EKIP– Expert Club for Economics and Politics A Different Opinion
Джулиан Адърни[1]
People who believe that capitalism is about huge, powerful, multinational corporations miss some of the key elements of free markets.
Information, capitalism and open source
In a surprisingly influential article in The Guardian, Paul Mason argues that the sweeping changes taking place in the economy are early symptoms of so-called “post-capitalism.” But the changes he describes (the move toward open-source applications and the dissemination of information) show that the world is more capitalist than ever.
Mason argues that with the advent of open source and Wikipedia, we are shifting from a price-based economy to something more cooperative. In fact, these structures are capitalist in nature. Capitalism is a system in which individuals trade to obtain what they do not have, helping others to help themselves. The foundation of capitalism is that people trade value for value (whether monetary or not) in order to enrich themselves. In writing open source, millions of exchanges occur every day. What prevents some people from recognizing these trades as such is that the “price” of each exchange is usually not monetary. Instead, they are an example of what Austrian economist Ludwig von Mises called “psychic profit”—the personal benefit that someone derives from an action, even if that action does not yield monetary gain. [2]
Spontaneous collaborations, like open source software, are full of psychic profit. A programmer creates an improvement to some software so he can add it to his resume. On Reddit, another example of supposedly “free” free collaboration, you often have to spend time contributing to the community before community members will start following the links you post on your website. The time spent contributing is the price you pay for the benefit of visits to your site. As long as people have desires and are willing to work to satisfy them—whether it’s gaining prestige in a community or increasing network traffic—prices will be a part of humanity. The fact that the price of money has fallen to $0 simply means that capitalism is evolving.
Many people would argue that these collaborations are not capitalist because the end result is not a private product. But the benefit is still private: if an engineer contributes to an open source project and builds his prestige in the community, that prestige is his. This is a change in capitalism, but it is not something completely different.
The end of capitalism?
Mason argues that the information age heralds the end of capitalism, but capitalism thrives on information. Most introductory economics textbooks assume that consumers have perfect information, allowing them to make rational choices about which companies to do business with, for example. The widespread dissemination of information allows producers and consumers in a capitalist economy to make more informed choices. The Internet has proven to be a game-changer for consumers, allowing them to rate products online, in front of others. Online review sites like Yelp allow consumers to comment on the quality of a company’s service and products, making it possible for better market regulation of quality. Far from heralding the end of capitalism, this flow of information is vital to a well-functioning market economy.
Mason also argues that the information age is killing capitalism, driving prices down to $0: “Information is a machine for grinding down the prices of things and for crunching the labor hours needed to sustain life on the planet.” Replace “information” with “capitalism” and you have an accurate description of the past two hundred years. Between 1830 and 1870, in the absence of any labor laws, the number of hours Americans spent working in manufacturing fell from 69.1 to 61.1. Real prices, measured in how long you have to work to buy a particular good, have also fallen steadily. In 1959, it took the average worker 100.5 hours to earn enough to buy a washing machine. In 2013, the number of hours was just 23.3. Although there are some exceptions (healthcare and real estate, for example) [3], prices have been falling for decades everywhere.
Capitalism has driven down many prices to $0. People who could calculate huge sums, for example, used to provide a valuable (and well-paid) service. But now I can use Excel to quickly add and multiply numbers. There is a small initial fee for the software itself, but no marginal cost: performing each subsequent calculation is free. The market has been pushing the prices of certain goods down to $0 long before the advent of the information age.
Mason’s argument is based on a fundamental misunderstanding of capitalism. Capitalism is not a system of giant corporations and monopolies. Rather, capitalism is about human action and how people trade to make a profit and improve their lives. That profit can be monetary or psychological. Entrepreneurship, characterized by small startups disrupting existing industries, is capitalist. Nonprofit organizations that work to provide a valuable product and serve their customers are also capitalist. Only by looking at capitalism through a very narrow lens can one reach the conclusion that Mason does, that capitalism is on its last legs. The reality is that recent innovations are making markets more advanced than ever.
You can read the original text in English here.
[1] Julian Adorny is a Young Voices Fellow and an economic historian. His work has been published by the Foundation for Economic Education, The Hill, Townhall, and economist Lawrence Reed's recent anthology, Excuse Me, Professor.
[2] As Ludwig von Mises himself defined it in his magnum opus Human Action, psychic profit "is the result of the sum total of all the subjective and personal value judgments of people, manifested in their behavior in the market. However, we should not confuse it with value judgments as such."
[3] However, it should be noted that these two sectors are over-regulated or subject to artificial government intervention through low-interest housing policies, for example. For more information, see: Johan Norberg, “How the Right to “Affordable Housing” Created the Bubble that Crashed the World Economy”, After the Welfare State, pp. 97-109.
