Monday, July 12, 2010

capitalism: for and against

I responded to LinuxLiberty on a reddit thread (source), which began with a misleading quote from John Maynard Keynes.

LinuxLiberty:
It is kind of amazing that capitalism even needs to be defended given the enormous amount of prosperity it has brought to the world. While I won't say the U.S. is an example of free market, in particular like the rest of the world it has a Marxist banking system that repeatedly fails, but it has brought enormous amount of prosperity to even poor people. Look even most poor people live in a house an apartment that has indoor plumbing, electricity, AC, a color television, a DVD player, a phone, a computer with Internet, and many poor people own cars. If you own all of those things that puts you in the top 10% of the rest of the world. The average person in China can't even afford a color television much less a car.

The biggest problem with capitalism is it turns people into spoiled brats who can't even comprehend what a rough life or poverty is.

billkerr:
It's true that capitalism has been the most productive system to date. However, there are also some problems with it, which I would summarise as follows:
  • it can't avoid major economic crisis, eg. the last Great Depression and the next one, soon
  • it has deformed or crippled the nature of work, especially the way factories operate
  • the wealth disparity b/w rich and poor continues to increase
  • it promotes the unsustainable dream that you can create more money from money

29 comments:

Mark Miller said...

I regard capitalism in the same way that I view democracy. As Winston Churchill said, "Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time."

Re. the Great Depression, it would be worth looking into why it lasted for so long in the United States, and not elsewhere. Depressions had happened in the U.S. many times before. In those times the typical response of government was to reduce taxes, regulation, and spending in order to promote recovery. These periods had tended to be short-lived crises.

Incidentally, my own reading of the history of the Great Depression is that the financial collapse was caused by the Federal Reserve. Hayek would probably say that they set interest rates too low during the "Roaring 20s". The Fed even has admitted to causing the Great Depression in the last 15 years or so. Economic historians have said that the Fed contracted credit too much during the downturn that led to the Depression, choking off chances of recovery, and creating a deflationary spiral. This is the reason that the Fed this time did the opposite, decreasing interest rates to record lows. My own sense is now the problem is they've probably overdone it, creating the seeds for runaway inflation down the road.

In conjunction with what I said earlier about the limits of human ability to comprehend complexity, it seems to me that the Federal Reserve was probably a bad idea, because it assumes that a small group of people can regulate the ebbs and flows of an economy, to "even out" the highs and lows. It clearly is unable to do that. In effect it engages in price fixing of some interest rates.

I've heard libertarians advocate for a currency market, in place of the Fed, where interest rates are allowed to float, which would allow for times when the economy needs more spending and less saving, and times when it needs less spending and more saving and investing. Instead we try to artificially create a climate for spending all the time even when the economy would naturally tend towards saving and investing for future development. I have a very amateurish, untested (to my knowledge) theory that this is one of the main reasons that we're in the situation we're in now. It's definitely something I'd like to investigate further.

Mark Miller said...

I had to break up my comment. Continuing...

I've heard libertarians advocate for a currency market, in place of the Fed, where interest rates are allowed to float, which would allow for times when the economy needs more spending and less saving, and times when it needs less spending and more saving and investing. Instead we try to artificially create a climate for spending all the time even when the economy would naturally tend towards saving and investing for future development. I have a very amateurish, untested (to my knowledge) theory that this is one of the main reasons that we're in the situation we're in now. It's definitely something I'd like to investigate further.

From what I understand, economists accept as a given that capital markets naturally ebb and flow, rise and fall, rather like the seasons, though this affects people more dramatically. Where they differ is what the government's response should be to this flux.

I would not say (myself) that capitalism has deformed the nature of work, because that shifts responsibility away from where it lies. My understanding is that in the 19th century 90% of the people in the U.S. were self-employed. This shifted quite dramatically in the 20th century. Being self-employed can be hard work, depending on what business you're in and the economic demands of your own life. Farmers used to work from sun up to sundown, with only breaks for meals and sleep. The children on the farm worked pretty much the same schedule. You can imagine during the height of summer when the Sun is up for more than 12 hours a day that this is pretty rigorous work. I've heard stories about how factory work used to be just as lengthy before child labor laws and unions lessened the work day and week.

From what I understand, the reason people moved from the farm to factories is economic security. Farming was risky. Bankruptcies were frequent, because while farming methods were crucial for success, they were not a guarantee of success. A lot depended on whatever happened to be the climate for a growing season. It still does.

Mark Miller said...

Continuing...

Re. #3, I've frequently heard from economists that the claim of a growing disparity between rich and poor is a misreading of economic statistics. Sometimes it seems like it's willful. From what I understand, the way this is derived is the nation's work force is divided into quartiles, each one having a "total wealth" indicator, with the lowest representing the poor. What happens in a growing economy is that people "leave" the lower quartiles, and increase the number of people in the upper quartiles. This decreases the financial statistic in the lower quartiles and increases it in the upper quartiles. To some, apparently, this creates the illusion that "the disparity has grown", but if you look at it from a population perspective, what's really happened is people have changed statistical categories. They were once in the "poor" category, and have moved up to "middle class" or "rich". This is what we hope would happen--upward mobility--and yet it's disparaged as a failure of the system!

I'm in agreement with you about #4 insofar as it creates a misallocation of resources, tending to cause financial panics and destroy a significant amount of wealth. However, I think the answer lies in looking at the economy from a systemic perspective, that it is a system made up of millions of small, individual transactions.

Using what motivates people to trade, and taking as a given that people can typically only "see so far", and so therefor rely on signals (prices) in the economy to help guide their financial decisions, the question in my mind is how to create financial incentives such that capital is more often than not put to productive use rather than towards speculation? It would be useful from this perspective to investigate what is encouraging people to use capital to speculate. Once it's found, then we can see if it leads to a pattern of imbalance. If it does, then the issue of how to correct it at the point where the imbalance is created can be explored, perhaps by changing a rule for transactions, or perhaps modifying a government institution that regulates an activity which is important in creating this imbalance. Perhaps there was a regulatory decision made a long time ago that was meant to solve one problem, but ended up causing another. From a systems perspective this is to be expected. There can be many unintended consequences that flow from making changes to a complex system, hence the reason to be cautious about doing so.

Mark Miller said...

Continuing...

Using what motivates people to trade, and taking as a given that people can typically only "see so far", and so therefor rely on signals (prices) in the economy to help guide their financial decisions, the question in my mind is how to create financial incentives such that capital is more often than not put to productive use rather than towards speculation? It would be useful from this perspective to investigate what is encouraging people to use capital to speculate. Once it's found, then we can see if it leads to a pattern of imbalance. If it does, then the issue of how to correct it at the point where the imbalance is created can be explored, perhaps by changing a rule for transactions, or perhaps modifying a government institution that regulates an activity which is important in creating this imbalance. Perhaps there was a regulatory decision made a long time ago that was meant to solve one problem, but ended up causing another. From a systems perspective this is to be expected. There can be many unintended consequences that flow from making changes to a complex system, hence the reason to be cautious about doing so.

Finally...the end. :)

Bill Kerr said...

hi mark,

wrt #3 the wealth disparity b/w rich and poor continues to increase

I regard growing wealth disparity as uncontroversial. Most supporters of capitalism just say its one of the unavoidable consequences of a highly competitive system that is necessary to mobilise human motivation. I'll just quote an extract from David Harvey's Limits to Capital which provides substantial evidence for the proposition:
"According to the UN by the mid 1990s the net worth of the 358 richest people in the world was then found to be equal to the combined income of the poorest 45per cent of the worlds population - 2.3 billion people. The world's 200 richest people more than doubled their net worth in the 4 years to 1998, to more than $1 trillion, so that the assets of the world's top three billionaires were more than the combined GNP of all least developed countries and their 600 million people.... The share of the national income taken by the top 1 percent of income earners in the US more than doubled between 1980 and 2000 while that of the top 0.1 percent more than tripled. The income of the 99th percentile rose 87 percent between 1972 and 2001 while that of the 99.9th percentile rose 497 percent. In 1985 the combined wealth of the Forbes 400 richest people in the US was $238 billion with an average net worth of $600 million, adjusted for inflation. By 2005, their average net worth was $2.8 billion and their collective assets amounted to $1.13 trillion - more than the GDP of Canada. Much of this shift has been due to rapidly rising rates of executive compensation. In 1980, the average chief executive made about $1.6 million a year in today's dollars but by 2004 this had risen to $7.6 million." (p. xi, Intro to the 2006 Verso Edition)

I quoted an extract of Harvey's figure on another reddit and received this reply:
"Wealth is not a finite pool that all humans pull from. There is no evidence that if the millionaire in Dubai releases his wealth back into the wild that it will ever find the hand of the poor man in Bangladesh. So studies highlighting the gaps and distributions are foolish post hoc, ergo proctor hoc arguments."

ie. just one of those inconvenient truths that we have to learn to live with in the real world.

Bill Kerr said...
This comment has been removed by the author.
Mark Miller said...

I'm inclined to agree with the commenter from reddit in the main. Maybe you know Latin. I had to look this up. The phrase "post hoc, ergo proctor hoc" is explained here). It translates to: "after this, therefore because of this". It's applied to arguments that say, "Because A happened, and was followed by situation B, therefor A caused B."

There is a great quote that I used a while back on my blog from Narayana Murthy, who was the CEO of Infosys in 2002:

“We all believed in socialism because we were children of a different generation. Then I realized that if you want to irradicate poverty you don’t do it by redistribution of existing wealth. You have to create new wealth.

This is the point that the commenter on reddit was making. One of the great challenges I think we have in our modern society is to get people to be fully knowledgeable participants in capitalism so that they can have the possibility of generating their own wealth. If people are employees at companies, unless they are executives, they tend to not get the experience they would need to understand capitalism, and so they're more at the affect of it than participants in it. Entrepreneurs/business owners get a lot of real world experience with it very quickly.

Mark Miller said...

Continuing...

The problem I see with Marxism is it assumes that human nature can be molded and changed. Where Marxism has been tried it runs into what I'd call "the wall of human nature". It doesn't achieve its stated goals, because imperfect people are involved in the enterprise. Inevitably the same qualities that Marxism tries to overthrow: greed, the hunger for power over others, end up controlling the enterprise. I think Lord Acton's maxim holds true no matter what structure is tried: "Power corrupts. Absolute power corrupts absolutely." Such efforts to create a society where everything is parceled out equally and no one has more power than anyone else is continually frustrated, because human nature keeps getting in the way.

The way that Sowell explains the constrained vision is that it recognizes a fixed quality of human nature, but seeks, through legal structures and a respect for certain disciplines, to encourage the positive qualities, and to hem in the negative qualities. It takes as a given that humans are flawed, imperfect, however one would like to characterize it, and that human existence is not going to be perfect either, but we can try to use the positive qualities of human nature to make an "as good as it gets" society. These structures are not fixed. As we try different approaches, we can try to judge what tends to create a more peaceful and contented society, and what doesn't. An important aspect of this is to have an educated society that is capable of thinking about these issues. Otherwise nothing is learned in the process, and the effort to improve is frustrated.

Mark Miller said...

Continuing...

Something I've been realizing as I've researched it a bit is that science is one such effort to use certain qualities of human nature in a disciplined way to create a better outcome. It uses our curiosity, our ability to create abstractions, our sense of wonder about the world and universe we live in, our sense of beauty, and checks it with our ability to be skeptical, to be critical, to be precise, to reason, and our ability to share ideas and receive feedback. One discipline I can recognize in it, which takes practice, is recognizing human fallibility, not just in others, but in ourselves as well.

It is by no means a perfect system. Scientists frequently get things wrong, get lost in their own egos, get trapped into believing something is true and not checking that belief carefully against the evidence, and can even be deceitful in the pursuit of their own goals. Whole communities of scientists can fall into deluding themselves (which can be identified (though perhaps not always) by the use of the term "consensus"). I've talked about this a bit with Alan Kay and he said that though all of these things have happened in science in the past, and in the present, the scientific process always wins out in the long run, steering the scientific community back to a pursuit of studying what's really happening. It is self-correcting over time.

I would say the same is true of capitalism. It is by no means perfect. There are perversions that can show up in it which distort it, but there is the possibility of correction as well, so long as the participants in it understand what it actually is, how to actively participate in it, and government interference in their pursuit of it is limited to keeping the "rules of the road" consistent. That's a pretty big caveat, because as I said I think most people do not have a full understanding of what capitalism is, and how it works, because most people in the developed world now work for somebody else. And there is some government interference that creates a situation where "the gains are capitalized, and the losses are socialized" for those who are "too big to fail". Another way of saying it is "heads I win, tails you lose." From what I understand, these situations are created where government has limited competition, often through regulation that does not explicitly target competition, but has the effect of limiting it, because it creates barriers that are too high for startups to surmount. This allows a few players to dominate a critical industry, centralizing risk, and thereby become "too big to fail".

Mark Miller said...

Continuing...

Kenneth Clark observed from history that too much wealth is destructive to society. I would agree with that. From what I've observed this is because wealth, if used liberally, shields people from many of the challenges they would otherwise face in life, and they lose the lessons that life has to teach, including how to be a constructive participant in society. However, I think the answer is to address it from a societal basis, not impose a mandated program, unless a community consented to it. It would be a good thing for this destructive quality to be exposed so that people are warned about it. I haven't heard too many people talk about it explicitly. One way that wealthy people in the past have tried to avoid this destructive quality is to be philanthropic, giving away a large portion of what they have, or keep a lot of it as "hands-off", and hide it from their children, creating a modest lifestyle for them to grow up in.

Another way that it's destructive to society is the concentration of political power that it creates. Honestly I don't have a good answer for this. I've heard some say the answer is more money in politics, not less, but from more diverse sources, with the only requirement that all donations be disclosed so that it can be scrutinized by the public. They may be right. It seems all efforts to limit money in politics have failed. We've created legal barriers about where money can go, but more and more money is used in the process as time passes, not all of it disclosed.

Having said all this, I must admit that while I understand some aspects of capitalism, I am not a fully knowledgeable participant. I have some knowledge of it, but my own practical experience with it is limited. I try to educate myself by listening to people who have more experience with it.

Cheers,

Mark

Bill Kerr said...

hi Mark,

I would argue that there is cause and effect in the figures that Harvey quotes. The Keynesian approach was a response to the Great Depression. It seemed to work ok in the 1950s and 60s but then ran into difficulties. Then we had the rise of Hayek and the implementation of his ideas by Thatcher et al. (sometimes called neo liberalism). That seemed to work for a while but now has run into difficulties. One of the consequences of Hayek's approach has been to accelerate the wealth disparity that Harvey documents. It's fairly obvious that an unregulated capitalist system will lead to those in positions of power and influence acquiring more lucre. That is what has happened, it is documented and you and the reddit guy just want to say there is no relation. I think that's just being in denial of obvious reality. For a more detailed outline of Harvey's views try this interview. I don't agree with all of Harvey but his analysis of neo liberalism seems sound to me.

Bill Kerr said...

hi Mark,

I googled some more Thomas Sowell wrt his early marxism. I think he does have some understanding of marx but nothing special. There are many critical interpretations of Marx and his is nothing new that has not been responded to. The trouble is that it takes a lot of effort to sort through it all. I noticed this quote from Sowell where he appears to disagree with David Harvey's documentation of increasing wealth disparity, referred to by Sowell as labor's relative share. Sowell says that "labor's relative share has not declined" in the process of correctly asserting that marx was not a minimal or subsistence wage theorist:
"Economists often assume as almost self-evident that Karl Marx's prediction of ever increasing misery for the workers under capitalism refers to a decline in the amount of goods and services they will receive. Some writers have implied that only the intellectually dishonest could deny this view. It is readily inferred that the interpretation of Marx to mean a decline in labor's relative share is only an afterthought of latterday Marxists seeking to salvage something from the ruins of the prediction. While labor's relative share has not declined, this at least has the dignity of a plausible prediction which went un fulfilled, while a theory of absolute misery would be thoroughly dis credited by history."
- MARX'S "INCREASING MISERY" DOCTRINE
I get the impression from that that Sowell would dispute David Harvey's figures, that such figures would constitute an indictment of the system that produced them.

Mark Miller said...

The Keynesian approach was a response to the Great Depression. It seemed to work ok in the 1950s and 60s but then ran into difficulties.

From what I understand there was not a total adherence to the Keynesian model during the 50s, though it was generally accepted as "the model to use"--it still is. Keynesian policies became stronger in the mid-1960s and thereafter.

We in the U.S. switched away from Keynesianism after the 1970s because the existing economic policies were unsustainable. We had extraordinary inflation and interest rates, and stagnant economic growth. We called it "stagflation". In any case, stimulus, an increasing money supply, and price controls were not producing economic growth. From what I understand a major cause of this was the fiscal cost of the Vietnam War, which had economic impacts years after it was ended.

The problem that I see with the Keynesian model, though I am not well read on it, is it assumes that spending always needs to be encouraged to keep the economy healthy, when as we've observed from history this is not always the case. We've been using Keynesian policy since Obama became president. A very simple homespun phrase sums up my view of recent history nicely: "You don't solve a problem that was caused by too much spending and too much debt with more spending and more debt."

Mark Miller said...

Continuing...

Then we had the rise of Hayek and the implementation of his ideas by Thatcher et al. (sometimes called neo liberalism). That seemed to work for a while but now has run into difficulties.

Again, we did not adhere strictly to Hayek's philosophy. Hayek did not like the Federal Reserve's ability to set interest rates and control monetary policy. From what I understand he preferred that interest rates be allowed to float in a market. We did not have that anytime in the last 30 years. He explicitly warned that the enemy of robust economic growth was artificially low interest rates, because it created unsustainable booms that result in painful busts--like we've just had. He wrote about this years ago, and we did just what he said we should NOT do, after the 9/11/01 terrorist attacks. The Fed set interest rates to historic lows. Along with regulations which allowed irresponsible mortgage lending and leveraged bets to be placed on the mortgage market set the stage for the collapse of 2008. I imagine he would not have endorsed the corporate bailouts we've implemented either, both in the late 1990s and in 2008/09. They save our collective bacon in the short term (and tends to keep those who caused the corporate collapses in place), but it creates an effect called "moral hazard", where bad financial behavior is perceived as being rewarded, and so the psychological restraints against this behavior become more and more lax.

Mark Miller said...

Continuing...

The Clinton Administration tried to put a cap on executive compensation in the 1990s, but corporate boards used stock options and in-kind gifts to award executive compensation beyond the cap. In reality executive compensation did not drop, but the regulation created perverse incentives. Executives decided to promote cooking the books to make the company's performance look better than it really was so that the company's stock price would go up and up, increasing the value of the executives' stock options. It did not correct the problem. Instead it made it worse, harming employees and stockholders, and entrepreneurism. One of the net effects was a strong push to restrict the use of stock options (missing the real cause). From what I heard at the time from VCs, options are crucial for recruiting executives for new start-ups, who will be challengers to the big established companies. Good first-order ideas are not necessarily good second and third-order ideas.

I do see excessive executive compensation as a problem. The market answer would be "produce more executives capable of forming equivalent executive teams and managing such firms". High compensation signals scarcity, and the solution that will allow the market to self-regulate compensation downward is to increase the supply.

Mark Miller said...

Continuing...

It's fairly obvious that an unregulated capitalist system will lead to those in positions of power and influence acquiring more lucre. That is what has happened, it is documented and you and the reddit guy just want to say there is no relation. I think that's just being in denial of obvious reality.

I am not saying that there is no correlation from one era to the other. I was just explaining the Latin phrase. What I am emphasizing is that by focusing all of your ire at the "fat cats" and seeking to take punitive action against them so as to presumably equalize things socio-economically, you end up in reality hurting the very people you are trying to help. In order to get at the wealthy you end up having to create regulations that cut off avenues for those who are poor and middle class to create their own wealth. I refer back to the quote from Narayana Murthy. They tried that for years. It didn't work. From what I have seen looking at other examples where this has been tried, the poor and middle class do not benefit from the tender mercies of such systems.

From what I have seen of history, Keynesian economics is not terrible. It has been shown that it can work for a time, though I suggest that the era in which it did appear to work was unique in world history. When those world economic conditions changed, we had to get off of that road, or face fiscal and economic ruin. I fear we face the same choice now, though we just "got back on that train" 2 years ago.

Bill Kerr said...

hi mark,

wrt point #2 that capitalism "has deformed or crippled the nature of work, especially the way factories operate"

In your response (July 12, 2010 5:36 PM) you talked about how hard and risky it is to be self employed using farming as an example.

The nature of work, the evolution from skilled crafts to a high division of labour in factories accompanied by specialisation of machinery is something that Marx knew a lot about and devotes many pages to in Capital Volume 1. Of course things have changed in factories since the terrible, to put it mildly, conditions of early capitalism. Or rather conditions have changed in advanced industrial countries like the USA and Australia, but if you read about conditions in say China you could say that the horrors of early capitalism are being repeated there.

Rather than go on about that I'll just throw in something to illustrate what I meant (I think you misunderstood), an issue which I know you do understand. Computer programming and the way it is promoted and taught could be done much better. You understand the difference b/w a well designed programming language (eg. SmallTalk or Squeak) and a poorly designed one better than I do. Now why is that it is so difficult to promote in a broad way good programming languages? Well, one answer is commercialisation, eg. the Apple, "there's an app for that" campaign, as pointed out by Mark Guzdial in one of his articles. That is the point I'm trying to make. That issue occurs everywhere. The division of labour, dumbing down is worse in factories but the tendency is there throughout society. The trend in education these days to elevate skills testing above everything else can be seen in the same way. That's the point I'm trying to make about how capitalism has "deformed or crippled the nature of work". At the same time there is always a niche out there for the original designer or educator but it's just a niche, the mainstream always has this tendency to deform or cripple.

Mark Miller said...

Hi Bill.

Your comments about IT WRT capitalism do strike home for me, and I thank you for that as (I hope) it makes your argument clearer to me.

Your position reminds me of an IT blogger, named Paul Murphy, who I've sometimes read. He's said on many occasions that Microsoft Windows causes an IT department to structure their operations a certain way, and to respond to IT problems in a certain way. He's proposed that IT directors use a different technology set based on Unix or Linux, which he says promotes a different way of working, with many benefits. He has, however, contradicted his own thesis on many occasions, complaining that most IT operations that use Linux treat it like it's a Windows system, and so therefor don't realize its benefits.

I can see his POV from the standpoint of "The people who choose Windows typically have a common set of behaviors in response to these common situations," but this is a kind of technological determinism: "This technology causes this response." In my view this misplaces the responsibility, and I've told him that. His own stories about how Linux is used goes against his theory: Using Linux does not by itself change the behavior of IT managers and workers to a different way of working. They have to be educated to that different way of working. The same is true of Windows. People had to be educated to use it. There are just a LOT more people educated to use it than Unix or Linux.

I think the real problem in this domain I'm talking about is a set of beliefs that go along with the idea that the computer is "just a box", and that it's possible to just take current technology "off the shelf", with minimal configuration, and use it in combination with other off-the-shelf technology, get IT personnel "off the shelf", and assume that everything will be fine. This is not true about current technology.

Mark Miller said...

Continuing...

I think the way Alan Kay has tried to change the situation in computing, as much as he can, is to promote real science in education, something that is a rarity in most educational settings.

He has talked about the economic implications of the ignorance of science. Carl Sagan talked some about this as well years ago. What Alan has complained most about recently is ignorance of what science really is. On my own blog I've complained about a stubborn ignorance of what computing makes possible, which is based in instrumental reasoning.

Ignorance is allowed in capitalism. It can thrive economically, as we've seen. Thomas Sowell has pointed out that even if people are ignorant in many areas, they can have a knowledge of their own specialty that's very valuable, and which serves the needs that others have, which come from their own goals. He talks about this in his most recent book, "Intellectuals and Society".

What I think you and I are both spotting is that people often miss the value that's added to their own lives, to their own goals, by getting a good education. I think the reason they miss it is they have to take a break from their instrumental goals to look at themselves, and question those goals. Where I connect this idea with Thomas Sowell is the saying, "You can bring a horse to water, but you can't make it drink." It has to be a voluntary choice that people make in order for it to really work. You can invite people in, but they have to choose to come, even if it's a secondary choice that's the result of the insistence of their parents. Fortunately we do have a culture that promotes education to a certain extent. Unfortunately it's usually for instrumental goals.

Mark Miller said...

Continuing...

One thing that Alan Kay has talked about is that most people the world over think in terms that strongly tend toward instrumental goals. A difficult task of education is to help people realize that this is not the only way to think, and that there are other ways that one can use one's mind, and that this makes more powerful goals possible.

The positive side of capitalism, even with the limited goals of most people, is that a wealthier populace has more opportunity to become educated. The rub here is that education needs to be valued for its own sake in order for this to really happen, or else you end up with nothing but expensive, glorified skills/job training centers, which is what I'm seeing. I'm not sure why this has happened, but just from my amateur observation of history it seems to be linked to a decision that was made almost 20 years ago to allow increased corporate sponsorship of higher education, which has, in my estimation, amplified the instrumental goals universities had previously been able to resist somewhat.

It seems to me though that a focus on the economic system ignores the real issue. Capitalism is just a system. It is just as capable of serving the ends of an educated populace as it is of serving those of an ignorant one. As we can see with computers and the internet, what often propagates is the shallower ideas. People often think "the system is the goal"--learn how the system works, and how to use it, and you're set--rather than seeing it as an idea, and then judging whether it's a good one or not. If it's judged to be a good one, then we can look at the way it's being applied, and see whether it needs to be modified, or if some other ideas need to be added to it to benefit those, who despite their best efforts cannot benefit. From this standpoint, one can consider whether other powerful ideas can be brought to it. Perhaps the idea of capitalism needs to be improved, or other ideas need to be brought into society to complement it. I'm open to that. I have a strong aversion to Marxism, however, because I've seen the attempts to apply it to civilization. Whatever the negative effects of trying to apply capitalism, I think the effects of the Marxist efforts have been worse.

Mark Miller said...

Some final notes I typed up. I'm not sure how they fit into my loooong argument:

What's been disappointing to me about the attitude of many educators I encounter is they look at "what's easiest to teach" rather than "what's valuable to teach". Alan Kay has emphasized in education the teaching of valuable outlooks which have been invented. This relates back to his non-universals which you've mentioned before. I find that a lot of people, educators, manufacturers, and marketers alike try to reduce everything down to the universals, because "it's what sells". Unfortunately it doesn't "produce" too well, which to me partly explains the economic situation we're in.

In my view, capitalism does not force everything down to a lowest common denominator. What we're seeing that's objectionable is it *allows* for this reduction. If people choose to go down that road, capitalism will accommodate it.

Bill Kerr said...

hi mark,

wrt your July 15, 2010 11:14 PM comment where you say that science progresses despite problems (eg. the problem of consensus science in the global warming debate) and equating this progress with the ability of capitalism to correct mistakes and also progress

I think the methodologies employed by mainstream economics would not be regarded as scientific by serious students of scientific methodology. eg. econometrics is not real science because of assumptions it makes about the tendency of a free market to approach general equilibrium. Of course to develop this argument in full would require a book. I think this book has been written (From Political Economy to Economics). Much of today's economics seems to founded on empiricism and logical positivism, ie. explicit denial of theories that look below the surface, which is a requirement of a genuine scientific method.

I don't think your analogy of progress in science and progress in the study of capitalist economics is valid from a methodological viewpoint.

Mark Miller said...

I was not saying that science and capitalism or economics are equivalent. I was saying that capitalism is a human system with self-regulatory dynamics just as science is, thereby they are not perfect, and meander into calamities caused by human frailties quite often, but they do self-correct. The dynamics are nowhere near equivalent, because they are after totally different purposes and results, but I see them as both falling into this category.

Bill Kerr said...

hi mark,

Bad science has self correcting mechanisms as well. There were many refinements of the Ptolemaic model of the universe before it was finally overthrown.

Bill Kerr said...

hi mark,

The book I recommended does have a quote from Thomas Sowell's Classical Economics Reconsidered where he does criticise Ricardo method "abstract models, artificial definitions, syllogistic reasoning - and no direct application of the results to policy. The historical, the institutional and the empirical faded into the background, and explicit social philosophy shrank into a few passing remarks", ie.that Ricardo was a one sided deductivist approach that leads to dogma.

Although Marx does not reject the historical, the institutional, the empirical or the philosophical in his analysis nevertheless he does also embrace Ricardo's deductivism as an important starting point in developing his law of value, etc.

Marx attempts to be scientific in a way that other economics do not. Connecting this to the idea that socialism has failed in practice. An alternative explanation here is that those who were fighting for socialism found it too difficult to explain the complexity of the analysis to those who it was meant to benefit. Also it is clear that some who described themselves as marxist didn't understand marx in part because of the complexity of his analysis. The Thomas Sowell criticism of Ricardo could easily be correct when applied to dogmatic marxists, those who just took some conclusions from marx but did not understand his method. This is why I recommend From Political Economy to Economics, because it does explain the struggle b/w different methodologies over the past 200 years. It shares common ground with Sowell's writings but reaches a different conclusion. By my reading it was Marx who analysed capitalism scientifically and history is bearing out that his analysis was on the right track, that capitalism will always generate periodic crises.

Mark Miller said...

Hi Bill. Getting back to this. Have had intermittant internet access this month, as I'm travelling.

You know, I had the thought after we had our discussion here that one possibility with what I had seen was that the people who tried to implement Marxism, or as you said, the people who were meant to benefit from it, didn't understand it, and so misapplied it. This idea has been with me for a long time with regard to computer science. It goes along with an idea that I had heard years ago, "Communism has never really been tried." At first this baffled me, because I thought, "Well of course it's been tried: The Soviet Union, Cuba, China, etc." What I learned later is what was meant by this phrase is, "Yes, these were efforts in that direction, but they did not fully implement what Marx talked about." So I can see that possibility. It may be that Marx was interpreted through a pre-existing cultural/social lense, and this became the de facto operative definition. This sort of thing has happened in the past, particularly with religious movements (not to say this is equivalent). So I guess the challenge then is finding a way to make the scientific outlook scale, eh?

Thanks for the references. Maybe I'll look into them at some point.

Bill Kerr said...

hi mark,

Perhaps the "failure of communism" could be analogous to the "failure" of the free and open source software movement organisationally (with various, sometimes bitter splits about the "best brand") combined with the failure to develop a coherent theory of computer science at the university level, described by alan kay as java vocational training. To most people the theory and practice of how computing science ought to be done is pretty much invisible. With communism and its different brands, versus capitalism, the stakes are higher and consequently the misleading propaganda is even more extreme.

Mark Miller said...

I was rather hesitant to add that "Communism hasn't really been tried yet," because I think the evidence shows that the prior attempts have not ended well. I'm tempted to ask, "Why try any more instances?" precisely because the stakes are so big.

Anyway, here's an article on the "science of social science" that might be of interest. It's about trying to apply the scientific method to social programs to tease out what works vs. what doesn't.

Bill Kerr said...

hi mark,

Thanks for the link to the Jim Manzi article. He concludes: "At the moment, it is certain that we do not have anything remotely approaching a scientific understanding of human society"

The nature of science is central to the evaluation of marx, ie.what does it mean when marx in his writings claims to be "scientific". To argue about marx's analysis of capitalism is to argue about the nature of scientific analysis. But both his critics and many "marxists" have not understood this. For a good introduction to this idea read chapter one (materialist dialectics) of Saad-Filho, The Value of Marx (pdf)