Should America's Future be More Capitalist or More Socialist?

Proposition

Given the current mix of our economy (where some industries have greater government involvement than others), future generations would likely be better served if we trended toward an overall more capitalist economy, rather than an overall more socialist economy.

For by Jonathan Church. Against by Ben Burgis. Please see end of debate for bios.


For: Opening

F.O.01. Economics is the study of how people generate the most value from scarce resources. Note that I take for granted that resources are scarce. I don’t deny that we live in an affluent society. But that does not mean resources are limitless. The question is not whether we have enough, but how to make the most of what we have. First, how do we employ resources to supply the most value at the least cost (productive efficiency)? Second, how does this value – which we can think of as goods and services available as inputs to production, or for final consumption (i.e. demand) – get allocated most efficiently (allocative efficiency)? Third, if the efficient allocation is deemed “unfair,” how can it be redistributed to enhance welfare without being inefficient (distributional fairness)?

F.O.02. In The Worldly Philosophers, Robert Heilbroner identified three ways to organize economic activity: tradition, command, and markets. Putting aside tradition, in which people assume roles established by tradition rather than choice or state directive, are we better served by capitalism, an economic system which places more trust in markets, or socialism, an economic system that places more trust in central planning? I contend that capitalism is more likely to optimize efficiency and welfare.

F.O.03. To begin, I claim that it is not quite right to imply that capitalism moves us toward markets while socialism moves us away from markets. Markets—by which I mean supply and demand—are always present. For example, while we hear of AI-inspired utopian visions of “fully-automated luxury communism,” IT “employers face prolonged gaps in the hiring process” as job postings outpace the supply of IT talent. Thus, while this is not the place for a more exhaustive treatment, I define capitalism as a system which organizes the interaction between supply and demand, primarily by de-centralized decision-making in response to market incentives. In contrast, as Heilbroner wrote, socialism “must depend for its economic direction on some form of planning, and for its culture on some form of commitment to the idea of a morally conscious collectivity.” In other words, socialism relies on state directives that either defy, or accommodate, market-based realities.

F.O.04. The question, then, is the extent to which we allow for a governing body (or tradition) to supersede de-centralized decision-making in the private sector. I do not deny government has an essential role in the economy. It sets up rules, arbitrates disputes, enforces contracts, protects property rights, defends competition, and addresses market failures such as principal-agent problems, public goods, and externalities. As a rule, however, society is better off in the long run if it tends to lean away from central planning and toward de-centralized market-based decision-making.

F.O.05. At this point, it is necessary to observe that there is a cost to any choice we make. But we must be concerned not with absolute cost, i.e. simply tallying up dollars and cents, but with opportunity cost (which also allows us to make an essential distinction between economic profits and accounting profits). By opportunity cost, I refer to what we lose by choosing one option over another. Take, for example, the time value of money. If we choose to put money under a mattress, we lose out on the interest or dividend payments we could receive if we bought bonds or stocks instead. If we focus on whether to invest in stocks or interest-bearing assets as an inflation hedge, inflation risk—the risk that inflation expectations diverge from inflation reality—is a crucial cost to consider.

F.O.06. Opportunity cost is critical. Too often, economic policies fail because they do not adequately assess the incremental risks and returns, or costs and benefits, of alternative options. Socialism can only proceed on the faith that a planning body can, more often than not, make these assessments better than de-centralized decision-making by consumers and producers in a competitive market economy. But this faith is misplaced. It relies on a presumption of omniscience that government can figure out the optimal use of resources across a countless variety of alternative uses. It also has too optimistic a view that human beings can collectively agree on moral ends without cheating or fallibility, which is as unrealistic as the “moral incentives” associated with Ernesto Guevara’s New Man.

F.O.07. It is true that individuals in the private sector can make mistakes in assessing risks (costs) and returns (benefits). The difference between a market economy and a planned economy is that, in the long run, competition guided by prices is likely to get more value out of scarce resources (e.g., via trading and arbitrage). Where there is competition, economies thrive. Where competition is inhibited, or government has a monopoly on decision-making, economies stagnate. Moreover, as I explain here and here, competition (and inequality) does not necessarily come at the expense of general welfare.

F.O.08. Consider, for example, China and Cuba. In 1979, as you can read about here, China radically broke from Soviet-style central planning, and “sought to decentralize economic policymaking in several sectors, especially trade.” In the ensuing decades, “China’s economy has grown substantially faster than during the pre-reform period, and, for the most part, has avoided major economic disruptions.” China is still a developing economy, however, and its transition to a market economy has remained incomplete, as the “government still plays a major role in the country’s economic development.” It does not come as a surprise, therefore, that several challenges confront the Chinese economy: corruption, difficulties enforcing the rule of law, overleveraging, excess capacity, and “large internal imbalances of savings, fixed investment, and consumption.”

F.O.09. But China’s economic performance since 1979 has been remarkable, and clearly a result of turning toward de-centralized decision-making and away from central planning. Cuba, on the other hand, has remained, if not exclusively, then primarily, a centrally planned economy. The results have been disastrous. It is true that Cuba has a 99% literacy rate and has a health care system that is available to all Cubans. Moreover, according to one report, 84% of Cubans own their own home. Finally, as I have written elsewhere on Cuba’s economic policy, “as long as the Soviets were subsidizing the economy, Cubans were able to live in an economy that, while broken, was at least sufficiently functional to allow them to lead a minimally comfortable daily existence.”

F.O.10. But as I also wrote, there is no free lunch: “Though it has relaxed restrictions on private enterprise in recent years . . . the government directs most economic activities in the service of state-sanctioned ends, such as universal health care and literacy.” It thus “must confront the enormous administrative burden of overseeing the allocation of resources across an entire island economy of 11 million people.” But despite “its accomplishments in the areas of education and health care, Cuba is an economy in which three-fourths of the people work in the public sector and earn an average of $20/month. Rations are common. Infrastructure is dated. Supplies at hospitals are lacking. Taxi drivers make more than doctors, and a nurse quits her job ‘to start a small business selling fried pork skin and other snacks from a cart,’ earning ‘about 10 times more every month’ than she did as a nurse.”

F.O.11. I acknowledge that “[s]ome of the deprivations in the Cuban economy can be attributed to the U.S. embargo, yet it is difficult to argue that the embargo alone has an outsized effect on the economy in comparison to the fundamental inefficiencies of a planned economy. Cuba does not exist in isolation.” China, Canada, Mexico, Brazil, the Netherlands, and other countries trade with Cuba. Foreign tourists visit regularly. And “one wonders if the removal of the U.S. embargo would benefit ordinary Cubans, or whether the benefits would merely accrue to foreign capital and cronies of the regime.”

F.O.12. In sum, the ideals of a planned economy have come at high costs stemming from fundamental inefficiencies that arise from central planning. “For all its corruption and inequality,” I wrote, “Cuba was a thriving middle-class economy in the 1950s, with a literacy rate approaching 80 percent.[1] In comparison, the Cuban economy is now a sclerotic, lethargic machine of inefficiency.”

F.O.13. Since the 1990s, Nordic countries have developed policies to bring debt under control and encourage market competition after economic crises in the 1980s and 1990s. Sweden, whose vast expansion of the public sector in the 1970s and 1980s “culminated in a severe economic crisis in the early 1990s,” turned its “political focus in the early nineties…to opening markets for competition” and encouraged competition, tax reform (including scrapping its inheritance tax in 2005 and a wealth tax in 2007), trade liberalization, and debt control (see here, here, and here). It has since become a model “example of how to optimize market capitalism.” These developments came in the wake of Robert Heilbroner, outspoken socialist and arguably the most successful writer on economics ever (selling ten million books helps make the case), admitting in 1989: “Less than 75 years after it officially began, the contest between capitalism and socialism is over: capitalism has won…Capitalism organizes the material affairs of humankind more satisfactorily than socialism.”

Against: Opening

A.O.01. My background is in analytic philosophy. One of the methodological biases I get from that is that I always want to start by disambiguating key terms. What does it mean to move in a “more socialist” direction? What does it mean to move in a “more capitalist” one?

I. Differentiating Socialisms

A.O.02. Socialism in the strict sense would be a system where division of society into workers and businessowners has been eliminated. Proposals for how this might work range from the intricately thought-out utopianism of Michael Albert and Robin Hanhel’s ideas about participatory economics to the relatively grounded vision of the Democratic Socialists of America (DSA). In the DSA’s strategy document Resistance Rising, we’re invited to imagine a society in which “very large, strategically important sectors of the economy” would be nationalized and thus “subject to democratic planning outside the market,” while a “market sector of worker-owned and -operated firms” would handle “the production and distribution of many consumer goods.”

A.O.03. All the elements of the DSA’s vision of socialism have been successfully beta-tested under capitalism. There are already many examples of advanced western democracies running at least some key industries as public utilities outside of the market. Think, for example, about Britain’s system of nationalized hospitals and publicly employed doctors, which delivers lower infant mortality, higher life expectancy, and lower  “mortality amenable to healthcare” than the American system. As to workers’ cooperatives like Spain’s Mondragon Federation, a growing body of empirical research shows that, at least in some dimensions, they’re even more productive than conventional hierarchical firms.

A.O.04. If socialism in the strict sense of the term is about eliminating the distinction between workers and capitalists, social democracy is about pushing reforms that reduce the power of the latter over the former without altering the fundamental nature of the capitalist economy.

A.O.05. This distinction spans a wide range, but a relatively well-defined one. We can reasonably call anything within it a move in a “more socialist” direction. In turn, we can use this idea to define what would count as a “more capitalist” move, e.g., a proposal to undo some social democratic policy or privatize some currently public enterprise.

A.O.06. If I argued for moves of the first kind (and against those of the second) by appealing to some special set of socialist principles, I would be opening myself to accusations of begging the question, i.e. smuggling my conclusion into my premises. Instead, I’ll make my case on the basis of the values proclaimed by the 18th century revolutionaries who overthrew the feudal ancien regime in order to institute capitalist free markets--liberte, egalite, and fraternite.

II. An Important Caveat

A.O.07. There have been societies that have gone by the socialist label but have scored quite badly in terms of all three of these values. Stalinist regimes embodied no one’s idea of liberte, and a society in which citizens are encouraged to inform on one another to the secret police is hardly conducive to fraternite. Even in terms of egalite, their record was decidedly mixed. East Germany, for example, was far more egalitarian than West Germany in terms of both income levels and sexual relationships, but in the absence of political democracy, nationalizing the means of production did nothing to reduce the inequality in power between party bureaucrats and ordinary people.

A.O.08. A good historical argument can be made that, given how the word ‘socialism’ was used before the Russian Revolution, ‘undemocratic socialism’ is a contradiction in terms. Some people think such arguments commit the No True Scotsman fallacy. That’s just wrong. We’re talking about the classical definition of socialism, not some ad hoc redefinition. That said, I don’t want to rest too much on this point. We’re dealing with broad and loose categories here—more socialist and more capitalist—and East Germany was in some important ways more socialist than the West. As such, it’s worth clarifying that when I talk about the advantages of moves in a more socialist direction and against moves in a more capitalist one, I mean in the context of a democratic political system.

III. Liberte, Egalite, Fraternite: Putting Socialist Flesh on Liberal Bones

A.O.09. Let’s start with egalite. Social democratic programs enhance equality from both directions, since they eliminate major costs for working-class people, and it’s all paid for with progressive taxation. An all-out move toward socialism would presumably reduce inequality even further. (Bhaskar Sunkara has some interesting thoughts about how wage scales might work in a socialist society in the first chapter of his book.) Even in the authoritarian regimes disowned above, the financial gap between high-level party bureaucrats and menial laborers was nothing compared to the gap between western CEOs and ordinary workers.

A.O.10. Nor can inequality in distribution be easily separated from the kinds of equality prized by classical liberalism. Equality in political representation means far less when politicians take phone calls from wealthy constituents while they have low-level office staffers take calls from poor ones. When some people can afford meaningful legal representation and others cannot, equality before the law is a bad joke.

A.O.11. The argument from liberte is less obvious, but no less important to my overall case. Let’s start here: Public employees are in many ways more free than their private sector counterparts. In 1970, when anti-communist paranoia and open racism were both at far higher levels than they are now, then-Governor Ronald Reagan tried to have black revolutionary Angela Davis fired from her position at the University of California for being a member of the Communist Party. The courts rebuffed him. It’s unconstitutional to fire a public university professor because you don’t like her politics. Private employees enjoy no such protections. That’s one of the things that makes doxxing such an ugly and effective tactic.

A.O.12. In the United States, no one can be constitutionally denied a permit to march down a public street because of the content of their views. You don’t even need a permit to pass out leaflets on a public sidewalk. If the owner of a private street doesn’t want you to express your opinions there, you’re out of luck.

A.O.13. If YouTube and Twitter were public utilities, they would have to respect their users’ free speech. Moving in a more socialist direction by making public the spaces currently owned by private oligarchs would expand the sphere in which people are free to advocate whatever ideas they like. Moving in a more capitalist direction by taking things that are currently public and making them private would have a silencing effect.

A.O.14. If this doesn’t feel like the kind of silencing we should be up in arms about, it may be because we’ve been trained to accept a far too minimalistic notion of freedom. The mere absence of laws against abortion gives women a limited sort of reproductive freedom, but women who live in countries that have both universal state-supported childcare and abortion services provided by a system of socialized healthcare enjoy far more meaningful choices.

A.O.15. To complete the liberte argument, let’s return to the workplace, where most of us spend half of our waking lives five days a week—only half and only five because of previous moves in a more socialist direction—and where employers enjoy a level of control over employees many dictators would envy. Workers are routinely told when they can go to the bathroom, how long they can spend there, and whether they can have a stick of chewing gum in their mouths when they get back. Even when it comes to their lives outside of work, people quite rationally worry all the time about what their current employer (or some prospective future employer) will think of their new tattoo or their Facebook posts or whether they participate in one of those protests that can only be held on a public street.

A.O.16. Moves in a more socialist direction—which is to say a direction that is democracy-enhancing in the economic sphere—all tend to lessen employers’ power. This effect is most obvious when it comes to policies directly related to the workplace, whether we’re talking about Jeremy Corbyn’s initiative to promote workers’ cooperatives or about something as mild as laws that make it easier for workers to join unions. But even moves in a more socialist direction such as national health insurance and tuition-free higher education have this effect. If someone is considering piercing their nose or joining a controversial political organization, they’re a lot more likely to do it if they aren’t worried that the cost of angering the boss will be to lose their health insurance or to be unable to send their kids to college.

A.O.17. Once we’ve covered liberte and egalite, the argument from fraternite makes itself. A social order so unequal that people are willing to submit to such an extreme level of domination by others in order to secure their livelihoods might be justified in many ways. No doubt we’ll explore some of those ways as the debate goes on. One thing it’s not, though, is the kind of society we’d accept if we took seriously anything even faintly resembling the notion that all men are brothers.


For: Rebuttal

F.R.01. I support Ben’s vision of egalite, liberte, and fraternite. I support workplaces in which employees can negotiate competitive wages[2], don’t have to ask permission to use the bathroom, and can freely voice their political opinions.[3] I share a desire for affordable universal healthcare. I support Denmark’s flexicurity. But as an economist, I’ve learned supply and demand are unavoidable. Democratic socialism is a distraction. It is market power, not markets, that should concern us.

F.R.02. During college, I worked as a research intern one summer at the Federal Reserve Bank of Boston and came across an article about taxi medallions in Boston. As the son of a taxi driver, I became interested in the topic, conducted research, and wrote three short articles on taxis in New England. One article discussed “a 1934 law which fixed the maximum number of cabs allowed to operate in Boston at 1,525.” Except for “a 1990 decision to add 300 cabs,” the number of medallions had been capped by Depression-era regulations attempting to address what two authors called “ruinous competition.” From 1980 to 1998, given vast expansions in office space, airport traffic, and hotel development, “the value of a medallion soared from $25,000 to $140,000.”

F.R.03. In the fall, I chanced upon a course on the Frankfurt School, fueling a foray into Marxism that lasted until I graduated. In my senior year, I decided to write my economics thesis on taxicabs, addressing a trend toward taxi leasing. Many complained that leasing demoralized the driver, who became an independent contractor forced to work long hours to pay lease rates so high the driver barely eked out a living.

F.R.04. It seemed a slam-dunk case of capitalist exploitation based on rent-seeking. But alas, I overlooked moral hazard. Under traditional revenue-sharing schemes, drivers often under-reported revenue. Under leasing, drivers had an incentive to minimize costs (e.g., speeding tickets) and maximize revenue because they took home every marginal dollar above the lease rate. I collected data from 208 drivers in Philadelphia, ran tests on the relationship between performance and contractual arrangement, and found that lease drivers were more efficient than owner-drivers.

F.R.05. Leasing prevented cheating while creating an incentive to work hard.[4] Unfortunately, in many cities, the lease rate was artificially inflated by restrictions on the supply of medallions. Thus, earnings reflected not only driver effort and number of rides, but windfall profits that owners were able to extract from total revenue intake, given a limited supply of medallions and a relatively large supply of drivers [5]

F.R.06. Limiting the number of medallions was government-sanctioned market power, not a somewhat false dichotomy between capitalists and laborers.[6] Markets work best when competition thrives. Monopolies raise prices and restrict output.[7] Monopsonies, i.e. single employers like the UK national health service, tend to suppress wages and reduce employment. Market power impedes practical application of the Coase theorem, which refers to a theory well-known among economists that markets can work out efficient solutions to a dispute between two parties over property rights (most famously, between a polluting firm and a residential community) if markets are competitive and there are zero transaction costs.

F.R.07. Competition, however, maximizes consumer and producer surplus while allowing factors of production (e.g., laborers) to earn their opportunity cost and producer surplus.[8] The problem with the American healthcare system is not capitalism, but lack of competition, overutilization,[9] strenuous regulatory oversight, and de facto subsidization of medical and pharmaceutical innovation for the rest of the world. Moreover, freedom to voice political opinions is not absent from competitive labor markets, as witnessed by recent walkouts by employees of Google and Wayfair,[10] and competition is likely to promote better working conditions, e.g., companies may compete to retain talent by offering benefits like paid leave.

F.R.08. By competition, I mean an economy in which prices are reasonably free of impediments that hinder allocatively efficient equilibrium between supply and demand. This definition means we should enforce antitrust laws (which means protecting competition, not competitors).[11] It also means we must think carefully about incentives. When Senator Sanders refreshingly admitted in the debate that “he will raise taxes on [the] middle class to pay for universal health care,” he acknowledged there is no free lunch. When economist Michael Kremer employed a median voter model to suggest that worker cooperatives can distort incentives, he was forcing us to consider disincentives that may arise when mean and median productive capability diverge in cooperatives with incomplete contracts and in which majority votes determine wage schedules. Incentives matter because scarce resources make markets inevitable. Democratic socialism is a distraction. It is not capitalism, but market power that thwarts competitive outcomes, which should be our main concern.

Against: Rebuttal

Defining Socialism and Capitalism

A.R.01. Church initially relies on Robert Heilbroner’s terminology. Heilbroner defines capitalism and socialism in terms of the distinction between market and command economies (F.0.02). I would argue that this language confuses more than it clarifies for at least three reasons. First, it ignores the possibility of market socialism. I discussed one such version of socialism in my opening statement, referencing the DSA’s Resistance Rising strategy document (A.0.02). Another interesting proposal along those lines is made in Seth Ackerman’s thought-provoking article The Red and the Black. Second, private sector bosses command employees below them at least as much as public sector managers (Indeed, public sector employees are often somewhat more autonomous than their private sector counterparts, as I mentioned in A.O.11.). Finally, any significant move in the direction of implementing the traditional socialist goal of workers’ control of workplaces, even if workplace democracy only consisted in electing full-time managers, would significantly complicate this dynamic of one-way command.

A.R.02. Church himself moves away from Heilbroner’s definitions, asserting that markets are present regardless, because any set-up involving both production and consumption counts as a market. (Thus, for example, parecon, which I mentioned in A.O.02, would count as a market economy despite lacking both competition and currency.) This extraordinarily broad definition of markets leads Church to claim in F.0.03 that the distinction between capitalism and socialism is best understood in terms of the degree of centralization. To see why this is misguided, consider the following pair of examples: Imagine that all 5,000 or so Walmart stores in the United States were taken into public ownership, not by the federal government, but by the municipal governments of the cities in which they were located. Would this massive decentralization of a company that makes up an increasingly impressive chunk of the economy count as a move in a more capitalist direction? Conversely, if all 116,867 public libraries in the United States were privatized, and the same company—let’s call it Library Inc.—bought up all 116,867 of them, would this really be a move in a more socialist direction?

The Record of Chinese and Cuban Communism

A.R.03. Church paints a bleak picture of the failures of the model of socialism first developed in the USSR and then replicated in countries like China and Cuba. As I indicated in my opening statement, this is very far from being my preferred model. Some of the problems Church points to are very real. That said, his strategy in paragraphs F.0.08-12 seems to be to attribute their failures (but not their successes) to the non-capitalist elements of their systems.

A.R.04. Church is surely right to say that it’s unreasonable to attribute all of Cuba’s negative outcomes to the six-decade-long embargo from its largest natural trading partner. Nevertheless, parity of reasoning suggests that we should be similarly cautious about attributing all of Cuba’s quite astonishingly positive outcomes post-1959 in literacy, education, doctor-patient ratio, life expectancy, child mortality, and the rest to the USSR’s history of subsidizing the Cuban economy (F.O.11). The subsidies no doubt helped a lot. The embargo has had well-documented catastrophic effects. We simply don’t know how things would have played out if both were absent.

A.R.05. Similarly, in F.O.08, Church seems to attribute the post-1979 successes of China’s economic model exclusively to the capitalist elements of the mixture. This strikes me as a dubious inference for at least three reasons.

A.R.06. First, there are no more-capitalist-than-China countries that have accomplished as much as quickly as post-1979 China. This success suggests a possibility that Church doesn’t consider, but which I alluded to here, which is that the ideal amount of state planning for rapid poverty reduction might lie somewhere in between what China had before 1979 and what most western economies have now. If so, the question is whether such a happy medium is compatible with a democratic form of government, a private sector dominated by workers’ cooperatives rather than top-down capitalist enterprises, and other measures that would bring it closer to a form of market socialism I would endorse.

A.R.07. Second, the track record of countries that have transitioned from the kind of economic system China had before 1979 to one with much less state planning than China has now is far bleaker. Russia has recovered somewhat since the dystopian social collapse it experienced during the 1990s, but things are still bad enough that most Russians are nostalgic for the Soviet era. As my late friend Victor Panaanen used to put it during the Yeltsin era, usually delivering the line with a wry smile, “Capitalism sounds good in theory, but it just doesn’t work. Look at Russia!”

A.R.08. Finally, even when it comes to the history of the Chinese economy, we need to take into account its successes before 1979. Jean Dreze and Amartya Sen are very far from being Maoists, but their comparison of death rates in India and China relative to population in the decades after both countries achieved independence in the 1940s finds that things were far worse in India. It’s safe to say that the difference in mortality would be even starker without the entirely avoidable mass deaths resulting from lunatic experiments like the Great Leap Forward, and important to note—when thinking about capitalism and various possible forms of democratic socialism—that it’s difficult to imagine such initiatives being approved for long by politicians who had to worry about being voted out of office by angry and hungry constituents. Summarizing Dreze and Sen’s argument, Bhaskar Sunkara says that, for all the human tragedy caused by those experiments, “The authoritarian Communist leadership’s emphasis on eliminating poverty, and its investment in education and healthcare, compare favorably to the neglect of Indian elites.”

The Nordic Experience

A.R.09. Church claims in F.0.13 that the Nordic countries went too far in a socialist direction in the 1970s and 1980s and were forced to scale things back. In particular, he seems to be drawing causal connections between Sweden’s social democratic history and the crisis in the early 90s. This is a very controversial take on the relevant economic history. As Matt Bruenig drily asks, “[I]f the 1992 Swedish banking crisis disproves socialism, then does the much bigger 2008 U.S. banking crisis disprove capitalism?”

A.R.10. It’s also worth noting that Sweden successfully resolved the former crisis by extracting equity from the banks in exchange for bailout funds, a far more socialist way than the United States resolved its crisis,. Whether the Swedes would have been better off without the accompanying more capitalist moves Church praises is, at the very least, an interesting question. Meanwhile, we can be sure of this much: The Nordic economies today continue to have both far larger public sectors and far better outcomes for people at the bottom of society than countries like the United States.


For: Closing

F.C.01. Adam Smith ushered in the modern study of markets, but I disagree with any inference that markets are historically novel. Markets are unavoidable, however much they may vary in the extent of public sector involvement, or the degree to which private property rights are encouraged. Marx, however, should be avoided. The labor theory of value has little to offer, satisficing is an example of how firms do not always pursue profit maximization,[12] and the class-conflict model pitting capitalists against workers distracts us from what should be our main concern: market power.

F.C.02. Markets are imperfect. The question, then, is the extent to which a collective governing body should supersede decision-making in the private sector. Socialism tends to place more faith in collective decision-making. Capitalism puts more faith in de-centralized decision-making. The latter is generally better because planning bodies with sole legal authority to implement their decisions face no competition (with the exception of black markets). Markets work best when private property rights are enforced, thus spurring the incentives necessary for competition to thrive.

F.C.03. Finally, de-centralized decision-making need not imply de-concentration. Concentration may not undermine competition. Conversely, atomistic mom-and-pops may not enhance competition. De-centralizing control of Walmart stores may not be pro-competitive if Walmart, with massive economies of scale and scope, constrains the pricing power of Amazon (re: everyday low pricing), or otherwise provides a better retail alternative for consumers (Ben also implicitly reminds us of the Tiebout model, according to which municipalities compete in the market for residents by offering varying mixes of tax rates and public goods, thus solving the free-riding problem).

F.C.04. In sum, future generations should embrace, not spurn, capitalism because private sector competition is generally better-positioned to evaluate specific marginal benefits and marginal costs, thus arriving at efficient outcomes that do not necessarily come at the expense of general welfare.

Against: Closing

A.C.01. In my opening statement, I defended socialism not by appealing to any specifically socialist principles but by grounding my argument in the kind of small-r republican values that both sides should agree on. Specifically, I talked about freedom, equality, and solidarity (A.O.06). In his rebuttal, Church confirmed my assumption that these values would form part of the common ground between us (F.R.01). Oddly, though, with one apparent exception, he didn’t contest any of the pro-socialist and anti-capitalist arguments that I made on the basis of those three values. Instead, his argument focused on utilitarian concerns regarding issues like employment and wage levels.

A.C.02. The apparent exception was Church’s claim that workers in at least some private sector companies do feel free to express their political opinions (F.R.06). While undeniably true, it’s not relevant to my comparative claim about political freedom in the public and private sectors.

A.C.03. In my opening statement, I laid out a modest vision of socialism whose elements had all been “successfully beta-tested under capitalism.” In this paragraph, I talked about the “growing body of empirical research” showing that workers’ cooperatives are more productive than traditional hierarchical firms (A.O.03). In his rebuttal, Church referenced a paper using the median voter model to generate an a priori prediction that the opposite would be true (F.R.08), raising an interesting methodological issue. If a seemingly rational abstract model generates predictions that come into conflict with the empirical evidence, should we reinterpret the evidence or reject the model?

Let’s assume for the sake of argument that co-ops aren’t as productive as the research seems to show them to be. At that point, if my original argument for socialism stands, the remaining question is this: How much productivity are we willing to sacrifice for the sake of freedom, equality, and human solidarity?


Debaters

For

Jonathan Church is an economist and writer. His publications can be found at www.jonathandavidchurch.com and he can be followed @jondavidchurch.

Against

Ben Burgis is a philosophy professor at Georgia State University Perimeter College and the author of Give Them An Argument: Logic for the Left. He also does a regular weekly segment on The Michael Brooks Show called The Debunk. He can be followed @benburgis.


Notes

[1] See Table 2 on p. 249 here; it is worth noting ‘the nation-wide illiteracy figure of approximately 23 percent prior to the [literacy] campaign mask[ed] vast differences between urban and rural populations. At that time, illiteracy in the countryside was estimated at 41.7 percent, while in urban areas, primarily Havana, it reached only 11 percent (Jeffries, 1967).’

[2] I note that I have argued elsewhere there is a small but not insignificant privilege to being poor, and that income inequality does not have to imply the consumption inequality. I also eschew any society that moves too aggressively toward egalitarian outcomes, considering the high risk of incentive distortions (I further note that progressive taxation makes no sense in an egalitarian society, at least if measured by equality of income or wealth).

[3] I would, however, cherish an ability, and thus support the right, to buy private streets because I choose to avoid protests.

[4] There was an unresolved endogeneity issue of whether leasing caused drivers to be more efficient, or whether more efficient drivers were attracted to leasing.

[5] More technically, earnings reflected rents captured by medallion owners whose market power was further enhanced because drivers typically have low opportunity costs to driving.

[6] Given human capital, everyone is a capitalist, though I acknowledge these critiques.

[7] I note that Joseph Schumpeter argued, in a nod to Marx, that monopoly profits can spur innovation through a process of creative destruction (but this is just competition in the long run).

[8] Contractual issues like the famous reserve clause can subvert such outcomes (but this is another example of government-sanctioned market power).

[9] As Ryan Huber writes: “…if there were more price-based incentives and market forces at play, people might act more like consumers when it comes to non-life-saving medical interventions.”

[10] Two female employees at Google claim they have been subject to retaliation. Google denies it, and the dispute will presumably be worked out in the court of public opinion or perhaps literally in the courts, as was the case with Angela Davis.

[11] Full disclosure: I worked seven years for NERA Economic Consulting, specializing in the economics of antitrust.

[12] Proposed by Herbert Simon as a theory of bounded rationality, satisfice combines the words satisfy and suffice. As quoted in the introductory Microeconomics textbook by Lipsey and Courant (1996), Simon wrote: “We must expect the firm’s goals to be not maximizing profits but attaining a certain level or rate of profit, holding a certain share of the market or a certain level of sales.” Lipsey and Courant continue: “In general, a firm is said to be satisficing if it does not change its behavior, provided that a satisfactory (rather than optimal) level of performance is achieved.”