In 1940, economist and social philosopher Friedrich Hayek wrote and addressed his book The Road to Serfdom to ‘the socialists of all parties.’ I, however, will be addressing only the democratic socialists, as a plea to elucidate the flaws and inconsistencies in their ideology.
To Democratic Socialists:
I am a millennial; the son of an immigrant, and; a biracial individual. I am a classical liberal; I am a free-market capitalist.
Free-market capitalists, of the classical liberal sort, share many similar end-goals with you, the democratic socialists. Our methods, however, differ, because of the danger that we see through your assumptions and reasoning.
On our Nation’s birthday, and the surge of democratic socialism occurring, I see it as my duty, as an advocate of a free and prosperous society, to enumerate some of those precarious assumptions:
Democracy as a Means
Democratic socialism espouses to be different from pure socialism, in that it does not believe that the economy should be centrally-planned by the government; rather, it believes that democracy—majority voting—can make the best decisions in regards to social investments. Additionally, it favors policies such as a higher minimum wage, universal healthcare, tuition-free-college, and even a jobs-guarantee.
To achieve these policies, via democracy, presumes that the majority of people will approve of these policies. Although there have been polls taken, the predictions of many polls—most notably and recently, the 2016 Presidential Election—differ from the actual result.
Moreover, social theorists have proved that collective-decision-making does not reach a ‘fair’ outcome. One of these theorists, Marquis de Condorcet, is from 1785, and; another, is more recent, from the 1960’s, the Nobel laureate Kenneth Arrow. Not only are these rules not fair, but — as found by economist Duncan Black — they depend on the median voter. However, the median voters’ preferences may not be the preferences of the ‘fair’ outcome. Adolf Hitler was elected democratically. His policies were certainly not fair.
Two of my research areas in economics is public choice and constitutional political economy. Scholars of these two research areas blame our encroachment of Liberty on the focus on outcomes rather than on rules. Rules, agreed on by EVERYONE, that are fair, can better serve the public needs. If the rules, or powers, entrusted the government of Hitler’s time were more restrictive, much of the detrimental impact he had on the world may have been less severe.
This leads me to the next malleable assumption — the government as a means.
Government as a Means
Democratic Socialists believe that certain provisions should be left up to the government. I find this to be the most dangerous presumption.
As we have seen from our current president, being a member of the government does not make one succumb to his or her self-serving tendencies and become ‘holy.’ No transformation occurs when one goes from a private citizen to a government official. Like most people, government actors do what they can to keep their jobs. They appeal to the block of constituents whom will get them the best chance of winning. They issue ‘rent-seeking’ type policies, such as log-rolling and pork-barreling, to keep their jobs or advance their political careers. These rent-seeking policies are often at odds with the ‘public need.’
Speaking of ‘public need,’ this term is hard to define. People have different conceptions and definitions of the ‘public need’; they also have different preferences, needs, and wants (even ‘basic’ ones). To presuppose that one entity, the government can provide an array of these, or some á là carte system from which people can choose their wants, is dubiously realistic, given the motives of government actors, and the works of social theorists mentioned, above.
Public choice economists, do not choose to see any government actor as a ‘deus ex machina,’ but rather fallible human beings – just as everyone else. Some humans are saint-like; some are knaves. By entrusting the government with certain public provisions, as democratic socialism does, it allows for both the kindness of the saints, and the hubris of the knaves. Again, public choice economists argue for rules to restrain government actors, to eradicate rent-seeking behavior. Among these rules are complementary institutions – or frameworks – for these rules to benefit ALL individuals – not just some. This will be discussed next – the Democratic Socialist’s Assault on Capitalism.
Democratic Socialism’s Assault on Capitalism
Democratic socialists accuse capitalism of being inhumane because it focuses on the profit-motive. This, however, is false. Capitalism is not tantamount to big-business; in fact, the capitalism for which free-marketers advocate is vastly different from the ‘capitalism’ that the United States is experiencing today. What we have in the United States is not capitalism; rather, it is a mixed-economy of both capitalism of socialism, which creates a system of ‘rent-seeking,’ which public choice economists—again, who are vastly free-market advocates—abhor.
When free-market economists talk about the ‘profit motive,’ we do so as a theoretical assumption. Most people act in their best interest. Economic profit is not the same as accounting profit, which focuses on monetary value, however. Economic profit can also actually consist of many non-monetary values—some of which are even tied to our emotions. To act in a way that cost outweigh the benefits, to us, is coercion, because a person would not rationally, in his or her mind, voluntarily choose to take on more costs than benefits (unless he or she was gambling). Since we advocate for a free society for all people, we advocate against coercion, or the costs outweighing the benefits; instead, we argue for the opposite—the benefits outweighing the costs, which is, technically, ‘profit.’
When talking about private business and entrepreneurship, free-market economists do advocate for the profit-system to guide the economy. However, we do this because we advocate for the business that meets consumers needs the best will be the most profitable. We believe that businesses who meet consumers’ needs should be rewarded, because they drive innovation. Businesses like Amazon, Apple, Microsoft, Tesla, and others, have changed our lives tremendously. Additionally, these profits provide two important functions: first, they provide a signal for businesses to keep producing. With these additional profits, more of the goods can be produced—sometimes even at a higher quality, due to the extra funds. This can mean more jobs for people, in order to create these new goods—it does NOT always mean that the profits will simply go to the corporate executives, only. Moreover, the increased amount (supply) of goods can, sometimes, be translated into lower prices, so that more people can afford them. For example, Elon Musk set out a plan to use profits to make cheaper, higher quality, products so that everyone could afford them. (See, not all capitalists are bad! Some are good, some are bad. What matters is how a system restrains the band people—this is the sphere in which capitalism is superior to socialism, by letting individuals make the best decisions for them)
Some of the people who can have these newer goods are the poor. We, just as democratic socialists do, care about the poor. Recent efforts to expose the similarities between some of our goals to reduce poverty have been written, most notably by Brown political philosopher, John Tomasi, in his book Free Market Fairness. As mentioned in an article of mine, I advocate for capitalism because I grew up poor; I want to eradicate poverty. I don’t take much personally, but to hear that capitalists are inhumane and don’t care about the poor is probably the only insult I will take personally. Facts are stubborn things – they do not lie. The fact is, historical data shows capitalism eradicates poverty more often, quicker, and better, than does socialism. Socialism of all kinds, that is.
Where to Go from Here
I wrote this letter to not to urge you to change your positions. As mentioned, I, and other free-market capitalists, share the same end-goals with you. What I do urge, however, is that you reconsider your policy prescriptions for these goals. The methods by which you wish to achieve these goals presume too much benevolence and omnipotence on our government; fail to see the limits of democracy; focus on the outcomes, even though people have different preferences on outcomes, rather than on rules, and; criticize capitalism for what it is not. The ‘disease’ is not capitalism; rather, it is the rules of our mixed-economy, and the unfair advantages it lends to some at the expense of others.
Additionally, I request that we have open debate to hear each other out. Most of the debate, thus far, between us has been ad hominem. Just as this medium of writing did not allow me to posit my argument ad nauseum, I might be missing some of your insight, too.
For the sake of our future prosperity, let’s celebrate our Nation’s birthday by changing our past transgressions. We ought to debate and discuss the facts, so we can ensure and create the best future possible for our descendants.
Your Capitalist Friend,
J. W. Plante