Thread by @Coyoteblog

When I argue with folks on the failures of socialism, I tend to group these failures into three buckets. @boriquagato is getting at the third and probably least discussed of the three

https://twitter.com/boriquagato/status/1338125319505580033

Readers are probably tired of me repeating these, and I know there are others who are better at this who use different frameworks, but here is mine.

Socialism fails in practice, and will always fail (until we get to a Banks' Culture-like end to scarcity) for at least 3 reasons

1. Information: It is impossible for any group of humans (or even humans with powerful computers) to come close to the power of distributed, organic, bottom-up markets in coordinating human behavior to improve the sum of individuals' welfare [insert "I pencil" reference]

Critics of capitalism react to competition and describe the whole system as dog-eat-dog. But competition is only the outer, visible shell. Competition is what keeps things vibrant & efficient. But the core of capitalism is not competition but cooperation

It is the only system (or un-system as some like to call it) that allows hundreds of millions of people to cooperate in their productive activities without physical coercion. Socialism, though it tries to disguise this, always comes down to cooperating at the point of a gun

2. Incentives: People work hard, take risks, innovate, etc. in a market economy because they have the (financial or other) incentive to do so. Socialism removes some or all these incentives, causing productivity and innovation to grind to a halt

Sometimes this happens immediately (think Zimbabwe farming). Sometimes it takes a while -- nationalized health care systems often can do OK for a generation as built-in work and service ethics from the old market system remain among older workers,

but then they still eventually fall apart as a new generation raised in a free-rider culture take over.

Forget the stiff characterization of Atlas Shrugged, the real virtue of that book is to tell the story of an economy where capitalist incentives have been removed

In this interpretation, the hobo's story on the train to Dagny about 20th Century Motors is the climax of the book, not Galt's Gulch.

The Soviet Union & communist China faced this problem from day 1, and much of their history is wrestling with it (eg hero worker programs)

The other incentive issue is the incentive of the politicians themselves. People who envision these socialist systems imagine political leaders who make hard decisions in the best interest of the nation. Is that the way it works on the planet you are from?

Because history offers no evidence that this is the way things work here on Earth. The more power one gives to a government leader, the more they are going to use this power to retain their own power and position and rewards.

(The same is true by the way of private actors. Give corporations access to a regulatory state and state power over markets, and they will use their wealth and influence to manipulate those rules to their benefit and to exclude competition)

I call this the wargames rule. The only way to avoid inevitable cooption of state power for personal ends is to not create the state power in the first place

Even if the guys who start the revolution are nominally fair-minded and idealistic, they are going to lose out fairly rapidly to the thugs who want all the new power that has been created to serve themselves.

The reason the US has been successful for so long is the founders assumed tyrants would try to take over, and tried to wire the system so they could not. And ever since, our political leaders have been messing with the wiring to try to defeat these protections

3. The individual value functions: The third area of failure is probably least discussed, but is the one that gato was highlighting -- that even if government could successfully optimize the economy to some value function, which value function would it be?

The US has 320 million people and we thus have 320 million unique value functions. These are unknowable to any technocrat in DC (sometimes they are even unknowable to ourselves until we are faced with a choice). There is no way to aggregate this into anything that is meaningful

People in power claim to be working for the common good, but since this is unknowable, they become like a priesthood that claims to have unique access to the word of God. Oddly enough, everything that God apparently wants turns out to increase the priests' power

When actual preferences are favored, they are either ones that increase the politician's power or popularity, or they turn out to be the the politician's personal preferences projected onto all of us

And no matter what restrictions are put in place, they never apply to the politician themselves -- whether you are an apparatchik in the Soviet Union shopping in a special party store that actually has stuff on the shelves, or Gavin Newsom entertaining at the French Laundry.

COVID has been a pain in the ass, & the government response has been infuriating & worrying, but one silver lining is that it has absolutely highlighted this effect. There is no existent science on the dangers of sitting in bars or going to church or protesting in the street

So orders for closures and the termination of some activities but not others telegraph the personal preferences that politicians are applying to us in the name of it being for our own good.

During COVID, we are creating something I would never have imagined possible -- a political priesthood where "science" is the unknowable God that can only be interpreted by the priests.

Christians in the middle ages were not supposed to read the bible & think creatively about God for themselves. Only the Church was able to do that and all us peasants were required just to obey the priests. They are the only ones in contact with God's will.

We are in EXACTLY the same position today. Only our governors and the CEO's of social media companies are allowed to interpret the word of science, and the rest of us are not allowed thoughts or speech that diverges from these interpretations - that would be heresy.