Libertarians pride themselves — not unreasonably — on their principles, which they say make sense from root to leaf of society. Whereas most of politics is argument over fruits and twigs, libertarians aim to go much deeper, down the trunk to the structure in the soil.
Politics is the art of influencing the behavior of the State, and taxation is the most basic state activity. Organizations without the power to tax do not qualify as States. Libertarians extol voluntary (reciprocal; multilateral) interaction, and correctly point out that taxation is hegemonic . . . based, ultimately, on initiated violence and the threat of it. So libertarians look at taxation suspiciously — at best.
Classical liberal theorists were of a similar mind. French economist J.-B. Say, for example, argued that “A tax can never be favorable to the public welfare, except by the good use that is made of its proceeds.” The idea here is that taxation itself is the worst way of going about building a civilization, but if there is no other way to protect the public, then tax, and expend the conscript resources only on projects (rule of law, national defense, say) that truly benefit everybody.
Libertarians often argue that most government spending, these days, does not fill the old liberal standard of benefiting everybody. Instead, most spending of taxed resources aids some at the expense of others, and amounts not to serving a plausible public interest, but, instead, serving private, or factional interests.
Therefore libertarians argue against all variants of statism on grounds that would have been familiar to the old liberals, often making arguments like this: government funds built on taxes must inevitably present a “tragedy of the commons” where individuals and factions fight each other to exploit the common resource each for maximum advantage, gaining more than the other — or at least not gaining too little to become a net taxpayer. This endangers the common resource — just as overgrazing of a common field, or over-fishing of a commonly owned lake, river, or stream — and can have the effect of favoring the greedy and powerful over the masses, and eventually leading to the degradation of the commons.
Classical liberal economists, individualist social theorists, and libertarian political philosophers have been elaborating variations on this theme for centuries. These arguments have demoralized statists, over and over, to the point that they turn to obscurantism (Marxian fancies or Keynesian farragoes) or mere name-calling, in response. (Statism is the idea that the public good can be served by massive state regulation and spending, all dependent upon taxation.)
But this is mostly conflict over branches. Down at the root libertarians emphasize what the old liberals usually just “understood”: taxation is expropriation by force, and is an intrinsically bad way to run a civilized enterprise.
And, on this level, we see many to the far left taking the opposite approach. It is not uncommon, these days, for “progressives” and socialists and other statist politicians to look upon taxation as a good thing in and of itself. It is good to take most of the wealth of some people, and some of the wealth of most people, and not only to “do good” with that wealth. People should not have that wealth. They do not deserve it. They cannot properly use it. Marshaling the State to confiscate this wealth is a virtuous and indeed noble activity!
President Barack Obama took that tack when he argued that the capital gains tax rate should be kept high or even raised even if lower rates would yield more revenue.He flouted J.-B. Say’s rule; he flaunted the thief’s ethos, right in our faces. And when he and Senator Elizabeth Warren floated the “you didn’t build that” meme, they were carrying on that fundamentally illiberal program. It is an attack on voluntary society and an upgrading of the State to a kind of super-paternalistic (and maternalistic) Authority.
Libertarians focus on taxation to counter these fiends. Taxation is the key to the whole super-state mania. Libertarians see in the statist defense of the intrinsic righteousness of taxation an assault on civilization’s liberatory principle: the growth of reciprocity, voluntary cooperation, and peaceful relations. And libertarians see in the lip-smacking lust to ply the State to take other people’s money as the grossest corrupter of morals: the celebration of greed and envy and malice under cover of bogus “social justice” and pharisaic “caring.”
Libertarians oppose the demagoguery behind super-state transfers of wealth, hoping that humanity can avoid the cementing of tyranny by means of the greatest long con in history.
The temerity of the Left! One of today’s leftists’ characteristic charges is that capitalism and slavery are a package deal, somehow, and that American capitalism depended upon the institution of chattel slavery for its success, and that the wealth Americans now revel in is tainted by the institution of slavery that was abolished over a century and a half ago.
An astounding assertion, and utterly without merit. But some of the scholars associated with Project 1619 are adamantine in their linkage.
Their arguments make much of not clarifying between capitalism, capitalism, and capitalism, as it were. That is, what we advocates of free markets are for is laissez faire, which is a policy quite distinct from that of mercantilism — and against which laissez faire was first advanced — and that it is mercantilist capitalism which is quite compatible with chattel slavery.
Now, later forms of anti-laissez faire practice, such as neo-mercantilism, progressivism, fascism, social democracy and other forms of statism, are not usually associated with chattel slavery, for the point of statism is to turn the masses into wards of the State, and to encourage a kind of servility all around. Laissez Faire Liberalism opposes all statism as well as mercantilism and institutions of chattel slavery. Ideological projects, like those that flying under the banner of 1619, muddy up this — trying to tar private property and free labor with slavery! — and must be argued against, and perhaps ridiculed out of existence. These people are generally socialists, and for that reason have no grounds to criticize we who oppose all forms of slavery, socialist as well as chattel.
Most bizarre is the notion that a good way to redress past harms caused by slavery is to oppose freedom generally.
What leftists cannot confront is that it is their policies that are “reactionary,” atavistic, retrogressive. Slavery is bad. Yes. Evil. Yes. It must be stamped out. But it is bad in both chattel and political/collectivist forms. Socialism is bad.. Yes. Evil. Yes. It must be opposed in all forms.
Socialism is slavery for all.
A few years ago I answered a question on Quora that touched on this issue. Here it is:
Why is capitalism not the root cause of slavery?
Because, perhaps, the root cause of slavery is the opposite of the root cause of capitalism?
Slavery is a very old institution. It appears that it was often a result of warfare: the conquered, instead of being slaughtered, were enslaved. There are many accounts in ancient literature like this. And it has been argued that slavery is moral because of this, because “at least we are not killing them all.”
At least!
Interestingly, the account of the salvation of the Manchurians after being conquered by the Mongol Horde is not very dissimilar. Temujin demanded that the Manchurians be slaughtered en masse. One of his generals suggested that letting them live, and taxing them, instead, would be more profitable. Temujin assented. And so the Manchurian Chinese became tax-slaves.
And it is no shock: taxation often proves itself the easiest form of slavery to manage. Indeed, if one limits one’s slavery over others to just such a simple tribute, the “slaves” will manage themselves. It is all so very efficient.
Capitalism is a rather different set of institutions. It features widespread private property, including land holdings, but especially in raw materials and the results of productive processes. These institutions go hand in hand with low rates of expropriation (criminal theft as well as government confiscatory practices, including taxation), a division of labor with free entry and exit from wage and service contracts, and markets in productive goods. Prominent features of capitalism thus include money, banking, and a stock market.
So, note the obvious: Slavery is not free labor.
Slavery is, instead, a political/micro-political limitation on exit from master-worker relations. It requires heavy degrees of coercion (force and threat of force) to maintain.
Capitalism, to the contrary, is marked by low levels of coercion to maintain. A rule of law, however provided, is capitalism’s foundation. Slavery, on the other hand, has existed where no real rule of law exists, proving more than merely compatible with the rule of the strongman’s threat. Slavery is the natural coexistent with tyranny.
Historically, there is a strong association between capitalism and the policy of laissez faire. It is generally agreed-upon that the more laissez faire the government, the more capitalist the society — so long as there is also widespread respect for private property and freedom of contract. A weak government without at least customary private property will not be capitalistic, but (most likely) merely pastoral.
And it is worth noting that the laissez-faire economists (Adam Smith, J.-B. Say, Destutt de Tracy, Frederic Bastiat) were, on the whole, among the most persistent voices against slavery as an institution. Laissez faire was never really about weak or no government. It was a policy of defense of basic rights under a rule of law, and not much more. After such basics were maintained, the idea is then to let business and labor and the people in general interact freely. It was “hands-off” or “let-alone” only after the basic set of standards have been established and maintained.
And those standards were anti-slavery in principle. They were thought of as the laws of a free people.
The conflict between those new and liberal standards with the ancient institution of slavery was widely recognized in the heyday of liberalism, c. 1776–1860. It was the liberals who opposed slavery, by and large (though the word “liberal” was not much used in America, probably for obvious reasons). Thomas Carlyle, for example, hated “political economy” because it was associated with breaking down the old order, the pre-capitalist ancien régime:
Carlyle labeled the science “dismal” when writing about slavery in the West Indies. White plantation owners, he said, ought to force black plantation workers to be their servants. Economics, somewhat inconveniently for Carlyle, didn’t offer a hearty defense of slavery. Instead, the rules of supply and demand argued for “letting men alone” rather than thrashing them with whips for not being servile. Carlyle bashed political economy as “a dreary, desolate, and indeed quite abject and distressing [science]; what we might call . . . the dismal science.”
Carlyle, as summarizes the writer for The Atlantic just quoted, “couldn’t find a justification for slavery in political economic thought, and he considered this fact to be ‘dismal.’”
And then there is the apologist for slavery, George Fitzhugh. Contemplate his arguments in Sociology for the South (1854) and Cannibals All! (1857). He identified slavery with socialism and free labor (which he pilloried as “wage slavery”) with liberal capitalism, arguing that only a few people were fit to run their own lives. Liberalism was a curse upon society, because free markets allowed the masses to be enslaved at low rates, not benevolently under class socialism of slave-owning South. These are quite amazing books. Even if some elements of his arguments can only be regarded as preposterous, he is utterly convincing in showing that laissez-faire liberalism and its support of capitalism had nothing to do with the spirit of slave-holding. He was very forthright about this, and he, also, like Carlyle, had contempt for the social science that wasn’t named “sociology,” as economist Pierre Lemieux explains in his introduction to a recent ebook reprint of Fitzhugh’s 1854 work:
Fitzhugh disliked “political economy” (as economics was then called), which he saw as “the science of free society,” as opposed to socialism, which is “the science of slavery.” He was totally ignorant of economics and had almost certainly not read Adam Smith or any of the other economists he attacks, such as David Ricardo and Jean-Baptiste Say. Fitzhugh denied that an increase in the money supply normally leads to a higher price level. He was hopelessly confused between money and wealth. He did not understand comparative advantage. And so forth.
But however much genius there is in Fitzhugh to recognize an important identity — between socialism and slavery, a point often made by advocates for laissez faire in the century-and-a-half since — his own defense of slavery and against freedom are incoherent. “Fitzhugh had no idea how free markets work,” Lemieux, again, explains. “He believed that competition reduces individuals to economic cannibals, making the weak freeman no better off than slaves, and in reality worse off because the freeman lacks the protection of a master. . . .” But there is a lesson in his mishmash:
Fitzhugh’s writings brew a strange mixture of socialism and conservatism. “Extremes meet,” he notes. This saw is not the deepest aphorism in the history of mankind, but it is at Fitzhugh’s level. A better way to express his idea would be to say that authoritarian power is the common denominator of socialism and conservatism.
Capitalism rests upon principles of individual sovereignty; slavery rests on the repudiation of such principles, at least for some (the slaves). There are many kinds of capitalism, of course, many degrees of freedom, so to speak. Just as there are many kinds of slavery: chattel and political, to name just two. And it is certainly possible to combine the two principles, the two institutional forms. It is what our modern conservatives and progressives do.
We call the current mixture “the mixed economy.”
There are reasons some of us prefer laissez faire rather pure: because we want our capitalism without the taint and evil of exploitation and slavery.
While it is true that capitalism grew out of previous institutional arrangements, which included slavery, it is not true — and can in no way be demonstrated — that capitalism gave birth to slavery. The history is clear: with the rise of capitalism, then and only then was it possible to array the political forces necessary to abolish slavery worldwide. The claims we often hear to the contrary are by ignorant and desperate propagandists, people who want to parlay your instinctive love of freedom as an excuse to enslave you in some way you are not expecting.
The usual method is to fixate on chattel slavery and ignore other forms.
So I suggest we be really scrupulous about those other forms. Like the huge burdens promoted by today’s socialists to increase levels of taxation and regulation, as well as add on evermore new mandates to do specific things.
twv
N.B. The image of Marx, at top of page, should not be construed to imply that the old commie was stupid enough to believe current leftist b.s. about slavery. He may have been evil and wrong about most things, but he did not fall for that.
I hate to pick at nits, but I do not think there is such a thing as “libertarian economics.” But I assume that the questioner really means “economic policy,” and is right to think that libertarians have a distinct policy. But any such policy is also a matter of law (libertarians, even of a hard-core private law variety hold to a rule of law) so the question becomes, What property rights are included under libertarian legal and economic policy?
Well, this turns out to be a big subject.
There are some differences of opinion, in part because the libertarian camp is a bit broader than usually let on by its most insistent advocates. But what defines libertarians is the way they themselves define liberty: as the freedom that all can share by being seen in the negative: a freedom from initiated coercion, or force. (Freedoms-to, in Isaiah Berlin’s formulation, are not the focus of libertarian principles.)
And for libertarians, liberty starts with the individual. Though it can be defined politically, as self–government, it is often, perhaps usually (following Locke and the Levellers) defined in property terms. Liberty entails self–ownership. To own one’s self means to own one’s own body. And like all property this entails excludability. In other words, self-defense.
So, already, at this most fundamental level, chattel slavery is prohibited. One cannot own others against their will, unless that other has committed some crime and his enslavement is repayment. Slavery is commonly thought to be not an acceptable kind of ownership, and slaves not legitimate property. Though Libertarians argue about the legitimacy of selling themselves into slavery.
Certainly, the chattel slavery that was the basis of 17th-, 18th- and 19th-century American economy is not legitimate property according to libertarianism. Libertarians were almost all abolitionists, in the mid-19th century, before the Civil War.
The basic conception of justice that libertarians hold has been called the entitlement, or proprietary theory of justice. As formulated by Robert Nozick, a property holding is just if it was justly acquired and justly transferred. To be justly acquired, it cannot be wrested from another. Hence the idea of self-ownership, and the idea of a first-come/finders-keepers ethic of property acquisition. This is the fairly logical outcome of the attempt to find a basic rule that would minimize conflict. Only scarce resources can be owned. So free goods (in the economic sense, as defined by economist Carl Menger and other early marginalists) are not subject to ownership.
This leads to problems of some common resources, such as air (non-economic on the surface of the planet, outside our nose and lungs) and oceans (lots of water there). Libertarians tend to evade or disagree or remain puzzled by these resources, and how property rights could possibly be applied in these resource pools. (Nevertheless, much work has been done, and should be looked up.)
But not to problems of land. I know of few libertarians who go the Georgist route, thinking that land may not be owned — but there used to be many of these, including the young Herbert Spencer and the individualist Joseph Hiam Levy, an able fin-de siècle economist (see his debates with Auberon Herbert and Benjamin R. Tucker.)
Intellectual property rights attorney Stephan Kinsella argues that intellectual property is a misnomer. He extends the analysis of Murray Rothbard, who thought that laws against “libel and slander” were unsupportable because one cannot own one’s reputation. Kinsella makes the point that patent and copyright law are both monopolistic “protections” (intrusions, interventions) of the State, and could not possibly arise in a society that takes the Non-Aggression Principle (NAP — really just a formalization of the principle of universalizble negative freedom) seriously, consistently.
So:
a. property in one’s own person, by which we mean “body”;
b. property in land and other scarce resources that no one else has owned, and which you have appropriated by some widespread or locally apt convention; and
c. property in scarce resources that one has purchased, by contract and without duress.
Libertarians these days almost univocally reject the Lockean idea that possible-to-own resources that have not been appropriated are “owned in common.” This notion is at best a fiction. At worst an imposition. Non-privatized property is seen as UN-OWNED. And property rights theorists are beginning to understand the importance of “ceasing-to-own” as a category. That is, not only must property rights require justice in acquisition and transferance, but also in maintenance. Just as one may lose property, in a physical sense, one can abandon it, in a normative sense. This puts the property into the category of un-owned. If you leave your car on the side of the road, and never return, it is abandoned. The road owner usually appropriates it, but since, today, all automobile titles are tightly regulated by the states, and most roads are State-owned, the states tend to assume ownership. This would not be the case in a libertarian society. Law and custom would look very different. And would have to include rules about disowned property, inadvertent or deliberate, and regard it as un-owned, allowing for a new appropriation.
Other cases of property abandonment? Littering, pollution, and (in the realm of self-ownership) body abandonment upon inadvertent death as well as intended death (suicide). (Would a consequence of this perspective be that suicide is often a form of littering, and, unless measures were made in advance by the would-be suicide, many acts of suicide would be rightly preventable, by coercion, as defense of the property the corpse is intentionally being abandoned upon?)
According to Murray Rothbard, there can be no “public property.” All property must be private. F. A. Hayek demurred from this, arguing that what we are really talking about is “several property,” which would include ownership by groups, in some corporate or even informal capacity. (Randy Barnett explains the seemingly archaic term in this way: “The term ‘several property’ makes it clearer that jurisdiction to use resources is dispersed among the ‘several’ — meaning ‘diverse, many numerous, distinct, particular or separate’ persons and associations that comprise a society, rather than being rooted in a monolithic centralized institution.”) The rule of law defends several property, which would allow for any forms of property now considered “public.”
Philosopher Roderick Long has discussed a public property element in a free society as configured around by the NAP. This subject is still under debate among libertarians.
All property comes down to the right to exclude and the right to control. Several property is private chiefly in the sense of de-priving others of its use. Where you cannot forcibly exclude others (understood as self defense), there is no property. Where you cannot control the thing ostensibly owned (without initiating force), it is not property. I believe Kinsella’s arguments against intellectual property flow directly from these considerations.
No wonder, then, that one proposed alternative to the term “libertarianism” is “propertarianism” — no other school of thought takes property rights as seriously libertarians do, or see them as so fundamental.
Note: There is a whole school of economics devoted to property rights discussion. Many of these economists are libertarians or near-libertarians. Richard Stroup, for example, has proffered a basic rubric for property rights: “For markets to work . . . rights to each important resource must be clearly defined, easily defended against invasion, and divestible (transferable) by owners on terms agreeable to buyer and seller. Well-functioning markets, in short, require ‘3-D’ property rights.” Again, the 3-D property rights require
Definability — clarity in boundaries;
Defense — ability to be maintained;
Divestibility — capacity for ownership cessation by the property holder.
This latter includes divestment by gift, divestment by exchange (giving on condition of receiving something), and inadvertent abandonment (loss by inattention) and purposive abandonment (essentially, gift to the unowned state, gift to “whoever will appropriate from an unowned state” or assault upon others, if the property abandoned is specifically disutile or inutile to all).
Libertarian economic policy rests on conceptions of property rights, centered on individual self-ownership and extending outwards to natural resources and produced goods. Many kinds of several property are allowed, but the society would not be de facto libertarian if there were extensive black markets in stolen goods of whatever kind, or if the state (or similar institutions) appropriated by decree all sorts of un-owned and dis-owned property, or engaged in mass expropriation (taxes) or piecemeal expropriation outside the court system, or in contravention of the NAP.
‘Corporatism’ is not an alternative to capitalism, it is capitalism. Albeit not free market capitalism, it is capitalism none the less. Calling X corporatist is just a cop out to avoid admitting that is in fact capitalism.
Capitalism = Private ownership over the means of production
Socialism = Worker ownership over the means of production
Is that exactly right? Workers can own the means of production in capitalism.
I own my small business. There do exist workers’ cooperatives. And laborers’ pensions often own stock in companies, though most often not majority stock in any one company, and not in their own — which, since they invest at their own discretion, suggests that workers, generally, do not want to own the means of production. Only a few exceptional people do.
And, interestingly, under several of the socialist societies that have existed — the most prominent one, anyway, that called itself socialist, explicitly — small business was not exactly tolerated, was it? And workers did not own their factories, etc., the State did. And, further, it was industrial workers that were focused on: agricultural workers were despised, expropriated, and killed en masse. For “workers” owning “the means of production” was not the point of socialism, historically. Not really. It was “everybody” owning the means of production through a central planning office, through the State. Which in practice just means tyranny.
And I note that the socialists I know personally, and the ones I see on TV, do not seem much interested in workers as such, or the means of production as such. They are concerned with consumers, making sure that everyone can consume about the same amount of goods: equal access to healthcare, equal access to housing, equal access to iPhones, complete financial security for all, etc. Which suggests, once again, that “workers” is the reddest of red herrings. Socialism always comes back to a form of consumerism. State-supported and -enabled consumerism.
What “corporatism” means is not always clear, either. We have a lot of publicly* traded stockholders’ corporations in these United States, and they sure look like market institutions, and not a few are even basically operating within something like a free market. But many — though, once again, certainly not all — of the most successful are dependent for their success on government contracts (some of the biggest corporations are those within the ambit of the military-industrial complex) and, when the biggest fail (most recently in the financial sector) they are bailed out, at taxpayer expense. Further they are regulated in such a way that “just so happens” to protect established businesses from upstart competitors. This system is certainly not laissez faire, as stated in the answer, above. But its capitalist nature, while being there, is certainly open to some interrogation. What it looks like to me might best be called “producerism.” A form of it. Producerist arguments were dominant in 19th century support for protective tariffs, and they now dominate the government practice of regulation and bailouts.
Which should indicate my approach to free-market capitalism: it is consumerist-producerist . . . both. We produce to consumer, sure, but no consumer and no producer should really be given special favors. “Workers” and “business” do not compete so much as cooperate, and foisting a class narrative on their relations is a bad idea. They are just two special interests, and our rule of law should serve the general interest, not any specifically identified class or group. Neither consumer-oriented socialism nor worker-oriented socialism make sense, and corporatisms that focus on bolstering up specific industries for the sake of stability are not much better.
============
* Note that we call publicly traded stock companies “private” — our nomenclature sure must confuse the young.
I run hot and cold on the word “capitalism.” The institutional system? Fine with it. Would want more of it. But the word itself is less than perfect. (Like capitalism itself!)
A “capitalist” is not an advocate of “capitalism.” When I see the word used that way I flinch. A capitalist is someone who invests capital, specifically someone for whom such investment is a major source of income. Not all that many people are really capitalists.
But “capitalism” seems inapt for a more profound reason: the major institutional features of the capitalist system are
extensive private property holdings
self-ownership in one’s actions, meaning, especially
free labor (not “free” in terms of price or fantasy, of course)
free trade (unencumbered by prohibitions, regulations, etc)
private markets in capital goods
Now, that last point might justify the term. It’s a profound concept that most people have no idea about. Even economists have balled it up.
But we traditionally note three factors of production: land, labor, and capital. And yet, when we use the word capitalism we identify the lack of criminal and governmental interference in the management of these factors by only one factor. That’s prejudicial. It’s rather lame.
There are huge demarcation problems associated with the word, too.
The economists of France and Britain began developing the science of the study of this set of institutions with the critique of a particular form of government policy, which Adam Smith called “mercantilism.” That’s a good term, an apt term, since it refers to the close relationship between some merchants and the State. It seems an apt moniker for the policy.
Under mercantilism, governments favors some over others, engages in various forms of protectionist trade restriction policies, and generally tries to keep production within a nation rather than outsource it (“free international trade” being the thing established, well-connected merchants most fear) while aiming to increase the supply of money (in the early cases, gold and silver) within the boundaries of a nation, and especially into the coffers of the king.
But mercantilism is not a bad term for what we have today, in many ways. Sure, international trade has been encouraged — but in a rather regulated way. The amount of regulations in America and Europe is astounding. The secular trend regarding this has been growth. And this hardly seems very “capitalistic,” if you mean it in the robust sense. And it certainly favors some capitalists and entrepreneurs and managers over their competitors, immediate and possible.
And yes, this feature makes a difference. The general effect of government regulation of markets — what Mises called “interventionism” and what Pareto called “restrictionism,” but which everybody else calls progressivism, fascism, democratic socialism, or the Administrative State — is to favor established business over upstarts. This is known. There is no real way around this. Current trends in hollowing out the upper-working class economy is largely a result of mechanization in combination with the suppression of small business by the regulatory state.*
So, while we certainly now live under “capitalism,” it is nothing like the laissez faire that economists dreamed up to regulate not business and market life, but the State itself (limited government being the flip side of laissez faire, with the constitutional limits it establishes being a form of anti-corruption regulation).
Recently, folks have been using the term “crony capitalism” to refer to the regulated/subsidized (“bailed out”) nature of current American economic policy. This reflects the old mercantilist practice of favoring well-connected insiders (“cronies”) at the expense of the masses of workers and entrepreneurs.
Anthony de Jasay calls the current form of governance/policy “the churning state,” since there is so much forced wealth distribution that we cannot really keep track of net winners — instead, the interests and the transfers are merely “churned.”
I tend to dub the current mode of capitalism “neo-mercantilism,” but an adjective is in order: technocratic neo-mercantilism. The technocracy is important to this, for it gives college graduates cushy jobs while they pretend to manage “the economy.” Which doesn’t exist . . . but that’s another issue.
The crucial thing to understand about capitalism is that it rests on rights to private property (including one’s own body and person) and mostly unencumbered trade.
And trade, or market exchange, is pretty much what Thomas Jefferson’s favorite economist said it was, “a transaction in which the two contracting parties both gain. Whenever I make an exchange freely, and without constraint, it is because I desire the thing I receive more than that I give; and, on the contrary, he with whom I bargain desires what I offer more than that which he renders me. When I give my labour for wages it is because I esteem the wages more than what I should have been able to produce by labouring for myself; and he who pays me prizes more the services I render him than what he gives me in return.”
This is an elaboration of Condillac’s chief notion in his 1776 treatise. How this made sense in terms of value and distribution — how to think about it precisely — took another century of stumbling by economists. The work of Carl Menger and William Stanley Jevons, especially, clarified the exact nature of mutual benefit through exchange.
And it is indeed this concept, of ex ante mutual benefit in trade, that is the most essential feature of “capitalism.” The mutual benefit aspect is the core aspect. And it is why freedom — a division of responsibility and a general lack of coercive bullying — is the key concept, the entelechy, of the very idea of capitalism.
And it is what politicians of nearly all parties — and their supporters — attack daily, to the hobbling of civilization.
twv
* John Kenneth Galbraith’s notion of “countervailing powers” gets it exactly wrong. Big Government to adjudicate between Big Business and Big Labor is a nice model, and all. Nice and technocratic. But it ignores how things really work. These powers do not countervail, they reinforce each other. It just so happens that the Reinforcing Powers of the major institutional forces bolster each other up, at the expense of the masses. Which is why technocracy is anti-democratic and would only have a chance of working without free access to government bureaus and power centers. Only by setting up a caste of trained technocrats could government really ride herd over business in general. And only by prohibiting the right to petition one’s government — lobbying — and the revolving door between government and the private sector, could Galbraith’s vision even have a hope of a chance. And still, I hazard, the outcomes would likely be horrific, for reason described in The Road to Serfdom: the worst would get on top, because giving some people unchecked power of control over others cannot be a recipe for civilized life.
This morning I disengaged from the closed-but-unmoderated Libertarian Facebook group that my friend James Littleton Gill has promoted in the past. Why? It mostly consisted of posts about how libertarians are racist and really like or approve of Nazis. Yikes.
Apparently, if you set the cost of joining a group at FREE, and don’t vet anything, then, why, your enemies will ruin it!
Wow. Who would have thought!
It is almost as if private property and the legitimate threat of expulsion serve a function. In a free society. Read the rest of this entry »
A “capitalist” is not an advocate of “capitalism.” When I see the word used that way I flinch. A capitalist is someone who invests capital, specifically someone for whom such investment is a major source of income. Not all that many people are really capitalists.
And trade, or market exchange, is pretty much what Thomas Jefferson’s favorite economist 
This morning I disengaged from the closed-but-unmoderated 
Wirkman Comment 