Monday, January 20, 2014

Individualism and capitalism don't mix well

Socialism is the system where productive people are taxed and the money collected is distributed among the improductive ones. Theoretically it's a negative-sum transaction as there are always costs, as the organizations performing the collection-redistribution (typically the government) aren't running for free (quite the opposite). "Negative-sum" is more or less the definition of "harmful" or "evil". But for some reason this "evil" doesn't seem to disappear. On the other hand, communist countries failed too. Why do people support Obamacare and risk drowning while fleeing from Cuba at the same time?

Lot of game-related discussions led to the solution: the goal of people isn't to gain wealth, but to have fun! Socialist wealth redistribution is a positive-sum transaction if we consider fun instead of money. What the hell am I talking about? The non-linear money-fun curve. If you have no money at all, you are a starving bum. You feel cold and hungry. These negative feelings are the opposites of fun. If you receive money equaling the poverty line, you can afford a rent flat with a friend or partner, food and clothes. Getting rid of cold and hunger is a huge increase in your fun. If you get a second poverty line money, you can afford a flat all by yourself and can look at the quality of the food. Being able to decide who to live with and to eat delicious food is a large increase of fun, but less increase than leaving cold and hunger behind. If you get a third unit of money, you can afford a car. No more boring waiting for the bus, no more slow bus ride, stuffed close to smelly and loud people. You go wherever you go, whenever you go. It's a significant increase of fun, yet smaller than leaving cheap food and forced flatmating behind. The difference between the 50th and 51th unit of money can barely be noticed. Having your second luxury car barely add to your fun.

Let's try to define it mathematically. Everyone have 24 hours a day. You must spend time earning money, which is defined as work and not fun. You can spend the rest of the day with what you like, so this is fun time. Let's assume that you also need $50000/year to buy things needed for both survival and having fun. The question is, how much time do you have to work on a workday?

As you can see, the graph is absolutely not linear, but 1/x. It means it's much more sensitive at the start than at the end. So money taken from the rich takes away much less fun time than the same money gives to the poor. For example taking away $10000 from someone earning $100/hour is taking away only half an hour every workday from fun. On the other hand if we give this money to someone earning $20/hour, it saves him two hours a day. The effect is obviously strongest if the income is so low that the person can't earn the $50000 even with 12 hours/day working. He is deprived of goods, so giving him welfare increases his fun infinitely.

This means that wealth transfer from the rich to the poor increases the overall fun of the population. So if a society values fun, it must have serious wealth transfer. Why let a rich man spend money on his second Lamborghini which will increase his fun only a bit when the same money can turn the day of dozens from hard labor into fun?

What about the communists then? They - contrary to popular capitalist belief - don't fail because of opressing the rich. They survive and linger because of it. They fail because they also oppress fun. In a communist country not only starting business is forbidden. Extramarital sex is forbidden, porn is forbidden, drugs are forbidden, jokes are forbidden, travel is forbidden. With all kind of "fun" activities forbidden, no doubt that people aren't happy. The ideal world for "for fun" people is one with high social transfers but no goverment meddling with their non-financial aspects of their lives: social-liberalism. See also: Greece, Italy, Spain!

What does the above mean? That a capitalism and individualism are mutually exclusive. As most people consider their own goal to "have fun", if you accept the person, his freedom, rights and dignity as the core of your ideology, you automatically set "fun" to be the goal of the society and we already saw that social transfer is the best tool for optimizing fun. Capitalism can only thrive in a collectivist society, that values some goal above their members. The greatest GDP jumps happened in times of war, when the society was forced to unite for a goal: defeating enemies. The reason for that is obvious: capitalism optimizes production, so the more capitalist you are, the more weapons you can build. This is true for any society level goal (like saving rainforests or sending man to the Mars).

The question isn't "why democracies aren't laissez-fair capitalism?", the question is "how can any remnant of capitalism survive in a democracy?" The answer is that a certain level of production is needed for people to have fun (food, shelter, clothes, medicine must be produced). As you can't have slaves in a democracy, the only way to motivate productive people to create this value is to let them keep some surplus, instead of just taking all away and redistributing. So the level of redistribution is a compromise between maximizing fun of the population and letting productives have enough incentives to continue production. Capitalism is a "necessary evil" in democracy. And most thinkers and political activists threat them this way.

How can you imagine collectivist - capitalists? You don't need to imagine them, as practical pro-capitalists (who don't write essays but have money) are alread more collectivists than socialists. For example the Republicians in the USA are more likely to be religious, patriots and supporters of the American supremacy, which are all collective goals (spread the religion, increase the power of the nation, force others to submit).

How can socialism be broken then? On the individual level, as Rand suggested: work less. While this indeed increases your hours spent fun, and your frustration over being exploited by morons and slackers, it won't break the system, merely make everyone poorer. The country will still redistribute the limited resources for maximizing the fun of the population. The Randian solution only works on the society level if it pushes the country into bankruptcy or losing a war. The society-level solution is giving it a goal or moving to a country that has a goal. As soon as the society accepts any goal to be more important than the fun of the population, it will be motivated to maximize generating resources for the goal, hence it will become more capitalist.

22 comments:

Anonymous said...

Congratulations! You've discovered Utilitarianism. Something for you to consider are the recent psychological/sociological studies of "happiness" which show that humans derive a great deal of satisfaction from thinking that they have more possessions than those around them.

Anonymous said...

Socialism is the system where productive people are taxed and the money collected is distributed among the improductive ones.

That... that isn't really the definition of socialism. That is a rather twisted and narrow view of the concept of socialism. A socialist society is one of shared ownership, which includes the productive. It isn't a Robin Hood society of "rob from the rich and give to the poor".

Also socialism doesn't exist in a vacuum. Democrating and largely capitalist societies will (depending on the government of the day) create socialist policy which is for the good of everyone (i.e. socialised medicine - healthy workers are productive workers! Socialised education - everyone can access world class education and everyone can have a chance to better themselves).

Your entire post the runs right off the rails when you start invoking Rand.

Anonymous said...

You do know the "ideal countries" you named are dirt poor right? Also, you are talking about utility of whatever let it be fun or a burger. You second unit of x will always have less utility than the first.

Anonymous said...

They fail because they also oppress fun. In a communist country not only starting business is forbidden. Extramarital sex is forbidden, porn is forbidden, drugs are forbidden, jokes are forbidden, travel is forbidden. With all kind of "fun" activities forbidden, no doubt that people aren't happy

Communism and crack down's on anti-social behavior are largely orthogonal to each other. Yes there is a strong correlation within communist state's for this sort of behavior (although an argument can be made that no nation has ever reached a state of communism - strong socialists perhaps but never quite communism) but this is usually an attempt to hold onto power through control.

In places where communism DOES work (small isolated communities) there isn't this kind of control.

Communism doesn't require that "fun" be banned. Dictators do. Might be worth reading Marx again.

Gevlon said...

Yes, shared ownership between everyone. How about you have 2 apples and I have zero and we share. That will be TOTALLY different from simply me taking an apple from you.

The "utility of second unit is smaller than the first" statement is obvious. If I want to travel faster and spend $2000 on a vehicle, the second $2000 won't buy me a twice faster/safer vehicle. However it still has higher utility than giving the money away. Socialism comes from the idea that every persons fun is equal, so the society must try to find the highest fun-utility of money, which is at the hand of the poorest man of the group.

In small isolated communities such control is not needed, because the members of the community either agree on rules, or the authority of the leader is unquestioned. I don't doubt that communism CAN exist without banning fun, I'm saying it in the post that that's the ideal state for social people.

Anonymous said...

Steel H

The view that productive people are taxed to pay for the unproductives is na├»ve and simplistic. The problem here in the US is that everyone has joined the game of Pigs at the Govt Through, and everybody is busy transferring wealth from everyone. Frankly, I’ve gotten to the point where I don’t care if some bum gets some money; whatever, he’s got it bad as it is. It’ corporate welfare that bothers me – being robbed by the rich assholes. You’ve got billions&billions on subsidies for everything under the sun, from oil, corn, sugar, renewable energy. Then you have mortgage interest deduction and employer health benefits paid from pre-tax money; these are huge subsidies for the middle-class that also massively distort the market. Pretty much every other shitty thing here has some special preferential tax breaks. Then you have bailouts and printing money…

Now, I am a libertarian capitalist pig – an actual capitalist pig. Whenever I am presented with some right wing, pro-capitalist, free-market politician or pundit or blogger, the first things I want to hear is how you’re going to eliminate subsidies, eliminate preferential tax breaks, eliminate bailouts and TBTF, recoup the money that was taken through the Iraq-war no-bid contracts (and put the heads of those who made the deals on spikes), and then we’ll talk about some inactives. Otherwise, you are a lying sack of shit. That’s because your dear republicans will talk all that nonsense, then come to power, vote for every socialist, big government spending bill and bailout, and shower subsidies and tax breaks on all their favorite special interests.

Anonymous said...

Yes, shared ownership between everyone. How about you have 2 apples and I have zero and we share. That will be TOTALLY different from simply me taking an apple from you.

It is totally different because we're not talking about apples here, we're talking about a society.

Your apple analogy is absurd on the face of it.

If we, for example, socialize medicine - and you (and others) pay for that socialized medicine, then the return to you is free health care, and healthy workers. The benefit to you is even *greater* profitability (and this has been proven countless times), despite your greater tax.

In small isolated communities such control is not needed, because the members of the community either agree on rules, or the authority of the leader is unquestioned. I don't doubt that communism CAN exist without banning fun, I'm saying it in the post that that's the ideal state for social people.

Communism doesn't really exist at all at the level of a state because of corruption. In fact, communism is supposed to work without an autocrat. Once you get an autocrat you have a dictatorship regardless of how you spin it. As I said before, the crack down on "fun" and communism are unrelated. The crack down of fun is a symptom of a dictatorship or some form of single party rule system such as in China.

A communist utopia would actually be a pretty great place to live. Unfortunately human beings are assholes and the chances of that ever actually happening are pretty much zero

Anonymous said...

"Socialism comes from the idea that every persons fun is equal"

No, socialism comes from the idea that you are judged by how you treat the lowest members of society.

It would be cute and quaint to paint everyone who does not work as a moron and a slacker, but, in the democracies which are laughingly painted as "socialist", what it actually means is "We have figured out that it is disgraceful if our unemployed cannot feed themselves, or get medical treatment before their condition is critical, or are on the streets"
(By the way, these societies which are tagged as "socialist" by angry right wing Americans(and others), are just as capitalist as any other Western country, they just don't think you should give the rich tax breaks at the cost of those who need it, and understand that "job creators" and "trickle down economics" is just bullshit from those who decry welfare while accepting monumental government handouts and tax breaks)

maxim said...

Erich Fromm's "Escape from Freedom" (known as "Fear of Freedom" outside US) can be considered the seminal work on the topic of why capitalism necessarily leads to de-individuation. I highly recommend it.

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In terms of reasons for failing of communism, you are clearly both discounting China and underestimating the impact of the World War 2.

It is suprising to see you as a fan of mobilisation towards a goal. Though not all tha surprising in hindsight :D.
Countries can't stay fully mobilised for long, though. Focusing too hard and too long on a single goal is also in itself un-fun.

Mobilisation brought around the Soviet economic miracle in early XX century. However, overmobilisation forced by WWII and subsequent nuclear rush was (imo) the source of all the tendencies that ultimately killed USSR.

Oska Rus said...

I must admit that greedy goblin is so hady with numbers that i believed for almost half a second that socialism is a good idea.

Although that nonlinear fun curve might suggest the more redistribution brings the more total fun there is also second well hidden highly nonlinear curve that says the more redistribution the more wasting. And at a certain point redistribution costs overwhelm all productivity.

And words like moral, selflessnes, sharing, solidarity are just used by socials who want some free profit.

Anonymous said...

You are making a big mistake in assuming that "fun" (aka utility) can be compared between persons at all.
Who is to say how deeply taking away my yacht to buy you some bread will affect my feelings? Maybe you are some zen-like philosopher who doesn't care about *anything* very much and I am the most hysteric yacht owner you can find?
You can't measure the loss of utility persons experience in any reliable way - even if you gave both of us some scale to mark the loss we would experience on, you have no idea how our individual scales are calibrated against each other. Maybe the 10 (maximum loss) on his scale is equivalent to a 3 on my scale because he is just of a very stoic disposition.
Comparing utility is illogical and unscientific.

Most of public economics works around this problem by assuming that all people have exactly the same utility function (or the same utility function save for a small number of idiosyncratic parameters) but everyone does of course know perfectly well that this is complete bullshit. However, the only alternative would be to shut up on most matters of public policy and nobody wants to lose their sweet consulting gigs and tenured positions just because of some idealistic desire to maintain logical consistency in your models.

Sen has developed a slightly better concept than "fun" with his capability sets but even those are usually not comparable between persons (very rare that one person will have an exact subset/superset of the capability set of some other person). Capability sets also don't lend themselves very well to mathematical treatment.

tl;dr public economics ignores basic logic and econ 101 because otherwise the field couldn't exist. so instead of shutting up 95% of the time and having something worthwhile to say in the other 5% economists engaged in this field of study tend to brabble 100% of the time based on obviously absurd premises.

Gevlon said...

@Anonymous: utility function MUST be taken as equal, otherwise exploiting would be trivial, just as you said: I so much need a yacht that I must get one.

Anonymous said...

Explain why Spain, Greece, and Italy have no fun anymore, then?

They are welfare states. The real fun-seeking countries are in the northern half of Europe.

Gevlon said...

They ran out of money, so they can't redistribute more. Also, the free moving within the EU means that a productive Greek can work in a lower-tax country, paying nothing to Greece.

Anonymous said...

Utility does not have to be equal. That's where supply and demand curves come in. I'm willing to buy 2 hotdogs at 1 dollar but I'll be 3 at .75. That is why everyone doesn't buy the same number of things as everyone else but it can be measured as an avg. that's also why economics is an art not a science.

Anonymous said...

@anon
>A communist utopia would actually be a pretty great place to live. Unfortunately human beings are assholes and the chances of that ever actually happening are pretty much zero

So in other words, you are saying a system that neglects taking basic human nature into account is a good one and would be a great place to live... if only humans would stop behaving like humans? Really?

Also, utopia and dystopia are two sides of the same coin. Let that sink in.

Experiments in communism failed horribly (even at more local levels) because it's a system thought up by two bored armchair academics (not even proper scientists!) in time where humanity in general wes suffering from an extreme case of Dunning-Kruger effect when it comes to knowing how the world ACTUALLY works.

Anonymous said...

I suggest making a study of Japan. Your model of highly capitalist no-fun collectivism seems to be how they run their society.

Satori Okanata said...

I've always said that we should end hunger and poverty by eating the poor. Can we go back to killing goons now?

Petri Petrified said...

Actually, Capitalism is where individualism is best allowed to nurture. The imposition of another's will over yourself verus the imposition of your own over yourself can only happen in a free society. Socialist leaning and Socialist nations impose their vision on the individual. Capitalism makes no demands on the individual except that hard work pays off.

The individual can then practice a personal form of socialism, known as charity, and give to those who have less than them. The more socialist a nation, the less generous people are as individuals.

A famous person once said: "the problem with Capitalism is capitalists. The problem with Socialism is Socialism."

Socialism dictates what fun is - particularly if you are one who thinks fun is earning $100 an hour and spending it as you will.

The person making $100 an hour is as much a worker as the person making $1 an hour. The real question is: what keeps the person making $1 an hour from making $100? Is it himself (limitations in education, capability, etc) or external such as regulation, welfare, or some form of elitism such as racism or sexism?

Socialism cannot be if it allows the individual to be at their most free.

Anonymous said...

humans already ignore living in nature for thousands of years. since the time we know how to build tools and teach. so what ever system we come up with it will fail. the last untouched tribes in the amazons where resettled because of mineral greed. we don't care. they where uncivilised savages in the first place, right? completely ignoring that they where living within nature like we did ten thousands of years. sure they already where biased and stupid but they where the closed thing of all humans right now to live within nature.
but it doesn't matter now it's destroyed for coin.

we where all born in several doctrines and radicalised throughout our youth. we all, even the tribespeople, are heavily biased and really don't know how to use a brain since the time we stoodup in evolution.

thanks for the post. it reminds me again that we don't know shit.

Anonymous said...

> Socialism is the system where productive people are taxed and the money collected is distributed among the improductive ones

Nope, socialism is where the *means of production* are owned by all, not the products themselves. Ie, to use your apple analogy, you don't have to share your 2 apples, you do have to share the apple seeds so that I too can make apples. Nothing in socialism requires direct monetary transfers. Many governments do have substantial transfer programs, but this is orthogonal to being socialist or not.

> Theoretically it's a negative-sum transaction as there are always costs, as the organizations performing the collection-redistribution (typically the government) aren't running for free (quite the opposite).

True, government intervention has an inherent operating cost, as well as a deadweight loss. However in many cases there can be positive effects outweighing this. If an individual can not afford proper healthcare, and becomes ill, he or she can no longer produce. So state funded healthcare (which, by the way, Obamacare is not) can cause an increase in production. If this outweighs the deadweight and operational costs of providing the service, then the net productivity of the country has increased.

Not all government intervention will have a net positive effect, so your question as to why taking these ideas to the extreme doesn't work has a trivial answer, there's no reason it ought to.

What then follows is a naive application of utility, which hits on roughly the correct conclusions. Overall utility is increased by wealth redistribution, however wealth redistribution also has an effect on productivity. This effect may be positive or negative, as there are two competing factors. People with less money have a higher marginal propensity to spend than people with more, so redistribution increase demand, however redistribution also has a negative incentive to work, thus decreasing supply. Which of these factors wins out depends on what the current wealth curve looks like.

>The greatest GDP jumps happened in times of war

Yes, this is because war is a huge demand shock, which causes higher productivity. There are some collectivist aspects too, but it's mainly just Macro 101.

Anonymous said...

A previous anonymous wrote, "You are making a big mistake in assuming that "fun" (aka utility) can be compared between persons at all."

Um... no. Not only have philosophers been hairsplitting definitions of utility for about 150 years, but also see Sam Harris' recent work "The Moral Landscape: how science can determine human values".

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