Capitalism

It is my intention to not only make a case for capitalism, but also respond to Con's points made. In this argument, I will do both:I would like to start by pointing out on the fatal flaws of Capitalism's arch rivals, Communism, Socialism, and other Marxist Ideologies. I will then work this into my case for Capitalism. The first fatal flaw of these ideologies (Marxism, Socialism,Communism)is that they are based on incorrect views of Human Nature. Most Marxist ideologues operate on either a "Tabula Rasa" or "Noble Savage" view of Human Nature. "Tabula Rasa", developed by many philosophers throughout history, holds that humans mental content is non existent at birth. Therefore, according to this theory,all of our personality traits, intelligence, and mental content are products of societal institutions. The "Noble Savage", developed by Jean Jacques Rousseau of France, is quite similar, except it holds that Humans are actually born good (as in unselfish) but then corrupted by society as their life progresses. These views of Human Nature led Communists to believe that self interest and differences in human minds are not an inherent part of human nature, but actually artifacts of society. In fact, these assumptions on human nature were disastrously wrong, and we have the body count to prove it. Human Nature is not a product of environment, but is largely influenced by Genes. Most mental traits are heavily heritable. Another important insight is that Humans, like all organisms, are inherently self interested by nature. Self Interest is at the heart of all human choices. This includes seemingly altruistic actions, like Charity. Which has been shown to be driven by a desire for wealthier members of society to flaunt their wealth in order to attract those of the opposite sex. Adam Smith explains the role of self interest in any economy with a simple story:"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. "Capitalism, unlike any other system, allows the self interest of millions, or even billions, of economic agents (people) to maximize utility (aggregate happiness). Again, Adam Smith explained this beautifully:"By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. "The idea that millions of people pursuing their own self interest is best for society may seem odd at first. However, capitalism has certainly worked in practice. If you look at the world, the most prosperous nations also have the freest economies. Of course, my opponent is not a communist. He is an advocate of Social Democracy (from what I understand). This is very different from communism. However, the same issues are at hand in this system. Nobel Prize Winning Economist Edward Prescott looked at Tax Rates effect on Hours Worked and found that the social democratic systems in Western Europe, and the high taxes they entail, significantly disincentivize work effort:"Americans now work 50 percent more than do the Germans, French, and Italians. This was not the case in the early 1970s, when the Western Europeansworked more than Americans. This article examines the role of taxes in accountingfor the differences in labor supply across time and across countries;in particular, the effective marginal tax rate on labor income. The population ofcountries considered is the G-7 countries, which are major advanced industrialcountries. The surprising finding is that this marginal tax rate accounts for thepredominance of differences at points in time and the large change in relativelabor supply over time. "Europeans are not simply lazy, they are rational. In Europe, high taxes and high welfare payments have made work much less attractive relative to leisure, leading to less work effort in European Social Democracies. Granted, the goal of capitalism is not to get people to work more. It is to improve standards of living. Even most European Welfare states have the three key elements that allow capitalism to work: Property Rights, Stable Money, and Stable Government. Capitalism gives entrepreneurs an incentive to create new things and improve old things to meet consumer demand. Of course, they only do it for their own profit, perfectly in line with Adam Smith's theory. This is the core of my case for capitalism. Humans, by nature, pursue their own economic self interest and only capitalism can hone that reality into a social good. Now, I will respond to some points made by Con:Utopia? Pure Capitalism, as my opponent says, may never be a reality. However, that does not mean that we should try to move close to this type of system. The idea that Pure Capitalism may never be a reality does not do anything to rebut the notion that Capitalism is superior to all other economic systems in practice. My opponent also seems to think that Capitalism relies on some assumptions that it does not actually rely on. Con said:"Things like perfect competition, perfect information and perfectly rational bargainers exist in textbooks, not in society. Moreover, much of these things are not even conceivably attainable. "This is not what capitalists argue. We simply argue that reason underlies economic decisions, not irrationality. As far as perfect information and perfect rationality, neo classical models understand that these things are not always attainable. This is why they have been replaced by bounded rationality, where economic decisions are still guided by reason but also reflect limited information. I also think my opponent underestimates the power of prices. Prices are at the center of all economics. In Capitalism, all relevant information is contained in the price. This largely eliminates the "perfect competition" problem brought up by my opponent. Health CareFinally, I come to Health Care (due to space limitations, externalities will have to be in my next argument)The idea that Health Care Should function any different than other markets is odd. Like other markets, rational Consumers should compare costs and quality. Therefore, total health quality should go up as prices go down. The main problems I have with my opponents argument here is that he assumes that the US Health Care System is market based, which it is not. It is deeply distorted by two large entitlements and a tax distortion which keeps people on prepaid private insurance. This creates a problem with people paying for Health Care with somebody elses money, giving them no incentive to shop for lower prices. If Health Care did not have these distortions, quality would go up while prices would go down. This is not just theoretical. Lasik Eye Surgery in America is not covered by insurance. Over the past 15 years, prices have fallen while quality has increased. The same is true of Cosmetic Surgery. I also don't share Con's admiration of the NHS. He may see it as a more "just" system, but NHS patients get far lower quality care than American Patients. A Lancet Oncology Study on Cancer Survival found that, for all cancers in men, American Men had a five year survival rate of 66.3%. Scottish Men, covered by the NHS, survive 40.2% of the time. On top of this the Commonwealth Fund found that 60% of UK physicians think that patients have excessive waiting times for diagnostic tests, compared to only 9% of American physicians. This is borne out by the fact that there are only 5.6 MRIs per capita and 7.6 CT Scans in the UK, vs 26.5 and 33.9 in the USSources:. http://www.minneapolisfed.org...http://www.telegraph.co.uk...http://en.wikipedia.org...http://www.commonwealthfund.org...