Saturday, August 20, 2011

Are Capitalists Happier? Huh?

Can't hear, can't speak, can't see.
Tosho-gu shrine in Nikko, Japan. [1]

Last Friday 12-08-2011, the post "Are Capitalists Happier?" signed by professors Ronald Rotunda, Vernon Smith and Bart Wilson, appeared at Reuter's The Great Debate Blogs.

In that post the authors purport to answer, on experimental evidence, the question: "Which kind of economy ultimately works better in the long run - capitalism or socialism?"

Once I learned of that post (h/t Occasional Links & Commentary), I posted a reply (16-08-2011), questioning the experimental design.

In my opinion their design badly misrepresents both socialism and capitalism. Thus, the apparent conclusions stated in the post do not follow and could even be reversed.

I also requested a link to a formal publication, in order to produce a more accurate opinion about the research.

As of Sunday 21-08-2011 (Sydney time) no answer had been posted by the authors, and I must assume none will be posted. Maybe they haven't seen my reply, or, having seen it, they don't intend to consider my observations.

In any case, I decided to reproduce the text of my reply (see below), so that readers can judge by themselves if my criticism is fair, or whether I am missing the point.

If the readers know more about the research, where I can get it and/or would like to comment, as usual, pertinent comments are welcome.
My Reply:
Aug 16, 2011
9:47 pm EDT

While a Marxist, my personal approach to experimental economics is rather sympathetic. I, for one, am happy to acknowledge the many positive things achieved by researchers in this field (like Prof. Smith): in my view, the flaws demonstrated in the Homo economicus view of human behaviour, underlining the broader methodological individualism paradigm.

Also, unlike most Marxists, I tend towards empiricism.

With these two things in mind, it’s easy to understand that I find intriguing and exciting the idea of applying experimental economics to the question: “Which kind of economy ultimately works better in the long run – capitalism or socialism?”

What’s more, I welcome the proposition: “Using virtual economies, we can now literally recreate, in laboratory investigations, the state of nature and are no longer left to philosophical musings of first principles.”

Considering all these things, I respectfully must say that the desire not to rely on “philosophical musings of first principles” is not an excuse for not knowing what those first principles are.

And I regret to say, with due respect, that on the evidence of the text presented, the authors seem to have a poor understanding of basic terms.

Let me put an example where no “philosophical musings” intervene. If I understand the experimental setting, each experimental subject is equally endowed with the basic means of production: a capacity to produce (i.e. labour) and a “field” (i.e. land) where they can individually produce the blue and red commodities in some proportion of their choosing. (Although capital was not mentioned anywhere, this is not necessarily an objection, unless the authors intended their demonstration to apply to Marxist socialism).

They can also steal “from each other because, in the state of nature, no legal system protects private property”. Although not explicitly stated, I take it they can steal blue and/or red commodity from each other, but not the “field” itself.

To put it all in a more succinct way: there is absolute equality (including property of the means of production)

However, it’s a basic point of all forms of socialism that not everybody is equally endowed with the property of the means of production. Incidentally, the term “communism” itself alludes to an ideal state where land and capital belong to the community (which although not identical, somehow seems to correspond to your initial setting, ironically enough).

Although the authors do not seem to have it in mind, in the capitalist mode of production, for example, the fact that capitalists monopolise capital (while workers can only provide labour) leads to conflicts. Note the inequality in the initial endowments.

Likewise, in the feudal mode of production, the fact that feudal lords/aristocrats monopolise land, while serfs provide labour in exchange for the right to use a part of the land on their own behalf, produces conflicts.

Thus, the initial experimental setting of absolute equality seems singularly inappropriate to test whether socialism improves well-being: why should people strive to achieve equality, if they are already equal?

Although a more philosophically-oriented criticism would probably be unfair and outside the scope of this reply, I would recommend a revision of the notion of individualism underlying economic liberalism, as it has deep Hobbesian roots; unlike socialism, in all its forms, that emphasises equality, collaboration and at least some degree of “collectivism”.

Finally, I understand that the post I’m replying to is not a formal research report, thus there may be things “lost in translation”. If possible, a link to a publicly available formal report (maybe the working paper version) could help clarify the situation.

Image Credit:
Three wise monkeys: Wikipedia

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