Why I am not a socialist

Hello, I recently saw a YouTube video where a Marxist explained his political reasoning.  I thought I would make a few comments about the subject of socialism to explain a different point of view on the subject.  Perhaps my own reasoning will either help socialists to come up with reasoning that is more likely to persuade non-socialists such as myself.  Alternately, it might convince them that their current position on the subject is in error, so they should adopt mine instead.  In either case, they are likely to benefit from some insight into a certain non-socialist line of thought.

The first observation that I would like to make is that some of the rhetoric seems unnecessarily inflammatory.  I realize that people often become quite passionate when making their political points.  I myself am not completely immune to this tendency.  However, what might come across as compassionate concern for the poor to a socialist, might come across as being more combative to someone who is inclined to support capitalism.  In particular it would be wise to avoid statements that capitalism is immoral and that people have a moral duty to do what they can to bring about its demise.  A better approach would be to present reason and evidence to explain why you believe that capitalism leads to what you see as its harmful effects.  Think about what would happen if someone were to say that socialism was immoral and that it was the moral duty of everyone to bring about its demise.  It is best to keep in mind that no matter what your opinion is, there are concerned, well intentioned people who hold an opposing point of view.  If you want your position to succeed in producing its desired results, you will need to convince them instead of alienating them.  This is good advice for those who support capitalism as well.

Now for the particular arguments concerning socialism, the argument starts with an explanation of the Marxist theory of value.  It may well be that Adam Smith supported this view.  However, in this day and age the theory holds little sway for non-Marxists.  When naively interpreted it leads to some counter-intuitive results.  If socialists wish to persuade others that they are right, I would suggest that they come up with a more realistic theory.  To help illustrate this point I will present an alternative: the subjective theory of value.  I should point out that this is not original.  It is standard Austrian economics.

To the extent that values have meanings, they can be stated as preferences of some individual.  Each individual will have different preferences.  When we say that the "value" of an item is $14, we mean that a vendor is willing to sell it at that price, and that the item has a willing buyer at that same price.  The buyer values the item more than the $14 and the vendor values it less.  The vendor has expended some resources in order to produce or otherwise obtain the item in question.  The vendor has expended those resources because he or she believed at the time that the benefits of doing so would exceed the costs.  This expectation may be realized or frustrated.  If they are frustrated the vendor is likely to revise similar expectations in the future in the light of this experience.

I assert that the theory stated above explains the same phenomena as the Marxist theory of value and is superior in that it lacks a serious defect of the latter theory.  Both theories account for the fact that the price of an item will tend to bear some relationship to the value of the resources expended in order to produce it.  The more labor that the item takes for production, the more expensive it will tend to be.  However, labor alone will not make an item valuable.  The labor is put into production of the item because of the value that it is expected to create.  Some of our efforts will, unfortunately, be fruitless or fail to obtain the desired results.

The socialists have failed to make an a priori case for instability under capitalism.  The claim is that employers will reduce wages in order to drive up profits, but that then no one will be able to buy their products.  However, even assuming that they are able to reduce wages, they would still be able to sell the items.  They would only need to reduce their prices.  As it happens the assumption that they can reduce wages cannot be accepted a priori. This assumes that they will be able to find willing workers at a price that is less than what they are currently paying.

However, there is a powerful a priori case to be made against socialism.  This case was made by Ludwig von Mises and appears in his magnum opus, Human Action, among other places.  Socialism is defined as democratic ownership and control over the means of production and distribution.  This is a definition that I have taken from socialists, so it cannot be said to be biased against them.  Whatever socialism would mean it must include a democratically controlled state that is the sole owner of capital goods, or the material resources needed for production.  If capital goods continue to be privately owned, then it could hardly be said that the means of production were democratically owned.

However, this creates an interesting dilemma. In order to say that production is democratically controlled, then there must be some rational process that makes decisions concerning production.  The benefits will have to be weighed against the costs.  Among these costs will be the cost of capital goods.  However, this is precisely what we cannot know under a socialist economy.  The democratically controlled state will be the sole owner of every capital good.  Hence they will neither be bought nor sold.  It will become meaningless to talk about the price of capital goods.  Without this information our planners will have insufficient information about the cost of producing these capital goods.  They will be unable to make adequately informed decisions regarding production.

In addition to this a priori case against socialism, there is the experience of socialistic experiments that democratic governments have made during the twentieth century.  Democracies tend to favor incremental reform over completely scrapping the entire economic system in order to serve some utopian ideal.  Toward that end some democratic governments have nationalized certain key industries.  The result has been that they transformed profit making industries into government functions that required subsidies.  Understanding this is easy if you take a public choice type of view.  The interests that are more concentrated are the ones that are preferred.  The elected government will want to give the employees the best deal.  Next come the customers. The taxpayers are treated worse.

In short socializing an industry is good for the people who work in that industry, but bad for everyone else.  It cannot be implemented as a universal principle.  You can't subsidize everything.  You need to take your taxes out from somewhere, and taxing an industry can be thought of as the exact opposite of subsidizing it.  Hence this system of partial socialism produces unfairness.  The recent trend in democratic countries has been away from nationalization and toward privatization, sometimes even in education and other areas that we consider to be traditionally provided by government.

It has been stated that capitalism is incompatible with democracy.  On the face of it, this might seem like a plausible assertion.  If the people have no control over the means of production, in what sense can they be said to rule?  However, this misses an important point.  Democracy doesn't mean that the people directly decide every issue, nor need it require that they select people who will.  In order for democracy and capitalism to coexist, it is only necessary that people believe that state ownership and control of the means of production and distribution is a bad idea.  We have the ability to decide that we should be governed by abstract principles.  Our democratic institutions don't directly decide who should be placed in prison.  This is determined by abstract principles known as laws.  The people have a right to reject socialism.

Rejecting socialism is precisely what we should do because reason and experience both lead us to believe that it cannot and will not work.  However, the status quo is neither socialism nor pure capitalism, but interventionism.  Ludwig von Mises also presents good a priori arguments for rejecting the most popular forms of interventionism.  It has been suggested, by Karl Popper among others, that democratic institutions provide us with a method of empirically testing various forms of intervention.  Unfortunately our tests on the appropriate size of the social welfare state have all been in only one direction as it has been assumed that social spending should never be reduced.  However, that is a subject for another post.