Monday, April 19, 2004

Are Competitive Markets and Capitalists Good?

Assuming the definition of capitalists to be "an investor of capital in a business", then I would say capitalists are motivated by making money: they provide money with the expectation of receiving more money in return. Is this good or bad? In and of itself, making more money seems a hollow goal. Who wants to be remembered because they made a lot of money? And a good capitalist is captive to the needs of the market. The market is concerned with the efficient allocation of goods and services. Capitalists are pulled into markets where profits are higher. Capitalists help correct inefficiencies in the marketplace. But do they do good?

Competitive markets are silent on "good vs. bad". Is it better to have competitive markets? Yes. There is no more successful model for the efficient allocation of scarce goods and services. But does that mean it is good? Certainly, if it helps feed people, helps them have houseing, results in safer countries, then it is in the right direction.

But how might it not be good? It is not good if the benefit is not spread as widely as possible, resulting in great disparities in wealth. It is not good if market decisions are not being made with long-term information (i.e. the markets are not being short-sighted). Unfortunately, there are significant pressures (greed, entitlements, etc.) that work to keep disparities in wealth, especially between nations. And we all know how imperfect the information about long-term costs and benefits are; just look at our track record in the past 100 years. How can we know the long-term costs and benefits of something like nuclear energy when the technology hasn't even been around for very long? What are the long-term costs and benefits of burning fossil fuels at the rate we are burning them? Do we really know what will happen with all the carbon dioxide produced? Do we need our oceans and water supplies to be cleaner? What are the long-term costs and benefits of genetic engineering of plant and animal species? So many questions, so few answers. I don't trust our competitve markets to lead us in the right direction in such cases. Long-term costs are often ignored in favor of short-term benefits.

Moral choice, the choice between what is good or bad, needs to counterbalance the potential failures of the competitive market. I don't want to be governed by economists who often incant Keynes' statement, "In the long run, we're all dead." I prefer, thank you very much, in the long run to be good and alive!

April 19, 2004