Our politics increasingly runs toward extremes. We no longer join together in cheering on competing teams of players selected for their talent. Instead, we retreat into increasingly remote ideological camps. We take distant shots aimed at vilifying our opponents, yet somehow imagine that others will treat our ideas with the respect to which we insist they are entitled. The result is not merely dysfunction. It conveys the misimpression that meaningful political discourse is divorced from practical political engagement. No functional political or economic system is intellectually pure. The world is messy, and so too is the relationship between government and markets. Acknowledging that does not make us weak. What will weaken us is assuming that the antidote to one set of extremes is yet another.
I previously argued that Trumpism is not inevitable. We can come out of this. I separately explained why I am not a libertarian. It is now time to turn my attention in the other direction and to explain in clear terms why I am not a socialist. Defending a blended government facilitating a mixed economy is philosophically, and even rhetorically, unexciting. But it is an essential step in moving both sides toward recognizing the importance of fighting practical political battles on a smaller, more mundane, and more issue-specific scale, while still calling out those who threaten our longstanding and basic institutional norms.
Recognizing the popular attention of fresh socialist candidates and the continuing influence of the Bernie Sanders wing, DNC Chair Tom Perez has declared Alexandria Ocasio-Cortez and like-minded candidates the “future of [the Democratic] party.” The New York Times invited political scientist Corey Robin to provide an intellectual foundation for this growing intra-party movement. In The New Socialists: Why the pitch from Alexandria Ocasio-Cortez and Bernie Sanders resonates in 2018, Robin doesn’t defend or even define socialism; instead, he offers a sociological account of the movement’s past and present appeal. New York Times columnist, and Economics Nobel Laureate, Paul Krugman offers support to at least some aspects of Robin's account in “Capitalism, Socialism, and Unfreedom,” as signaled in the more telling subtitle: “Minimal government doesn’t remove power from our lives.”
Robin’s central claim is that supporters view socialism as unlocking the door to freedom and, specifically, freedom from the constraints capitalism imposes. Whereas libertarians view markets “as synonymous with freedom,” Robin explains that socialists recognize that capitalism forces us to enter markets, often in problematic ways. He discusses an anxious parent or employee pleading to an insurance representative or catering to a boss’s whims to ensure coverage for her child’s appendectomy or to get a rightful promotion or avoid being fired. The problem, Robin states, isn’t that capitalism makes us poor; rather, it’s that it makes us unfree: “The socialist . . . believes that making things free makes people free.” This is hardly a defense of socialism, which can no more make things free than believing in the tooth fairy, Santa Clause, or the Loch Ness Monster can make them real.
Students of markets appreciate two things. First, they start from a premise of scarcity, a challenge that no belief system can make go away. And second, they recognize that market economies produce wealth either by production or exchange. Production means the creation of goods or services that others value, typically sufficiently above the cost of manufacture or development as to render the activity profitable. Exchange allows the transfer of assets or services from those who hold them to those who value them more highly, typically on terms that allow both sides to gain in the resulting transactions. There’s nothing magical about market economies. Professor Robin and I agree on that. Robin offers the following anecdote on his website: “Late in life, William F. Buckley made a confession. Capitalism is ‘boring,’ he told me. ‘Devoting your life to it,’ as conservatives do, ‘is horrifying if only because it’s so repetitious. It’s like sex.’” Perhaps. But markets hold the unique power of motivating those seeking more resources to create or otherwise provide what others wish to have. Markets make it profitable to improve social welfare.
Of course, not everyone is motivated by profit, at least all the time (says this law professor/blogger). Some people just love what they do, feel compelled to do it, and will not be deterred. Nor are market economies and the results they generate perfect. Far from it. Markets fail. But not all market outcomes that people find disagreeable represent failures. Higher prices following a natural disaster—sometimes called “gouging”—isn’t a failure. It’s the market’s method of signaling the availability of what economists call “rents,” meaning returns above opportunity cost. The signal encourages entrepreneurs to reallocate resources to where they are more highly valued, that is, until the crisis dies down and prices normalize.
By contrast, insurance markets are prone to routine failures, as, for example, when insureds engage in risky activities as a result of failing to bear the full downside risk. This is known as "moral hazard." Or when, as with health insurance, those who are healthy are motivated to forego coverage or to avoid mixing with those who are not. Game theorists describe this in terms of a separating versus pooling equilibrium, the problem that the Affordable Care Act was intended to help ameliorate.
And there’s no denying that most markets are not perfectly competitive most of the time. It is an unfortunate reality that Econ 101 generally treats perfect competition as an ideal against which virtually all actual markets seem destined to fail. Although the next lecture invariably introduces monopoly, competition's juxtaposed model, even then most students (along with some professors) miss the real takeaway. The problem isn’t so much that firms routinely hold market power, typically arising from creating products or services with distinct features that we enjoy. Economists call this "product differentiation." Rather, it is that once we have entered into a contractual relationship, with, as Robin observes, an insurer or an employer, or perhaps with a car dealership or a home developer, in a seemingly competitive market at the front end, we then encounter little or no choice at the back end. Economists refer to this as "bilateral monopoly," which means that the buyer and seller are stuck with each other, and the more powerful player, quite often the seller (although powerful employers “buy” labor), the more vulnerable player finds herself subject to the risk of market exploitation, typically taking the form of unfair dealing. (Nobel Laureate Oliver Williamson described this in terms of “appropriable quasi rents,” meaning temporary opportunities for rents resulting in the failure of the advantaged party to provide the other party with her expected contractual benefit.)
Markets are oftentimes brutal places, not entirely unlike the wild, with competition rewarding those who use their resources to dominate. Robin is certainly correct that markets do not make us free, if by freedom he means empowered to live one’s life unhindered by the need to do what’s necessary to survive and thrive. To have such resources, we need to confront serious choices about education, job training, careers, family, and community. And these choices arise in the context of scarcity, the fundamental feature of markets that makes the appeal to “free” goods or services illusory. Whereas socialists claim that free goods make us free, economists recognize that the very fact that goods are scarce, and thus not free, motivates entrepreneurs to invest resources with the goal of earning a profit while producing what people value.
In a post published in Bleeding Heart Libertarian, Professor Fernando Teson, distinguishes “democratic socialism” and “social democracy.” He defines democratic socialism as state ownership of the means of production, coupled with protected liberties. Teson claims that the category has proved an empirical nullity because to maintain ownership, the state invariably exerts control that is at odds with individual freedoms. This might explain why Robin observes that “[for] some, [socialism] conjures the Soviet Union and the gulag.” Teson defines social democracy as a market economy with the state empowered to provide modest market corrections and to tax and redistribute to benefit those most in need with a safety net. Teson maintains that describing the latter economic system as socialism is mistaken. Teson is correct. The terminological confusion might help to explain why Robin states “for others, [socialism conjures] Scandinavia and guaranteed income.”
Ultimately, Robin doesn’t explain which if either of these economic models, or some other, he has in mind; instead he asserts that socialists believe “that making things free makes people free.” With respect, this proposition is absurd. All economic systems confront the reality of scarcity and the challenge of motivating the creation of desired goods and services. If we could imagine conjuring goods and services at no cost, free goods would make us free. But even Harry Potter’s magical world disallows such a result. In Harry Potter and the Deathly Hallows, chapter 15, we learn that that world has limits; you cannot simply conjure food.
Robin raises a genuine concern: vulnerable people have always experienced the dangers of working at the whim of those in power. And it’s true that dangers arise, as Robin observes, “When my well-being depends upon your whim, when the basic needs of life compel submission to the market and subjugation at work . . . ." But what Robin and other socialists fail to grapple with is the harder question: would empowering the state to control the production and allocation of resources make us more free? Would it eliminate appeal to the whims of those empowered to control the resources we need to survive, let alone to thrive? And would it ensure the production of those resources in the first place? The historical counter examples are too numerous to list. Explaining socialism’s appeal is no substitute for explaining how it is that socialism actually succeeds better than robust markets in providing for society’s wants and needs. History weighs universally on the side of socialism’s detractors. Even if we accept the obvious assertion that past examples have failed to live up to the socialists’ ideals, this merely begs the question “why?” What frailties of human nature disallow our world, like the magical Harry Potter world, to limitlessly provide in ways that couple free access to resources with genuine freedoms?
Familiar readers know that I have long been highly critical of Trumpism. I truly believe that his candidacy and his administration have done tremendous damage to our nation’s institutions and to our standing in the world. But the Democratic party is on a profoundly dangerous path if its leaders believe that the antidote to Trumpism is socialism. I called this blog “blindspot” because we all have them, and we are almost always better off having them pointed out. Although those who identify as socialist remain a minority, a truly blinding spot is emerging in our nation’s left rear view mirror. It is time to call it out.
I am not a libertarian. I am not a Trumpian. And I am not socialist. I believe, and I continue to hope, that the same is true of a majority of Americans. This includes persons of good faith who identify as liberal, conservative, or, like me, centrist. I fear that our two major parties are, or at least risk, being coopted in ways that undermine once-shared core values.
Winston Churchill famously described democracy as “the worst form of Government except for all those other forms that have been tried from time to time.” The same can be said of market economies, or capitalism. Paul Krugman is, of course, right to point out that “Minimal government doesn’t remove power from our lives.” But it is a fantasy that socialism does. Those with the levers of power in a socialist state also hold the power to prevent competition. On his blog, Professor Brad DeLong observes that Robin’s examples of the market's excesses actually aren’t that at all; they are instead excesses of bureaucracy.
History reveals, over and over, that in socialist regimes, those with power to control the bureaucracy have been brutal in its exercise, especially at the hands of the weak. In a developed economy such as ours, markets are rarely purely competitive. But the profit motive allows the possibility of competition. In doing so, markets allow a process that has at least the potential to blunt the most egregious abuses of power. Too often, this ideal isn’t met, and often it takes a long time, and even legal action, to ensure that markets deliver on their promise. Even so, that's no justification for embracing a system that is theoretically flawed and without virtually any empirical support. Unfortunately for Professor Robin, the problem is not merely the absence of a theory to show why socialism is better; it is that those embracing that vision have proved otherwise time and again.
Markets are imperfect, as is democracy. It’s a constant struggle. Liberals generally seek stronger regulations and an enhanced safety net. Conservatives generally seek the opposite. The debates are repetitious. On one hand, maybe William F. Buckley was onto something: defending the work of capitalism and democracy, and our mixed economy, is “boring.” On the other hand, despite the repetition, I'm quite sure that Robin and the rising socialists within the Democratic party have failed to offer up anything worth substituting for sex.
I welcome your comments.
[Special thanks to Bob Stearns for comments on an earlier draft.]
Postscript: Here is a link to several letters that the NYT subsequently published in response to Professor Robin's original column. Of particular note are those by Professor Stuart Gottlieb (Columbia); Professor Emeritus David Shapiro (Penn State); Charles H. Gessner; and Thomas Perkins.
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