Friday, April 20, 2012

The miracle of capitalism

The miracle of capitalism is that, first of all, it makes the correct assumption about mankind and how people function. That assumption is that human beings will virtually always act in a way that tends to increase their own happiness or satisfaction. This may be described in various ways:

  • Self-defense
  • Self-preservation
  • Self-serving
  • Selfishness

The actions may range, for example, from building an improvised shelter when lost in a wilderness to buying an iPhone. These are both acts of that put self ahead of other options. For example, I may destroy trees or kill an animal to survive when lost in a wilderness area.

What most liberals, progressives and leftists, however, fail to consider is that the buying of the iPhone was just as selfish an act as selling the iPhone was—as was the creation and manufacture of the iPhone.

  • If you bought an iPhone, you did so because you felt that you would be happier, more satisfied or better off for having purchased it than by not purchasing it and keeping your money or using it to throw a big pizza party for your friends. Your act was purely selfish. You did not make the decision on whether the world would be a better place if you had an iPhone. You also probably did not consider: “Maybe I should just mail my money to the federal government so they can help more poor people with it.”
  • If you sold an iPhone, you did so because you felt that your own situation would be improved by having sold it. This holds true whether you were the salesperson behind the counter, accepting a wage—and maybe a commission—for selling the iPhone; or if you were the owner of the franchise or store that sold the iPhone to the end-user. Indeed, it holds true down the entire supply chain—the distributor, the wholesaler, the manufacturer. Each of these were acting in their own self-interest when they acted to sell the iPhone.
  • If you manufactured an iPhone, chances are you did so because it was in your own best interest to do so. (This is where it gets touchy.) Things are not so wonderful in China. It is quite possible that an eleven-year-old working ten hours a day manufacturing iPhones in China is not being coerced—at least not by Apple®. It is not at all unlikely that the parents of the eleven-year-old feel that it is better for the entire family for this child to be working in the factory than to be in China’s schools of indoctrination, where the treatment of the students may be no better than the treatment in the factory. It is even likely that the eleven-year-old worker feels that it is better for him or her to be in submission to his parents than to rebel. In fact, this young worker may even feel a tingle of pride and satisfaction that he or she is able to contribute to a better life for his whole family by working in the factory. (Granted, this is not the American way—to put children into factories—but we are not in a position to prejudge how other cultures grow and evolve over time. For more on this topic, please read here.)
  • If you created the iPhone, if you were part of the product design team or even an inventor of one of the components, you, too, decided to create the product and work to get it into production because you were selfish. You did it because you thought you would be more satisfied or better off for having done so than in not doing so. It may have been because you were paid by Apple® or some other company to do the work. Or it may have been that you were simply so enthralled by the invention and innovation that the only way you could find satisfaction was to see it produced and distributed—even if your financial reward was relatively small by comparison. Either way, you selfishly sought whatever it was that brought you satisfaction or happiness.

So, what is the miracle of capitalism? It is the fact that capitalism turns your selfishness into service to the satisfaction of others.

Apple®, in the absence of government coercion, has no power to force anyone to buy an iPhone or an iPad or an iPod. The buyer—as indicated above—buys the product voluntarily (choosing it above all the alternatives, which are not just other similar products, but every other option—including just keeping the money) because the buyer sees the value of the product/service provided by the creators, manufacturers and sellers who bring the product/service to him.

This is the miracle of capitalism: transforming serving for self-satisfaction into service for the satisfaction of others.


James Armstrong said...

What you neglect to mention is that the market actually responds to dollar-votes, rather than preferences, and so the rich have much more influence over market outcomes than the poor. This is not only unjust, but inefficient.

This helps to explain the booming market for luxury yachts, when a large number of people can't even afford the basic necessities.

As the production possibility frontier (PPF) demonstrates, there is always an opportunity cost associated with choosing to supply good y rather than good y. In this case, diverting our scarce resources towards building luxury yachts moves resources away from all of life's other necessities.

RDCushing said...

Well, for lack of a better word or a more succinct response, let me just say that your theory is flawed.

Nevertheless, you're certainly welcome to hold your wrong opinion on the matter.