Friday, September 24, 2010

Chaos Theory

Ninety nine dreams I have had
Every one a red balloon
Now it's all over and I'm standing pretty
In this dust that was a city
--Nena

Masterful observations from, well, the master. Excerpted from Mises' (1949) magnus opus. He makes a number of salient points here.

Although many reformers and utopians wax poetic about the "state of nature" as paradise, from a human life perspective, nature is a state of scarcity and poverty.

Markets, grounded in production to satisfy human wants, reduce conditions of scarcity and elevates standard of living--even for those at the bottom of the social pyramid.

A central proposition of socialism has been that it would abolish restraints on productive forces inherent to capitalism, increasing the productivity of labor beyond all measure. Capitalism, proposed to benefit only a few at the expense of many, would be replaced by a 'fair' system of social organization which would make class struggles disappear. More socialists have been modifying their views, however, as they increasingly see problems with this theory.

The dominant social philosophy of our age remains that capitalism harms the vast majority of people and that it needs to be replaced in the name of 'social justice.' Held by institutions of all walks, from USSR to Nazi to Catholic to FDR.

Fundamental errors of the socialist proposition include: no recognition for uncertainty and environmental change--which static central planning structure cannot cope with (lack of pricing mechanism leads planners to misallocate resources in a big way). Failure to acknowledge that entrepreneurs hire and pay workers based on their productivity, not their time (reduced incentive to perform in bureaucratic structure).

Any reasonable individual should conclude that capitalism is superior to socialism in terms of overall productivity.

Socialists might admit this point, but argue that it is better to have all live equally under a lower standard of living. Moreover, it might be possible that some fraction of people will be better off under a planned system than in a capitalistic system. No praxeological proof can settle this argument decisively.

Over time, however, this argument become moot. As Mises observes, absent means for economic calculation in socialism, the long term choice is between capitalism and chaos.

References

Mises, L. 1949. Human action. New Haven: Yale University Press.

1 comment:

dgeorge12358 said...

Socialism proposes no adequate substitute for the motive of enlightened selfishness that today is at the basis of all human labor and effort, enterprise and new activity.
~William Howard Taft