Saving Elephants’ own Josh Lewis hosts an election night panel to discuss the incoming results of the race and what it may mean for the future of the country, Republican and Democratic parties, and conservative movement.

Meet the panelists:

Brooke Medina

Brooke Medina is a homeschool mother of four and the Director of Communications at Civitas Institute where she manages Civitas’ outward facing platforms, oversees messaging strategy, and handles all press relationships. The North Carolina based Civitas Instituted is a nonprofit policy organization dedicated to removing barriers to freedom so that all North Carolinians can enjoy a better life. Brooke also co-hosts Civitas’ podcast Civitalk, which focuses on drawing connections between civics and culture.

Brooke is a graduate of Regent University, holding a B.A. in Government and a minor in English. She has also completed several programs with the Charles Koch Institute, including the Koch Leaders Program and Koch Communications Fellowship, focusing on the philosophical underpinnings of market-based management and classical liberalism. She also sits on the board of directors for ReCity Network, a Durham-based non-profit committed to empowering civil society in combating poverty-related problems. Brooke’s writings have been published in outlets such as The Hill, Entrepreneur, Washington Examiner, Daily Signal, FEE, and Intellectual Takeout.

But most importantly, Brooke’s hot takes, insights, and shenanigans on social media are worth following so be sure and check her out on Twitter @Brooke_Medina_

Justin Stapley

A prolific writer and thoughtful tweeter, Justin began working on projects not at all dissimilar to Saving Elephant’s mission to fight for a restoration of political principles in the American political process shortly after the 2016 election. And during the past several years, Justin has launched multiple websites and written for many affiliate groups.

His flagship website is the apply named justinstapley.com which links to his various endeavors, including a contributing advocate and writer for the Federalist Coalition, an advocacy journalist at NOQ Report, an opinion columnist at Porter Medium, the founder and editor of The Liberty Hawk, and the Shooting Editor at Spencer Durrant Outdoors and will be a co-host for the up-and-coming Spencer Durrant Outdoors Podcast. Earlier this year Justin launched his own podcast called The New Centrist which features his original commentary and highlights of worthwhile speeches. In addition to politics, his writings include recreational shooting, hunting, fishing, and self-defense. His most current work includes the near-weakly newsletter Self-Evident.

Justin described himself as a “liberty-minded conservative and member of the Republican Party” whose “principles and beliefs are grounded in the idea of ordered liberty as expressed in the traditions of classical liberalism, federalism, and modern conservatism.” While much of that remains the same, he no longer feels he can be a card-caring member of the Republican party and hold to those values, as he explains at length in the episode.

You can find Justin on Twitter @JustinWStapley.

JB Shreve

Veteran podcaster JB Shreve conducted a series of interviews of Christians of various political persuasions to ask about their expectations and recommendations in the upcoming 2020 election. JB had invited Josh to join as the “conservative” participant in the interviews. And Josh was happy to return the favor in having JB on the show to share his insights.

JB Shreve is the founder of The End of History, a blog and podcast for Christians dedicated to helping believers make sense of the chaos of the world around them. JB has been producing podcasts and articles since 2012.

After more than 200 podcast episodes, his listeners have come to expect well researched, fact-based backgrounders on a wide variety of topics to help them better understand the world around them. These backgrounders range from the history of the Middle East to the true story of economic inequality. Episodes and posts frequently expose myths and false paradigms we have come to believe. JB is adamant he is not pushing a political agenda. Rather, JB’s mission is to:

• Help believers in crafting their own response to world affairs and current events
• Provide a faith-based, values-centered voice in the face of current global issues
• Ease the tension between a Biblical worldview and the world we live in
• Provide reasonable, intelligent perspectives empowered with Biblical values and faith
• Remove the yelling, outrage, and debate from our worldviews to find facts and seek the truth

You can learn more about JB’s work and podcast on his website, The End of History. JB can be found on Twitter @JB_Shreve

Calvin Moore

Calvin Moore is the host of Leading Questions with Calvin Moore, a weekly moderated roundtable discussion about ongoing issues in our culture. The podcast brings together disparate voices on a particular issue, discusses disagreements, considers one another's positions and, at the very least, leaves the table with a measure of respect for the person on the other side of the debate as they strive to create a space for passionate, yet healthy dialogue.

Always the inquisitive, skeptical member of his family, Calvin has consistently pushed the boundaries of accepted conventions in his search for truth and understanding. With the rise of new media, he noticed the degradation of dialogue between disparate viewpoints, which led to the creation of this program.

Calvin earned his Bachelor of Science in History Education at Rochester University in Rochester Hills, Michigan. His focus is on the African-American experience in the Early American Republic and Presidential History.

Calvin resides in Michigan with his wife, Jennifer.

November 04, 2020 at 12:37PM - Josh Lewis

It’s finally here! It’s Election Day. After what feels like the longest year of our lives, the campaign season is over.

While voting and elections are still fresh in our minds, now’s as good a time as any to reflect on the voting process. Yes, you may have already voted, but the act of voting is about so much more than checking a box once every four years. It’s about the life-long process of becoming the sort of people fit to live in a free republic.

It’s easy to get tripped up right out of the gate if you’re fuzzy on the purpose for voting in the first place. As citizens of a constitutional republic, one of the ways in which we “participate” in governing ourselves is by electing representatives to—literally--represent us. We are far too encumbered with our own busy lives to fully take the time to understand the nuances of tax policy, foreign diplomacy, or a myriad of other issues. Therefore, we rely on others to fully immerse themselves in these issues in a manner that best represents our interests and values.

Perhaps this sounds so pedantic or straightforward you find it odd to even mention it. But it is quite easy for other competing notions of the purpose of voting to swim about in our heads and, unless we take the time to think them through, we may fall victim to these subconscious biases. It is quite easy for us to quickly turn the idea that we are voting on people to represent our interests and values in a political sense to a broader notion of representation. We may come to believe it is important that we be able to “relate” to the person we vote for, or that we need to find them more likeable than their opponents.

The purpose of voting is to communicate our values, ideas, and concerns, not to make a political statement. It’s to find leaders who will represent our interests and protect our rights, not to express our anger at political frustrations.

Voting should not be viewed as the central duty of fulfilling one’s civic responsibilities when called upon, but one of the many ways we perform our civic duty. Serving in the military, paying your taxes, voting in elections, and obeying the speed limit fall under the rubric of civic duty; but so too does educating yourself, honest dealings in business, staying true to your personal commitments, and flossing your teeth.

Part of what it means to participate in a society of self-governance is to govern oneself. That does not mean we must be perfect, but it does mean that we create a greater need for governmental intervention each time we fail to govern our own affairs. It also does not mean who we vote for is unimportant, but it does mean how we conduct ourselves in our personal and professional relationships is far more important to the health of our nation. A nation is no greater than the sum of the individuals and sub-groups within the nation.

November 03, 2020 at 07:02AM - Josh Lewis

In this bonus episode, Saving Elephants host Josh Lewis is interviewed by Wes Siler, director and founder of The Burkean Conservative. This conversation was originally broadcast on Facebook Live under The Burkean Conservative’s weekly video series Conservatism on Tap LIVE. The conversation centers around how Saving Elephants came to be and the ongoing project to reignite conservatism for Millennials in hopes of restoring the Republican party.

The Burkean Conservative is a website, social media presence, and series of frequently updated videos focused on educating and expanding the conservative movement on the basis of Edmund Burke's principles. They define a “Burkean Conservative” one who ascribes to conservative political philosophy in the tradition of Edmund Burke, an 18th century philosopher and statesman widely credited for developing classical conservatism.

According to The Burkean Conservative website, Edmund Burke took strong stances against the violence and progressivism of the French Revolution while also taking a position of sympathy and leniency towards the more justified impulses of the American Revolution. Today the ideas, speeches, and political stances of Edmund Burke serve to philosophically differentiate conservatism from other beliefs. However, Burke's ideas are still too often ignored and disregarded by leading American intellectuals today. Far too many conflate conservatism with libertarianism or simple nostalgia, and in doing so they ignore the true intellectual roots and maturity of the conservative perspective.

October 27, 2020 at 06:22AM - Josh Lewis

Can we all just admit that 2020 sucks? This year has been a disaster on so many fronts it’s hard to keep track. What feels like a decade’s worth of news stories pass from one week to the next with no end in sight. But just how bad is 2020? Compared to what? How are we doing as a nation, world, or species in the grand scheme of things? Is the future bleak or bright? And how do we maintain perspective so that we can clearly see what needs to change without overlooking genuine progress quietly taking place elsewhere?

Long-time guest Bob Burch is back after a long hiatus to join host Josh Lewis in parsing through the good, the bad, and the ugly truths about 2020 and to share how the conservative mindset can help keep hope alive in the midst difficult times.

October 20, 2020 at 06:33AM - Josh Lewis

Hardly anyone disagrees Americans are divided, or that our divisions are problematic. But could continual political partisanship and polarization actually fracture the United States into multiple nations? What is the likely outcome or potential risks if we do not find a way to reverse the negative polarization? What are the preconditions for state secessions, and how close are we to meeting those preconditions? Is the United States facing another civil war, acrimonious divorce, or eventual reconciliation?

Those are precisely the questions David French sets out to answer in his new book Divided We Fall: America's Secession Threat and How to Restore Our Nation. David joins Saving Elephants host Josh Lewis to discuss the threats political polarization represent for the United States, what our history can tell us about the likelihood of these dangers, and how returning to the Madisonian blueprint of the extended republic may offer the solutions to many of the controversial political battles today.

About David French

David French is an Iraqi war veteran, attorney, free speech and religious liberties advocate, political commentator, and author who has been at the center of some of the hottest political battles over the past four years. His name was used to coin the term Frenchism to describe a deference to classical liberalism and opposition to the new nationalism and authoritarianism on the Right (see the Saving Elephants article on Frenchism for more information).

French has served as a senior counsel for the American Center for Law and Justice and the Alliance Defending Freedom, has lectured at Cornell Law School, and spent much of his career working on religious-rights issues. He served as president of the Foundation for Individual Rights in Education (FIRE). He retired from FIRE in 2005, citing plans to serve in the United States Army Reserve as a judge advocate general officer. He was a staff writer for National Review from 2015 to 2019, and a senior fellow at the National Review Institute. In 2019 French left National Review to join the conservative news site The Dispatch as a senior editor.

October 06, 2020 at 06:18AM - Josh Lewis

Many Evangelicals and conservatives share an embattlement mindset. Somehow we’re always losing the culture wars despite political gains and cultural acceptance, and even when we’re in the majority politically or enjoy unprecedented influence we can’t shake the feeling that the other shoe is about to drop. No majority, position, or gain is ever secure and we’re just one election away from losing everything.

But where does this embattlement mindset come from? Is it simply crackpot paranoia? Is there something embedded in the histories of the Right and Evangelicalism that gives this mindset an air of legitimacy? Or is it a little bit of both?

Paul Matzko joins Josh to answer these questions by exploring the murky histories of the radio Right in the 1960s, Kennedy’s successful efforts at censoring opposition, and the cultural significance of Evangelicals’ evolution from The Painter of Light Thomas Kinkade to The Painter of Trump Jon McNaughton.

About Paul Matzko

Paul Matzko is a historian (PhD, Penn State) specializing in the intersection of politics and religion in twentieth century America. His work also draws from media studies, public choice economics, gender studies, and social movement theory.

Paul’s book The Radio Right, was published earlier this year, which tells the story of the 1960s far Right, who were frustrated by what they perceived to be liberal bias in the national media, particularly the media's sycophantic relationship with the John F. Kennedy administration. His book provides the essential pre-history for the last four decades of conservative activism, as well as the historical context for current issues of political bias and censorship in the media.

Paul has taught multiple courses at Penn State, both on campus and online, and worked as an adjunct at Princeton University. He is currently the Assistant Editor for Tech and Innovation at Libertarianism.org, an outreach of the Cato Institute, where he runs a regular column and also hosts a podcast on emerging technology called Building Tomorrow. He cohosts the Impolitic podcast dedicated to friendly conversations on politics, culture, and history from the standpoint of his own libertarian views and the socialists views of his friend Sean Trainor.

Paul can be found on Twitter @PMatzko

September 15, 2020 at 06:40AM - Josh Lewis

If you have read through the previous posts in this series, you may have noticed much of the criticism leveled against socialism could just as easily come from a capitalist point of view as it could from conservatism per se. And, while I have noted that conservatives are, generally speaking, capitalists, I have not taken for granted that capitalism and conservatism are not synonymous. Rather, I’ve taken the long way round to now explore what conservatism offers that capitalism, taken by itself, does not.

Namely, conservatism offers a comprehensive worldview beyond a mere economic point of view. What of it you may ask? Well, if we are simply pitting capitalism against socialism, the socialists have the advantage. For they too offer something akin to an all-inclusive worldview. As we began to explore in Part 4, socialism is far more than an economic system. It is an all-encompassing effort to redesign society in a manner that’s morally acceptable to the socialist. Socialism is appealing precisely because it extends beyond economics and into questions of justice and equity and thereby offers a deeper sense of moral purpose and community for the socialist.

That’s a tall order to ask of an economic system, but socialism manages to pull it off, whereas capitalism is a pitiful substitute for a moral code. That’s not to say some haven’t tried to make capitalism into something akin to an all-encompassing worldview. The writings of Ayn Rand and her homegrown philosophy of objectivism stop just short of making a religion out of the pursuit of one’s own self-interests in the free market. I will save my criticism for this approach for another day. Suffice it to say for now, I hardly think it’s controversial to suggest that objectivism has utterly failed in making capitalism as appealing to the masses. Objectivism is a lonely religion.

“Conservatives are cracking open Atlas Shrugged and shouting about socialism”--worries New York Times columnist Ross Douthat, referring to Rand’s most famous treatise—“but they seem to have lost the appetite for thinking through the problem of community in an individualistic age—which is, of course, precisely the problem that makes socialism so appealing in the first place.” In an age of hyper-individualism, many will naturally seek solace in the community spirit of either socialist collectivism or Burkean/Tocquevillean conservatism.

“Man is a social being, and his desire for community will not be denied,” Douthat continues, “The liberated individual is just as likely to become the alienated individual, the paranoid individual, the lonely and desperately seeking community individual. And if he can’t find that community on a human scale, then he’ll look for it on an inhuman scale—in the total community of the totalizing state.” Douthat’s statements are insightful and eloquent, but hardly original. Half a century earlier, American sociologist Robert Nisbet issued a similar warning in relation to socialism’s radicalized offspring, Communism:

“To say that the well-fed worker will never succumb to the lure of communism is as absurd as to say that the well-fed intellectual will never succumb. The presence or absence of three meals a day, or even the simple possession of a job, is not the decisive factor. What is decisive is the frame of reference. If, for one reason or another, the individual’s immediate society comes to seem remote, purposeless, and hostile, if a people come to sense that, altogether, they are victims of discrimination and exclusion, not all the food and jobs in the world will prevent them from looking for the kind of surcease that comes with membership in a social and moral order seemingly directed toward their very souls.”

Douthat’s contemporary Jonah Goldberg has similar misgivings about attempting to defend capitalism on purely economic grounds: “The true defender of free markets, and of liberty itself, must go outside the walled citadel of capitalism and fight on the muddier battlefields of morality…In every generation, we see capitalism threatened not by dangerous economic arguments but by seductive moral claims.”

Socialist Seduction

Conservatism offers us community, tradition, and the combined moral codifications of Western civilization ethics and Judeo-Christian teachings. What “seductive moral claims” does socialism offer? As we explored in Part 4, socialist rhetoric belies far more than promises of greater economic efficiency and material prosperity. It includes the promise of addressing what’s wrong with humanity. Socialism is the moral critic of inequalities, injustices, and historical grievances coupled with the promise of setting things right and thereby alleviating what ails humanity. In short, socialism is the attempt to make people good. As former socialist Irving Kristol warned:

“All of modern socialism is a movement that says it will create a good society, which will then create good people…It is true that a good government can improve the people somewhat, with difficulty. But the notion that a handful of true believers can, be manipulating the mass of the people, create a good society inhabited by good people is pernicious nonsense. All such movements end the same way, coercing people ‘for their own good’ until, at a certain point, the people who are doing the coercing forget why they are doing it and come to regard the coercion, in and of itself, as legitimate.”

Socialism has the formula exactly backwards. It is not good society that makes good people, it is virtuous people who have a shot at producing a good society. I say “virtuous” here instead of “good” to sidestep the religious/philosophical arguments about whether humans can be “good” or what we even mean by “good”. Suffice it to say, for purposes of erecting a stable society where both liberty and the pursuit of virtues can be enjoined, a certain quantum of republican virtues are necessary ingredients. But these virtues do not arise from government programs or economic systems. Instead, they are dependent upon tradition and liberty.

How so? “What economic liberty actually means becomes obvious when we state that the contrary of it is compulsion,” cautions German economist Wilhelm Röpke. “Every limitation of economic liberty, every state intervention and every single act of planning and directing, contains some constraint.” An economic system that fosters liberty leaves individuals alone to pursue lives of virtue (or vice). An economic system that enforces some idea of morality cannot make people moral, and in coercing them into state-approved behavior it is likely to lead to resentment, complacency, and stagnation of character development.

The conservative journalist M. Stanton Evans put this idea rather forcefully: “The free economy permits morality but does not guarantee it; the coerced economy guarantees immorality.” I’m not entirely inclined to agree as I believe people are capable of moral behavior no matter what economic system is in place, but the point remains: coerced economics does not make people good and is far more likely to breed immorality.

We might agree that people ought to be more charitable but redirecting their personal property and hard-earned wages to charitable organizations isn’t charity but confiscation. While the state may coerce certain actions that appear charitable on the surface, the human heart either isn’t reached or, worse still, is hardened and learns to equate ideas such as justice, charity, and love as acts of the state rather than duties of the individual. This is the spirit of Ebenezer Scrooge from Charles Dickens’ “A Christmas Carol”. When his fellow capitalists approach him and ask if he’d like to contribute to their collection for the poor for Christmas, Scrooge replies, “Are there no prisons? And the Union workhouses? The Treadmill and the Poor Law are in full vigor, then?” Charity, to Scrooge, was the goal of the state, not the duty of the individual.

The great allure of the morality offered by socialism is that we get to define “morality” on our terms. And by “we” I mean the enlightened few who have appointed themselves to the socialist priesthood. Kristol offers some justification for such an approach: “The distribution of income under liberal capitalism is ‘fair’ if, and only if, you think that liberty is, or ought to be, the most important political value”—for what it’s worth, if we’re choosing the “most important political value” my vote is for prudence, but the point remains—“This distribution of income under capitalism is an expression of the general belief that it is better for society to be shaped by the interplay of people’s free opinions and free preferences than by the enforcement of any one set of values by government.”

This may be a hard sell for some. Is it “fair” to give up our shot at defining a moral code that promises to make people good and to end inequalities, injustices, perhaps even racism, sexism, bigotry, and class struggle all in the name of “liberty”? Laying aside the very real problem of whether the enlightened priesthood could actually make people good, let’s turn to an even more fundamental concern: how do we reach consensus on what’s “fair”? Economist (and another former socialist) Thomas Sowell acknowledged the free market doesn’t always produce results that are “fair”, but points to the problem in trying to enforce “fairness”:

“It is unfair when some people are unable to earn as much as others with similar skills and diligence, because of innovations which were as unforeseen by most of the people who benefited as by most of the people who were made worse off. Yet this unfairness to particular individuals is what makes the economy as a whole operate more efficiently for the benefit of vastly larger numbers of others. Would creating more fairness among producers, at the cost of reduced efficiency and a resulting lower standard of living, be fair to consumers?”

The Altruism of the Enlightened Priesthood

But let’s back up further still. Supposing the enlightened priesthood could devise an economic system that makes people good, and supposing they (and we) could reach some agreement on what we all mean by “fair”, it still doesn’t follow the sort of centralized control that’s needed to enforce this new morality would be used by altruistic forces. Why should we expect our new masters to be any better than the freely chosen actions of private interests and individuals? It is a mistake to think of the role the state plays in a socialist system as being somehow outside of the natural constraints, passions, and temptations of human beings, says Sowell:

“The market is as moral or immoral as the people in it. So is the government. The fact that we call one set of people ‘the market’ when they engage in transactions among themselves and another set of people ‘society’ when they exercise political power over others does not mean that the moral or other imperfections of the first set of people automatically justify having the second set of imperfect people over-ruling their decisions.”

Let me emphasize that the real question isn’t whether we want an economy that’s controlled by “private” or “public” actors, but whether we want an economy that’s “controlled” in this sense at all. I am not suggesting private business owners are more virtuous than men and women who dedicate their lives to public service. I have worked for both private and public employers and can attest they are comprised of both good and bad actors. It is not at all inconsistent with capitalism to have a negative view of many—even most—capitalists and to fear a world in which they are “in charge”.

Yet this false dichotomy is ingrained in the socialist mindset. If the self-appointed enlightened priesthood—with their best of intentions—aren’t directing the show, how awful to think that those dastardly, greedy capitalists who were born with silver spoons in their mouths and have more than they need are the ones calling the shots. “For intellectuals generally, the feeling of being mere tools of concealed, even if impersonal, market forces appear almost as a personal humiliation,” Hayek observes. “It evidently has not occurred to them that the capitalists who are suspected of directing it all are actually also tools of an impersonal process, just as unaware of the ultimate effects and purpose of their actions.” Capitalism does not mean those who own capital are “in charge” but that individuals have the liberty to act in their own best interests.

I said above that even if we allowed an enlightened priesthood could make people good via the proper economic system that we could all agree was “fair”, it simply doesn’t follow we should trust they would behave any better than a system in which capitalists were truly in charge. In fact, we do not have to wonder how the enlightened priesthood would behave, for we have ample examples just such experiments. I’ve intentionally waited until this last post to bring this up as objecting to socialism on the grounds it’s “all been tried before and found wanting” is certainly low-hanging fruit. But the fact remains, it has been tried before. Over and over and over.

But, That Wasn’t Real Socialism

Yes, I am aware that many socialists will insistent that each example of socialism offered somehow wasn’t real socialism or that it would have gone better had the state not fallen into the wrong hands. But let’s take just a moment to examine the sheer magnitude of the number of socialist experiments that somehow don’t count as real socialism.

To begin with, there are the multitude of countries that went hard-core socialist by instituting Communist totalitarianism:

Afghanistan, Albania, Angola, Belarus, Benin, Bulgaria, Cambodia, China, Congo, Cuba, Czechoslovakia, Ethiopia, East Germany, Grenada, Hungary, Laos, North Korea, Mongolia, Mozambique, Poland, Romania, Somalia, Tuva, Russia/Soviet Union, Ukraine, North Vietnam, South Yemen, Vietnam, and Yugoslavia.

Then there are the countries who tried a variety of socialist systems outside of Communism:

Burma, Cape Verde, Djibouti, Egypt, Equatorial Guinea, Ghana, Guinea, Iraq, Libya, Madagascar, Mali, Mauritania, Seychelles, Sierra Leone, Sudan, Syria, Tunisia, and Zambia.

What about countries with multi-party systems that had majority socialist or Communist parties at one time or another? Glad you asked:

Algeria, Angola, Bangladesh, Barbados, Congo, Djibouti, Ecuador, Guinea-Bissau, Guyana, Mauritius, Mozambique, Mexico, Namibia, Nepal, Nicaragua, Portugal, Saint Vincent and the Grenadines, South Africa, Syria, Tanzania, Uruguay, and Venezuela.

I’ll spare you Wikipedia’s list of seventy-five—seventy-five!—additional short-lived political entities that “emerged during wars, revolutions, or unrest and declared themselves socialist under some interpretation of the term, but which did not survive long enough to create a stable government or achieve international recognition”.

What remains is the Nordic Model, which includes the “socialist” countries of Norway, Denmark, and Sweden. Indeed, American socialists like Bernie Sanders and Alexandria Ocasio-Cortez often point to our European allies as their preferred form of socialism. This would be worth debating if it weren’t for the fact the Nordic countries abandoned socialism in the last century. In that same century, Irving Kristol observed that “people who persist in calling themselves socialist, while decrying the three quarters of the world that has proclaimed itself socialist, and who can find a socialist country nowhere but in their imaginings—such people are anachronisms.”

The Fatal Conceit

Anachronistic, yet doggedly persistent in their belief that they can succeed where all others have failed. But let’s take another look that “them”—this enlightened priesthood. Who are these self-appointed moral modernizers? They claim to speak on behalf of the workers of the world—those who are exploited by greedy capitalists—but we should not take it for granted that their ranks are rarely comprised of the sort of actual workers they claim to be working to benefit. They are, more often than not, the elite of society. The are college educated, professional, and—above all—intelligent. “The higher we climb up the ladder of intelligence, the more we talk with intellectuals, the more likely we are to encounter socialist convictions,” posited Hayek. Why is that?

“One’s initial surprise at finding that intelligent people tend to be socialists diminishes when one realizes that, of course, intelligent people will tend to overvalue intelligence, and to suppose that we must owe all the advantages and opportunities that our civilization offers to deliberate design rather than to following traditional rules, and likewise to suppose that we can, by exercising our reason, eliminate and remaining undesired features by still more intelligent reflection, and still more appropriate design and ‘rational coordination’ of our undertakings. This leads one to be favorably disposed to the central economic planning and control that lie at the heart of socialism.”

Who else but the most intelligent among us would fall prey to notions that they were capable of redesigning morality, economics, and human nature? This is what Hayek referred to as the “fatal conceit”. The mistaken belief that “the ability to acquire skills stems from reason.” But this is not so, as we have explored throughout this entire series. “It is the other way around: our reason is as much the result of an evolutionary selection process as is our morality.” What makes the socialist conceit “fatal”? In their well-intentioned efforts to redesign the world based on their reason alone, they destroy the very tradition that made the complexities of the free market possible in the first place. Without this tradition humanity is cast back on its pre-civilized method of acquiring goods and services through violence instead of careful cooperation and mutually beneficial rules.

“Priding itself on having built its world as if it had designed it, and blaming itself for not having designed it better, humankind is now to set out to do just that,” continues Hayek, “The aim of socialism is no less than to effect a complete redesigning of our traditional morals, law, and language, and on this basis to stamp out the old order and the supposedly inexorable, unjustifiable conditions that prevent the institution of reason, fulfilment, true freedom, and justice.” In the end, socialism destroys what capitalism has achieved: prosperity, opportunity, and freedom from coercion.

But I am not ignorant to the fact capitalism has not brought us utopia. There is still poverty, corruption, greed, exploitation, and want. And, even where those are minimal, there is the sad malaise of a society sinking into complacency and mediocracy. Irving Kristol’s writings—perhaps because of his socialist origins—contain a grain of sympathy to his old comrades:

“A free market responds, or tries to respond, to the appetites and preferences of common men and women, whose use of their purchasing power determines the shape of the civilization. Since common men and women are likely to have ‘common’ preferences, tastes, and aspirations, the society they create—the ‘consumption society,’ as it is now called—will be regarded by some critics as shortsightedly ‘materialistic.’”

The enlightened priesthood may not be all wrong in their critics of capitalist society. Of course it matters what the people consume and what kind of people we become. But socialism does not offer us the salvation they would hope for. Neither does capitalism. For that we need the sort of tried and true traditions conservatism defends.

September 11, 2020 at 03:22PM - Josh Lewis

The conservative contends that socialism doesn’t work. It fails to provide for our material needs and desires as well as capitalism can. But why doesn’t socialism work? Let’s examine some of the weaknesses in socialism’s efficacy.

Incentives vs. Intentions

We are not born into a world of limitless abundance, but a world of scarcity and latent provisions. Scarcity is the fundamental problem of economics: our resources are quite limited while our needs and desires are seemingly limitless. How then do we best manage the limited resources we have? Certainly, the distribution of resources is an important consideration. But if humanity were reliant only on the distribution of the things the earth provided naturally, most of us would die of starvation.

“The root of all socialist economics is the separation of the distribution of wealth from the production of wealth,” wrote Irving Kristol. “Socialist economics assumes that there is no problem of production, only a problem of distribution.” But the problem of production and the problem of distribution cannot be separated. They are joined by incentives that induce human behavior. And it is incentives that compel the transformation of the raw materials the earth provides into the abundance we hope to enjoy. Distribution cannot generate this wealth—it can only allocate the resources our earth and our productivity has provided.

How do we best maximize these provisions? By matching their profits directly to those who are responsible for generating them. It would be ideal if those who were capable of this willingly shared their production with those who were most in need. But then, so would a world in which humans were incapable of malice, greed, corruption, and division. “Economic policies need to be analyzed in terms of the incentives they create, rather than the hopes that inspired them,” cautioned Thomas Sowell. When we craft our economics around how we would like for people to behave, rather than how they are incentivized to behave, we are crafting an economic system that only works in the imagination.

And while generosity is a character trait that any virtuous society will encourage, it is hardly sufficient for dealing with the very real problem that there simply isn’t enough stuff to distribute around in a manner that we’d find agreeable, let alone in a manner that would stave off rampant starvation. But an interesting phenomenon occurs when we allow those who are responsible for producing wealth to enjoy the fruit of their labor: they end up being generous with their wealth even when they had every intention of being selfish.

“People tend to do more for their own benefit than for the benefit of others,” Sowell says, stating the obvious. What’s not so obvious, however, is that “freely fluctuating prices can make that turn out to be beneficial to others.” As we explored in Part 3, a freely fluctuating price contains invaluable information about the unseen and often unknowable costs of a good or service. When each individual participates in the long and complex process of production in a manner that’s beneficial to them, they inadvertently end up benefiting everyone else involved. “The morals of the market do lead us to benefit others, not by our intending to do so, but by making us act in a manner which, nonetheless, will have just that effect”--echoes economist F. A. Hayek–“In a way that good intentions alone cannot do—and thereby does make our efforts altruistic in their effects.”

The Incomprehensible Complexity of the Free Market

We’ve examined the important role price plays in all this talk about economic efficiency and unintended generosity, but it would be difficult to overstate the importance of the information conveyed in price and how it works to our benefit. In fact, I’d go so far as to say I don’t know that humans are capable of comprehending the extent to which this is true, in the same sense our brains can comprehend the fact that there are fifty stars on the American flag but not that there are 100 billion stars in the Milky Way. Nevertheless, some illustrations may suffice to get the point across.

The YouTuber How To Make Everything demonstrates the importance of the free exchange between individuals by showing what it would be like to try to make things on one’s own. As such, there are videos ranging from how to make a T-shirt for only $5,000 in only three years to how to make a sandwich for only $1,500 in only six months! Thankfully, the complexities of modern society, which includes a highly efficient division of labor and distribution of goods, make these otherwise impossible tasks quite affordable. I may not know how to grow the cotton that goes into my t-shirts or the wheat that goes into my bread, but I do know how to make a living as an auditor, and I can take my earnings from the profession I specialize in and use them to pay the people who do know how to do these things so that I can wear t-shirts and eat sandwiches as I please.

But there’s another, infinitely more complex, component of the free market at work here. For it’s one thing to observe the benefits in the division of labor—benefits both capitalists and socialists are likely to find equally agreeable—but it’s quite another to then claim we understand how to direct this division of labor.

Just how is it that the person who grows the cotton or the farmer who harvests the wheat knows what to do with their tiny slice of the production process? How do they know how much to grow, who to send it to, and what price to charge such that I can walk into a retailer or restaurant and purchase these items at an affordable price? For that matter, how is it the complex web of individuals responsible for every level of the production process—from raw material to the finished product finding its way on a store shelf—each seem to know exactly how to play their part such that everything comes together at the right quantities and prices to keep store shelves adequately stocked with merchandize? Who is directing all this?!

I, Pencil

Leonard E. Read’s essay, I, Pencil, written over six decades ago, still provides the clearest explanation for this mystifying process I’ve ever encountered. The essay depicts a pencil sharing its origin story with the reader, which includes some a rather audacious claims:

“I am a lead pencil—the ordinary wooden pencil familiar to all boys and girls and adults who can read and write…You may wonder why I should write a genealogy. Well, to begin with, my story is interesting. And, next, I am a mystery—more so than a tree or a sunset or even a flash of lightning…I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to prove. In fact, if you can understand me—no, that’s too much to ask of anyone—if you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an airplane or a mechanical dishwasher because—well, because I am seemingly so simple.

Simple? Yet, not a single person on the face of this earth knows how to make me.”

What follows this rather bold assertion are “innumerable antecedents” that describe the fascinating process of producing just one pencil, which involves raw materials from a multitude of places all over the earth and a seemingly endless stream of occupations involved in each step along the way. After this dizzying description the pencil asks, “Does anyone wish to challenge my earlier assertion that no single person on the face of this earth knows how to make me?” Indeed, it is evident no individual possesses the knowledge, resources, and equipment needed to produce the deceptively complicated pencil.

We are left with a rather startingly realization: if no individual knows how to make a pencil, how do pencils ever get made? Surely someone must be in charge of the production, orchestrating things from beginning to end! Not so, says our friend the pencil:

“I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies—millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human masterminding! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree.”

Where’s the Master Mind?

Invoking God the creator here seems apropos. To the skeptically minded, the mysterious ability of the free market to somehow direct individuals—each of whom do not understand how to fully produce something like a pencil from beginning to end—to act in such a way that pencils are actually produced when no master mind is involved in the process seems…incredible at best and perhaps unbelievable. “Just as primitive peoples tended to attribute such things as the swaying of trees in the wind to some intentional action by an invisible spirit, rather than to such systemic causes as variations in atmospheric pressure,” explains Sowell, “so there is a tendency toward intentional explanations of systemic events in the economy, when people are unaware of basic economic principles.”

Yet it is precisely the information that gets conveyed in the freely fluctuating price that directs everyone to play their role perfectly such that pencils are manufactured and store shelves are adequately stocked. “To the naïve mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions, and that a division of authority will actually extend the possibility of overall order,” adds Hayek, “Yet that decentralization actually leads to more information being taken into account.”

No one master mind is directing this process. No central committee of hyper-intelligent bureaucrats was in constant communication with each individual involved in each step of the process such that the store you just happened to walk into on a Tuesday evening after work would have a decent selection of pencils to choose from at prices you were willing to pay. To even imagine the cartoonish absurdity that would be involved in directing market forces on how best to meet the public’s demand for something as “simple” as a pencil is dizzying. No wonder political writer Lord Acton warned that centralization of economics means “apoplexy at the center and paralysis at the circumference.”

In lieu of an intelligent master mind with general knowledge directing the entire process, the free market instead relies upon the highly specific knowledge of each individual involved. For each individual involved in the production of something like pencils couldn’t possible understand how to direct the entire process, but they do understand how to play their part. “Specific knowledge is one of the scarcest of all resources,” contends Sowell, “regardless of how many people there may be who can talk in glib generalities. The net result of all this is that even countries which have long been food exporters often begin to have difficulty feeding themselves after the government has taken control of agriculture.”

Unintended Generosity and Generosity as a Virtue

All of this leads us back to the wild assertion that a system which relies upon the incentives inherent in each individual acting out of their own best interests somehow leads to unintentional generosity. As Hayek explains:

“In our economic activities we do not know the needs which we satisfy nor the sources of the things which we get. Almost all of us serve people whom we do not know, and even of whose existence we are ignorant; and we in turn constantly live on the services of other people of whom we know nothing. All this is possible because we stand in a great framework of institutions and traditions—economic, legal, and moral—into which we fit ourselves by obeying certain rules of conduct that we never made, and which we have never understood in the sense in which we understand how the things that we manufacture function.”

We’ll turn to Hayek’s idea of “rules of conduct” in a moment. But I do not want to confuse this unintended or accidental generosity with the actual virtue of generosity. Nor do I mean to imply that virtue is incidental to a functioning economy. On the contrary, it is absolutely essential. It was the philosopher and economist Adam Smith who first popularized the most self-evident aspect of economics: human behavior can often be explained as the rational pursuit of self-interest. But Smith was not saying we should only pursue what we believed to be in our self-interest. Irving Kristol, in surveying Smith’s work, wrote that Smith “assumed and asserted that there were natural and self-correcting limits to the pursuit of self-interest”. As such, Smith’s ideal world was not “liberated from the traditional moral virtues but was, in its own way, still rooted in them.”

Let’s think back to Kristol’s observations about the distribution of wealth. When it comes to distributing the wealth generated by producers we have three broad options: 1) individuals can be incentivized to produce by taking ownership of what they have produced (capitalism), 2) the government or community or some form of collective can distribute what has been produced on a basis they deem to be just and equitable (socialism), or 3) those who are strong simply take from those who are weak.

This third option was—sadly—precisely how most of the world prior to capitalism operated and far too much of the world still operates. Journalist and author Jonah Goldberg often illustrates this point by imagining how he might get an apple from you. There’s the simple, if somewhat primitive, method—“I hit you with a rock and take your apple. There is one apple-eating winner and there is one apple-less loser with a lump on his head.” But then there’s the method that’s far more mutually beneficial: trade. “Because the apple buyer needs an apple and the apple seller needs the buyer’s money for something else. Trade builds trust and encourages strangers to see each other as equals in a transaction.”

Them’s the Rules

“To operate beneficially, competition requires that those involved observe rules rather than resort to physical force,” argues F. A. Hayek. And just how did civilization manage to move from bashing each other over the head with rocks to get what they want to observing the sort of “rules” necessary for the complex trade relationships we witness in the free market today? Is it because we’re just better than the people who lived long ago? Don’t flatter yourself. To the extent we are more virtuous—that is, more civilized—it has nothing to do with some make-believe superiority we have over our ancestors. Humans are, after all, all the same carbon-based life forms capable of both nobility and savagery. Our superior virtues are not due to a superior nature but are instead the product of both religious and cultural tradition.

Precisely how tradition infused humanity with the sort of rules of fair play that allows for the free market to function is a lengthy subject for another day. What’s important for our purposes here, is that these rules and especially our willingness to observe these rules is not something that comes naturally to humans. It takes something like tradition to enforce a set of values upon us that we would not otherwise observe. And this distinction is important, for it tells us a great deal about the limitations of humans to devise an economic system that doesn’t evolve within our religious and cultural traditions.

Socialism is the attempt to circumvent this evolutionary process of rules based on tradition and instead to impose a set of values we have created and deemed worthwhile. This is evident in the moralistic tone socialist critics of capitalism often take. We are told that capitalism represents greed, that it is unfair in that it produces inequities. We are assured that it was built upon a repressive system of the strong taking from the weak (imperialists vs. the conquered, the patriarchy vs. feminism, white European males vs. minorities, slave owners vs. slave, the bourgeoisie vs. the proletariat, and so on). Socialists are interested in correcting this sad history of oppression and erecting in its place a new economic order operating on the values of justice, equality, and the recognition of positive rights to things like healthcare, housing, food, and education.

But are humans capable of swapping out our traditional moral order for updated alternatives? “Our moral traditions, like many other aspects of our culture, developed concurrently with our reason, not as its product,” continues Hayek. The hubris of social planners teach that we can utilize our reason to develop an economic system outside of the free exchange between individuals that’s just, equitable, and virtuous. But that is not how human behavior develops:

"Learning how to behave is more the source than the result of insight, reason, and understanding. Man is not born wise, rational, and good, but has to be taught to become so. It is not our intellect that created our morals; rather, human interactions governed by our morals make possible the growth of reason and those capabilities associated with it. Man became intelligent because there was tradition—that which lies between instinct and reason—for him to learn.”

Shorn of our traditions, humanity is not apt to behave in the moral sense socialists have in mind. For it is precisely because of our traditions that we have managed to claw our way out of the system where Jonah Goldberg has to bash you over the head with a rock to get your apple to a system where you each have been conditioned—by tradition—to follow the sort of “rules” that make mutually beneficial free trade possible.

The Temptation to Extend the Extended Order

The temptation and folly of socialism is to take something that is good at one level—the distribution of things such that no one lacks—and to scale it up to the point it is no longer feasible. This is the distinction Hayek makes between what he calls the “local order” and the “extended order”. The local order can only be experienced between you and those who are closest to you. The extended order includes everyone outside of that bubble. And it is tradition that helps us decipher what “rules” we are to follow in the context of each group. As Hayek explains:

“Part of our present difficulty is that we must constantly adjust our lives, our thoughts, and our emotions, in order to live simultaneously within different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e., of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilization), as our instincts and sentimental yearning often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them.”

Jonah Goldberg is also fond of explaining how, in the Goldberg household, he practices Marxism: From each according to his ability, to each according to his needs. He does not expect his daughter to contribute equally to the family’s finances. Nor does he have any qualms about limiting her freedom proportional to her maturity. In the “local order” these are good and desirable virtues. But applied to the “extended order” they become the tools of tyrants.

But what affection, what love, what acceptance is found in the group Hayek so superficially refers to as the “local order”! Wouldn’t it be nice IF we could—if you’ll pardon the pun—extend the local order into the extended order?

This desire—this longing for the extension of community—is precisely what makes socialism so appealing. In the end, no economic argument will dispel the appeal of socialism because socialism represents far more than an economic system. And this is precisely where we’ll turn in the fifth and final part of this series.

August 29, 2020 at 03:09PM - Josh Lewis

Stephanie Kelton’s book The Deficit Myth released in June was just the latest in a series of books, blogs, articles, podcasts, and videos extoling the virtue of Modern Monetary Theory (or “MMT”). We’re told that governments that have sovereignty over their currency can afford a wide array of social programs from entitlement expansion to generous welfare benefits to the Green New Deal. Leftist are ecstatic that they finally have an answer to the Right’s persistent question “how are you going to pay for all this stuff?”

But is MMT sound monetary policy? For that matter, what is monetary policy? What did famous economists like Milton Friedman and John Maynard Keynes have to say about monetary policy? Was it a mistake for America to get off the gold standard? What is the Federal Reserve, and why can’t they seem to leave the interest rate alone? Do deficits matter? If so, how?

For most, monetary policy may sound like a subject that’s dreadfully complicated or—far worse—boring. Yet this opaque subject matter is very important to our economic wellbeing. In fact, bad monetary policy greatly exacerbated economic downturns to the point of creating The Great Depression and The Great Recession. Sound monetary policy benefits us all, and it’s imperative we understand what sound—and not so sound—monetary policy looks like.

Returning guest and friend to the podcast Joseph Sternberg joins Josh in a discussion on monetary policy that’s both digestible and engaging. We last heard from Joseph in episode 35 when he dropped by to discuss his book The Theft of a Decade: How the Baby Boomers Stole the Millennials’ Economic Future.

About Joseph Sternberg

Joseph is a member of the editorial board of The Wall Street Journal, where he writes the Political Economics column. He joined the Journal in 2006 as an editorial writer in Hong Kong, where he also edited the Business Asia column. He currently lives in London. He graduated from The College of William and Mary in Williamsburg, Virginia with an economics major.

August 25, 2020 at 06:54AM - Josh Lewis

In a lot of ways, capitalists and socialists look at the world very differently. Where capitalists celebrate profits as the lifeblood of a thriving economy that represent prosperity, socialists denounce profits as excesses lining the pockets of greedy business owners. Socialists primarily see value in the labor that went into a product, whereas capitalists look to other attributes to explain a product’s worth. Capitalists see private property as the cornerstone of a healthy society while socialists are either skeptical of such claims or even hostile to property rights altogether.

Both economic viewpoints have numerous assumptions baked in, making it difficult to truly judge between them without first examining these assumptions. To that end, we will spend the remainder of this post examining some of these core assumptions.

Toilet Paper Shortages and Price Gouging

The Youtuber Internet Historian hilariously depicted the great toilet paper mayhem that began in Australia and spread around the world during the beginning of the COVID-19 pandemic. Misinformed news reports and sensational rumors led to a nation-wide panic where shoppers bought all the toilet paper they could find which—unfortunately—actually did lead to a temporary shortage.

As is predictable in any crisis that generates shortages, angry accusations of price gouging ensued, leading to lawsuits against companies suspected of such selfish misdeeds. How could anyone be so avaricious that they would raise the prices on toilet paper just when the people—to say nothing of the poor—were in such dire straits? Many states have anti-gouging laws in place that freeze prices during an emergency for this very reason.

But however well intentioned these laws may be, when laws prevent prices from rising during a shortage, the problem is only exacerbated. With the sudden increase in demand for toilet paper, and no corresponding increase in the price to mitigate that demand, what might have been a temporary inconvenience for a handful of communities in Australia because an international bathroom quagmire.

While it is certainly true some business owners would happily profit at the misfortune of others, the surest way to prevent price gouging is to simply let the free market do its thing. If, in the middle of an international shortage of toilet paper, a store owner tripled the price of the toilet paper they had for sale while all the other stores in the community had only doubled the price, the savvy shopper would simply buy from those other stores. So long as there was a relatively stable quantity of toilet paper in all of the stores in the local community, the greedy store owner would be foolish to triple the price of the toilet paper they were selling because that would divert customers to their competitors.

Who Determines the Price?

But let’s back up a step. What exactly does it mean that our greedy store owner “raised” the price on toilet paper to three times what it had been selling for the day before? Does this imply he was watching the news one evening and, upon hearing of the shortage, rushed to the store shelves to triple the price? If so, how did he arrive at that amount? Do we imagine that the store owner first checked around all of the other stores in the community to see if they had raised their prices also? What if the other stores had actually quadrupled the price to adjust to the new demand, but our store owner had no knowledge of this when he tripled his price? Would that still make him greedy or just misinformed?

Charges of price gouging are hardly straightforward, once you peel below the actual accusation and begin to look for the supposed perpetrators. The actual price of toilet paper is determined by a multitude of factors—from the availability of the raw materials to the production process, to distribution, wholesale, retail, and consumer demand—each of which involve a complex web of individuals making estimates on the actual costs associated with their limited exposure to the entire process. Our store owner might put a price on the final product he’s made available to his customers, but he has no control on the various costs inherent in the rolls of toilet paper by the time they arrived at his store. And these are costs that don’t go away simply because an anti-gouging law holds the price down.

In a capitalist society—where the price is determined by the free exchange between individuals—the price is not some arbitrary value that can be increased or decreased by the whims of a greedy capitalist. Rather, price conveys information that shows the inherent cost imbedded in the goods or services. To demand “reasonable” prices is to misunderstand the role costs play. “It is completely unreasonable to expect reasonable prices,” charges economist Thomas Sowell explains:

“Free-market prices are not mere arbitrary obstacles to getting what people want. Prices are symptoms of an underlying reality that is not nearly as susceptible to political manipulation as the prices are. Prices are like thermometer readings—and a patient with a fever is not going to be helped by plunging the thermometer into ice water to lower the reading. On the contrary, if we were to take the new readings seriously and imagine that the patient’s fever was over, the dangers would be even greater, now that the underlying reality was being ignored.”

None of this is to suggest that shortages in goods and services—particularly during a crisis—isn’t a problem. But the nature of the problem is among the legions of factors that gets conveyed in the price of those goods and services that are in short supply. To effectively deal with a shortage we must first turn our attention to the real problem, not the make-believe problem of greedy store owners. If toilet paper was in short supply during the pandemic because most toilet paper is manufactured overseas, or because too many workers are sick and unable to manufacture more rolls, or—as was actually the case—mass panic led to people buying far more rolls than they needed such that manufacturers couldn’t keep up with demand, then those problems must be addressed if we want the inherent costs to come down. Forcing store owners to hold their price below the actual cost ignores the actual problems contributing to those costs and will likely make things worse.

Are Profits Evil?

Once we can grasp the relationship between cost and price we are in a better position to evaluate the socialist’s distain for profit. To the socialist, profit serves no purpose beyond the enrichment of the individual enjoying that profit and may, in fact, be evil as it represents the exploitation of workers. George Bernard Shaw called profits “overcharges” whereas Karl Marx referred to them as a “surplus of value”. But to the capitalist, profits represent invaluable information.

“The high-minded socialist slogan, ‘Production for use, not for profit’, which we find in one form or another from Aristotle to Bertrand Russell, from Albert Einstein to Archbishop Camara of Brazil…betrays ignorance of how productive capacity is multiplied by different individuals obtaining access to different knowledge whose total exceeds what any single one of them could muster,” argues economist and Nobel laureate F. A. Hayek. That store owner may not understand the current availability of the raw materials that go into the manufacturing of toilet paper, but he has some insider information—that is, the price he had to pay to acquire the toilet paper to stock his shelves—that accurately reflect the inherent costs in the product.

“Profitability works as a signal that guides selection towards what makes man more fruitful,” continues Hayek, “only what is more profitable will, as a rule, nourish more people, for it sacrifices less than it adds.” In other words, profit is what helps convey the price at which the consumer, retailer, wholesaler, manufacturer, and those who acquire the raw material are willing to pay for their contribution to the entire chain of events. And because each individual in this long line of participants see value in paying the price to participate, each individual is better off as a result.

Far from exploitative excess, profit is the natural, and positive, consequence of individuals forming mutually beneficial cooperative relationships. There is nothing sinister about private enterprise that produces greedy excess. In fact, says Thomas Sowell, “when a company makes a million dollars in profits, that does not mean that its output would cost a million dollars less if produced by a non-profit organization or by a government-run enterprise. Without the incentives and constraints created by the prospects of profit and the threat of losses, the same output might well cost millions of dollars more.” What makes private enterprise more efficient than non-private efforts is that they rely on the information conveyed in price rather than the good intentions and limited knowledge of individuals presuming they understand the price that works best at all levels of production for all involved.

How Do We Measure Value?

But the information conveyed in price does even more than generate a mutually beneficial series of exchanges between individuals. It also conveys the true value of a good or service. Human beings are hard wired to recognize the value inherent in a product when we can observe the process of transforming raw materials into the finished good. But we have a harder time apprehending the added value of information and processes that aren’t easily observed. Hayek elaborates on this point:

“The market process deals with material objects, but its shifting around of them does not seem to add (whatever might be claimed or really be so) to their perceptible quantities. The market transmits information about them rather than producing them, and the crucial function played by the conveying of information escapes the notice of persons guided by mechanistic or scientistic habits who take for granted factual information about physical objects and disregard the role played, in the determination of value, by the relative scarcity of different kinds of objects…An increase of value—crucial in exchange and trade—is indeed different from increases in quantity observable by our senses. Increase in value is something for which laws governing physical events, at least as understood within materialist and mechanistic models, do not account. Value indicates the potential capacities of an object or action to satisfy human needs.”

The true value of a good or service—in an economic sense—will always be relative to the individual. Toilet paper may be a hot commodity in the West, but it’s of little value in India where 95% of the population use water instead. Raw materials such as oil, uranium, or sulfur were of little value to armies in the ancient world but are a deciding factor in how wars are fought today. The value of everything from the clothes you wear to the food you eat to the place you live cannot be fully determined independent of your unique circumstances, knowledge, needs, and preferences.

No economic model has done a better job at providing goods and services to consumers at a price they are willing to pay than capitalism. That is because the free market price conveys information about both the cost and relative value of those goods and services. “It is not costs which create value,” explains Sowell, “it is value which causes purchasers to be willing to pay for the costs incurred in the production of what they want. Where costs have been incurred in excess of what the consumers are willing to pay, the business simply loses money, because those costs do not create value, whether they are labor costs or other costs.”

Marx and the Labor Theory of Value

Undeterred, the socialist is quick to decry prices under capitalism as undue obstacles to achieving material goods, and profits as greedy employers depriving their workers of the actual value of their labor. Why should the employer have a right to the value produced by their worker? Certainly, we can agree that the worker adds value by pouring their labor into a product. But is labor sufficient for determining value? Karl Marx argued that the economic value of a good or service could be reduced to its total necessary labor. In fact, he claimed this “hidden” value wasn’t a matter of opinion but scientific fact:

“Let us take two commodities, e.g. corn and iron. The proportions in which they are exchangeable, whatever these proportions may be, can always be represented by an equation, in which a given quantity of corn is equated to some quantity of iron, e.g. 1 quarter corn = x cwt of iron. What does this equation tell us? It tells us that in two different things—in one quarter of corn and x cwt of iron—there exists in equal quantities something common to both. The two things must therefore be equal to a third, which in itself is neither the one nor the other. Each of them, so far as it is exchange-value, must therefore be reducible to this third.”

Thus, Marx’s labor theory of value contends that the fact commodities such as corn and iron could be shown to be proportionally exchangeable via a simple equation, we could use a similar thought process to deduce that what gave each commodity its value can be reduced to the one thing they have in common: labor. While not all socialists are Marxists (as we discussed in Part 2), Marx’s assertion that it is labor that determines value provides the foundation to a lot of socialist teaching.

“While modern economists take price, empirically defined, as their explanandum, Marx tries to explain another, hidden variable, of which ‘price’ is the mere ‘phenomenal form’,” countered Sir Roger Scruton, “Not surprisingly, such ‘phenomenal’ entities as supply and demand (which explain price) cannot explain the hidden ‘essence’ of ‘value’, nor even provide us with reasonable grounds for its existence.” The path to Marx’s labor theory of value requires a suspension of disbelief and something akin to dogmatic faith. It is not something that is scientifically demonstrable to those who have not already accepted Marxism as “scientific fact”.

Scruton’s reference to “modern economists” is not a chiefly partisan statement. Outside of those who accept Marxism on faith, you would be hard-pressed to find economists who still ascribe to the labor theory of value. “By the late nineteenth century,” Thomas Sowell contends, “economists had given up the notion that it is primarily labor which determines the value of goods, since capital, management, and natural resources all contribute to output, if these inputs into the production process are to continue to be supplied. More fundamentally, labor, like all other sources of production costs, was no longer seen as a source of value. On the contrary, it was the value of the goods to the consumers which made it worthwhile to incur the costs required to produce those goods…If labor were in fact the crucial source of output and prosperity, then we should expect to see countries where great masses of people toil long hours end up richer than countries where most people work shorter hours, in a more leisurely fashion, and under more pleasant conditions, often including air-conditioning, for example. In reality, we find just the opposite.”

Labor vs. Ability

But if labor is not the primary determinant in the relative value of a product or service, what is? “Ability,” answers Russell Kirk. “Labor without Ability is simply the primitive effort of natural man to obtain subsistence. Recognizing that mankind cannot prosper by mere labor, society hitherto has endeavored to encourage Ability by protecting its incentives.” Two laborers taking the same amount of time producing toilet paper will only produce the same value if they possess the same ability. But what if one of those laborers had either the natural or developed ability to produce toilet paper at twice the rate or at a much higher quality as the other laborer? Better yet, what about a good or service where the relative value is even less transmittable in the production process? Say, for instance, artwork or music or writing. Is the inherent value that’s produced by artwork or music or writing primarily (or even remotely) dependent upon the amount of labor exerted, or by the ability the laborer brings?

It is easy to imagine why the socialist would be fixated on the labor component of value: labor is more easily manipulated and transferable. If what produced value—and the wealth of nations—was the mere labor that goes into goods and services, government compulsion could induce even more labor or, at least, provide for full employment where everyone was laboring and thereby generate wealth. But this has the opposite effect, says Kirk: “Under compulsion, Ability sinks to the level of mere Labor; no man will exert unusual talents if he is to get no reward.”

Yet ability is a doggedly stubborn value-driving-commodity. Try as the socialist might, you cannot distribute or induce or transfer ability between person to person nearly as easily as you can labor. Education, training, and experience can go a long way in bolstering ability, but there is no guarantee of success and—worse still—there persists an absolute guarantee individuals will not develop equally in ability. This is because a certain component of ability is innate and cannot be reproduced by human effort or especially legislation. This does not mean labor is not an important factor in the overall value of a product or service. But it is far less of a factor than the ability of the laborer—which cannot be manipulated by the whims of socialist central planners.

Privatizing Property

Both labor and ability are necessary ingredients of the relative value found in goods and services. But for most goods and services, there is another important ingredient: property. It wouldn’t matter that two laborers had different abilities in the manufacturing process of toilet paper if they were denied access to the raw materials and manufacturing equipment utilized in the production process. While the capitalist and socialist are in agreement on this point, they differ on the question of whether such property should belong to individuals or to the community as a whole.

It was the French Enlightenment philosopher Jean-Jacques Rousseau who first called into question the efficacy and morality of private property:

“The first person who, having enclosed a plot of land, took it into his head to say this is mine and found people simple enough to believe him, was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would the human race have been spared, had someone pulled up the stakes or filled in the ditch and cried out to his fellow men: ‘Do not listen to this imposter. You are lost if you forget that the fruits of the earth belong to all and the earth to no one!’”

At first glance, this would appear to be a powerfully compelling argument against private property rights. Indeed, the history of any nation is littered with sad tales of “crimes, wars, murders, miseries, and horrors” involving disagreements and fights over lands and property desired by competing individuals. But it doesn’t follow that humans behave much differently before the advent of private property. Are we to assume hunter-gather societies where no one in the tribe claimed ownership of the land were free from such miseries? Are the few remaining places on earth where such primitive practices still exist noteworthy for their relative peace and serenity? Would you want to live in that condition?

The truth is, private property marked a major advance in the human condition. It was the necessary condition to establishing civil society in the first place. Thomas Sowell surveyed the nation-states that attempted to achieve some sense of “community” ownership and warned it impeded prosperity: “In a country without property rights, or with the food being owned ‘by the people,’ there was no given individual with sufficient incentives to ensure that this food did not spoil needlessly before it reached the consumers.” Nor was this tendency limited to products humans produce: “The only animals threatened with extinction are animals not owned by anybody…likewise, it is inanimate things not owned by anybody—air and water, for example—which are polluted.”

From the question of whether private property marks an advancement in the human condition or the beginning of our societal ills, to the role price plays in communicating the true costs of goods and services, to how the value of those goods and services are determined and what is most responsible for producing that value, capitalists and socialists start with different economic assumptions.And it is precisely because of mistaken assumptions that socialism cannot compete with capitalism.Socialism doesn’t work.Precisely why it doesn’t work is where we’ll pick things up in Part 4.

August 21, 2020 at 11:13PM - Josh Lewis