I think it is becoming clear that both socialism and capitalism have large, glaring flaws.

One of the glaring flaws of markets (i.e. capitalism) and socialism is the same: information. Information is not symmetrical nor is it complete. Or another way of putting it is ignorance…even rational ignorance. Factor in that people generally have a really hard time with evaluating uncertainty (i.e. probabilistic events) and you can have problems in both systems.

However, economists have studied these information problems in capitalism far more extensively and have found strategies for solving them. Heck even markets come up with such solutions since there are profits to be made and people can be innovative. For example, using Akerlof’s lemon (cars) model. If a buyer doesn’t know if a car is a peach or a lemon the peach market fails to exist. However, people with peaches (assuming they know they are peaches) can offer things like limited warranties as one way of signalling the quality of the vehicle. Another is to allow the prospective buyer to take the car to an independent mechanic. Now these are sub-optimal outcomes (economists call them second best outcomes) in that they increase the cost of purchasing a peach, but so long as these costs are less than the benefits that accrue to the seller and the buyer then the peach market can come into existence, albeit smaller than it would be in a situation of complete and symmetrical information (or as economists call it perfect information).

But with socialism and the method of allocating resources there, very little work has been done on the incentive problem, information asymmetries, and so forth. Most economists would likely say that without some sort of price to signal information such a system is going to have lots of problems before you even get to the issues of things like the principle agent problem, moral hazard or adverse selection. How do you know where to ship input X? People producing X in a capitalist system answer this question quite easily: who is offering the most for X? The fact that these people are offering the most suggest they want it the most. No such mechanism exists in socialism if there is no price.

Capitalism, for all its faults, is a system with distributed information that is aggregated up into single (or maybe a vector that is finite) measure: the price(s) of the good in question. The informational problems distort that measure.

In socialism, the price is not set by market participants and aggregated up, it is made up out of whole cloth by the political process. For example, if people, in general, have persistent economic biases (see Tyler Cowen’s work on this) then that political process is going to set the wrong prices. And this assumes that people are not going to be voting for a candidate that is pandering to them…and nevermind that most Socialist systems always seem to end up as dictatorships.

I think I’d rather have the inadvertant errors associated with capitalism than the deliberate errors of socialism.

I’m sure the government has a lot of economists working for it. And I’m certain that one of the most important qualifications for those jobs is to favor government control.

Not necessarily. Lots of the government jobs that go to economists are ones where information is supplied–e.g. the Bureau of Economic Analysis and the Bureau of Labor Statistics. Both supply valuable information that help the market function better (CPI, labor data, economic growth data, etc.). One can do that and still have fairly consistent libertarian views…in fact, I used to work for the latter agency. Most of the economists I worked with had a very healthy and positive regard for markets and their ability to allocate resources.

Indeed, socialism is so infeasible that one has to wonder how the idea could ever be taken seriously by anyone with any economic sense at all.

You have to look long and hard to find an economist that favors outright socialism, IMO. Looking at the literature on the principle-agent problem would suggest that most economists understand that there are very significant problems there.

Dichotomies are inherently unstable, and rife for manipulation by pitting one side against the other. Imagine a cuisine with only two recipes, sex with only two positions, or American with only two parties. Well, I guess you don’t have to imagine that last one; how well is that working out for ya?

While we all know from previous discussion on this site that there are no such things as conspiracies, I sometimes wonder if the idea that the government should own all means of production wasn’t cooked up by some lowly government economist who just wanted to get in tight with the head of whatever state he was living in. It’s like telling the ugly babe sitting next to you in the bar how gorgeous she is so you can get laid (I’ve heard that this happens, but have never done it myself, of course). Indeed, socialism is so infeasible that one has to wonder how the idea could ever be taken seriously by anyone with any economic sense at all.

Well, that may be so, but I wouldn’t call it for certain based on that particular sentence. — After all, you could probably round up 200 people from college campuses who think we need socialized medicine like yesterday. (I’d even lay odds that someone already has done so.)

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“Jump, you fuckers!” — seconded.

Thank you for that, for a split second I saw my old E101 teacher in football pads and laughed myself silly.

French Revolution, anyone?

What I said was that I think Bush’s anti-intellectual tendencies are often justified

No they aren’t.

Making decisions in spite of what experts suggest is not “anti-intellectual”; it’s arrogant and stupid.

I’m guessing the “IMO” is implied.

FWIW, Klein is an idiot, Chomsky is spot-on except for his penchant for socialism, IMHO.

But this IS their expertise! These are the most educated economists in the country.

I didn’t say that Bush was justified here. What I said was that I think Bush’s anti-intellectual tendencies are often justified, as intellectuals frequently are charlatans who wrap up their wishful thinking in barely parsable jargon.

It was said about F. D. Roosevelt that he was a traitor to his class. I have my doubts about that. I think Roosevelt did just fine by his class.

But it can never be said that George W. Bush is a traitor to his class. And I’m betting it has nothing to do with alleged stupidity.

After some more give and ake, Sen. Richard Shelby, the top Republican on the Senate Banking Committee, presents a five-page list of 192 economists and business school professors who oppose the plan. Bush isn’t impressed. “I don’t care what somebody on some college campus says,” Bush says. Instead, he says he trusts Hank Paulson, who, he says, has more than 35 years of experience and access to more information than those academics on Shelby’s list.

And to be charitable to Bush he does have Ben Bernanke there as well, one of the top economists in the country. The Federal Reserve also employes lots of economists, probably more than 192. So it is probably safe to say that Bernanke does have access to information that academic economists don’t have access too. Still, considering what they have to say is the prudent thing, IMO. Bush response is arrogant and anti-intellectual since not too long ago Bernanke was one of those guys sitting on a college campus.

Those who cannot do, teach…or at least get graduate students to teach for them!

Why the f doesn’t Bush just issue executive orders instead of going to Congress?

“The Constitution is just a goddamn piece of paper.”