Sometimes it seems like the cold war never ended.
The western world is ostensibly a free-market democracy, and yet you could be forgiven for thinking otherwise. Corporations are universally reviled, sometimes with hilarious results. The socialist running for US president is widely beloved, while the business owner is a public joke. Academia and the more elite publications will, behind closed doors, admit they thought the former СССР had some good ideas. Despite what it says in our history books, this memetic conflict is still ongoing.
I don’t care so much about what name we give to Moloch. I’m much more interested in the things people say, the ways they behave when engaging in this cosmic struggle. It’s quite curious.
Despite our political squabbles, most people generally hold the same object-level beliefs. Our ideas regarding morality are largely the same. Murder is bad. Love is good. Don’t hurt other people. That sort of thing. At the end of the day, this is why we all do the things we do. Further, it’s not too difficult to judge whether something achieves these goals or not. While it’s hard to really predict the long term effects a given policy will have on society, we can all generally agree on which systems work and which systems fail. So why do we disagree so viciously on politics when we agree on the goals and have objective ways to measure them?
The big clue to me was when I started to notice, in the US anyway, that someone’s professed party often doesn’t do the things you would expect it to do from first principles. Republican ‘pro-business’ policies often give preferential treatment to certain businesses at the expense of others. Democrat social policies have a strange tendency to backfire on the poor and reward the upper-middle class. It’s almost as if people value Being A Democrat (Republican) more than they value actually achieving Democrat (Republican) goals.
When you see an obvious contradiction, and nobody else seems bothered by it, that’s a clue to look deeper. Many people are better at understanding than communicating. Perhaps something illegible is going on. Maybe a deeper cause drives this difference, and all we see is the bad explanation.
For all people’s opinions on social policy, they’re shockingly bad at systems thinking. People think, “X will solve our problems,” and go about trying to do X. What they fail to realize is that systems are dynamic and chaotic. If you do X to a system, the system will react. If your path to X is “do X until it’s done”, the system will push back, and you’ll never get anywhere. You can’t do X directly. You have to figure out something else, something that leads to X. If you aim where X is, you will miss. You have to aim at where X will be.
The key to all of this is incentives. Incentives matter. Anything you do to society will only change it today. But if you change the incentives, you will forevermore change what society will do in the future. There are implicit incentives in all our decisions. It seems people rarely give them the attention they deserve. But it’s interesting to look at the incentives that fall out of different policies, and ponder what they might mean.
As I said before, communism, capitalism, I don’t find this argument interesting. But the incentives that fall out of communism and capitalism in practice, these are fascinating. We have all these ideas in our heads, from society, from the media, about what these mean, but the incentives tell a different story. Following the incentives, the fundamental difference between the two is central planning. The naïve intuition might frame this as redistribution, but that’s not quite correct. There are ways to redistribute wealth in a decentralized fashion, but communism never implements itself that way.
Communism is fundamentally central planning. The core idea of communism is that we can identify coordination failures in systems, and if we could avoid them it would be better. Avoiding them necessitates an overseer, who can supervise and step in when necessary. This overseer is necessarily centralized.
Capitalism (or, more precisely, free markets) is fundamentally decentralization. The core idea of free markets is that by empowering a million people to make a million decisions for themselves, their incentives for success and against failure are stronger, and the diversity of experimentation will generate more and better solutions over time. This system does not work when a single director ultimately makes decisions.
As an illustration, consider the medical industry. Well, the medical industry in the US is a horrendously bad example of a free market, so consider the relatively free case of nonessential surgeries at private clinics.
I’ve lived in the US for many years, and I am a Canadian citizen. I have ample experience with both medical systems. The difference is a useful illustration of my point.
Consider knee replacement surgery. This surgery is nonessential, nobody will die without knee replacements, but it is significant for quality of life. In the US, if I need a knee replacement, I will go to a clinic, make an appointment, have the surgery next week, and a month later receive a bill for fifty thousand dollars. In Canada, I will go to my doctor, get on a waiting list, wait at least six months, have my surgery, and pay fifty bucks for some painkillers. The reason why medical care is astronomical in the US is well documented, but what’s up with Canada? Why does it take so long? The difference is in the incentives created by the US’s markets and Canada’s socialism.
In the US, a million people who need knee replacement are each able to weigh the costs and benefits of surgery, and make the right decision for themselves on whether or not to go under the knife. In Canada, this decision is ultimately delegated down to a central agency. Instead of a million people making a million decisions, one person (or committee) is making one million decisions on behalf of one million people.
This is an unmanageable burden. One person can’t do the work of a million people. That’s why most modern communistic proposals imagine massive computer systems to take on this burden. Failing that, the only way to manage this burden is to turn a million illegible decision processes into one simple, scalable bureaucratic policy.
A result of this is that the policy necessarily must be one-size-fits-all. Sure, it can be complicated, with exceptions carved out for this, that, or the other group. But the exceptions are still based on relatively simple factors such as demographic group membership. The process can’t mold itself to fit an individual’s needs. And it can’t react in real-time to shifting conditions in the environment. It’s restricted to a predefined set of procedures to be used in different contingencies
Additionally, the central authority’s ability to make the correct policies is limited. A central authority can’t possibly know what a million people want better than they do. It must accept trade-offs. The most common one is legibility. Earlier I mentioned that people often understand better than they communicate. The central planner’s policies can only be based on what people can communicate. They must engage in some streetlight sociology.
The end result is that communistic policies treat the systems they apply to as static systems, out of necessity. In the socialized healthcare of Canada, the central health agency is given a budget and told to optimize given that budget. The amount of resources they can bring to bear on the problem is ultimately fixed; all they can do is use them wisely. If a million people want knee replacements, and we can only afford 200,000 a year, a hell of a lot of people are going to be on wait lists.
In the free, decentralized system of the US, this doesn’t happen. The system is dynamic and open. It readily exchanges resources with the outside world. More people wanting knee replacements doesn’t stretch a fixed budget; it makes more resources available! Alternatively, as the price rises, more people are able to decide for themselves that it’s not worth the cost, and drop out of the pool of waiting patients. Nobody needs to preemptively put themselves on a wait list.
The tradeoff is cost. It sounds optimistic when I say “more resources available to provide more knee replacements,” but remember, resources means money. More knee replacements means that more money gets spent, in total. It is more expensive, in total. The budgetary mindset of the central planner allows them to aggressively drive down the price of the surgery, at the expense of other, non-monetary factors (opportunity cost, time, quality of service). In the US, no such compromise on service quality takes place; you simply spend more money instead.
It’s this difference in mindset, I think, that is at the heart of the deep political differences between socialists and free marketeers. If you’ll let me engage in a bit of armchair evolutionary psychology for a moment, consider the following. In situations where the pool of resources is fixed, the budgetary mindset makes sense. There is no chance the pool of resources will grow, so having a central authority allocate the resource makes sense. The alternative would be waste and instability in the service of a goal that we’ve already hypothesized is impossible.
On the other hand, very few resources are truly fixed, and rarely are they permanently so. In many cases, taking the central allocation approach is unnecessary, and retards the experimentation and diversity the leads to growing the resources you have.
It’s plausible that both types of situations were common throughout human history. In times of famine, where no more food would be available until after winter, the strict central management of resources is critical. At the confluence of two rivers, a trading post represents a place where you can grow the pool of a critical resource, at the expense of a less important one.
Perhaps, over time, evolution thought it valuable to fixate genes that bias people towards both mindsets, with the optimal one for any given situation ultimately dominating the memetic landscape.
Perhaps we all agree on what our goals should be. Perhaps we all are good at judging when we’ve succeeded or failed. But perhaps we’re all afflicted with genetic blindspots, and coming together to solve society’s problems involves overcoming the bug-ridden software that evolution has armed us with. Capitalism, communism, the flavour of the system doesn’t matter. What matters is that the incentives are aligned to best achieve the goals we all agree we should reach.