Myths of the Market

The market is universally praised by members of the establishment, but I will show that all those praises are false. Falsehoods can be either

  • lies (intentional deceptions — a secret conspiracy, if shared by many people), or
  • mistakes (unintentional, perhaps due to insufficient questioning).

Members of the establishment never publicly question the premises of the market. And I would guess they do not question the premises secretly either, for a secret cannot be maintained by a large number of people. But can a mistake be made by so many people? Yes, if it is “common knowledge.” For instance, many years ago it was “common knowledge” that Earth was flat.

We may conclude that the praises for the market are a sincere shared belief — they are a vast mistake, not a vast lie. That mistake is perpetuated, reinforced, and elaborated upon by many think tanks — the Cato Institute, the American Enterprise Institute, the Hoover Institution, etc. It may be helpful to think of those organizations as religious temples, places of worship. The premises of the market are their  myths. People in those institutions must see people like me — people who question the market — as heathens to be converted or exterminated.

The market is a state religion, necessary for respectability: One cannot become a member of the establishment without praising the market. Even the leftmost members of the establishment frequently mention their support for small businesses and “free enterprise.”

Moreover, it is a self-serving religion: One cannot accumulate wealth in the presence of poverty without believing in selfishness. But its worshipers believe they are “doing well by doing good.”

MYTH

vs

TRUTH


The rich get that way by being smarter than most of us; we should accept everything they say as great wisdom.

The rich got that way by being thieves or descended from thieves, and they stay that way through selfishness. Everything they say is a lie or a mistake.


The market rewards the industrious and punishes the lazy.

The market rewards the few who control the market, and screws everyone else.


We can all respect each other and treat each other fairly, even if we live separately and we don’t share or care.

When we don’t care about something (or someone), we start to see it as an object to be used for our own purposes, a commodity to be exploited or discarded.


Capitalism is the source of all innovation and progress, including flush toilets and cellphones.

Science and technology are the source of all progress. Capitalism arrived around the same time, and tries to claim credit. That’s like me taking credit for the music of Tom Petty, because I was born in the same year.

But nearly all innovation originates in university labs and government labs, where the workers are paid in a socialist fashion, not according to how much profit they bring in.


Competition brings out the best in us.

capitalism-as-fishAnything that can be done with competition, can be done better with cooperation. Competition kills empathy, and brings out the worst in us. Competition kills empathy, leaving greed, fear, hate, lies, racism, sexism, authoritarianism, loneliness, wars for profit, etc. But Alfie Kohn has explained this better than I can; listen to his lecture about it.


Capitalism has lifted millions of people out of poverty and hunger.

The world now has the resources for ending poverty and hunger altogether, but that’s not happening because it wouldn’t be “profitable” to the Powers That Be. On the other hand, the communist revolutions of Russia and China did rapidly lift millions of people out of poverty and hunger.


Most poor people in the USA are wealthier than ancient kings.

That’s not true. Many people in the USA go to bed hungry, or die because they cannot afford medical care.

And what of the rest? Perhaps absolute poverty has diminished, but relative poverty still means someone else controls your life. What good is a Rolex in a prison cell?

Economic inequality is bad for everyone; even the rich get heart attacks from worrying about not being rich enough.


Capitalism is democracy.

Few people in our society get to vote on how their workplaces are run; that’s why we all hate Mondays. And the 2014 research by Gilens and Page showed quantitatively that government follows the preferences of the rich, not those of the general public.


The only alternative to capitalism is Stalinist dictatorship.

Admittedly, we haven’t seen any long-lasting examples of voluntary sharing, but that’s because sharing communities get crushed by the armies of plutocracy. Revolutionary Catalonia, 1936-1939, was crushed by the fascists. The Paris Commune of 1871 was crushed by the troops of Versailles. Early Christians, whose sharing was described in Acts 2:44, were persecuted by the Romans until they were co-opted by Emperor Constantine. And hunter-gatherer societies generally have been put in concentration camps, or “reservations,” by expanding agricultural societies.


Voluntary trade happens only when both parties benefit. Thus, trade is the essence of freedom.

The migrant farmworker “voluntarily” chooses long hours at hard work for low pay, rather than starvation. The “volunteer army” is recruited by the poverty draft. Their lack of alternatives is built into the capitalist system.


Voluntary trade makes us all better off.

Even if both parties benefit from a trade, generally one benefits more. Generally it’s the one who was already in the stronger bargaining position, and so the trade makes him stronger still. Thus trade — even when it is voluntary and honest — increases inequality, and ultimately creates a small wealthy class that controls everything —  homes, workplaces, government, banks, debts, and even the market itself. So if there ever were a “free” market, it wouldn’t stay that way for long.

This process is not a result of “corruption,” but happens even when trade is working “properly” — just like the board game Monopoly always ends with all the players but one totally destitute.


The market is efficient and wise.

A trade is negotiated between two parties, typically a “buyer” and a “seller.” But its consequences may affect other parties who are not consulted, such as workers, the community, and the ecosystem. These side effects generally are harmful, uncompensated, and unmeasured. They are called externalized costs, or externalities, because they are outside of (external to) the considerations of the negotiators.

These unmeasured costs don’t affect the calculation of market prices, so the market can’t be efficient. Indeed, you have to ask what the word “efficient” even means. Efficient toward what purpose? Hitler’s gas chambers were very efficient at killing people.

The market chases after short-term profit, but it does not serve anyone’s long-term purposes. Its externalities are destroying the ecosystem. If continued, that will kill everyone. Even the rich will discover that they can’t eat money.


Don’t try to understand capitalism. Its justifications are in the complicated math you see in modern economics textbooks.

The math in modern economics textbooks only obscures the truth. Mathematics, even if carried out correctly, only shows you the consequences of your assumptions; it cannot choose the assumptions. Math only answers the questions you ask; it cannot choose the questions. Conventional economics textbooks ask, “how can I selfishly make more short-term profit for myself and/or my company?” They don’t ask “how can we make this world more sustainable and more pleasant for me, or — better still — for everyone?”


“Caveat emptor” works fine. Just boycott the bad companies.

Few of us have the time or talent to live like Ralph Nader, investigating every company, becoming an expert on every product or service we buy. We might hire people to become experts for us; that’s the job of the Environmental Protection Agency, the Food and Drug Administration, and several other government agencies. That’s the “government intervention” that businesses often complain about. Unfortunately, those agencies get underfunded, and bought off by the bad companies. The only way to really end corruption is to end its incentive, the pursuit of private advantage.


Capitalism makes “the American dream” possible.

The so-called “American dream” is a nightmare: You keep your stuff in your house, I keep my stuff in my house, I don’t need to care about you, I can’t afford to care about you. Separate property creates the illusion of separate lives, despite pandemic and the destruction of the ecosystem. The guy who gets left behind financially or emotionally may start shooting. This is not a good system.


Under capitalism, anyone who works hard can succeed, and even become rich.

If that were true, every woman in Africa would be a millionaire.


If people would just work harder, and get themselves educated, they would be able to get jobs.

Education has been priced out of the reach of most people. And there are far more unemployed people than job openings right now, regardless of education. And that trend will continue, because productivity keeps increasing, as employers get better information, better materials, and better equipment (including automation). If we all shared the benefits of increased productivity, we’d all have more paid vacations. But instead the benefits of increased productivity are pocketed by the owners of the workplace. Thus, for most people, progress means layoffs, not leisure. Progress is making our lives worse.

But if this trend continues, the owners of the robots will have few paying customers for the goods and services produced by those robots. A capitalist can only get rich if other capitalists are paying decent wages to employees. This contradiction means the system is heading toward a crash. What new system will replace it, and how painful the transition will be, depends on whether we all discuss it now.


The smart thing to do is to work hard and pay off your debts.

By all means, pay off your debts if you can. Individually you’ll then be better off. But not everyone can do that. Here is why:

We think of money as something positive, something good for you to have, something that represents goods and services. But it’s more accurate to say that when you have money, that’s bad for someone else. That’s because essentially all money is created as someone else’s debt (created by banks using fractional reserve lending). So the total debt in the world is money borrowed plus interest. Because of interest, there does not exist in the world enough money to pay off all the debt. Most of us are indebted to someone — most often, to banks, who create the money.

This bizarre situation is similar to the children’s game of “musical chairs.” In that game, there are fewer chairs than players. Each time the music stops, everyone scrambles frantically for a seat. The player without a seat is removed from the game — but after that, a chair is removed too. Of course, when the children’s game ends, everyone laughs and it’s time for cake and ice cream. But when the money game ends, someone is homeless and hungry. Thus, desperate competition is built into our economic system.


Corporate executives deserve their enormous salaries, because they are smarter and work harder than everyone else; they do very valuable, important, difficult work. Under capitalism, you get paid what you deserve; you get paid according to how much you produce.

In the few instances where workers have kicked out the executives and taken over the business, generally profits and productivity have increased greatly. Apparently the work of the executives was not really all that valuable.

It might be possible for someone to be twice as smart or twice as hard-working as you, but not 300 times as smart or as hardworking — that’s just biologically impossible, so it can’t justify a salary 300 times as large. The real reason your boss is drinking more from the money stream is because he is standing between you and the stream. Under capitalism, you are paid not by how much you produce, but by how much you control.

The word “earn” has two very different meanings in English. It is possible for someone to acquire a million dollars, but it is not possible for someone to deserve a million dollars. Robinson Crusoe might make himself comfortable, alone on his island, but he could not make himself rich there; one can only get rich by acquiring a piece of the work of large numbers of people.

And how much does anyone “deserve”? If your brother is bedridden with a debilitating illness, so that he produces nothing and needs much, does he deserve nothing?

In a caring society, we should produce what we can for the community, and we should be paid what we need, though those two quantities actually are not connected. But our present culture is not one of caring; that explains its violence.


We just need to clean things up a bit. The problem is not capitalism itself, but “unregulated capitalism,” “corporate capitalism,” or just a few bad executives. Capitalism would be fine if we just reform it a little. Its fundamental principles are sound, but we have strayed from them into corruption.

Evidently you haven’t understood what the fundamental principles of capitalism really are. They are “every man for himself, get all you can, and to hell with the commons.” There is no healthy version of those principles.

You cannot safely harness greed. If you sign a contract with Satan, all the loopholes will favor him, and his team of lawyers is better than yours. The wealthy buy the legislators who you hoped would protect us from the wealthy.


Some people in business are quite ethical. The problem is with unethical people, not with business itself. And surely the problem is only in big businesses; there is nothing wrong with small businesses like the Mom-and-Pop grocery store on the corner.

If some people in business are ethical, that’s in spite of the market, not because of it, just like some people can walk up the “down” escalator despite it going opposite to the way they want to go. But why not take the “up” escalator instead?

Capitalism grows like cancer. The Little Prince explained that he needed to weed out every baobab while it was still small, or the resulting giant baobab would destroy his little planet. Even the Mom-and-Pop store perpetuates the idea of our separateness. Will Mom and Pop give free groceries to the man who just got laid off? That won’t be enough. What we need is not charity, but solidarity. Small businesses often do behave honorably, but that’s in spite of capitalism, not because of it. Their legitimacy is co-opted by big businesses, which then crush and swallow the small ones.

And big and small can’t be separated, because they swim in the same sea of competition. Mom and Pop don’t really want their retirement savings to depend on fighting desperately against Walmart and Amazon. They would love to convert their little store into a socialist distribution center, and change their focus from people’s money to people’s needs.


Capitalism is the only system that will work, because people are basically selfish. They will only work for money, for private gain.

Sociologists have found that money is a good motivator for mechanical, menial, uncreative tasks, the kind of work that capitalism excels at creating, the kind of work that automation is rapidly making unnecessary. But sociologists have found that money is actually a demotivator — a remover of motivation — for creative, meaningful work, because monetary payment displaces the intrinsic rewards of meaningful work. For instance, nurses and firefighters don’t get big paychecks, but they feel good about being useful to other people. We should restructure our economic system so that all people have meaningful work.

Hollywood tells us that, in the event of disaster, people turn into savage beasts and fight each other for scraps of food. That makes an interesting story, but it’s not true. Rebecca Solnit’s book A Paradise Built In Hell shows that in actual disasters, when day-to-day habits are swept aside, people band together to help each other. Later they speak about how wonderful it felt to be part of a community.

Culture can change. It sometimes does change accidentally. But we’re intelligent enough that we don’t have to wait for an accident; we can consciously choose to change our way of life. The first step is to get more people talking about it.


Personally, I’d be glad to be in a sharing and caring society, but most people would never go along with that.

Ironically, that’s what most people say.


“Property rights.”

Though laws are always enforced selectively, the law says that when you buy stolen property, it doesn’t become yours. Legally it still belongs to the people from whom it was stolen. But if you trace things back a bit, you’ll find that they bought it from someone who bought it from someone who stole it.

If you trace it all the way back, you’ll find that all the land, and all the good things produced from the land, originally were shared by the whole community. Sharing comes naturally to hunter-gatherers, because everyone is dependent on everyone else. That all changed 10,000 years ago, with the invention of agriculture, which made property possible. (It did not make property necessary.) The first thief was the first guy who put up a fence and said “this portion is mine.”

Admittedly, sharing is hard to imagine, because we’ve departed so far from it. But we’d better relearn it soon, because the ecosystem can’t survive in privatized little bits. Species are rapidly going extinct all around us, and we’ll join them soon if we don’t change our ways.


How do you intend to implement a fairer system? Through a violent revolution? Or do you think you can just sweet-talk the rich and powerful into voluntarily giving up their wealth and power?

It’s true that the powerful, corrupted by their power, will not easily be converted. Most of them will resist violently, through whatever thugs they can hire.

And few of the police will join us, initially. They were selected for their authoritarian inclinations when they were first hired, and then they were trained to strengthen those inclinations. You can see that already, in police beating up protesters. (You rarely see protesters beating up police.)

Generally a revolution turns successful on the day when the police switch sides, and decide they will no longer fire on the protesters. You can see examples of this in history — e.g., in the Russian revolution of 1917, and in the fall of the Berlin Wall in 1989. It’s a cultural change, and if it’s complete enough, then there will be very little bloodshed. The rich will not join us, but we can just say to them “we will no longer honor your pieces of paper,” and suddenly they will no longer be rich.

The cultural change requires education and recruitment. That is best carried out with leaflets, not bullets. Indeed, violence will alienate many of the people who have not yet decided what side they are on. But some violence may be necessary later, purely in self-defense from the old regime.

I would like to avoid violence as much as possible, for both ethical and practical reasons. But if we are forced into violence, I will still feel that ethics is on our side. Systemic violence, structural violence, is already quite widespread. What are poverty and hunger, but slow violence? Mark Twain said this really well, in describing the French Revolution:

“There were two ‘Reigns of Terror,’ if we could but remember and consider it; the one wrought murder in hot passions, the other in heartless cold blood; the one lasted mere months, the other had lasted a thousand years; the one inflicted death upon a thousand persons, the other upon a hundred million; but our shudders are all for the ‘horrors’ of the minor Terror, the momentary Terror, so to speak; whereas, what is the horror of swift death by the axe compared with lifelong death from hunger, cold, insult, cruelty and heartbreak? A city cemetery could contain the coffins filled by that brief terror that we have all been so diligently taught to shiver at and mourn over; but all France could hardly contain the coffins filled by that older and real Terror – that unspeakable bitter and awful Terror which none of us has been taught to see in its vastness or pity as it deserves.”


(More myths may be added here.)

(More truths may be added here. Send suggestions to LeftyMathProf@gmail.com.)


In conclusion, the market is all bad, and if continued its externalities will kill us all, as I noted earlier. We should try to replace trade with sharing. That’s a radically unfamiliar idea, but we have no alternative.

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2020 Nov 5, revision 1.21. (Original version Oct 2015.)