Capitalism Or Socialism // SSCI 100

in this lecture we're going to think about how economies are structured the rules that guide economic decisions economics is very interested in how we coordinate our lives together right supply and demand workers and managers consumers and firms so economists spend a lot of their time thinking about questions such as how much income does the average person earn in a year is this higher or lower than last year which industries are growing which are shrinking how much do houses cost in a particular city we can think of this as the economic game as it were the

rules have been set and what's happening in the game right and the game's really important it's what defines our day-to-day reality right if i have a job that's great if i don't that's bad and so while the game is important sometimes we need to back up and consider more fundamental questions like are the rules of the game appropriate do the rules need to change do they need to be modified do we need to play an entirely different game when i was growing up i was really into baseball i loved baseball and i still do and

i was pretty good for a while but as you grow up the rules start to change you start with the t you hit the ball off the t then you go to a pitching machine coaches pitch and so on it's the same game but the rules are a little bit different right who pitches the ball changes well my love of baseball changed when kids were allowed to start pitching and i saw my first curveball one moment the ball was coming towards me at another moment it wasn't at that moment i knew i was done with

baseball the rules had changed such that i wasn't gonna be good at it i wasn't gonna find it fun i was gonna find it terrifying so i went and found a new game to play so in this lecture we're going to think about the rules of the game and whether they need to change and specifically the pros and cons the merits the relative strength and weakness of capitalism and socialism this is our question for the moment we're not going to think about feudalism or mercantilism hunters or gatherers capitalism or socialism and what we want to

do is determine which provides a better set of rules and so i'm going to spoil the lecture immediately and do something i'll call a tarantino so quentin tarantino is a famous director a lot of his early movies he would do this thing where he starts at the end and then works backwards right so i'm going to start at the end and then work backwards and so what i mean is this i am going to argue for capitalism and then i'll um justify my stance this image we see is the korean peninsula at night all right

and on the north is obviously north korea and the south is south korea and what's especially relevant for our discussion is that up until the mid 20th century this was an area that had a very similar culture people even now the climate isn't really different between north and south korea but things have changed radically right the korean peninsula is divided into two countries north and south korea both of these countries consider themselves democratic republics right north korea considers itself a democratic republic outsiders would label it a socialistic dictatorship south korea also considers itself a democratic

republic while outsiders would label it a presidential system very similar to the political system we have the united states and so when we look at this image what is striking is how clear the artificial boundary between these two nations are the 38th parallel is not an imposing mountain range it's not a raging river it's just a line in the sand right it's a line in the sand but we can clearly see where north korea is and where south korea begins when we look to the north we don't see much to distinguish north korea right there's

there's a void there's not much to distinguish it from the seas that surround it as we look to the south we see lights and lights and more lights and we take a step back which creates this light is what alfred marshall the famous economist called the everyday business of life right it's families making dinner maybe watching tv friends going out for a night on a town maybe it's an ambulance driving to the hospital to deliver a baby at three in the morning all of these things create light and the absence of light suggests little of

this is happening in north korea and so when i think about the type of economy i want to live in i'm going to choose south korea over north korea every time and i'm not alone take a moment to think about the last time you heard about a refugee crisis at the gates of north korea or cuba or china right when was the last time there were too many people trying to get into those countries it just doesn't happen if anything it happens in the opposite people flee these nations to find countries that are liberal democracies

countries that economies are based on capitalism rather than socialism i will say this though before we move on when i think about where i want to travel places i want to go i would choose north korea i'd love to see something novel and unique i like to camp with my family one of my favorite things about camping is to see the night sky in places that aren't near cities so if i want an adventure north korea is what i choose but if i want a place to live it's going to be south korea okay i've

given you my punch line but it's pretty flimsy to be honest it's conjecture i've never been to the korean peninsula so it's it's based on things that i have little experience with it's based on knowledge of a corner of the world that i've never been to so let's go back to the beginning let's tarantino it and rewind and outline some principles to guide our decision between capitalism and socialism and see where we end up all right and to do this i want us to get rid of all the things that we think we know right

jettison your biases your preconceived notions forget about what i just said about the korean peninsula let's start with a blank slate and see where we get to do this we're going to apply a mental exercise made famous by john rawls john rawls was an american philosopher of the 20th century and very very influential and he came up with this idea of the veil of ignorance right so the veil of ignorance asks us to do some things as we think about social questions or how we might structure an economy so as we step behind the veil

of ignorance as we seek to understand principles that should guide the ways that we structure the economy there's a few few rules to guide the exercise one we have to forget who we are our position the things that we've been given or not given in this life right so for me um i need to try to be ignorant to the fact that i'm a white male that grew up in northern virginia the son of phil and becky peach i need to forget that i'm an economics professor right i need to forget these things because what

i want to do what we want to do is come up with principles that we would all agree on regardless of the outcomes all right often in this exercise you're asked to ignore notions of the good life or the way that's like the ways that life ought to be and i'm not going to ask you to do that for two reasons one this is a course on justice and to understand justice you need to bring a moral compass with you right and so if we're going to argue that justice is part of a good life

we need to understand what justice is and we need to bring notions of morality with us so that's one reason that we can't ignore the good life the goals if you will the second is when we're thinking like economists when we're acting like economists we can't just sit in an armchair and be philosophers in a distant land we need to be pragmatic we need to go into the world and see what's actually happening right and so to do that we need to take notions of the good life we need to understand things that are better

or worse preferred or not preferred so we'll step behind the veil of ignorance we'll forget we'll ignore our position in life as it is in 2021 and we'll seek to understand whether capitalism or socialism is a better way to structure our economy so let's define those terms these are terms that are right for misunderstanding um to be misconstrued so let's set the set to table with a common definition let's define capitalism as an economic and political system in which a country's trade and industry are controlled by private owners for profit rather than the state let

me say that again capitalism is an economic and political system in which a country's trade and industry are controlled by private owners for profit rather than by the state socialism socialism is a political and economic theory of social organization which advocates that the means of production distribution and exchange should be owned or regulated by the community as a whole let me say that again a political and economic theory of social organization which advocates that the means of production distribution and exchange should be owned or regulated by the community as a whole okay let's pick out

a few defining characteristics of these these definitions that are important one we immediately see that the economic and political are linked right the rules of the game in the economy are linked to the rules of the game in the political sphere right we immediately see overlap in both of these systems the second thing to note is they differ explicitly on who owns the means of production in capitalism it's private individuals so the means of production are simply the things that you need to produce something right so in filming this video you need to have a

camera you need to have a computer and so on a private actor in this case george fox university owns those things it's not a community it's not the government okay the second distinction is who regulates production distribution and exchange in socialism's definition we're told that it's by the community in capitalism's definition we're simply told it's not the state so what's inferred in that is it's private actors most of the time so when we think about regulation in this context it's not necessarily making up explicit laws it's more the ways that we operate right so when

i choose to not drink tea i am quote unquote regulating my decisions into that market right or maybe you do drink tea right so it's private actors that are dictating the ways that the economy operates in capitalism and then it's communal actors in socialism so we need to say a word about community right socialism can take on different forms you could have a community uh that looks uh something like a commune meaning a bunch of people get together they're gonna share the land they're gonna work the land they're gonna share what they farm and that

might be a socialistic commune we're not going to talk about that we're going to compare countries okay so we're going to compare countries that operate under socialism with countries that operate under capitalism so when we do that the community becomes the state or government right so practically again stepping out of the philosopher's armchair practically when we say community what we mean is government okay and this will be important later in the lecture so now that we have these definitions in place i want us to create a scoreboard i want us to think about how we

might evaluate what's actually happening in economies that are capitalist or socialist and evaluate who's playing the game better all right and so i'm gonna offer three measures and i'd like you to come up with your own but let me offer mine first my first measure is this i want to measure how much money people are actually making okay so measure one scoreboard tally number one is how much money people are actually making the second thing i care about is equity right how are the material gains how is income distributed do a few people have a

lot um do people widely share in abundance so i care about equity and then the third thing i care about is is freedom right so we talked about economic and political being intertwined i care about people having economic freedom to choose the career that they want to and also political freedom to choose the leaders that they want so my three elements for my scoreboard are income equity and freedom i'd like you to think about what you might add to your scoreboard in in a minute or two we'll do that explicitly okay so before we start

looking at the scoreboard we need to think about what do we do with economic and political power because these definitions tie these things together should they be combined right should the economic and political be explicitly tied to one another should they be set off in separate spheres and there's reasons to combine them and there's also reasons to separate them when we combine power that helps us get things done i think of my family as an example um my wife and i have the power if our children had power very little would get done they would

exercise their power to not do the dishes not clean their rooms probably not go to school right so when we think about the economy when there's concentrated or combined power between the political and economic spheres things can get done right we make a decision and we move forward we don't have to haggle we don't have to get people on board the decision's been made and we do it right but there's also downsides it's hard to know what people want right when i make a decision for an entire country how do i know what people want

how do i know what's good for them uh when we think about the economy how much should we make what should the prices be should we even use prices so there's there's merit there's strength there's benefits in consolidating economic and political power but there's also going to be limits and weaknesses if we look at the other side of the spectrum and we allow economic and political power to be distributed allow them to be separated what we're going to gain is autonomy right people will have more say in the lives that they lead people can live

the lives that they want you can try to be an entrepreneur you can be a doctor you can pursue those things that you want to do there's a lot of autonomy and in general we think of this as a good thing but there's also downsides to this right we've referred many times to ways in which we might not know what's best for ourselves right so if i decide that i want to be a point guard i'm going to spend the rest of my life practicing to become a point guard this is a delusional dream for

me i am never going to be a point guard in the nba so there's all kinds of reasons that maybe we want to limit peace excuse me there's all kinds of reasons we want there's all kinds of reasons we may want to limit people's autonomy or maybe we want to coordinate political and economic decisions during a public health crisis perhaps or some other national emergency so now we're ready to tally our score we have our definitions i've offered three elements of a scoreboard i want you to think of one more to add maybe it's health

maybe it's education maybe it's environmental damages or environmental quality so i want you to add one more element to the scoreboard again mindless income equity and freedom i'd like you to add one more again maybe it's health maybe it's gender equality whatever you want that thing to be add a fourth column and this is what we're going to do you'll be provided with data sources for my three measures a data source for income a data source for equity and a data source for freedom and then in class you'll you'll find other data sources for the

different measures that we've decided to include and this is what we're going to do we're going to compare we're going to look at the actual score the ways the countries are playing the game and so i have a list of countries that identify as socialist nations and we're going to compare them to the us we're going to use the us as the representative capitalist economy there's many others that we could choose but for most of us that's the economy we know the best all right so the nations that we are going to compare the united

states to are china cuba vietnam [Music] north korea and tanzania and there'll be a list provided but it's again china cuba vietnam north korea and tanzania and so in this you're going to tally a score and i want you to tally the score for per capita gdp income inequality and then economic freedom and again links will be provided for those okay we have our list we have our score and what you'll do on your own is tally the score i'm not going to give you the answer right i want you to find which countries are

providing the highest incomes for the average person which countries are more equitable in terms of income inequality which countries offer more economic freedom and as you tally that score you'll see which countries are playing the game better as i've defined it and which are worse and then you also include your tally and so we've compared or we will compare these socialist countries to the united states and that's just the beginning we probably need to offer more capitalist economies as a point of comparison but this is a way to dip our toes in the water to

see how the game is being played and as you look at the score i want to ask you what set of rules would you choose for an economy that you would live in which set of rules allows more people to realize their economic goals which set of rules allows more people to lead a virtuous life which set of rules leads to a just society right we can incorporate the economic measures that we've mentioned but also the virtues and principles we've discussed in our previous lectures and so as you think about which set of rules you'd

consider i'll leave you with two final thoughts the first is this during the 20th century there were too many atrocities too many crimes met excuse me the first is this during the 20th century there were too many atrocities too many crimes against humanity too much horror i'm thinking of the holocaust china's great leap forward and the terror of life in the ussr under stalin when we think about these atrocities the list that i've given you we need to ask the question why do so many authoritarian governments show up on this list why do socialist nations

with their state of goal of being communal and acting in the best interest of the community why are they so adept at destroying community why are they so adept at destroying the thing that they're tasked to manage and steward why as amardi ascend the nobel laureate observed why is no famine ever taken place in the history of the world in a functioning democracy what about socialism has led to these dire atrocities and then the second thing is this and i'll leave you with this in the u.s why is socialism becoming more appealing and capitalism less

appealing why are more americans becoming discontent with capitalism what are its problems what things need to be fixed what's the appeal of socialism what are the ways in which the u.s economy is floundering what are the ways in which it's not helping everyone live the life that they want to live ways in which it's not allowing us to live virtuously or hindering us from living out lives of economic justice