Who’s On First? Private Property or Competition?

David Brin trained as a scientist, has written science fiction and consults with the government and corporations regarding what will happen next. He’s not an economist, but he’s written an interesting little article about right-wing ideology. It’s called “Stop Using Adam Smith and Friedrich Hayek to Support Your Political Ideology: The Irony of Faith in Blind Markets”. 

Brin cites John Robb, an author, “military analyst” and entrepreneur, as a big influence on his thinking. Robb isn’t an economist either, but here are a couple of paragraphs from his blog

The only way to manage an economy as complex as [ours] is to allow massively parallel decision making.  A huge number of economically empowered people making small decisions, that in aggregate, are able to process more data, get better data (by being closer to the problem), and apply more brainpower to weighing alternatives than any centralized decision making group.

In other words, central planning cannot cope with the economies of developed nations in the modern world. We need the Invisible Hand of the market. Yet: 

…an extreme concentration of wealth at the center of our market economy has led to a form of central planning.   The concentration of wealth is now in so few hands and is so extreme in degree, that the combined liquid financial power of all of those not in this small group is inconsequential to determining the direction of the economy.  As a result, we now have the equivalent of centralized planning in global marketplaces.  A few thousand extremely wealthy people making decisions on the allocation of our collective wealth.  The result was inevitable:  gross misallocation [of resources] across all facets of the private economy. 

Getting back to Brin, he argues that:

….across 4,000 years we’ve seen that whenever a small group of men become powerful enough to control an economy and command-allocate its resources, they will do so according to biased perceptions, in-group delusions and fatally limited knowledge. Whether they do the normal oligarchic thing—cheating for self-interest—or else sincerely try to “allocate for the good of all,” they will generally do it badly.

So what’s the solution? Brin says it’s competition: “the most creative force in the universe”: 

By dividing and separating power and—more importantly—empowering the majority with education, health, rights and knowledge, we enabled vast numbers of people to participate in markets, democracy and science. This has had twin effects, never seen in earlier cultures.

  1. It means everybody can find out when a person stumbles onto something cool, better or right, even if that person came from a poor background.
  2. It allows us to hold each other accountable for things that are wrong, worse or uncool, even when the bad idea comes at us from someone mighty.

…cutting through countless foolish notions that held sway for millennia—like the assumption that your potential is predetermined by who your father was—while unleashing creativity, knowledge, freedom, and positive-sum wealth to a degree that surpassed all other societies, combined.

Even the most worrisome outcomes of success, like overpopulation, wealth stratification and environmental degradation, come accompanied by good news— the fact that so many of us are aware, involved, reciprocally critical, and eager to innovate better ways.

Some have argued that cooperation has contributed just as much to human progress as competition has, but putting that issue aside, Brin arrives at his major point: the people who call themselves “conservatives” and claim to revere thinkers like Adam Smith and Friedrich Hayek, both of whom extolled the benefits of a competitive market, don’t really believe in competition:

The problem is that it’s all lip service on the right! Those who most loudly proclaim Faith In Blind Markets … are generally also those proclaiming idolatry of private property as a pure, platonic essence, a tenet to be clutched with religious tenacity, as it was in feudal societies. Obdurate, they refuse to see that they are conflating two very different things.

Private property—as Adam Smith made clear—is a means for encouraging the thing he really wanted: fair and open competition….But anyone who actually reads Adam Smith also knows that he went on and on about that “fair and open” part! Especially how excessive disparities of wealth and income destroy competition…. When today’s libertarians praise the creative power of competition, then ignore the unlimited [worship of property] that poisoned it across the ages, we are witnessing historical myopia and dogmatic illogic, of staggering magnitude….

But in rejecting one set of knowledge-limited meddlers—100,000 civil servants—libertarians and conservatives seem bent on ignoring market manipulation by 5,000 or so aristocratic golf buddies, who appoint each other to company boards in order to vote each other titanic “compensation packages” while trading insider information and conspiring together to eliminate competition. Lords who are not subject to inherent limits, like each bureaucrat must face, or rules of disclosure or accountability. Lords who (whether it is legal or not) collude and share the same delusions….

Hence, at last, the supreme irony.  Those who claim most-fervent dedication to the guiding principle of our Enlightenment: competition, reciprocal accountability and enterprise—our neighbors who call themselves conservative or libertarian—have been talked into conflating that principle with something entirely different. Idolatry of private wealth, sacred and limitless. A dogmatic-religious devotion that reaches its culmination in the hypnotic cantos of Ayn Rand. Or in the Norquist pledge to cut taxes on the rich under all circumstances—during war or peace, in fat years or lean—without limit and despite the failure of any Supply Side predictions ever, ever, ever coming true.

An idolatry that leads, inevitably to the ruination of all competition and restoration of the traditional human social order that ruled our ancestors going back to cuneiform tablets — Feudalism

As Paul Krugman has often pointed out, it’s not the 1% that’s the problem. It’s more like the 0.001% (Brin’s “golf buddies” and their ilk around the world) whose vast wealth makes them modern-day aristocrats. It’s also those who Krugman called “enablers” in today’s column – the minions who spread the “private property is sacred” and “government destroys liberty” gospel. If these so-called “conservatives” were true to the spirit of Adam Smith, they’d celebrate “mass education, civil rights, child nutrition and national infrastructure etc.”, which Brin mentions, as well as antitrust enforcement, workers’ rights and environmental protection, all of which have “empowered greater numbers of citizens to join the fair and open process of Smithian competition”.

PS – Brin’s article is on a site called Evonomics: The Next Revolution in Economics. It’s worth visiting.