They suggested that capitalism generates its enormous social benefits neither through its guarantees of private property, nor by its cultivation of personal initiative in response to personal incentives, nor by capital flowing freely to seek its highest return based upon market and social valuation. Inefficient enterprises are unprofitable, and therefore cannot sustain themselves over the long run, go bankrupt, and are replaced by firms that are efficient. This is the market discipline. Even some Western market economists who should know better were nodding yes to this concept. People, they argued, can interfere with the efficiency of the theoretical market system by being slow to respond to market changes because they may misinterpret, misunderstand, or develop habits or loyalties that may make them slow to respond to product changes and allow inefficient firms to survive longer than they should.
People always do seem to be a problem for social theories.
Such socialist rhetoric is seductive, but unconvincing. There is so much wrong with these arguments that one hardly knows where to begin in refuting them. The central fallacy is likely the regard of human beings and human nature as negatives in society and economy. Under capitalism the society is not corrupted or complicated by individuals, but rather is the individuals. Human tendencies to form social bonds, to show reluctance to change, and to be vocal about changes in the economic world are not imperfections but rather strengths in a market system.