Capitalism

Instapundit: Markets Work to Transmit Bad News. No Wonder They're Unpopular.

But are they really? Large majorities of us prefer creative destruction to government-managed economies.

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Writing at USA Today, Glenn Reynolds of Instapundit gets to the reason why markets are often unpopular with politicians, intellectuals, and other critics:

When the "Great Leader" builds a new stadium, everyone sees the construction. Nobody sees the more worthwhile projects that didn't get done instead because the capital was diverted, through taxation, from less visible but possibly more worthwhile ventures — a thousand tailor shops, bakeries or physician offices.

At the same time, markets deliver the bad news whether you want to hear it or not, but delivering the bad news is not a sign of failure, it is a characteristic of systems that work. When you stub your toe, the neurons in between your foot and your head don't try to figure out ways not to send the news to your brain. If they did, you'd trip a lot more often. Likewise, in a market, bad decisions show up pretty rapidly: Build a car that nobody wants, and you're stuck with a bunch of expensive unsold cars; invest in new technologies that don't work, and you lose a lot of money and have nothing to show for it. These painful consequences mean that people are pretty careful in their investments, at least so long as they're investing their own money.

Drawing from Nassim Taleb, Megan McCardle, and the well-worth-following Twitterer @chmtp, Reynolds argues

Markets make people better off, but they don't provide sufficient opportunities for politicians to extract bribes and intellectuals to feel better about themselves. This explains why they're unpopular with politicians and intellectuals. The real question is why anyone else listens to the self-interested claims of politicians and intellectuals. Maybe because the subject of what works and what doesn't in economics is mostly written by journalists?

Read the whole thing here.

Reynolds quotes from Reason's recent interview with Whole Foods' John Mackey, who lays much of the anti-capitalist mentality at the feet of jealousy and status envy.

I'm not fully buying that, though I think there's some of that going on. Years ago in a very different context, my Reason colleague Brian Doherty once noted that the most punishing thing about markets in general is that they almost completely dismantle any fantasy of control a particular producer might have. One minute you're topping the charts and playing stadiums, the next thing you know you're back doing bar mitzvahs at $10,000 a show. Understood properly, creative destruction is an endlessly subversive ideal that calls to mind the Buddha's response to the king who asked him to say something that would cheer him when he was sad and humble him when he was gloating: This too shall pass. 

Customers in a relatively free economy are more fickle than fate itself. When functioning freely, capitalism forces producers to offer better and better goods and services at lower and lower prices. That goes for ideas, as well. Without regard to ideology, policymakers and intellectuals (broadly defined) have an inordinately difficult time getting people to pay attention to what they consider the obvious truth. That causes anger and resentment more than envy per se.

Reason

Beyond that, there is a huge tendency for capitalists to equate their (often-momentary) riches with something approaching the natural order of things. Too many plutocrats in 19th-century England and America, for instance, assumed that their success was either god-granted or, possibly even worse, the result of some "natural aristocracy" when in fact it was embedded in all sorts of cultural, genealogical, and contingent networks of power. At times, that led to something far beyond callous disregard for the unfortunate and the poor. In fact, it often led to closing off paths to betterment on the tautological grounds that you just can't help some people. If they were capable of rising above circumstances, this thinking goes, they'd have already done so.

So there are more reasons than graft and envy for anti-market animus. Perhaps the most interesting thing is that free enterprise is actually amazingly popular. Amazingly few people believe in pure socialism or command economies any more, showing that we can learn from history. As the Reason-Rupe poll found, nearly 70 percent of Americans have a favorable view of "free markets" and fully two-thirds have a negative view of a "government-managed economy." In the same poll, millennials are far more likely to respond positively to the term socialism, but it's clear from other contexts that they don't understand its historic meaning. Hence, even millennials favor "free markets" far more than "government-managed" economies.

Reynolds quotes from our John Mackey interview. In his book Conscious Capitalism and in virtually every presentation he gives, Mackey always raises capitalism's image problems. He believes it is the best anti-poverty program ever created but worries that many of its champions fixate on its competitive aspects and its efficiency gains at the expense of painting a fuller picture of what free enterprise does for all members of society, especially the poorest among us. Check out a transcript here and watch the video below (produced by Todd Krainin).