Politicians and policymakers don't understand where wealth comes from. They don't understand the very basics of why capitalism works, they don't understand how the wealth of a nation can increase - and as a result, almost every single policy is counterproductive to a country's competitiveness. This is despite the observation that the free market builds wealth due to one of the simplest of reasons, and once policymakers understand this, a completely different support structure would emerge.
Politicians and activists frequently regard the economy as a zero-sum game, where somebody must lose for another to gain. This is despite the quite trivial observation that we have built quite a lot of wealth from the Ice Age up until present day, and almost nobody is as bad off today as everybody was during the Ice Age. In this, it is baffling why politicians and pundits focus on redistribution, when the focus should be building of wealth.
Lots and lots of wealth
But it's counterintuitive for politicians to focus on building wealth, because doing so requires relinquishing control. Regulators can't build wealth and competitiveness. They can only destroy it to various degrees. A lot of this comes from not understanding just why, and how, capitalism and the free market works to increase overall wealth, and not just redistribute it.
The free market brings 179,000 people out of extreme poverty every day. Not politicians. Not foreign aid. Not siezed and redistributed wealth (minus the usual cuts to the redistributors). In my work in the European Parliament and elsewhere, I have rarely met a politician who understands the very fundamentals of why capitalism builds wealth - despite it being so ridiculously simple.
Capitalism works because it is voluntary.
It works because people seek to maximize their wealth, on a completely subjective basis. Some people value free time, some value money, some value happiness, some value rare Pokémon. That's fine, all of it. The only thing you need to do as a politician is to get out of the way of millions of people trying to maximize their own value by trading something with other people.
In order to maximize overall wealth, you want to maximize the quantity of voluntary trades. That's it.
Since every trade is voluntary, both voluntary parties consider themselves gaining in value from the transaction. This is key. As a result, a voluntary transaction adds value to the nation as a whole. Every voluntary trade adds a small bit of value, with both parties having gained from it, and maximizing wealth is about merely maximizing these voluntary trades on a purely quantitative basis. The more trades you have, the more increases in value you get.
Now, every person's perception of "value" is arguably subjective. Some of it can be measured in terms of GDP, other subjective value is just happiness in various forms. The good part about the many forms of value is that you don't have to concern yourself with this at all; people's completely subjective understanding of value is much better than yours when distributed across millions of people.
The distributed free market is better even at determining and valuing the precise definitions of "value" than any bureaucrat has ever been.
Now, compare this with how politicians today try to "build wealth" or "create jobs" and thump themselves over the chest about it.
It usually involves creating horrible burdens on every single transaction. At minimum, a receipt must be created (usually with penalties for not offering it). Moreover, transactions must be summarized to some kind of tax authority at regular intervals, and often to more than one authority. Meticulous bookkeeping is required - not for your sake, but for the sake of authorities. All this creates a wet blanket of unhappiness smothering the will to make voluntary transactions.
And then, of course, other politicians have the idea that regulated transactions are good for wealth, transactions which aren't voluntary and therefore contain at least one losing party, if not two. These don't build wealth. They may make the politician or regulator look good, but they aren't a transaction in the free-market sense because they're not voluntarily agreed upon by two consenting parties.
To top this off, all of the burden is usually directed toward subsidizing obsolete industries because they're a vested interest and/or contributed a lot to somebody's election campaign.
Politicians basically behave toward the free market and wealth-building like drunken elephants trumpeting about in a porcelain factory.
No, I don't have an illustration for that.
Let's do a thought experiment if we really wanted to create wealth in a nation, and just quantitively maximize the number of voluntary trades. How far can we go in making a nation competitive in this measure?
We're eliminating all requirements to tell authorities about your transactions. No wet blanket of despair. That means no income taxes, no sales taxes, no bookkeeping requirements. You let people trade and be happy. This means you can't have a corporate registry, there's no regulation of employment (as that's a special form of regular transaction), there's possibly not even a concept of a corporation at all. There's just people trading and taking entrepreneurial investment risks. Such risks can be detailed contractually in a project-by-project basis to eliminate the need for bankruptcy law and therefore the need for corporate legal entities and the heavy supporting authority bureaucracy.
There is still a need for a social safety net of some kind, not for compassion reasons, but for straightforward competitiveness reasons. You could solve this with a universal basic income like Friedrich Hayek and Milton Friedman have suggested. That would also be cheaper than building a bureaucracy for somehow determining who's "worthy" of support. With such a general safety net, you create competitiveness for the nation overall as a lot more people will try out business ideas in entrepreneurship.
Society as a whole benefits from a risk-positive environment, and if you can provide a mechanism where anybody can try any stupid commercial idea without risking becoming homeless and indebted, more people will innovate and take risks – and the society using this mechanism will get a competitive edge.
So what you need is a population register with people who qualify for UBI (citizens or similar). You also need a land registry, for reasons I'll be returning to. But that's it. All other registers can be scrapped. Every one. Car plates, drivers licenses, corporate registers, boat registers, every other database that requires data collection, and therefore puts obstacles in the way of maximizing the sheer quantitative amount of voluntary trades.
All this is perfectly doable today. It's just that politicians think that Regulating More is the answer to creating wealth. It's not, obviously. They Regulate More instead of focusing on something really simple - like the mere quantity of voluntary trades - and just doing everything possible to maximize that number, to get rid of obstacles for voluntary trades. As it turns out, you don't even need taxes. Taxes require paperwork. There are ways to fund a state-construct maintenance that don't require taxation and therefore don't require paperwork.
I'll be returning to that with a proposal for a Simplified Taxless State in a three- or four-part series over the coming days.
The world abounds with people who know
That political speak is only a show
A reflection of reality it is not
Yet those who point this out often are shot
They dress up the woes of the world in words near and far
Yet really could they have been randomly pulled from a jar
Assure you they control fiances, the men in the dome
Yet if I had my way we would send them home
Capitalism collects a lot of hate it is sure
Yet in reality for most issues it is the cure
Many people laud and shout out history
Yet where they learned it truly a mystery
People like Sanders praising the Danes
When those I speak to only mention pains
Socialism held aloft as the true way to be free
Yet places like Sweden used Laissez-faire don't you see
@chaospoet Clever graphic & poem :)
@falkvinge thanks for your interesting post - steem on!
Yep.
Double yep.
So glad to see your great content here, @falkvinge. I wrote a post a while back about how something like Steemit could be used to create a UBI, especially with the wave of automation that's coming. Exciting times to be alive, for sure. I look forward to the series, and you have my follow for sure.
To oversimplfy, there are two forces that retard human progress, do-gooding and rent-seeking. The term "do-gooding" has little to do with the actual performance of acts that create good results, but instead refers to processes with have the appearance of doing good, and building personal social capital on that appearance. Rent-seeking refers to processes that provide accumulation of profit from other people's capitol and work.
Both rent-seeking and do-gooding are self-interest motive process that interfere with full human production.
Redistribution policy appeals to both of these motives. Politicians, of course benefit from both motives. I think we can all name a politician who has grown wealthy in "public" service. These politicians can use redistribution policy to attract the votes of people with both rent-seeking and/or do-gooding motives.
A historical example outside of redistribution policy would be Prohibition. There is a concept known as "bootleggers and Baptists" which can be summarized in having the bootleggers support prohibition for rent-seeking motive ( higher prices and less competition in selling booze) while the Baptists had the do-gooding motive of fighting "devil rum".
Surprisingly enough (not really), there is not a whole lot of academic research in these areas. If anyone is interested, I can put up some references to what I have collected so far.
Spot on. Bravo.
Thanks for the shout out! And yes, the Chinese have a curse: "May you live in interesting times". We definitely are.
Hah! That phrase seemed too crazy to be true so I had to look up the origins. Wikipedia says it's apocryphal.
The more you know. :) Thanks.
I learned something new today as a Chinese from non-chinese people . LOL
Wikipedia says
"Better to be a dog in a peaceful time, than to be a human in a chaotic (warring) period"
宁為太平犬，莫做亂离人 nìng wéi tàipíng quǎn, mò zuò luàn lí rén"
the Chinese have a curse: "May you live in interesting times"
:-) I am a Chinese, I never say that. LOL
You have all my upvote and follow
This seems to assume politicians create policies via free agency, which is a great way to focus the article but not nearly the whole picture. The vast, overwhelming majority of policies/regulations are bought and paid for by non-public agencies to serve and expand the power/wealth of non-public agencies (corporations, special interests). Politicians are really just mouthpieces that funnel ever-increasing power/wealth to the few at the top of the pyramid.
"In order to maximize overall wealth, you want to maximize the quantity of voluntary trades."
Dan was pure genius in eliminating the transaction fees entirely from the Steemit ecosystem. Steemit may well be the purest form of capitalism in human history.
While true, this is still out of self-interest for those politicians to keep getting elected (specifically, getting campaign funding).
Self-interest works, but unfortunately, it requires the self-interest in quantity, not just at the top.
Government self interest is a big problem. The entrenched bureaucrats at all levels try to increase budgets, increase people . You look at the total population of those that receive government checks, by job, by welfare, by any means, that number out numbers, by far those creating the wealth.
This is the absolute best description of how capitalism works I've ever read. In the end, capitalism isn't about money, it's about freedom. Well done, sir.
Thank you for taking the time to write the shout-out!
So glad to see you here Rick! And, I'm excited to announce (exclusively here), that Rick Falkvinge will be speaking at Anarchapulco 2017 (http://anarchapulco.com)
The happiness to see you here is mutual, Jeff!
Hot damn. Anyone on here able to make some data models of that maxim? That's brilliant stuff, @falkvinge.
Capitalism, with all its flaws, has raised more people out of poverty than any other system in human history.
Yep, yep wholeheartedly agree :)
What flaws does capitalism have?
I think it's more about how the way our industrial capitalist society currently runs that is very flawed rather than capitalism. Isms and economic/social theory are pretty much that - theory. I don't really think there's evidence to prove that there's ever been an example of a perfectly competitive capitalist/free trade marketin history. Of course, communism and socialism also look great on paper and isolated from bias or history, but it's more how an economic system is used to either mobilize more people upwardly or widen the gap between the rich and poor that determines its flaw or success.
I don't want to capitalism. I want to be free.
Steemit is pseudo intellectual capitalism.
Rich people deciding what poor people should be paying attention to.
Some of my posts get 80+ votes and are worth $1.00 because they dont fit the whales' agenda.
I live in the USA. This is all I know. Im about sick of it. Best of luck to you guys.
Yet, you sre still here. You are demonstrating how value is created
https://steemit.com/money/@alexbeyman/how-capitalism-is-like-evolution-and-socialism-is-like-intelligent-design
You might get something out of reading this.
The Economic Equation: Limited Resources for Unlimited Wants
A nation's political system is a good representation of what the citizens allow whether by action or inaction. A more intelligent population will overall likely make better decisions and have better systems in place, which lead to economic progress in solving the basic economic equation, although can it really be solved? maybe a post scarcity society kind of situation. But in any case in order to have progress, in the economic sense by introducing more efficiency into the system, there will always be a short term sacrifice, of capital, energy, time, etc. That sacrifice is an investment, for a better future.
At a fundamental level, increasing the level of intelligence in a population would have the greatest return on investment and lead to faster progress.
And then there is power, those with power who have more control tend to also have more inertia, wanting to resist change unfavorable to themselves. In the same way we self-sabotage our best intentions at good health such as good exercise and good diets by indulging in negative behaviors, those in control are unable to resist temptations. Lack of longterm vision and ideals leads to a society worse off.
Rather than measuring a societies standard of living, I think that measuring the degree of freedom could be more meaningful. The range of each individuals freedom being a spectrum, from no freedom(no control, slavery) to all powerful(god-like power) although the all powerful isn't really attainable in a group of individuals, there will always be movement towards an equilibrium.
All I can think of as I'm reading this article....
Money, get away
Get a good job with more pay and you're okay
Money, it's a gas
Grab that cash with both hands and make a stash
New car, caviar, four star daydream
Think I'll buy me a football team
Money, get back
I'm all right Jack keep your hands off of my stack
Money, it's a hit
Don't give me that do goody good bullshit
I'm in the high-fidelity first class traveling set
And I think I need a Lear jet
Money, it's a crime
Share it fairly but don't take a slice of my pie
Money, so they say
Is the root of all evil today
But if you ask for payrise it's no surprise
That they're giving none away
Away, away, way
Away, away, away
heh, nice :)
Capitalism really works. And it's not a coincidence because it's also principle given by God to people (you can check that in Bible). The only pity is that there are no countries today where true capitalism is really practiced and supported. You can mostly see mix of socialism with corporatism.
Really good post! This is exactly how I think about economics in a country. All forms of regulation by governments will make the economic system less efficient, so there is less wealth to share. I hope many people will read your post. Upvote!
Great idealistic article, would work great if it wasn't for
any goods, which are only feasible if offered in a monopoly setup, such as railways, airports big part of the Medical Industry (if you have pain or physical problems, there is a third component involved in the price finding beside offer and demand to determine the price).
People be genetically re designed to work honest and with a certain respect for people, to meet the root requirements of you Model.
otherwise who or what takes care of the biological underprivileged in this setup?
how you address the environmental impact of the actors?
how one actors is responsible for his actions?
if the individuals actors operate almost in anonymity how is trust possible?
how you prosecute miss behavior of the actors?
who has the power to do and enforce rules?
how much state does this Model suggest to provide the basic general income (how is it financanced?)
Regulation is for sure a double sided sword. It is great to a certain degree to ensure an minimum or equal quality of services or product quality on the other hand it is for sure the burden you point out and brings economic inefficiencies to the table, and recently for sure is a key role in securing national interest for key industries rather then looking at the benefit for the population, (see the FDA).
Bureaucrats Industries, Bookkeepers, Regulators, Executors, Bankers what entrepreneurial spirit, can be demanded frequently form the stereotype of People enjoying these jobs? These job typ's , are all outlined by far with the least interpretational spirit required, being very defined what to do and what not.
According to the DISC model (Dominance (D), Inducement (I), Submission (S), and Compliance) you can creat subsets in any population (since we are all equal by law, but not buy biology or personalities (https://en.m.wikipedia.org/wiki/DISC_assessment)). I would suggest that you enhance your Model by creating at least four ideal individuals and see how they would perform in your model.
My guess is the Dominant, keen for competition is doing fine, the compliant may be not so. For sure the Submissive would be more frequently at the lower end of the food chain in your setup the Inducement ones might lead it.
For sure our current setup is at best a third best solution from an economical and human perspective, but given the fact, that a major part of any population is not keen on taking any risk in life, rather receive orders in a 9-5 setup then being the own boss in a 24-7 setup I think in this century if a fundamental change in systems is demanded, the new system has to address all needs not equal, but to the best ideal from each personalities perspectives. It might be a "Personomical Free Capitalism", where the state is narrowed done to Economical independent Regulation to ensure responsibilities in between the actors in a most ideal way. How you approach the building of the state?
anyway, for sure a great article to rethink the current setup.
I think the best way to bring about freedom would be this: What we have now > limited government (Local, county, state, fed) > go from there. Huge reduction in taxes and regulation. I think we are all ready for it.
I disagree on the central point that capitalism works because it is voluntary. It is not, for at least two reasons.
There is also the problem of public amenities and services. If we just had a free market, who would build a road between two poor neighbourhoods allowing free movement and such? Who would take care of the homeless when they needed help? Infrastructure and a social safety net are a huge basis upon which capitalism can work, but without which it would be be a suboptimal solution.
People are social creatures. They want to do things together. Government is one expression of that.
But who will build the roads? So companies have the intelligence to put cell phones in our pocket, but they wouldn't be able to devise a system to build a road from a house to a store. I think you limit the creativity of Mr. Market. And yes, you are right, people are social creatures. However, this doesn't make big government necessary. Friends, family, clubs, sports, associations, jobs, events, parades, communities all can support people's need to socialize.
That's not exactly what I'm saying. I'm suggesting that a lot of the infrastructure that businesses depend upon is provided by the state. I'm thinking about property rights, currency (at least until Bitcoin, but still to a very large extent), roads, etc. I don't think the market couldn't do it, but for a big part it isn't incentivized enough to do it (example: a road between two poor neighbourhoods, clean water/electricity for everyone, even if they live far from others).
Capitalism was yesterday. Crypto is tomorrow
Capitalism is whenever transactions are voluntary. Crypto won't change that.
I don't want you to think I'm doubting you, as this appears to be your passion and life's work and I am a newcomer to the area of economics and anarchy, but I like to live by the tenet question everything. Do you have any proof or links showing that 179,000 people exit extreme poverty daily due to the free market?
Found it: http://www.worldbank.org/en/news/press-release/2015/10/04/world-bank-forecasts-global-poverty-to-fall-below-10-for-first-time-major-hurdles-remain-in-goal-to-end-poverty-by-2030
200 million out of extreme poverty over three years because of globalization and free trade comes to that number.
Although this number gets me to 182,000 per day, it's still the same ballpark.
Hey Rick!
Appreciate you getting back to me.
One thing though:
I'm still not convinced that this is entirely, or even mostly due to free trade and globalization. While outward looking policies for sure greatly contribute to that number, isn't it possible that inward looking policies may as well? Jim Yong Kim actually never mentions trade or tourism, and reinvested funds in education, health, and social safety have kept poverty at bay.
Regardless of what the actual number coming from free trade is, as you mentioned in this blog or a previous one, free trade is not a zero-sum game: both sides gain something more valuable to them and win, and it increases wealth. It's beautiful to see concrete proof that poverty is decreasing so quickly.
Look forward to reading your latest article tomorrow, keep up the good work!
This is a number I saw in my information firehose. I've been trying to re-source it, but didn't manage to do so for this article (my google-fu is under level 9000). I'll keep looking and will make a note to ping you too when I find source again.
Good day to you @falkvinge! I just wanted to let you know that my new post "The 40 anarchists you want to follow on Steemit!" is up, and you're on the list :-) You can find it here
They very well understand it, that is why they want to steal from it, chip the wealth away little by little, until the taxes are so great , fueled by their greed, that it destroys the economy. It's the greed of politicians that destroy economies!
I disagree! Capitalism is self destructive ... work ... is fact, but like everything that values the continuous evolution and improvement, must be increasingly rethought. You can not find that is already good ...
The essence of capitalism is economic freedom .... even when done right or wrong
Wrong! Essence of Capitalism is profit! ...capitalize!
Does the oncoming doom of 'jobs are for machines' destroy everything here? I was re-reading The Wealth of Nations when I came across this thesis.
See Burger Joint
For the thesis see Jobs are for machines
Looking forward to reading this :)
Great post. I like how you put this, "Politicians basically behave toward the free market and wealth-building like drunken elephants trumpeting about in a porcelain factory." Looks like you are monetarily aware of were we are in this economic season. I just posted a great video that might interest you.
An incentive based individualistic society is the only thing that works. If give everything your kid want's the kid is useless after the age of 18. If it's not earned it's not appreciated....... looking forward to the next couple of posts.
NYPP squad up in the hizzy. Great article!
Regulation isn't always a bad thing. Take for instance the auto industry and the death rate of passengers over the past 70 years. But I agree with you, voluntary and free trade is the quickest way to increase wealth and is a positive-sum game since both sides gain value, and having less regulation with regards to that is desired.
Using aggression is always wrong, so regulation enFORCEd by aggression is also wrong. Voluntary regulation is not a problem, but would it even be called regulation if it were voluntary?
Deregulation will set us free!
Rick last night I was in the main transport hub here in Panama and I saw about 50 refugees who are sleeping in the terminal hoping for their chance to make it North to the USA. They were from Congo, Senegal and Cuba. I have spent plenty of time in Africa and understand what they are leaving. They are not trying to get to the USA because of their social programs, they are trying to get there because of the dream of capitalism they see in media. Boy are they in for heartbreak. I really wanted to tell them that they would be better staying here in Panama where Capitalism is alive and well.
Indeed, that is a sad story. And while one or two might make it, most just won't.
Then again, we have the same story within the US with people trying to get to Hollywood to go into acting, where most just don't make it.
Great article. I tend to think of myself as Libertarian leaning, however, it's hard for my mind to wrap around no regulations. I'm not saying that we should or shouldn't. I just haven't come up with my own conclusion for total laissez-faire capitalism.
I believe I have a model for it, but it does require a bit of rethink around land deeds and the military, in terms of "who owns land and why". Will be following up with that over the next couple days (hopefully - I have hand surgery tomorrow and don't know when I'll be able to type again).
Thanks, Great post
Great article! Too many are blind to reality from indoctrination and fear. Government is an unecessary middle man and run by greedy thugs. Money itself has no value but we scramble in this fiat system to provide daily necessities we are granted by birth to the world to access free of charge. They don't want everyone in wealth, they only want the wealth for themselves. "Wealth meaning access to the world, not just fiat." We see his with agenda 21.
meep
This post inspired me enough to go looking for a drunk elephant.
ROFLCOPTER
I just upvoted you and increase your payout by $250.00 just wanted you to know.But the main thing I wanted to say is the first step to making things better is to do away with the federal reserve banksters ,and the united states government print the money.A government should never borrow the first cent from anyone ,if money is needed print it themselves
Great to have you here. Any friend of @lukestokes is a friend of mine.
We can't expect someone who went to school for a Political Science degree to know what's best for the nation, economy, etc. We can expect them to be good at selling their power to corporations. This is the exact reason why we need to regulate the politicians. We should be writing laws that remove powers from the government not granting them powers. The free market works the internet is the best example of that today.
I am eager to read more of your content.
This video explains a method to run a UBI program on a blockchain. I think it is a good start. Looks like UBI could be decentralized and you may not have to track citizens in the way that you might expect.
You can probably skip the first 15 min .. also, Youtube lets you speed up videos, you'll have to pop it out of the comment so it loads at youtube.com then under the settings gear icon try 1.5x speed ..
Hello, Great post thanks for sharing. Some valuable nuggets of information. I often think there should be more voluntary transactions between people without the need to exchange money. I had no idea that still classes as capitalism. Mind blown! Does that now make me more intelligent than most politicians? Following
Capitalism works so well because it taps into our innate impulse to be creative by stimulating our reward (or future potential reward) desires with a very real reward: money and thus power to be further creative!
Great post, politicians always want to legislate their way to prosperity. I don't know about you but I've had enough of that. Really all we need is sound money, low taxes and rule of law. Politicians respect none of those (save Ron).
ps - can't wait to see that elephant illustration ;-)
Great article. What you say about all of this can be applied in an international context as well. Voluntary trade with other individuals - in peer-to-peer transactions or facilitating trades by bringing goods directly from the source to one's domestic consumer market - can be accomplished in basically the same manner as local trade. Imagine a world without government barriers and unnecessary secondary or tertiary markets increasing costs to the final consumers.
I'm actually working on acquiring capital for my new business where I deal directly with farmers in Central America. I bypass all of the middlemen, increasing profits for my producers and reducing my costs to remain competitive. I can deliver superior quality combined with lower prices, and consequently, maximize value for my customers.
I want to use Steemit as a way to help launch the business and also return some of the value I generate to the farming communities in order to lift them up as well. Voluntaryism - and capitalism - in action. Check it out and if you like it, please share it with your followers. I think this project can also deliver a lot of value to Steemit in the process:
https://steemit.com/anarchism/@ats-david/enriching-lives-through-the-power-of-steemit
"somehow determining who's "worthy" of support"
I've been seeing this image (the blue part in the middle) being passed around a lot on FB lately. It's been driving me INSANE.
They're so busy fighting over who is the best tax slave as if it's some kind of contest for which they'll be rewarded.
So I had to take that ridiculous meme and fix it. Here's my result (I hope this works):
I don't really understand that mix of keywords: anarchy and capitalism.
Funny that you speak of capitalism and come here to grab money from the good will of other. That's much closer to socialism than capitalism. Because some whales agree to share they wealth with you, you get some money.
That's couldn't be further away from capitalism.
Also in your analysis, you forget to mention than most politicians are coming from wealthy families, never really have much to do to get there... But still they still think about the people who would die young because no tax would mean no affordable medecine and so on...
Capitalism is always nice when you don't have to worry about money, but for anyone else, your free tax capitalism would be hell.
Sure, I don't like to pay tax, but I believe that most of it will benefit people which have less chance than I have...
From everything I've read that you have published thus far I have come to the conclusion that i should have been following you more closely a lot further back.
The problem with capitalism, as it is currently practiced, is that it is based on a " scarcity" model, which doesn't represent the reality of our planet, and it's based on competition. As long as those two factors remain in place we won't get very far from where we've been.
Scarcity is reality. And capitalism is based more on cooperation than on competition.