derive from foundations for ethics, nor form a foundation for ethics, nor say anything about ethics or meta-ethics. Value-neutrality is basically the whole point of economics, ever since Adam Smith codified the subject.
* In fact, to drive home that second point there, if two people agree on a preference ordering, it doesn't matter whether that ordering has any metaphysical or "foundational" significance whatsoever. Economics is making a weird assumption, from the anthropological point of view, that people won't agree on preference orderings -- what with all being humans and thus having very similar material needs.
To unpack the first point, which is most likely the important one... The Impossibility Theorem says that no system of ordinally-ranked voting (in which candidates are listed in order of preference) can satisfy the following three criteria, and also something called Pareto efficiency we'll get back to later.
The three criteria:
* If every voter prefers alternative X over alternative Y, then the group prefers X over Y.
* If every voter's preference between X and Y remains unchanged, then the group's preference between X and Y will also remain unchanged (even if voters' preferences between other pairs like X and Z, Y and Z, or Z and W change).
* There is no "dictator": no single voter possesses the power to always determine the group's preference. Note that "dictator" here is a technical term: the hypothetical "dictator" would probably not know who he or she is. An informal term that captures the correct meaning in today's term would be closer to "swing voter" -- Asimov wrote a short story about the phenomenon (http://www.5novels.net/ScienceFiction/Asimov41/27325.html).
So, how does a "market system" do "better" than a centrally-planned one? Well, firstly, it employs cardinal (real-number) preferences rather than orderings, and secondly, it allows for dictatorship (primarily of the wealthy, and in both the technical and informal senses). This of course means that any preference-aggregation system which is willing to bite these two bullets (preferences are numbers rather than orderings, and there may be one person in the population whose voice determines the outcome) faces no troubles from Arrow's Theorem. The Gibbard-Satterthwaite Theorem will still apply (any system must exclude some candidate, suffer from a potential (if unknown) dictator, or be vulnerable to tactical voting), but it of course applies to "market planning" just as much as to any other system (particularly since market planning bites the dictatorship bullet).
As to the question of efficiency, capitalism does not even claim to provide social efficiency in any sense, merely Pareto efficiency regarding things which can be owned as property. Pareto efficiency just means, "The best outcome that can be obtained without taking from the rich to give to the poor." Worse, markets are not known to converge to equilibria in real life -- they're far too stochastic for that.
And then of course we run into all the previously-mentioned issues of trying to combine freshman political science, wildly idealized economics, and right-wing ideology to claim to have formed a foundation for morality or to answer fundamentally moral questions.
Hmm, thats a lot to respond to, I'm going to start with just a small part initially.
I'm not taking free markets to be a foundation for morality, I'm saying that I believe morality and values to be subjective. Markets are just one way to achieve consensus in a distributed system.
You mentioned earlier that you believe in moral realism, a definite objective moral code which ALL humans should follow and humans who do not are wrong/bad/broken. Do you believe the same about values? That there is an objective preference ordering all humans should have and those that do not are wrong/bad/broken?
I don't particularly favour capitalism or democracy as systems, but I do prefer them over central planning or dictatorship BECAUSE I believe values and morality to be subjective. Any alternate system should take that into account.
>Do you believe the same about values? That there is an objective preference ordering all humans should have and those that do not are wrong/bad/broken?
That's a misconceived question in the first place. There are only actual feelings, preferences, etc. that actually-existing human individuals really have. To talk about "more objective" versus "more subjective", you have to talk about how well-informed those feelings and preferences are by someone's experience of the world: the objective, normative preference is the one you would form if you had all relevant experience of the world.
What values are not is subjective in the economic sense, of being both completely particular to each given agent and also arbitrary, unlinked to what sort of person you are or your circumstances. This is why it's often a better idea to inform and educate someone than to merely give them what their misconceived desires currently point towards -- for instance, to hospitalize suicidal people.
>I don't particularly favour capitalism or democracy as systems, but I do prefer them over central planning or dictatorship BECAUSE I believe values and morality to be subjective. Any alternate system should take that into account.
But again, you are completely ignoring both the definitions of the systems you're talking about, and how they actually operate. The questions you're trying to argue about are not fundamentally about "objective values" (a less misconceived idea) versus "subjective values" (a very extremely misconceived idea). They are about how you transmit information about what actually-existing people want or would want, and combine material inputs to give people what they want or would want.
Capitalism, especially of our current kind, is quite bad at giving people what they want, whether it's objective or subjective or naturalistic! This is why you are sitting here resorting to bad meta-ethics and bad history: you cannot justify your system by reference to the broad masses being genuinely satisfied with their lives, so instead you say, "Values are subjective, so capitalism is the only alternative to dictatorship, because Arrow's Impossibility Theorem." Every part of this statement is fractally wrong: there are more political systems than just "democracy" and "dictatorship", there are more economic systems than just capitalism and "central planning"/command-economy, Arrow's Impossibility Theorem demonstrates certain limitations that markets have to follow just like everything else, values are naturalistic, and the masses are mostly quite unhappy with their lives.
Please, learn more history, learn more political science, learn more economics, and learn them honestly. Avoid ethics, actually: it's a crappy field because it's founded on the false assumption that there are actually things called "values", which are either dictated by God, spring fully-formed from the Platonic Form of Reason, or are "subjective" to the point of meaninglessness.
People can "cheat" (for example give incomplete information, or mislead about how much stuff they have really done, etc.) and then for that, they get more votes about what is socially useful activity? Of course they will reinvest those points into more what they are doing, and at the end of the day, you will end up with people like that controlling the economy.
And that's what actually happens - owners of capital decide by huge margin where to invest, because accumulation of capital gives you a leverage which just doing normal work doesn't. It also happens to a lesser extent between other social groups.
Now, I see two realistic solutions to this loophole:
- Limit personal wealth to some amount (say 100x average) and redistribute the rest.
- Limit amount of overall wealth (let's say GDP) than can be subject of competition to a certain percentage (say 50%) and redistribute the rest.
These are essentially proposals for having a mixed economy.
> any centrally planned system will be inefficient
Is democracy central planning or not? I don't think "central planning" is particularly useful category, to be honest. All larger-scale human activities have to be done by cooperation of many people, and this cooperation can be always viewed as central planning, or at least as place where individual values are suppressed.