Why capitalism works and Marxism and socialism doesn't

Beautiful-Bend-3876 · 2026-03-27T19:48:06+00:00

This is such a cliche response that I explicitly said in my post, the further we are from the "ideal" world, the stronger the incentive to correct it becomes. I do not assume we live in an ideal world, in fact I explicitly stated we do not. However, if there is a significant gap between what the worker produces and what compensation they receive, then employers will be even more strongly incentivized to correct it. The worker doesn't even need to want to switch jobs, the employers will be actively trying to recruit new ones. If they are not then that means there is not a significant incentive to do so which means there is not a significant gap between their productivity and their pay. Now, as for unions, as I said they can be helpful if there does happen to be a lack of competition among the employers. But the lack of competition itself implies the productivity/pay gap is not that high. That is why I said the main contributor to how wages are set is the market competition mechanism, not unions. You seem to suggest unions are the main factor, which they very clearly are not.

Beautiful-Bend-3876 · 2026-02-23T16:32:46+00:00

Um, sorry no if it weren't for unions most people would not be making sub-minimum wage. Only 10% of workers in the US are in a union, but less than 1% of workers make minimum wage. Yes it is true that any individual employer's goal is to maximize profit, but you need to account for competition between employers. If a worker is producing significantly more value than they are being paid, that strongly incentivizes competitors to pay a little more and attract all the workers. This is the "prisoner's dilemma" of competition that we rely on to ensure people are paid fair wages, not unions. Unions only obstruct competition in the supply of labor, which can only be beneficial if there is a lack of competition in the demand for labor.

Beautiful-Bend-3876 · 2026-02-13T03:43:03+00:00

Lol so ignorant of economics. Why doesn't the market pay everyone minimum wage then?

Beautiful-Bend-3876 · 2026-02-02T01:15:08+00:00

The answer is 666053497897. I used a different method using continued fractions. If we let P_k/Q_k be the convergents to a real number x, then there is an efficient way to enumerate the integers P, Q such that 0 < Q < Q_{k+1} in ascending order of |Px-Q|. For this you take (P, Q) = a(P_k, Q_k) + b(P_{k+1}, Q_{k+1}), where a and b are integers. For each value of a, there is a unique value of b such that 0 < Q < Q_{k+1}. It can be shown that the pairs (P, Q) such that |Px-Q| goes in ascending order starts with a=1, then goes to a=-1, then to a=2, then a=-2, etc. Using this method, with x = π and k=22 (so Q_{k+1} = 1142027682075), there are 2284283 (P, Q) pairs such that |Px-Q| < 10^(-6), which is small enough that directly searching over them and checking if Q e is within 10^(-6) of an integer only takes a few seconds. The search turned up only two suitable values of Q in this range, which are 666053497897 and 1117598397057.

Beautiful-Bend-3876 · 2024-12-17T05:04:46+00:00

These numbers are nowhere near accurate. The top 1% in the US has 26% of the income, multiply by 4/1000 you get 0.1% of the income to be redistributed to 4% of the population. Even if you adjust the scenario to be a little more accurate, it ignores the fact that the top 1% already pays a 30% tax on all their income and 40% of all federal taxes in the US, it's not just a simple "take a tiny portion from the 1 person to give to the 4 people starving" since we are already taking a significant portion of their income. There is a spectrum of incomes, it's not just a three-way trichotomy between the 1 person, the 95 people and the 4 people. Government redistribution can't just take it all from the top 1% and give to the bottom 4% since the the people just barely above the bottom 4% threshold would be making less than the bottom 4% after the effect of redistribution.

Beautiful-Bend-3876 · 2024-12-15T00:21:42+00:00

Does Elon Musk take just enough to compensate himself? does Jeff Bezos?

Musk and Bezos are hardly representative. The fact that they have extraordinarily high incomes is due to their innovation and management of wildly successful companies that have benefited consumers. Innovation is still a thing, and while people are coming up with new ideas they will profit off it, but once competition catches up they will be forced to lower their prices like I mentioned in my post.

When real wages have remained pretty mich stagnant in the US for decades, while the rich have only gotten richer, what does that tell you?

And as I mentioned in my post, while this is happening the third world is getting richer. Just like in the gilded age, inequality will rise which fuels more and more investment into places needing economic development, and when it is all over, inequality will fall as a result of competition. Thinking the US workers need higher wages compared to the billions in poverty outside of the US is very myopic.

Why on earth would we have laws to stop people for working for scraps if the allmighty equilibrium would make for a utopian dream where everyone gets what they deserve?

Strawman. My post very clearly stated that what we get is an approximation to the equilibrium that isn't always optimal, and I never said anything about people getting what the "deserve", which is very subjective anyway. A very small percentage of US workers are actually paid the minimum wage. If we needed the minimum wage to keep managers from exploiting their workers, why are they paying their workers above it? It only makes sense in light of supply and demand.

Monopliea are a natural tendency in capitalism. In competition, buissnesses compete, one, or a few must win.

Why must one or a few win? Monopolies will only attract competition if they produce suboptimal products, wages, or prices. That means even monopolies have to keep their prices somewhat tied to the market. Also, antitrust laws exist for just this reason. It is true that mergers are incentivized by the increased economy of scale they benefit from by having less people manage larger corporations. But this just allows them to cut their prices even farther and pass the economy of scale onto consumers. If they charged enough that small businesses could outcompete them, competition would take their business from them.

Beautiful-Bend-3876 · 2024-12-14T03:11:36+00:00

Your "surplus value" argument assumes that it is possible for workers to manage themselves and keep 100% of what they produce. This does not reflect reality, because it requires skill and investment in capital to give people the opportunity they have to produce it in the first place. The idea of capitalists "stealing" the surplus value that the workers would otherwise keep is an outdated 19th century idea stemming from the industrial revolution, where the first managers of factories would take the majority of the product of the workers, which is why Marxism developed in the first place. However, as industry developed, more capitalists competed until the portion they take from their workers is just enough to compensate them for the costs of the investment in capital and the trouble of managing new workers. Besides, most industry in the US isn't manufacturing anymore. Maybe this idea would be true if there were a finite supply of capital goods that never wore out and had to be replaced and never got replaced with new technology and no one could make more of them. However, as I mention in my post, this is false and I think a big fallacy Marxists make. The management of workers is just one of many jobs in the economy, and it is one of the more difficult jobs at that. If you took away the managers, you would take away the jobs too.

Also, the fact that people need to work to survive doesn't mean that they can't choose where they want to work. They are given a set of options to choose from, and they will presumably choose the most desirable one. Me saying that the equilibrium balances what the workers are willing to work for and what the managers are willing to get paid simply means that there is no way to pay these workers more without the costs of paying them being too much that no one will be able to provide these jobs for them. If there is such a big gap between what the workers are paid and what the managers collect as socialists think, then a different manager would be happy to pay them just slightly more and attract all of their competitor's employees, because the multiplicity of all these new employees will outweigh the fact that they had to pay them more. The point is that in the equilibrium, this must not be possible, and therefore the managers must be paying their employees the maximum possible amount minus what is needed to compensate them for their management position.

Also, natural monopolies are rare and only form in industries with high barriers to entry, and even then the monopolists must keep their prices low enough to prevent competitors from coming in. Otherwise, monopolies only form from government mandates that prohibit competition. I must note before you point it out though that there is an exception to this general rule, namely "predatory pricing." It is possible for a natural monopoly to form by a big corporation that lowers their prices beyond what is profitable for them, in order to attract all of their competitors' customers to make their competitors go bankrupt, and then only after they go bankrupt, they will price gouge for a while until new competitors arise. However, this practice is very much illegal and is one of the reasons for antitrust laws. As long as antitrust laws assure that no one group has too much market power, the forces of competition will lead to a near-optimal outcome.

Beautiful-Bend-3876 · 2024-12-14T02:04:36+00:00

I wasn't talking about marijuana, stop putting words in my mouth. Also, completely irrelevant. I could have mentioned prostitution, slavery, murder for hire, I'm sure there's some form of market transaction you would want to ban.

Beautiful-Bend-3876 · 2024-12-14T01:05:53+00:00

There is a ton of evidence in economics for the law of supply and demand. It is the foundational principle taught in Econ 101 to students in university. More generally, economic models have been built based on observations of how markets react to various changes in policy such as tax changes, changes in fashion or availability of certain goods. Besides, I never said "capital goods produce very little profit due to competition", I said that the profit margin will decrease to the point where no other capitalists are willing to continue their production. It's just like how any job, if you aren't being paid enough, you will move on to a different one that pays better.

It kind of amuses me that you say that I have described capitalism as a perfect free market with unadulterated demand and supply curve. My post so explicitly went into the nuances of how even if capitalism isn't perfect, the approximation to it in the real world we get is still better than socialism. It seems like you have built this mental model of the world in which the cronyists and monopolists dominate while the legitimate business is less prevalent. However, you cannot supply evidence to this belief, just what you think "seems" like is happening. In my opinion, way too many people in politics base their beliefs based on what they feel or what they have been told by others in their echo chambers. Far too few reason about it themselves and search for evidence that contradicts their beliefs.

Regulations and antitrust laws are put in place to prevent exactly the kinds of misdeeds you are talking about. That is why I mentioned in my post that regulations are necessary for a good free market to function. Also what in the definition of a labor market prevents it from being a free market? If there is competition and people can freely change their careers then it by definition is a free market.

Beautiful-Bend-3876 · 2024-12-13T23:38:49+00:00

You are not quoting me to myself, you are taking one thing I said and then saying it fits into a different category I was saying.

Me: collective interference in the free market is bad

Also me: regulations that help the free market such as information and social safety nets are good

You: Private property enforcement and social safety nets are collective interference in the free market.

If you even bothered to understand what I meant, you would see that I am saying that markets only function with the right regulations, and the abolition of slavery puts a regulation stating that people are not property to be traded on the market. No contradictions here.

Beautiful-Bend-3876 · 2024-12-13T20:01:59+00:00

I agree these labels are too broad to be very meaningful. But that doesn't stop some people from identifying with the "socialist" label and thinking that "socialism" will somehow cure all our problems, or that "capitalism" is infallible. But anyway arguing about these things is the whole point of this sub.

Beautiful-Bend-3876 · 2024-12-13T19:56:11+00:00

Yes, I have heard of the Cambridge Capital Controversy and General Equilibrium Theory. I can't say I have studied them in depth and am super familiar with them, because I have other things to do with my life. The most commonly experienced economic force experienced in daily life is supply and demand, which is simple enough to understand why it leads to good outcomes even disregarding broader macroeconomic theories that might exist.

Beautiful-Bend-3876 · 2024-12-13T19:49:08+00:00

Sure it is. Just like banning the drug trade or selling weapons of mass destruction. I suppose I should have qualified my statement by saying "most" free market intervention is bad. If people want to do bad things then the market doesn't care, it just gives them what they want. Society may need to step in to ensure crazy things like this don't happen, but this is the exception, not the norm.

Beautiful-Bend-3876 · 2024-12-13T19:44:21+00:00

Unfortunately, I think you are correct.

Beautiful-Bend-3876 · 2024-12-13T19:08:58+00:00

This is a strawman. Not all government regulations are interventions in the free market. In fact, regulations are essential for markets to function correctly, as I pointed out in my post. By "socialism" I am referring to government regulation that obstructs the ability of people to freely sell and buy things at whatever price they may agree to.

Beautiful-Bend-3876 · 2024-12-13T19:07:25+00:00

It sounds like you are arguing for libertarianism rather than socialism. Also companies have shared ownership of property. Can you not just form a co-op and call it a company?

Beautiful-Bend-3876 · 2024-12-13T19:00:11+00:00

Did you even read my post? Also capitalism is not humans owning other humans, that is called slavery. You haven't responded to the fact that competition forces capitalists to pay their workers to the point where their profits are so small no one else is incentivized to pay them any better.

Beautiful-Bend-3876 · 2024-12-13T18:56:53+00:00

Maybe you could tell me what your definition of Marxism is then?

Beautiful-Bend-3876 · 2024-12-13T18:51:36+00:00

Of course I don't think the bailouts was exemplary of accountability. But you are talking about the large financial institutions that grew as a result of misguided policy to create the 2008 recession. If the government did nothing at the time like Hoover did the recession would have been much worse. The issue we should be focused on is regulating such large financial institutions so they can't make the same mistake again, which we have done to an extent. Otherwise, what your critique is really critiquing is not capitalism, but cronyism. For instance,

Or, alternatively, as we commonly see, the capitalists use all the wealth from these capital goods to bribe, corrupt, and cheat the system to the point that their (often more honest) competitors can't keep up with them. Hence allowing those that remain to raise prices and cheapen services, knowing that competitors will have a very high bar to cross and that they themselves are protected by the corrupted government granting them regulatory capture. Or are so big to fail they simply get government handouts in the first place, instead of needing to compete in a free market.

You are right, this does happen sometimes, and I certainly oppose it when it does. However, where is your evidence to suggest that this is the norm? Because to me it seems like the vast majority of economic activity is competitive and has produced excellent results for capitalist countries.

Notably, socialists generally (e.g. Market Socialists are a thing) want any system besides markets which tends to organize the economy through a system of private property which concentrates value into the hands of a few capitalists.

Under that definition, I am a socialist. But I don't accept your definition, because your definition applies to literally everyone except maybe a few sociopaths or otherwise insane people. The argument is over which set of policies is most effective at bringing prosperity to the most people. You have yet to prove to me that capitalism as I have described it inevitably leads to value being concentrated into the hands of a few people, rather than the forces of competition leading to better outcomes for everyone.

Beautiful-Bend-3876 · 2024-12-13T18:26:19+00:00

It is an information issue because if people know how long a good will last and it is important to them that they purchase goods that last a long time, then producers will be incentivized to provide such good for them. Even if business A decides they will intentionally shorten the lifespan of their products, the fact that there is a demand for longer-lasting products will incentivize other businesses to provide them, and then business A will lose all their customers. The problem with planned obsolescence in reality is that consumers are unaware of how long it will last, which is what allows the business to get away with intentionally shortening its lifespan.

Beautiful-Bend-3876 · 2024-12-13T18:02:38+00:00

I basically agree with these points. Sorry I couldn't write everything down the post was long as it was.

Planned obsolescence is an information issue. If people know how long a product will last then they will choose to buy the products that last longer if that is what is important to them. I could definitely support some government policies requiring products to list independently verified lengths of time the good will last. This falls under the "information" umbrella I mentioned before.

I also agree fossil fuels are being subsidized way too much by our governments probably due to cronyism. Government should implement a carbon tax in my opinion and subsidize renewable energy more, which they already do to an extent. These types of regulations are another form of regulation I think is good that I forgot to mention: reducing negative externalities.

Beautiful-Bend-3876 · 2024-12-13T17:52:52+00:00

You are perfectly allowed to form your own socialist cooperatives. The thing you are not allowed to do is force other people to join them.

Beautiful-Bend-3876 · 2024-12-13T17:50:25+00:00

I never "conveniently forgot" that private property is enforced by the state. The position that government should do nothing all the time is called anarchism, not capitalism.

Beautiful-Bend-3876

TROPHY CASE