Why Not Capitalism?

• Author: Munger, Michael
• Position: Book review

* Why Not Capitalism?

By Jason Brennan

New York: Routledge, 2014.

Pp. vii, 114. $24.95 paperback.

For decades, academic philosophers have wondered whether people were "good enough" for socialism. That is, they grant one of the two key premises of the argument for market systems but ask whether that premise might be mitigated by careful choice of institutions and group size.

For those late to the question, the two major premises of the consequentialist argument for markets are (1) the knowledge problem and (2) the human nature problem. That is, given that knowledge is complex, dispersed, and expensive, any aggregating institution must collect and interpret huge amounts of information and then give specific directions to individuals in highly differentiated local situations. Then, given that humans are concerned primarily about themselves--not exclusively, but primarily--they must have their own reasons to follow those instructions.

Suppose that I happen upon a substance under some rocks near my hovel. It is surprisingly heavy, but it turns out to resist both water and rust, and, even better, it can be pounded into thin, pliable sheets. In other words, an ideal roofing material from my perspective.

So I dig it up, heat it so it is easier to work, and pound it out to a nice thin foil a fraction of an inch in thickness. To cover my ten-by-ten-foot hovel, I need about eighty ounces of the stuff, so I dig until I find that much. And then I roof my hovel with it. The neighbors admire it, commenting on its beautiful yellowish color because, of course, it is gold.

It turns out, however, that there are many other uses for gold. Although it is perfectly true that gold is a fantastic roofing material, it is also useful for fillings in teeth, for electric circuits, and so on. Are these other uses "more valuable" than my roof? Without prices, how can we even tell? What does that statement mean?

Obviously, with prices I can fairly easily find out that the gold on my roof is worth almost $100,000 in alternative uses because the market price of gold (at this writing, $1,215 per ounce) multiplied by the amount of gold on the roof (eighty ounces) is one expression of the opportunity cost of using the gold for my roof.

But that brings us to the second problem: Why would I care if other people value the gold more than I value it for my roof? Human nature is to care (first) about oneself. I might donate the gold, knowing that others value it more, but I also might cover it with thatch...