Tag Archives: mixed economy

The Problem with Socialism

Economic Theory BookThe critics of the Affordable Care Act are relentless in their characterization of the law as “socialist.”  And, socialism, of course means the End of America! The death spiral of the Nation! Or at the very least the ultimate diminution of our Freedom and Liberty.   The problem with all this palaver is that socialism is one of those amorphous intellectual creatures which comes in at least as many flavors as might be manufactured by an upscale ice cream factory.

Econ 101

For the sake of those who get their information from chain e-mails let’s start out as simply as possible.   There are three basic economic activities: (1) The production of goods and services; (2) The distribution of goods and services; and (3) The exchange of goods and services.   Production includes growing, mining, manufacturing, or providing goods and services. Distribution in a material sense concerns the transport or shipping of goods, or the provision of off site services.  Speaking more theoretically, distribution refers to the way in which total output (or income or wealth) is distributed among individuals or among the the “Factors of Production,” i.e. land, labor and capital.  Exchange means exactly what it sounds like — a rational exchange is the act  in which the product or service is transferred to a consumer for compensation.

Econ 101a

Now for the benefit of those who get their infotainment from Faux News, we might want to get a bit more nuanced.

If we take the simplest definition of socialism we would describe it as an economic system in which there is collective ownership of the means of production and co-operative management of the economy.  At this point things start getting fuzzy.  What might a person mean by “collective ownership?”   Here come the first different flavors.

If by using the terms collective or social ownership do we mean cooperatives? For example, is a farmer’s market, owned and operated by its members with the profits shared by those members, a socialist economic enterprise?  Is it “common ownership?”  In this format the enterprise’s assets are owned by individual members in common.  At the other end of the spectrum socialism might be defined by state ownership.

Once we’ve figured out what definition of social ownership is being applied, it’s time to tackle what might be meant by “co-operative management.”

Econ 101b

Since we’re speaking in very broad terms let’s generalize the “co-operative management” into the concept of a mixed economy.  Now things get sticky.

“There is not one single definition for a mixed economy, but the definitions always involve a degree of private economic freedom mixed with a degree of government regulation of markets. The relative strength or weakness of each component in the national economy can vary greatly between countries. For some states, there is not a consensus on whether they are capitalist, socialist, or mixed economies.” [PrincetonEdu]

This explication is just about broad enough to include every national economy on the planet.   A person could be talking about an economy in which the means of production, distribution, and exchange are almost completely nationalized, to an economy in which there is precious little regulation of economic activities.  To an extreme “social libertarian” of the classic archetype ANY regulation which infringes on free association and free exchange would be on the socialist side of the spectrum of mixed economies.

It’s difficult to determine what some people might mean when they are telling us “Obamacare is Socialist,” but the charge does tell us where they are on the range of definitions of a mixed economy.  If the facilitation of the purchase of health insurance policies from private health care corporations is “socialist” then the person is informing us that he or she believes government should not interfere in any way with the production, distribution, or exchange of goods and services — even if the “interference” is intended to encourage participation in the market for private health care policies.

Political Science 101

There’s always another possibility — that the individual slapping the socialist label on various and sundry ideas, be they regulatory or promotional, is merely parroting talking points on offer from political leaders and opinion manufacturers.  At this point some obvious logical inconsistencies emerge.

One cannot logically be in favor of “pro-business” policies which seek to promote business by means of trade representation, start up financing for entrepreneurs, or the compilation of consumer statistics, while at the same time proposing that government has no “right” to interfere with such things as child labor.  Like lunches, there really is no such thing as a completely free market in the real world.

I am not free to manufacture highly flammable pajamas for infants. I cannot hire 10 year old boys to sort coal from slate in my mine.   I am not free to  use floor sweepings in the production of my sausage.   There are some topics in which there is a general acceptance that public safety, health, and welfare must not be sacrificed on the altar of a completely free market unrestrained by anything but the tragic consequences of avarice.   The result? A mixed economy.

Of course, there’s always another explanation — The one which proposes that extremely low information individuals, who rigidly adhere to simplified talking points fed to them by other individuals who have “skin in the game,” apply the socialist label to anything they are told not to like?”

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