Why Capitalism

My support for capitalism is primarily based on moral and ethical grounds. That capitalism also is economically efficient is an added bonus to me. Its instrumental role in creating more wealth than alternative systems is great but even if that were not so, I would still support it because it is the only system that is consistent with individual freedom and choice.

Capitalism is based on private property rights and voluntary exchanges in free markets. It’s essentially an impersonal process — no one is giving out commands for people to follow — out of which emerges an order that is beyond anyone’s ability to foresee or improve upon (unless there is a benevolent, omnipotent, omniscient dictator who controls every single entity, which in our case we have not got.) This process leads to outcomes that are, in the words of the Scottish Enlightenment philosopher Adam Ferguson “the result of human action, but not the execution of any human design” (1782).

Are distributions of income and wealth obtained by this process fair? Since the distribution obtained itself is not the intention of any person or persons, we can only ask if the process which leads to the distribution is fair or not. Therefore if we agree that the process is fair, we can accept that the resulting distribution is fair.

Is it morally superior to other systems? I believe that a system that does not involve coercion is superior to a system that requires coercion of some by some others. Capitalism does not involve coercion, while socialism and communism cannot be enforced without coercion. Therefore I judge capitalism to be morally superior to collectivist enterprises.

Who Owns You?

If in answer to the question “who owns you?” a person replies “I own myself” then we are dealing with a free person and not a slave. But where does this self-ownership arise out of? It’s a natural right. What’s a natural right? It’s a right that follows from being human; it’s not a right that is granted by anyone.

And from that natural right of self-ownership follow other rights. Those rights are negative rights. What are negative rights? They are rights that do not impose obligations on others to do something; only that others refrain from forcing one to do something. In contrast to that, positive rights impose an obligation on others.

An example of a negative right is a person’s right to life and liberty. That does not impose any obligations on others; only that others refrain from taking the life and freedom of the person. An example of a positive right is the “right to education” that the government of India has enacted. That imposes an obligation on taxpayers to fund the education of others.

To the extent that people of a society have positive rights, to that extent the society is not composed of free people; they don’t fully own themselves. If you are forced to work against your will for the benefit of others, you are a slave.

A state that protects the negative rights of citizens and does not grant positive rights is Robert Nozick’s minimal state. A minimal state is a protective state — one that only protects citizens. It does not produce other goods or services, does not interfere in the economy, does not redistribute income or wealth to achieve social justice goals, etc.

In his book Anarchy, State and Utopia (1974), Nozick writes:

Our main conclusions about the state are that a minimal state, limited to the narrow functions of protection against force, theft, fraud, enforcement of contracts, and so on, is justified; that any more extensive state will violate persons’ rights not to be forced to do certain things, and is unjustified; and that the minimal state is inspiring as well as right. Two noteworthy implications are that the state may not use its coercive apparatus for the purpose of getting some citizens to aid others, or in order to prohibit activities to people for their own good or protection.

Along the minimal state-maximal state continuum, India falls close to the maximal state end of the spectrum. That fundamentally means that Indians are not free. They are slaves of the state. Slaves are never very productive.  Lack of freedom and lack of prosperity are twins: if you have the former, you necessarily have the latter.

Do Indians own themselves? Not really. There are laws that make Indian citizens wards of the state, and to that degree, slaves of the state. The Indian state provides all sorts of “free” goodies to its needy citizens, in exchange for which it enslaves them. That enslavement leads to more neediness, which the state then addresses by a little more enslavement. It’s a vicious circle of dependence and poverty.

I think here it would be appropriate to address a question from a comment to a previous post:

Question: There are consenting adults who want to commit suicide. Assume, I open a business which offers exotic and very satisfying pre-suicide and suicide experience. If you are in government, will you stop me?

Allow me to rephrase that question: “Is the government justified in stopping a person from committing suicide?”

The answer is, “It depends on who owns the person.” If the government owns the person, i.e., the person is the property of the government, then because it is wrong to destroy the government’s property, the government is justified in stopping the person from killing himself.

However if the person owns himself — the self-ownership condition — then it is no one’s business what the person does with his own self. Not only is he free to live or die, he is also free to use his body any which way he wants to, and he also owns whatever his labor produces.

When people lose their freedom, when they become enslaved through some process (which in most cases involve their consent to some extent), they become sub-human. They become chattel of the master.

In our case, the government is the master that owns the people. Therefore the people are not free, even to kill themselves.

Personality Cults

I came across that picture on my twitter feed. An old man bending to touch the feet of a man who has no particular accomplishments at all.

I dislike cults, and that goes double for personality cults. I feel revolted by the pitiable groveling of the followers. I suppose by debasing themselves, they elevate the person and thus justify their worship. They crawl so low out of ignorance, fear and greed. Their display of loyalty also demonstrates their abject lack of virtue.  Here’s a bit hauled out of the archive, from nearly 13 years ago: Continue reading “Personality Cults”

Democracy, Freedom and Independence

The words democracy, independence and freedom are frequently used carelessly without a clear understanding of the fundamental conceptual difference between them. They are in fact orthogonal even though they are sometimes correlated. Independence and freedom are used interchangeably, and democracy is automatically assumed to imply independence and freedom. That’s confused and wrong.

You do have states that are independent, and in which the citizens enjoy economic, civic and democratic political freedoms. But that’s not the only choice: you could have states in which citizens have economic freedom but are not independent; you could have independent states in which citizens have democratic political freedom but little economic freedom; you could also have states in which citizens lack political freedom but have economic and civic freedom; and so on. Continue reading “Democracy, Freedom and Independence”

Happy Birthday, Adam Smith

Born 16th June, 1743, Adam Smith was one of the greatest minds of the Scottish Enlightenment. He is regarded by many to be the “Father of Economics”, and deservedly so. His book, An Inquiry in the Nature and Causes of the Wealth of Nations, published in that miraculous year 1776, set the theoretical foundations of free markets.

Economics is a branch of moral philosophy. Smith’s other book, published in 1759, is The Theory of Moral Sentiments. Here are a few quotes from the two books. Continue reading “Happy Birthday, Adam Smith”

Hayek: Between Instinct and Reason

Economics has from its origins been concerned with how an extended order of human interaction comes into existence through a process of variation, winnowing and sifting far surpassing our vision or our capacity to design. Adam Smith was the first to perceive that we have stumbled upon methods of ordering human economic cooperation that exceed the limits of our knowledge and perception. … We are led — for example by the pricing system in market exchange — to do things by circumstances of which we are largely unaware and which produce results that we do not intend. In our economic activities we do not know the needs which we satisfy nor the sources of the things which we get. Almost all of us serve people whom we do not know, and even of whose existence we are ignorant; and we in turn constantly live on the services of other people of whom we know nothing. All this is possible because we stand in a great framework of institutions and traditions – economic, legal, and moral – into which we fit ourselves by obeying certain rules of conduct that we never made, and which we have never understood in the sense in which we understand how the things that we manufacture function.

Modern economics explains how such an extended order can come into being, and how it itself constitutes an information-gathering process, able to call up, and to put to use, widely dispersed information that no central planning agency, let alone any individual, could know as a whole, possess or control. Man’s knowledge, as Smith knew, is dispersed.

[Except from The Fatal Conceit (1988) by F. A. Hayek. pg 14]

From the archives: The Sacred Ritual of Elections

Change is not something that arises out of random chance. If the underlying factors that motivate the electorate don’t change, the outcome will be the same. If party A promoted a certain set of policies as a result of a set of constraints, another party B will have to also adopt the same or a very similar set of policies as well. Why? Because the underlying reality is the same. Continue reading “From the archives: The Sacred Ritual of Elections”