[FoRK] Capitalizm, libertarianism, labels, belief vs. hypothesis

Jeff Bone <jbone at place.org> on Sun May 13 12:22:36 PDT 2007

On May 11, 2007, at 7:01 PM, Jeff Bone wrote:

> On May 11, 2007, at 6:09 PM, <strata at virtual.net> wrote:
>
>> The way some of you folks express your belief in the absolute  
>> superiority of
>> capitalism and the 'invisible hand' of the marketplace, in light  
>> of numerous
>> evidence to the contrary, is just as 'nutso' (as you so tactfully  
>> put it).
>
> I'm not going to knock it off on the religion stuff --- see aside,  
> below --- but I'm going to knock it off (or at least ease off a  
> bit) on the perfect-market stuff.  I've seen the light.  There are  
> several fundamental problems with the brand of Capitalizm (tm) I  
> was peddling a while back.

"You folks."  What folks would those be?

BTW, Strata, in case you weren't paying attention:  the above is a  
good illustration of the difference between "belief" and "hypothesis"  
--- one that can constructively be used to come up with a reasonable  
definition of a "True Believer."  A true believer is somebody whose  
model of the world is not subject to modification on the basis of  
observed disagreement between model and reality.

I've long been frank about the fact that the thorn in my side -wrt-  
my extreme libertarianism is anti-trust;  for years I wrestled with  
this in the context of being an entrepreneur attempting to innovate  
in a market dominated by near-monopolies (whether Microsoft, AOL,  
EMC / NetApps, etc.)  That small thorn has grown into a rather wild  
and gnarly sort of rose.  That problem plus a more robust theory of  
markets that I've been picking at for years has lead to the current  
hypothesis:  given certain constraints (rational agents, isotropic  
transaction costs, scale-free definition of agent, non-entelechy,  
lack of systematic bias in the presence of ignorance, perfect social  
network connectivity, isotropic search costs, and so on) free markets  
are provably (i.e., mathematically) superior to markets + regulatory  
or other coercion at approximating Pareto-optimal distribution of  
"value", i.e. resources / satisfaction / etc.

(Note too that the very idea of Pareto optimality is somewhat  
contrary to the way "real" humans judge success, i.e. only in  
relation to having more of something than their neighbors.)

Unfortunately, that idealized model's fairly divorced from reality;   
given the facts of reality, it seems that pushing *for* more freedom  
in markets is generally a good thing, but coercive means may  
occasionally be necessary to avoid short-term (and maybe long-term)  
imbalances.  It seems intuitive to me that coercive means should in  
reality probably be applied as minimally and judiciously as possible,  
but I don't have a rigorous reason for that.  And I don't have any  
oracle for determining on a case-by-case basis whether any given  
coercive measure is warranted or will have the desired effect.

I've long said that economics is nothing more or less than the study  
of human interaction, and markets nothing more or less than the sum  
total of that interaction.  It's become clear to me that my  
definition of both is somewhat more expansive than the typical  
definition;  to make model agree more closely to reality, it's got to  
encompass imperfect information, lazy consumers, complex social  
network topology, systematic bias, unevenly distributed transactional  
advantages, coercion, manipulation, a much more variable idea of time- 
value-of-money than is usually formulated, and so on.  (And on, and  
on...)

What does all this do to my libertarianism?

Not much.  I can insist on libertarianism all I want;  being overly- 
zealous about such things only helps to balance out the over- 
zealousness of the regulation / central-economic control advocates.   
(In fact, it doesn't even do that;  clearly the systematic bias that  
exists in our society today values majoritarian coercion and / or  
socialism over market solutions for many things.)

But it would be a mistake to say that I'm claiming --- or have ever  
claimed, cf. longstanding caveats about monopoly --- that the market  
we find ourselves in is even a close approximation of the ideal "free  
market" of economics, or that it can be made so simply by  
deregulating and letting the market sort itself out.  Whomever you  
might have meant by "you folks" ---be careful where you stick those  
labels.  Hypothesis isn't belief, and the standard tactic of calling  
economists, libertarians, etc. "true believers" is --- for folks that  
actually approach economics with a scientific point-of-view, at least  
--- both inaccurate and cheap, both in my own case and, probably, in  
general.


jb


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