[timr]

"If Capitalism isn't buying shit and lying about it to sell it for higher, I don't know what Capitalism is. This is only a difference in degree, not kind."

I'm neutral on the question in this case, but really, any discussion of "capitalism" that goes beyond chapter one, page one of an undegrad economics textbook covers the point that efficient markets are not deceptive markets. Participants are assumed to share equal information. HN's understanding of capitalist theory seems to begin and end at the phrase, "supply and demand", and everything that has a two-sided market is otherwise A-OK.

In this particular case, consumers are sort-of informed, but it's also a lot harder to be informed than it used to be. I'm someone who tries to find high-quality items, and even I screw up on a regular basis. I wouldn't fall for this one, though.

[WalterBright]

> Participants are assumed to share equal information.

That is not a requirement for efficiency. Unknowns are factored into the price as "risk".

For example, if I am selling you my car, I know its condition a lot better than you do. But, the more you are suspicious about its condition, the less you are willing to pay for it.

If you're a crackerjack programmer, my interview process is inexact, so I'm going to discount the salary offer based on how risky it is that you're not a crackerjack.

Sellers offer guarantees in order to reduce the customer's risk, and hence be able to sell at a higher price. Investment returns are based on the riskiness of it. I pay more at the post office for less risk of non-delivery. Insurance companies, of course, are an entire industry based on managing risk.

Risk is a perfectly normal characteristic of efficient markets, perfect or equal information is not required at all.

[timr]

"That is not a requirement for efficiency. Unknowns are factored into the price as "risk"."

If someone is lying to you and you have no way of knowing it, there's no way to price the risk. Dishonesty can never be eliminated (that's software engineer pedantry) but it's always a drag on efficiency. People who don't trust each other don't engage in trade.

"Risk is a perfectly normal characteristic of efficient markets, perfect or equal information is not required at all."

Risk is a normal characteristic; there are always things you can't measure. Deception is not normal. It's why "capitalism" as practiced in countries where there are no stable legal systems tends to have lower levels of growth.

[starbeast]

>People who don't trust each other don't engage in trade.

You are going to need one hell of a citation for that claim, or you are using some new definition of 'trust' that I have not previously encountered.

[timr]

Saying "citation needed" doesn't work when it's one of the fundamentals of the field. But hey, Hackernews, I'll google it for you:

https://www.jstor.org/stable/41638856?seq=1#page_scan_tab_co...

http://econ.sciences-po.fr/sites/default/files/file/yann%20a...

https://voxeu.org/article/trust-and-economic-development

https://pdfs.semanticscholar.org/f7e3/e958b4b7387707a5ae32fa...

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2906280

http://www.oecd.org/innovation/research/1825662.pdf

https://www.parisschoolofeconomics.eu/IMG/pdf/Huck2.pdf

I stopped midway down the first page. But this quote is great, so I'll include it:

"Conjoint action is possible just in proportion as human beings can rely on each other. There are countries in Europe, of first-rate industrial capabilities, where the most serious impediment to conducting business concerns on a large scale, is the rarity of persons who are supposed fit to be trusted with the receipt and expenditure of large sums of money."

- John Stuart Mill, Principles of Political Economy, 1848

[starbeast]

Caveat Emptor - Chandelor v Lopus (1603)

edit - there is a core difference in definitions of trust going on here and it is basically the difference between the list of people you would lend money to vs the list of people you would buy something from. For certain trades, these lists are essentially the same, but for other trades they are very, very different.

[redial]

> People who don't trust each other don't engage in trade.

Yes, that is why banks don't require any collateral for anything, after all if you are doing trade you are trustworthy right?

[WalterBright]

> People who don't trust each other don't engage in trade.

They do all the time. It's just that the level of distrust is factored into the price. For example, you'll pay more money to buy a used car from a dealer than from a random person, and you'll pay more to buy from a reputable dealer. And it's why there are such things as cashier's checks, wire transfers, and escrow services.

> Deception is not normal.

It is normal, and it is factored into the price as "risk".

> It's why "capitalism" as practiced in countries where there are no stable legal systems tends to have lower levels of growth.

Of course. An unstable legal system means high risk, high risk means adverse prices, and as such lower levels of growth.

[timr]

"It's just that the level of distrust is factored into the price."

Right. That's called "reduced economic efficiency".

[zozbot123]

> It's why "capitalism" as practiced in countries where there are no stable legal systems tends to suck.

Indeed, countries without stable legal systems don't practice "capitalism", as defined e.g. by Adam Smith's work. At their best, they practice crony capitalism-- but that's not quite the same thing!

[pjc50]

> efficient markets are not deceptive markets. Participants are assumed to share equal information.

Unfortunately this does not exist outside the textbook; there's an entire field devoted to information economics (Akerloff, Stiglitz et al). And then there's the brilliant "markets are efficient iff P=NP" paper: https://arxiv.org/pdf/1002.2284.pdf

[starbeast]

>Participants are assumed to share equal information.

So any form of arbitrage is therefore impossible. Hang on a minute...

[timr]

Well, yes. In an efficient market, arbitrage opportunities are transient and scarce. By definition.

No market is 100% efficient, but markets where people deceive each other have a lot less efficiency.

[starbeast]

>No market is 100% efficient

Anyone who has ever bothered to watch an ad break will be less than surprised by this.

Given that we actually have markets where people deceive each other pretty much all of the time and justify the lying as a matter of business principle, perhaps we should study those instead.

Don't get me wrong, these fictional markets are interesting, but a lot of time seems to have been wasted looking at them instead of looking at the actual economy.

[deogeo]

> .. covers the point that efficient markets are not deceptive markets. Participants are assumed to share equal information.

Are 'efficient markets', defined by not being deceptive, and all participants having equal information, a requirement to call something 'capitalism'? Does that mean capitalism has never been tried? How long can such a system last, when it is in the financial interest of a large part of the participants to make the markets less 'efficient', so they can extract a higher price for less work?

[coldtea]

>I'm neutral on the question in this case, but really, any discussion of "capitalism" that goes beyond chapter one, page one of an undegrad economics textbook covers the point that efficient markets are not deceptive markets. Participants are assumed to share equal information.

So every discussion of "capitalism" that goes beyond chapter one is based on fairy tales?

[zozbot123]

No, it's just that markets where deception is common are not "efficient". A deceptive market can only result in complete unraveling, or exploitation of the honest, non-deceptive players (which is per say inefficient). There's no other possibility.

[coldtea]

Well, then there has never been an efficient market that also had the quality of existence...

[adminu]

Well, and advertisement is meant to be "information". Textbook capitalism is just not a good model of real world capitalism.

[edw]

It is irksome that people lay all of the horrors of the world at the door of “Capitalism” when people have been scamming, exploiting, and generally screwing each other over since the beginning of time. Capitalism is something that emerged in the Eighteen Century. The word means something and to ascribe every immoral or amoral act that aggrandizes someone to Capitalism is an act of intellectual vandalism. And to forstall the karma-harvesting mosquitos about to descend on my comment with a smug “But Capitalism is not therefore an unalloyed good!” reply, I’m not saying Capitalism isn’t without its problems.

[claudiawerner]

That's not a very charitable interpretation of the position, which I see to be along the lines of the fact that the economic mode of production in any given period reaches past mere individual transactions and into our whole mode of being, influencing everything from politics to art to religion.

The criticisms of capitalism, at least from a scientific standpoint, are not that people under capitalism are doing bad things, it's either that (i) under previous or potentially future modes of production there would be little or no incentive to do those things, (ii) capitalism has exacerbated the degree to which the behavior persists. The second part of the criticism is that capitalism is a class society, and thus rife with the antagonism that comes with class society in the form of "contradictions", which manifest themselves in capitalism as the contradiction of abstract and concrete labour, use-value and exchange value, capital and labour, price and value, culture and the commodity etc.

[zozbot123]

> The second part of the criticism is that capitalism is a class society

The modern middle-class society of the present day would quite simply be utterly unrecognizable to 19th-c. theorists of "capitalism [as] a class society". In fact, they would find that most, if not all, of the policy goals that they originally set for themselves have been achieved, in a market economy! The Chinese leadership understands this quite well, BTW; the above consideration plays a significant role in their understanding of what a "socialism with Chinese characteristics" should look like.

[claudiawerner]

On the other hand,

The fact that the class structure has been complicated does not mean it has disappeared, nor does the increase in class mobility mean that classes have disappeared. It's worth noting that it's not only the 19th century theorists who thought of capitalism as class society, but relatively recent ones too. The notion that the "concrete aims" of Marx and company (if you're referring to them) have been fulfilled is farcical - they didn't only call for an increase in living conditions for non-capitalists, they called for a society different in kind, not just degree. I'd be interested in how core ideas such as "abolition of the value-form" play into a system to which they are antagonistic (market economy).

A lovely quote from the 60s:

“If the worker and his boss enjoy the same television program and visit the same resort places, if the typist is as attractively made up as the daughter of her employer, if the Negro owns a Cadillac, if they all read the same newspaper, then this assimilation indicates not the disappearance of classes, but the extent to which the needs and satisfactions that serve the preservation of the Establishment are shared by the underlying population.” (Herbert Marcuse)

And from the same person:

“Not every problem someone has with his girlfriend is necessarily due to the capitalist mode of production.”

[zozbot123]

> "abolition of the value-form"

Isn't that a feature of only the final stage of social evolution according to Marx? The one that Marx calls "communism" (not to be confused with e.g. "communist countries" or "communist parties", as a reference to their politics). A close relative to the communist stage wrt. the theory of market economies would be what we call a "post-scarcity economy" - except that it's not really a 'core idea' in any sense. It might or might not happen at some point in the future, but a market theorist has no need for that hypothesis.

I'd love to comment about the remark you quote regarding the "preservation of the Establishment" and how ironic it sounds today, but to do that I'd have to mention some quite uncomfortable facts about present-day political dynamics, which would take us very far from the subject, and deep into partisan controversy. Sorry!

[AnimalMuppet]

> ... capitalism is a class society

So? What came before capitalism? Feudalism. That was a class society at least as much as capitalism is.

[claudiawerner]

That was what I was trying to say; capitalism isn't distinguished by the fact of contradictions, it is distinguished by a new set of contradictions.

[AnimalMuppet]

A new set because, while class isn't new, the specifics of the class structure are?

BTW: Why "contradiction"? It looks like Marx chose that word in order to make the fall of capitalism look inevitable - it has contradictions, so it must be self-inconsistent, so it must fall, right? But it looks to me that what Marx is describing is just the differences that occur in any society. In what way are they truly contradictions (in the normal sense of the word)?

[coldtea]

>Capitalism is something that emerged in the Eighteen Century

More like 15th century, is the widely accepted chronology. And it did bring with it a totally different kind of horror, including colonialism...

[AnimalMuppet]

Here is one definition of capitalism: Reinvesting the profits in the enterprise, to make it more efficient, larger, or better in some other way. That started in 12th Century Italy, and perhaps also in China's 11th Century Industrial Revolution.

(China could have had an iron-based industrial revolution long before Europe. But the mandarins saw that some lower-class people were getting rich, and so they shut it down by force.)

Also: Colonialism is an evil of capitalism? The Roman Empire did something very like colonialism. The Spanish in the 1500s weren't exactly capitalists, either.