Capitalism

In my last post, I attempted to make a case for capitalism based on human nature. My opponent asked a question that I did not adequately answer in my past post: Why does human nature render Social Democracy an inferior system to Capitalism?Social Democracy and Human NatureTo me, this is a simple answer. Social Democracies can seem successful. However, this is because most social democratic countries have a strong capitalist foundation place (Property Rights, Sound Money, Stability). However, I argue that Social Democracy is a worse system than Capitalism.My basis for this argument is quite simple, and I would assume my opponent agrees. High taxes and large welfare payments make leisure more preferable to work. Therefore, people in social democratic countries have less incentive to work hard and even get employed at all.This brings me to my next point. The study I cited in my last post was from Nobel Prize Winner Edward Prescott. My opponent says:"The first thing to say is Pro quoting the abstract of an article does not constitute an argument. Even if true, Pro has to use the facts and figures provided by the research and explain how these correlations = causation."Fair enough. There is however reason to believe this is a case of causation. First, and most importantly, this is exactly what theory would predict. Mainstream economists are in pretty much agreement on the fact that higher welfare payments and higher taxes lead to less growth. Second, there are no other explanations of this phenomenon that are not easily debunked. One idea is that Americans work more due to "cultural differences". However, this does not explain the fact that labor supply was the same or, in some cases, higher in European nations in the 1970s, when tax rates were similar. Another plausible explanation, that Labor Unions are too blame for Europeans working less, also seems unlikely. This is because, in cases where countries are highly taxed but not highly unionized, work hours have also declined. Such a case would be France.Thirdly, there is a bulk of subsequent research Bolstering Prescott's work. One example would be the work from Lee Ohanian, Andrea Raffo, and Richard Rogerson:"We document large differences in trend changes in hours worked across OECD countries between 1956 and 2004. We assess the extent to which these changes are consistent with the intratemporal first order condition from the neoclassical growth model, augmented with taxes on labor income and consumption expenditures. We find that the model can account for most of the trend changes in hours worked measured in the data. Differences in taxes explain much of the variation in hours worked both over time and across countries."This study also looked at the "Union" hypothesis and found that most measures of unionization did not correlate with hours worked like tax rates did.Finally, renowned Economist Raj Chetty, using Firm Level Data in Denmark, finds that taxation does impact labor supply in a strong way.I believe, given the data presented, there is a very little reason to doubt that high taxes have large harmful effects on the economy, through disincentivizing productive behavior.My opponent makes some very odd claims to try to rebut this. First, he argues that GDP per hour is a better measure of how taxes affect work effort. Why would this be?Labor Taxes have the effect of lowering hours worked. Even more oddly, he cites Norway and Luxembourg as examples. Norway, for one, is very rich in oil. It would be hard pressed to attribute their economic success to policy. Luxembourg is a small banking haven, another country that does little to show the success of social democracy.The most odd argument is that France has the same tax levels as America. This is easily disproven by looking at simple numbers. The tax to GDP ratio, the measure commonly used to measure tax burden, is about 46% in France, vs 27% in America. That is a large difference.UtopianismAs I said last time, I openly acknowledge that Pure Capitalism may be POLITICALLY unrealistic. However, if it could be implemented, it would be an excellent system. This is because, unlike Communism, it is economically realistic.I know this sounds utopian, but it is not. I am arguing that Developed Countries should try to move towards purer capitalism, which is not politically unrealistic.My opponent straw mans neoclassical economics numerous times. My point was that, in order for Neoclassical models to be accurate, perfect information is not required. All that Neoclassical models require are that humans are generally rational and self interested, assumptions that are very accurate. This is the idea of Bounded Rationality. Neoclassical Economics does not assume that all economic actors act in a completely rational way with perfect information all of the time. Instead, it assumes that most economic actors act somewhat rationally with sufficient information most of the time. Which is very different from the straw man my opponent is presenting.Health CareI readily acknowledge US health care will never be completely market based, the public would never support getting rid of Medicare, Medicaid, and the FDA. However, we can reform the system based on market principles. For example, we can take Paul Ryan's reform to Medicare seriously. This would not get rid of Medicare, but it would be a much more market based system. I'm sorry if my link was broken. However, my sources were not cited. My stats on waiting times and diagnostic tests came straight from the Commonwealth Fund. My source for cancer survival rates were from the highly respected Lancet Oncology. Anyway, my opponent seems to rely his entire empirical argument on this WHO Study:"On the empirical side, a WHO report (2000) (4) found that countries which had universal systems for disproportionately better than those without, with countries like France topping the poll, the UK performing well at 18th (despite a relatively low level of GDP spent), while the US spent more than any other country, but languished behind in 37th. The findings of the report was to “extend health insurance to as large a percentage of the population as possible.”First, he misrepresent the study he cites here. He implies that the US ranks 37th in the study despite spending a lot on Health Care. In fact, this study takes how much money spent into account. Without looking at cost this study ranked the US 15th in the world. It would be more accurate to say that the US ranked 15th despite spending alot of money. However, there are more problems with this study. First, it is 11 years old, very outdated. Second, it uses terrible methodology. It relies on Health Inequalities, Health Status, Inequalities in Financing, and Responsiveness as its standards. I don't at all agree that health care system rankings should be based on the inequalities present in the systems, and Health Status has little to do with the Health Care System. The one area in the study that is non controversial, responsiveness, the US is ranked 1st in the world.I conclude by saying that I think there is undeniable evidence that Capitalism is the best economic system conceivable, as it is the only system that works in accordance with Human Nature.Vote Pro!!!Sources:http://economics21.org...http://www.cato.org...http://www.nber.org...(for more empirical evidence that high taxes hurt economic growth, look here)http://pirate.shu.edu...