Capitalism vs communism from data science’s perspective
Here is the comparison of communism and capitalism as competing data-processing systems
Data scientists perceive the world as data-processing systems, and this view is now being increasingly adopted in economics and politics: after all, we think of the economy not as consisting of a myriad of individual perspectives but rather as a coherent whole.
Y. N. Harari in his book “A Brief History of Tomorrow” offers a unique comparison of arguably most important ideologies — communism and capitalism — not as competing paradigms but as different approaches to data collection and its handling.
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According to him, capitalism employs distributed data processing, whereas communism — centralized. He writes that
Capitalism processes data by directly connecting all producers and consumers to one another, and allowing them to exchange information freely and make decisions independently.
Thus, laissez-faire capitalism distributed the work of analyzing data, teasing out patterns, and making recommendations and decisions based on the obtained information between a plethora of independent but very closely interconnected and actively interacting processors.
As an Austrian economist, F. Hayek has put it,
… in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to co-ordinate the separate actions of different people in the same way as subjective values help the individual to co-ordinate the parts of his plan.
Exactly due to data-processing reasons advocates of a true capitalism favor lower taxes.
When taxes are low, individuals retain most of money and therefore have greater opportunities to effectively invest these resources. When taxes are increased, this means that more capital accumulates in the state’s coffers’ and therefore the government makes most of the decisions.
In the most extreme case, communist data-processing system, all of the profits are in the hands of the state, which alone processes the data and makes decisions based on this information — how much should a factory produce, what the price of shoes should be, etc. — in essence, the entire economic life is controlled and regulated by the government in communism.
Capitalism, on the other hand, uses distributed data-processing, and this is the advantage that helped capitalism defeat communism. This is because when a single processor makes a mistake, the results for the economy are disastrous, whereas, in free-market capitalism, there are many other players, who, in case one of them fails, are quick to utilize this mistake and eventually balance the system out.
Y. N. Harari gives an example of how in a centralized system when the only decision-making processor makes a mistake, negative effects of misguided decisions inflict severe damage on the country.
The Soviet science ministry forced all Soviet biotech laboratories to adopt the theories of Trofim Lysenko — the infamous head of the Lenin Academy for Agricultural Sciences. Lysenko rejected the dominant genetic theories of his day. He insisted that if an organism acquired some new trait during its lifetime, this quality could pass directly to its descendants. This idea flew in the face of Darwinian orthodoxy, but it dovetailed nicely with communist educational principles. It implied that if you could train wheat plants to withstand cold weather, their progenies will also be cold-resistant. Lysenko accordingly sent billions of counter-revolutionary wheat plants to be re-educated in Siberia — and the Soviet Union was soon forced to import more and more flour from the United States.
If a company in the capitalist United States decided to adopt Lysenko’s pseudoscience approach to agriculture, it would inevitably fail as the USSR did, but, unlike in the Soviet Union, other data processors would fill the gap, thereby mitigating the damage inflicted by the failure of one of the processors.
In the 20th century, distributed data-processing worked better than centralized because it was quick to adapt to changing conditions. When all available information is analyzed and decisions are made by several conservative communist apparatchiks it is very hard to undertake right measures and live up to the standards of the new technological era.
This is how capitalism compares to communism and why it has been able to withstand pressures and adjust to rapidly changing forces.
If market forces make a wrong decision, the invisible hand of the market will correct it and return the situation to equilibrium.
This is why capitalism is so effective.