Capitolism: Harnessing the Power of Stupid

[dalebert]

by Scott Adams
http://dilbertblog.typepad.com/the_dilbert_blog/2007/08/the-power-of-st.html

The Power of Stupid
A reader sent this story about his workplace.

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"A theme from many of your previous comics came true to life for us today. Quality in the workplace.

Yesterday, a pointy-haired boss decided our meeting room needed nice motivational pictures on the wall. Twelve by eight inch, wooden frame, 1940s-style motivational tools (think 'Rosie the Riveter' in artwork, color and font). So an assistant was ordered to procure such things.

The first mistake was where the artwork was obtained from. Rather than pay $15 per picture for the real thing, it was decided to take the small JPEG images of what we wanted from a website that sold these trinkets. Cheap picture frames were bought (from a dollar store, by the look of things).

When the images were enlarged to fit into the 12 by 8 frames, the pixelation was terrible. In itself, this was funny. A picture that celebrates the idea of quality in the workplace looked cheap, and knowing it was a stolen image lessens the impact of the message slightly."
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This story made me think about one of the great wonders of capitalism: It is driven by morons who are circling the drain, and yet. . . it works!

Think about all the people working and earning paychecks from companies that will ultimately fail. It's a lot of people. But until those companies fail, the employees are getting paid, buying goods, and contributing to the economy. After the failure, those employees hop over to another sinking ship, and so on.

Within successful companies, a huge portion of resources are dedicated to projects and products that will ultimately fail. But in the meantime, everyone is getting paid and propping up the economy.

I once worked in a bank, making loans to small business start-ups. Our rule of thumb was that 90% of new businesses fail. The exceptions were franchisees and pizza places. But we saw no shortage of people willing to mortgage their homes to start their own sporting good stores and boutique dress shops, despite the 90% chance of failure. Without clueless optimists, the economy would grind to a halt. My own career has been a long string of failures and a few notable successes.

I understand the math of capitalism, and how the few successes are so large they pay for all the failures and then some. But at any given moment, the majority of resources in a capitalist system are being pushed over a cliff by morons. This fascinates me. And it's clearly the reason that humans rule the earth. We found a system to harness the power of stupid.

In the rest of the animal kingdom, being a moron is nothing but bad. A moron lion, for example, who can't catch anything to eat, is adding nothing to the lion economy. But a moron human who starts a business selling garlic flavored mittens is stimulating the economy right up until the point of going out of business.

My point is that I hope the monkeys that already know how to use sticks for tools don't start using leaves for money. If that happens, we're screwed.

[dalebert]

I'd have to say, I like this comment on that page:
"What make capitalism infinitely better than socialism or communism is simple: A stupid capitalist wastes all of his money, but a stupid (or corrupt) communist wastes all of yours." 

Fixed.

[EthanAllen]

I'd have to say, I like this comment on that page:
"What make capitalism infinitely better than socialism or communism is simple: A stupid capitalist wastes all of his money, but a stupid communist wastes all of yours." 

That would be true if capitalism didn't use the state's privilege granting abilities to protect their profits as the freed markets drive price to cost and squeeze profits. Can you have capitalism without profits?

[jsorens]

I'd have to say, I like this comment on that page:
"What make capitalism infinitely better than socialism or communism is simple: A stupid capitalist wastes all of his money, but a stupid communist wastes all of yours." 

That would be true if capitalism didn't use the state's privilege granting abilities to protect their profits as the freed markets drive price to cost and squeeze profits. Can you have capitalism without profits?

Read Schumpeter, Capitalism, Socialism, and Democracy: profit is a key part of a successful market system.

[Jim Johnson]

I'd have to say, I like this comment on that page:
"What make capitalism infinitely better than socialism or communism is simple: A stupid capitalist wastes all of his money, but a stupid communist wastes all of yours." 

That would be true if capitalism didn't use the state's privilege granting abilities to protect their profits as the freed markets drive price to cost and squeeze profits. Can you have capitalism without profits?

A Capitalists does not use the 'state's privilege granting abilities'.  The 'state's privilege granting abilities' is a Communist attribute.  Capitalists believe in the freedom to exchange with out interference.

There would be no purpose to exchanging anything if there was no profit in the exchange.

People wasting their own money is an erroneous statement.

[EthanAllen]

I'd have to say, I like this comment on that page:
"What make capitalism infinitely better than socialism or communism is simple: A stupid capitalist wastes all of his money, but a stupid communist wastes all of yours." 

That would be true if capitalism didn't use the state's privilege granting abilities to protect their profits as the freed markets drive price to cost and squeeze profits. Can you have capitalism without profits?

A Capitalists does not use the 'state's privilege granting abilities'.  The 'state's privilege granting abilities' is a Communist attribute.  Capitalists believe in the freedom to exchange with out interference.

There would be no purpose to exchanging anything if there was no profit in the exchange.

People wasting their own money is an erroneous statement.

I am confused. Are we talking about actually existing capitalism or freed markets?

[EthanAllen]

I'd have to say, I like this comment on that page:
"What make capitalism infinitely better than socialism or communism is simple: A stupid capitalist wastes all of his money, but a stupid communist wastes all of yours." 

That would be true if capitalism didn't use the state's privilege granting abilities to protect their profits as the freed markets drive price to cost and squeeze profits. Can you have capitalism without profits?

Read Schumpeter, Capitalism, Socialism, and Democracy: profit is a key part of a successful market system.

I am just asking if profit is even possible in a completely freed market where there are no barriers to entry and perfect knowledge? Theoretically, wouldn't prices be driven to costs and therefore where are the profits to come from?

[Jim Johnson]

I have no idea what a 'Freed Market' is, either people are free to exchange as they see fit or they are not.

Profit is determined by the people engaged in trade. 
Anecdotal examples:
1)  There isn't a car on this planet worth $20,000.
2)  A piece of fruit is worth more than a box of lip stick.
3)  I have no use for platinum, at any price, until I know someone who will buy it off me for more than I pay for it.

[Tom Sawyer]

That's the beauty of the market, you don't need to be able to figure out how the product will get to you it just does.

That's why the eggheads loved communism, the planned economy, they thought that it needed to be controlled. And of course they were the ones that should decide.

[CNHT]

That's the beauty of the market, you don't need to be able to figure out how the product will get to you it just does.

That's why the eggheads loved communism, the planned economy, they thought that it needed to be controlled. And of course they were the ones that should decide.

Whew.. I was worried about how many people here might actually agree with EA that capitalism is evil...and not their choice of system.

[EthanAllen]

I have no idea what a 'Freed Market' is, either people are free to exchange as they see fit or they are not.

There is no such thing as a "free market". It is a theoretical construct just as "pure competition" and "perfect knowledge" is. So you can only have a more free market (freed) in actually existing capitalism.

Now in a theoretical "free market" with "pure competition" and "perfect knowledge" you can't have any profits because price is driven to costs. So how do the owners of capital insure their profits with the least amount of effort? Not by the economic means* because that actually leads to less profits.

The political means* - covert privilege, overt subsidies, regulatory cartelization, etc.

*see Oppenheimer and Nock

http://www.mutualist.org/id81.html

excerpt:

A. Liberal Corporatism, Regulatory Cartelization, and the Permanent Warfare State.

Stromberg's argument, to which we are heavily indebted, is based on Murray Rothbard's Austrian theory of regulatory cartelization. Economists of the Austrian school, especially Rothbard and his followers on the Rothbardian left, have taken a view of state capitalism in many respects resembling that of the New Left. That is, both groups portray it as a movement of large-scale, organized capital to obtain its profits through state intervention into the economy, although the regulations entailed in this project are usually sold to the public as "progressive" restraints on big business. This parallelism between the analyses of the New Left and the libertarian Right was capitalized upon by Rothbard in his own overtures to the Left. In such projects as his journal Left and Right, and in the anthology A New History of Leviathan (co-edited with New Leftist Ronald Radosh), he sought an alliance of the libertarian Left and Right against the corporate state.

Rothbard treated the "war collectivism" of World War I as a prototype for twentieth century state capitalism. He described it as

a new order marked by strong government, and extensive and pervasive government intervention and planning, for the purpose of providing a network of subsidies and monopolistic privileges to business, and especially to large business, interests. In particular, the economy could be cartelized under the aegis of government, with prices raised and production fixed and restricted, in the classic pattern of monopoly; and military and other government contracts could be channeled into the hands of favored corporate producers. Labor, which had been becoming increasingly rambunctious, could be tamed and bridled into the service of this new, state monopoly-capitalist order, through the device of promoting a suitably cooperative trade unionism, and by bringing the willing union leaders into the planning system as junior partners.6

This view of state capitalism, shared by New Leftists and Rothbardians alike, flies in the face of the dominant American ideological framework. Before we can analyze the monopoly capitalism of the twentieth century, we must rid ourselves of this pernicious conventional wisdom, common to mainstream left and right. Both mainline "conservatives" and "liberals" share the same mirror-imaged view of the world (but with "good guys" and "bad guys" reversed), in which the growth of the welfare and regulatory state reflected a desire to restrain the power of big business. According to this commonly accepted version of history, the Progressive and New Deal programs were forced on corporate interests from outside, and against their will. In this picture of the world, big government is a populist "countervailing power" against the "economic royalists." This picture of the world is shared by Randroids and Chicago boys on the right, who fulminate against "looting" by "anti-capitalist" collectivists; and by NPR liberals who confuse the New Deal with the Second Advent. It is the official ideology of the publick skool establishment, whose history texts recount heroic legends of "trust buster" TR combating the "malefactors of great wealth," and Upton Sinclair's crusade against the meat packers. It is expressed in almost identical terms in right-wing home school texts bemoaning the defeat of business at the hands of the collectivist state, or describing the New Deal as an example of the masses voting themselves largesse from the public treasury.

The conventional understanding of government regulation was succinctly stated by Arthur Schlesinger, Jr., the foremost spokesman for corporate liberalism: "Liberalism in America has ordinarily been the movement on the part of the other sections of society to restrain the power of the business community."7 Mainstream liberals and conservatives may disagree on who the "bad guy" is in this scenario, but they are largely in agreement on the anti-business motivation. For example, Theodore Levitt of the Harvard Business Review lamented in 1968: "Business has not really won or had its way in connection with even a single piece of proposed regulatory or social legislation in the last three-quarters of a century."8

The problem with these conventional assessments is that they are an almost exact reverse of the truth. The New Left has produced massive amounts of evidence to the contrary, virtually demolishing the official version of American history. (The problem, as in most cases of "paradigm shift," is that the consensus reality doesn't know it's dead yet). Scholars like James Weinstein, Gabriel Kolko and William Appleman Williams, in their historical analyses of "corporate liberalism," have demonstrated that the main forces behind both Progressive and New Deal "reforms" were powerful corporate interests. The following is intended only as a brief survey of the development of the corporate liberal regime, and an introduction to the New Left (and Austrian) analysis of it.

[EthanAllen]

That's the beauty of the market, you don't need to be able to figure out how the product will get to you it just does.

That's why the eggheads loved communism, the planned economy, they thought that it needed to be controlled. And of course they were the ones that should decide.

Actually they thought markets and money were inherently exploitative. Especially when the means of production (capital) were owned privately as "surplus value" was being robbed from the laborer.

[CNHT]

 

If I remember correctly, you said you told yourself you'd give it a year to get this board to follow your brand of socialism.  And when you couldn't, you quit.

But now you're back, selling the same old thing under the premise that capitalism is evil.

Promises promises!

I think you need to start a leftist/socialist/mutualist forum somewhere.

[EthanAllen]

That's the beauty of the market, you don't need to be able to figure out how the product will get to you it just does.

That's why the eggheads loved communism, the planned economy, they thought that it needed to be controlled. And of course they were the ones that should decide.

Whew.. I was worried about how many people here might actually agree with EA that capitalism is evil...and not their choice of system.

I don't think capitalism is evil per se. I think the privileges that lead to regulatory cartelization that is inherent to capitalism, as capitalist try to protect their profits, leads to an unjust system where capital commands labor.

Remove the privileges and you get much closer to a theoretical free market. But capitalists have no interest in this as labor then will get it's full due (diminishing profits) as they are no longer able to be commanded by capital.

[EthanAllen]

If I remember correctly, you said you told yourself you'd give it a year to get this board to follow your brand of socialism.  And when you couldn't, you quit.

No, what I said was that I would take a year to hone my analysis on this board by having it critiqued. When I was made aware that you were spreading lies about Vt secession* I thought I would come back to dispel that fiction. Why don't you read what I wrote rather than responding to what you wished I had written?

* for anyone that is interested see the link in Jane's signature