The Three Marketeers

In order to make a judgment, we must have a standard by which to compare the object in question. For example, if someone says, "this apple is sweet", that would only make sense if we lived in a world with foods that were not sweet. Otherwise, the statement is about as meaningful as "this apple is made of atoms."

The same is true in political theory. When someone criticizes capitalism, they must show that the same criticism would not apply to socialism as well; otherwise, the criticism is not really about capitalism at all - it would be true regardless of the economic system.

Thus, when socialists claim that capitalism causes alienation, greed, the breakdown of the family, and a general disregard for the happiness and wellbeing of our fellow man, I must ask whether the same would not be true of any economic system in an advanced, modern society.

Here is a perfect example of what I'm talking about. The author of this piece in the Guardian begins with an anecdote:

Queuing in a branch of WH Smith some months ago, I was a captive audience while one shop assistant told another about an encounter with an elderly woman who was looking for a book that wasn't on the shelves. The assistant had not known and not cared where the book might be found, and the old lady had asked if she could be more helpful. "So I told her to fuck off," was the assistant's triumphant punchline.

After a few more anecdotes, the author attempts to make a broader argument:

We live in a culture where the primacy of the self and its satisfactions is everything. We are bombarded with messages telling us that we should have what we want because we're worth it. As consumers, we are kings. We know that we have rights, that brands seek our favour; that as long as we can pay, we feel powerful. We like that sensation. It is seductive because it is so at odds with the reality of the rest of our lives. As workers and producers we are under more pressure and feel more insecure than ever before. Our private lives are increasingly unpredictable; our financial futures uncertain. There is no general respect for mundane lives, well lived, in a popular culture that celebrates wealth, beauty, celebrity, notoriety and youth. Most of us cannot feel confident about our worth and about the regard in which we are held.

This conflict between our sense of entitlement and our shaky sense of self-worth enrages us. At work many of us bolster ourselves by struggling to assert our superiority to others. Managers who crave the respect of their staff, but fear they don't have it, create the semblance of it by frightening those underneath them. They are too concerned with maintaining their status to think about the damage they are doing to their subordinates. Service staff who feel their jobs are beneath them often make their disdain clear by doing them as gracelessly as possible. Minor officials take pleasure in exercising obstructive petty authority.

She then takes this argument one step further and lays the blame for this culture of selfishness directly at the (invisible!) hand of the market:

The old idea that one had a social responsibility towards one's host or fellow guests is beginning to be replaced by a determination to maximise one's individual satisfaction, regardless of the emotional injury caused to anyone else. The values of the market are openly invading the social sphere. Why practise duty when you could make a contact or secure a gain?

In a way, this article reminds me of the nostalgic myth that "times were different back then." "Back in my day," the old geezer says, "people respected one another. Now the world has gone to hell in a hand basket." The interesting thing about this claim, besides being false, is that people have been making similar complaints for hundreds of years, reminiscing about a non-existent past.

What exactly is the argument here? At what point in time were people all peachy to each other? When did this change? How was this a result of "marketeers"? Was there is no selfishness, no disrespect, and no telling each other to "f*ck off" in non-capitalist societies?

Consider the very first anecdote mentioned in the article: a shopkeeper tells an assistant to " f*ck off" and stop bothering her. Now, presumably, this shopkeeper is not the owner of the establishment (hence, "shop assistant"). But even if the author didn't explicitly mention that this was merely an assistant, it would be a very reasonable assumption to make. Why? Because no owner who plans on staying in business for very long insults his customers like that.

But why would an assistant do so? Because of what economists call the "principle-agent problem". The owner's interests (profit maximization) are not aligned with the assistant's interests (earning a salary regardless of overall profits). Since the owner cannot watch the assistant at all times, he must instead rely on various enforcement mechanisms as proxy: random observations, complaint boxes, etc.

Now, at this point, I risk committing the fallacy of the False Dilemma. However, I have no choice. The author did not make an argument against capitalism by comparing it to another system, so it is now my job to somehow discern what her proposed alternative might be. I have to assume that the alternative to "marketeering," unless otherwise stated, is political bureaucracy.

Contrast "marketeering" with political bureaucracy. Does the government bureaucrat care whether those who receive the service are happy or not? Why should he? Since there is no profit, he gets paid regardless of how well the bureaucracy functions. In fact, in many instances, bureaucrats get paid more if they do a bad job; failing public schools, for example, often ask for more funding precisely because they are failing.

When people criticize markets, I expect to hear good arguments, not unsupported moral platitudes using "marketeers" as a scapegoat for everything that's wrong in the world.

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I get it all the time,

I get it all the time, poeple complaining that anarchy won't solve this or that problem or that when their government doesn't solve the problem either.

Good post Micha. Good point

Good post Micha. Good point John.

How many of these problems are just problems of human nature: rape, greeed, cruelty, and other evils human nature all seem to exist independent of the economic system.

It is true that social evils vary from country to country, but I see no reason to attribute the variance to any given economic system. Rates of theft, murder, rape vary widly. People always vary in the level of trust they have for their neighbor and the value they place on hospitality.

If I were a betting man, I would guess the these variances are deeply ingrained in the culture and have very little to do with the economic system.

How ironic it is that at the

How ironic it is that at the beginning of her article criticizing capitalism she is in WH Smith, possibly purchasing a DVD or Oprah Book of the Month. I notice that she doesn't complain about the benefits of capitalism described in that statement: she can make a living simply by writing (and not for the State), she can get culture from all over the world, and so can other people, not just commissars or political favorites. Global capitalism brings huge benefits right to her door, and all she can see is some native rudeness.

Blaming bad customer service

Blaming bad customer service on *capitalism*?

That's hilarious. One does wonder if the author ever tried to get good service in any of the countries of the Communist bloc back when that existed (or even immediately afterwards). I mean, large sections of humor books have been written about how bad the service is in socialist countries.

Being from the free market

Being from the free market tradition of Benjamin Tucker and Thomas Hodgskin, I should mention that I use the term "capitalism" in a different sense: an economy is capitalist to the extent that it DEVIATES from a free market, because of government intervention to privilege the owners of capital against the operation of the laws of the market.

That semantic quibble aside, I think the Guardian author gets the causation exactly in reverse. The civility and organic cohesion of Norman Rockwell's America were destroyed by government intervention in the market. Because of state capitalist intervention, the economy is much more centralized and transportation-intensive, and its firms much larger, than would be sustainable in a free market. As a result, the country is much more demographically mobile and atomized, and local communities and extended families are much less stable, than they otherwise would have been. In many ways, twentieth century America was a monstrous social engineering project carried out by Henry Ford and the civil aviation industry, in collusion with the federal government. Not to mention the postwar decimation of neighborhoods by the FHA, highway spending, and zoning regulations.

And as with all forms of government intervention in the market, the resulting unforseen consequences and social pathologies are used to justify more and more intervention: the Great Society, social engineering through the publik skool establishment, and so forth. The process is one of snowballing irrationality, until the system breaks under its own weight.

How many of these problems

How many of these problems are just problems of human nature: rape, greeed, cruelty, and other evils human nature all seem to exist independent of the economic system.

ahhhh! but here's the crux of the matter: there are those who would not, do not & will not, will simply refuse to accept this postulation of human nature. no matter how much evidence is presented & no matter how much history argues to the contrary, utopians of all shapes, sizes & ideological predispositions will continue to indulge in their--sorry to deploy such emphatic language, but--dementia.

the guardian-ites of the world point to the world of today & exclaim: post-industrialist ennui! rampant consumerism! existentialist alienation! what they, being the silly fools that they are, miss, is that post-industrialist ennui, rampant consumerism & existentialist alienation are rather tame annoyances compared to what folks must put up with under planned economies--namely, in some cases, starvation.

My personal experience with

My personal experience with this sort of 'dementia' is in my day to day work with entertaiment industry professionals. Since day 1 I noticed the grotesque hypocrisy spewed out by these 'demon-crat' alruist's about the evils of capitalism, all the while sitting in a session being paid for by, lets say Chevron or Coke. This is no generalization, media 'persons' almost to a mathematical immpossibility, are some kind of variation on the hard core liberal/ socialist/ utopian /capitalist hater theme. it would be laughable if not for the fact that they program almost everything in print and on the airwaves. its a wonder capitalism can survive.

When was the last time the

When was the last time the author of the Guardian piece was at a DMV (or equivelant)?

I can't say that I agree

I can't say that I agree with Micha's example, at least. "Sweet" wouldn't exist as a word or a concept without opposites, but I don't think that's a good analogy. Suppose that you denied the existance of "bitter" things because such a taste is pleasant to you. You may argue that "sweet" doesn't have an opposite, but merely exists in varying degrees in all things. Or you may argue that "bitter" isn't really the opposite. Or, if you're Serpent, you'd argue something about how free will is a bunch of junk and we're all fools for not being rigid determinists, and who cares about apples after all.

Regardless, none of the above arguments are counter-arguments regarding the existance of "sweetness." To wit, opponents of capitalism don't have to demonstrate that selfishness will be "solved," only that it will be mitigated under other systems, including reformed capitalism.

Matt, I never claimed that

Matt, I never claimed that opponents of capitalism have to demonstrate that selfishness will be solved completely; that would be an unfair standard. My point is that this author, and opponents of capitalism in general, commit the fallacy of blaming capitalism for certain defects without at all demonstrating that these same defects wouldn't be present under any economic system.

Here's another analogy that you may or may not agree with, from Alan Dershowitz:

"I am reminded of former Harvard President A. Lawrence Lowell?s attempt to start a debate at Harvard in the 1920s about whether the number of Jews should be restricted because Jews cheat. When a distinguished alumnus pointed out that non-Jews also cheat, Lowell replied that the alumnus was trying to change the subject, because Lowell wanted to talk about Jews."

So too, those who criticize capitalism without demonstrating that those same criticisms would not also apply to socialism are committing the same fallacy.

Great post. One of my new

Great post. One of my new books, The Theory of Incentives: The Principle-Agent Model points out that the sub-optimal outcome due to the principle-agent problem requires no public policy response for efficiency reasons. The problem is that the government will face exactly the same informational asymmetries that the firm owner (the principle) faces.

My overall view is precisely as noted here. Many of the people who complain about capitalism offer almost stupid alternatives. For example, some have called for a non-hierarchical society. When pressed as to what this means they claim that all issues should be solved democratically via majority voting. They seem completely unaware that such a method of decision making is itself heirarchical. Nevermind any of the problems with voting in general for making decisions asn allocating resources.


I don't think you fully appreciate the problem, IMO. The problem is that there are informational asymmetries (i.e., hidden information--e.g., you know something I don't, or hidden actions--e.g., you can do something without my being able to observe it) and that people often work towards differing objectives.

Once it is cast in this manner it should be obvious that it is a problem pretty much no matter what system you have. Now which system is better at handling these problems is precisely the point Micha was trying to make. Pointing to the existence of the problem in a market economy and saying it is a necessary and sufficient proof of the failure of market economies is definitely not sufficient at the very least.

qwest, Luckily, the


Luckily, the utopianism these entertainment professionals give lip service is so utterly and completely denied by their actions that they end up teaching the exact opposite of what they profess. One of the sturdiest ideas they have taught is that utopian dreams are invariably the product of utterly impratical dreamers or unscrupulous salesmen or both.

Now we can truthfully say, "Thank God for hypocracy!" It is a great teacher.


hi, please tell me

please tell me about:
what are the principle -agent problem 's variances ?



Once upon a time, in the deep jungle, lived a Lion and a Monkey... One day the Monkey, tired of the Lion always taking the LION'S SHARE, and seeing that such injustice represented a danger to all the species of the jungle, demanded JUSTICE... The Lion, yawning and stretching, said, "You would have to have paws and sharp teeth..." Then the Monkey, who was very clever, devised a plan: He would go to the costume store, and look like a lion...

When the Lion saw him, noticing that the new lion wasn't a match for him, and fearing COMPETITION, killed him on the spot --before the indifferent look of the little animals of the jungle... And that's how the Law of the Jungle was re-established one more time...