I don’t meet a lot of people like commenters here in the flesh, but if I did I don’t know what I’d do. What if a lot of people’s experience with leads them to morally different conclusions to yours? What if the issue isn’t we should use nicer words to describe our system, but the dichotomy of massive accumulation at one end and mass emiseration at the other, to say nothing of living paycheck to paycheck. I know MY says these are just emotional reactions and not logical. I know economists say this is actually the normative state of human society. But huge numbers of people don’t agree. Popularists take some of your fucking medicine and listen that large numbers of people don't want a rebrand of capitalism, they're confronting the actual problems of capitalism.
I find it amusing that "greed" is used as a pejorative for "self-interest" by so many people who would acknowledge pursing the latter but excoriate others for allegedly pursuing the former, even when both parties are doing the same thing. I recently retired after a 45-year career as a CPA in a national firm. I never encountered an employee who didn't seek to maximize his salary, and it wasn't uncommon for some to be dissatisfied with their annual increase or bonus: that's pursuing self-interest! And I never had an employee say, "Oh, that's too much; I can't possibly accept it." But when a firm pursues a goal of maximizing profits to satisfy investors, the investors are "greedy" rather than simply acting in their own self-interest.
I agree with your position, but I'd push a little deeper. When wealth concentrates enough to bend the rules, raise the barriers to entry, and capture the very regulators meant to keep the market free, that's the mother of all rent-seeking. In my eyes it's the incumbency that writes all the other incumbency.
My fix would be a new competitor, one company in each industry, but with different owners. Owned in equal shares by millions of ordinary people, so the customers are the owners. Want to go global? Make it owned by billions.
And I agree that greed exists beyond ownership so this doesn't cure it, it aims to align it. The millions of owners do not have to be nicer people; their self-interest just points the other way, because they're buying what their own companies make. Extraction stops making sense to them. Make those companies compete in the current market and that should free the invisible hand.
I've been working this idea out in detail, a different fix than welfare, but still aimed at the same freedom you're describing.
> I think it’s underrated to an extent how much the audience is the problem.
This argument appeals to journalists for obvious reasons but isn’t a useful diagnosis. If it’s human nature to prefer negativity, you can complain about it, but it won’t change. And things weren’t like this before. Something else changed, namely media technology (the internet).
Contrast:
1) “the audience is the problem” => we have an individualized shortfall of virtue and need people to be better. Collective action problems are hard. This doesn’t work.
2) “the media is the problem” => we need to regulate media or invent new ones. Hard but certainly easier than revising human nature.
This problem didn’t exist to nearly the same degree 20 years ago. Mostly the same people are still alive and consuming media now.
It’s a very sharp test: did the people get worse? Did they get worse for reasons that aren’t traceable to external causes?
To give an analogy, we’d never accept this logic in criminal justice: even if, morally, murderers are the problem, that diagnosis is totally causally inert. “Make the murderers better people” isn’t a policy program, but “buy back guns, post more beat cops, change the lighting on the problem streets”, whatever, is.
The way it looks to me: I think the audience stayed about the same, but market conditions changed secondary to technological changes. The newspapers always knew the gossip page and horoscope and funnies were in more demand than the serious news coverage, but when they were unbundled via the internet, it became impossible to cross-subsidize the serious news operations on the demand from people for gossip and horoscopes and funnies. And at the same time, the ad revenue that used to support local papers from want ads and such moved online, so their main revenue source went away.
I think it is hard to address much of this via policy, both because regulating news media is hard to do without running afoul of the first amendment (see the threats made by the FCC against broadcast media in this administration for worked examples), and because even trying to have a few subsidized serious news operations that somehow weren't captured by the government despite getting funded by the government would only do a little good--most people would still be looking for gossip and sex scandals and hatereads rather than careful high-quality reporting. I'm still trying to consume high-quality news sources, but it seems very hard to make my neighbor do the same, or to make her stop reading social media outrage bait, or whatever.
The parallel that occurs to me is the breakup of the AT&T/Bell phone monopoly. This seems like a good decision in terms of adding competition and opening up space for innovation, but a side effect of it was that AT&T could no longer use their monopoly rents to subsidize a prestige project called Bell Labs that just happened to be the best research lab on Earth. The technology changed, and it would have been increasingly costly (in terms of phone bills and innovation) to keep this monopoly in place, but killing the monopoly off destroyed Bell Labs.
There’s not really a silver bullet, but the closest thing and something I’d really like is a progressive tax on online ad revenue. The digital-ads business model has enormous negative externalities. If the companies that sell the ads had to internalize that, there’d be less engagement-chasing and addiction and overly efficient competition for attention.
I mean, I think it's in the word, which is to say capital has a favored status over labor. I know I'm a bit to the left of most people here and am more favorable to unions than others but I do think people have not an entirely wrong sentiment that even in capitalism, certain people "owners, both of companies and land" have more power than people who don't, and that the current system benefits the incumbents of that systems vs everyone else. Free market assumes a certain level of equality, which doesn't pit workers against owners and ironically assumes the state of Adam Smith's system of perfect symmetry of information and no barriers to entry, whereas capitalism as defined by people's conception of profitability and the stock market depends on the asymmetry of information and barriers to entry to ensure profitability.
>the stock market depends on the asymmetry of information
Perhaps a hot take, but this isn’t a bad thing. It’s a fundamental nature of the universe that information is not perfectly distributed, and sometimes knowledge doesn’t even exist at all and has to be discovered. That there is an incentive to go out and surface new information through research, and that said information is then at least partially shared (through the movement of share prices) with the rest of society, is a good thing on the merits.
"Why do you say the AMA is keeping supply artificially low instead of imposing high standards for the profession?"
Because it sure seems like the lower standards used in most other countries are, on net, producing better health outcomes for those countries. I'm not going to go so far as to say that the AMA is entirely doing it for devious rent-seeking reasons rather than believing their own BS, but if they were merely imposing a high standard, that would be an absolute standard, not one that changes depending on the year you apply to med school.
“I hate capitalism because of [outcome that is due to socialism]” is sadly a pretty common refrain.
I mean the prime example is the NBA you mention: it, like all American pro leagues is *incredibly* socialist. The revenue sharing, the salary caps, the non-compete clauses that prevent players from playing in two leagues, etc, it is about as socialist as you get. This is, in fact, a defining characteristic of American sports leagues that differs from the EU. Imagine a salary cap in the Bundesliga. FC Bayern would not exist.
For a great example, consider how people were OUTRAGED that Kawhi Leonard got a side deal to play for the Clippers. They were genuinely pissed that Balmer “cheated”, where the “cheating” was… paying an employee more? How is that bad? Unless you are one of the other 29 teams that would prefer to collude to keep salaries low? Which, again, is so very much not how free markets work.
Sports leagues in the US are as far from socialism as is logically possible. When owners set up agreements to limit worker pay (player salaries) that is as pure a definition of capitalism along the control axis as exists: the owners are capitalists, they own the teams, as a group they collude to limit worker pay. Anyone with a good 5th grade education knows that socialism is defined as the ownership of real capital by the state and workers being paid by the state (independent of revenue streams correlated with the work performed). Socialism is a failure and will always be a failure because it completely removes the production of real value as metric and therefore makes all socialist organizations structured around political power.
None of that is socialism. People often sign contracts that limit some of their choices, as with NDAs, non-compete agreements[1], contracts to perform some service for a certain amount of money within a certain time, etc.
The NBA and other sports leagues are a kind of cartel, but it is genuinely hard to see how you'd have a pro sports league without pretty large-scale collaboration of a kind that would be unusual and maybe illegal in other industries. You have to agree on the rules and the schedule, and also on meta-rules like how you're allowed to recruit new players, pay restrictions, etc. I think without this, big market teams just end up winning all the time, because with 10x the budget of the smaller teams, they can hire a much better set of players.
But also, the New York Knicks are competing with the San Antonio Spurs in sporting events, but as a business they are not really competitors. The Knicks are competing with the other sports franchises in NYC, as well as alternative entertainments like Broadway plays, movies, concerts, and the like. If the Spurs decide to cut ticket prices, this does not undercut the Knicks' business one bit.
[1] These are evil and I'd like to see them banned, but they're common enough in current businesses.
I don't understand. What you're saying is that capitalism can produce cartel-like behavior, then labeling that "socialism". And I'd agree with the first part, but the second is just being criminally imprecise with words.
The NFL’s behavior is not cartel like, internally to its structure. The Rams and the Cowboys compete against each other, but are not *allowed* to do so in a free market capacity. They are literally contractually obliged to obey a salary cap.
This is different to a Kartel, in that Kartel members collude, but often the Kartel collapses because of the prisoner’s dilemma. You in fact saw this pretty regularly with OPEC back when they were a true Kartel (i.e. before countries like the US produced enough oil to be net exporters). They would collude, the price of oil would skyrocket, then inevitably one member would get greedy, and the price would crater.
It’s notable that the NFL should, for all intents and purposes, be an illegal monopoly (because, again, they are violating a whole bunch of free market principles), but are not because of a literal act of congress that JFK pushed for, and this set a precedent for the other big sports leagues.
I am far from the first to make this comparison, by the way. The Acquired podcast on the NFL lays this out quite explicitly, as does their podcast on the IPA (India pro cricket league).
Your point is that this is a group of separate companies who have come up with shared pricing agreements and shared agreements on labor sourcing. And that this behavior is something our anti-trust laws regulate, but exceptions have been made. This is cartel-like behavior.
I don’t understand your counterargument. Like, in a polite way I don’t know what it means. The counterargument is that the Rams and the Cowboys are not “allowed” to compete against each other. Not allowed by whom? Federal law? A contract to another organization enforced by Federal law? This is just a cartel that’s found a way to enforce its members’ behavior by leaning on enforceable contract law and corporate governance, while obtaining itself an exception from specific laws that are designed to prevent Federal law from being used to enforce cartel adherence.
The NFL (and other pro sports leagues) only got an antitrust exemption in 1961 as applied to TV rights. And these leagues only have an antitrust exemption as applied to the players due to forming collective bargaining agreements with their unions that supersede that.
In all other aspects, they're still bound to the Sherman Antitrust Act like anyone else. See American Needle v. NFL for a recent example.
I do think that a lot of anger at capitalism or markets or whatever ends up being anger at the existence of tradeoffs or scarcity of resources.
Why can't you spend all day sitting around in your underwear playing video games and watching porn? Because a bunch of people have to work every day for you to be able to spend all day doing that, from the farmer who grows your food to the plumber who unclogs your drains to the doctor who treats you for repetitive stress injury, and you or someone else has to provide them some incentive to do those things rather than sitting around in their underwear playing video games and watching porn all day.
Isn't the entire concept of leisure time something that was invented with capitalism? because suddenly you could have enough time and money that you could take breaks from working, or stop working early enough in the day to do something fun and frivolous?
No, that's silly. There are a ton of old peasant dances and music, traditional fairs and festivals, etc, all from pre-capitalism days. The people back then were churchmouse poor (even kings were poor in many ways, like no decent medicine or dentistry), but they did sometimes have leisure time and used it.
I was a child in the People's Republic of Poland, which was socialist, not capitalist, and believe you me, grown-ups did *not* sit around in their underwear and read porn mags (no online porn or online anything else in those days). There was a lot of "all comrades must contribute/laziness is a vice" rhetoric, and it was unacceptable for an able-bodied adult not to work. (BTW, stay-at-home moms were extremely rare; as a mother, you were supposed to leave your young child with your retired mom/mother-in-law/a government-run nursery and get a job outside the house)
This is great for how to think about market regulations, but also much of the capitalism/socialism argument has to do with worker pay/rights and wealth redistribution, and of course you don't go into that in this post.
You've probably got other posts where you talk about the morality and market efficiency of things like collective bargaining and social safety nets, but I'd still love to see more posts about that.
I'm especially interested to know if you think that deadweight loss is a big problem in the realm of worker's wages (in other words, collective bargaining and minimum wages laws are misguided and actually harm workers), or if you think that the market of wages doesn't function the way that the market for goods and services does?
You should have listened to one or more of your historically-minded friends who told you there is a difference between "social democracy" and "socialism." Or you could have just asked an LLM. That's what I did. Here is the answer it gave:
"Yes, there is a fundamental difference: while socialism historically seeks to replace the capitalist system with collective or state ownership of the means of production, social democracy aims to reform capitalism rather than abolish it. Socialism focuses on ending private property and market-driven production to eliminate class distinctions, whereas social democracy operates within a democratic, capitalist framework to provide a robust social safety net. Social democrats advocate for a market economy regulated by the state, characterized by high progressive taxation, strong labor unions, and universal public services—such as healthcare and education—to reduce inequality without dismantling the private sector."
It’s true these terms have distinct definitions. But Matt’s observation is that the public discourse in one country often ends up using one term for the same thing that the public discourse in another country uses another term for. We might complain about how the word “liberal” is used in North America and in Australia (it’s used differently in those places, while Germany tends to use it in closer to a technically correct way). But for public opinion, how people use the term is more directly relevant than its technical meaning.
In practice, many countries have socialist parties that don't want to end private property and market-driven production or nationalize the factories or any of that--"socialist" is just the name they have for center-left policies like more benefits programs and more environmental regulation.
You can complain about this (or about how the center-left in the US is called "liberal"), but it's just how people have named their parties. For example, the Socialist party is running things in Spain right now, and they seem to have refrained from nationalizing the banks and liquidating the Kulaks so far.
I wasn't complaining about how people name their parties, just about *Matt* seeming to imply (the "main practical distinction is that countries where people speak Germanic languages tend to have social democratic parties whereas those where people speak Romance languages have socialism") that there isn't any difference between social democracy and socialism. But a lot of smart people (Ferdinand Lassalle, Jean Jaurès, Eduard Bernstein, FDR, Willy Brandt and Olof Palme) spent their lives fighting for a social democratic vision different from socialism and there is an argument - that I find fairly persuasive - that a lot of the good things that we like about the world we live in are downstream of their lifetimes of work to create a vision of socioeconomic progress that was both practical and politically appealing.
Great piece! I’ve been noting for a while that, while our capitalist system produces extraordinary levels of wealth fairly broadly through society, it also seems to move us further away from human connection. In order to maximize my wages, I would need to move away from members of my family, the friends I grew up with, and take my kids away from all of theirs. If I really want to maximize wages, I’ll need to do it again every few years, since hiring managers always seem to value new hires more than existing employees.
I remember a Hidden Brain epsisode where they talked about how you don’t want your friends to treat you the same way a bank treats you, but you also don’t want your bank to treat you the same way your friends do. Transactionalism is dehumanizing, but obviously there are plenty of areas of our lives where we want it to keep existing. It’s fine for our employers not to treat us like we are friends or family (in fact, some have written that companies use the idea that “we are all family here” to get employees to put up with unreasonable things for a workplace), but none of us want to be treated like robots either, or like numbers on a paper.
I think part of the point here needs to be that efficiency is wonderful, but it’s not everything. University of Chicago economists love to bring out reams of stats telling us how much poorer Europeans are and how much worse their productivity numbers are etc. But those are all very nice places to live. So maybe efficiency and productivity don’t need to be our only priorities.
I like that you try to separate “free markets” from “capitalism”, I’ll try to remember that one. I’m also glad you bring up cheating because I think economists tend to under-appreciate it’s affect on the market. A perfectly fair market wouldn’t be a perfectly efficient one, it would be a perfectly corrupt one. It’s always going to be easier to win by cheating than by being better. And businesses have a lot of incentive to come up with creative ways to do it. Economists don’t like attacking the problem with layers of regulations because it feels like playing whack-a-mole, but that really is the only way to preserve freedom in the markets. Just look at professional sports, their rule books are huge and so complicated that even most players and coaches don’t understand them all. But that’s the only way to prevent players from acting in ways that undermine the things we like about watching the sport. The infield-fly rule is one I find especially annoying, but having it is the only way to prevent players from intentionally dropping pop-fly’s. I have a hard time believing that private equity firms buying a distressed company, “selling” it’s assets to shell companies they own at a discount, and then declaring bankruptcy to eliminate their own debt, is something that actually benefits the economy in any way. It’s an intentional dropped ball, and we need regulations that stop certain people from profiting at the expense of the other market actors.
Free markets and private property plus well-adapted laws and customs turn the private vice of greed toward pro-social ends, making everyone better off.
More generally, a well-functioning society is one where each of the traditional vices (the seven deadly sins, say) is largely turned toward harmless or pro-social ends. Lust incentivizes getting married and having a family, sloth incentivizes finding cleverer ways to do things with less effort, pride incentivizes doing virtuous /impressive things in public to be seen to be virtuous/impressive, and so on. The better your society does this, the better it works.
I don’t meet a lot of people like commenters here in the flesh, but if I did I don’t know what I’d do. What if a lot of people’s experience with leads them to morally different conclusions to yours? What if the issue isn’t we should use nicer words to describe our system, but the dichotomy of massive accumulation at one end and mass emiseration at the other, to say nothing of living paycheck to paycheck. I know MY says these are just emotional reactions and not logical. I know economists say this is actually the normative state of human society. But huge numbers of people don’t agree. Popularists take some of your fucking medicine and listen that large numbers of people don't want a rebrand of capitalism, they're confronting the actual problems of capitalism.
This is incorrect. Reality doesn't suck, it bites (https://en.wikipedia.org/wiki/Reality_Bites).
I find it amusing that "greed" is used as a pejorative for "self-interest" by so many people who would acknowledge pursing the latter but excoriate others for allegedly pursuing the former, even when both parties are doing the same thing. I recently retired after a 45-year career as a CPA in a national firm. I never encountered an employee who didn't seek to maximize his salary, and it wasn't uncommon for some to be dissatisfied with their annual increase or bonus: that's pursuing self-interest! And I never had an employee say, "Oh, that's too much; I can't possibly accept it." But when a firm pursues a goal of maximizing profits to satisfy investors, the investors are "greedy" rather than simply acting in their own self-interest.
I agree with your position, but I'd push a little deeper. When wealth concentrates enough to bend the rules, raise the barriers to entry, and capture the very regulators meant to keep the market free, that's the mother of all rent-seeking. In my eyes it's the incumbency that writes all the other incumbency.
My fix would be a new competitor, one company in each industry, but with different owners. Owned in equal shares by millions of ordinary people, so the customers are the owners. Want to go global? Make it owned by billions.
And I agree that greed exists beyond ownership so this doesn't cure it, it aims to align it. The millions of owners do not have to be nicer people; their self-interest just points the other way, because they're buying what their own companies make. Extraction stops making sense to them. Make those companies compete in the current market and that should free the invisible hand.
I've been working this idea out in detail, a different fix than welfare, but still aimed at the same freedom you're describing.
> I think it’s underrated to an extent how much the audience is the problem.
This argument appeals to journalists for obvious reasons but isn’t a useful diagnosis. If it’s human nature to prefer negativity, you can complain about it, but it won’t change. And things weren’t like this before. Something else changed, namely media technology (the internet).
Contrast:
1) “the audience is the problem” => we have an individualized shortfall of virtue and need people to be better. Collective action problems are hard. This doesn’t work.
2) “the media is the problem” => we need to regulate media or invent new ones. Hard but certainly easier than revising human nature.
Okay, but if the audience is indeed the problem, fixing the media will not solve the problem.
This reminds me of the joke about the drunk looking for his keys under a streetlight.
This problem didn’t exist to nearly the same degree 20 years ago. Mostly the same people are still alive and consuming media now.
It’s a very sharp test: did the people get worse? Did they get worse for reasons that aren’t traceable to external causes?
To give an analogy, we’d never accept this logic in criminal justice: even if, morally, murderers are the problem, that diagnosis is totally causally inert. “Make the murderers better people” isn’t a policy program, but “buy back guns, post more beat cops, change the lighting on the problem streets”, whatever, is.
Fair enough.
The way it looks to me: I think the audience stayed about the same, but market conditions changed secondary to technological changes. The newspapers always knew the gossip page and horoscope and funnies were in more demand than the serious news coverage, but when they were unbundled via the internet, it became impossible to cross-subsidize the serious news operations on the demand from people for gossip and horoscopes and funnies. And at the same time, the ad revenue that used to support local papers from want ads and such moved online, so their main revenue source went away.
I think it is hard to address much of this via policy, both because regulating news media is hard to do without running afoul of the first amendment (see the threats made by the FCC against broadcast media in this administration for worked examples), and because even trying to have a few subsidized serious news operations that somehow weren't captured by the government despite getting funded by the government would only do a little good--most people would still be looking for gossip and sex scandals and hatereads rather than careful high-quality reporting. I'm still trying to consume high-quality news sources, but it seems very hard to make my neighbor do the same, or to make her stop reading social media outrage bait, or whatever.
The parallel that occurs to me is the breakup of the AT&T/Bell phone monopoly. This seems like a good decision in terms of adding competition and opening up space for innovation, but a side effect of it was that AT&T could no longer use their monopoly rents to subsidize a prestige project called Bell Labs that just happened to be the best research lab on Earth. The technology changed, and it would have been increasingly costly (in terms of phone bills and innovation) to keep this monopoly in place, but killing the monopoly off destroyed Bell Labs.
There’s not really a silver bullet, but the closest thing and something I’d really like is a progressive tax on online ad revenue. The digital-ads business model has enormous negative externalities. If the companies that sell the ads had to internalize that, there’d be less engagement-chasing and addiction and overly efficient competition for attention.
Relatedly, launch sports gambling into the sun
I mean, I think it's in the word, which is to say capital has a favored status over labor. I know I'm a bit to the left of most people here and am more favorable to unions than others but I do think people have not an entirely wrong sentiment that even in capitalism, certain people "owners, both of companies and land" have more power than people who don't, and that the current system benefits the incumbents of that systems vs everyone else. Free market assumes a certain level of equality, which doesn't pit workers against owners and ironically assumes the state of Adam Smith's system of perfect symmetry of information and no barriers to entry, whereas capitalism as defined by people's conception of profitability and the stock market depends on the asymmetry of information and barriers to entry to ensure profitability.
>the stock market depends on the asymmetry of information
Perhaps a hot take, but this isn’t a bad thing. It’s a fundamental nature of the universe that information is not perfectly distributed, and sometimes knowledge doesn’t even exist at all and has to be discovered. That there is an incentive to go out and surface new information through research, and that said information is then at least partially shared (through the movement of share prices) with the rest of society, is a good thing on the merits.
"Why do you say the AMA is keeping supply artificially low instead of imposing high standards for the profession?"
Because it sure seems like the lower standards used in most other countries are, on net, producing better health outcomes for those countries. I'm not going to go so far as to say that the AMA is entirely doing it for devious rent-seeking reasons rather than believing their own BS, but if they were merely imposing a high standard, that would be an absolute standard, not one that changes depending on the year you apply to med school.
“I hate capitalism because of [outcome that is due to socialism]” is sadly a pretty common refrain.
I mean the prime example is the NBA you mention: it, like all American pro leagues is *incredibly* socialist. The revenue sharing, the salary caps, the non-compete clauses that prevent players from playing in two leagues, etc, it is about as socialist as you get. This is, in fact, a defining characteristic of American sports leagues that differs from the EU. Imagine a salary cap in the Bundesliga. FC Bayern would not exist.
For a great example, consider how people were OUTRAGED that Kawhi Leonard got a side deal to play for the Clippers. They were genuinely pissed that Balmer “cheated”, where the “cheating” was… paying an employee more? How is that bad? Unless you are one of the other 29 teams that would prefer to collude to keep salaries low? Which, again, is so very much not how free markets work.
Sports leagues in the US are as far from socialism as is logically possible. When owners set up agreements to limit worker pay (player salaries) that is as pure a definition of capitalism along the control axis as exists: the owners are capitalists, they own the teams, as a group they collude to limit worker pay. Anyone with a good 5th grade education knows that socialism is defined as the ownership of real capital by the state and workers being paid by the state (independent of revenue streams correlated with the work performed). Socialism is a failure and will always be a failure because it completely removes the production of real value as metric and therefore makes all socialist organizations structured around political power.
None of that is socialism. People often sign contracts that limit some of their choices, as with NDAs, non-compete agreements[1], contracts to perform some service for a certain amount of money within a certain time, etc.
The NBA and other sports leagues are a kind of cartel, but it is genuinely hard to see how you'd have a pro sports league without pretty large-scale collaboration of a kind that would be unusual and maybe illegal in other industries. You have to agree on the rules and the schedule, and also on meta-rules like how you're allowed to recruit new players, pay restrictions, etc. I think without this, big market teams just end up winning all the time, because with 10x the budget of the smaller teams, they can hire a much better set of players.
But also, the New York Knicks are competing with the San Antonio Spurs in sporting events, but as a business they are not really competitors. The Knicks are competing with the other sports franchises in NYC, as well as alternative entertainments like Broadway plays, movies, concerts, and the like. If the Spurs decide to cut ticket prices, this does not undercut the Knicks' business one bit.
[1] These are evil and I'd like to see them banned, but they're common enough in current businesses.
I don't understand. What you're saying is that capitalism can produce cartel-like behavior, then labeling that "socialism". And I'd agree with the first part, but the second is just being criminally imprecise with words.
The NFL’s behavior is not cartel like, internally to its structure. The Rams and the Cowboys compete against each other, but are not *allowed* to do so in a free market capacity. They are literally contractually obliged to obey a salary cap.
This is different to a Kartel, in that Kartel members collude, but often the Kartel collapses because of the prisoner’s dilemma. You in fact saw this pretty regularly with OPEC back when they were a true Kartel (i.e. before countries like the US produced enough oil to be net exporters). They would collude, the price of oil would skyrocket, then inevitably one member would get greedy, and the price would crater.
It’s notable that the NFL should, for all intents and purposes, be an illegal monopoly (because, again, they are violating a whole bunch of free market principles), but are not because of a literal act of congress that JFK pushed for, and this set a precedent for the other big sports leagues.
I am far from the first to make this comparison, by the way. The Acquired podcast on the NFL lays this out quite explicitly, as does their podcast on the IPA (India pro cricket league).
Your point is that this is a group of separate companies who have come up with shared pricing agreements and shared agreements on labor sourcing. And that this behavior is something our anti-trust laws regulate, but exceptions have been made. This is cartel-like behavior.
I don’t understand your counterargument. Like, in a polite way I don’t know what it means. The counterargument is that the Rams and the Cowboys are not “allowed” to compete against each other. Not allowed by whom? Federal law? A contract to another organization enforced by Federal law? This is just a cartel that’s found a way to enforce its members’ behavior by leaning on enforceable contract law and corporate governance, while obtaining itself an exception from specific laws that are designed to prevent Federal law from being used to enforce cartel adherence.
A few nitpicks here:
The NFL (and other pro sports leagues) only got an antitrust exemption in 1961 as applied to TV rights. And these leagues only have an antitrust exemption as applied to the players due to forming collective bargaining agreements with their unions that supersede that.
In all other aspects, they're still bound to the Sherman Antitrust Act like anyone else. See American Needle v. NFL for a recent example.
Capitalist and free-market are not the same thing.
I’d consider our housing system to be capitalist (based on home ownership and rentals by private landlords).
But housing in the US is certainly not anywhere close to free-market.
I do think that a lot of anger at capitalism or markets or whatever ends up being anger at the existence of tradeoffs or scarcity of resources.
Why can't you spend all day sitting around in your underwear playing video games and watching porn? Because a bunch of people have to work every day for you to be able to spend all day doing that, from the farmer who grows your food to the plumber who unclogs your drains to the doctor who treats you for repetitive stress injury, and you or someone else has to provide them some incentive to do those things rather than sitting around in their underwear playing video games and watching porn all day.
Isn't the entire concept of leisure time something that was invented with capitalism? because suddenly you could have enough time and money that you could take breaks from working, or stop working early enough in the day to do something fun and frivolous?
No, that's silly. There are a ton of old peasant dances and music, traditional fairs and festivals, etc, all from pre-capitalism days. The people back then were churchmouse poor (even kings were poor in many ways, like no decent medicine or dentistry), but they did sometimes have leisure time and used it.
This +100
I was a child in the People's Republic of Poland, which was socialist, not capitalist, and believe you me, grown-ups did *not* sit around in their underwear and read porn mags (no online porn or online anything else in those days). There was a lot of "all comrades must contribute/laziness is a vice" rhetoric, and it was unacceptable for an able-bodied adult not to work. (BTW, stay-at-home moms were extremely rare; as a mother, you were supposed to leave your young child with your retired mom/mother-in-law/a government-run nursery and get a job outside the house)
This is great for how to think about market regulations, but also much of the capitalism/socialism argument has to do with worker pay/rights and wealth redistribution, and of course you don't go into that in this post.
You've probably got other posts where you talk about the morality and market efficiency of things like collective bargaining and social safety nets, but I'd still love to see more posts about that.
I'm especially interested to know if you think that deadweight loss is a big problem in the realm of worker's wages (in other words, collective bargaining and minimum wages laws are misguided and actually harm workers), or if you think that the market of wages doesn't function the way that the market for goods and services does?
You should have listened to one or more of your historically-minded friends who told you there is a difference between "social democracy" and "socialism." Or you could have just asked an LLM. That's what I did. Here is the answer it gave:
"Yes, there is a fundamental difference: while socialism historically seeks to replace the capitalist system with collective or state ownership of the means of production, social democracy aims to reform capitalism rather than abolish it. Socialism focuses on ending private property and market-driven production to eliminate class distinctions, whereas social democracy operates within a democratic, capitalist framework to provide a robust social safety net. Social democrats advocate for a market economy regulated by the state, characterized by high progressive taxation, strong labor unions, and universal public services—such as healthcare and education—to reduce inequality without dismantling the private sector."
It’s true these terms have distinct definitions. But Matt’s observation is that the public discourse in one country often ends up using one term for the same thing that the public discourse in another country uses another term for. We might complain about how the word “liberal” is used in North America and in Australia (it’s used differently in those places, while Germany tends to use it in closer to a technically correct way). But for public opinion, how people use the term is more directly relevant than its technical meaning.
In practice, many countries have socialist parties that don't want to end private property and market-driven production or nationalize the factories or any of that--"socialist" is just the name they have for center-left policies like more benefits programs and more environmental regulation.
You can complain about this (or about how the center-left in the US is called "liberal"), but it's just how people have named their parties. For example, the Socialist party is running things in Spain right now, and they seem to have refrained from nationalizing the banks and liquidating the Kulaks so far.
I wasn't complaining about how people name their parties, just about *Matt* seeming to imply (the "main practical distinction is that countries where people speak Germanic languages tend to have social democratic parties whereas those where people speak Romance languages have socialism") that there isn't any difference between social democracy and socialism. But a lot of smart people (Ferdinand Lassalle, Jean Jaurès, Eduard Bernstein, FDR, Willy Brandt and Olof Palme) spent their lives fighting for a social democratic vision different from socialism and there is an argument - that I find fairly persuasive - that a lot of the good things that we like about the world we live in are downstream of their lifetimes of work to create a vision of socioeconomic progress that was both practical and politically appealing.
Yes, I wasn’t persuaded by this argument at all. DSA isn’t the SDA and there’s a reason for that.
Great piece! I’ve been noting for a while that, while our capitalist system produces extraordinary levels of wealth fairly broadly through society, it also seems to move us further away from human connection. In order to maximize my wages, I would need to move away from members of my family, the friends I grew up with, and take my kids away from all of theirs. If I really want to maximize wages, I’ll need to do it again every few years, since hiring managers always seem to value new hires more than existing employees.
I remember a Hidden Brain epsisode where they talked about how you don’t want your friends to treat you the same way a bank treats you, but you also don’t want your bank to treat you the same way your friends do. Transactionalism is dehumanizing, but obviously there are plenty of areas of our lives where we want it to keep existing. It’s fine for our employers not to treat us like we are friends or family (in fact, some have written that companies use the idea that “we are all family here” to get employees to put up with unreasonable things for a workplace), but none of us want to be treated like robots either, or like numbers on a paper.
I think part of the point here needs to be that efficiency is wonderful, but it’s not everything. University of Chicago economists love to bring out reams of stats telling us how much poorer Europeans are and how much worse their productivity numbers are etc. But those are all very nice places to live. So maybe efficiency and productivity don’t need to be our only priorities.
I like that you try to separate “free markets” from “capitalism”, I’ll try to remember that one. I’m also glad you bring up cheating because I think economists tend to under-appreciate it’s affect on the market. A perfectly fair market wouldn’t be a perfectly efficient one, it would be a perfectly corrupt one. It’s always going to be easier to win by cheating than by being better. And businesses have a lot of incentive to come up with creative ways to do it. Economists don’t like attacking the problem with layers of regulations because it feels like playing whack-a-mole, but that really is the only way to preserve freedom in the markets. Just look at professional sports, their rule books are huge and so complicated that even most players and coaches don’t understand them all. But that’s the only way to prevent players from acting in ways that undermine the things we like about watching the sport. The infield-fly rule is one I find especially annoying, but having it is the only way to prevent players from intentionally dropping pop-fly’s. I have a hard time believing that private equity firms buying a distressed company, “selling” it’s assets to shell companies they own at a discount, and then declaring bankruptcy to eliminate their own debt, is something that actually benefits the economy in any way. It’s an intentional dropped ball, and we need regulations that stop certain people from profiting at the expense of the other market actors.
Every complaint against capitalism appears to actually be a complaint about not having servants and unlimited income.
I dislike saying capitalism is greed. I don't believe that the human condition changes under socialism
Free markets and private property plus well-adapted laws and customs turn the private vice of greed toward pro-social ends, making everyone better off.
More generally, a well-functioning society is one where each of the traditional vices (the seven deadly sins, say) is largely turned toward harmless or pro-social ends. Lust incentivizes getting married and having a family, sloth incentivizes finding cleverer ways to do things with less effort, pride incentivizes doing virtuous /impressive things in public to be seen to be virtuous/impressive, and so on. The better your society does this, the better it works.
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