The Unsocial Reality Of Socialism

A lovely but unfortunately uber-liberal friend of mine shared this graphic on Facebook. It revealed such a profound and frightening misunderstanding of socialism that I felt I had to unravel it a bit.

millennials and socialism.jpg

First, what is “socialism”? Well, it’s not any of the things listed in the graphic. Not one. In fact, it has nothing to do with any of those things. Socialism is an economic system where the government owns the means of production of wealth. Here’s the Merriam-Webster dictionary definition:

Definition of socialism. 1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.

And here’s a definition from Paul Samuelson, the winner of the first Nobel Prize for economics:

“Socialism refers to the government ownership of the means of production, planning by the government and income distribution”.

Simply put, socialism is where the government owns the farms, the fishing boats, and the factories, and decides who gets the wealth thus produced.

Now, do you see anything in there about healthcare? Nope. Social security? Nope. Affordable college? Nope.

Why not?

Because those are all services, not the means of production of wealth. Let me make a small digression here.

Wealth is the stuff that we use in our lives. Food. Vehicles. Steel. Clothing. Tools. Computers. Musical instruments. Houses. Gasoline. Lumber. And strange as it may seem, there are three, and only three, ways to produce wealth.

You can extract wealth from the natural world—dig a mine, catch a fish, fell a tree.

Or you can grow wealth—have a backyard garden, grow fields of corn “high as an elephant’s eye”, plant a tree farm, grow row vegetables.

Finally, you can manufacture wealth—construct a jungle gym for the kids, start a car factory, make a balalaika, sew dresses in your home, build a boat.

That’s it. All the rest is services. Many of these are essential services, perhaps life-and-death services to be sure … but services nonetheless.

To highlight this difference between activities that produce wealth and activities that are services, let me provide an example.

Suppose there are two couples living on an isolated tropical island. One person fishes, one has a garden, one gathers food and building materials from the forest, one makes clothes from some local fiber. They could go on for a long time that way because they are creating wealth.

But suppose on the next tropical island there are two couples, and one person is a barber, one is a doctor, one is a journalist, and one is a dietician. Now, those are noble occupations, we need all of them in modern society … but they are all still services nonetheless.

And because nobody on that second island is producing any wealth, those folks will have short lives because they have nothing to eat, nothing to wear, nothing to keep them from the rain. None of those occupations create wealth, while all of the activities on the first island do.

And this is why my shorthand description is that socialism is where the government owns the farms (growing wealth), the fishing boats (extracting wealth), and the factories (manufacturing wealth). Those are the “means of production”, and the question of who owns them and distributes what they produce is at the heart of the difference between capitalism and socialism.

Unfortunately, people continually confuse socialism with the provision of services. In addition to the mistaken listing of Social Security and healthcare as aspects of socialism in the graphic above, I’ve seen folks who claim that the US Post Office and the various local police forces show that the US is somewhat “socialist” … nope. Every one of them is a service.

And all kinds of governments, from tyrannies to monarchies to democracies to socialist governments, provide some level of services. Be clear. The provision of services, whether extensive or minimal, has absolutely nothing to do with socialism. Socialism is about the creation and distribution of wealth, not about services.

Next, the graphic says that the mythical Millenials referred to think of Canada and Switzerland when they hear “socialism” … I’d laugh if it weren’t so tragic. Both Canada and Switzerland are strongly capitalist societies. In neither country does the government own the farms, the fishing boats, or the factories. All they do is provide some services, like universal healthcare, that the US doesn’t provide. The poster boy for this is Denmark, which most of the uninformed extoll as a successful democratic socialist state … but in fact, it’s nothing of the sort.

Don’t believe me? How about the Prime Minister of Denmark. Would you believe him? He commented on this during a 2016 trip to the US (emphasis mine):

After seeing his country held up as an example in the US presidential debate, Danish Prime Minister Lars Løkke Rasmussen used an address at Harvard to explain the Nordic model to a US audience suddenly very interested in Denmark.

Speaking at Harvard’s Kennedy School of Government, Danish PM Lars Løkke Rasmussen told students that he had “absolutely no wish to interfere the presidential debate in the US” but nonetheless attempted to set the record straight about his country.

“I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy,” Rasmussen said.

“The Nordic model is an expanded welfare state which provides a high level of security for its citizens, but it is also a successful market economy with much freedom to pursue your dreams and live your life as you wish,” he added.

As I said … Canada, Switzerland, and Denmark have nothing to do with socialism because the government doesn’t own the means of production of wealth. They are, as the Danish PM made clear, “successful market economies” just like the US.

Finally, the most amazing part of this whole discussion is that there has NEVER been a successful socialist economy. The Soviet Union tried it. It failed, with millions dead. The Chinese tried it. It failed, with millions dead. The Cubans tried it, leading to untold misery. Hitler tried it with his “National Socialist” party (the “Nazi” party, an acronym forNationalsozialistische”), and we know how that worked out.

And so have a dozen or more other countries, all of whom tried socialism with the same outcome—tyranny, economic collapse, misery, police state, and death.

The most recent of the collapses, the “democratic socialism” of Venezuela, has died the same painful slow death that all the rest suffered. Venezuela proved the truth of the old maxim which says “You can vote your way into socialism … but you’ll have to shoot your way back out”.

Why do they all fail? They fail because unlike the free market, which is really good at producing and distributing goods, governments are bad at it, plus the temptation of the commissars to divert the goods to their own profit is irresistible. Matt Ridley, the brilliant British author, provided a lovely illustration of this:

Every object and service you use is the product of different minds working together to invent or manage something that is way beyond the capacity of any individual mind. This is why central planning does not work. Ten million people eat lunch in London most days; how the heck they get what they want and when and where, given that a lot of them decide at the last minute, is baffling. Were there a London lunch commissioner to organise it, he would fail badly. Individual decisions integrated by price signals work, and work very well indeed.

On the other hand, with socialism, as with its uglier elder brother communism, the elite always end up with everything, and the workers end up with nothing. There’s a Soviet-era joke about Lenin showing his mother his lovely summer home. Now, like many socialist leaders and unlike his socialist followers, Bernie Sanders is a millionaire with no less than three homes. But he’s got a ways to go to catch up with his hero. Here’s a photo of Lenin’s “dacha”.

lenin;s dacha.png

Lenin’s mother wandered around, marveling at the luxury of the furnishings, the gold leaf on the paintings, the size and grandeur of the building and the grounds. But at the end of the tour, she looked very worried, and Lenin asked her why.

“Oh, my dear boy, it’s so lovely,” she said, “but what will happen when the communists find out about this?”

Fun fact. Stalin, Lenin, and Bernie Sanders all share one characteristic. Outside of government and politics, none of them held any job for any length of time. If you want to be a socialist, it helps immensely in keeping the fantasy alive if you have no experience of any kind in a real job.

Here’s the frightening part. All of these forms of socialism and communism and democratic socialism and the rest flow from the demented ideas of Karl Marx, who is the largest mass murderer of all times. People following his economic bad dreams have killed untold poor souls:

Lenin/Stalin – 6 million from purges, the gulags, and deliberately induced famines.

Hitler’s National Socialists – 6 million in the camps, a total of 11 million non-combatants

Chairman Mao – maybe 70 million from famine, camps, and the “Great Leap Forward”

Pol Pot – 1 million through forced labor, camps, executions, and killing fields.

And that eighty million or so is just the scorecard for the superstars. It doesn’t include the tens of thousands killed by Castro, or Che Guevara, or Maduro of Venezuela (who endorsed Bernie Sanders in 2016), or a host of other lesser killers.

That is the real danger of socialism—it is a death cult that gives absolute power to the government, and as the old saying goes, “Power tends to corrupt, and absolute power tends to corrupt absolutely”.

But despite that unvarying record of failure, sadly there are always more foolish young people with as little experience of real-world jobs as Bernie and Lenin had, who say “Well, yes, socialism has failed in the past, but they did it wrong, and we know how to do it right, this time we’re going to implement real socialism”

You know what the one and only difference is between fascism and socialism?

Nobody ever says, “Well yeah, you’re right, fascism failed this time, but it wasn’t the REAL fascism”

Like I said. Everything in that graphic regarding what millennials think about socialism is false. And you know what?

That’s scary … you can see why even the Democrat party leadership is terrified that Bernie Sanders might be their presidential candidate—it will be a disaster for the Democrats if he loses, and it will be a far worse disaster for the nation and our economy if he wins.

My warmest regards to all, even misguided Millenials,

w.

96 thoughts on “The Unsocial Reality Of Socialism

  1. Willis

    I think the current crop of socialists has moved on from the dictionary definition, Today, the goal is to control business through regulation and taxes, closer to the fascist model. This avoids the messy need to actually managing an operation. I think they have come to realize the socialist mindset is not particularly well suited for running an existing business and nearly incapable of innovation as there is no significant individual reward system. This is not to say a command economy is not capable of turning out vast quantities of an item, especially of the means of production is well understood; eg the numbers of T-34 tanks Russia produced in WWII. However, they usually use their personnel resources with the same abandon as the production materials.

    Liked by 1 person

    • The USA government already regulates pretty much all of the wealth creation and services in a way that benefits the big players in each economic sector. The USA does not have capitalism. It has a blend of crony capitalism and crony socialism. Sanders criticisms of the system are often accurate. His solutions for it are not good.

      Like

  2. Willis,

    Great essay. Exactly correct and that’s why Bernie and the rest of the Democrat party continually lies about the true natures of socialism and capitalism. Capitalism is way the world works. It is a fundamental feature of the design of a living system. Those who oppose it misidentify human wickedness as a component and not an external factor to any economic system.

    Liked by 1 person

  3. Barring some yet unforeseen set of events, we are headed to a brokered Democratic convention in Milwaukee this July. The leading candidate is a Democratic socialist. Socialism, as proposed by Bernie Sanders is not on the minds of most Americans as it entails these voter’s loss of their private health care, ramps up their anger that they paid for their children’s education including being co-signers on their student loan debt and now others will get “free” tuition, the gigantic costs of the current proposed new social programs will weigh down upon the middle class as tax increases, and the real possibility that a Democratic Socialist president would put the US economy into a tail-spin. It does not seem all that likely that a reality based election of Bernie Sanders represents anything other than children’s magical thinking.

    To get from here to there, that is, to get President Trump out of the White House by installing a Democratic Socialist may mean accepting a complete and catastrophic economic collapse in the pursuit of an ideological illusion.

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  4. Barring some yet unforeseen set of events, we are headed to a brokered Democratic convention in Milwaukee this July. The leading figure is a self-proclaimed Democratic Socialist. Socialism, as proposed by Bernie Sanders is not on the minds of most Americans as it entails these voter’s loss of their private health care, ramps up their anger that they paid for their children’s education including being co-signers on their student loan debt and now others will get “free” tuition, the gigantic costs of the current proposed new social programs will weigh down upon the middle class as tax increases, and the real possibility that a Democratic Socialist president would put the US economy into a tail-spin. It does not seem all that likely that a reality based election of Bernie Sanders represents anything other than children’s magical thinking.

    To get from here to there, that is, to get President Trump out of the White House by installing a Democratic Socialist may mean accepting a complete and catastrophic economic collapse in the pursuit of an ideological illusion.

    Like

    • I survived socialism (Soviet style) once and I have no desire to repeat the experience. Mr. Bernie “bread lines are good” Sanders, you know socialism only from fairy tales. How many hours of your life did you spend in bread lines? I am probably close to two thousand. Guess if a promise of free bred lines appeals to me?

      Liked by 1 person

    • Socialism aside, if Bernie makes it to the Democrat Convention with only a plurality of delegates, and then gets screwed out of the nomination by shenanigans of a brokered convention, there will be blood on the streets. The events of 1968 Chicago will be mild in comparison. [I hope I’m totally wrong about that prediction, by the way]

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      • There is a good reason why Comrade Sanders has a large support of young people: The state of schools: schools have been taken over. They have to start over.

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  5. 👍
    I was raised in a family of Labour Party supporters, Willis. You are totally accurate. The political argument was never about socialism, but about what services the taxpayers should fund and what they should not, and about ensuring working people could earn a decent living. Compared to the modern Labour apparatchiks, the men who thrashed out policies and strategies in my grandfather’s living room were right-wingers

    Liked by 3 people

  6. Pingback: The Unsocial Reality Of Socialism – Truth is difficult but essential…

  7. Socialism fails only when greedy capitalists infiltrate governments.

    “If you wish to control commerce, banking, transportation, and natural resources on a national level, you must control the federal government. If you and your clique wish to establish worldwide monopolies, you must control a World Government. The Rockefellers are not humanitarians; they are power-seeking Machiavellians. They are using. their phony philanthropy as a guise for seizing power on a magnitude that would make old John D. Sr. proud.” -Gary Allen
    https://educate-yourself.org/ga/RF4chap1976.shtml

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    • jmorpuss February 24, 2020 at 2:49 pm

      Socialism fails only when greedy capitalists infiltrate governments.

      J, that comment is easily the most contrary to history of any that I’ve seen. Socialism has been tried since 1917 in dozens of countries. It has crashed and burned EACH AND EVERY TIME, usually with dead numbering in the tens of thousands.

      And you blame that on “greedy capitalists”? Really? That’s why every single socialist country from Russia to Venezuela has had its economy collapse? Capitalists?

      It seems that George Santayana was correct when he observed that “Those who cannot remember the past are condemned to repeat it.” …

      Sadly,

      w.

      Liked by 1 person

      • Maybe he’s saying that the Socialist leaders really are just greedy exploiters (on whom he mistakenly applies a favorite pejorative without understanding its meaning). They act like it. Telling lies to the people they enslave whil living well themselves. Anyway, why would true Socialists leaders ever let Capitalists infiltrate their midst and ruin the People’s Paradise?

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        • Gary, Your the one that may not understand the meaning .
          What is capitalism in simple terms?
          Capitalism is an economic system. In it the government plays a secondary role. People and companies make most of the decisions, and own most of the property. … The means of production are largely or entirely privately owned (by individuals or companies) and operated for profit.

          What does socialism mean in simple terms?
          The term socialism refers to any system in which the production and distribution of goods and services is a shared responsibility of a group of people. Socialism is based upon economic and political theories that advocate for collectivism. In a state of socialism, there is no privately owned property.
          a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

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          • “…political theories that advocate for collectivism.”
            And how did the collective farms of China make out? Were they not a perfect example of “…the production and distribution of goods and services is a shared responsibility of a group of people”

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          • Capitalism is not a political construct. It is what happens naturally when a group of people each with differing talents comes together. You are a good hunter. I am a good farmer. My wife can weave cloth. We trade to
            Our mutual benefit because no one can do everything (at least not well). We all benefit from the best doing what they do best and we enter into mutually agreed trade.

            Socialism must necessarily be enforced by the point of a gun because it is in no ones self interesr

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  8. Thanks Willis,

    This article succinctly defines Socialism in a digestible read that I can forward to my friends to read. A lot of them, especially the younger of the group, do not really understand the evil at the root of Socialism. Freedom from tuition and medical bills comes at a price I suspect Americans will not be willing to pay in the end.The Scandinavians have negotiated a deal or contract with their governments whereby the citizenry do pay a price- but it is one on which they agreed, and have deduced they can subtract from the profits on what they DO own and produce. Huge difference between this proposed abomination and that European bargain.

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  9. “It seems that George Santayana was correct when he observed that “Those who cannot remember the past are condemned to repeat it.” …”
    Well here’s a slice of history that were about to repeat…

    “The Great Depression was the worst economic downturn in the history of the industrialized world, lasting from 1929 to 1939. It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers. By 1933, when the Great Depression reached its lowest point, some 15 million Americans were unemployed and nearly half the country’s banks had failed.”
    https://www.history.com/topics/great-depression/great-depression-history

    From the financial Times July 1 2009

    “Just why is there so much debt in the Anglo-Saxon world? Bankers and regulators know well that it is in nobody’s long-term interests to have allowed borrowing to escalate to a position where the US now owes far more, as a multiple of the economy, than at the start of the Great Depression.

    The answer is capitalism’s dirty little secret: excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.”
    https://www.ft.com/content/e23c6d04-659d-11de-8e34-00144feabdc0

    The Biggest Scam In The History Of Mankind – Hidden Secrets of Money Ep 4
    i know you think videos move to slow, but you need to watch this .

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    • jmorpuss, you claimed that the reason that every single socialist economy cratered with lots of deaths was, hang on, I want to get this right … that “greedy capitalists infiltrate governments“.

      So I questioned that claim, and in return, I get a diatribe on the Great Depression … huh? WTF does that have to do with socialism? Wait, never mind. Upon reflection, I don’t think I want to know.

      Oh, plus a claim that excessive lending is a mistake … true. So what?

      Look, I’m happy to discuss socialism. That’s what this post is about. But no, I’m not going to get into a discussion of the problems with capitalism. Yes, there are problems. But with all of its faults capitalism has brought the people of the world out of abysmal grinding poverty. It’s been the only system humans have ever devised that has done that. Yes, capitalism is a flawed system … but with all of its flaws, it’s far better than any other system that we have invented.

      And socialism has driven people into grinding poverty. EVERY. SINGLE. TIME.

      So you’ll have to excuse me if I’m not willing to trade, no matter how many flaws you might point out with capitalism.

      Best regards,

      w.

      Liked by 2 people

      • Willis , If you drop the” ism ” https://en.wikipedia.org/wiki/-ism
        Social , https://en.wikipedia.org/wiki/Social
        or
        Capital , https://en.wikipedia.org/wiki/Capital_(economics)
        what world do we actually live in ??
        Is it “united we stand” or “divide and conquer”?
        Whats better “work to live ” or “live to work” ?

        Would you like to be judged by your social skills or by how much capital you have .?
        At some stage were got wealthy and worthy mixed up . Being rich doesn’t make your worthy.

        One thing for sure man will sell his soul if the price is right.
        John Howard once said ” nothings for free nor should it be” And that’s why you don’t hear please and thank you as often as you once did.
        Do Humans need to be social.? or is capital all we need to be happy?

        I brought up Capitalism only to bring balance to your post. The reason Socialism fails is it’s ruled by man the same man that will destroy Capitalism one day.
        Will man one day have no need to spend trillions on war? or as you pointed out there’s no perfect “ISM “??
        No system will ever work if were governed by lies and half truths. A media free to tell the truth is the backbone to a true democracy. Only the truth will set us free from the shackles we call life. Every human on the planet can have a better life if we recognise or similarities and not so focused on difference. Do we need to find another life form out there in space so we can unite and fight as human beings. Anyway I hope your feeling better after your fall and life is back to normal.

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        • “Is it “united we stand” or “divide and conquer”? Whats better “work to live ” or “live to work”
          Would you like to be judged by your social skills or by how much capital you have .?
          At some stage [we] got wealthy and worthy mixed up.”

          The answer to your questions is yes. The world is gray. Always has been. Always will be. Learn to live with it.

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        • jmorpuss, we have two economic systems under discussion.

          One has rescued most of the world’s people from grinding poverty and has led to the bounteous wealth and freedom that much of the planet currently enjoys.

          The other has killed people wherever and whenever it has been tried, leaving starvation, sickness, imprisonment, slavery, and poverty in its wake.

          While even the poor people in the Western world live a life richer than that of ancient kings, the populace is eating zoo animals in Venezuela, for god’s sake, and you wish to debate which system is better?

          Seriously?

          Not with me, you won’t.

          Pass. Take your foolish claims elsewhere, you’ll have to go debate this with someone else. Sorry, not interested in the slightest.

          w.

          Liked by 1 person

        • “Only the truth will set us free from the shackles we call life.”
          I feel with you, but can’t help you. It can be achieved much faster with a bullet.

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  10. In his book (Zone Policeman 88, 1920, chapter 7) Harry Franck suggested that the most successful socialist experiment may well have been the Panama Canal Zone during construction…supported by American money and administered by the United States Army..

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  11. “And all kinds of governments, from tyrannies to monarchies to democracies to socialist governments, provide some level of services. Be clear. The provision of services, whether extensive or minimal, has absolutely nothing to do with socialism. Socialism is about the creation and distribution of wealth, not about services.”

    And governments are just as bad at providing services as they are producing wealth. It just takes longer for it to become apparent. Why? Because of a lack of choice and consequences to failure to produce the service. The problem is not that they provide services but their they only ones allowed to provide that service.

    One issue I have is with your example.

    “Suppose there are two couples living on an isolated tropical island. One person fishes, one has a garden, one gathers food and building materials from the forest, one makes clothes from some local fiber. They could go on for a long time that way because they are creating wealth.

    But suppose on the next tropical island there are two couples, and one person is a barber, one is a doctor, one is a journalist, and one is a dietician. Now, those are noble occupations, we need all of them in modern society … but they are all still services nonetheless.

    And because nobody on that second island is producing any wealth, those folks will have short lives because they have nothing to eat, nothing to wear, nothing to keep them from the rain. None of those occupations create wealth, while all of the activities on the first island do.”

    Now lets change the makeup of the islanders and their location. Both Islands are in a northern clime and cold. The first one is fertile and has an abundance of food but no means of heating and their shelter is minimal so the people freeze. The second one has an abundance of coal and timber but the people are malnourished. Someone on island 2 hears about island 1 and builds a boat taking the coal and timber to island 1 and trades for food. The point being that the worth of something is only relative to the demand and supply. Moving goods (while not creating them) changes a worthless surplus into something that is desirable and needed. Your example works for the first group because there are all the resources there for the taking and there is no need to produce more than what they need at any one time. Take away one or more resources and the situation changes. If it’s a subsistence situation where there are abundant resources the concept of wealth becomes abstract. Since you lived in the tropics for a long time, think about the mindset of the islanders in that regard. Now the occupations that you mentioned that are services are not wealth producing nor do they directly impact wealth production (though a doctor comes close since if you are too sick you can’t produce). So bottom line is that there are things we look at as services but are integral to the production of wealth.

    Like

    • Bear February 25, 2020 at 4:01 pm

      Now lets change the makeup of the islanders and their location. Both Islands are in a northern clime and cold. The first one is fertile and has an abundance of food but no means of heating and their shelter is minimal so the people freeze. The second one has an abundance of coal and timber but the people are malnourished. Someone on island 2 hears about island 1 and builds a boat taking the coal and timber to island 1 and trades for food.

      Bear, I made the islands isolated so that we could understand the difference between activities that produce wealth and activities that are services. I wanted to avoid questions of trade, because as soon as that enters into the question then we have to deal with “worth”, which is an entirely different universe. You go on to say:

      The point being that the worth of something is only relative to the demand and supply. Moving goods (while not creating them) changes a worthless surplus into something that is desirable and needed.

      A hamburger is wealth, whether you are actively eating or not. It has different worth depending on condition, age, materials, and supply and demand. But it is wealth in all of those situations.

      A haircut, on the other hand, is a service. The world is wealthier when someone creates a hamburger (manufacturing). But the world is no wealthier when you have short hair than it was before your haircut. Despite that, the haircut also has worth, you have to pay someone to cut your hair, it depends on quality, supply, demand, the usual.

      My point is, you are conflating worth with wealth …

      Your example works for the first group because there are all the resources there for the taking and there is no need to produce more than what they need at any one time. Take away one or more resources and the situation changes. If it’s a subsistence situation where there are abundant resources the concept of wealth becomes abstract. Since you lived in the tropics for a long time, think about the mindset of the islanders in that regard. Now the occupations that you mentioned that are services are not wealth producing nor do they directly impact wealth production (though a doctor comes close since if you are too sick you can’t produce). So bottom line is that there are things we look at as services but are integral to the production of wealth.

      All kinds of things are integral to the production of wealth … but that doesn’t make those things wealth.

      For example, the world is no wealthier when someone doesn’t have the flu than it is when they do have the flu. All that does is change the amount of wealth that that person might potentially produce through growth, extraction, or manufacturing. The doctor can change that … but she’s not producing wealth either. Just changing the potential.

      Or the person in question could change potential wealth production by simply going on strike … but that doesn’t mean that “not striking” is wealth.

      My best to you,

      w.

      Like

      • Thanks for the reply. Our disagreements seem to be on wealth vs worth and services used to produce wealth verses services that don’t.

        “Wealth is the stuff that we use in our lives. Food. Vehicles. Steel. Clothing. Tools. Computers. Musical instruments. Houses. Gasoline. Lumber. And strange as it may seem, there are three, and only three, ways to produce wealth.”

        Absolutely agree, but there is also, for example, utility. Your tropical islanders have no need for coal (plenty of easily obtainable wood). Therefore to them is coal wealth? They could mine it every day but it doesn’t increase the amount of wealth since it has no utility to them ( they don’t use it in their lives). Move it to a northern clime and it now becomes wealth because it has utility. Give the islanders a smelter and iron ore and the coal now has utility and becomes wealth to them. But then what if you have more of something that you use that you or no one else in your community could ever utilize? Is that surplus wealth? To others who lack it and need it, it would be wealth wouldn’t it?

        I think back to a story I heard about one of the Soviet 5 year plans. A shoe factory meet their quota of shoes, however they only produced one size and for the left foot. In a sense they created wealth (something that people use) but it lacked the matching right shoe and was more than anyone wanted. Obviously that’s a classic case of why governments shouldn’t be involved in wealth creation, but they also shouldn’t be involved in those services that are essential to wealth production such as transportation. Governments also screw up the service industries, but because things like barbers aren’t going to destroy the wealth of a country if they are run incompetently, the don’t have the same impact on our well being.

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  12. Sorry, I don’t buy your disctinction between ‘creating wealth’ and ‘services’

    a plumber who is repairing things is not creating wealth, he is providing a service.

    many ways to ‘create wealth’ require an infrastructure of other things before they can provide value (so your desert island example won’t work)

    now, I do think there is a difference between jobs that provide value (in either a service or a good) and jobs that have more questionable value (government, bureaucrats) but even there, some minimal level is needed. For example, every company needs someone to do HR/legal/security jobs, but it’s very easy to get overloaded overloaded with those people and have them cripple the company.

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    • David, it is a critical distinction. For example, why do you think that socialists are concerned with controlling the means of production of wealth, and not with controlling the services?

      Please consider:

      Is the world wealthier after you’ve gotten a haircut?

      I say no. I say that’s a service that doesn’t create wealth.

      What say you?

      Next, I did NOT say that service jobs are unimportant or unnecessary. Some indeed can crucial.

      But that does NOT mean that they create wealth. Think again about the barber …

      w.

      Like

      • is the world wealthier? In part it depends on how you measure wealth.

        are you looking at the absolute amount of ‘stuff’? if so, then digging gold out of the ground isn’t valuable because there is still the same amount of gold in existance.

        trading/shipping isn’t valuable because the same amount of goods exist (even through after successful trading, more good are able to be used, and so have far more value.

        rearranging electrons has no value as there are still the same number of electrons (even though you may power a factory with them)

        all jobs are just rearranging existing material if you dig down deep enough.

        And Socialism is very much interested in controlling the services as well as the means of production. They very much want to dictate what people are allowed to do, and what they can charge. Remember, their theory is that
        it’s the amount of labor that goes into things that determines it’s value.

        Confiscating the factories and other material means of production is the easy first step in their control

        Like

  13. Lenin/Stalin – 6 million from purges, the gulags, and deliberately induced famines.

    Hitler’s National Socialists – 6 million in the camps, a total of 11 million non-combatants

    Chairman Mao – maybe 70 million from famine, camps, and the “Great Leap Forward”

    Pol Pot – 1 million through forced labor, camps, executions, and killing fields.

    The figure I’ve seen in the past from multiple sources regarding deaths attributed to Soviet era (1917 – 1987) malice or incompetence is 20-25 million. More recent estimates using Soviet archives which have become available have generally lower figures, but still north of 6 million for the whole Soviet era. But the methodologies used are hotly debated and the best that can be said is there is a great deal of uncertainty around the estimates.

    I think the uncertainty around estimates for China is even greater.

    Like

      • WIllis: re Marx:

        I’m afraid I have to disagree with you. As far as I know Karl Marx never killed anyone, or advocated that anyone should be killed. What he did was offer an outline to create a better society which included an economic model which in turn was based on the assumption that the source of inequality was greed, and preventing individual greed would improve the lot of the average person. Plans for Utopia go back to Plato’s Republic at least; Marx was following the pattern set by Plato, Bacon, More, Bellamy and others. He just managed to generate more popular appeal.

        Having a bad idea is not a crime and it certainly isn’t murder. It was Lenin and later Stalin and Mao who were the mass murderers. When bad ideas are held by people who either won’t or can’t admit they are wrong, and can instead suppress information and dissent, then you get the disasters you’ve detailed.

        And you will never stop people entertaining and advocating bad ideas; the latest incarnation is 100% decarbonized “renewable energy”. This is why I refer to the so-called “Green New Deal” as the “Green Leap Forward”; I don’t believe the people pushing it really intend to kill off half the current human population, but if people are dumb enough to pursue those ideas and powerful enough to ignore the results, that’s the likely outcome. But should that happen, it still wouldn’t make Al Gore a mass murderer.

        And it isn’t just the millennial snowflakes that fall for this — I just sat through a quarterly briefing by a senior manager (middle six-figure income) who must have said 20 times how important it was to help our customers “de-carbonize” their IT operations and Do Our Part to save the environment.

        Like

        • Thanks, Alan. My point was that whenever someone has tried to put Marx’s ideas into practice, it has always ended in death and destruction. Since it doesn’t depend on WHO is putting the ideas into practice, or WHERE they are doing it, or what language they speak, or what the previous economic system was, or whether it was voted in or imposed by force, or anything else, it seems to me that the blame must lie with Marx.

          Best regards,

          w.

          Like

          • Marx and Engles did proclaim a forcible revolution in their manifesto:

            “ The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution”

            So Marx does have blood on his hands even if he didn’t shed it directly.

            Another thing that I thought about was how socialism can be created de facto instead of de jure(best terms i could think of). And that’s by regulation. The ownership is still legally in the name of a private owner but the control of the company is totally constrained by regulations which may be arbitrarily invoked by the government. Communist China has been implementing something along those lines and so did Nazi Germany. It provides the government with control of the means of production without having to take responsibility for it. When things go bad they blame the “capitalist” and when they go well they claim it’’s there oversight that is responsible.

            Like

  14. Willis

    How would you categorize a company like Microsoft? Creator or service provider? They definitely created products that allowed companies, and individuals to create and manage products better than ever, but it isn’t really a physical product.

    Bruce
    Proud Alaskan since 1992 ( with a brief stint in 1968-69)

    Like

    • Bruce, for some things the categories of wealth vs. service are clear. For some, less clear. Me, I’d say that computer programs are tools just like a shovel is a tool, and that as such they are wealth. But YMMV.

      w.

      Like

      • The problem with software (fitting into this scheme) is that the costs of production are nil. Now R&D is clearly an up-front cost, but the end result is basically a way of capturing wealth in the world of ideas and data (via services and/or tools that operate in a new way). This new ecosystem blurs the line between wealth/capital and service/value. And to top it off, with mobile devices (phones) every person is carrying around these little wealth capturing/scattering devices. Very disruptive.

        Like

        • the cost of duplicating software is nill

          but if you support it, there is a significant cost, and if you maintain it there is an ongoing development cost.

          very few people are happy with software that never gets updated, and they expect a lot of updates for free (espcially security fixes, but also other bugfixes)

          David Lang

          Like

  15. Funny, whenever I’ve thought of Socialism, I’ve never thought of Switzerland. He must have meant Sweden.

    Technically, I can’t argue with the definitions, but they both mention “government ownership”. What does ownership mean once there is no private property? But even before that, what does ownership mean when the state has stolen your property? And even before that, when the state has taken “control” of your property?

    Take Canada as an example. By the definitions, it is not (mostly) socialist. But the current leader is. He is quite enthusiastic about telling capitalists what they cannot do. “Since Trudeau took over, $150 billion in capital and 200,000 jobs have left Canada because Liberals have made it impossible to build anything.”

    The deputy prime minister said over the weekend that Teck Resource’s decision to pull the plug on a giant mega-project should be a “wake-up call” for Canadians. Apparently, the call was for the rest of us, not for the Liberal government who created the mess in the first place.

    And to correct the record, this was not simply one “wake-up call” but followed dozens more since Prime Minister Justin Trudeau took over in 2015. At least $150 billion in capital has left Canada, and as many as 200,000 jobs, because the Liberals have made it impossible to build infrastructure or resource projects or wealth here.

    This is also not the last “wake-up call” either. More catastrophes await following this year’s calamities. The next victims, beset by government paralysis and Indigenous or eco-radical sabotage, will likely be: the $12-billion TMX pipeline; the $40-billion Kitimat LNG plant and $6.7-billion Coastal GasLink pipeline.

    https://business.financialpost.com/diane-francis/diane-francis-how-many-more-resource-wake-up-calls-will-our-prime-minister-snooze-through

    Obama – you didn’t build that. Trudeau – you can’t build that. Bernie – build the welfare state.

    Canada and Sweden may be examples of the kind of welfare state Bernie wants. Maybe that is what democratic socialism means to him. The question is, is that the foot in the door, is that the first step to real socialism?

    What is “at the heart of the difference between capitalism and socialism”? I say it is not who owns what, but rather who gets to decide. The Cathedral and the Bazaar. Do you let those with interests and innovations have a go, or do you leave it all to people just “doing their job” who don’t care and who are ideologically selected and who never listen to those beneath them? (Do I need to mention, susceptible to nepotism and corruption?)

    Paternalism, father knows best, hated by all millennials. Yet the state knows best, ruled by the elites, no problem. Go figure.

    Like

  16. Willis, it is true that they do not understand what socialism is. But then it is also true that what they are looking for is not socialism. Or to say it in different words, if they vote for Sanders thinking that he is socialist, that doesn’t mean that there is a danger of falling into socialism, because Sanders is NOT socialist by your definition (the correct definition). This is only a discussion about semantics, I think. If for them socialism means Canada/Denmark, then who cares? Is there something wrong about Canada/Denmark? If not, then who cares what name they want to give to their model?

    Like

  17. Thanks, Nylo. In fact, Sanders IS a socialist by my definition. He has praised the Soviet Union, Cuba, and Venezuela. He has called for the government to take over the banks, the energy sector, and other parts of the national economy. Classic socialism.

    Is there something wrong with e.g. Canada? Heck, yes. If you go to a doctor in Canada on January 1st and he sends you to a specialist, on average you’ll get to see her on May 20th. If the specialist recommends some special procedure, on average you’ll get it on September 1st … lots of folks have died waiting for treatment in Canada, or seen their condition get so bad it can no longer be treated. No bueno. See here for an example.

    w.

    Like

    • Willis, Canada is a country with undoubtedly worse climate conditions than the USA and yet their life expectancy is four years longer. USA is a great place to live when you are a multimillionaire. But from a health care point of view and for the standard guy, nope. No way. It has its good things, I will not deny it. Health care is NOT one of them, unless you are absurdly rich, or super healthy. In any case, I thought that we had just agreed that health care nationalitation, being a service, does not constitute socialism. I may have misunderstood you, but I thought that in your blog post you were saying that Canada, Denmark… are other examples of capitalism, despite health care. Banking is also a service. Energy? I will concede that one. But any chance of it ever happening? in the USA? Even Europe has long been moving in the opposite direction. A bigger level of regulation he may enforce, at most.

      Regarding praises by Sanders to Soviet Union, Cuba and Venezuela, I would like to see the actual quotes, I suspect that they will be classic examples of taking comments out of context. I can imagine him praising some particular thing happening in such places in some occasion, not the regimes themselves. But then, I do not follow nor care much about the guy, so maybe you will prove me wrong.

      Like

      • Nylo,

        I keep hearing how great Canadian health care is. I live in Oregon, I can go to OHSU (Oregon Health & Science University) and start counting Canadian license plates for those who have driven there for their care. Oregon doesn’t share a border with Canada yet Canadians are driving there for their health care. If I can find Canadians in a non border state looking for health care how many can I find fleeing to border states for health care?

        I’m not saying the US has a perfect health care system by any means, we have our issues. Just don’t tell me socialized medicine is better when people (who can afford it) flee socialized medicine to get their care.

        Like

    • “Is there something wrong with e.g. Canada? Heck, yes. If you go to a doctor in Canada on January 1st and he sends you to a specialist […]”

      I suspect that those numbers are made up and exaggerated. It would be nice to see real data. However, you do have a point. There is a trade-off to be made. Everybody wants fast, quality, and inexpensive. All at once, not a pick-one thing. The capitalist approach would be to run it like an airline, with both first class and economy service, and maybe several levels in between. You want an MRI tomorrow, no problem. You want an MRI free, take a number. To a Canadian, that would seem unfair. The Canadian system is not socialist, but it does have the over-riding principle that there is only one class of service for everybody. Well, the rich can always travel to the US for the faster service. Better service? I have no idea. I can only say from talking to both Canadians and Americans that in general Canadians like their system better and that many Americans agree. But hardly anybody understands how both systems work.

      The Canadian system is health insurance, which is not quite the same as health care. Perhaps this will again be a topic in the coming election.
      https://www.ephpp.ca

      Like

        • Don’t take it personally.

          If you go to a doctor in Canada on January 1st and he sends you to a specialist, on average you’ll get to see her on May 20th. If the specialist recommends some special procedure, on average you’ll get it on September 1st

          I was just asking (too subtle, I know) about your source for this “data”. Any particular special procedure?

          lots of folks have died waiting for treatment in Canada, or seen their condition get so bad it can no longer be treated.

          It’s hard to argue with that. It may have a bit of truth to it, but is it the whole truth? Where would I go to find out? Both the usual cases and the exceptional cases. And especially compared the the US and any other country that has a better system.

          Just asking. Like Willis would ask about unusual claims of sea level rise. 🙂

          Like

        • YMMV March 6, 2020 at 11:40 am

          Don’t take it personally.

          If you go to a doctor in Canada on January 1st and he sends you to a specialist, on average you’ll get to see her on May 20th. If the specialist recommends some special procedure, on average you’ll get it on September 1st

          I was just asking (too subtle, I know) about your source for this “data”. Any particular special procedure?

          Bullshit. You were NOT “just asking”. And far from being “too subtle”, you were not subtle in the slightest. You flat-out accused me in a most unsubtle manner, saying you “suspect” that my numbers are “made up and exaggerated”. Your explanation is a lie. I neither make things up nor do I exaggerate them. I tell the truth as best I know how.

          So to do things your way, you’re an arrogant insulting asshole … but “don’t take it personally”, I’m probably just being “too subtle” …

          ==========

          In any case, you could start with any of these

          Click to access effect-of-wait-times-on-mortality-in-canada.pdf

          https://www.commonwealthfund.org/publications/podcast/2018/oct/truth-about-waiting-see-doctor-canada

          https://torontosun.com/news/national/canadas-wait-times-break-new-record-21-2-weeks-fraser-institute

          https://www.eurekalert.org/pub_releases/2018-10/hasf-cis101818.php

          w.

          Like

        • I read that link the first time you posted it. Somebody heard two Canadians talking. That would count as an anecdote. I would not count it even as one data point without some verification. I wrote it off as hearsay from someone with an axe to grind. He does not like socialized medicine. He says so. The catch is that Canada does not have socialized medicine. It may have some overcrowded hospitals. What else is new? It may have some incompetent doctors. Anything is possible. I would like to hear the other side of that story. There must be more to it. And it probably includes the item that Canadian health care paid for all that nice American hospital care.

          I would like to hear more about Canadian versus American health care, but I’m not going to believe everything I read or hear.

          Like

  18. A while back, I saw a survey where Americans rated various institutions. Coming in dead last, with an approval rating of 9%, was the US Congress. Socialism would in effect put this pack of idiots in charge of everything. I think it needs to be hammered home how badly that institution functions and is therefore imperative that it has as little to do with our material well-being as possible.

    Like

  19. Willis, I have followed your musings for the last 10? Years or so.
    Re sea level rise, I have a pic I took close to the Harlingen harbour, a long time ago, showing when the sea dike was “raised”. Picture is not clear but would like to show it if you are interested. No idea how to do that. I am not on twitter nor Facebook.

    Like

  20. The main sea dike by Harlingen. If memory serves, about 2 km from the town. The markers indicate the years when the dike was raised. ( added height)
    Again, from memory, individual towns in the Middle Ages built their own sea walls. Later these dikes were incorporated in polders. “KRUN” ( crown ) is top of the dike at that time.

    Like

  21. WE’s exact words: All the rest is services. Many of these are essential services, perhaps life-and-death services to be sure … but services nonetheless.

    Trade itself? Transportation and logistics? Ghod forbid money-changing…?

    If the tribe of the mountain trades rocks with the tribe of the forest’s sticks, both have the means to produce spears. Rocks alone, or sticks alone, are not as valuable. One tribe traveling into the other’s territory to throw rocks (or swing sticks) to kill competitors and TAKE sticks (or rocks) is, well, counter-productive. Trade, afforded by transport, creates a form and quantity of net wealth that can’t be produced otherwise.

    The three-legged model of extraction, cultivation, and manufacturing is, at very best, incomplete. As modeled above, even if extraction alone is considered, two way transport of rocks and sticks spreads the wealth in useful ways. Combinations of sticks and stones allows building — literally — useful stuff that can’t be manufactured otherwise.

    When we start looking at actual markets in trade, transport, storage for future needs, trades-other-than-direct barter (leading to the whole new game of “banking” and “money” ) we start getting skeptical about over-simplified models, don’t we?

    Like

    • pouncer March 10, 2020 at 9:55 am

      WE’s exact words:

      All the rest is services. Many of these are essential services, perhaps life-and-death services to be sure … but services nonetheless.

      Trade itself? Transportation and logistics? Ghod forbid money-changing…?

      Yes, absolutely. The easiest way to understand the difference is to imagine that everyone is engaged in the activity. If everyone farms, everyone will eat. If everyone fishes, everyone will do well.

      But trade? It’s like the old joke about the tribe that are known as ruthless traders and nothing else. Three of them end up shipwrecked on a desert island … and when they are rescued some years later, all of them are very rich from trading with each other …

      Of course, the reason that is funny is that on some level everyone understands that no wealth is created by trade …

      You go on to say:

      If the tribe of the mountain trades rocks with the tribe of the forest’s sticks, both have the means to produce spears.

      When you manufacture spears, you create wealth. Suppose they trade rocks for sticks and they do NOT manufacture spears. No new wealth is created. You still have just rocks and sticks.

      Which demonstrates that manufacturing creates wealth in the form of spears … but trade doesn’t create wealth.

      Regards,

      w.

      Like

      • WE: Suppose they trade rocks for sticks and they do NOT manufacture spears. No new wealth is created.

        Suppose there is no new wealth … why trade? Aside from the errors of socialists, trade only occurs when the trading partners each have some reason, however idiosyncratic, for making the trade. For making a profit, fulfilling a perceived need. Why do the tribes want spears anyway, who are the planning a war with? But assuming they want spears, is there a better way to allocate rocks and sticks?

        Well, since you find that distracting:

        Consider a parent who divides a bag of M&Ms equally between children. One child observed (and whines) “You got more green ones that I have!”. The other responds, “So?” Note that only one potential partner in the candy economy cares about the color. The parent knows the color is tasteless. The child that says “So” may or may not know, but doesn’t fuss. Only the child that, perhaps mistakenly, cares about the color even notices, much less initiates action.

        “I’ll give you all five of my brown ones, for your four green ones.”

        “Why, what’s wrong with the brown ones? Did you lick ’em already?

        ” No. Okay 3 red and 2 orange for 4 green.”

        “Five for four, but I get to pick my color.”

        “But not green. Deal. ”

        “Deal!”

        So no new wealth — from the perspective of the parent or indifferent child — is created. There remains a constant number of M&Ms in the system. There is no real difference in calories or taste in the distribution. But one child gets a preference fulfilled, and another gets an extra treat. BOTH profit, as soon as the trade is executed and the 9 pieces of candy are moved between piles.

        The perspective that there is an idealized true “value” of wealth that can be determined by a privileged observer; that the wealth is badly allocated, and that the privileged observer could, if empowered, do a superior allocation of that wealth, is the basic error of socialism. And implementing a solution requires essentially three new participant/roles in the allocation. An assessor, to determine the value of rocks or sticks or M&Ms: a collector, to take up the excess value from those who currently (and undeservedly) hold such excess, and a distributor, to provide value to those who have use for it, need of it, or at least preference for it. Of course those three functionaries must ALSO be compensated for their contributions to society’s superior allocation.

        In the real market, each party assesses zer own needs and excesses; each voluntarily surrenders excess to a trading partner, and — perhaps — each contributes to the pay of a distributor (transporter, warehouseman, retailer) who moves the stuff around. You may disagree with the share of value the transport / distribution workers contribute to the trade, but I believe you are mistaken in dismissing such value entirely.

        Like

        • pouncer March 11, 2020 at 1:21 pm Edit

          WE: Suppose they trade rocks for sticks and they do NOT manufacture spears. No new wealth is created.

          Suppose there is no new wealth … why trade? Aside from the errors of socialists, trade only occurs when the trading partners each have some reason, however idiosyncratic, for making the trade. For making a profit, fulfilling a perceived need. Why do the tribes want spears anyway, who are the planning a war with? But assuming they want spears, is there a better way to allocate rocks and sticks?

          Pouncer, someone had to go out and get the obsidian from nature. When they do that, new wealth is created. The world has more obsidian.

          Someone had to go out and harvest the spear shafts from nature. When they do that, new wealth is created. The world has more spear shafts.

          If you understand accounting, the spear shafts and the obsidian would go on the ledger as ASSETS. Things of value that you own. In other words, wealth.

          But trading one asset for another doesn’t change your balance sheet in the slightest. If I have a company and I trade $100 worth of beans for $100 worth of corn, neither I nor the world is any wealthier. My bottom line is unchanged.

          You keep mistaking making a profit or making money for creating new wealth. If I buy a sack of beans for $100 and sell it for $120, does the world end up with more dollars? Does the world end up with more beans?

          No to both questions. Yes, I’ve made money, but no new wealth has been created.

          Best regards,

          w.

          Like

          • your concept of ‘wealth’ is limiting.

            you list physical goods as wealth.
            you admit that softare (the arrangement of bits) can be wealth
            why can not the arrangement of flowers (not the picking of flowers) be wealth?
            if it can, why can not the arrangement of hair be wealth?

            if the arrangement of flowers cannot be wealth, why can the arrangement of bits be wealth, or the arrangement of bolts and panels (i.e. assembling a car from manufactured parts) be wealth?

            Like

          • Thanks, David, for your reply. However, you are trying to argue about just exactly where the line is drawn. That’s a side track.

            Me, I’m pointing out a very fundamental difference between cutting hair and mining gold. When you mine gold, the world ends up wealthier. When get a haircut, the world is NOT wealthier just because your hair is now short. Cutting hair is a service. Mining gold produces wealth.

            Now, you can dispute the edge cases and point to puzzling outlier activities all day long. But the point remains. Some activities (fishing, farming, factories) generate wealth. Other activities (services like cutting hair) don’t generate wealth.

            My underlying issue is simple. Socialism is the economic system where the government owns the means of production of wealth. Not the means of production of services. The means of production of wealth.

            Socialism has nothing to do with services. The system, capitalist or socialist, might provide those services or not provide them. And all kinds of economic systems, from the most capitalist to the most socialist, provide some kind of services.

            So I just laugh when I see people saying things like “The US is socialist because the government runs the police force and the Post Office.” Nope. Those are services. Important services, even crucial services … but still services. Their provision means NOTHING about whether the economic system is capitalist or socialist.

            And I laugh even harder when people claim that places like Denmark or Canada are socialist. Nothing of the sort. They are capitalist systems where the government does NOT own the farms, fishing boats, and factories. The only difference is that they provide more services than the US does. But that does NOT make them socialist states.

            My best regards to you,

            w.

            Like

        • ‘Pouncer’
          I reject your example of a parent doling out candy to children – that is _voluntary_, and he loves all the family’s children equally (or at least avoid envious squabbling).

          A child giving some of her candy to a kid next door could be _charity_ (also voluntary), or might be in friendship (also a voluntary transaction).

          Even the woman who lived very poor herself in order to help people in India did so voluntarily, her choice.

          OTOH, Socialist distribution is coercive.

          Like

  22. WE: Socialism is the economic system where the government owns the means of production of wealth. Not the means of production of services. The means of production of wealth.

    But socialism assumes a God-like perspective on what “wealth” can be. In my second example, which you have not yet engaged, one child believes herself wealthier if she can acquire more green M&Ms. A parent might view a child who trades off 5 brown ones for 4 green ones the victim of exploitation. With the best of intentions and the empowered privileged perspective that all color candies are equally valuable, the parent decrees that trading candies on the basis of color is against the rules. Both children in the prospective trade are now WORSE off — with unfilled desires. If the trade occurs anyway, both are now, well, not criminals but at least disobedient.

    You dismiss services … but those who want services find themselves “wealthier” by acquiring such service. You dismiss transport — but until the M&Ms move from one pile to another or sticks and stones move up and and down the mountainside, or ANY product or crop or ore is moved from the factory or farm or mine to the next stage in the market — there is no value. Crops, worst, rot in the bins unless moved to a mill. By the way, do you consider “milling” a service, or manufacturing?

    MARXIST socialism views the wealth or value of a product a result of the labor used to create said product. Which again invites consideration of a grain mill. If human laborers turn the capstan of the millstone, is the resulting flour meal more valuable than if an ox is hitched to the same capstan? If the stone is turned in a windmill — no muscle power used — is still less wealth produced? Is there any wealth LOST (to the evil “middle man” ) in the trade and transport of grain to the mill and flour meal away?

    I am accused of mistaking the taking of profit from the creation of wealth. I am invited to consider the accounting identity of assets on the ledger representing goods, and assets represent cash. I’m willing to review the discussion from such a perspective. I think that cash and profit and ledgers and assets, though, are a higher and more abstract set of concepts than you began with — crops and ores and manufactured goods. I’m curious if we can reach agreement on a tinker-toy model economy that incorporates all your elements of wealth, without dismissing mine.

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    • > WE: Socialism is the economic system where the government owns the means of production of wealth. Not the means of production of services. The means of production of wealth.

      In theory you are right, but in practice Socialism controls all services as well. This may be because of the fuzzy line we have been talking about, or it may be because Socialists think that they know how you should best spend your time for the good of society and can’t stand to have you ‘waste’ it doing something that’s not important enough, or it may be that any unconstrained work undermines the system

      Like

      • davidelang March 12, 2020 at 5:02 pm

        > WE:

        Socialism is the economic system where the government owns the means of production of wealth. Not the means of production of services. The means of production of wealth.

        In theory you are right, but in practice Socialism controls all services as well.

        That certainly may end up being the case. However, that’s not the definition of socialism.

        Thanks,

        w.

        Like

    • pouncer March 12, 2020 at 4:09 pm

      WE:

      Socialism is the economic system where the government owns the means of production of wealth. Not the means of production of services. The means of production of wealth.

      But socialism assumes a God-like perspective on what “wealth” can be. In my second example, which you have not yet engaged, one child believes herself wealthier if she can acquire more green M&Ms.

      Acquiring things is NOT producing wealth. Manufacturing M&Ms produces wealth. We know this because the world has more M&Ms.

      But person X acquiring M&Ms does NOT leave the world with more M&Ms, and thus it is NOT producing wealth.

      You dismiss services … but those who want services find themselves “wealthier” by acquiring such service.

      Nope. You are not “wealthier” because you’ve gotten a haircut.

      You dismiss transport — but until the M&Ms move from one pile to another or sticks and stones move up and and down the mountainside, or ANY product or crop or ore is moved from the factory or farm or mine to the next stage in the market — there is no value.

      Again, you are confusing value with wealth. When wealth is produced we end up with MORE of something. More food. More oil. More cars. More gold.

      But when something is moved from point A to point B, we do NOT end up with more of something. Ergo, transportation is a service.

      Crops, worst, rot in the bins unless moved to a mill.

      True. Not sure what your point is.

      By the way, do you consider “milling” a service, or manufacturing?

      Milling produces wealth. How do we know? Because the world ends up with MORE flour. That’s the key point that you are misunderstanding. When wealth is produced we end up with more of something. But when you get a haircut, the world doesn’t end up with more of anything. When you trade a bag of beans for a bag of corn, the world doesn’t end up with more of either beans or corn.

      So when you question whether an activity produces wealth or is a service, simply ask yourself “Does the world end up with more of something from this activity”? Amassing green M&Ms doesn’t increase the number of M&Ms on the planet, so it is NOT production of wealth.

      Finally, money is not wealth. And value is not wealth. When object X increases in value, no wealth is produced. Wealth is stuff, the stuff we sweat to produce so that we can eat and be housed and clothed.

      Best regards,

      w.

      Like

  23. WE: … money is not wealth. And value is not wealth. When object X increases in value, no wealth is produced. Wealth is stuff, the stuff we sweat to produce so that we can eat and be housed and clothed.

    Okay, stipulated for the nonce and for this discussion. I consider that an idiosyncratic definition of wealth leading to a weird definition of “socialism”, but why not?

    I observe no location component in the definition. A bird in the hand represents wealth equal to a bird in the bush, yes? Or, we quibble that the bush holds two birds, one of which can be captured as an extract of wealth from a state of nature, and which capture, alone, produces wealth. But then are we to understand that the bush hunter’s laborious transport of a bush-bird to the hand of a willing buyer is a negligible service — while the labor of finding and trapping the bird is “productive” of new wealth ? How does that help?

    Say the monarch owns the bush, considers all birds his own wealth, and the “productive” taking of birds is a crime called “poaching”. A warden confronting a poacher in the act of netting a bird may arrest a criminal. But if a warden finds a person in town with a bird in the hand … where is the crime? Somebody transported the king’s wealth to town and somebody traded some other wealth for the bird. May the warden at least take back the bird for the king, regardless? And does a dead, perhaps gutted and plucked, bird in hand (now a manufactured product called “meat”) represent the same amount of wealth as a live, breeding, bird in the bush? If manufacturing a family meal of meat from the raw material of bush-bird-corpse has added wealth to the system, isn’t the king – and his warden — reducing overall wealth by asserting a claim of ownership?

    Is there a time component in the definition? If the bird is preserved, smoked and salted and aged in the shop, more wealth gets manufactured, yes? Meat that resists rot represents more wealth than undressed raw meat. And it does take a while for the smokehouse to accomplish the intended goal. At some point in time does the king forfeit any claim to the wealth represented by the original bird from the bush?

    Saying the king, or any system of government, “owns the means of production” doesn’t complete my understanding of the changes impending from socialism.

    Like

    • pouncer March 13, 2020 at 8:59 am

      WE:

      … money is not wealth. And value is not wealth. When object X increases in value, no wealth is produced. Wealth is stuff, the stuff we sweat to produce so that we can eat and be housed and clothed.

      Okay, stipulated for the nonce and for this discussion. I consider that an idiosyncratic definition of wealth leading to a weird definition of “socialism”, but why not?

      I give up. That is the dictionary definition of socialism.

      Definition of socialism. 1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.

      See that about “production of goods”? Do you notice that it does NOT say “production of services”? Remember what I said about wealth being the stuff that we use, the clothes, the cars, the food, the houses? Those are “goods”, not services.

      I’m sorry, pouncer, but I cannot discuss socialism with someone who continues to insist after all my explanations that the dictionary definition is somehow my “weird definition”. That level of denial of reality puts us too far apart to discuss things.

      Best regards,

      w.

      Like

  24. Separate from questioning what is included, help me understand what “Socialism” — government ownership of the means of production — should properly EXCLUDE. Despite historical errors…

    If transport is a service not a product then governments that have “nationalized” railroads are not doing socialism. We need a new term for that.

    Similarly the governments that have “National Health Care” systems aren’t socialist. MAYBE pharmaceutical companies are producing something, but the laborers doing diagnostics, physical therapy, monitoring, billing, etc are all doing some form of service, not making product.

    The post office is not socialist, despite two centuries being held up as an example of how well government run systems can work for society. Timely transport of messaging is, after all, a service, not a product.

    Broadcast radio and TV, sending nothing but signals out to nobody in particular, are not producing anything of wealth — though they consume a great deal of wealth in siting and electronic equipment, and later wind up accumulating much wealth to those who control the broadcasting equipment. Nationalizing broadcasting is not socialist, then.

    A toll road, private or state operated, is not socialist. (Neither is a “freeway”) A road is not a product, right?

    I remain unclear on the concept, I’m afraid.

    Like

    • pouncer March 13, 2020 at 9:26 am

      If transport is a service not a product then governments that have “nationalized” railroads are not doing socialism. We need a new term for that.

      Correct.

      Similarly the governments that have “National Health Care” systems aren’t socialist. MAYBE pharmaceutical companies are producing something, but the laborers doing diagnostics, physical therapy, monitoring, billing, etc are all doing some form of service, not making product.

      Again, correct.

      The post office is not socialist, despite two centuries being held up as an example of how well government run systems can work for society. Timely transport of messaging is, after all, a service, not a product.

      True.

      I remain unclear on the concept, I’m afraid.

      I cannot agree more.

      Let me once again point you to the statement by the leader of Denmark, where the government provides health services, which you incorrectly and repeatedly claim is “socialist”.

      After seeing his country held up as an example in the US presidential debate, Danish Prime Minister Lars Løkke Rasmussen used an address at Harvard to explain the Nordic model to a US audience suddenly very interested in Denmark.

      Speaking at Harvard’s Kennedy School of Government, Danish PM Lars Løkke Rasmussen told students that he had “absolutely no wish to interfere the presidential debate in the US” but nonetheless attempted to set the record straight about his country.

      “I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy,” Rasmussen said.

      “The Nordic model is an expanded welfare state which provides a high level of security for its citizens, but it is also a successful market economy with much freedom to pursue your dreams and live your life as you wish,” he added.

      I’m sorry, but the provision of services (health, post office, etc.) is NOT socialism. READ THE DAMN DICTIONARY AND THE ENCYCLOPEDIA!!! Pay attention to the leader of Denmark.

      Look, I can explain it to you, but I can’t understand it for you.

      I quit.

      w.

      Like

      • I have need many dictionaries and encyclopedias that have said that socialism is the government controlling the means of production, but I have not seen any that specified that socialism does not also control the provision of services. And since, in practice, socialist countries also take control of the provision of services, I think you are straining to make a distinction that doesn’t need to be made.

        The fact that the government does something (be it delivering mail, providing health care, building a dam, mining gold, etc) doesn’t make it socialist, but when the government demands a monopoly on doing something, saying that no private companies/individuals can do the same thing, then it is clearly crossed the line into socialism.

        The US government has run the post office, but they have never forbidden private companies from delivering message/packages.

        The Scandinavian countries, even at their worst never forbade private health care/insurance (they came close, but backed away)

        but limiting your definitions of Socialism to the production of goods, and not any of the services involved with doing so creates contradictions and arguments.

        It may be that there has never been a pure socialist country (communes, like the one Bernie was asked to leave for not contributing, could come close, but larger groups fall apart very quickly), but the fact that every socialist organization/government insists on controlling at least some services makes your claim that “Socialism does not involve controlling services” a problematic argument.

        There is always some amount of capitalism in place in the form of the Black Market (or even people just owing favors to each other), so it is probably impossible for there to ever be a pure Socialist government. But claiming that Socialists have no interest in controlling something (anything) is a loosing argument if you look at their past actions.

        Like

        • davidelang March 13, 2020 at 4:08 pm

          I have need many dictionaries and encyclopedias that have said that socialism is the government controlling the means of production, but I have not seen any that specified that socialism does not also control the provision of services. And since, in practice, socialist countries also take control of the provision of services, I think you are straining to make a distinction that doesn’t need to be made.

          Sorry, David, but that’s simply not true. Consider China, where the Government owns and runs the steel, cement, oil, coal, electric generation, and other wealth-producing industries, but doesn’t own or run the barbershops or a host of other services.

          Why? Because if you control the generation of wealth, you control the country … but if you control the services, you just control the haircuts …

          w.

          Like

          • Willis

            Was not sure how to reach you so thought I would try this. I posted to your original Diamond Princess post on WUWT to point out that 96.3% of the CoronaVirus deaths in China were in Hubei Province (population 59.7 million) which had 83.6% of China’s cases to March 15. WHO posted the data for all the provinces in China until March 15 and Hubei was the only place it got away. I believe the graph you are updating at WUWT is a valuable contribution to the conversation but if you post the Hubei data (or just use the Hubei population with the China data) it will dramatically illustrate the difference between not treating the virus seriously at first (in Hubei 53 deaths per million to date) and starting testing and preventative measures as soon as the first cases show up (1.6 deaths per million to date in Korea, population 51.3 million).

            John

            Like

          • Thanks, John. What you say is likely true. However, here are my reasons against splitting it out.

            First I’m interested in the country-by-country response.

            Second, I don’t trust the Chinese numbers for the rest of the provinces one bit. I strongly suspect that there’s a whole raft of “unusual flu” cases out in the sticks, attested to by some barefoot doctor who knows very well what the central committee wants to see on their mortality forms.

            Third, worldometer doesn’t split the data out by province, and I’m always reluctant to combine two datasets.

            Regards, good point.

            w.

            Like

          • Willis

            I thought you were a scientist first. Very disappointed. Like the man said, you should never meet your heroes.

            Like

          • Oh, take a deep breath. Those were my reasons for not doing it. However, after further consideration of your idea, and before I saw your nasty reply here, I went ahead and did it, and posted it up over at WUWT.

            So screw you for being an unpleasant asshole and making vile untrue accusations when you don’t get your way. Piss off, and don’t come back until you’ve learned to keep a civil tongue in your head.

            w.

            Like

  25. HI, I’m late —

    WE: that the dictionary definition is somehow my “weird definition”. That level of denial of reality puts us too far apart to discuss things.

    The Dictionary, as cited — my bold: 1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.

    And me, asking for clarification back a few days: “Trade itself? Transportation and logistics? Ghod forbid money-changing…? ”

    I am willing to continue on the distinction of “trade” and “money-changing”, perhaps, being excluded; but if we can’t identify “Distribution” with “Transportation and Logistics” then we aren’t speaking the same language.

    Can we agree on a neutral term? “Allocation”. Free markets have one system of allocating wealth (and / or value ) while socialist systems have a different approach to allocation?

    Like

  26. Willis – the arguments above as to what is a good and what is a service only really point out that life has become more complex and less susceptible to simple definitions. When we’re talking about growing food and making steel as opposed to haircuts and beauty treatments, seeing what’s happening is somewhat simpler.

    I’ve made tools for shaping wood and metal, which are easily defined as goods. I’ve also written a fair amount of software and software tools, that allow people to do things more easily than they could before – that could be defined as a good or as a service, depending on whether you actually need that bit of software in your production of other goods. Without the software, that computer is just a brick, after all. I think that a lot of the things we use today are in that “grey” region where it’s hard to shoehorn them into one or the other definition.

    The main difference I see between Socialism and Capitalism is that the Socialists think that a central committee will define what goods are made, whereas in Capitalism everyone decides on what they can most-profitably do to gain more for less effort. The difference really is one of bandwidth (that bit of analysis from E.M.Smith). The committee won’t have the knowledge about what everyone can do, how good they are, and how much they want, and so their decisions will be sub-optimal in their allocations of work and workers. Where people are allowed to make their own decisions about what to make and sell, each person will optimise what they do as far as possible. It may take quite a while for the committee to recognise a new need and allocate people to it, whereas entrepreneurs seeing a possible profit will be far quicker off the mark.

    It seems to me that the ideal lies somewhere between the two extremes. Capitalism with no restraints leads to things like the Robber Barons. Socialism leads to everyone being equal and poor apart from the rulers, since human nature generally means that anyone who can get away with being paid to not work to their optimum capacity will do so (and the pigs are more equal than others). In Capitalism, the bankers shift a lot of money around and take a small percentage cut on each transfer, and thus get a surprising amount of cash for their time. In Socialism, it’s the leaders that end up with a surprising amount of cash (or goods). Putin, for example, has a pretty large fortune.

    Thus we need either Socialism with restraints as to what amount of corruption and graft can be allowed, or we need Capitalism with, again, restraints on corruption, graft, and venality. Bearing in mind the problems with committees, I’d reckon a restrained Capitalism to produce more wealth for a larger percentage of the people.

    Having grown up in the UK with the NHS (it was started around 6 years before I was born), I see both the benefits and the downsides. I think the benefits outweigh the downsides, and that “free” healthcare will be more profitable to the country than driving productive people into severe debt through the chance of falling ill or suffering an accident. The downside is that anything seen as “free” isn’t valued as much as something that is paid for. I think maybe for this the French system (where you need to pay and then reimbursed a percentage of that) probably makes people value their appointment slot more and make more effort to keep an appointment, and thus wastes less of the practitioner’s time. In both these systems there are also private practitioners, so you have an alternative to the “socialised” medicine. This is of course a problem for the Socialists, who complain that if you can pay, you can get “better” medicine, but of course that’s always true even in any Communist country too. The rich (in whatever system) can also get “better” housing, schooling for their kids, and any goods and services you can think of.

    Life isn’t, and never was, fair. If it was “fair”, and the amount you got was independent of how hard you worked, though, or how good you were at the job, how many people would try to do the job as well as possible? That is of course the central problem with Socialism – far fewer people do their best, because they aren’t rewarded for it any more than if they just did enough to get by.

    Like

  27. Hi Simon, thanks for helping. You write: ” the arguments above as to what is a good and what is a service only really point out that life has become more complex and less susceptible to simple definitions.

    With respect, my M&M example was (apparently unsuccessfully) intended to show that socialism, by definition, can’t even deal with trivial distinctions between goods and services.

    If the parent distributes a “fair share” of candy to each kid, that’s socialism. The power to provide and the power to distribute, both.

    If a kid prefers one color over all others, that’s a question of “value” which, according to our valued Host, is not relevant to the discussion of “Wealth” , as defined. If the two kids trade and redistribute candies to fulfill their preferences (for more overall, or more of one color) then that’s “profit”. Again according to our Host, “profit” is not relevant to questions of “wealth”. But if the parent swoops back in and reverses the trade, (threatens to with hold candy in future if the kids don’t quite whining about it.) he is exercising power to distribute and redistribute goods. So then that’s “sharing the wealth” and a good example of socialism, as intended and as defined. The parent VALUES “fairness” (or perhaps, power) and is unhappy with “profit”.

    If WE lives on his boat in the Pacific, the boat represents wealth. If he obtains fish from the ocean using his boat, that makes the boat “a means of production” and, under socialism, means the king should own the boat. And if WE sails from the fishing grounds to market at port to sell excess fish — for a profit — that turns the boat into, what? a tool of service? If so, using it to provide a service is taking it OUT of the realm of discussion. But it’s always the same boat and same user. WE is not an exceptional edge case, either. He’s just not a theoretical “Factory Worker” or “Consumer” or “Service Provider”. He’s a real person. I wonder, though about the reality of a self-described “Socialist”.

    Socialism is, in my opinion, not merely a flawed unreal concept. It is a lie. If we consider examples of nations and activities within nations that have been described as socialist — (and WE and I agree that nationally owned rail roads, post offices, health care, etc are NOT examples of socialism, whatever is said of them) we see either they fail, or they provide fewer goods and less service than market based systems. Socialism proceeds on a set sequence from lies, to theft, then to slavery, torture, and genocide. The lie begins in the sophistry of it’s own definitions and continues in the exercise of power to include or exclude or re-define concepts like goods vs service, profit vs value, fairness vs choice. Unicorn horns cure diseases, but whenever and where ever rhinoceros horns, narwhal tusks, or markhor antlers have been tried, diseases
    and injuries and dietary deficiencies and allergies all only get worse. Agreed, then, that those weren’t “real” unicorn horns, but… How long before we decide that maybe unicorns themselves exist only as a dangerous lie?

    Like

    • Pouncer – I’ve been finding it difficult to pin down a precise definition of Socialism that applies to all the systems that call themselves socialist, but the common thing that history shows is that such systems fail. They end up repressive/oppressive with everyone poorer than they should have been. People mostly just don’t work well without rewards that are commensurate to the effort put in. Those rewards may not be in money or goods, and can be in kudos, but they have to be there.

      I grew up in a railway town (Wolverton, now in Milton Keynes in the UK) and my dad (and a brother) worked on the railways. One side of the main road was the town, and the other side was the railway works. At that time it was nationalised, and employed a lot of people. No way could it have made a profit in private ownership, since the fares would have needed to be too high for the common folk to afford (but we got 1/4 fare deals, as railway workers). I also worked on the railways as a vacation job as a student, so experienced the low expectations of wealth produced per person-hour – it was pretty relaxed and easy work in general. Even today, with privatisation (and thus far fewer people employed), the rail fares are excessive, and if you want to go from, say, London to Edinburgh, you can fly for around 1/4 of the rail fare and arrive much quicker. You can even drive there cheaper than the rail fare. Somehow, people are still waxing lyrical about how good trains are (and they are indeed fuel-efficient) and are thus intending to spend a load of money on building a high-speed train network where the fares will necessarily be even higher. If they weren’t worried about CO2 emissions, and let private companies do what is most profitable, then I’d expect air travel to win out. Air travel is after all getting cheaper and more fuel-efficient, and electric aircraft are becoming technically-viable for short-haul trips (thus noise and emissions will reduce).

      The railways have become a socialist aspiration. Seems to be something that should be consigned to history, and that building more railway lines is looking backwards rather than realising that new technologies will be better. With the rate of technical advance that I see happening, it’s hard to predict what will be possible in 10 years’ time, except that it’s almost certain to be better and cheaper to get from A to B and that the need to get from A to B will reduce as people get better internet access.

      Maybe the big thing about socialism is the ossification of the society, since there will be a large cohort of officialdom who don’t want to change things. With a higher proportion of the populace being “employed” by government, there’s necessarily a lower proportion of people actually producing wealth (however we define wealth), and so the wealth produced per person is lower and each person will be less wealthy (except the people at the top of the pile).

      Things are bound to change as automation spreads into production of wealth, and as old jobs (such as truck-driver) disappear people will find (and need to find) new ways of making a living. Technical change happens very quickly, but social change takes a lot longer, so we can expect some disruptions. We may need to find better ways to distribute wealth around, since with automation of many if not most jobs automated, far fewer people will need to do a job that produces wealth but people still need to make a living. Could be a new Golden Age of arts and science, or could be a disaster if we just put all the unemployed in ghettoes on food stamps and forget them. As such, I expect we’ll probably need to utilise some “socialist” ideas and introduce a Universal Basic Income (UBI) at some point in order to keep the wealth circulating. No point in producing goods in a fully-automated factory if no-one has the money to buy them because they no longer have paying jobs.

      Could UBI actually work? I don’t know for sure, and there would be problems if some countries did that and others didn’t, causing immigration pressure. On the other hand, as a pensioner I get paid whether I work or not, and I haven’t stopped working yet. Most retired people find voluntary work to do while they are still physically capable. I think it could work, therefore. It could however be a difficult transition. A requirement for automation of production of wealth is that the cost of energy goes down. That’s technically possible now, and I’m expecting even cheaper methods to become available – I’m working on some of those and I know a lot of others are as well.

      We’re living at a time when things are changing faster than ever before. That will put stress on any society, but it seems that a basically capitalist system is better-placed to adapt. It’s also useful to have the uber-rich around, where a proportion of them will use their huge resources to push some boundary way beyond what a socialist society could manage. For example Musk with his push into space, which should give us the capability of diverting the next Earth-killer asteroid earlier than we would otherwise have achieved that.

      I’d suggest therefore that we don’t simply reject Socialism, but instead take and use the bits of it that work in the situation we find ourselves in, and that we also use the parts of Capitalism that work well. Reward a job done well whether it’s a well-written program or a work of art. We’ll probably need to re-think the options fairly frequently, too, as technology changes what is possible or practical. Around a couple of centuries ago, a large proportion of people (70-80%) were needed just to produce enough food, but now it’s around 3% or less needed to produce food in the West. Things change. The jobs people actually do has been changing from production of wealth towards services since fewer people are needed to produce the wealth. At some point we’ll automate the manufacture and maintenance of robots and thus the wealth will all be produced by robots. Maybe even the design will be automated, and there has been some work there already. The real cost of something is really just the amount of human time embodied in that product, and by the time that time is all robot and no human the product will cost nothing.

      Like

  28. Interesting discussion.
    Willis, I’d suggest that Simon has some good points mixed in with other stuff 😉
    A few points from where I sit:

    “Service” is too simplistic.

    My simple take: “Means of production” today incorporates a LOT of multidisciplinary work, particularly when one realizes that true “wealth” (product) only has value (yes, separate but crucial concept) when the “product” is truly complete… AND “complete” means can be utilized for an intended/valued purpose.

    IOW:
    – Is gold in the ground wealth? Not really, although ownership of that ground is potential-wealth.
    – Is a gold wedding band wealth? Yes, IF it can be owned by somebody.
    – Is a parking lot full of vehicles that cannot be sold due to various restrictions “wealth”? No — it’s actually a liability!

    Important modern concept: Cost Of Goods Sold (COGS)

    – All costs of materials, labor and more, necessary for “completion” of a retail product is part of COGS.
    – Many people make a living by contributing their work (“service”) to creation of wealth.

    Thus, there are wealth-producing services and non-wealth-producing services.

    Intellectual Property is a Thing.
    – It’s not manufactured
    – It’s “just” an idea, AND there’s no quantity involved
    – Yet it can be owned, bought, sold, accumulated, depreciated, etc.

    Last Point for now: “ownership” is too simplistic. Control and Regulation accomplish the same thing
    If I don’t have the freedom to buy/sell/create/destroy… then someone else partly “owns” my wealth.

    Like

    • Mr. Pete – the COGS you mention is the human hours needed to produce the product, when you follow the chain of production back to where all the raw materials come from and iterate that since getting the raw materials will normally involve using machinery that also has a chain of provenance. Since in reality that chain of provenance is never-ending then we’re going to cut out at some point and just put in the price it costs instead. The stuff itself is free, but all the people who contribute to making a finished product will need to get enough money to pay for their needs. For modern life in the 1st world, there will be a surprising number of people involved in producing any goods, and normally up in the many thousand all contributing their little part of the work needed.

      For third-world, the number of people involved in the production will be much less, and for subsistence-farming it could be just one.

      The complexity of the provenance of modern goods is somewhat mind-boggling. Still, that number of human-hours involved in the production of *something* is really what determines the cost. The price is determined by the cost plus how much profit can be gouged, and what the market can bear. People who can produce a product at lower cost than others make more profit.

      As automation grows further, firstly you need fewer people to design and program the robots than you would to run the machines, and later on the production (and maintenance) of the robots will be automated to and you’ll need even fewer people. Today there a few farms being automated, too, so it’s fair to assume that this will improve and spread just as soon as it’s cheaper to do that than to import seasonal workers to do the picking by hand.

      It’s easy to see a point in the future where the human hours in any product (COGS) becomes zero or at least almost-zero. That’s going to produce a difficult social problem as to what method you use to determine who gets what. Money may need a re-think. How will we reward people who do a good job, and provide a disincentive to simply do nothing because everything is produced by robots and thus free?

      You make a good point about control and regulation achieving partial “ownership” of some good or service. Since that is what bureaucracies do, and we know that bureaucracies always expand (Pournelle’s Iron Law), it’s going to be hard to avoid that in future.

      The current Covid-19 pandemic does provide a pointer to how people are valued when it comes to the crunch. The UK has just shut all schools except for the children of NHS people and those in the care professions, those of the police and army, those of people producing and transporting food, and those in essential financial services. About 75% will be sent home, needing at least one parent to remain at home and take care of them. I haven’t looked at the figures, but a WAG is that only around 1/4 of the population will have kids at school, and so another WAG is that maybe around 80% or more of the UK working population is deemed “non-essential” at the moment. It’s also interesting that most of the people deemed “essential” are not the best-paid, but at minimum wage or not much more.

      The nice thing about Willis’ articles is that they make me think about things I maybe haven’t before. The bit about installing railways was something I’d thought was not optimal but hadn’t really gone into the reasons why.

      Like

    • Hi Pete! Simon says: You make a good point about control and regulation achieving partial “ownership” of some good or service.

      You do. It’s true. And THAT opens up a whole ‘nother an of worms under the “Georgist” definitions of “Land.” If someone (Say a U.S. Senator) owns a product or property acquired at some historical price, and (respecting WE’s point about preserving distinctions among price, profit, value, and wealth) and the jurisdiction governing use of that product changes the rule … Maybe a tank of refined gasoline that was previously only salable in Nevada become deregulated and salable in California. Or, in real life and only recently, the US TV frequency “spectrum” was re-regulated so that one analog channel was divided up among several digital channels, one digital-share awarded to the original broadcaster and the others auctioned off. Upcoming maybe arid and marginal cow pasture is among sites chosen for a new Bullet Train.

      The government control of the product (let alone control of the “means of production” OF the product) affects the use of the product and therefore the wealth of the owner. And products themselves gain or lose “wealth” — utility, value, what SHALL we call it? — in response to government changes. When the TV spectrum legally changed the old style analog TVs were, overnight, rendered useless. So much for the wealth represented in THAT product. Then the government assisted consumers to buy “converter boxes”. Whole new product! More wealth for every body. Then the market brought digital HD TV to homes even more cheaply than the old CRT TVs — and how much wealth is now represented by a 12 year old converter box product? Or maybe we have to define the “box” as a provider of conversion services, eh?

      Like

  29. Hello Willis,
    This is the first time I have visited your site .
    I came via WUWT where I have seen your postings and have made occasional postings there.
    Here in New Zealand we are drifting towards socialism as the Green party (read socialists ) are part of our government .
    A very interesting true story about capitalism and creating real wealth not only for their families but for every person in New Zealand.
    Two brother in laws sold a fish and chip shop in Auckland and brought a small run down trucking business in the small rural town of Otorohanga in 1963.
    They gradually expanded and in the 1990s they were carting many dairy cows to the South Island with a surge in dairying in Canterbury.
    They could not get space on the Inter Islander ferries across Cook Straight so they brought a old ship from Europe and started shifting livestock across the straight .
    This is now the Blue Bridge ferries with three ferries across the straight and to Canterbury and Nelson.
    Unfortunately one of the partners died but his son and daughter still run the livestock business OTL throughout New Zealand ,
    The Inter Islander ferries are part of the New Zealand Railways and part of our government services and this direct competition has been the best thing that could have happened as the Inter Islanders had a monopoly and they now have to perform and their charges are kept down which helps all New Zealanders as a lot of produce and goods are carried not to mention travelers between North and South Islands.
    Jim Barker died and the Blue Bridge Ferries and Freight Lines has been sold but his son Peter runs a large trucking company Bulk Lines specializing in bulk freight .
    I maintain that Jim Barker did more for New Zealand than any politician and he was able to because of our capitalist system .He was not afraid to take risks and work long hours to achieve his vision.
    Graham Anderson

    Like

  30. Yah mean the Canada where people die on waiting lists, where health care is less effective because of bureaucracy (not that the US lacks for that I suppose), where it is difficult to find a regular doctor, etc.?

    Like

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