Capitalism, Socialism and Democracy



all right welcome everyone to not related the biggest brain podcast out there in this episode we're gonna talk about capitalism socialism and democracy which are not just three abstract nouns they are also a book written by Joseph Schumpeter who's a guy you probably haven't heard of and a book you probably haven't heard of but it's one of those books that a or so years later it just says such a density of thought takes that I think is still worth evaluating so as always I am Luke Smith your host if you have any comments about this episode send them to Luke at Luke Smith that XYZ donations paypal dot me slash Luke M Smith that's Amazon microphone and we'll also be reading donations and comments from the last episode which was on Julian Jaynes origin of consciousness in the breakdown of the bicameral mind that will come in the middle of the show but for now let's go ahead and jump into it shall we so capitalism socialism and democracy now first off with a book with a title so abrasive not abrasive but just sort of out there a might we might as well put our cards on the table so to speak put out a disclaimer because obviously if you have a book with this kind of title on these topics everyone's gonna come to the table with a kind of political axe to grind that's just gonna happen and I'll go ahead and tell you if you're looking for zingers from this book you might find some of them but you'll probably be disappointed and I say that not because it's a bad book not at all but this is one of those books that is written with such a level of subtlety that it's almost like it's written on an unknown level of irony so it's the kind of book that wallet has a lot of insights Schumpeter is keeping his cards close to his hand or his hand you know what I mean Schumpeter is the kind of guy who doesn't want to wear his politics on his sleeve and although he does have his own views they're the kind of things that you have to really shuffle through the bushes for so I'll go ahead and give you the literal arguments of the book the hot takes or at least that the superficial level Schumpeter is going to argue that capitalism is great but it's also going to collapse very soon he's gonna argue that monopolies are not that bad in fact they're not bad at all and market competition ultimately doesn't matter entrepreneurs do he's also gonna argue that socialism is inevitable and it's also democratic but it's not necessarily something worth looking forward to and he's also going to deflate the ideology of democracy not so much that he is anti-democratic but well we'll just wait for that we'll wait for those takes so Schumpeter i should go ahead and say again this book is written at an unknown level of irony many people have read it and even at the time it wasn't really clear what Schumpeter's actual opinion was about the whole thing because as I said he's going to argue he seems to be a fan of what he calls capitalism but of course he's also saying that it is going to soon come to an end we'll get into the specifics in a second but I think the general consensus is that Schumpeter is what we would call nowadays sort of a black pilled conservative he he almost is one of the first people to have caught that kind of post-war conservative defeatism where he wants to sort of die nobly he has his views he thinks that they're right but he also thinks they're going to lose and there's nothing he can do about it that's the sort of attitude with which this book is written now even if you're a socialist yourself even if you you know could he could totally hate someone of Schumpeter's a political disposition the book is written in a way that no one is going to put it down and and I'm not saying that it's particularly exciting I mean in the sense that there are a lot of times where people read books they don't agree with and they put them down and disgust this isn't the kind of book that you're going to do that for even if you don't necessarily agree with Schumpeter's takes because again it's written at such a subtle level also this is the kind of book now I originally read it around ten years ago and this was back around the financial crisis now during the financial crisis a lot of people this is a book that a lot of people name dropped because at that period a lot of people were sort of looking through the economic past for people with insight you know sort of new economic paradigms people were grasping at straws as to you know what kind of thing we're gonna go onto next so the name droppers of the New York Times and all these other I don't know pseudo-intellectual publications would name drop this book read the first 100 pages maybe read the first you know 50 pages or something quote from it profusely and then sort of leave it at that so that's how I first encountered this book and I originally I was like that I read the first 100 pages thought it was interesting but as time progressed I ended up reading this book several times and each time even as I reread it to do this podcast you still find little gems of insight so anyway let's go ahead and before we get into the actual content of the book which I've alluded to already I might as well provide a little bit more context of the time that this was written and so again this was first published I think in 1942 now the context of the field of economics at the time was in a pretty significant shift now on one side you have of course a lot of socialist movements during the period now of course the Soviet Union existed there were communists almost revolutions in different parts of Europe and other countries so you had that as a background and Schumpeter it's pretty clear that he's not a big fan of socialism additionally there was the rise of Keynesian economics which if you don't know this is economics associated with John Maynard Keynes this arose in the english-speaking world in the 30s now John Mariner came cabe's wrote his general theory I want to say 35 I'm not quite sure but he had a huge influence on the field of economics there was a huge sort of sea change because not just because Keynes had a novel economic theory or at least in part but also because he was very socially connected to the I guess intelligentsia at the time and he was a very charismatic guy and he had a view of economics that that he contrasted in well he put in contrast to what he calls classical economics and in his construal classical economics is what we would think of as being more libertarian as we would call nowadays in the sense of you know free trade free markets no government intervention Keynes had a view of economics however in which there was a natural tendency in the macro economy for depressions in that we don't have to go into the specifics of his theory because it's not too germane here but the idea was that there is a lack of effective demand and this necessitates government funding to alleviate again we won't go into the specifics if you don't know what we're talking about just just take it at that but Schumpeter was very much opposed to this view as well and it was also very much opposed to things that either implemented Keynes's theory or were consistent with it like for example the New Deal which actually started before Keynes but you know that's not so important now Schumpeter was an Austrian economist from Austria there's also a school of economics called the Austrian School of Economics he was not one of those he was loosely associated them here with him he had a lot of connections not just with them but other schools of economics but he himself is the kind of guy who really cannot be categorized in any any particular view in a lot of ways when you read capitalism socialism and democracy you see that despite the fact that he is very much against socialism not viscerally but he's generally against it he actually draws a lot from Marx himself he actually the first several chapters is actually really praising it might be ironically praising but praising Marx as a economist sociologist really a general theorist even as a prophet I think there's a chapter called Marx the Prophet so Schumpeter takes a lot from Marx he takes some from the historical schools of economics so he really has a very unique view all right so let's go ahead and get into the actual content of the book now again Schumpeter is pessimistic he's a proponent of capitalism but he thinks that Indian capitalism is going to come crashing down he's going to make an argument later on that's gonna be not dissimilar from the argument of Marx or other so-called scientific socialists in which capitalism comes to an end due to the material conditions that it creates but in the short term he's very much an advocate of capitalism and he thinks that it's not only created enormous amounts of wealth but it has created an equalization of well-being for everyone in society so on one side on the numerical side which is not the side that Schumpeter thinks is very important but some people care about this kind of stuff he argues that capitalism will probably continue producing the same growth in terms of economic well-being that it has for the past hundred years into the future he says specifically that he prophesies around prophesies prophesizes around an increase in the GDP of about two percent per year on for 80 90 100 years as far as capitalism will survive now with the great depression this is sounds like a sort of a strange pronouncement to make but it's a pronouncement that ended up being very much true now additionally more importantly than that for Schumpeter is the fact that capitalism is it pertains the material structure of society in a way that can't be measured by just money or wealth alone now some people have critiqued capitalism saying that it is an economic system where there is inequality or sometimes it might even increase inequality or something like this but Schumpeter makes the argument that in reality if you don't look at the numbers and you look at the actual material reality the actual lifestyles of people you see that if anything capitalism has drastically decreased functional inequality between people so he writes there are no doubt some things available to the modern workman louis xiv himself would have been delighted to have it was unable to have modern dentistry for example on the whole however a budget on that level had little that really mattered to gain from capitalist achievement even speed of traveling may be assumed to have been a minor consideration for so very dignified of a gentleman electric lighting was no great boon for anyone who has the NUMMI money to buy sufficient numbers of candles and pay servants to attend them it is the cheap cloth the cheap cotton the rayon fabric boots motorcars and so on that are the typical achievements of capitalist production and not at as a rule improvements that would mean too much to a rich man Queen Elizabeth Owens still silk stockings the capitalist achievement does not typically consist in providing more silk stockings for Queens but in bringing them within reach of Factory girls in return for steadily decreasing amounts of effort so Schumpeter has this as a general counter critique for people who have the idea that well capitalism causes inequality or something like this because again his idea is that private property and entrepreneurship are precisely those things which make the changes in production that would result in more efficiently made products produced at a cheaper price it's not just about taking such as about seizing the means of production and you know passing on more savings to the worker or something like that it's an issue of active development in private property that causes these changes now anyway Schumpeter has this optimistic view of the change in capitalism but he also responds to some other critiques now at the period there were a lot there was the development of a I guess what you could call market competition theory there are a lot of people who had different theories of how efficient markets work or perfectly competitive markets now if you take economics 101 nowadays you'll learn about perfect competition now what perfect competition it's a theoretical thing and what perfect competition means is that an industry is perfectly competitive if it has an infinite number of firms theoretically of course but a an extremely large number of firm's products that aren't really different in any particular industry and all firms sell different products and what happens is because there are so many firms and they all sell products that are basically the same to consumers gradually prices will be as low as absolutely possible they'll be basically as at the break break net break neck that's not what I mean break-even point of production so there are no economic profits what that means is the prices are going to be as low as possible for consumers now this is what you learn when you take economics 101 and I think again it's called a perfect competition so a lot of people hear this and they have the idea that perfect competition is perfect it's something that we should all strive for and there are a lot of theories at the time that consisted in assuming this so Edward Chamberlain had written his theory of monopolistic competition a little bit before Schumpeter had wrote this and wrote this and written this and Joan Robinson who's an interesting character in herself Robinson wrote the economics of imperfect competition again before Schumpeter's book she actually praised Schumpeter's book as well Robinson was a socialist herself and a lot of the rhetorical turn of her economic views specifically on competition was the capitalism is inefficient because it is not actually perfectly competitive the reality of capitalism is that there are really only a few firms and in this in in an industry or those firms produce highly differentiated products now if you don't know what that means differentiated products I should explain that that just means that there's products have a particular brand when a company makes it or they're slightly different now the reason why that's bad for perfect competition is that that means that you know a company can sell a unique product they have a functional monopoly in that and thus people they they can sort of be a little bit more I guess more stringent with how they price that so for example Apple is it a good example Apple makes computers but they make specific Apple computers and because of the brand that they've cultivated and the memes they put out about how great Apple products are they can pretty much charge you know three or four times as much as what another company can so that is not good perfect competition now in Robinson's view she is a socialist thinks that perfect competition is more or less the ideal capitalism is not succeeding in this we need some kind of government intervention or collective management of society to improve this Schumpeter on the other hand he agrees with this with the facts of on the ground about this he thinks that capitalism does tend towards monopoly he thinks that not just monopoly but what I think what you'd learn in economics 101 as a monopolistic competition and that's a model where there are different firms that sell products that are loose substitutes of each other so Apple has their own brand of computers Dell has their own brand of computers you know and they're loosely equivalent but they're not exactly the same now Schumpeter's view is that this is actually we should really not think of perfect competition as being perfect it's really just an abstraction that doesn't exist in the real world we have monopolies monopolistic competition and this is a good thing now his point I'll read this here and this is on page 83 a system any system economic or other that at every given point in time fully utilizes its possibilities to the best advantage may yet in the long run be inferior to a system that does so at no point in time because the latter's performance to do so may be a condition for the level of speed of long run performance so what he's saying here if you didn't immediately digest what he's saying his point is okay so you can look at synchronically what a perfectly competitive market looks like and say this is economically efficient it's what's best for consumers and producers at the same time it maximizes all the marginal everything's it's perfectly good but the reality is even if it's efficient at every point in time doesn't necessarily mean that it's good over long periods of time his point is that profits have a very important role in an industry so if you've if a firm or an industry doesn't make profits you can't take those profits and put them into research and development you can't use them to hedge against disaster you can't really do anything I think a lot of people in the in I guess public parlance have this idea that when a corporation gets profits it all goes to plating the CEOs hot tub with gold and diamonds and stuff like that that's not how it is at all most of it goes into reinvestment in its own firm to make capital more effective to make things more efficient and really to drive down costs later on in the future or as I said to hedge against disaster hold on to that put it in some kind of financial financial who-knows-what just keep that money use it when you need it because sometimes disasters strike you know a Dust Bowl happens an economic downturn happens and you need that to draw on that money now in a perfectly competitive system in a perfectly competitive industry you don't have that fallback and you also really don't have any kind of research and development or future changes in the industry so for example if you know one industry that people typically think of as being highly perfectly competitive is traditional commercial farming I mean before Monsanto or any other stuff like individual farmers were pretty close to being perfectly competitive because they had products that were pretty much all the same they couldn't differentiate them and that is not necessarily a good market being you're not you don't have much control over what you can sell your product for because there's so much competition there's not much you're accomplishing and it's really not an industry that is going to survive very well or it's going to survive but it's going to survive I guess at subsistence level which isn't necessarily the best so Schumpeter objects to this I guess equilibrium based view of the economy and Schumpeter in a lot of ways is very much against even the concept of equilibrium in in the real world now most economists deal with finding the optimal prices and you know by checking your marginal revenue and stuff like this and if you don't know anything if you haven't taken economics 101 or something it's not particularly important but generally the idea is you know we want perfect competition or even economic efficiency but Schumpeter's view is that these things don't really even exist especially in an economy where there are constant changes you know prices are we think of prices as being in terms of money but prices are in terms of money but they're indirectly in terms of how much everything else is in society or how efficient everything else is made and stuff like this so whenever you have any kind of changes in the economy you have this spilling over of constant shifts in price levels and there is no such thing as an equilibrium in real life you're never going to find that optimal point the reality for Schumpeter is constant dynamism and constant change and monopolistic competition and more monopolistic industry structures have arisen because they are more effective at surviving than a perfectly competitive industry it's not just you might say oh well it's good for the corporations well yeah it is good for the corporations but over the long term it's good for the industry and good for consumers as well that's the point that he's soaring sort of trying to draw home here but of course it is an almost ironic point and I think that's part of Schumpeter style because he's doing what nowadays we call agreeing and amplifying he's taking an argument that's usually used against capitalism for example that is monopolistic it you know there are so many profits and he's actually saying no that that's really a good thing when you actually think about it don't think about it in terms of the mathematics of perfect competition and the autistic diagrams that you make in econ 101 nowadays you don't think of it in those terms think of it in terms of what he calls the perennial Gale of creative destruction now what does that mean that's actually a turn of phrase that Schumpeter uses all the time perennial Gale of creative destruction creative destruction is one of the terms that Schumpeter well he's definitely credited with coining but it's the concept that I think is most fundamental to his view of capitalism now it's pretty much exactly what it sounds like now of course it's not like creative destruction let's go destroy things let's like you know burn buildings down that's not what capitalism is supposed to be about but his view is that really the competition that happens while we do have these monopolistic markets the real competition comes from creating totally new ways of producing products not just in developing new things but totally like paradigmatic shifts in how industries are constructed things like you know inventing the internet inventing the steam locomotive things like this so his view of industries in particular is that they are monopolistic but creatives destruction describes the fact that over time you have new industries based on new technologies and new innovations based on the work of entrepreneurs that come to replace those industries that already existent existed the recalcitrant industries that are either degenerate or non-productive in some sense so for him the change is not or the goal of capitalism is not necessarily stagnation and economic growth within confines of some economic mold that's not what he thinks is important what he thinks is being important is the constant creative destruction the creation of new kinds of ways of productive producing totally new products thus replacing those things that used to occur that is creative destruction and it's a good thing it's a good thing for to totally replace these industries that for example you know the industry of horse and buggy rental totally an industry which no longer exists because it's functionally obsolete you have over nowadays or something like that so this is his core view it's not the competition that happens inside of a market but it's the grand over time well as he says the perennial Gale over time you have these massive industry shifts and that is the real substantial change the real substantial good of a free-market capitalist society now Schumpeter actually quotes from Marx on this because he thinks that one of the good things about Marx's analysis is that Marx notices that capitalism is not a stable social system in the way that feudalism or you know Imperial China would be it's not about keeping some kind of social environment and manicuring it and really constancy over generations capitalism is about constant flux it's about constant change but also capitalism gradually breeds intellectual changes and this is one of the things that Schumpeter get it gets into now I said before the trumpeters argues in effect that capitalism is hoisted by its own petard it's destroyed by things that it puts in place what exactly is this now in Schumpeter's view this is the first seeds of it is a kind of materialistic rationalism that is what happened during the rise of capitalism which Schumpeter originally traces to city-state Italy but you know we you could trace it to different places it doesn't really matter but one of the big changes that happens in the late medieval period on into the Renaissance period as private industry begins is a kind of rationalization of economic life while in smaller societies and tribal societies or even you know peasant societies in Europe people's relate people's economic relationships were also social so you might have been a baker he made bread you would sell some of that bread but you know if you know the cobbler or if you know the Smith and you probably have some arrangement with them you give them this they give them that that or they give you that that isn't necessarily on the books it might just be sort of impersonal and a lot of the economic relationships people were involved in were at a very social level or they directly knew everything that was going on it was or maybe there was no money mediating the exchanges whatsoever and money was used in contact with foreigners now Schumpeter's view is that as things changed and as people started to use money to mediate their economic life they adopted gradually the mentality that's necessary for that kind of life and that is a more rationalistic one now for Schumpeter this is something that at the beginning is something very good because it means that people are being more efficient with their daily life it means they're you know really assessing everything they do in economic terms and I guess is creating a kind of critical mould but it becomes pathological at a point in fact he actually notes some specific things things like for example getting married and having children it used to be that of course well even today in normal societies you get married and you have children because that's what's expected that's what causes continuity of your society that's just what happens you don't think about it it's just an obligation it's what happens but in post capitalist societies what happens is that people take this rationalism and even apply it through these kind of social domains people even say well you know I could have a child but that would cost this much money next year and this much money that a year after and it cost all this and I you know there I'd have to get a babysitter and stuff like this I mean you hear this stuff all the time where welfare you actually see the divide very much in America nowadays because you know these people who middle-class people or you know I guess 30 year old boomers all have this idea of well I have to I have to be making this amount of money and they're always rationalizing the having marriage and doing you know having kids and stuff like this but lower-class people are just like they just have children it just happens and they end up taking care of them and they work it out and Schumpeter's view is that what's happened with the capitalist mentality is that we have this rationalist mentality where we're overthinking all of our social relationships to a degree that's that's bad and it also drains the heat hero was out of life that is you no longer there's sort of well the quote that he actually uses is the stock exchange is a poor substitute for the Holy Grail that is as you have this rationalistic society that gradually comes to be in Europe and in America you lose contact not just with you know well you really just lose contact with your social roots you don't have that connection to what was required of you in previous ages people believe in religion less they rationalize everything and they don't even believe in the Holy Grail and whatever hermetic interpretation of what that is supposed to actually be so that is the absolute state of modernity and it was bad enough at trumpeters time and frankly it's only gotten a little worse now so we should have a vision of Schumpeter's view of capitalism's collapse so far because you have this rationalizing mindset which is already undermining social institutions but the last missing piece of the puzzle is the I guess what you could call the Vanguard class of socialism in Schumpeter's for you now Marx or traditional socialists or so-called scientific socialists had the view that there would be a a proletarian revolution this would be caused inevitably from the accumulation of capital which over time would gradually you know drive down wages and more people would be unemployed etc etc and these people would inevitably have to revolt against capitalism and impose a new economic system this is the you know a Gestalt of the traditional Marxist view now Schumpeter takes that on its head and Schumpeter's idea is it's not that an underclass where will revolt against capitalism but an over class in Schumpeter's of you one of the things about our rationalizing society is that it creates far more quote educated unquote people than we actually need and that is in the actual real world in the private economy we need entrepreneurs we need people with high agency who are willing to take risks and you know do things and create new methods of production which might not necessarily be too heroic but it's the kind of thing that has a huge impact on improving people's well-being but what happens in our society is because we don't really know how to do I guess train that one of the things that's very common is people just continually go to college they'll get master's degrees nowadays even if they don't necessarily know what to do with their degree now Schumpeter has a lot of choice words for intellectuals as he calls them on page 147 he says intellectuals are in fact people who wield the power of the spoken and written word and one of the touches that distinguish them from other people who do the same is the absence of direct responsibility for practical affairs this touch in general accounts for another the absence of first-hand knowledge of them which only actual experience can give the critical attitude arising no less from the intellectual situation as an onlooker in most cases also and as an outsider than from the fact that his main chance for asserting himself lies in his actual or potential nuisance value should add a third touch so anti-capitalism arises because capitalism produces this class of over educated people that don't have a place to go you probably know so many people in your life exactly like this people who went to college maybe they majored in whatever studies or English or something that frankly is absolutely useless and it's not just that they didn't learn anything it's the college changed them psychologically they went in they have this expectation of things given to them they have this idea that college is going to make them more valuable and work but they their sense of entitlement becomes enormous the they become unperson able sometimes it changes their social and political views that makes them frankly pathological and anti-social this is something that's normal I mean it was true in Schumpeter's day but now it's it's insane it's like hold my beer what what kind of world are we living in nowadays so what happens is now your English major comes out of college and expects an 80 thousand dollar an hour job for I don't I don't even know what kind of jobs these people would want and when that doesn't work out they become extremely hostile to the society that they live in and you know they'll get a job at BuzzFeed nowadays or some kind of minor journalists institution but that's one of the things that I think Schumpeter definitely understands but I think a lot of people don't is there are a lot of the intellectual class in the West in a lot of ways Schumpeter understands this is not formed out of people who want to be there there are some people for example I when I was younger I deliberately wanted to be a professor and that's you know sort of the career choices I made but a lot of the people who are professors or graduate students are not like that same thing with journalists they are in that situation because they went to college they didn't necessarily learn anything they became psychologically unemployable and positions either in journalism or in the permanent bureaucracy are places for people like this to go where they have no other institutional function they just sort of are there they are rigorously defending the system in whatever or the system meaning the the anti-capitalist sort of a grievance mongering system in that sense so this is how Schumpeter understands it and frankly it's only gotten more extreme nowadays the way he puts it this is page 153 all those who are unemployed or unsatisfactorily employed or unemployed drift into vocations in which standards are least definite or in which aptitudes in acquirements of a different order count they swell the host of intellectuals in the strict sense of the term whose numbers hints increased disproportionately the Internet in a thoroughly discontented frame of mind discontent breeds resentment and it often rationalizes itself into that social criticism which as we have seen before is in any case the intellectual spectators typical attitude towards men classes and institutions especially in a rationalist and utilitarian civilization now Schumpeter has created this is the fall of capitalism for him it is the intellectuals the unemployed intellectuals who bring it down and in his view intellectuals I mean and frankly this is my view as well intellectuals are just less competent versions of normal people they're not there necessarily because they're smarter they're there because you know this selection process that Schumpeter mentions so this is his rider on ik take on the Vanguard class and I think this is about time for a break so I'm gonna take a little break I'm gonna come back read your donations from last time and of course emails and responses that respond to them and then we'll go through the less the rest of the book is views on socialism and democracy all right we're back that was quick well quick for you at least so let's go ahead start out with some donations again if you have any comments about this episode email them to Luke at Luke Smith that XYZ and if it's a good comment I might read it out on air it's not really on the air if it's a podcast but whatever you can also send donations to pay pal Donny slash Luke M Smith that is M as in matrix all right so anyway donations Luke sends ten dollars great podcast always wanted to read more about big brain topics but I haven't at a time really enjoyed the recap Thank You vu for the ten dollars twenty four dollars and eight cents interesting amount from Sebastian says simply spend it wisely mr. Smith Thank You Sebastian and also say don't donate just like one or two dollars on PayPal or even less than a dollar and on saying that because I'm greedy I'm saying it because if you do that it's literally just the donation to PayPal like I get such a small sliver of low amounts for example I got our donation from will and it was fourteen point eight ei rubles which is only like a quarter and PayPal gets most of it it would be like six cents for me so I'm not going to accept low donations I'm just gonna pick up a nickel in a penny and I'm gonna count that as this donation but yeah just as a reminder once in a while someone will donate like one dollar a lot of times and just like don't do that too donate one larger donation but you know that's just I I don't necessarily want to pit fun PayPal okay so now on to the comments from last episode and remember that was on Julian Jaynes origin of the cotton of consciousness in the breakdown of the bicameral mind so the outpouring was actually unexpected for this episode I will say because usually when I put up something on my youtube channel that's a little bit different very few people will watch your comment or something but this was way more than I was expecting a lot of people a lot of people said wow this really shook up my week this has really really made me think really something different and so lots of people a lot of some lot more support than I expected to doing a topic that was so out there but I'm happy about that so let's read some specific comments Rudy says do you think they will do you think there's a way to lose consciousness or in other words revert to the bicameral mind through social factors or otherwise I'd have to say in James's theory consciousness our internal world is a kind of mental habit I guess so losing consciousness in that sense would be like losing a kind of mental habit you might compare it to like forgetting a language theoretically I could imagine that happening but I think it's something it's the kind of thing that would be very difficult to it probably be a different difficult habit to kick I'll just say that so other comments pepé brian says meme arrow next episode meme arrow assuming there's going to be a next episode this time well you spoke too soon because here we are Martin says excellent podcast Luke have you read Nietzsche's birth of tragedy the dian dian I see and Apollonian concepts as portrayed in the book are definitely or definitely seemed bicameral and hallucinogenic no I haven't read that I actually have a lot of Nietzsche's books including that one but that is the one that I have not read so when I read to come and I pull it off the shelf put it on my desk so I might leaf through it eventually so that's that oh and you know what there's a bad comment I want to read this one's pretty funny well embarrassing but instructive comment my melius Rex says Jane's entire approach is philosophically confused to be conscious is to be aware many animals are conscious I wonder how he accounts for that well first off I don't know how you know that animals are conscious but I mean I'm not saying they're not but it's just an interesting thing to state categorically as if it's like some kind of evidence the comic goes on of course can anyone here seriously entertain the thought that someone acts just like us but is not conscious because we have accounts of life pre collapse and guess what they're pretty similar well maybe you didn't listen to the podcast the whole point is life before your collapse is totally different religious structures totally different social structures totally different that's the whole point of the book comment goes on imagine someone ducking out of the way of a bird that's flying towards them but saying that guy wasn't actually conscious at all well it's funny you say that because there is a condition in the world called blind sight now blind side if you don't know about this it's a condition where someone's eyes do in fact work in some sense they see things but they can't they're not consciously aware of their sight that is the eyes will send a message to the brain but only the unforeseen so for example if in this situation if a bird flies that someone with blind sight they their brain actually does react to it they do have this sort of reflex of moving out of the way but they're not conscious of it they don't even know what exactly happened they just know that their body jumped away and they sort of like if you press a touch a hot stove or something like that so I don't really see how that's an argument but I realized that this post is probably satire in the last paragraph which I'll read out now all of the philosophical groundwork for this was done by Vidkun Stein and Ryle and a few others ascribing consciousness to ascribing consciousness is a matter of acknowledging certain behavioral criteria wrong how can anyone think that okay maybe I should give the background to this so first off ascribing consciousness is not a matter matter of behavior has nothing that consciousness and behavior are utterly unrelated we can very easily imagine some kind of being that is conscious which doesn't have any way might just sit there you can be conscious without behavior and in the same way you can imagine a zombie or a machine which has behavior but no consciousness now people who are wondering why would someone think something crazy like this there is a very particular school of thought in psychology in the old days it was called behaviorism but the the references to Vidkun shine and rile sort of show a philosophical I I guess flag-waving of this but the idea is well the scientific quote/unquote scientific idea behind it was that consciousness is something that is not empirically objectively observable and so what they would do is since they wanted signs to be objective is either ignore consciousness altogether or try to speak about consciousness in only in terms of behavioral actions and stuff like this so people like this would make arguments to the effect that well if things don't have behavior they don't have consciousness they don't exist because well there's no empirically observable behavior therefore you know consciousness can't happen now so might sound like a crazy idea but again Vidkun shine is a person you hear from quite a lot it's one of the most victims Stein is probably the most overrated philosopher of the twentieth century contributed absolutely nothing to philosophy I'll go ahead and say that and it's I guess he say in the same way that a light bulb is for a gnat he is for all pseudo thinkers nowadays it's just immediate because he he's an eccentric person will just say that but aside from this there are people nowadays one of the most popular being Daniel Dennett who in one way or another has this sort of behavior istic view of looking at consciousness and his his theory of consciousness amounts to simply denying that consciousness actually exists that you don't actually have pains you know I actually have feelings you don't actually have any of this stuff and the only meaningful way to talk about any of this stuff is to talk about it in terms of behavior now this is again is it's like the saluté state of like I don't know scientific reductionism because it's based again on this assumption that science has to be empirically observable and if you have that I mean that's nice in principle but when you're dealing with something like consciousness which the 100% of it is subjective there's no way of showing someone your interior world you can describe it indirectly but that's not quite the same and something you know when it comes to stuff like consciousness some kind of autistic view of science which insists on observable behavior is just utterly and equipped and this is a philosophical problem that people have to deal with but it's another level of absurdity to pretend that behavior is consciousness or that there is no consciousness without behavior it's just false you'll see people arguing this they don't believe it because they've been irrationally convinced of it they believe it because in an autistic objective worldview it is the only thing that they can say so that's just what I have to say well I will say one additional comment there's a comment on NPCs right so here you hear a lot about in pcs nowadays non-player characters this is a meme that's been floating around even within the last week since I did my podcast and it's the idea right what if some people out there they're not actually conscious they're actually NPCs they don't actually think now the only situation in which that philosophical view is acceptable is if the people who are endorsing it are in fact NPCs they are not actually conscious for whatever reason now a Jaynes view of consciousness mind you that might actually be a possibility in the same way that our consciousness is different from the mental you know environment of a bicameral person might be that there are people out there who just don't development consciousness or they're they operate in a different ways so if someone like this doesn't know what isn't consciousness and doesn't understand what the word consciousness really means doesn't understand that it is subjectively viewable experiences because they don't have subjectively viewable experiences I understand if they support the views of it condign or dented or any of these sort of behavior I I don't want to call Vidkun Stein a behaviorist but I think that people of that pseudo philosophical disposition will quote from both behaviorists and Vidkun Stein but anyway so that's about all the oh one more one more comment this is an email from Severin he says you've stated multiple times that you're generally not a proponent of going to college slash uni now I'd be interested in know in knowing your opinion on universities of Applied Science they've been very successful especially in german-speaking countries they teach both theory and practical knowledge well I haven't been to one I'm not gonna pin you Nate on opinionate opine on one the reason I say what I say about college is because I've been there I know all about them I know exactly how it affects the human psyche has it Schumpeter interestingly enough so I don't have any strong opinions on universities of Applied Science or what do they call them vocational schools in America I mean I don't hear anything particularly bad about them but I'm not categorically against them so my critique of universities doesn't necessarily apply to those all right now back back to capitalism socialism and democracy again by Joseph Schumpeter here's part two as we talked about several minutes ago we went over Schumpeter's view of creative destruction his view of monopolistic competition his idea that while inequality exists in capitalism material production material changes lower functional inequality and we also talked about how despite the fact that he likes what capitalism has done he projects its demise not a demise from below but from above destroyed by a hostile elite an elite created by capitalism over edgy right over educated by capitalism but ultimately hostile to it so you can already tell that his argument is drowning in irony again because he's taking he's agreeing and amplifying with a lot of the things that socialists at the time were saying they were saying capitalism is mana list aqui saying you know what it is in fact that's a good thing they were saying that capitalism is going to fall he's saying well yes it is but only because it's just so great and this is usually why people classify Schumpeter is a kind of ironic conservative now he keeps that irony up into his sections on socialism that is it begins well exactly is the following he asks can socialism work of course it can and you you sort of get the feeling as you read on that maybe he doesn't exactly mean what he's overtly saying now first off as a little more background to the socialism thing he mentions early on the well there's a debate during this period as to whether a socialist economy can actually survive now of course the Soviet Union existed and was doing its own thing yeah actually having quite a mess at the particular period but of course he's writing to a during Second World War anyway but there was quite a lot of debate among economists as to whether a socialist economy was even possible now Schumpeter mentions and of course many of you will know about the work of Ludwig von Mises who had a particular critique of socialism that I think people should probably be familiar with but it's one of those things that's so misunderstood I think that we should state it overtly here because now Lou Duva Mises who now is typically thought of as a kind of libertarian basically every libertarian will love this guy he wrote a book called human action among other things but he had a particular critique of not just socialism but any kind of controlled economy and it's called the economic calculation problem now it's misunderstood for a lot of reasons now a lot of people will misunderstand to mean something like he he's trying to say well people will interpret it to mean that the economic calculation problem just means that socialist economies don't know what prices to set or we need to have the math to be able to calculate marginal revenue or something like this that's not really what it's about now Mises idea in effect and I actually sort of mentioned this earlier not in these words but I mentioned the idea earlier in this podcast and that is the economy is full of prices and each price is defined is built of billions of different facts about the world so if you look at the price of a computer that price is based off all of the things that are inside of it the demand the availability of all those things how many of those things there are so for example if magnesium is rare and you need magnesium in your computer that's going to increase the price so every little thing your computer is made out of is partially going to have a say in what price it is and also on the demand side your view of computer the particular computer the advertising about a computer all this different stuff all of it plays into the price of a good in fact even when you walk down a grocery store aisle and even if you don't touch anything you are in effect affecting the prices because your decisions to buy something or not buy something are tacitly influencing by negation in effect the price so Mises argument is that prices are composed of billions of facts about the world all of them are interconnected all of them are related and when you have a socialist economy any kind of economy where you either set prices or you either change prices with ceilings or something or you just manually set prices based on what you think they're going to be in Mises idea that's something inherently unstable you when you because if you set one price wrong it's going to affect the prices of all the things that go in it even if you don't have a real price economy it's going to affect you're gonna have shortages or you're going to you know need more or less of something depending on how you've missed priced that and the problem sort of is compounding its snowballing if you miss price one thing it's going to gradually cause problems in everything that's connected to it so this is the calculation problem so this was a debate that was raging at the time and here's the thing with Schumpeter's argument Schumpeter brushes that aside he doesn't want to talk about it because ultimately I think his editorial stance is again one of sort of poking fun at socialism on its own play a playing field now he then goes into what he calls his own blueprint of socialism well not really his own but a potential blueprint of socialism and that is how can a command economy actually work now what he does here I will abbreviate it here but I'll say what he if in effect says it doesn't say this explicitly but he says that socialism can work but socialism can work insofar that it is a cargo cult capitalism that is he creates a blueprint in which there are socialist credits instead of money there is a central planning board instead of say a corporation there are delegated responsibilities in the same way you might have a corporate you know hierarchy or something of the sort and decisions are actually made in a socialist planning environment in the same way that you would make them in a private firm in fact he doesn't necessarily say that there will be profits in the way that capitalist economies are on but he implies that there will be incentives put in place that precisely mirror those incentives so this is the interesting thing about trumpeters argument he's saying that socialism can survive but when you look at his version of socialism and when you look at the version of socialism that is arising in the Soviet Union at the time or well I should say later again this is during world war two that he's writing this you see something that's not necessarily dissimilar from capitalism it's just sort of renamed said of having money you have this kind of social credit etc etc now whether this argument is entirely sarcastic or not it's interesting to note at least it has come true in a lot of senses for example this is really exactly what you see in China and other quasi command economies in the East Asia region that is you have a nominally socialist communist country in China which in effect I mean does anyone really think it's a communist country anymore in a lot of respect respects they have some a lot less economic regulation on some things than the United States does not not in everything but it's a place where they're really all even if organizations are run by the state they're run in a way identical to the way that they are run in any kind of capitalist society so this in essence is Schumpeter's core satire he's saying in effect I mean notice how he set this up he said at the beginning of the book that the way the optimal way the capitalism should be construed is one in which we don't have perfect competition we don't have a lot of decentralized you know businesses that all focus you know all make the same product and they're all competing and they all all have extremely low prices no he's saying first off capitalism in essence is big business capitalism that's how it is it's robber baron capitalism that's how it really is it's mostly monopolistic you have creative destruction that creates and destroys firms as necessary that's the nature of capitalism and a socialist economy is really the same thing it's just renamed that is instead of having a monopoly for every industry in capitalism you really just have the same in a socialist economy now in essence this is to draw back on this socialist calculation debate for a second this has been something that's noted of this socialist calculation debate that it doesn't just apply to socialism it actually even if you have a business that is so big that it controls you know a lot of production from the raw materials upward they have the same kind of calculation debate because they have to manually set a lot of these prices they're not determined in markets so really I mean a lot of times people think about economies as being in terms of is it owned you know is a company owned by the private or owned by the public but Schumpeter is saying in effect that they're really the same thing they follow the same incentives and if you want something that is going to produce you know some a society that is constantly increasing production or having economic wealth all you have to do is put the same kind of system an isomorphic system in place that gives the same incentives it doesn't matter if it's public or private or owned by everyone or owned by just one person or anything that doesn't matter as long as the incentives are still there and in capitalism and socialism so-called they're going to converge on similar structure capitalism converged on this big business kind of capitalism where you have large monopolistically competitive firms and socialism for him is going to converge in the same way now the central irony the like the part of the book that really gets I almost almost like laughs I know as I said a beginning I should say this again as I said at the beginning even if you are a die-hard socialist you can read this book and you can internalize it and you can be like you know what I understand the intuitions but there are some parts that alma on a skill honestly get like such – such a ludicrous degree of satire that it's pretty funny but one of his arguments that he makes and this is that in the chapter on the human element he addresses some of the problems some people have argued that in socialist economies people won't be adequately incentivized to work you know because who takes out the trash so to speak now Schumpeter for the same reasons that I just said says that you can put the same incentives in place in a socialist economy but he actually says in a lot of ways socialism is better than big business capitalism for particular reasons now this is on page 215 he says the socialist management will find it much easier to use whatever tools of authoritarian discipline a may have there will be no government to interfere intellectuals as a group will no longer be hostile and those individuals who are will be restrained by a society that once more believes in its own standards a society will in particularly be firm in its guidance of the young and to repeat public opinion will no longer countenance what it will consider semi criminal practice a strike would be mutiny so if you think about what Schumpeter is saying here he's saying you know what big business capitalism and socialism are the same except socialism has these extra good things they can crack down on you know strikes they can indoctrinate the young with their values they don't apologize for their viewpoints they can argue for it on a strong ethical footing that people believe in intellectuals are not constantly trying to undermine socialism and of course in any kind of publicly controlled organization you can police it publicly and you don't need there's no separate government above economic organization and I want a capitalist society there are private firms that do what they want and a parent and sometimes of course get regulated by the government in a socialist economy that dynamic isn't there because the business interest which is in fact the government itself has no form of regulation on it none whatsoever only the indirect parts of democracy which we'll talk about in just a second so this is sort of the the idea of Schumpeter his idea is that yes socialism can work and in fact in the Soviet Union it is working and in even today in communist China it is working in fact in China the socialism is working so well it's creating such an enormous growth rate because it is just like this big business capitalism it has all the benefits of that but they can also crack down on dissent they can crack down on unions they can have an authoritarian state because the private there is no difference between the private and the public sphere they are all owned by the same people they're all controlled and so you really have well you have what exactly we have in a place like China so we have now covered Schumpeter's views on capitalism and socialism be they explicit be they a little subtle and possibly ironic now I'm not done with this book but I want to draw this episode to a close briefly think what I'm going to do is next episode I have another book that I really want to do I might either put that one up next or I might do a capstone to this possibly bringing in from another book on democracy because the end of this book is going to be on democracy itself Schumpeter has a lot to say about it a lot of stuff that it's not so much that people don't say but people don't even consider de menthe people never evaluate democracy critically in any of the societies we live in but Schumpeter very much does so in the next episode we're going to talk about that and there's another book that I'll probably draw from and I think we'll have one episode on democracy now it might be the next one that mean might be the one after the next depending on where what progress I make on the other book that I want to cover in the next episode so this is gonna be pretty much all for now as a reminder Schumpeter's view on capitalism socialism is of course capitalism as is a dynamic system it tends to monopoly it tends to be creatively destructive or destructively creative however ever you want to think about it and economic models that work in equilibria aren't very useful he does think the capitalism as a negative point forces the rationalization of society which means the increasing of an intellectual class that can undermine it and while he is subtly against socialism there's a sense in which he views socialism as a kind of continuation of capitalism at least in his interpretation now he does in his section on democracy which we'll talk about next time he just talked about other varieties and other parties of socialism things that are closer to what you might call cynic lists so we might talk about that later but that's going to be in the next episode so again if you have any comments about this episode or questions send them to Luke at Luke Smith on XYZ and if their insightful I might read them out and respond to them in the next episode additionally you can of course you the drill send any donations to PayPal me / wait yeah PayPal dot me slash Luke M Smith that is M as in Mexico so thanks for listening and I will see you guys next time I really need some outro music and if anyone has any ideas for outro music or intro music I might be looking for something like that just cuz why not or really something to do in the break yeah that's a good idea so if you have any ideas feel free to email at me but see you next time




Comments
  1. I could not believe my ears to hear that a crust of bread
    was turned down by a hungry person because it was baked and generated by a
    socialist food program…and not by the generosity of a known capitalist inspired
    charity…

  2. Hey Luke, regarding plan-economies, there's a lecture on youtube titled "why ussr collapsed", here it is (maybe you've seen it); https://www.youtube.com/watch?v=rMRU369GaMo It is NOT a vague lecture, hard numbers on the board, and it is an interesting study in plan-economies both in triumph and failure.

  3. When communism fails it turns into capitalism and when capitalism fails it turns to fascism and the cycle renews

  4. 44:29 REEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE…. REEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE
    55:48 https://youtu.be/yuBe93FMiJc?t=136

  5. Kind of scary how Schumpeter basically prophetizes the inevitable decomposition of capitalism from the top down (which is exactly what neoliberalism has implicitly orchestrated the last 4 decades in full-swing) yet somehow fails to realize (or admit) that it and his definition of socialism lead to the same conclusion: an authoritarian oligopoly.
    It's disheartening, to say the least, that this is the only outcome we can come to expect from a society compliant to an economic theory that reduces all human actions to material-incentive/profit-seeking.

  6. > free will is proved to be false by science and pure reason
    > economic liberals: "lets base our whole ideology and philosophy on freedom of choice!!1"

  7. I always suspected modernity was a cancer but, and not to be ironic, it sounds like this guy really lays out the rational framework confirming my suspicions. I'll be checking this book out, thanks Luke-kun

  8. Doesn't matter what kind of system you have, if the Federal Reserve is a privately owned bank and the incometax is not only unconstitutional, but also solely exists to pay interest over the loan the FED provides, you know you're being fucked in the ass

  9. 41:44 For those who want to get the gist of the podcast. Luke makes a remarkable point that sums up Schumpeter views on economics. On a more technical note, his microphone does not always seem to pick up the sound correctly so you might want to have your volume higher than usual.

  10. Congratulations on making it to episode 2 this time.

    Also, will this podcast be (((replacing))) the rambly livestreams?

  11. 51:00, I what you are saying in this moment is the opposite of what Misesians are saying. The price isn't determined by the costs of its inputs but rather than the prices of the inputs are determined by the price(a surrogate for demand) of the end product. At least that is how I interpreted it. The alternative uses of those inputs also effect their prices. Not knowing which output to use those inputs on is the key to the economic calculation problem.

  12. This book – and your analysis – is so on-point for today's world. Thanks for the excellent commentary. You are truly an eclectic man, as I find your linux presentations equally illuminating.

    Food for thought: Through insight, preparation, and good communications skills you can clearly pull off long form dissertations. But I wonder if a 20-30 minute tour-de-force would be more effective?

  13. All marxists are materialists, but not all capitalists or libertarians are materialists. Schumpter is a materialist. No large scale process over centuries inevitably produces a result. In fact no process does. That is the Paradox. Particles will behave erratically upon a free-will agent knowing 'too much' about its state. Marx is an idiot.

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