Capitalism: What Holds Us Back?

Two recent posts from Alex Tabarrok "suggested" the title of this one. In the first post, Tabarrok noted that he will be speaking at a "Voice and Exit" festival in Austin this week. While the festival marketing seemed a bit "over the top" - which prompted more than a little bemusement on the part of MR commenters - why not take advantage of the spirit it suggests? From the festival info:

We assemble those who ask: What are the systems and ways of life that are holding us back? What can we create to make those old ways obsolete? What innovations enable us to find wellbeing, life meaning and stronger connection to others?

There was a knee jerk reaction on the part of some, who also reasoned the festival is "bound" to be another attempt to belittle capitalism. But why such a quick assumption? That didn't appear as though the intent of the promotional literature. Indeed I remember similar language of hope - going on two decades old already - which was mostly smacked down in the U.S. after the events of 9/11. As to the referenced innovation in the above quote, there's been too little talk of innovation on the Main Streets of the U.S. for some time now...

At Marginal Revolution, other commenters assumed that "systems" inevitably implies meant more government planning. But how has everyone missed that governmental systems are sorely in need of redefinition from elsewhere? Some seek to minimize government, and processes involving scaled back fiscal activity have already begun, often out of sheer necessity. Just the same, does minimized government mean that better services will magically materialize in other capacities?

Not if a fair amount of planning and purposeful reorganization doesn't occur first. Without a radical rethink, a lot of private offerings would not really look all that different from today's government supported services. Not only is it difficult to generate sufficient growth from these existing services structures, but present day organization in this regard does little to address personal needs, incentives and challenges.

Let's at least keep an open mind, regarding events where advocacy for change is not just worn out political slogans. For all the complaints about government spending - let alone the dilapidated local budgets of recent decades - where are real efforts to generate a better services marketplace? And as James Pethokoukis notes, there needs to be a lot more flexibility and choice than what was advocated for services in the 1990s. Before governments are forced to cut social programs even further, there needs to be free market alternatives that are 1) capable of serving many and 2) capable of making continued economic growth possible.

In the more recent post, "Is Capitalism Making Us Stupid?", Alex highlights a review he provided for Joseph Heath's most recent work, Enlightenment 2.0: Restoring Sanity to Our Politics, Our Economy, and Our Lives. I have little doubt that Heath's latest book should be a good read, for he made reasonable arguments in his earlier book "Economics Without Illusions" which I read about four years earlier. Here's a podcast in which Heath discusses some of its themes. Regarding the latter book, here's Tabarrok:

The limitations of reason provide Heath's defense of tradition along Burkean lines...Tradition knows more than reason can articulate. The problem with modern conservatism, however, is that "it has become a defense not of tradition against reason, but rather of intuition against reason." And we cannot found a civilization on intuition. Intuition was built for survival in small, primitive societies riven by "blood feuds, tribal warfare, [and] periodic famine" and these are the societies that we will revert to when reason does not override intuition with second thoughts.

Of course, by no means is the tribal instinct strictly limited to a conservative perspective, for it manifests in the reactions of progressives as well. Often, the dialogue one encounters in social media, does not ask what can be done better. Instead the first impulse is to simply assert (once again) what the "other side" is doing wrong. That's an impulse which thus far has been difficult to overcome.

As to the seeming abandonment of reason in public dialogue, a long series of economic contributing factors are readily traceable. Society was forced to compromise time and again, as artificial limitations in knowledge use prompted more and more complexity in redistribution structures than ever should have been the case. Ultimately, governments have painted themselves into a corner, and now have few means to maintain the 20th century version of a knowledge based economy. As services have become a more important part of the marketplace, so too has time value. Only one problem: While the time value of of the specialized few has been accounted for, it can hardly be expected to suffice for the economic time value of those who remain excluded.

Does anyone really wonder - after decades of snowballing effects from limits on knowledge use - why reason has "abandoned the premises"? Fortunately - if knowledge use is once again allowed its rightful role in the marketplace - reason could ultimately return to public dialogue. Sure, it will take a lot of time to regain lost ground. But knowledge use systems are one way to begin the process, and they would lead to renewed growth potential as well.