The Socialism Red Herring: Are we all Sociacaps now?

I love how we are debating socialism. The Ds love to taunt the Rs with this stuff. Capitalism is bad. Socialism is good. No, it isn’t. Your mother wears combat boots. No, she wears Sketchers. Blah blah.

As usual, we get all pumped up by these pols and we start fist-pumping and breast-bumping. It’s almost better than Perry Como reruns.

Let’s start with some definitions I found in Wikipedia:

Socialism is a range of economic and social systems characterised by social ownership of the means of production and workers' self-management, as well as the political theories and movements associated with them. Social ownership can be public, collective or cooperative ownership, or citizen ownership of equity.  

Capitalism is an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

The main distinction--and an important one--is that capitalism is run by private owners for profit and socialism is run by social ownership.

So what does that mean in theory and practice?

In theory, the distinction arises out of what roles we play as citizens when it comes to who makes the donuts. Notice it is the same people in either system – the citizens. In socialism, we all come together and decide how many donuts to make and at what price to sell them. We then create a sharing scheme to distribute the revenues. In capitalism, we let people self-select so that some people make and sell the donuts while the rest of us make steel or farm the land. Those who farm the land don’t share their profits with those who make the donuts and vice versa.

That’s the theory. What about the practice? I doubt there has ever been either of these systems working any place at any time. It is impossible for all of us much less the people in Bloomington to make the donuts together. What happens in reality is that some folks get selected to do the work. Then the political process decides who gets what. 

Capitalism is never tried either. Notice that countries have governments and governments never let capitalists run willy nilly. Governments scoop off their share of the revenues with something called taxes. And of course they cannot resist regulating these companies in the name of the people.

So if we never see socialism or capitalism, what’s the big debate about? The reality is that most modern countries are somewhere on the socialism/capitalism scale. In some countries the ratio of government to private is higher; in other countries it is lower. The best most countries can do is to move the needle at little one way in one year, a little the other way in another year.

So we are all Sociacaps now. And what we are doing in the political arena today is to move the needle. The Ds want to move it left. But in reality it isn’t as theoretical as you might think. Arthur Okun wrote a book a long time ago called Equality and Efficiency: The Big Tradeoff.  In that book he wrote that if you want more equality (free schools, free healthcare, etc.), then efficiency and economic growth will suffer.

That is what the coming election is about. Will the Ds come up with something that effectively improves equality without throwing the baby (the economy) out with the dirty bathwater?

I suspect we will hear a lot about that this year. Thus the need for plenty of JD... and donuts.