The classic argument against socialism is that it gives people bad incentives.  What’s the point of working, conserving, saving, quality control, and/or taking out the garbage if they don’t pay?  The classic socialist reply is that capitalism creates the selfishness it purports to benevolently channel.  Socialism will give birth to a “New Socialist Man” who loves his neighbor as himself.

I’ve often been amazed by how many Austrian economists take the New Socialist Man position seriously.  Several Austrians have seriously told me that the incentive argument is “weak” because it’s vulnerable to the New Socialist Man response.  But I’ve always considered the New Socialist Man position to be not just weak, but absurd.  Ever heard of Darwin?  People are selfish because of billions of years of evolution, not capitalism.  End of story.

Is it possible, though, that I underestimate the initial plausibility of the New Socialist Man response?  After the horrors of Lenin, Stalin, and Mao, it’s easy to ridicule the idea of reshaping human nature (for the better, anyway).  But was the failure of socialism to change human nature really foreseeable before the socialists got their hands on the reins of power?

It was – at least to the great Eugen Richter.  I just discovered his attack on New Socialist Man in his dystopian novel Pictures of a Socialistic Future – dating from 1893.  The leading critic of the fictional socialist state begins by pointing out its obvious evils:

“What have we come to? In endeavouring to get rid of the disadvantages
of the socialistic method of manufacture, you place such restrictions
on the freedom of the person, and of commerce, that you turn Germany
into one gigantic prison.

The critic then confronts the feeble attempt to blame these evils on the pre-existing corrupting influence of capitalism:

“Your explanation of all this is, that we are at present in a state of
transition. Nothing of the sort. Things will get worse and worse the
longer the present system lasts. Hitherto you have only descended the
topmost steps of those which lead to the abyss. The light of day still
reaches you on those upper steps, but you turn away from it. Whatever
culture is now extant, whatever schooling, and practice, and skill, are
all due to former systems of society. But in our socialistic schools of
to-day, both elementary, advanced, and technical, our young people make
no progress at all, not from any lack of time, or means of instruction,
but merely because no one feels that he is absolutely bound to acquire
certain things as stepping stones to future success in life.

“You live upon the capital of culture and of wealth
which descended to you as the result of former arrangements of society.
So far are you, however, from putting by anything, and from providing
for improvements and additions, that you cannot even properly maintain
such possessions as we have, but suffer them to fall into decay.  There are now no means
to keep all these things intact, because in destroying the hope of
profit, which induced capitalists to engage in enterprises, you
simultaneously prevented all further formation of capital, which in its
turn would again have led to new undertakings.

“All higher development of the faculties, no less than
all material progress, is at a stand-still since the abolition of free
competition. Self-interest used to sharpen the wits of individuals, and
bring out their inventiveness.
But the emulation of the many who strove in the same field of labour,
constantly operated to make common property of the achievements of

I take hindsight bias seriously.  Many mistakes really are hard to see until you actually make them.  But socialism wasn’t one of them.