Creative Capitalism, Capitalist Government, and Thought Experiments
By Arnold Kling
Mencius Moldbug proposes a thought experiment.
Imagine that there had been no scientific or technical progress at all during the 20th century. That the government of 2008 had to function with the technical base of 1908…
[Conversely, imagine] what would become of 1908 America, if said continent magically popped up in the mid-Atlantic in 2008, and had to modernize and compete in the global economy – tell a different story. I am very confident that Old America would be the world’s leading industrial power within the decade, and I suspect it would attract a lot of immigration from New America.
…if we imagine the 20th century without technical progress, we see an almost pure century of disaster…
a decaying system of government has been camouflaged and ameliorated by the advance of technology.
That is, today our elderly are affluent, our poor are more likely to be obese than hungry, and so on, in spite of rather than because of changes in the role of government. Obviously, that point of view is debatable. Still, if you had to choose between 21st-century technology alongside 19th-century government institutions vs. 21st-century government institutions alongside 19th-century technology, you would choose the former, no? If nothing else, the delta in technology is more strongly positive than the delta in government institutions, even if you disagree with Moldbug that the delta for the latter is negative.
As another thought-experiment, imagine that Moldbug’s OL series were to be published as a book with authorship attributed to Clive Crook, Brad DeLong, Ed Glaeser, Michael Kinsley, Bill Gates, Gary Becker, and other luminaries, while the Creative Capitalism aggregation were sold as being under the authorship of the anonymous, unlicensed (I assume he has no Ph.D) Mencius Moldbug. Which book would be considered provocative and a must-read?
On the Creative Capitalism front, Steven Landsburg has the best post so far (which probably means that others will ignore it).
At the textbook firm, all revenue goes to workers and investors. At the [Creatively Capitalist, do-good] firm, some revenue goes to something else. Where does that revenue come from? The laws of arithmetic admit only four possibilities:
A. It comes from the workers.
B. It comes from the investors.
C. It comes from the consumers.
D. It comes from nobody, because the CC firm can use labor and capital more efficiently than the textbook firm.
In a sense, creative capitalism suggests that corporations should be a shade more like government. What Moldbug argues is that governments should be a lot more like corporations. If we were shareholders rather than voters, and governments maximized profits, we would be better off.
I think Moldbug mistakes the outcome of a process for the quality of the institution. That is, I do not think that corporations are inherently efficient. Instead, I think that corporations are run tolerably well because of competitive pressure. The market drives out the worse-run corporations, and it leaves the less-worse-run corporations standing.
Give a corporation the same monopoly power that the U.S. government has, and I don’t think it will run so well. A monopoly motivated by profits is not going to work any better than a monopoly motivated by the need for re-election or motivated by Reformist religious principles.
What I think government needs is not the institutional structure of the corporation but the sandpaper of competition. I want it to be easier for individuals to opt out of jurisdictions that govern against their wishes and into jurisdictions that govern more congenially.