Hey VoteRando,

I love you're idea for an econ notes blog, and I'm really looking forward to seeing where it goes.

As for Mr. Z, Don't worry -- lawyers aren't necessarily so smart; they're just good at sounding that way. ;)

As for "lesson 1"

Capitalism is evil. Capitalists care only aboutmaximizing revenue

(Forgive me if this sounds round-a-bout, but this isn't a simple issue to address. I'll be as brief as I can.)


"Economics" is the study of human action as it relates to exchange. It's a study of human nature. The funny thing about capitalism is it isn't really an economic "system", by which I mean something planned, or contrived. It's the absence of a system. It's the way people get the things they want when they're left alone to trade freely with one another when they're left alone to act according to their nature.

There are certain things like self-ownership and individual autonomy that must be recognized in order for capitalism's required property rights to emerge, but so long as these ideas are a part of our culture (and they are), I'm pretty convinced that property would be defended regardless of whether there's a system of laws to do so.

To say that, "capitalism is evil," then, is to say that either human nature or self-ownership and individual autonomy are evil that pursuing our desires & acting according to our individual values is evil. It's clear from what you wrote that Mr. Z believes slavery's no good, so he must not have a problem with self-ownership or individual autonomy. His problem with capitalism must be elsewhere.

If Mr. Z believes that people only value "maximizing their revenue" regardless of the moral implications, then I can see why he might think that human nature is evil, and therefore that capitalism -- i.e, "people acting according to their nature" -- is evil; but I would disagree with him there. (That's a different topic altogether!)

I'm driving from Gainesville to Jacksonville in a few hours. I know that the cheapest place to buy a tasty beverage along the way just happens to be the place between Waldo & Starke that also sells swastika flags & other Nazi-type memorabilia. If all I cared about was maximizing my revenue, then I'd shop there; but I don't. Doing so would make me feel bad, and I (like most people) care more about maximizing my happiness, than maximizing my "revenue".

I think that's where your teacher is wrong: People (capitalist or otherwise) care about maximizing their happiness, which they do by acting according to their values. Sometimes this means "maximizing their revenue", but not always Not at the expense of compromising something they value more highly.

As for Lesson 2:

Communism just does't work. In order to have a working communist society, everyone must be virtuous and willing to do their allotted share of work. It is completely against human nature. Karl Marx was naive.

Yikes I don't know that I'd say Marx was "naive". His mistake was that he failed to recognize that not everybody would come to share his values. He believed that people would one day evolve out of their diverse individuality and become "species-beings", all working towards the same set of goals, with the same set of values, for the good of the "species" (i.e, the collective). (Okay, maybe that is naïve.) I guess Mr. Z's saying that everyone must be "virtuous" is one way of putting it, though it seems to imply that he would agree with Marx that diverse individuality is something other than "virtuous". (This could go back to explaining his description of capitalism as "evil".)

Where Mr. Z is right is in saying that communism doesn't work because it's completely against human nature. Unlike capitalism, communism is an economic "system" something that's imposed upon people, and that forces them to act in a way that they otherwise wouldn't. Any system that regulates behavior in a way that's contrary to human nature is bound to fail eventually. Communism's rather short-lived existence & disastrous, inhumane consequences prove this quite clearly.

Lesson 3:There is no such thing as pure capitalism...

Of course there is! The "black market" for banned goods, such as illegal drugs is a perfect example of a functioning pure capitalist free-market. It's completely regulated by supply & demand, and it's thriving.

I've been chatting with you on IM since I wrote that last part, and you raised the point that your teacher means that no country has adopted a "purely" capitalist economy -- by which I'm assuming he means a "laissez-faire" capitalist economy; one in which the government is purely "hand's off". However, just because there isn't a government that's managed to keep its hands out of the economy, that doesn't mean that pure capitalist exchange doesn't exist. In fact, if you think about it, there's something kind'a weird about the notion of looking for a government that's adopted laissez-faire capitalism, since, by definition, laissez-faire capitalism is nothing more than the absence of government in exchange! A government could only officially embrace laissez-faire capitalism by enacting a law something like this:

Um, yes, and as for the economyoh, never mind. As you were.

Besides, even if there weren't examples of pure capitalism, what would this prove? Just because something doesn't exist doesn't mean that it shouldn't exist. Lesson number 3 may be an observation, but as for "teaching you to think", it doesn't do so much.

Finally, for poor Martha: Personally, I hope you do care about the Marthas of the world. They're the reason I'm such an advocate for laissez-faire capitalism! Raising the minimum wage would both drive the cost of goods higher, and put some of her co-workers (if not her!!) out of their jobs! (Her employer can hire more employees for $5.15 than $6.15.)

Better still, in a "hand's off" capitalist system with no minimum wage, we'd have (on average) full employment. ("Full employment" meaning that everyone who wants a job could get one; not that the entire society, kids included, would be employed. That would suck!) If you had full employment (or even near-full employment), then employees would be far more scarce, and therefore far more valuable. If any business wanted to grow, then all other businesses would have to make sure they paid their employees well-enough to keep them around, or else they'd be faced with staffing shortages. Just consider the extravagant benefits being showered upon web programmers in the late '90's if you want to see what happens to employees when they're in short-supply! My brother was one. Twice a day massages while he sat @ his desk; in-office catered lunches; ridiculous salaries "If people realized how much government regulation favors business at their expense, we'd all be free-market capitalists!" -- Adam Smith, The Wealth of Nations, severely paraphrased.

...so much for brevity ;)
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sh(A)ne

Minister of Truth