Is Capitalism a Game of the Survival of the Fittest?
It is quite common to be in a discussion about economics and proposing a capitalist solution when someone pipes-in “that’s just survival of the fittest.” What they are talking about is “Social Darwinism” and the image they mean to conjure up is that capitalism is like a bunch of gladiators fighting it out to the death until there is just one winner. Unfortunately, this tends to trip many of us because we often say that capitalism is about competition and that competition is what makes America great.
However your point that disruptive technology almost never comes from big companies is quite valid. In the software industry I have what I call the "Pizza Principle". The team to design a new product should be the size that can sit around a Pizza and work. I'll allow an extra large pizza since computer geeks generally like pizza but the point is that small teams do the real innovations -- then big companies buy them.
Of course the software industry has a very low threshold for entry. At the minimum your capital investment is a single computer. One can't design a new rocket the same way.
But we don't only have disruptive innovation, we also have continuous innovation formed by companies selling similar products inventing minor improvements to give them an advantage with the competition. This is what companies spend the bulk of their creative time doing. A car company's R&D department does not try to create airplanes or space vehicles, it improves cars -- adding rear view cameras, etc. Every year they innovate and improve -- cars.
Your image of one car company or one telephone company results in a black car/phone. The Model T was available in black, as was AT&T's phone -- although in later years at a significant monthly premium you could get a different color.
Once you have competing companies in the space trying to produce minor improvements that will make them more attractive to the consumer we have a rainbow of colors.
I like living in a world with rainbows.
Unfortunately, this post got more play than what I think is a more fundamental post on the connection between evolution and economics, http://www.thesavvystreet.com/inventi... (https://www.galtsgulchonline.com/post.... Both of these posts are just a glimpse of the connections I make between economics, evolution, and entropy in my book Source of Economic Growth.
The main motivation for this post was to get people to understand that competition is not what makes America or capitalism great (or is the key to evolution). Of course competition is a poorly defined term, which is why I make it clear that I am talking about the goal of pure and perfect competition. I explain why perfect competition is evil at length in my book as well as my Atlas Summit 2015 talk.
You appear to be intermixing competition with invention. In science it is important to hold one variable constant while adjusting the other variable. This is why I showed that competition by itself had only a 13% improvement over a century in the 100 meter dash. I think this is fair statement of what competition without invention can accomplish – in fact it is probably an overstatement. Competition is not what makes capitalism great, inventions are what make capitalism great. Are inventions the result of competition? No, not in general. Inventions are made because the inventor wants to solve a problem, not because he want to out compete his neighbor. Rearden did not create his metal to out compete Associated Steel.
Neither capitalism nor evolution are driven by competition. Competition is a side effect in both cases. In evolution the driver is genetic changes and capitalism inventions are the driver. In fact, there is plenty of competition in a totalitarian state – competition for bread, for shoes, to not stand out, to get the choice political appointment, what there is not cooperation. When people say that capitalism is about competition we get bad economics, bad economic policy, and excuses to not protect our natural rights.
Monopoly is a loaded word. If what you mean by the 500 monopolies comment, is that we do not want 500 companies each producing high value products/services without anyone producing a nearly identical product/service then you are wrong. That is exactly what we want. The richer the country and the richer we are the more people are going to be producing unique high value products. If what you meant is that we do not want the government to put rules in place (inconsistent with natural rights) to bar competition, that is absolutely true, however it is not the most important issue for wealth creation or what makes capitalism great. A monopoly in economics can only be created by government interference in the market. A sole provider of a product is not a monopoly. If it were then we are all monopolists over are labor, over our property, etc. This is the sort of sloppy thinking that leads to nonsense. In fact, some economists who push this point of view have been honest enough to suggest that all property rights are monopolies, which shows this line of thinking is double speak.
BTW: As many people can attest on the gulch I am not known for being highly patient.
Your piece about capitalism as a game of survival of the fittest reminded me of many past occasions when I spent time contemplating the nature of capitalism and the related concepts, many of which you invoked. I am responding (too?) late because of some travelling I had to do.
Here, I would like, in a way of response, to take the same and similar ideas and express them differently. I mean it when I say differently. I am not saying “better”, nor do I mean in conflict with what you said. Just a different perspective of a different individual with a different life experience. But also with the same need for consistency, the same obligations of truthfulness and concordance with reality.
(As you can tell, this is going to be relatively long, coming from a meticulous nitpicker using a foreign language. Sorry about that. I hope that you are a patient man. If not, the “delete” key is very helpful.)
It seems to me indisputable that life is a phenomenon governed by the laws of nature, e.g. principles of thermodynamics, and the nature of matter. As you say, it consumes energy by multiplication and reproduction, which implies a drive for survival. As a consequence of the non-equilibrium nature of the life processes, life of an individual living thing is finite. Nothing living is immortal. The drive involved is directional and the processes irreversible.
Seeking sources of energy directly leads to competition, among the individuals and species, for food and space (territory). As Darwin so clearly demonstrated, the competition leads to improvements and evolution. Continuous improvement in chances of survival and reproduction leads to better individuals and better species.
I know nothing about the game theory. Many years ago I read something about it that turned off and I never gave it another chance. The evolutionary competition that I mentioned leads directly to cooperation, sort of superimposed on the competition that is life. My limited experience is in playing soccer, basketball and lots of chess. The cooperation is called teamwork. But, please note that on every team there is also a competition among the members of the same team.
We humans, as a species of living organisms are, as a matter of course, subject to all those things I mentioned above, including the same basic driving forces. Being rational, we are able to understand reality better and deeper than any other living things. But, even among humans, there are vast differences in those abilities as well as in physical abilities.
Humans develop methods of producing useful things (technologies) and thus create value. Value being determined by how much other humans are willing to part with value of their own creation, to obtain the valuable useful things made by any given technology under consideration. There is also a sort of life cycle in technologies. The basic innovation creates it. Its early success in the markets generates revenue to fund efforts in continuous improvement (I call it development engineering). Many innovative ideas and novel designs support that continuous improvement. Gradually, the cost of each improvement grows and the overall improvements become less significant. The technology matures. Then somebody else comes up with a bright new invention and the old technology is replaced by a new one. The effectiveness of that continuous improvement is measured by efficiency of the development processes: how much increase in product value versus the cost of implementing the improvement. Please note that this is the same as the efficiency of a bird trying to find enough food. Flying all day for one grain leads to sudden death.
Of course nobody would want 500 firms building model Ts. But I submit that no one would want 500 monopolies either. The competition on efficiency and productivity is part of the essential nature of capitalism and, as I hope I made clear above, as well of the essential nature of life. In every kind of business there is someone that thinks that there is a better idea on how to run that particular kind of business. The only way to really find out is try to do it. It is called entrepreneurial risk. Own money and private investors willing to take that risk. And the first real life lesson in marketing for the new entrepreneur. The competitors force each other to be more efficient and find continuous improvements: in technology, in management, in marketing and financing.
The only place I differ with you, I think, is on the goal of the economy. I think that the better goal for a capitalist economy is to simultaneously maximize total wealth and median wealth. You do not want a couple of multi-trillionaires and all the rest of us scraping to put together the down payment for the mortgage on the home.
I would like to point out that social arrangements based on life, liberty, private property and pursuit of happiness are in deep agreement with the nature of life and the nature of capitalism. Without freedom to accumulate value and then risk it on the owner’s idea of a successful enterprise, there cannot be capitalism. The fundamental flaw and deeply corrupting influence of our form of government at present is its ability to sell protection from competition to the willing buyers of that service. Lobbying is just a euphemism for bribery, in my opinion.
Finally, about Mr. Spencer’s defamation of capitalism. Darwin was far too smart and knowledgeable to make such a basic mistake. He never even remotely visualized the species or the individual living things as gladiators in mortal struggle to become the last survivor. Actually, I think that Mr. Spencer did not make any mistakes. He deliberately wanted to confuse and mislead his audience.
I hope that I demonstrated amply and convincingly that life and capitalism are deeply related and analogous phenomena. In my opinion, both are truthfully and fully described as phenomena where the rule of the demise of the unfit is always operational. If you break a leg, you cannot walk. If you poison your mind, you cannot think.
What do you think, Dale?
Existence exists is a circular statement and really means nothing. It is no different than saying a tree is a tree. It communicates nothing; teaches nothing.
Existence does exist why this is true is not necessary for understanding logic.
Unless we agree on origins, we can discuss nothing else; foundations are key.
Defaulting to "existence exists" is a cop out and denial of what is all around you. You cannot reason to a tree...it is there, so you have to believe it is either there by purpose, or accident.
There is but one logical alternative... Support Survival Of The Weakest....
Toss THAT into the conversation and see what happens... I've done that in 'discussions' where people decry the effects of The Profit Motive...
"So, you'd prefer the Loss Motive"? Try to float some stock based on THAT goal... :)
agents.
What I was inspired to say by putting what I thought was a humorous twist on it is that I am learning as I interact with the Gulch. I should be more serious in my responses. You opened up new vistas of thought for me and pathways that I hadn't considered before. The fascinating thing about the Gulch is that, instead of wasting time and energy pointing out the screwed up premises of those I communicate (argue?) with, I can either put forth what I have learned and learn from others instead.
Epigenetics? Ooh, esoteric.
You know, you folks often make me feel like I'm back in college. A dictionary in one hand, a encyclopedia in another and an atlas in another. And it's been a very, very long time since I was in college.
bread keeps rising regardless! -- j
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