Capitalism – a meaningless concept in which we can believe

As one surfs the economic forums of Medium and other media one often sees the word “capitalism” in the headlines but mostly I ignore these items because the word’s definitions are generally so vague the word is meaningless.  Because capitalism is such a meaningless word it is something in which we can believe while ignoring a less pleasant reality.

When we study economics we can try for an honest understanding so we can solve problems and reduce human suffering or we can seek rationalizations for things which will make us rich in spite of exploiting others, destroying the environment and overusing scarce resources.  If I were the chief executive of a large corporation or a politician I would want the second approach to economics.  Guess who pays the salaries of most economists.  This blogger makes no money out of his study of economics, so he can take the first approach.

The main feature of the economic organization with which most of us are familiar is that a lot of it is based on legislation which restricts competition.  Patents, copyright, licensing and subsidies all work to restrict competition  and/or distort prices.  These are so pervasive that we cannot say we have competitive market economy.

The problem with a perfectly competitive economy is that it does not allow for profits.  Competition reduces profits until each firm makes wages and a return on investment but no profits.  If one wants profits one needs government to pass legislation to restrict competition and most current  governments are happy to oblige.  Once upon a time this blogger used to make pottery.  I suggested that in order to make a good living we should form the Canadian Potters Association and get the government to pass legislation that all the people in Canada should eat only from dishes make by members.  Other potters laughed but lots of other occupations have that legislation: teachers, doctors, lawyers, septic tank installers, most large corporations (patents and copyright), etc.

Like lots of other people I would like to see an economy with more equality and less exploitation.  I believe the best way to get it would be to have more competition.  To get there we should repeal or at least reduce copyright, patent and licensing legislation and drop all subsidies.

This would leave many people exposed to economic adjustments which often cause suffering. A guaranteed income scheme would be a better way of coping with these problems than restricting competition.

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Bill Gates and vested interests

The world’s richest man thinks robots that displace human labour should be taxed and the money used to fund philanthropic employment in health care and education.  This proposal would suit the interests of the one per cent but there are probably better ways to deal with problems created by the agricultural surplus.

Bill Gates deserves some credit for his philanthropy and for recognizing educational and health care needs although one has to be concerned about the economics of how he became the current chairman of the board of the world’s elite.

To evaluate proposals like this we need to look at the vested interests of the person making them.

Mr. Gates’ foremost interest has to be in maintaining copyright and patent legislation as that is the foundation of his fortune.  If our society did not have that legislation he would be just another clever computer nerd, we would all be using cheaper and better software and there would be a great deal more equality in our society.

His second greatest interest has to be promotion of the social monitoring and tracking industry. The future of his fortune probably depends upon the success of Microsoft in tracking and monitoring all people so the information can be sold to advertisers.  I fear this not so much because of the advertising but because once the information is collected it will also be available to governments and the one per cent for social control.  I switched my computer to linux minx because I figured Microsoft was getting too blatant and too untrustworthy in its collection of information.

Another major interest of this guy is full employment and the work ethic.  He needs for everyone to be working so we can all purchase his software and be subject to targeted advertising.  If that does not happen his position as the richest man on earth becomes precarious.

Another of Mr. Gates interests is the maintenance of poor people in this world.  Without them he would not get brownie points for philanthropy.

Will his proposal help to save jobs?  Probably not because the root problem is that we have used up the most easily available energy and mineral resources.  Those that are left will take so much energy to extract their value is limited.

The development of robots should be seen as part of a long-term technological development which has given us a high agricultural and material goods surplus and which allows all the benefits of modern civilization.  The challenge is to use the technology for the greatest enjoyment of human lives.  It may be the greatest benefit would come from a new emphasis on doing arts, crafts, music  and theatre rather than marketing more elaborate gadgets.

So there are two things which might interfere with Mr. Gates’ desire for full employment and his future.  First is the depletion of energy and mineral resources which will reduce our economic activity and the second is if more and more people get fed up with the marketing conspiracy and reduce their interest in contributing to economic growth.
 

Fiddlers, venues and copyright

Last night we went to a concert by two Canadian fiddlers –  J.J. Guy from Saskatoon and Gordon Stobe of Nova Scotia.

The unique feature of this concert was that it was for 25 to 30 people in the living and dining rooms of a private home. Not only were the performers mingling with the audience during the intermission but there was also terrific interaction between both groups during the show.

johnny_automatic_3_fiddlers_in_silhouetteAfterwards I asked Gordon  about the difference between this venue and a larger auditorium.  His reply was that he made more money playing to a larger crowd but this was much more enjoyable for him because of the interaction.

Another thing is that these two musicians were making a living out of their music without having to go on the cruise ships.  Even so they do a lot of teaching and they are away from home a lot.  They are making it by being very good and going for a niche in the music industry.  They are probably a lot smarter than those who try to make it in the pop sector.

I also asked about copyright and the music industry.  There have been so many recent changes in the music industry that copyright legislation is mostly irrelevant.  It may be that the future of the music industry is in small venue concerts such as last night.  I hope so and I encourage other people to seek out such concerts.

The evils of patents and copyrights

Two economists at the St. Louis Federal Reserve have called for the abolition of the American patent system, a proposal I endorse 100 per cent.   I would include copyright.

Their argument is that the patent system retards innovation.  My argument is that patents and copyright restrict competition which increases inequality.

“The historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side effects, strong patent systems retard innovation with many negative side effects,” Boldrin and Levine wrote. “More generally, the initial eruption of innovations leading to the creation of a new industry—from chemicals to cars, from radio and television to personal computers and investment banking—is seldom, if ever, born out of patent protection and is instead the fruit of a competitive environment.”

 

In order to have a competitive market there should be no restrictions on entry to that market.  The purpose  of patents is to give the patent holder protection from competition.

zeimusu_Sri_Yantra secondGenius is 90 per cent plagiarism.

If the British had strongly enforced patent protection, we would not have had the industrial revolution.  If the Elizabethans had copyright, we would not have Shakespeare.  If the Romans had copyright, we would not have the Bible.  If we didn’t have patents and copyright we would have a more equal society with even more useful gadgets and medical research would focus and serious diseases rather than the diseases of us rich people.

Patents and smart phones

Here’s a rather long article on patent wars in the software industry especially with regard to smart phones.

The purpose of patent and copyright legislation is to restrict competition and allow some people to make excessive profits.  In this case it appears some of those profits are going to lawyers.

If we didn’t have patent legislation the smart phones would be even smarter and would be less expensive.  Probably a lot of lower-income people would benefit greatly.

I have a theory that genius is 90 per cent plagiarism.  Therefore anyone can be a 90 per cent genius which isn’t bad – except those who don’t listen (or who get caught by patents).

Intellectual property rights

The protection of intellectual property rights in one of the foundations of our economy and is responsible for all the modern gadgets we use including the computers used in writing and reading this weblog.

Yes, in that property rights are one of the major ways in which we restrict competition in our economy.

But we might be better off if we didn’t protect intellectual property.

Here’s an article which claims Germany was able to quickly industrialize and catch up to the British because that country was slow in enacting copyright legislation.

I have read that during the British industrial revolution patent legislation was loosely enforced if at all and  there was  considerable circulation of ideas.  Some of the major inventors did not get rich and some died poor.

If the Romans had had copyright we would not have the Bible and if the Elizabethans had had copyright we would not have Shakespeare. It may be that a lot of creative people are motivated by things other than money.

If we didn’t have patent and copyright we might now be using more advanced and much cheaper computers, some of the world’s most difficult diseases might have been dealt with and the Olympics would probably a lot less commercial.

On the other hand, British Columbia coastal natives are quite possessive of their dances and songs.  While watching some visiting dancers I  asked the lady who led her band’s dancing if she was noting some of the steps to incorporate into her own dancing. She was somewhat emphatic in telling me she couldn’t do that because the dance belonged to those dancers and couldn’t be used without permission.  That was a part of their culture.

One of the features of perfect competition is that there must be no barriers to people getting into a field.  If we really wanted a competitive market economy we would abolish patent and copyright legislation.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Economics and the U.S. presidential candidates

The Lexington columnist in this week’s Economist tries to analyze the two U.S. presidential candidates in terms of their understanding and support for “capitalism and the free-enterprise system”.

I feel uncomfortable with terms such as “capitalism and the free-enterprise system” because I think they are meaningless words used to hide from us the reality of how our economy works.

Our economic organization is one in which governments pass legislation and regulations which work to restrict competition. Subsidies, tariffs, licensing, copyright and patents all work to limit competition and thus to increase profits.

Romney has certainly benefited from this aspect of government activity and as president would support if not expand it. I don’t now how Obama became a part of the one percent but there is no indication he would not continue to support it.

It appears both men are equally strong supporters of our current economic system whatever name one attaches to it.

 

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