A 3 Minute Introduction to Capitalism and Critique of Regulations and Socialism

hayekian
hayekian
Sep 8, 2018 · 4 min read

Why are private sector companies like BMW and Honda constantly innovating and copying each other’s innovations thus spreading superior knowledge and restructuring the social order into more advanced states as fast as humanly possible? Because the institution of ‘private property’ gives everyone in their role as consumers the ‘freedom to trade’ their wealth for what they like best. This ‘economic freedom’ is what inadvertently “turns on” ‘economic competition’ which is what motivates and inevitably forces everyone/BMW/Honda in our role as producers to produce something society values (our labor/products/services) which we do by innovating or copying existing innovations, or just doing what we are asked by managers/entrepreneurs. As cost-cutting ideas emerge leading prices to continuously fall, new profitable ideas arise and once again spread via competition in an endless cycle of knowledge generation/innovation. For example, computers were once very expensive, but once the price of making them came down enough, people easily realized that every home could have them, which gave birth to our computerized world and the Internet and all the great things that flow from it. The more wealth is produced, the more wealth has to be offered in exchange for labor as entrepreneurs/companies compete against each other for the labor they need which helps explain why the economic pie grows for everyone. Economic freedom, as opposed to leading to chaos, inadvertently “turns on” ‘economic competition’ which turns the entire planet into a massive distributed supercomputer that is constantly innovating and spreading superior information/knowledge and subsequent social order. Socialist/Communist/‘Public sector’/National bureaucracies are coerced MONOPOLIES that lack the competitive incentives in the always-competing private sector orders/companies. These bureaucracies get their wealth through taxation/compulsion so they have no incentive/pressure to be efficient and/or copy innovations. Central plans can’t work if people are free to not go along with them so they inevitably require compulsion/slavery. This helps explain why Socialist/Communist countries like the former Soviet Union, North Korea and Cuba were/are always run-down/poorer, copying all their technology from the Capitalist world, and have police-states needed to keep everyone going along with the plans/ideology. The now-classic image below shows a Socialist/Communist/Monopolistic order (North Korea) vs. a free/competitive/Capitalist order (South Korea). Try to envision the dynamism of the capitalist/free world, ideas constantly emerging/spreading in minds in the South(even outside in other countries and moving to/from the country) and spreading. But the North?

Keep your focus on information and order! Unlike information that arises in the private sector and is constantly improving as best as humanly possible due to economic competition, a government regulation is information that arises out of a few brains and is then forced upon the entire social order. The more the government regulates, the more it paralyzes competitive knowledge discovery. As government regulations have increased in the health care sector, turning it into a sort of island of paralyzed top-down competition-less socialist central planning, so have costs.

Below one can see how the less regulated a sector is the better it functions.

The IT sector is relatively unregulated, teens can work at Google/Microsoft and write the software in medical equipment that keeps people alive, yet there is no American Association of Computer Programmers dictating what or where such knowledge can be obtained similar to how the government via the American Medical Association regulates/paralyzes the medical sector via the licensing of doctors, medical schools, insurance sector, etc. At places like freecodecamp.org people learn to be highly-paid computer programmers for free. In the IT sector millions of people are ordered efficiently via smooth competition and are highly productive thus most make good salaries. If the medical sector, or better yet, the entire world-wide economy was as deregulated/free/competitive as the Software/IT sector, the rate of innovation and prosperity would skyrocket and I would guess that people who as of today have 10 years left to live might be able to beat dying of old age.


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