You and Nature
Imagine you are all alone in nature. You'll need to get goods. You can get these by working. If you have time or savings left after feeding yourself, then you can spend that while making tools. These tools can increase your production.

Other People
You come across another person. He has different skills and a different environment. What the two of you can do is that each spends his time doing what he's best at, and then you trade with each other, making you both better off. This means you'll be important to each other. After you've specialized, those skills will keep improving.

A third and fourth person show up. You'll only do a trade if you think it benefits you. Someone has to offer you that good of a price where you can stop making it yourself; and that is based on your skills, environment and wants. This is the way all can coordinate their production, which they also keep adjusting over time. Becoming wealthier here is a case of producing and trading a lot of what the others value.

Interfering with the work or the trading of the individuals means there will be less to trade or it will distort the coordination of work in the group. To prevent this, the concept property can be adopted. It means: what you make out of nature becomes yours, and you are free to trade it.

You can choose to hold your property in common ownership with someone else, but it means you stop checking if you're materially benefited between you and that person, which would be the case under trading.

Money
Besides trading what you have for what you want, you can also trade what you have for something you can more easily trade for what you want. This is an indirect trade, and it results automatically in one good outperforming all other goods in facilitating trade. This is then the money.

Over time the economy changes, and likewise what the money is changes.

When a money has emerged, you buy and sell in terms of the same good, so calculating profits and losses is much easier, as well as predicting your income if you would make something else.

Employment
Besides trading goods, you can also trade your labor. An entrepreneur invests in labor and goods in the hopes of making profits. The laborer earns a steady positive wage.

Interest
Goods can be loaned out to another person. Interest is the price paid for it.

Stocks
Many people can invest in an entrepreneurial project and partake in the profits and losses through the use of stocks.

Insurance
Insurance is a trade where one party assumes a specific risk of another party. The customer pays a surplus over the averaged estimated payout.

Regulation
You can provide the service of giving out information about the products of others. Individual consumers have preferences about what degree of uncertainty about offerings they are willing to risk and how much it is worth for them to get more information.

Crime
You can buy weapons and hire others to protect yourself against crime. But more fundamentally, you can increase the upside of peaceful cooperation and the downside of crime by establishing the reputation of individuals. Third parties can provide this service of arbitrating on and recording the actions between trade partners.

The Environment
Property ownership helps preserve the environment and use it efficiently in a number of ways. You have to carefully manage your waste and chemicals because it's a crime if it ends up on someone else's property and causes damage. When you own a resource, then you're also interested in the value of the resource. This means that you're not just thinking of the immediate return but also about the returns in the future, and the value of the property itself on the market, which is the estimated returns in the future by buyers.

Socialism
Socialism is not peaceful trading and sharing under property rights, but a forceful grab of all resources in a certain area by a central power. Production and trade no longer determine ownership. All information from prices disappears. So who is better comparatively at doing what? Which goods are valued and by whom? Are less valuable goods being transformed into more valuable goods?

If a group of men were great at coordinating labor and production, then the proper way of dealing would be to offer these services voluntarily like any other firm. Resorting to violent aggression is an admission that the well-being of the individuals they are dealing with is not valued.

Democracy
Democracy is not peaceful trading and sharing under property rights, but a forceful grab of security and arbitration in a certain area by a central power. Public voting then determines who makes and interprets the rules. So what happens is that everyone tries to use the rule-making power of the state in their own advantage. It will be a constant push towards the erosion of the freedom to produce, own, trade and act, and very little in way of holding it back.

Intellectual Property
Copying an idea or piece of information from someone else is a peaceful act; it does not harm the physical integrity of the property of another. In fact, it is one of the most important ways that producers have to create beneficial offerings, because they can see what works and doesn't work, and produce what does work cheaper or build upon it in a new way or a new place.

Economists
There are a number of economists and other figures in history that are associated --by themselves or by others-- with the ideology of capitalism. Among these are Adam Smith (1723-1790), Ludwig von Mises (1881-1973), Friedrich Hayek (1899-1992), Ayn Rand (1905-1982) and Milton Friedman (1912-2006).

However, all five were not for individual sovereignty and a voluntary order where security, arbitration and reputation are goods traded on the market. Instead, they advocated a rulership of some over others in the name of peace; a glaring contradiction incompatible with capitalism.

On top of this, Smith was also for the monopolistic state to produce roads, bridges, canals, harbors, coinage, a postal service, hallmarking of gold and silver, quality regulation of wool- and linen cloth, regulation of paper money notes, regulation of bank trades, public and compulsory education, publicly funded religious instruction, protection of intellectual property, and more.

Hayek was for the state production of roads, education, a social safety net, theaters, sports grounds, certification of professions, building regulations, food regulations, factory safety and health regulations, restriction on the sale of dangerous goods --including drugs--, and more.

Friedman was for the state production of roads, city parks and the protection of intellectual property, and if a state had a central bank --which he did finally end up being against-- he advocated it steadily inflate and intervene heavily during a depression.

Rand was for the protection of intellectual property.

Mises did not advocate additional state interventions.

Poverty
The problems of poverty, low wages and unemployment can all be ascribed to a lack of capitalism. The only way for people in those circumstances to become wealthier in a sustainable way, is to allow them the freedom to be productive, so they can use their human capabilities in ways that they, and others, find beneficial.

If you look at the areas where people are the poorest you will no doubt find enormous restrictions on all industries, from farming to healthcare to factories to money, ..in the strength of their property rights, from buying to exporting, ..and in their freedom to travel and relocate.

Monopoly
Microsoft has many thousands of software patent privileges acquired from the state which it can use to stifle competition --just do a search for the words: microsoft.. sues.. patent..--. But most of all, its software falls under copyright protection, which means that anyone who copies the software becomes a target of the state criminal system, even if there wasn't an agreement between that person and Microsoft. Such a thing could not happen in a free market.

Copyrights and patents are a way of shielding established businesses from competition. What we need instead is real capitalism.

Thanks for posting this Nielsio. I always enjoy reading your posts.

Yeah, great post!

It would seem that your definition of both Socialism and Democracy imply a coercive central entity be in place before the formation of this society, grabbing resources and security. Could it not be the case that the members of a society mutually agree on common responsibility under these auspices? (bearing in mind the awareness that this is not actual history per se)

You can only agree on that which belongs to you. Democracy is voting on the belongings of other people.

Think about it, how can millions of people all mutually agree on something? The only thing they can theoretically all be in agreement on is to respect property rights. Shifting the question to anything else must necessarily lead to a disagreement. (what should we eat? what kind of transportation should we use? who should marry whom?)

And this leads to the reality of the democratic society: it is an unending conflict.

Are you aware that the concept of ownership is a societal construct, and private property rights are a public good? And their enforcement can only be achieved through a state-like mechanism?

My issue is with the notion that every democratic or socialistic society comes prefab with these coercive principles. It's not that you're point isn't being made clearly, I just feel your too stringent in your theoretics. The same goes for Hayek, Friedman, et al. Reviewing every example in history on democracy and socialism would likely yield many tactics and methods most would choose to leave out of the optimal society.

Our societies developing from highly moralistic organizations caused these conflicts you mention imo. Like the sea-change on gay rights in the US, marginalizing the flawed moral argument leads to agreement in all sorts of ways... dadt for instance (regardless the political chicanery, which has it's roots in our moral culture)

I agree that the concept of ownership is a societal one. This is how I see the concept work from an individual level up, in society: http://www.youtube.com/watch?v=tE9dZATrFak .

I am trying to attack your post but I have to say it is very coherent... however you just assume that an AC Society would be "peaceful trading and sharing" given that presumption I could also make a case for any other ideology.

The issue is that in a society without oversight and restrictions all that you advocate would be the ultimate farce.

How can something be a crime if everything is voluntary? There are no laws back by a power monopoly governing behavior. There is no court you have to front. Everything has to be based on reputation, and the truth is, no one cares if you're an *******, provided you're not an ******* to the people buying your goods. This is true today WITH laws and WITH some measure of forced transparency...even you probably buy goods made by companies using slaves and causing much environmental damage. There is no reason to think disincentives for polluting neighbouring land will be better and not worse in AC land.

That's assuming you're rational. Most people aren't when it comes to the long long term, strongly preferring shorter term profit. For example, the redwoods of California - within private property - are regularly clearfelled, when it is the worst long term practice for forest management and gives the lowest long term profit (each additional year of growth on a mature tree adds far more and higher quality wood than a young tree).

But few want to wait 50 or even 20 years for their money.

The nature of people living in close proximity means that there is always some degree of agreed upon behavior enforced by the group. Whether by shunning or laws, this is necessarily coercive by its nature. Democracy isn't a bad way to manage this...it's certainly preferable to socialism and there is no evidence it isn't preferable to Somalia.


So if you spend a year writing a book, and publish it, and I come along the next day with my big printing machine and flood the market with cheap identical copies, profiting off your work, that is morally fine?

It seems like a dubious argument to me. And it seems highly disincentivising to significant investment in creativity.

No, they cannot. They are more properly ascribed to lack of talent and/or lack of ownership of productive land and resources, usually related to circumstances at birth. None of that would change in a society of unfettered capitalism.

Um, India is a thriving capitalist country with strong property rights and little effective regulation and has some of the worst poverty in the world, on a large scale.

http://www.heritage.org/Index/Countr...siness-freedom

I guess not.

The problem is Nielsio has done his homework and it is hard to prove him wrong, however I would name all the Arabic Oil Countries that are very wealthy on the paper, but where immigrants are paid very poorly, sure that might also be the states fault. But they are perceived as so free.

The rest of your post is really good, pingclown.

Hmm...I guess this is true for the cities, but certainly not the rural areas where there is lots of poverty. But I'll concede I may be wrong on India. The list however shows countries like Chile and Mauritius, which have some rather bad poverty, ranking higher than Germany, Sweden and Norway on economic freedom, which have excellent quality of life.

http://www.heritage.org/Index/ranking

Even within the US poverty varies enormously by state and region despite similar regularity frameworks, laws and property rights...Nielsio's assertion is simply wrong. It's even more wrong if he's attributing this poverty to "restrictions". Most of the poorest countries are poor because there are far too many people with insufficient talent packed into an area with insufficient resources for widespread wealth.

wealth is cumulative. if china turns capitalist and still are poor doesnt mean capitalism no workie. if poverty falls and wealth increase it means capitalism workia. same with sweden, sweden was capitalist 1800-1930 and became the richest country in the world around 1950, since then not one big company was been established and jobs in private sector has not increased. sweden is still rich, but that doesnt mean socialism workie. it's the change that tells the story.

but sweden was never anywhere near anarchy between 1800-1950 an in those times there were a lot of strikes and ****ed up conditions for the poor.

also he was never claiming that capitalism does not work. The question is how can working capitalism be accomplished. And PingClown and me are on another side of this issue than you and Nielsio.

So how is the theory falsifiable?

Also, I'll point out the Sweden's economy has been growing at the same rate as every other Western country - had it not it would not be a wealthy country today by world standards. Do you think this magically happened? Do you think it happened in spite of socialism?

Again, how is your theory falsifiable?

10% higher tax means 1% lower gdp growth per year. source
http://www.cato.org/pubs/journal/cj18n2/cj18n2-1.pdf

www.bit[delete].ly/infyht <-- press play

That's not what falsifiable means.

Also, top 15 countries by tax revenue as a percentage of GDP:

Most of these countries are economic powerhouses. Further down we have this wonderful grouping of countries:
In the tens and below we have:
No economic powerhouses there, or even mild contenders.

If anything, there appears to be a very strong correlation between higher tax rates and a stronger economy, not the converse.

It is also interesting to note that marxist followers believe kapitalism came from industrialization, and that it is actually a good thing because it lifted alot of people out of poverty. They dont see kapitalism as some kind of evil, but they think it is flawed, and it will eventually destroy the system which will result naturally in socialism. Complete bull**** ofcourse. But I think there are often misconceptions about this.

steelhouse?

Nielso,

What about a centralized military and police force? Do they exist and what are there roles?

in Nielsio's world they don't exist.

I hope he is ok, keep checking this thread for updates but he is long gone.

I'll try to respond today.

Can you clarify your meaning here?

.

On top of the state as 'protector of property', Mises didn't advocate that the state do anything else in the economy (such as prohibit gambling, start wars abroad, send people to the moon, make monopolists out of first movers in ideas, require licensing for hair braiding, etc).