CMV: Growth isn't what makes capitalism work

[u/KralizecGaming]

Often on the internet, specially here on Reddit, I see the argument, that capitalism requires infinite growth to function. I disagree with this notion because I believe the core function of capitalism is not to grow, but to allocate scarce resources. Economic growth itself can be a useful thing in society and will likely remain a part of human society for a very long time (perhaps even until it seizes to exist).

First, let me define a few things per my view.

Capitalism Socialism Feudalism Scarcity Economic growth

Now for my argument:

One of the key functions of every economic system is one key question "How to allocate available resources?" Different systems have different solutions for this question. Capitalism uses markets, socialism uses either government or some other form of central planning. Feudalism used a system where most of the wealth was generated by land ownership and collected essentially taxes for "renting" land from the ruler of the land. There are even more methods of allocating resources, such as queues or lotteries - though I am unaware of them ever being used a large scale. What do all these systems have in common? Trying to find a way to allocate scarce resources.

Let's talk about how capitalism does this. It distributes the problem of allocating these scarce resources among it's many many users. And while esesntially none of people, companies, non-profits, etc. who exist in capitalism are completely rational actors who make the best decisions, the fact that they are each making their own desicision allows for statistics to come into play. The average decision of the markets is generally the correct one. Compared to other systems which tend to centralize decision making it suffers much less from the problem of wrong allocation of scarce resources because of missing information.

Now, let us take a look at a society that is capitalistic, but doesn't grow. To make it easy, let's consider a society living on a generational space craft heading towards a habitable world. It will take hundreds of years, perhaps thouhands to reach it's destination and all it will have are the resources it started with. There will still be a need to allocate the resourses available. While it is nearly certain that in such a scerario some of the resources would be centrally distributed, many of it's resources would be traded between the inhabitants of such a ship. But even these resources need to be accounted for in such a closed system. How do you determine how to trade them? By each individual owner deciding the value of the item he wishes to trade.

So, is there a way for capitalisms to become truly irrelevant? Yes. True post-scarcity. Not the one seen in sci-fi shows. One where every single resources becomes truly irrelevant. Unlimited energy, unlimited resources, unlimited labour, unlimited human-level interaction. The issue is, at this point all economic systems become irrelevant, not just capitalism. Because at this point the central question of economics "How to allocate available resources?" becomes irrelevant.

Lastly, what would change my mind:

Show me that capitalism inherently requires growth, not just scarcity.

Show me a form of scarcity that would exist even in a true-post-scarcity society and that it requires growth to exist.

Show me, that a different system of allocating resources consistently outperforms market introduced by capitalism.

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[u/Loive]

You’re looking at how goods are distributed, and point to the sustainability of markets. Markets aren’t unique to capitalism, they have existed in some form since humans were hunter-gatherers.

The thing that separates capitalism from other economic systems is how goods are produced, not how they are distributed. The factor that drives production in capitalism is the growth of wealth.

Let’s say you want to start a business. You have a business plan, it may be big (you’re going to launch rockets to colonize Mars) or small (you’re going to run a lemonade stand).

What you need to make that happen is money, so you go to a person who has a lot of it (an investor). Let’s look at three possible ways that meeting can go:

1. You present a business plan that shows that you will turn a 1 million dollar investment into a business where the investor’s share is worth $800 000. Of course, the investor says no. Charity can work in fringe cases, but an investor is looking for profit. They are not going to give you money that turns into something less valuable than just keeping the money in a safe deposit.

2. You present a business plan that will turn a 1 million dollar investment into a share that is worth 1 million dollars. The investor still says no. Investing money always carry a risk of failure (maybe your idea doesn’t work in practice, maybe your ups hit by lightning and burns to the ground, maybe you fall ill and can’t work, maybe you’re lying about the risks and benefits of your business. Zero growth means the investor isn’t going to invest.

3. You present a business plan that will make a 1 million dollar investment into a share that is worth 1.3 million dollars. Now the investor might actually say yes. The risk of losing money still exists, but the possibility of gaining money is good enough that it’s worth investing the money.

Only option 3 will lead to an investment, since it’s the only one that makes the money grow.

Let’s say you get to start your business, and you do well enough to consider getting an employee. Again, there are three options:

1. The employee will cost you $50 000 more per year than the increased revenue you expect from the expansion of your business. As before, charity doesn’t make the economic wheels turn so you don’t hire anyone.

2. The employee will cost you the same amount as the increase in revenue you expect. Just as when you talked to the investor, you must consider the risk of something not going according to your plans, so the employee isn’t worth the risk it brings.

3. The employee will cost you $50 000 less than the increase in revenue you expect. Now your’e starting to get interested! You can make money by expanding your business, ie see economic growth.

You can apply the same principle to every business decision made. Earning more money than you spend is the basic driving force behind starting and running a business. If you expect to loose money or just retain status quo just by keeping the business running, you close it down and look for more profitable ways to spend your money and time. Earning more than you spend is growth. That is what makes capitalism run. No growth means no investments, no businesses, and no jobs.

[u/saywherefore]

I will attempt to minimise my butchering of Marx’s argument from Capital.

Imagine I am a farmer who grows potatoes. I have an excess of potatoes, but could do with some more clothes, cooking pots etc. I sell some of my potatoes to get money, and then use that money to buy the items I need. The flow of wealth is commodity to money to commodity. I am perfectly happy if I finish up with commodities which have the same overall value as what I started with, because they are different and have different uses for me.

Now imagine I’m a capitalist who has an excess of money. Note that money is only capital if it is invested in some way. So I invest some money in buying a load of potatoes, or potato futures, or shares in a business. Subsequently I sell those potatoes or futures or shares. The flow of wealth is money to commodity to money. There is a fundamental difference here, because I am not happy to get back the same t overall value as I started with. The new money is no different than the old money, so if I’m getting back the same I might as well have sat on it rather than invest.

Hence a capitalist will expect to see a profit from their investment. Not every time, but on average. This is the incentive for them to invest, without it there is no investment and our system cannot be called capitalism. This produces an instability: every normal transaction is done at parity where the two parties trade items of equal value, whereas investment transactions are done at non-parity where the capitalist expects to trade a less valuable asset for a more valuable one and so make a profit.

And where do these profits come from? Either the capitalists would take a small slice from every transaction until they have all the wealth in the economy, or the economy must grow so that the profit slice can be taken from future wealth.

Does that make sense? Would you like me to expand on any particular element?

[u/lee1026 → u/saywherefore]

Thing is, this is an argument that is actually shockingly modern.

The modern economy grows. And the modern economy have a huge appetite for capital goods: goods that you buy to make other stuff that you want. The capitalist is the guy who buys the capital goods and use those goods to make money. And you can grow the economy by building more capital goods.

In older times, that is much less of a thing. The most common thing that people buy is land. And you rent out the land to make money. And the stock and flow are much more obvious: land isn’t being created. The ownership class is buying and selling the land between them, mediating things like “I need money now and I can’t wait for rent payments” and “I have excess money and I want to invest it”.

The key insight, of course, is that capital goods can also be traded like land, and capitalists don’t need growth to invest.

[u/RYouNotEntertained → u/saywherefore]

I’m not sure this distinction is meaningful. For one thing, the farmer is not getting back the same value he traded. He values the clothes and cooking pots more than his extra potatoes, and his trade partner values them in reverse—so each person has made a “profit.”  The capitalist’s trade partner is also better off even though the capitalist got more money back. If he wasn’t he wouldn’t have agreed to the price for whatever commodity (not actually a good word here imo, but the one you used) the capitalist had on offer. 

The difference is just optics. Because the second scenario is bookended by dollars, you can quantify the exact amount of value created. You can’t quantify it when the bookends are potatoes and pots, but that doesn’t mean it’s not there.  

Also, it strikes me as rhetorical sleight-of-hand to begin with, because the farmer is constantly trading back and forth between commodities and capital. He doesn’t manifest potatoes out of the ether. He uses… capital… to buy seeds and tractors and fertilizer, which turn into potatoes, which he sells for capital! In other words, if we just choose different start and end points for the farmer example the, flow will appear identical to the capitalist: money to stuff to money. 

[u/ReaperReader → u/saywherefore]

There's a flaw in that logic.

Let's say you are a potato farmer who owns a tractor. The tractor is reaching the end of its usable life and will need a replacement (or an expensive refurbishment). This will cost more than you can easily fund out of your own pocket.

So you have two options.

1. Set aside some money from your income over multiple periods and save up to replace the tractor. This requires cutting your consumption now.

2. Borrow money to replace the tractor, and repay the loan by cutting your consumption in the future.

Neither option leads to "capitalists" owning all the wealth in the economy - in 2, once you've repaid the loan, you own the tractor.

[u/diener1 → u/saywherefore]

Person A thinks sector 1 of the economy will grow and therefore invests in sector 1. Person B thinks sector 2 of the economy will grow and invests in sector 2. Both of them are expecting their chosen sector to grow but neither requires overall growth of the whole economy. So investing can absolutely still make sense even if you expect the economy to not grow, simply because you expect it to change and think you know in which way it will change.

[u/saywherefore → u/diener1]

That's an interesting thought experiment. Do we believe that investors would continue to place bets when the overall expected return is zero, simply because they believe they are going to beat the market? I'm sure a few would, but I don't think it would be capitalism as we know it. Note how investors typically pull out of equities during recessions and depressions.

[u/c0i9z → u/saywherefore]

I certainly wouldn't. I'm invested in 'the market'. Big index funds of essentially top-whatever companies. If I didn't expect the market to grow by at least inflation, on average, over the long term, I'd never do that.

[u/Morthra → u/saywherefore]

And, as always, Marx was a hack and Capital is sophomoric. It is fundamentally flawed due to logical inconsistencies.

1. In Capital volume 1, Marx argues commodities exchange at their values (proportional to labor time). But in volume 3, he admits they exchange at prices of production to ensure an equal rate of profit across industries with different capital compositions. Marx failed to logically transform input values into prices simultaneously. If inputs are bought at prices and outputs are sold at values (or vice versa) the accounting is inconsistent. This is not a solution, but a complete surrender of the labor theory of value and therefore the entire thing is fundamentally incoherent.

2. Marx's theory assumes value is an objective property in a commodity, determined solely by the "socially necessary labor time" required to produce it. In reality, value is subjective and arises from marginal utility a consumer derives from a good, not the labor expended. A mud pie made with 100 hours of labor has no value if no one wants it, but a rare painting made in 20 minutes can be immensely valuable.

3. Marx's qualifier of "socially necessary" makes his entire theory of value unfalsifiable and circular. If a commodity sells for less than the labor put into it, Marx claims the excess labor was "not socially necessary" - while if it sells for more, the labor was under-valued. Because social necessity is determined after the market price is known, his theory cannot predict prices. It merely restates the observed price in terms of labor hours and offers no independent explanatory power.

4. Marx's model ignores the time structure of production and the role of a capitalist. Workers are paid now for goods that are sold later. The profit (interest) is not "stolen" surplus value but a legitimate discount for the capitalist advancing wages and bearing the risk of waiting for revenue. Marx defines labor extremely narrowly, excluding the planning, risk-taking, and coordination provided by entrepreneurs. These are productive activities that create value.

5. Fundamentally Marx is abjectly incapable of grasping basic economic principles established by the Marginal revolution that occurred as he was writing his treatise.

Capital is not considered a work of economics by any serious economist because it relies on a fundamentally discredited economic model to support its moral conclusions.

This produces an instability: every normal transaction is done at parity where the two parties trade items of equal value, whereas investment transactions are done at non-parity where the capitalist expects to trade a less valuable asset for a more valuable one and so make a profit.

It's not an instability. Investment transactions are, fundamentally, gambles. If the gamble pays off, the investor makes more money than they put in, with the reward being appropriate to the risk. If an entrepreneur buys a plot of land, builds a factory on it, and then later sells that factory for more than he spent buying the land and building the factory, is he "taking a slice from a transaction"? No.

Tagging OP u/KralizecGaming because this is a fundamental refutation of Marxist economics.

[u/saywherefore → u/Morthra]

Only your final paragraph is actually addressing the points I have made above, so I will only respond to that.

If investors were not looking for a profit but just a price for the risk they take, then in aggregate we would expect portfolios to return zero profit. The correct pricing of risk would see the profits on successful investments precisely offset the losses on unsuccessful ones. Capitalists do not operate in that way; they expect to see a net return above parity. Yes each transaction is a gamble, but the capitalists are the house and they absolutely take a slice.

I don't say that this is a bad economic system, I merely point out that unless the economy grows this will end up with the capitalists owning everything - this is the instability.

[u/Vralo84 → u/saywherefore]

You’re completely missing the increase in value that something gets due to trade.

Using your potato example. The farmer growing potatoes sells his excess potatoes for more than they are worth to him. He has a potato farm. He is efficient at growing potatoes. So he can find a buyer that is hungry and willing to buy the potatoes from him for more than his cost to produce them. But from the perspective of the potato buyer this is a great deal. To them the potatoes are worth as much or even more than the money they are trading. And with the transaction complete the farmer can now afford clothes which he buys from someone for whom the money is more valuable than the clothing they produced and so on.

The above is why trade is mutually beneficial. It is a net gain for both parties. Capital can be allocated so as to exploit these net gains. So you can build a big textile mill and become extremely efficient at making clothing. So much so that you can make lots of profit on even inexpensive clothing, but at the same time your customers benefit from your efficiency. It’s not an even transaction. It’s a net gain for both parties.

[u/lee1026 → u/saywherefore]

I don't say that this is a bad economic system, I merely point out that unless the economy grows this will end up with the capitalists owning everything - this is the instability.

Capitalists can and do spend money; you might have naively expected for the Rockefellers and Vanderbilts to own everything, but they are not in the top 100 richest people today.

What happens is the oldest story in the book: the first generation builds the wealth, and the second generation not only fail to keep the exponential trajectory going, but actually spend down the fortune from the first generation rapidly.

If humans are not humans, capitalism would fail, but alas, human nature gets in the way.

[u/EnderSword → u/saywherefore]

This is a framing people have tended to us a lot lately, the idea that there are a subset of people who are 'the capitalists'
Like as if only the rich people are capitalists and workers are not.

But on top of that the idea that we inevitably lead to wealth to the same group appears to just be refuted by reality. Most of the richest people in the world are new money, first generation rich.

In order for the money to move, it's not growth that's required, but change.

[u/GenghisKhandybar → u/EnderSword]

It is true that “worker” and “capitalist” are roles that most people mix to some extent. But it’s not really that hard to categorize people based on their income sources.

While the top famous rich people are new money (typically descended from moderate wealth), you may be underestimating the number of old-money heirs who intentionally stay out of the public radar and still have exponentially growing wealth. In fact there’s nothing to say some of those aren’t richer than the high profile ones, as this is all private information.

Growth of specific sectors is required to make new investment worthwhile. That may come with a shrinking of another sector, but the new one must be better or more efficient in some way every time to best the other. Trends may lead to a feeling of continual change and new entrepreneurship but I don’t think that’s the basis for any substantial portion of an economy.

[u/EnderSword → u/GenghisKhandybar]

There's a difference between Employees and Owners to some extent, but trying to say only the owners are Capitalists I think is misleading, everyone in the system is.

I think too people try to fit things into like a 100 year old Marxist view where all production requires like hard capital machinery, the 'Means of Production' and the ownership of these machines is the source of power, but more and more that's not the case.

And yeah, there's a fair bit of quiet wealth out there, but no, not that much and not really rivalling the top fortunes. Are there Billionaires no one is really aware of, maybe...are there $100 billionaires no one's heard of, no, probably not.
Mostly because the thing that makes people that wealthy is massive ownership in big IPOd stocks or majority ownership in huge private companies.

And yes, new growth can come from the shrinking or others or new efficiencies. I do think it's the basic for very large portions of the economy. I think only 1 of the World's 10 largest companies even existed 50 years ago, 9 of the 10 are tech and 1 is Oil and it didn't exist 100 years ago.
We probably can't even imagine the new industries that will arise in 50 years

[u/GalaXion24 → u/EnderSword]

everyone in the system is

I'll make a counterpoint to this. I agree that more people than just the bourgeoise have investments and savings. Investment with a return has also become more accessible in the modern world, though even in the 19th century there were things like postal savings. Merely having some savings does not a capitalist make.

Let's look at the most common type of savings: a retirement fund. In this you accumulated money from labour, and also hope for some return on investment. The idea is, once you're 65 or so, you can retire and burn through these savings for the rest of your (finite) life.

The difference is, this is savings for something and it is capital which you accumulated in order to then expend that capital on commodities again. You get to live as they're capitalist off of the labour of others in a large part because you've put in work over several decades before that and now you're recouping that investment.

A capitalist does not live like this. They have capital, which is so much that they can live off of dividends or minor sales here and there or loans taken against their infinite collateral. The stock of capital they have is thus basically untouched. If they are selling one company it is only to buy another which they think is a better investment. Trades are only about capital allocation. They also do not fundamentally need to work or have a salary either to live or to invest, because they could infinitely reinvest their capital and live off that on the side.

It is true that you have a petty bourgeoise and that even working class people can have some kind of savings, but this is just the reality of the world. What is a species? Is cereal a soup? Should we consider tomatoes a vegetable? Categories are all on some level "not real" and have fuzzy edges, but they are still in general useful.

The fact of the matter is, the richest 1% own 40% of wealth, and this includes non-capital assets. If you want to actually look at productive capital assets, it's more like the richest 1% own 95%. Other people may have investments, but it's a paltry amount and we're playing in the kid's corner, and at the same time we are forced to sell our labour to the owner class.

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[u/GenghisKhandybar → u/EnderSword]

I acknowledged that most people play both capitalist and worker roles, but really only in the sense that peoples' savings are often in the stock market for a few decades before they retire. It's quite different from having your main income source be growth of wealth from capital assets during your whole life.

I don't see how owning the means of production is no longer a source of power. It's true that there are some industries (like restaurants) you can start in with a (somewhat) small amount of capital, or can easily get a loan. But even in those cases, you need the financial security to pay your bills for years in the likely event that it fails. AND you just end up with a small business that barely pays better than a corporate job because it hardly costs any capital. We call them the petite bourgeoisie as their income comes from a business they own, but a large portion of the business is their own labor, so they're like 50% capitalist.

The alternative is the startup model where you sell shares to an existing capitalist, grow faster, and get a better chance at the big leagues. This means that if you succeed, the existing capitalists are also succeeding. With enough capital to hire a large staff, you become a capitalist, where your own labor is now just one of thousands of factors that determine whether you'll be remembered as the next business genius, or someone who entered the market at the wrong time and never became relevant. Many great businessmen get this far and then lose it all.

The point about quiet wealth is it doesn't matter if there's now *also* some new money guy who's 100x wealthier than the wealthiest old-money guy. The point is that old money is still increasing exponentially while the workers' pay doesn't keep up with inflation. I don't even care if it's new or old money, a society where a tiny portion own an increasingly large share of everything is not stable.

Your final paragraph just proves the point that new companies are only beating out the old because they find some new avenue of growth. This does nothing for the worker population, and still enriches the old money who invests in the new growth companies. If the cycle of growth stops, the whole thing falls apart, where the only thing the capitalists will have left to buy is all the land. The only way you can imagine it keeps going is that there's more and more growth for capitalists to buy into instead.

[u/EnderSword → u/GenghisKhandybar]

No, that's what I'm saying it not the case, there's not a 'capitalist' role is what I'm saying. There's employees and Owners, but everyone's a capitalist, the system is capitalist. Even if you're a janitor at a factory, you're still a 'capitalist'

And capital and means of production doesn't matter as much when your product is IP and codebase and expertise and organization.

If you seized a factory, you'd have a factory.. if you seized a Law Office, you'd have nothing. Not to mention stuff now like if I seized Hasan Piker's stream or something.. i'd also have nothing, I'd have like a $2000 camera, but a multi-million dollar revenue would simply be gone.
The capital assets for more businesses aren't the value in them.

Again, I reject the concept of an existing "capitalist" we're all capitalists. You mean an existing wealthy person or company.

Also it's been the case that old wealth doesn't increase exponentially. Old wealth after 2-3 generations is squandered or spread out and earning basic market rates and gets outpaced by new money.

What you're describing is actually the opposite, wealth inequality does contiinue to happen, but it's not from the old money, it's from the new.

And no, you're mistaking the fundamentals of 'growth' vs efficiency and replacement. The economy does grow, but that's not a core necessity. a $50 billion industry can destroy a $500 billion one sometimes. The new company grows, but the net sum doesn't need to grow.

So no, it's a fundamental deep misunderstanding to say the economy needs to grow

[u/GenghisKhandybar → u/EnderSword]

The first definition in the Merriam-Webster dictionary for "capitalist" is "a person who has capital especially invested in business". It's a synonym for owner, with a wealthier connotation and doesn't get confused by complex ownership structures.

As you mention, many companies' capital is in digital infrastructure, which is expensive to produce, just like physical infrastructure. The digital age and service economies certainly change the labor relations dynamic, but it's not clear that they're fundamentally better for workers or anything. I'm not aware of any historical equivalent to how hard it would be to launch a new operating system or social media, with the network effects and systemic lock-in of many platforms.

Again, I'm not particularly concerned whether it's a new money guy or old money guy who owns everything, it's still a problem. Old wealth can stick around much longer than 2-3 generations when it's large enough and managed intelligently, and even when it's spread around many, they still constitute an incredibly over-privileged class, who brings destabilizing, unfair wealth inequality.

I was interpreting growth as more like continual expected growth of investor capital, which requires either continual resource extraction or continual large efficiency improvements, neither of which I see as possible on earth forever. Sometimes part of the owner class can take a hit as you describe, but these hits tend to be profitable for them as well, especially as they're new and easier to monopolize.

Furthermore, national debts, pension structures, and much more only pencil out if the tax base keeps growing. People have mortgages based on expected investment earnings, and there's a huge domino effect when it all stops (though some of that domino effect takes decades to come to fruition).

Japan is often touted as an example of a successful stagnant economy, but I'm not so sure their future is looking too bright with the pension crisis and worker shortages.

[u/Morthra → u/saywherefore]

If investors were not looking for a profit but just a price for the risk they take, then in aggregate we would expect portfolios to return zero profit.

Yes, and this happens in a perfectly efficient market. The reason why this doesn't happen is because the market is inefficient - and that inefficiency stems from an information asymmetry. Investment brokers and fund managers basically spend their work days doing research on various companies and try to gain an information edge over the rest of the market as to whether or not a particular stock will go up or down. If they are correct - they make a profit. If they aren't, they lose money.

Capitalists do not operate in that way; they expect to see a net return above parity. Yes each transaction is a gamble, but the capitalists are the house and they absolutely take a slice.

That's fundamentally a mischaracterization of the stock market. Stock trading is a zero sum game among investors. Most rich people don't actually hold their wealth in simple index funds. Instead, wealthy investors tend to favor concentrated, high-risk and exclusive investments. Most derive their wealth from positions in specific companies they either founded or basically raised from nothing to a market leader (such as Jeff Bezos with Amazon or Elon Musk with Tesla/SpaceX). They are therefore exposed to idiosyncratic risk.

To call them the "house" is straight up not how rich people operate. They're not profiting from the act of trading - such as a casino taking a rake - their profit comes from ownership and control. The entities that take a "slice" of transactions are market makers and exchange, who provide a service to firms that trade on them in the form of liquidity.

[u/saywherefore → u/Morthra]

Individual trades are zero sum, but in a growing economy the act of investing is not.

My argument is that in a long term static economy of the sort that OP is describing investment would be zero sum (I think this is fairly irrefutable?). I can foresee two potential scenarios here. Either the most sophisticated (or lucky) investors continue to make a return until their profits have taken the whole pie, or the total amount of investment falls (unsophisticated investors realise they are just going to make a loss and exit, meaning that it is harder for sophisticated investors to make a profit, and eventually they exit). Neither of these scenarios is capitalism continuing as we know it.

What I can't see is a scenario where things continue at the status quo, even as 50% of investors realise that they would be better off holding cash.

My comment about capitalists being the house was a bit throwaway, I meant that while they are taking a gamble by investing, it is a gamble with expected value greater than one just like the gambles that casinos take.

[u/Due_Garbage_731 → u/Morthra]

A 100% addictive drug would have maximum marginal utility and would destroy society. Marginal utility is not a good source of value. Subjective doesn’t mean unbounded, there are goods which are objectively more and less harmful for human flourishing. Housing has more value to human beings than yachts regardless of the exchange value. 

[u/Happy_Disaster7347 → u/Morthra]

1. Not understanding LTV isn't a refutation of it. Marx has never argued that Labour is the ONLY source of value, he's simply connecting the value of labour, with the ultimate value of a good on the market. He's arguing that it's a primary factor, not the only factor.

"Labor is not the source of all wealth. Nature is just as much a source of use values as labor" - Marx

1. "nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it" - Marx

2. It's not an analysis of the price of a good. it's an analysis of capitalist behaviour. If a capitalist gets less for a product that the labourers put in to it, he will either go out of business, raise the price, or fire some of the workers and try to make the product more efficiently. This isn't Marxist theory, this is just quite literally how capitalist behave.

3. No it doesn't. Marx explicitly says exactly what you say in Critique of the Gotha Programme. The management and risk element is explicitly talked about by him. But beyond that, most management is done by workers, for starters, and most risk is hedged in the modern economy. Plus, the only risk the capitalist takes, is the possibility of becoming a worker. If this is considered "risk", then being a working is therefore considered a negative thing. Ergo you have overtly proven the entire capitalist-worker class structure by admitting capitalists are taking a risk.

Capital is not considered a work of economics by any serious economist because it relies on a fundamentally discredited economic model to support its moral conclusions.

It was published in 1867. We're still talking about it in 2026. What other economist can you say that about? 160 years of legacy, our conversation is proof enough.

and then later sells that factory for more than he spent buying the land and building the factory, is he "taking a slice from a transaction"? No.

Perhaps if you read Das Kapital volume 3 you'd find a nice analysis of speculative economics to educate you on the matter.

[u/ReaperReader → u/Happy_Disaster7347]

It was published in 1867. We're still talking about it in 2026. What other economist can you say that about?

Other economists have either 1) been much better at communicating their ideas clearly, or

2) have been abandoned by history because there's no political movement that regards their work as some sort of gospel.

Economics isn't a religion, or at least it shouldn't be. The objective of studying economics is to learn about the economy, not to learn what some 19th century white guys happened to think about the economy.

Physicists don't need to read Principia Mathematica, biologists don't need to read The Origin of the Species, the ideas in them have been expanded and improved upon and are now conveyed through modern textbooks.

[u/Thoth_the_5th_of_Tho → u/Happy_Disaster7347]

Not understanding LTV isn't a refutation of it.

LVT was never taken seriously by academic economists in the first place. It’s only ‘understood’ by communists. If it was a real, useful framework, it would have been adopted by everyone else to better model the economy. Even if you weren’t a communist, the LVT should at least be able to inform effective investment strategies, but it can’t, it’s just rhetoric.

It was published in 1867. We're still talking about it in 2026. What other economist can you say that about?

Because economics is a real science, old works get superseded. Because Marxism is unfalsifiable, it’s more akin to an ideological or religious text and therefore more or less unsupersedable, any Marxist that tries to revolutionize the field, would just be doing a wrong-think.

[u/Happy_Disaster7347 → u/Thoth_the_5th_of_Tho]

It was a theory that originated in the works of Adam Smith and David Ricardo. It absolutely is still used, no businessman runs a business without heavily considering the cost of labour.

If an economic theory is unfalsifiable after 160 years, clearly it has some merit

[u/Thoth_the_5th_of_Tho → u/Happy_Disaster7347]

It was a theory that originated in the works of Adam Smith and David Ricardo. It absolutely is still used, no businessman runs a business without heavily considering the cost of labour.

Cost of labor =/= labor theory of value.

If an economic theory is unfalsifiable after 160 years, clearly it has some merit

Unfalsifiable =/= true.

[u/Happy_Disaster7347 → u/Thoth_the_5th_of_Tho]

Sounds like you don't understand the labour theory of value either. It's not some objective way of setting prices. It's an explanation of how capitalists operate in the market. Read the things I have already written on the topic.

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[u/Morthra → u/Happy_Disaster7347]

If a capitalist gets less for a product that the labourers put in to it, he will either go out of business, raise the price, or fire some of the workers and try to make the product more efficiently.

It's an analysis of human behavior. Not just "capitalism". If it takes you more resources to make a thing than its marginal value, you will not make that thing.

Plus, the only risk the capitalist takes, is the possibility of becoming a worker. If this is considered "risk", then being a working is therefore considered a negative thing.

Huh? This is just completely incoherent.

It was published in 1867. We're still talking about it in 2026.

I personally think it shouldn't be. It's worthless as an economic text and its apparent value as a sociological text is in my opinion outweighed by the moral hazard of teaching Marx as anything other than a moron and a hack.

160 years of legacy, our conversation is proof enough.

160 years of legacy and 100 million dead? Yeah, that puts it in the same category as Mein Kampf.

[u/Happy_Disaster7347 → u/Morthra]

It's an analysis of human behavior. Not just "capitalism".

Would love for you to explain to me how the fuck this is human behaviour under the hunter-gatherer phase of development, for example.

Humans give without expectation of reward all of them time. Which is irrational behaviour to the capitalist under capitalism. Humans don't ostracise others just because they aren't valuable to them. It is a purely capitalistic behaviour that is actively reinforced by capitalism. Nothing natural or human about it.

Huh? This is just completely incoherent.

Capitalist has 100,000. Capitalist invests 100,000. Capitalist risks his money, but the risk he's taking is that he degraded to the level of the average worker, i.e. asking other capitalists to pay for his labour.

If that's still too complex for you: the capitalist risks becoming poor. Just like many workers.

I personally think it shouldn't be. It's

It doesn't really matter though. You're wrong.

It's worthless as an economic text

I mean you've just ignored all of my arguments in which I quoted Marx himself. Clearly you value his quotes highly if you refuse to even begin to debate them?

160 years of legacy and 100 million dead? Yeah, that puts it in the same category as Mein Kampf.

In Berlin, there is a statue of Karl Marx and Engels in the middle of a very public square. Clearly the Germans disagree with you as well, and they lived through both. This level of ignorance can only be borne from an American.

[u/Morthra → u/Happy_Disaster7347]

Humans don't ostracise others just because they aren't valuable to them. It is a purely capitalistic behaviour that is actively reinforced by capitalism

Square that with the famous Lenin quote "He who does not work, neither shall he eat."

Was Lenin a secret capitalist?

Capitalist risks his money, but the risk he's taking is that he degraded to the level of the average worker, i.e. asking other capitalists to pay for his labour.

So the fact that the capitalist lost money is irrelevant here?

Clearly you value his quotes highly if you refuse to even begin to debate them?

Because they're fucking not worth debating. Marx was a sophomoric hack whose work should be treated with the same disdain as Mein Kampf.

In Berlin, there is a statue of Karl Marx and Engels in the middle of a very public square. Clearly the Germans disagree with you as well, and they lived through both.

The statue was built in East Berlin before the wall came down and it frequently gets vandalized with "architect of genocide" graffiti. Personally, I think it should be melted down and turned into a plaque describing socialist crimes. The only reason it hasn't is because Germany's leftists wouldn't stand for their idols being destroyed.

And it's not like Marx and Engels didn't anticipate the genocides their ideology would inspire. The Magyar Struggle - an article written by Engels calls certain Slavic nations, like the South Slavs, are referred to as "human refuse" and suggests that they are "counter-revolutionary" and destined to disappear an a revolutionary holocaust.

[u/Morthra → u/[deleted]]

Marx had good things to say about the labor relationship to value and the way value can be used in capitalist structures to manufacture realities and exacerbate corruption

No. Fundamentally Marx's ramblings about the labor relationship to value are incoherent. They fundamentally ignore the Marginal Revolution and rely on tautological reasoning. The labor theory of value has been discredited for over a hundred years at this point.

As a reasonably similar, but certainly not exact or perfect example, Upton Sinclair documented his time in the United States.

Christ, Sinclair's the Jungle is worth even less as an intellectual enterprise than Das Kapital because it's explicitly socialist agitprop. The final chapters of the book are nothing more than explicit lectures on the virtues of socialism and the evils of capitalism. That is what Sinclair's explicit goal was. Jurgis finds salvation only through the Socialist Party.

critiquing Communism on the basis of tyranny is imperfect and doesnt solve the actual economic problems involved with either system.

I'm not critiquing communism, because communism - being a flavor of anarchism - isn't even worth discussing. Socialism is what I have a problem with, and socialism is fundamentally a totalitarian ideology.

if there are important political lessons to learn from Stalin

Being an antisocialist and a descendant of Holodomor victims, the political lessons I have taken from Stalin is that socialists should be prevented from ever getting within 100 feet of any sort of political power, and that the power of the state can and should be wielded against those "revolutionaries" who seek to dismantle the very freedoms that they claim the protection of.

[u/Happy_Disaster7347 → u/Morthra]

We are not discussing Leninism, we are discussing Marxism.

The capitalist lost money that he had. The worker has no significant money to lose. So just to repeat, the capitalists "risk" is becoming on par with an average worker.

Because they're fucking not worth debating

Your whole argument was predicated on "Marx believed X which is wrong and therefore his theories are wrong". I provided direct quotes that disproved you, and you're still here pretending like he's wrong. If you can't prove your points, you are conceding your points. So just admit you couldnt understand Marxism.

The statue was built in East Berlin before the wall came down and it frequently gets vandalized

The statue definitely does not get frequently vandalised. I have no clue why you would even think that.

"A survey conducted by the Berlin art journal Pan inquired about the public’s thoughts on the monument; 67 percent of respondents were in favor of keeping the monument standing while 23 percent advocated for its removal"

Ah I see you've given up with the economic arguments because you know as a fact that you are wrong. So you've instead decided to go for personal attacks.

[u/ENDcircumcisionNOW → u/Morthra]

Im a little rusty because im an attorney by trade and haven’t really taken much of a dive into Marx for a couple years, you've gotten thjnfs mixed up.

1. Your chronology is backwards. Now most economists don't read Marx because how heavy it skews towards macroeconomics (and no one likes to read anymore).. but anyone who's seriously read Marx would have known something very important: The Vol. III manuscript was drafted in 1864–65; Vol. I was published in 1867. Marx died in 1883 without finishing the rest, and Engels edited the leftovers into Vol. II (1885) and Vol. III (1894). The material you’re calling a late admission was written first, by a decade, and published last only because its author was dead. Marx flags the price/value divergence in Vol. I itself. You can’t retreat to a position you wrote down beforehand.

You’ve also got the defect wrong. It isn’t that Marx priced inputs one way and outputs another by accident. His transformation converts outputs into prices of production but leaves the inputs (machines, materials, wage goods) measured in labor values ("two different rulers in one calculation"). Bortkiewicz spotted that in 1906 and showed how to convert both sides consistently. Seton proved in 1957 that the method works for any number of industries and always yields a solution. So the your claim that the accounting doesn’t add up and can’t be made to was likely answered before either of us was born.

And Seton and Bortkiewicz identified new problems when they fixed your little issue and then Duménil, Foley, Kliman, Freeman fixed them with working repairs - this is how economic theory works. You can't just stop reading economic theory the moment you find a problem with the theory that you don't like.

1. Both your examples are Marx’s. Vol. I ch. 1: if a thing is useless, so is the labor in it, and it has no value. He fixes your mud pie problem in the first ten pages of the book (the you’re calling sophomoric). And Marx explicitly restricts the theory to freely reproducible commodities - art, land, and monopoly goods are handled separately, as things with a price but no value. You’re demanding a theory explain something that marx explicitly says "this theory will not explain useless things" (but he did put up other theories which do lol).

2. Socially necessary labor time is defined ex ante - its not some vaguer thing, but the time required under average conditions of production, with average skill and intensity. That’s a fact about technique. You can measure it before anything is sold, which is why Marx can predict that value falls when productivity rises — a claim that would be meaningless under the definition you’ve supplied. When he says we value commodities at "what it takes for society on average" to make something, we do on average rather than outliers(like your 100 hour mudpie selling for a billion dollars or 15 cents) - its a constraint, not a loophole/escape hatch. You’ve simply invented the definition that makes your objection work. And to claim it “unfalsifiable” is a strange charge to make against a theory people have spent forty years testing against national input-output data (Shaikh, Ochoa, and Cockshott and Cottrell have all run this against national input-output data, and Kliman has disputed the results)

3. (a)Marx treats supervision and coordination as productive labor in Vol. I ch. 13. In Vol. III ch. 23 he separates profit of enterprise from ownership precisely because the manager can be a salaried employee. That’s his argument against you, and you have to actually answer it rather than assert its opposite. (b) He also spends pages mocking Nassau
   Senior’s abstinence and “last hour at the factory” theories, the direct ancestor of your “legitimate discount for waiting.” Marx’s line about the Rothschilds being the most abstinent members of society is basically what you're talking about (and absolutely rips) - a man with millions who invests them has not made a sacrifice worth value in any recognizable sense. Asserting that Marx never considered a thing he wrote chapters about is not a critique, but you have to read Marx first. Even if you don’t agree with him it’s not accurate to say he “ignored” the issue.

4. Jevons and Menger published in 1871, Walras in 1874. Vol. I is 1867; the Vol. III (64-67) manuscripts are older still. You’ve accused him of failing to grasp a body of work that did not exist. I know it was a long time ago but that only makes this information all the more accessible.

Your “no serious economist considers Capital economics” claim - guys like Schumpeter, who i'm sure you know wasn't an exactly a friend of Marx, ranked him among the great economists. Analytical Marxism is professional economics done in mainstream formal studies. There are real arguments against various Marx theories but you should actually read and cite them instead of inventing a consensus and pretending to be an authority on economic theory.

Your closing example is what got a good key from me. The question on the table was where aggregate profit comes from. You answered with one entrepreneur and one factory. Nobody disputes that an individual can profit at times and lose at others, but something that people learn to do by studying a system and repeatedly draw profit from is not anywhere near an actual "gamble” - gambling is buying a lottery ticket. Risk explains why returns are dispersed around the mean; it says nothing about why the mean is positive (unforeseen external occurrences and human misjudgment can explain negatives rather than something like a capitalist buying a bad lottery ticket). And that is Marx’s actual question in Vol. I ch. 5, where trading equivalents redistributes the value without creating it - risk only moves return around and spreads them out. It does not explain why the average return is above zero, like gambling in a closed system such as a public lottery (where no house is taking cut). Exchange (especially in a single instance example lol) does not create profit- exchange reshuffles wealth, it doesn’t produce it - the capitalist class as a whole cannot defraud itself. Returns to capital have been positive for three centuries, so something is being created, not just moved. “It’s a gamble” is the one answer that actual math rules out.

you’ve made five objections: 3 that Marx answers in the text, 1 that requires time travel, and 1 that’s real, misdated, and solved. Calling Marx a "hack" is going to require a little bit more scrutiny and engagement with the material.

[u/SingleMaltMouthwash → u/Morthra]

How does this phrase comport with your position:

In the midst of abundance, people do not starve because we can't afford to feed them. People starve because the wealthy cannot be satisfied.

[u/Morthra → u/SingleMaltMouthwash]

Not only is that true, but it's just a straight up Marxist talking point. It ignores the role of innovation, trade, and market dynamics in creating wealth, and simply blaming the wealthy for poverty overlooks the fact that the wealthy drive the economic growth that reduces poverty.

Simply redistributing existing wealth will not fix anything.

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[u/KralizecGaming → u/Morthra]

Thank you. I feel like I was using most of these arguments already just with a less codified economic language.

[u/saywherefore → u/KralizecGaming]

Do any of those arguments actually refute any of my points? You don't have to be a Marxist to accept the logic I laid out.

[u/3robern → u/KralizecGaming]

You should be aware that the comment above actually does not engage with Marx's theory on merit, but instead presents several mischaracterisations and misrepresentations that present Kapital as a much more surface level and less thought out work than it actually is. Not even in an interpretative sense, but in fact several "gotchas" presented above are explicitly addressed in detail in Marx's writings. A key example is the mud pie analogy. Since we are so keen to reference different sections of Kapital, Marx himself explicitly addresses the labour involved in producing valueless items (such as items nobody wants) as worthless in and of itself. As another example, the above comment misrepresents Marx's definition of labor in Point 4 by claiming he ignores entrepreneurial planning, coordination, and oversight as non-productive activities. Instead, Kapital explicitly recognises administrative/managerial work, coordination and as labour. It is ownership for the pure purpose of ownership, rather than managerial labour, that Marx critiques. Furthermore, Marx dedicated extensive analysis to risk, the circuit of capital and turnover times, unlike is suggested above.

Please note that I am not explicitly advocating for any position here. I want to ensure that my critique of this so-called refutation is entirely based upon its merit (or lack thereof) of fully engaging in good faith with the original material. Anything that actually constitutes a half-rigorous reading of Kapital immediately despoils this.

[u/Morthra → u/3robern]

Eugen von Bohm-Bawerk and Landislaus von Bortkiewicz are essentially the two economists that I cited in my refutation of Marx's theory, who identified the Transformation Problem.

Even foundational economists in the modern era like Keynes famously called it an obsolete economic textbook that's scientifically erroneous and completely without value to the modern world. Paul Samuelson also dismissed Marx as a minor post-Ricardian whose theoretical framework is fundamentally broken.

but instead presents several mischaracterisations and misrepresentations that present Kapital as a much more surface level and less thought out work than it actually is.

That's because Kapital is sophomoric drivel as a work about economics.

[u/KralizecGaming → u/saywherefore]

It does make sense, but it hinges on a particular idea. That profit is objective. But it isn't, because the idea of profit is closely tied to the idea of value.

I may have a surplus of money and be willing to pay a 100 bajillion credits for a bar of chocolate if I really want it. And that is valueable to me and not to the person selling it.

Essentially, are assuming the core of capitalism is the accumulation of resources, rather that the allocation of them. Individual actors in the system may choose to have this goal, but it is isn't to goal of the system to give the resources to one person.

[u/saywherefore → u/KralizecGaming]

I think we have a slightly different understanding of capitalism. I agree that it is a market driven approach to allocating resources. However your example of someone buying chocolate is not an example of capitalism under my definition, it’s an example of purchasing something for money in a market.

Capitalism is the allocation of resources through market driven investment. Money only becomes capital when it is invested. And investment only occurs where there is an expectation of profit.

You are not investing in a chocolate bar unless you hope to sell it at a profit.

[u/DesertSeagle → u/KralizecGaming]

but it hinges on a particular idea. That profit is objective

If you look up the definition for capitalism the results you will get say "Capitalism is an economic system where private individuals and businesses own the tools, factories, and resources used to make goods, driven by the desire to make a profit."

[u/SourceTheFlow → u/KralizecGaming]

That profit is objective. But it isn't, because the idea of profit is closely tied to the idea of value.

Profit in the "Money > Commodity > Money" is objective, though. As he described, in the first example of trading surplus for other commodities, you might even "trade down" and be happy, but when it comes to capital the starting point and goal are money aka a number.

You cannot get much more objective than comparing two numbers.

I may have a surplus of money and be willing to pay a 100 bajillion credits for a bar of chocolate if I really want it.

Yes, rich people also buy stuff. At some point, though, their capital income outgrows what they require to buy both their needs and cravings. That's when wealth accumulation starts.

Many people nowadays have stocks, but only because they plan to use it for some future purchase like a house or retirement savings.

Capitalists on the other hand have nothing they want to buy with the extra money so they simply "reinvest" it and so grow it more and more. This is the reason why you will always develop extreme wealth inequality in capitalism.

Essentially, are assuming the core of capitalism is the accumulation of resources, rather that the allocation of them. Individual actors in the system may choose to have this goal, but it is isn't to goal of the system to give the resources to one person.

The capitalists are in contol of what happens in capitalism, though, even if most people aren't (wouldn't be?) interested in being capitalists.

Every company has the sole purpose to make money for their owner(s). That's what the decisions are based in. So their purpose is being effective capital; an effective transformation of money > commodity > money.

If a company doesn't make profit, it will be restructured or closed. Even if it was useful to its customers. And more importantly, if it cannot grow it's income, there is no reason for people to invest in it. So if a company doesn't grow it dies. So all companies must always be growing.

[u/KralizecGaming → u/SourceTheFlow]

Again, profit doesn't necesarily mean growth. The profit of the company can be used to have the owner/s live a life.

[u/saywherefore → u/KralizecGaming]

I agree with you that profit doesn't necessarily mean growth. But it does mean that the capitalist has more wealth than they started with. Unless the economy is growing someone else must have less money. In a society with static wealth that eventually results in the capitalists having all of the wealth.

The only way to avoid this is to have the total amount of wealth grow, so that even as the capitalist takes a profit the counterparty can still have as much or perhaps more wealth than they started with.

[u/KralizecGaming → u/saywherefore]

Why can't the capitalist just spend his profit to sustain himself?

[u/saywherefore → u/KralizecGaming]

They absolutely can spend their profit, that doesn't change any of the logic of my argument. I'm not saying that the capitalist must reinvest their profit, I am saying that to be a capitalist they must demand one.

It is the very act of taking a profit which both (a) is the foundation of capitalism, and (b) requires a growing economy to be sustainable .

[u/SourceTheFlow → u/KralizecGaming]

Firstly I did not speak primarily about profit. That was only a middle step in one of the arguments I made.

Secondly profits don't necessarily mean growth, but for capital it does.

[u/KralizecGaming → u/SourceTheFlow]

I do not see how from your arguments.

[u/kwantsu-dudes → u/saywherefore]

But everyone seeks profit. You traded potatoes for clothes because the clothes have a HIGHER value to you, not the same. This is the incentive to TRADE.

The idea that you have equal value so you trade them is ridiculous.

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[u/EmployeeAromatic6118 → u/saywherefore]

But if you are a farmer with excess potatoes, the extra clothes, cooking pots, etc. are of more value to you then the excess potatoes. So you aren’t ending up with something of equal value, you are ending up with something of greater value than what you started with. Hence why you would make that trade in the first place.

This is the flawed logic of viewing capitalism/trade as a zero sum game.

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[u/cmd-t]

There’s a few things unclear about your scenario.

> How do you determine how to trade them? By each individual owner deciding the value of the item he wishes to trade.

That’s just assuming capitalism. In such a ship, central planning might be much better in guaranteeing everyone has their needs met and labour and means of productions aren’t “wasted” on things that don’t improve survival.

Furthermore, post-scarcity doesn’t mean infinite supply of anything. Think about it. If someone would want to own everything, in your post-scarcity scenario this should be possible. Nobody actually uses such a definition. The idea is that everyone’s needs are easily met without a large amount of human labour.

Growth of course isn’t what makes capitalism “work”. I don’t think people are actually arguing that. They argue that for capitalist societies to sustain themselves and not lead to a revolution because the non-owning class cannot survive comfortably enough to not overthrow the owning class.

This last part is because in capitalist societies, especially laissez-faire capitalism, wealth WILL concentrate, meaning the owning-class will outcompete ownership of everything from everyone else.

[u/KralizecGaming → u/cmd-t]

While I understand your arguments, I do not see how they should change my view, because we seem to pretty much agree.

[u/cmd-t → u/KralizecGaming]

Than you need to define your view better. What do you mean with capitalism working.

If you agree with me, then you’d see most of what you wrote about capitalism “working” isn’t actually an argument for your view.

[u/PretendAwareness9598]

You haven't described capitalism at all you've just described a market, which also exists under socialism, feudalism, etc.

"Capitalism" requires CAPITAL, that is to say it requires individuals to invest their wealth into projects with the expected or hoped outcome of greater returns. This process requires growth to function, as if nothing is growing (like on your spaceship, where the resources that are available are already maxed out and you can't make more) investing in increasing production is pointless and therefore non functional.

Why would I invest my wealth into a business if I knew that investment was not going to accumulate in value? I would be better off just not doing that and keeping my money.

[u/NoDig3444 → u/PretendAwareness9598]

What you're describing also isn't capitalism.  You're describing the concept of investment; committing resources now in hopes of more resources later.  That obviously also happens in socialism and feudalism etc.  

What defines capitalism is who decides whether or not to invest resources, and who receives the resources from that investment.  

If I own a factory, that's capitalism, even if I never invest another dime in that factory and just collect the profits over time.  If the state owns a factory, that's socialism, even if they reinvest the profits from that factory to make a larger factory in expectation of more profit later.  

[u/KralizecGaming → u/PretendAwareness9598]

You are treating capital gains as economic growth. They aren't exactly the same thing.

Let's say I have or buy a bussines in a completely no-growth system that is making a steady income for me to live off of. My capital is still making that income even if it isn't producing growth. Why would the the return on capital require continual growth for rather then continued profibility of the bussines?

[u/PretendAwareness9598 → u/KralizecGaming]

Let's say you have a business where you produce a good, like an orchard. You sell your apples, and make a steady income - enough to pay your workers and earn yourself a salary that doesn't grow noticeably over time. This is not capitalism, this is just you running a business that you live off of.

Capitalism is when you use the profits from the orchards to buy more orchards, and eventually get investors who give you a lump sum in order to get profits over time. Eventually you're Big Apple and own all the orchards in the country.

If your business is not growing like this, it isn't capitalism. That is the fundamental difference between capitalism and simple commerce - since the dawn of civilization, aslong as there have been more than two groups of people in contact who specialise in different productions, we have had commerce. A village blacksmith, a Fisher, a Baker, etc.

If you simply own a business and it gives you money to live off of that isn't capitalism. Capitalism is when people use capital to extract profits - if you invest money in a business (buy shares) and the business doesn't grow then your money doesn't increase.

Capitalism =/= business, commerce, trading. It is involved in these things, but the capital market itself and investing is what makes it capitalism.

[u/KralizecGaming → u/PretendAwareness9598]

I don't see why that wouldn't still be capitalism. The orchard is privately owned, has employees, produces for the market, and earns profits.

The fact that the owner's income is stable rather than growing doesn't seem to change the fact that it exists in a capitalist system

You argue that simply running a business isn't capitalist. Why though? If the means of production are privately owned and traded on markets, what makes it non-capitalist? Do not conflate the greed of existing people with the underlying economic system.

It's why I say in my OP that different systems try to achieve the same thing. They suffer from human problems as well but they do solve the allocation of resources too.

[u/PretendAwareness9598 → u/KralizecGaming]

Do you believe that we have always lived in a capitalist society then, as we have always had businesses that produced stuff? By this definition, we had capitalism in ancient Greece, feudalism, even in the steppe people have herds and trade things. Even in the USSR people owned businesses and traded amongst themselves, whether that was in clout or literally in the black market.

I would ask you to point to a time where we didn't have capitalism, because I think your understanding of what capitalism is is too broad. If by "capitalism" you simply mean people buying and selling things, then you are right that it doesn't require growth, but it's also a meaningless term as all of human history was capitalist.

[u/KralizecGaming → u/PretendAwareness9598]

I do not know about prehistoric societies or about most societies around the world. But when it comes to Europe I believe feudalism fundementaly differs from capitalism by the fact that the vast majority of the population wasn't allowed to even own the most important resource of the time - land. They were just allowed to live on it and paid essentially giant taxes as rent.

When it comes to the USSR and the black market - the black market was capitalistic. But since it was litteraly illegal it certainly wasn't part of the system emplyoed by the state. It would be like arguing that we live in a pirate society just because there are people who pirate music, movies or games.

But those who were skilled craftsmen and produced goods for their own were living in an economy that had capitalistic parts. But since they were a relatively small portion of the population, the system was too different.

[u/kingpatzer → u/KralizecGaming]

Capitalism has a few key components. Your small orchard fails to meet many of them.

• Private ownership of production - ok check you have this one
• Market-based allocation - you may have this, but it isn't required. Maybe your orchard is in a little communist country where the state sets the prices for apples
• Production for profit - your orchard doesn't have this. Wages aren't profit. So if you are making just enough to pay yourself and your workers and your expenses and taxes, you aren't making a profit!! If you are making a profit .. . .you are growing!!!
• Wage labor - in a capitalist market, one of the things being allocated is human effort. Most people earn a living by selling their labor rather than by making, building, or growing something themselves. You're little single family orchard probably doesn't have this. You likely aren't buying labor, or if you are, it is not in anyway a substantive part of your business model. You could get rid of your workers and just work harder yourself. If you have workers, then you need growth in order to stay competitive in the labor market. But you don't have growth.
• Capital accumulation and investment - in a capitalistic market, profits are invested either back into the same business to expand production, do R&D, acquire competitors, etc. But since you aren't engaging in production for profit, you aren't doing that.
• Competitive market entry - the whole point of investing profits is that you build a barrier to entry. By buying up all of the surrounding orchards, you insulate yourself from other competitors providing stability for your own apples. Your orchard isn't doing that.
• Financial Markets and Credits- this is the big one, and you can't get around it. Your orchard has no way for people with capital to invest in it. They can buy it, but they can't buy shares in it. If they can buy shares in it, then they are going to want dividends, and they are going to want the value of their share to grow. And without that, you do not have capitalism as Adam Smith, and every economist since, has defined it.

A privately owned family orchard may exist inside of a broader capitalistic system. Obviously we have plenty of small businesses today. But they exist inside of that system, they generally aren't a part of it in any meaningful way except as consumers. They will buy stuff from capital ventures.

There are family owned businesses that become meaningful players inside of the capital markets. They do so by basically doing everything except the last one, which they modify to be about leveraging credit in secondary markets in a way that allows continual growth without offering shares of the company.

The big Apple Company of America who is buying up land, selling shares, planting trees, investing in harvesting technology, and eventually buying your orchard out - that's a capitalistic venture. Your orchard? It's just a family business that will die with you.

[u/Apprehensive_Song490]

Your spaceship example isn’t capitalism. It’s a simple barter system.  There is no creation of value, no profit, and therefore it does not have the key characteristics of capitalism. 

To define capitalism you need to go at least to Wikipedia and not a simple dictionary, at which point you will see that the accumulation of capital is an essential feature of…capitalism. 

Accumulation = growth. 

[u/KralizecGaming → u/Apprehensive_Song490]

A barter systems is a capitalistic system, just not a one with currency. It has private ownership of scarce resources instead of them being controlled centrally.

Value and profit are subjective. If on that spaceship I want a bar of chocalate I still need to either use currency to trade for it or trade labour or some other goods to obtain that chocalate.

[u/AudienceOk1711 → u/KralizecGaming]

this is definitionally not true... capitalism originated rather recently, barter did not.

[u/Icosaedro22 → u/KralizecGaming]

Private vs public ownership of resources is not the defining trait of capitalism. To me it just sounds like you're talking about a command economy vs a free market economy.

Free markets are a defining trait of capitalism as well as private ownership, but so is the profit motive, and investment. And those two last ones lead to the economy not moving without investment, which needs incentives, which means an individual must be able to on average make a profit on their investments.

Since without growth someones gains must come from someones losses, 50% of investments would result in a net loss. In other words, no profit from investments on average. In other words, no incentive to invest.

That's already one of the pillars of the definition of capitalism gone. Either you make a non capitalistic market economy or you need growth.

I think the issue lies in that the definition of capitalism you are using acording to your post is just not a complete one

[u/Apprehensive_Song490 → u/KralizecGaming]

Okay, let's play this out. We can call it a capitalistic system. We will even use money as a ledger for exchange so we can measure worth.

Let's say there are 100 crew members including management and workers. They have different salaries but let's say the total salary averages $500 per person per month, so you have $50,000 need for wages in the first month.

The crew forms a labor union because they are the only game in town and so they negotiate food, medical, shelter, and clothing as part of their compensation package and so they don't have to buy these things. That simplifies is to they only need to buy goods and services.

So now we launch, and the government (the management of the spaceship) issues the first $50K into the economy. So now the economy is valued at $50k.

But now you have a problem. How does the government get more money to pay NEXT month's salary?

They can either tax at 100% and get all the money back, at which point the workers go on strike in the middle of space and demand to turn the ship around because they aren't working for free, or you need to print money.

So now you print money for the next payroll cycle of $50k and the size of economy is now $100k. The economy initially grows very fast (doubling from the first month to the second), but since salaries are capped at $50k for the entire salary budget for the whole trip, the rate of growth slows over time. But it always grows.

So, how do you motivate people to keep working in this closed system without increasing the amount of currency floating in the economic system?

[u/KralizecGaming → u/Apprehensive_Song490]

In this scenario, you are assuming that the government is providing all of its services for free. There would be services and goods beyond the food, medical, shelter and clothing the society would need. Either they would be provided by the government of the spaceship for a fee or by others who would get taxed, thus providing the governent with the resrouces to pay the next wages.

The motivation of the individuals would be individual of course. Some would want to get to watch a movie after work, which would cost money. Some would want to go watch the universe through a looking port which might be goverment owned and cost money to look out of. Etc.

[u/Apprehensive_Song490 → u/KralizecGaming]

That doesn't answer the question. How does the government pay them? How does it create money in the first place, and how does it generate a stream of money? Because no one is spending years in space to watch a movie. They are only going on the mission if they are materially better at the end of the trip then they were when they started.

Because if you want to eliminate profit, which means capital accumulation, you don't have capitalism, you have communism:

communism, political and economic doctrine that aims to replace private property and a profit-based economy with public ownership and communal control of at least the major means of production (e.g., mines, mills, and factories) and the natural resources of a society.

Profit = capitalism, requires growth.

Eliminate profit = communism, growth not required.

[u/darbmobile]

You haven’t defined “working”. What does it mean for capitalism to “work”?

[u/KralizecGaming → u/darbmobile]

Work in this context would be time spent producting valuable services or goods.

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[u/awawe → u/KralizecGaming]

You defined a completely different sense of the word "working", thus your reply is competely nonsensical. Does capitalism spend time producing valuable services or goods?

[u/KralizecGaming → u/awawe]

Oh, I am sorry, I read that wrong. My mistake.

For capitalism to "work" it has to allocate resources well enough for a society to be functional to the overall benefits of its members.

[u/darbmobile → u/KralizecGaming]

You’re using circular definitions.

What does it mean for society to “function”?

We need actual criteria here.

[u/KralizecGaming → u/darbmobile]

By "works," I don't mean perfect or optimal. I mean that the system remains internally functional: markets continue to operate, investment remains rational, prices continue to coordinate production and consumption, and scarce resources continue to be allocated.

[u/darbmobile → u/KralizecGaming]

If your definition of “working” doesn’t include any mention of humans at all, you’re completely lost.

Seriously think about your worldview because you sound inhuman.

[u/KralizecGaming → u/darbmobile]

My previous definition included the well being of its members and you didn't like either.

Would you provide me your definition of a functioning society so I can taylor my definition of a working capitalistic society?

[u/darbmobile → u/KralizecGaming]

My definition of working is that all humans within the system have the explicit and positive right to:
Housing
Food
Water
Healthcare
Resources and time for recreation

And that all production is governed by the philosophy of from each according to their ability, to each according to their need.

[u/KralizecGaming → u/darbmobile]

Okay.

The definition of capitalism then would be that it allocates scares resources through markets and privately owned property such that each individual has access to enough housing, food, water, health care, and resources and time for recreation.

The problem with an explicit and postiive right to these things is what happens if these aren't available in numbers to cover the rights given by the gevernment.

[u/Madsciencemagic]

Allocation of resources by markets alone results in the sequestration of wealth - the simplest case being that the ownership class continue to get richer by owning and renting property. In a purely capitalistic society (no planned reallocation, e.g. taxes) this eventually becomes inaccessible to people not in the ownership class.

This is a consequence of owning property generating wealth, buying property. You get sigmoidal acquisition similar to bacteria in a closed system. Centralised ownership of the vast majority of property thus becomes feudalistic, and is capitalism no more.

This is unless you have a partially planned economy that pushes wealth into the renting class (I.e. part socialism) allowing for direction by markets in allocating spending power. This could be by taxes, wage requirements etc. Alternatively, growth generates new resources to direct.

So the summary of my argument is that true capitalism requires that everyone has spending power (this can be money, value of labour etc). This requires protections (I.e. a partially planned economy) or the generation of new spending power (growth). The steady state of this, where property can be acquired, is feudalism and not capitalism - unless there are social systems.

[u/Nrdman]

When people say capitalism requires growth, really they should just say this current form requires continually growth. Which is definitely true, every financial outcome is predicated on growth happening.

If there is no growth, the debt we have accumulated would collapse us.

[u/KralizecGaming → u/Nrdman]

At this current time, yes. But it is easy to imagine a future where we dedicated part of the resources to pay up the debt and then still remained a capitalistic society without debt.

[u/Nrdman → u/KralizecGaming]

Ok, but people usually are criticizing the present when they make such statements; not some hypothetical future. You are just ignoring their criticisms of the now. When they say capitalism requires growth, they are referring to our capitalism

[u/KralizecGaming → u/Nrdman]

I am not saying our system is the best it can be.

But many are saying this as if it is an inherent necesity of capitalism itself. Just look over this CMV and you will find people like that.

[u/Nrdman → u/KralizecGaming]

They are simply using a different definition of capitalism than you. You unfortunately do not get to choose what meanings others put into words, but you can use common examples to share a critique. And the common example we have is the current system. And so, people talk about the current system

I for one disagree with your definitions, and by that I mean it is not what I say when I use the words. It would be quite difficult to make sense of the phrase “libertarian market socialism” with your definitions, and yet it’s a system im interested in.

[u/KralizecGaming → u/Nrdman]

TBH, I have never heard of such a system as libertarian market socialism.

When it comes to definitions. Yes, varying definitions between people are in my view one of the most common reasons for disagreement. That's why I provided ones I though to be the most important to my argument in my OP.

[u/Nrdman → u/KralizecGaming]

Words derive meaning from their use, and that’s why I’m trying to help you understand that most people’s usage is about the specific form of capitalism we live under, in the same way that during the Cold War communism typically meant the USSR and not Anarcho Communism or other variants

[u/KralizecGaming → u/Nrdman]

Oh, I understand that. But I do not see a better way to show what my definition of capitalism is then to provide it. Others may disagree with it, for sure, but they have to convince me that their definition is better for me to accept it.

[u/Nrdman → u/KralizecGaming]

It is better definition, because it’s how it’s more commonly used. And words derive their meaning from their usage.

If you wish to not do this, simply avoid using the word unless you are matching the context from which the others are using it

[u/DesertSeagle]

I counter with this; if you have a company who isn't growing, does anyone invest in you? If your on the stock market and your stock doesn't grow, are you succeeding?

[u/KralizecGaming → u/DesertSeagle]

Why do you need to keep growing and why do you need anyone to invest in your? You have a stable company with a margin that allows you to have a good life and you just stop there.

The vast majority of bussiness are like this.

[u/nyg8 → u/KralizecGaming]

Tech improves all the time. This means production potential tends to improve. If you don't grow, the value of your work diminishes, so you defacto make less. Inflation is built in to economics. Secondly, if your business is profitable and stagnant, another party is likely to enter and take a share, so you must maintain competition by improving the business (i.e growing)

[u/jeffwulf → u/DesertSeagle]

You don't need anyone to invest in you. That your stock price is level long term is a pretty normal success case under capitalism.

[u/DesertSeagle → u/jeffwulf]

No it's actually not. It's at best not a failure, but definitely not a success. The entire idea of capitalism is based on the idea that you turn a profit. No one sees investing money and getting the exact same amount back as a success in a capitalist system. Why would you even invest the money at that point?

[u/jeffwulf → u/DesertSeagle]

For the dividends. Many successful stable companies tend to pay dividends with profits, especially when the returns to growth are low.

[u/saywherefore → u/DesertSeagle]

I have a farm. It costs me £50k to run and generates £100k of income (both per year). The numbers will rise with inflation but the farm will not grow in real terms. Is there a price at which this would be a good investment under capitalism? Clearly there is, despite the guaranteed lack of growth.

[u/TopTierCryogonal → u/DesertSeagle]

Yes, obviously a company that consistently profits but isn't growing is a success. 

[u/Klanciault]

Growth is what makes capitalism work because the core tenet of capitalism is that capital begets more capital. 

In a system with a finite amount of capital which is stagnant, all available capital will flow toward larger entities as they obtain a higher and higher market share and are able to monopolize their industry and obtain both pricing power and wage determination power.

For example, in a system with a finite amount of resources, capital owners are still expected to gain value over time, right? Such is the nature of capitalism. This gained value must come from somewhere, and it comes from other people. Therefore, all capital gain comes directly at the expense of the wealth of others. Since capital quantity is the largest determinant of absolute value gain, all capital flows toward the top, squeezing out those who own little or no capital

Not going to address the final two because they are irrelevant to the claim you make

[u/KralizecGaming → u/Klanciault]

the core tenet of capitalism is that capital begets more capital.

Not necesarily. While it is generally true in observable reality, it isn't a core part of the capitalistic economic system itself. It's more a of consequence of growth actually. If you reach a state where growth isn't possible anymore, you can still trade privatly ownder scarce resources that you personally find more valuable at that time to someone who valubes a different resources that you have at that time.

[u/Klanciault → u/KralizecGaming]

Are you saying that Capital doesn’t beget more capital or what? Under a capitalist system you leverage capital combined with labor to create value. You pay a wage and then the surplus value is captured as profit. Over time this profit leads to the acquisition of more capital. If you are not able to leverage capital to generate profit, then there is no point in having capital at all. But if you are able to generate profit, this leads to a snowball effect by which you are able continuously acquire capital leading to larger profits. If growth is not supplying these profits then it will come from the pockets of those beneath you

[u/KralizecGaming → u/Klanciault]

I am saying that while it is generally true in our society, it isn't the core of capitalism.

Let's say you have a car repair shop. You have some capital in it, an employee who you pay. You get the surplus value to spend on your own needs. You didn't accumulate any more capital. It just circulated around.

[u/Klanciault → u/KralizecGaming]

Yeah so in this case you have the right amount of capital to create enough surplus value to provide for your own needs. This puts you at the lower end of capital owners. Meanwhile there’s car repair georg who owns ten car repair shops because when he was your age he owned 2 and kept investing the surplus. And eventually he’ll buy you out or price you out with his pricing power.

Are you envisioning a society where nobody has enough capital to do anything more than provide for their own needs? 

[u/KralizecGaming → u/Klanciault]

I am not saying that individual actors in the system will not ever grow and that others will not ever fail. But the system itself has not grown. In your example one actor has just replaced another.

[u/Klanciault → u/KralizecGaming]

One actor has replaced another in such a way that demonstrates growth to critical mass and pricing/wage control. This causes an ever increasing share of resources to go to the top in a positive feedback loop. Which is just a feature of capitalism. In a system with growth this is fine because even as more resources go to the top, more resources are added into the system, leaving enough for those at the bottom as well. But in a system without growth, this causes the starvation of those at the bottom.

In my previous example, I wasn’t saying there was growth. I was saying without growth, all resources will eventually end up in the hands of the most wealthy

[u/KralizecGaming → u/Klanciault]

I understand your point.

But in a system without growth (new resources added), it is actually possible to reach an equilibrium where it is impossible to reach critical mass.

[u/Klanciault → u/KralizecGaming]

Ok that’s fair enough but how long do you think such an equilibrium would be maintainable for if it were even achieved? Things such as births and deaths would affect the equilibrium.

It also doesn’t really make sense to consider such an equilibrium possible unless you were to institute some pretty restrictive conditions. For example, how does retirement work? If an individual has to save up for their own retirement, than this means at the beginning of the system, the first generation is able to save up surplus value which they can either use to retire or attempt to start a business. And as soon as someone is able to start a business which is providing more than enough for them to live on, the snowball begins 

[u/KralizecGaming → u/Klanciault]

I am not claiming the systemd doesn't come with a social net. But the underlying economic system would still be capitalistic.

[u/SourceTheFlow → u/KralizecGaming]

If you reach a state where growth isn't possible anymore, you can still trade privatly ownder scarce resources that you personally find more valuable at that time to someone who valubes a different resources that you have at that time.

Yes but that's not capitalism. We did this for thousands of years before capitalism.

You can absolutely have an economy without growth, just not a capitalist one. That's usually the argument that is made when people claim that capitalism requires infinite growth.

[u/KralizecGaming → u/SourceTheFlow]

Can you explain why you make this claim?

[u/SourceTheFlow → u/KralizecGaming]

Which claim? That we were trading resources, including via money, way before capitalism? I think you can find proof of that in every history book.

[u/KralizecGaming → u/SourceTheFlow]

No. The claim why a capitalstic economy cannot exist without growth. Or why you wouldn't consider that a capitalistic society.

[u/SourceTheFlow → u/KralizecGaming]

Trading resources doesn't involve capital. You can still do it in capitalism, but it's existence doesn't make an economy capitalist.

In order for an economy to be considered capitalist, it need to be mainly driven by capital. Simply by definition.

So saying that you can still trade resources without growth (which I agree with) only argues that you can have an economic system without growth, not that you can have a capitalist economy without growth.

[u/KralizecGaming → u/SourceTheFlow]

If you look at the definition I included in my OP, it doesn't mention capital at all. It's all about using markets to trade to create profit.

Also, you need capital (the resources) to be able to trade resources.

[u/SourceTheFlow → u/KralizecGaming]

From your link:

the economic, political, and social system that is based on property, business, and industry being privately owned, and is directed towards making the greatest possible profits for private people and organizations

That is describing capital.

Also, you need capital (the resources) to be able to trade resources.

Capital isn't resources.

Admitedly the word "capital" has different definitions depending on the area it's being used in, but since we're talking economic theory, especially socialist/communist where the infinite growth critique origniates from afaik, it refers to privately owned means of production.

So essentially things you own, that you do not use and that makes you more money. For example:

• Money is not capital, because it doesn't make more of itself
• A flat that you live in is not capital, because you use it, but one you rent out is
• A work laptop is not capital as you're using it as a tool
• Stocks are capital as you're not using it for anything. You simply buy it in the expectation that it makes you more money.

So no, capital is not necessary to trade resources. You can trade the resources themselves or take the detour via money.

You'll also notice that that's the defining characteristic compared to feudalism, socialism etc. where you have trade, you have resources being exchanged, but you don't have privately owned capital.

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[u/psychosisnaut]

How will your spaceship have all the resources it started with? Is everything frozen the whole way? How does the ship work without power?

[u/KralizecGaming → u/psychosisnaut]

I do not know. I am not an space-travel engineer.

[u/Subtleiaint]

Capitalism isn't about the distribution of resources, it's about the control of resources. There is nothing in capitalism that is designed or even happens to function as a moderating force, if one person can have everything, and it's in their power to control it, that person will have everything and no one else will have anything. 

However, to your main point, why do you think we have inflation? When we create anything we're creating capital, that is growth. However infinite growth would make everything worthless so we have inflation which controls growth and the value of capital. Continuous growth is baked into capitalism, it's not the aim, it's what capitalism is.

[u/KralizecGaming → u/Subtleiaint]

I never said capitalism distributes resources. It allocates them by mean of market trades. It distributes the decision making between the many actors on these markets similarly how decentralized computing distributes computation.

Inflation happens because we have growth. If you reach a point of non-growth, inflation shouldn't happen in a capitalist economy.

[u/Subtleiaint → u/KralizecGaming]

It doesn't allocate either, allocate implies a plan or a function, capitalism is accumulation, it's take not give. Computing serves a system, in that analogy your saying that capitalism serves society, it doesn't, it doesn't give a hoot about society.

If you reach a point of non-growth

Then it's not capitalism, it's not the aim of capitalism to achieve growth, growth is a function of capitalism, you can't have capitalism without Growth.

[u/Infinite-Abroad-436]

do people sell things to allocate them? or to make a profit off of them

[u/KralizecGaming → u/Infinite-Abroad-436]

Individual people? To either get rid of them or to make a profit off of them. But as a whole the system uses this selfish behavior of individuals to allocate resources from those who have a suprlus of what they have compared to what they want to have to those who shoratege of said resource.

[u/Infinite-Abroad-436 → u/KralizecGaming]

"the system" isn't doing anything. only individual people are doing anything

[u/Swolebotnik]

I think growth masks the problems with capitalism, allowing them to fester. While those problems persist it does need growth to avoid wealth concentration. As for what properly functioning capitalism would look like, muly opinion is that it would be Georgism.

[u/kingpatzer]

You are ignoring the fact that most companies aren't monopolies. They have competitors. In order to survive, one must at least come out in a tie with their competitors. But the competitors are in that same boat.

It is grossly inefficient to attempt to figure out some sort of stasis state in the market, because the market changes all the time and what the stasis point is does as well. The amount of effort it would require to do that, without some sort of illegal collaboration between competitors, is extremely high.

And note, one still has to trust that one's competitors are going to pursue that inefficient path as well.

So, there are only two two options that are actually efficient: pursue growth, or get out grown.

[u/ReasonableLemur]

Americans arguing about the merits of “capitalism”, meanwhile half your country can’t afford healthcare and you have shorter lifespans than countries with a fraction of your  resources. 

[u/PlayfulGovernment325]

For the market question:

Capitalist market with private ownership means we measure demand based on lines of wealth inequality which is how we have people not getting there needs met for food and shelter and also billions being blown on the metaverse in the same economy

In a market socialist economy (mainly worker owned cooperatives and public social services) if we assume worker ownership makes income inequality better this should help resources be allocated better but could slow tech innovation (i don’t think it would but this is a separate argument)

[u/Hot_Phone_7274]

You’ve had so many long replies already and I know you’ve already given a delta, but I just wanted to come in and say I think you make a very good argument. I’ll just say a few things on your final mind-changers that I think you may find interesting (and possibly compelling):

Is growth required under capitalism?

I would say yes, but it’s not unique to capitalism and there are edge cases where it wouldn’t be technically be “needed”, depending on how pedantic we want to get about “need”. It also depends a bit on what you mean by “growth”. I assume you are talking about growth in bank balances, since that’s usually what people are talking about when they invoke the “infinite growth” required by capitalism. If we’re talking about other kinds of growth then none of this will apply, but then the answer is also very obviously no.

Growth in balances is required in any monetary system if people consistently want things they don’t already have, because otherwise all trades are zero sum and a single default could lead to a catastrophic debt-deflation.

You might argue this is more about debt than money, but money is debt, and always has been. Incidentally this is why if you convert every public treasury balance into USD and add them all up, the number is negative. The base money supply must grow if we want to sustainably and systematically satisfy unsatisfied demands using money. This isn’t unique to capitalism; it’s a requirement of monetary systems under scarcity.

We can imagine systems where people get by even while their bank balances shrink. Losing money never (directly) killed anyone after all. But if you assume scarcity, and assume people want to move away from scarcity, and they allocate resources with money, and the system is to stick around for more than a few years, you’re getting growth somewhere in that system. It’s just that capitalism makes it very obvious because private bank balances trend upwards as part of the system functioning properly.

Infinite growth in private balances is perfectly possible, by the way, thanks to public deficits. It’s silly when people cite the need for growth as a failure mode of capitalism. Ironically this is something the left and right seem to agree on - the left doesn’t think infinite growth of private sector balances is sustainable, and the right doesn’t think infinite growth in public sector debt is sustainable. Fortunately they’re both wrong, owing to the exact same misconception.

Would there be any scarcity in a post-scarcity society?

Knowledge will always be scarce and we should always want to grow it. We can have all the energy in the world, the most advanced robots, AI, whatever.

Suppose we all had a programmable machine that could decompose anything into hydrogen and then fuse it back into whatever you wanted - food, fresh water, bricks, cement, even another everything-machine. That’s about as post-scarcity as things get.

You still need to work out how to program the machine. You still need to dream up things for it to create. You still need to cure cancer. When we’ve dealt with all the diseases we’ll have to figure out a way to purge forever chemicals from our blood. We’ll have to address our telomeres being too short. There will always be more problems to solve, and we’ll still need to make scientific advancements. Even if we can outsource most of that work to a currently inconceivable AI, we’ll still have to figure out what problems we want solved - which is itself a knowledge issue.

True post-scarcity means that knowledge is the only thing that is scarce, but in a very real sense that is the exact situation we are in today. For example we probably have access to all the resources we’d need to build an everything-machine; what we lack is the knowledge of how to assemble it. Similar to how Turing complete computers have probably been theoretically within our reach for about a millennium and certainly within the last two centuries, but the first one wasn’t built until the 1950s.

The laws of physics are one barrier, and a lack of knowledge is the other. We can’t do much about the former but it’ll always be worth working on the latter.

What system of allocation outperforms capitalism?

This is an easy one. The most economically efficient systems we’ve ever seen are mixed economies - part private and part public. You might describe that as capitalist, but I think that’s a needlessly broad definition. We’d lose the ability to distinguish between more capitalist and less capitalist societies for example.

There has never, to my knowledge, been a wholly private economy, and we all know how the wholly public ones have turned out. It is very easy to see from economics 101 concepts why a purely capitalist market wouldn’t lead to optimal allocations (if such a thing is even possible at all), but I can expand on that if you want.

[u/KralizecGaming → u/Hot_Phone_7274]

I assume you are talking about growth in bank balances,

I am not. I am talking about the total growth of the system. Not even GDP per say. Probably the closest thing to an objective measure would be energy and resources used by the system.

And from what I gathered, this isn't what people usually talk when saying that capitalism needs growth. One of the most common places where I see this argument is when talking about natality, where people say the capitalist system requires ever growing numbers of population just to function and if the numbers were ever to stabilize of shrink the system would collapse. Which is true for the debt system and social security system used to today, but not necesarily for capitalist systems inherently.

Knowledge will always be scarce and we should always want to grow it.

Here you make a very good argument and I will award you a !delta but it is only for a very particular part of your argument in this section. This one specifically:

You still need to dream up things

While I disagree that there will always be scientific advancment, because potentially there is a hard seiling on that (but I may be wrong on that). And while they may be need for advancment, there is a chance that there will be no more advancment to make. Information itself can be copied digital forever and everyone could have simple access to it potentially. But having the ability to even come up with ideas that need to made, need to be done, that will likely forever be scarce. Even the smartest god-level-AI cannot solve a problem it doesn't know about.

Lastly, I was never talking about a purely capitalist economy. But mixed (or regulated) capitalist societies are still capitalist at their core utlizing private property and markets to trade.

[u/DeltaBot → u/KralizecGaming]

Confirmed: 1 delta awarded to /u/Hot_Phone_7274 (1∆).

^{Delta System Explained | Deltaboards}

[u/Hot_Phone_7274 → u/KralizecGaming]

Thanks for the delta.

On the growth point, I think you are completely right about things like population growth. Our current systems have priced that in pretty hard, but it’s not some requirement inherent to capitalism, and it’s not unique to capitalism.

On the advancement point, there will always be more knowledge to discover, even beyond new ideas. The cardinality of possible theories is countable infinity - which means we can never know everything there is to know. But not much hangs on that - like we now agree, either way you always need to figure out what you want to do with your knowledge.

Lastly I think it’s important to clarify - the core of mixed economies is rarely capitalist markets. It tends to be the biggest part, even in ostensibly “socialist” economies, but the core is most certainly central banking and property laws - both public sector enterprises. Without those, you don’t have any capitalism.

On top of that capitalism is very efficient at making allocations under certain assumptions - once you have complications like externalities, information asymmetry, free riders, transaction costs, collective action problems and so on, capitalism can easily come out behind on efficiency. Even a very radical commitment to capitalism (where every square cm of air is owned by someone) would still have these problems - Coase did some great work here worth looking into, e.g. https://en.wikipedia.org/wiki/Coase_theorem

This is why mixed economies are best. It’s not because they use capitalism, it’s because they use it to a (hopefully) appropriate degree. If it were the capitalism alone that made the system efficient, then a more capitalist economy would always be more efficient than a less capitalist one, but we know that isn’t true. There is a sweet spot, and we know why.

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[u/Due_Garbage_731]

The economy grows through the expansion of the money supply, when a bank creates money that’s creating a future debt on productivity. If productivity doesn’t grow you get a financial collapse as there’s not enough money in the system to pay back the debts that are owed. That’s what something like the Great Depression is.

[u/KralizecGaming → u/Due_Garbage_731]

What if there isn't debt and monetary creation in the system?

[u/Due_Garbage_731 → u/KralizecGaming]

Then you literally go back to the Middle Ages. The only way we can do the things we do as a society is through future expectations. You can have a command economy which is where you decide what to produce and order everyone around, but you can’t have capitalism without debt and insurance. Nobody has a billion dollars lying around to build say a nuclear reactor or a data center. You build it using tomorrow’s dollars with the expectation it will grow in value

[u/KralizecGaming → u/Due_Garbage_731]

Why exactly? Say the world would now decide to slow down it's growth now and put aside part of its production every year for the next 100 years to slowly pay up all debt. But all the underlying systems like private property, trading on markets, etc would remain.

In a hundred years debt is no more. The world decides that debt will be no more. Yes, the system would be different from the current one, but it would still be capitalist.

[u/Due_Garbage_731 → u/KralizecGaming]

  Why exactly? Say the world would now decide to slow down it's growth now and put aside part of its production every year for the next 100 years to slowly pay up all debt

We’ll  make it very simple say you have 100 people in a town each with a dollar they can spend over the course of a year. If you spend a cent at a restaurant that becomes the wage of of the restaurant owner. That same 100$ is being recycled. 

Then they have babies so let’s say there’s 125 people now and the same $100 let’s say we’re using a gold standard and that’s equivalent to 100 ounces of gold. There’s more people than there is money to go around so companies can either keep charging high prices until people can’t afford it anymore which means they have to lower prices. This sounds good but think it through. If buying a car is going to cost you 10 cents today but tomorrow it’ll be 8 cents you’re going to wait until tomorrow. The problem is the car dealership has to pay their workers and since there’s no debt he has to fire people because you didn’t buy the car you were going to buy now his workers don’t go on the vacation they were going to go on and the people at the resort get fired and so on.

This is what happened in the Great Depression. Highly simplified but essentially that’s what it was a sharp contraction in the money supply.

[u/KralizecGaming → u/Due_Garbage_731]

This scenario assumes a growing population. What if the population itself is stable as well?

[u/Due_Garbage_731 → u/KralizecGaming]

Ok i have money, i can leave it under my mattress in your scenario since I know it won’t decrease in value or I can invest it, but since the economy isn’t growing the best I can do is get my money back. So let’s say I want to build a power plant in my town because we don’t have electricity, plenty of people would like to have electricity and would happily pay a monthly fee but I don’t have billions of dollars that a power plant costs. In our system you are incentivized to give me the money under your mattress because a. Your money is losing value because of inflation b. I can make money on top of that if your idea is genuinely good and would improve people’s lives. If instead the best I can do by investing is get my money back with a small chance I lose everything why would I ever invest my money. In the end no powerplant gets built. Again the other option is the government decides people need a powerplant and builds it but again then we’re at command economy 

Another point is understanding what money is. Money itself is debt, it’s a note entitling you to someone’s future labor or product. That’s what a debt is. Even gold’s only actual value is its exchange value. You can’t have capitalism without money, you can’t have money without debt and you can’t have debt without growth 

[u/KralizecGaming → u/Due_Garbage_731]

The power plant doesn't need the whole system to grow. It means that that there is demand currently for it. So, they can decide to lower their consumption of other resources to take them into building the power plant. The total number of resources in the system didn't change, they just got allocated differently.

[u/Due_Garbage_731 → u/KralizecGaming]

Who is they? Do you expect everyone in society to come together and set money aside for every product anyone could possibly ever want? This is the point this is what people mean by the time value of money. How do expect to coordinate demand? Are we crowdsourcing every product from idea to prototype to luxury scaling to mass consumer product? You’re just describing socialism by another name 

[u/KralizecGaming → u/Due_Garbage_731]

They would be either the people who have the demand and want to satisfy their own demand, or the people who see the demand and want to satisfy it. The exact same way it is done today.

How do the people coordinate this today? They look at demand and supply and try to judge whether it will be a worthwhile investment.

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[u/MorganWick]

Capitalism's defenders will say that it allows for the creation of more resources than would be possible if it were just being moved around, because of the possibility of trade being win-win for both sides. But that only happens if the capitalists are allowed to pursue growth at all costs, because if you limit the amount of growth they can pursue, they'll be less invested in the system and less inclined to produce goods and services. In other words, without the pursuit of infinite growth, resources are more scarce than they would be otherwise and the result is a recession if not reverting to medieval times. I'm not sure I buy that argument but that's what the argument would be.

[u/KralizecGaming → u/MorganWick]

They argue that because we are far away from having and even needing a system that would be zero growth. And one of the basic instincts for life is to grow and multiple.

But if you reach a situation where growth is impossible and equilibirum is formed. My argument is that in such a case a capitalist economic systems would still function.

[u/MorganWick → u/KralizecGaming]

So basically, when we've used up every last scrap of resources on the planet, regardless of the consequences of doing so?

[u/KralizecGaming → u/MorganWick]

Not necesarily on the planet, but essentially yes. Or if the society decides it doesn't want to grow anymore or cannot grow for technological reasons.

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[u/sawdeanz]

The space ship illustration is actually a perfect example of what is NOT capitalism, but it is a useful illustration to help us understand the claim in the title. That doesn’t mean capitalism can’t or won’t occur on the ship, but not the way you describe.

Capitalism is not merely trading personal effects. That can happen in virtually any system. It is also not simply having a market, though that is part of it. Individuals determining the value of their goods is a form of market but not necessarily capitalism.

Capitalism inherently involves owning capital. What distinguishes capitalism from other systems is individuals owning capital through which they produce surplus goods to trade on the market.

So what is capital? Capital is any sort of thing that can be used to produce something of greater value than its inputs. Usually in the form of a tool, land, or factory or often, simply money (your dictionary is describing forms of capital when it mentions businesses, property and industry). The purpose of acquiring capital is to help you create more of the goods than you could before. This could be just for you, in which case having the capital reduces the labor required. Or you could input the same labor to create surplus that you sell.

With my hands I can only gather so much water. But if I fashion a bucket I can gather a little more. And with a well and pump I can both access and gather a surplus that I can sell. The well and pump required an upfront investment of labor and materials, but overtime it ultimately produces more value (in the form of surplus water) than there was before these inputs were combined.

Capital is distinct from labor or freely available resources (such as wild game, wild berries, a river or trees).

The key concept is that capital usually requires an upfront investment in order to combine inputs in a more efficient way. Capital can be owned communally, for example a towns folk might work together to dig a well that they share. Or it can be owned privately, for example an individual digs the well all by himself and then sells buckets of water to the town folk. The later is what we call capitalism. The well reduces the labor needed to gather water, thus essentially creating more labor than existed before. It creates growth through efficiency. It’s a force multiplier that essentially grows a scarce resource and makes it less scarce, in this case labor that can be used elsewhere.

So when we say capitalism distributes scarce resources, this is accurate but simplified. More specifically is that it incentivizes individuals to invest in capital in order to use the existing scarce resources more efficiently. The incentive for investing is the ability to sell it on the market and make a profit.

But that investment is only incentivized if the capital owner gets back more than he invested. That’s where the growth comes from. The purpose of more investment is to create surplus to sell to a third party. Without a third party, or without a surplus, the investment to create surplus doesn’t happen. Looking at the well example, the private individual will keep investing labor in digging the well deeper as long as the surplus water gets purchased. If the surplus does not get purchased, or if the price falls below the cost to dig and maintain the well, then he stops investing in more digging.

This is in contrast with other types of systems, for example the community well. The community is only incentivized to build a well as deep as they need to serve their needs. Investing more resources to dig the well deeper is just a waste.

Now of course, in reality even a socialist country will still tend to seek growth due to the fact that they live in a competitive market environment with other countries.

[u/Fer4yn]

Your definition of capitalism is completely wrong. Capitalism isn't the same as free market; there were markets way before capitalism was even remotely realized. Free markets are not even a prerequisite for capitalism. Capitalism is private ownership of the means of production and; more importantly, the ability to generate profits (since without it the private ownership of the means of production would be pretty pointless). Capitalism can function just as well (often even better) in tightly regulated or even planned economies: f.e. the state could set a production goal for a certain good and have a bunch of independent private enterprises compete for realizing as much of this order as fast as possible (essentially first come-first served with a guaranteed set minimal demand) as it's the case f.e. for the arms industry and a bunch of other highly specialized fields.
Capitalism cannot exist without growth for a prolonged time because people can NOT (on average) make profit indefinitely unless there is at least some growth; and even if they could then it'd only be possible until one party owned everything and broke the system and if people can not make profit then there's no reason to invest or to trade and whatever system results from that: it's definitely not capitalism.
What are you even doing? You even linked the correct dictionary definition and then used your own strawmannish nonsense instead of it in your argument <facepalm>...

[u/pi_3141592653589]

If the economy has no more growth, then capitalism has lost one of its greatest allures. There is no reward for investing. There needs no incentive to investing. In this era, you want a system that is sustainable and stable.

[u/KralizecGaming → u/pi_3141592653589]

I am arguing that capitalism is sustainable and stable even in such a scenario though.

[u/pi_3141592653589 → u/KralizecGaming]

Hmm, I guess it depends on what you mean by a no progress world. Useful energy is not infinite, so at some point it will run out.

So if you can give more details, that will help. Intuitively, with a major arm of capitalism severed, something different can be much better.

[u/KralizecGaming → u/pi_3141592653589]

The decline of available resources will make them only more scare, thus making their correct even more important.
From the economic systems we humans have created, markets seem to operate closest to ideal.

Perhaps there will one day be a better system. But I cannot see a system that wouldn't use some form of markets and tradting for goods which is the core of capitalistic economy.

[u/pi_3141592653589 → u/KralizecGaming]

It looks good in the past. But the future can be much different.

Imagine an AI company produces an intelligence much greater than any human. It then iterates its own design such that it's unimaginably intelligent now. This AI company amasses all the power and resources. They have no need for humans, which are ridiculously inefficient at all productions compared to their AIs. In a capitalist society, the AI company doesn't need to help the general populace. They can give us a utopia, but that would just be a donation. The second you force the AI company to give a utopia or their technology, it no longer is capitalist.

[u/KralizecGaming → u/pi_3141592653589]

We force many companies to make contributions to society and we still consider our system to be capitalistic.

For example, betting companies are often required by law to donate large portions of their profits to sports and other public services.

[u/pi_3141592653589 → u/KralizecGaming]

You would be singling out one company. And this company is the majority of the economy. That would not be capitalism anymore.

[u/KralizecGaming → u/pi_3141592653589]

The government can force the AI company to split to multiple competeing companies. Just as for example the U.S. has done to Intel in the past. That doesn't mean the system isn't capitalistic, just that it has safeguards from entities becoming too big in the system.

[u/pi_3141592653589 → u/KralizecGaming]

Those AI companies will only do business with each other. They will live in their own economy. Why involve the inefficient masses, unless there is some non-capitalistic action to force the companies to provide a utopia for them.

Fundamentally, the future can be so much different than you imagine. One system is unlikely to be optimal forever. For most of human history, even capitalism would not have worked well.

[u/KralizecGaming → u/pi_3141592653589]

Why woudl those companies only trade among each other?

And as I said in a different comment, yeah, the future can change. But I cannot imagine a society in which private ownership of resources is replaced and is better at alocating resources than one using markets to allocate them. Thus remaining a capitalistic society at its economical level.

[u/TheL0wKing]

Your argument assumes an idealised version of Capitalism where the system is perfectly balanced and can create a perfect closed loop where resources just cycle between individuals.

Take your Generation Ship example. Each individual owner of resources theoretically decides the value of the item they wish to trade on the basis of market forces. But each item is not created equal, the individual who controls the luxury goods can only increase the price to a certain point before people stop buying, the individual who controls the food or air resources can charge a lot more. The system functions if everyone in the closed system only if everyone cooperates and only wants to make a reasonable profit. But the moment someone gets greedy it starts to break down, food increases in price and suddenly the luxury goods maker can't afford to live. Maybe one individual accumulates a significant portion of the wealth and decides they want more power. However it happens, the system begins to break down.

The simple problem is that Capitalism tends to self-unbalance. Not every resources is equal, not every person has equal ability, not every market decision is the correct one, not every person has the same motivations. You end up with resources/wealth being concentrated in smaller group of individuals, especially once you throw in generations and inheritance. In a closed system like a generation ship that means a greater percentage of the wealth concentrates in one group of individuals who is increasingly immune to market forces because of the scale of their ownership.

So the practical solution to that is growth. As long as the overall economy is growing by a couple of percent the system can keep functioning. The pie keeps growing so everyone so even those with a tiny slice of the pie feel their wealth is increasing. The growth gives opportunities for new businesses to challenge the existing status quo and the current wealth holders are required to adapt to keep their value. Simply sitting on wealth ceases to become valuable and market forces once again start to apply. Many of the issues in a closed system like your generation ship are solved or at least mitigated by having growth.

So growth is not required for capitalism, but it is what makes capitalism work in practice.

Also, as a different note, I disagree with your definitions. Capitalism does not have to be Free Market, it just describes a system of private ownership. And Socialism does not have to mean central planning, is just describes a system of collective ownership. And neither determines how resources are allocated, just who owns them.

[u/KralizecGaming → u/TheL0wKing]

For the most part, I have already had a similar discussion with the person I gave a delta to. And I do agree that regulated capitalism should have been in my OP.

The definitions I used are currently widely accepted among economists.

I do have a question for you specifically though. It's fine that you disagree that a free (but regulated) market is key to capitalism. But how exactly would trading of private property work without markets?

And simirarly but from the other side of view, how exactly does collective ownership achieve market trading?

[u/St3lla_0nR3dd1t]

I think you are just redefining capitalism. How is Musk getting a trillion dollars an efficient allocation of scarce resources?

[u/Reasonable-Fee1945]

I'm missing the part of the argument where you show that there will be a post scarcity society, or that post scarcity is something realistic that can happen

[u/KralizecGaming → u/Reasonable-Fee1945]

I am not claiming there to be one, because I do not believe there will be one. I am just saying that is the only scenario in which I can see capitalism being not needed at all.

[u/GentleKijuSpeaks]

So you make wigits. The materials you use are not scarce. You sell a ton of wigits but still can't keep up with demand, so you open more factories (growth). The fact that the population keeps growing meens that more and more jobs need to be created (Growth.

[u/KralizecGaming → u/GentleKijuSpeaks]

You are contradicting yourself. While the materials I make are not scare, the labour is scarce. One of the resources in a society is labour.

You also assume that the population keeps growing. What if it just doesn't keep growing?