An analogy meant to show how the crises of capitalism are based on structural failings of the system, rather than external meddling (ie state)
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Lets take a Rock concert where there’s a considerable amount of people who wish to have a better look at the stage. Lets also assume that people are absolutely respectful of the negative freedom of others and thus will not take physical action to restrict it in any way, unless it is physical action against someone in itself.
Now a perfectly reasonable action on the part of any of these people will be to bring a box with him in order to stand on it and thus get a better view of the stage. Of course others will be inconvenienced by the sudden worsening of their line of sight, while others will become envious of this better position instead.
Again, for both of these cases, a perfectly rational response would be to get their own box to stand on. Eventually most people will have acquired their own and thus the end result would be the same as in the original case.
Now consider that it is possible to stack these boxes on each other and increase one’s height once more. You immediately have a height race where people are trying to outstack each other in order to get a better view.
However, there are two catches:
- The person using these boxes needs to carry them himself and they can get quite heavy eventually.
- The higher one’s stack, the more precarious it becomes, increasing the risk that one might fall and more than likely take others with them.
So now we have a situation where through perfectly rational individual actions, we’ve reached the following situation:
First of all, the strongest will be able to carry more boxes and thus oligopolize the view. Eventually the people below and behind will be fed up and leave the concert. Once enough people do this, the general fun of the concert decreases (a concert with 20 people is not much fun I’ll tell you – unless it’s planned that way) and new people find it impossible to join since they have to bring a large stack of boxes from the start.
Second, as people start carrying more boxes, you end up in a very delicate situation where one person slipping might trigger a chain reaction of catastrophic proportions, both because of the height of the fall but also because it’s easier to fall. Once of course you have most people on the ground screaming in pain, the concert will stop and the new one will have to wait until most have recovered from their injuries.
So we have a classic game theory situation, where individual rational actions for the short term gain have an irrational collective result. This all starts of course from the ideological position that no physical action must be taken against people who start this height race.
This example of course is not random. Specifically it is made to provide an analogy for the capitalist crises. Consider that the concert as a whole represents the economy. The people are the individual companies and the boxes represent investments in capital.
The more and faster a company invests, the bigger the short-term advantage it has until the rest invariably catch up. The rising investment in turn creates the possibility for a crisis of overproduction as eventually there is so much supply that it cannot be matches by demand (especially if wages stay low, but even if not). Once this happens the whole system grinds to a halt, totters and collapses under its own weight once the profits cannot be realized anymore.
In our analogy this is the phase where a few people finally lose their balance. Depending on the precariousness of the concert area, this might mean that a whole section collapses, or that the entire thing does. And once that happens a few people can get some extra boxes on the cheap from those who will no be using them anymore.
The first situation on the other hand is simply the tendency of the system to end up in oligopoly, from which it’s almost impossible to get out of, as new players need to start with a lot of boxes instead of slowly building up. This again exaberates the situation as it takes fewer people to fall and initiate a collapse (They’ve become now “too big to fail”).
What is this analogy meant to show? Nothing more than the structural problem of any system based entirely on rational individualistic self-interest (ie greed).
It is also meant to give an example of why crises of capitalism are systematic and not caused by external factors such as the state modifying the money or credit supply. As you can see, in the analogy these is no need for an external party (a state) in order to have a disaster, but even if we were to add one, the result would be the same.
Lets assume for the sake of this exercise that the state (or in our case, the concert organizers) controls how fast or slow people can get new boxes (eg, they help you carry them).
Would this make any difference overall? Of course not.The drive to the top would still be the same but it would proceed at a faster or slower pace. However neoclassical economists would have you believe that because it is not “natural”, some people overextend, causing them to lose their balance.
But this is not the case of the fall, although it might allow it to come sooner. You simply cannot keep building an edifice indefinitely, no matter how slowly, especially since the same tendency is the one that shrinks its base (as people would leave disappointed in our example). In the same sense, Capitalism is impossible to be in a perpetual boom situation. Not only does it eventually have to collapse, but it will do so with a ferocity that will be analogous to the intensity and length of the previous boom period.
Of course anyone can see that there is another solution to this problem, one that avoids and endless series of builds and crashes, boom and busts. it is the simple solution of not allowing any individual person to start bringing boxes to the concert due to the long-term repercursions. Doing so would avoid an irrational collective decision.
Needless to say that this would require (the threat of) physical force against the ones who ignore the collective will in favour of their own self-interest. While this is obviously for the best, some ideologues will cry bloody murder and claim that such actions either restrict negative freedom (which they should do. Because.) or that they will necessarily lead to authoritarianism. But of course this is an absurd proposition for there is nothing authoritarian about not wanting one or two greedy bastards to ruin it for everyone. Concerts everywhere seem to back this up.
Neither would this mean that everyone would have to suffer an inferior concert experience. Rather the solution would lie in rational collective interest, where instead of each person acting alone, all cooperate (ie pool their resources) and democratically decide on what the best thing would be, to benefit all equally.
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That sounds like the set-up of a joke.
The communist wants to take out all the boxes and replace the rock concert with a screen showing the video from a camera pointing at the audience.
The mutualist wants to give the boxes to everyone so they can do whatever they want with 'em: build a box fort, give out boxes to other people, paint the boxes… (fuck the concert, no one's listening anyway)
The Georgist wants to give everyone a seat but no boxes. You don't need no stinking boxes, just raise yourself on your tip-toes until you build your own box from dirt!
The imperialist wants to beat up brown people and hoard their boxes so they can give 'em back to the people who already have the highest box towers.
The Austrian economist wants to re-make all the boxes out of gold. This will solve all problems for some reason.
Could be, but of course you're horribly misrepresenting communism.
How so? I assumed the concert represented the profit motive and the boxes represented capital.
No, I explained it above.
The concert repressented the economy as a whole and the boxes represented investment. I've even given an example on what would happen outside of capitalism at the end
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
Did you read the article?
Of course my analogy doesn't break down. The economy will keep going no matter how well you do within it, with the exception of crashes. The investment is what allows one to prosper more.
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
How does having more investment let you get into “the economy” more? I think your analogy kinda breaks down. It makes more sense if the concert is the profit motive.
It's just that I don't see how getting farther up with boxes letting you “see” more of the concert has to do with “the economy.” “The economy” is not something you can get more of, while profit is. You see what I mean?
Sorry, there's something funky going on in the comments of this post. I'm trying to reply by email to see if it works
OK, it seems the email reply resolved this. So to answer your question:
I see what you mean but you're nitpicking an analogy. One can easily assume that what companies are getting via investment is a bigger share of the view of the band (ie profit). And while that is the most important part of the concert (ie "economy"), it's not the only way to enjoy it, so people in the "concert" can still have fun, even if they don't see the band well, by doing their own thing (headbanging, chatting, simply listening etc).
Yea ok, the way you say it now makes more sense.
I think an even stronger case can be made than what you present here. You say that stopping people from starting to put down the boxes would require the threat of force. While I agree that it's possible to get overly fixated on the issue of force, I think there's two reasons why it might not require that, which might be nicer. One is that some other form of disincentive might be threatened, the nature of which was not force but a refusal of/redirection of services. E.g. the band won't sign autographs for anyone using a box, they won't be offered a discount on the next concert, they won't be told about the next concert, whatever.
The second one relies on the fact that in the real world, investing or employing people or doing capitalist-y stuff isn't a physical action, it's a way of organising other people. As such, in order for it to get very far, it needs active social support. E.g. I invest in some machinery, but I need society to ensure that others don't use it. Or I make an employment contract with some other people, but I need the courts to enforce and endorse that contract. So simply by withdrawing that active support, society makes the activity impossible, with no need to actively 'repress' it.
The equivalent in the rock concert analogy might be that boxes only exist in the concert organiser's private rooms, so people can't lay them down without being given them.
Good post though, I just think you under-sell the point.
There's probably a lot more ways to improve this analogy but to explore them all would just dilute the main point imho. Generally the idea I'm trying to promote in the end is that this kind of thing can be prevented by non-violent means with violence being the last resort, because when someone is greedy enough, all the peaceful means in the world won't prevent them from acting on their rational individualism. This is why Capitalism can't be restrained by customer action and always breaks free from government restriction.
Interestingly, your scenario is roughly analogous to the selective pressure on (and hence evolution of) trees. The largest trees can reach above the undergrowth and collect the most sunlight. Age, fire, and wind shear will occasionally bring these giants crashing down, yet a forest is hardly the epitome of collapsing calamity that you describe.
That's because a forest cannot be brought down by a domino effect (ie trees have roots for stability), while capitalism can and does.
Can a forest be brought down by a domino effect? Sure it can. These systems are complex and interconnected ecosystems.
But my point was not that a forest is a better analogy for capitalism. My point was more that arguing by analogy is not compelling, an informal fallacy. Your conclusion depends on your construction of the comparison. Just because two systems are similar in certain respects does not mean they'll react the same in all situations. Even your analogy strains to fit your perception of capitalism with these special rules for boxes that stack and topple.
Oops. I get the threading system now. Honestly!
Unfortunately this analogy holds because it acts very similar to how Capitalism has hitherto acted with Investment, namely that growing investment brought the system down, and the more of it there was, the harder the system fell.
I'm afraid that's quite the oversimplification of a complex issue. The current economic downturn is related to irresponsible lending by middlemen, poor risk assessment by insurance firms and mutual funds, a lack of accountability to investors and regulatory agencies, and many other factors. "Growing investments" are normally a good thing in any economy, as they enable the implementation of ambitious new projects and ideas, driving economic activity and progress.
First of all, aren't the markets supposed to be impervious to irresponsibility, poor assessments etc? Aren't they "self-correcting"? Of course I know that they aren't but if you accept this then it would be weird that you would support them.
As for investments, you would be incorrect *, while in a boom economy investments are good, they are the driving force for a slump. Particularly the rise in investments means that either more and more workers are laid off (as investments in machinery downsize them) which leads to oligarchy as the company undercuts its competitors and drives them out of business, or profit increases for a short while as production increases, until the competition invests as well and catches up.
However while the second thing happens, the rate of profit drops, which means that the cost of the investment is lost (as a company keeps earning the same amount as before the investment) and this forces the company to reinvest faster than the dropping rate of profit. Of course, this cannot continue ad infinite, as there's simply a point where no new technologies are developed and there's no more room to expand. Once this happens, the rate of profit finally drops and the cost of the latest investment cannot be repayed. This in turn leads into a slump as no more investments can be made. Then the companies start shedding workers and reducing wages, which makes the slump worse and if they can't do that fast enough, they crash. Not only that, but the more one company has gone into debt to invest, the harder it will crash
* Incorrect in that they are only good, not that this is not a complex issue.
You make a good analogy, but I do not think it follows that physical force is necessary to prevent people from stacking boxes. In an anarchist/socialist system, the concert would likely be run by a collective of some sort; the collective could simply exclude anyone wishing to stack boxes from the concert. This would be analogous to a larger collective of people refusing to trade with anyone who hoards capital. How does this interfere with the negative liberty of those people?
I have always thought that negative and positive liberty are two sides of the same coin; one is meaningless without the other. That seems to be the case here as well.
It is still some form of force however. For example, to prevent someone from going in the concert (think an open air), you would require physical force, especially since the concert in this example repressents the economy in general from which people must opt-out or made to do so.
Interesting analogy, though funny how it's overthought by everyone. It's just an analogy!
Anyways, db0, Doug's Global Communist site is up and is doing great, and we're going to be starting a blog carnival–I'm doing the first one, since no one else seemed interested. Would really love for you to submit something, even if it's an old post.
http://global-communist.com/redcarnival.php
Er, I've already submitted one on Monday :-/