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Is Capitalism Sustainable?
In, “Is Capitalism Sustainable?” Senior Fellow at the American Institute of Economic Research, Michael Munger, explains the benefits, and in fact the necessity, of capitalism in organizing human cooperation at scale, and urges the consideration of some problems inherent in capitalism. Karl Marx called some of these problems “contradictions,” and while he was wrong about many things, including a value theory based on embodied labor, his perceptions of capitalism were very accurate. The problem for Marxists is simple, Munger every flaw in markets is worse under socialism. At the micro level, every flaw in consumers is worse, and in fact much worse, in voters. Unless you are willing to advocate monarchism, or actual communist dictatorship, markets and democracy are the only two mechanisms we have for organizing society. So while Marx’s theory about the flaws of capitalism has some merit, he was utterly blind to the problems of democracy. Looking back now, with the benefit of the contributions of the Public Choice branch of political economy, we are in a position to evaluate markets and democracy on an even playing field. And most of the time, for most purposes, capitalism wins. Michael Munger is a Professor of Political Science, Economics, and Public Policy at Duke University. His Economics PhD was awarded from Washington University in St. Louis in 1984. He worked as a Staff Economist for Dr. Wendy Gramm at the Federal Trade Commission in the first Reagan Administration, and has had academic appointments at Dartmouth College, University of Texas-Austin, and University of North Carolina-Chapel Hill. He directed the MPA Program at UNC, and chaired the Political Science Department at Duke from 2000 to 2010. He currently directs the interdisciplinary Philosophy, Politics, and Economics Program at Duke. His research interests include regulation, political institutions, and political economy. His most recent book was Tomorrow 3.0: Transaction Costs and the Sharing Economy, published by Cambridge University Press in 2018. Munger is a Senior Fellow of the Independent Institute and the AIER, and is a former President of the Public Choice Society (1996-1998). He served as an editor of Public Choice (2005-2010) and Independent Review (2015 to present). He lives in Raleigh, North Carolina with wife Donna Gingerella and loyal dogs Murphy and Skippy Squirrelbane.
- GenresEconomics
422 pages, Paperback
First published January 1, 2019
33 people are currently reading
130 people want to read
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Displaying 1 - 6 of 6 reviews
December 17, 2019
This book was a reaffirmation of capitalism. Munger defends capitalism as the greatest of all economic systems while avoiding romanticizing it – since fallible people take part is any system.
Munger offers plenty of insights from Austrian economic and public choice theory to counter the rise of socialism's popularity.
But like I said, he doesn't romanticize capitalism. Imperfect, selfish people will play apart in any political economic system. Capitalism will never be perfect, and arguing bad things happen under it is not a legitimate argument against abandoning it. What it does best is align peoples' incentives better than any other system. The result is the prosperity we see all around us.
A negative for the book was it could have used some closer copyediting. I found quite a number of sentences that had grammar and punctuation mistakes. None of that took away from the important argument Munger makes.
Capitalism can be sustainable if we fully understand it capabilities and trust it to continue serving us well.
Munger offers plenty of insights from Austrian economic and public choice theory to counter the rise of socialism's popularity.
But like I said, he doesn't romanticize capitalism. Imperfect, selfish people will play apart in any political economic system. Capitalism will never be perfect, and arguing bad things happen under it is not a legitimate argument against abandoning it. What it does best is align peoples' incentives better than any other system. The result is the prosperity we see all around us.
A negative for the book was it could have used some closer copyediting. I found quite a number of sentences that had grammar and punctuation mistakes. None of that took away from the important argument Munger makes.
Capitalism can be sustainable if we fully understand it capabilities and trust it to continue serving us well.
February 26, 2020
I didn't realize Michael Munger had written a book until he pointed it out in a blog post about wolf conservation, implying it was full of examples about market environmentalism. The reality was exciting at first, because he raises a bunch of completely unrelated issues I also happen to be looking to read about right now: economies as natural phenomena that span political systems as well as conventionally recognized markets. He spends a lot of time early on developing arguments very similar to ones I've had percolating in my own brain for the last year or so. That the idea that "social constructs" are somehow arbitrary and changeable, following no natural logic and built by no particular forces. I was surprised to learn that this line of reasoning came largely from Hayek, who actually uses the term "cultural evolution" to describe it!
Anyway, the interesting meat of the book is in the way Munger lays out the argument for markets and capitalism in general, through a very compelling economic theory lens illustrated with lots of colorful examples. It's been a while since I spent much time with these arguments, and at this point I find most of them quite plausible at face value. The theory of prices and the case for price gouging are convincing, the notion that profit drives economic activity and can't simply be assumed and redistributed after the fact is stated more cogently and undeniably than I've ever seen it, his take on recycling makes sense (if it was worth doing people would pay you for it), and the explanation of why firms exist was interesting. I was intrigued to see him challenge the notion of market failure tout court and deny the possibility of a government correcting one through Pigouvian taxes. Not sure I'm totally convinced on that but it made me see the problem as much more difficult than the Pigou 101 version I was taught in Environmental Econ. On the other hand, there is very little here about sustainability, except for two posts about Simon and Ehrlich and overpopulation--a topic I desperately want to read a more in-depth economic take on--and the recycling thing.
The problem is, these are all interesting one-off ideas that sit only loosely together as a book, because this is quite literally a collection of blog posts! It is minimally edited together, with part introductions and references to other chapters. But it's not edited *that* much--the same quotes come up within pages of each other, as if it were the first time we were seeing them, for instance. That means the arguments feel frustratingly shallow, skimming exactly the sorts of questions and implications I wanted him to tackle simply because such things would be too weighty and complex for the blog post format. He switches around midway through from a "case for capitalism" style of argument to a self-consciously choir-preaching discussion of how to frame libertarian talking points to the public. It's quite jarring--I never realized I'd become a libertarian, so jumping right into learning how to state my libertarian opinions correctly took me off guard.
The reason I found this so frustrating is less affront over the label and more the conceptual gap it papered over. Once we move into "how do we convince everyone we're right about libertarianism", everything gets reframed in this boilerplate "state bad market good" rhetoric that IMO avoids all the interesting questions. It's as if the state is nothing more than a manifestation of our collective economic ignorance and misguided good intentions. He talks about how markets and voluntary societies that compete with the government can both improve outcomes for apparent "market failures" that demand state intervention. He makes the case that the existence of the state is itself the injustice that demands resolution, not some perversion or corruption of it. He goes through the public choice economics argument that bureaucrats are "no better or worse" than other people, and use their state roles in response to the incentives they present. He argues that democratic control is worse than markets because voters are the same dumb, limited people as consumers, but with bigger decisions to make at once and with less skin in the game.
That's all well and good. But it feels *so weird* to me to discuss political power as if well-intentioned ignorance were the only reason state power existed in the first place. As if the state's monopoly on violence, and the coercion that allows it to wield in the service of well-intentioned policy measures, is the only alternative to a world without coercion. Reading Peter Leeson's Pirate Economics last year gave me a lot of the material that's clearly lacking here: political structures like democracy and autocracy are literally the outcome of the same forces (transaction costs) Munger spends much of the book discussing. You could, ironically, make a case that the state we have is in fact something like the best solution we've come up with for mitigating state-like coercion (and I guess to be fair this is consistent with his case for constitutionalism over pure democracy), that fucking with it because you assume you've got a better idea is dangerous and hubristic, risking the same "Pretty Pig" mistake he applies to capitalism and socialism. Doesn't tossing out the state simply create a vacuum for much worse political structures? But there's no real discussion of that. Instead we only get this truncated view in which the only thing we need to do is outgrow the naive belief that we need a state to meddle to improve our lives. It makes it a far less complete picture of political economy than I would have liked. But again, what more can you expect from a set of blog posts?
A more fair criticism, I think, is that Munger's discussion of welfare is woefully inadequate to defend the points he wants to make. Sure, price signals the relative value we place on different goods, allowing them to flow to their best use. Great. But how does the fact that the marginal value of a dollar is so different for rich and poor people factor in here? My grasp of "liberaltarianism" has always been that markets do great in allocating and creating wealth, but sometimes fail to provide basic needs for very poor people, so state intervention is necessary. Munger elaborates the first parts of that argument and implicitly dispenses with the latter, but never justifies it. He gives a jerkoff critique of a single aspect of the welfare state that no one supports and never engages with any other iterations of it. Conversely, though perhaps less urgently, the fact that many wealthy people obtained their wealth through means that don't interfere with the importance of profit as an engive of value, or even actively undermine it (rent seeking through the government, committing literal violence and exploitation, arguably even inheritance). Doesn't that change the nature of the market? All of this extra-market power, exerted through the state or despite it, seem to introduce all sorts of "market failures", no? And yet elsewhere he implies market failures are sort of theoretically impossible?
I mean, I might be getting churlish by now, but I literally just wanted him to explain what libertarianism actually entails, in his mind? Like, he thinks slavery and civil rights violations are bad, but does he oppose the use of state coercion to end them? What is the nature of this thing he assumes we're all ready to learn talking points for? What I ultimately want, as always, is an account of economics grounded in evolutionary and ecological human nature rather than framed in the narrow confines of modern industrial state politics. On that front, he argues that Sweden and Denmark are very capitalist and that's great (implicitly supporting their strong welfare policies?) so I have no real argument with him politically.
Anyway, the interesting meat of the book is in the way Munger lays out the argument for markets and capitalism in general, through a very compelling economic theory lens illustrated with lots of colorful examples. It's been a while since I spent much time with these arguments, and at this point I find most of them quite plausible at face value. The theory of prices and the case for price gouging are convincing, the notion that profit drives economic activity and can't simply be assumed and redistributed after the fact is stated more cogently and undeniably than I've ever seen it, his take on recycling makes sense (if it was worth doing people would pay you for it), and the explanation of why firms exist was interesting. I was intrigued to see him challenge the notion of market failure tout court and deny the possibility of a government correcting one through Pigouvian taxes. Not sure I'm totally convinced on that but it made me see the problem as much more difficult than the Pigou 101 version I was taught in Environmental Econ. On the other hand, there is very little here about sustainability, except for two posts about Simon and Ehrlich and overpopulation--a topic I desperately want to read a more in-depth economic take on--and the recycling thing.
The problem is, these are all interesting one-off ideas that sit only loosely together as a book, because this is quite literally a collection of blog posts! It is minimally edited together, with part introductions and references to other chapters. But it's not edited *that* much--the same quotes come up within pages of each other, as if it were the first time we were seeing them, for instance. That means the arguments feel frustratingly shallow, skimming exactly the sorts of questions and implications I wanted him to tackle simply because such things would be too weighty and complex for the blog post format. He switches around midway through from a "case for capitalism" style of argument to a self-consciously choir-preaching discussion of how to frame libertarian talking points to the public. It's quite jarring--I never realized I'd become a libertarian, so jumping right into learning how to state my libertarian opinions correctly took me off guard.
The reason I found this so frustrating is less affront over the label and more the conceptual gap it papered over. Once we move into "how do we convince everyone we're right about libertarianism", everything gets reframed in this boilerplate "state bad market good" rhetoric that IMO avoids all the interesting questions. It's as if the state is nothing more than a manifestation of our collective economic ignorance and misguided good intentions. He talks about how markets and voluntary societies that compete with the government can both improve outcomes for apparent "market failures" that demand state intervention. He makes the case that the existence of the state is itself the injustice that demands resolution, not some perversion or corruption of it. He goes through the public choice economics argument that bureaucrats are "no better or worse" than other people, and use their state roles in response to the incentives they present. He argues that democratic control is worse than markets because voters are the same dumb, limited people as consumers, but with bigger decisions to make at once and with less skin in the game.
That's all well and good. But it feels *so weird* to me to discuss political power as if well-intentioned ignorance were the only reason state power existed in the first place. As if the state's monopoly on violence, and the coercion that allows it to wield in the service of well-intentioned policy measures, is the only alternative to a world without coercion. Reading Peter Leeson's Pirate Economics last year gave me a lot of the material that's clearly lacking here: political structures like democracy and autocracy are literally the outcome of the same forces (transaction costs) Munger spends much of the book discussing. You could, ironically, make a case that the state we have is in fact something like the best solution we've come up with for mitigating state-like coercion (and I guess to be fair this is consistent with his case for constitutionalism over pure democracy), that fucking with it because you assume you've got a better idea is dangerous and hubristic, risking the same "Pretty Pig" mistake he applies to capitalism and socialism. Doesn't tossing out the state simply create a vacuum for much worse political structures? But there's no real discussion of that. Instead we only get this truncated view in which the only thing we need to do is outgrow the naive belief that we need a state to meddle to improve our lives. It makes it a far less complete picture of political economy than I would have liked. But again, what more can you expect from a set of blog posts?
A more fair criticism, I think, is that Munger's discussion of welfare is woefully inadequate to defend the points he wants to make. Sure, price signals the relative value we place on different goods, allowing them to flow to their best use. Great. But how does the fact that the marginal value of a dollar is so different for rich and poor people factor in here? My grasp of "liberaltarianism" has always been that markets do great in allocating and creating wealth, but sometimes fail to provide basic needs for very poor people, so state intervention is necessary. Munger elaborates the first parts of that argument and implicitly dispenses with the latter, but never justifies it. He gives a jerkoff critique of a single aspect of the welfare state that no one supports and never engages with any other iterations of it. Conversely, though perhaps less urgently, the fact that many wealthy people obtained their wealth through means that don't interfere with the importance of profit as an engive of value, or even actively undermine it (rent seeking through the government, committing literal violence and exploitation, arguably even inheritance). Doesn't that change the nature of the market? All of this extra-market power, exerted through the state or despite it, seem to introduce all sorts of "market failures", no? And yet elsewhere he implies market failures are sort of theoretically impossible?
I mean, I might be getting churlish by now, but I literally just wanted him to explain what libertarianism actually entails, in his mind? Like, he thinks slavery and civil rights violations are bad, but does he oppose the use of state coercion to end them? What is the nature of this thing he assumes we're all ready to learn talking points for? What I ultimately want, as always, is an account of economics grounded in evolutionary and ecological human nature rather than framed in the narrow confines of modern industrial state politics. On that front, he argues that Sweden and Denmark are very capitalist and that's great (implicitly supporting their strong welfare policies?) so I have no real argument with him politically.
October 28, 2019
If you’re an economics nerd, this is a great read, short chapters (blog posts) on a variety of economic topics. Munger sets out to explain the benefits and necessity of capitalism in organization human cooperation at scale, and to consider some of the inherent problems with capitalism (Marx called them “contradictions). Munger writes, “The problem for Marxists is simple: every flaw in markets is worse under socialism.” For arranging cooperation on a massive scale there’s no alternative to capitalism. It reminds us that capitalism is about consumer sovereignty, not about creating jobs. That poverty and inequality are completely different things. To alleviate the former, create wealth, to end the latter, destroy wealth so there are no rich people. The choice is clear. Inequality is moral, as long as folks played by the rules earning it. If you want equality, visit a cemetery, as the German proverb says. That every flaw in consumers is worse in voters. So is behavioral economists are correct that we are irrational in spending our own money, think how bad they are as voters. And if we are seduced by “free,” then think of what that means when politicians play Santa Claus. How we can be dumb in the supermarket and geniuses in the voting booth?—we are the same person
That to consumers, all costs are transaction costs, so businesses turn their creative energies to devising ways to reduce these. That laws and legislation are not the same thing (laws against murder are natural, 55 MPH is legislation and it’s arbitrary). That Public Choice theory is Politics Without Romance—even good people can’t fix a bad system. That Anti Price-Gouging Laws harm the very people they are designed to help (people in disaster areas).
The discussion on “consumer surplus” is framed this way, which is excellent: How much would you pay for a ticket to Walmart? This thought experiment demonstrates the value of what we take for granted: access to markets that sell a variety of things we need and want. This type of value isn’t even captured in our national income statistics, significantly understating our standard of living. Also a great explanation of why firms exists if markets are so good (transaction costs!). North Korea, Cuba, the USSR, and Venezuela have all learned that profit is not all that costly after all. Munger also debunks the religion that is recycling.
In summary, he answers the title of the book this way: “I hope so.” So do I. This is a witty, funny, punchy, and worthy read. We interviewed Michael Munger on our radio show: The Soul of Enterprise on his book, Tomorrow 3.0. You can listen here: https://www.thesoulofenterprise.com/t...
Noteworthy
• The Pittsburgh left turn is illegal, but everyone does it.
• Eighty percent of the world’s pumpkin production come from Illinois, and 95% are grown there, just a few dozen miles from Peoria. Morton, IL produces more than 100 million pounds of pumpkins each year.
• Adam Smith: “To widen the market and to narrow the competition is always the interest of the dealers…”
• The best argument for markets is not the perfection of the price mechanism; it’s the imperfection of the world.
• An old English tradition: the reason the faces of leaders are put on postage stamps: allows citizens to thumb leader’s noses whilst they lick their hinder parts.
• It’s not a good idea to give more discretion to bureaucrats, it’s the train to tyranny. Foolishness and bluntness is the nature of law, not a perversion of it. The Thing itself is the Abuse! (Edmund Burke).
• Democracy, without checks against the majority, is tyrannical. “Imagine if all of life were determined by majority rule. Every meal would be a pizza. Celebrity diets and exercise books would be the only thing on the shelves at the library. And—since women are a majority of the population, we’d all be married to Mel Gibson.” P.J. O’Rourke.
• Josh Billings: “I honest believe it is better to know nothing than to know what ain’t so.”
• It’s forgotten that Japan’s Ministry of International Trade and Industry, in an attempt, to streamline and rationalize the auto industry, limited it to two companies: Toyota and Nissan. All others were told to direct their energies to motorcycles. One loner didn’t listen, named Soichiro Honda.
• Munger describes himself as a “directional” libertarian: if a policy cuts spending or increases liberty, he’s for it, even if it isn’t a real libertarian policy. I’m a conservative for ideological reasons, and a Republican for pragmatic ones, same thing.
That to consumers, all costs are transaction costs, so businesses turn their creative energies to devising ways to reduce these. That laws and legislation are not the same thing (laws against murder are natural, 55 MPH is legislation and it’s arbitrary). That Public Choice theory is Politics Without Romance—even good people can’t fix a bad system. That Anti Price-Gouging Laws harm the very people they are designed to help (people in disaster areas).
The discussion on “consumer surplus” is framed this way, which is excellent: How much would you pay for a ticket to Walmart? This thought experiment demonstrates the value of what we take for granted: access to markets that sell a variety of things we need and want. This type of value isn’t even captured in our national income statistics, significantly understating our standard of living. Also a great explanation of why firms exists if markets are so good (transaction costs!). North Korea, Cuba, the USSR, and Venezuela have all learned that profit is not all that costly after all. Munger also debunks the religion that is recycling.
In summary, he answers the title of the book this way: “I hope so.” So do I. This is a witty, funny, punchy, and worthy read. We interviewed Michael Munger on our radio show: The Soul of Enterprise on his book, Tomorrow 3.0. You can listen here: https://www.thesoulofenterprise.com/t...
Noteworthy
• The Pittsburgh left turn is illegal, but everyone does it.
• Eighty percent of the world’s pumpkin production come from Illinois, and 95% are grown there, just a few dozen miles from Peoria. Morton, IL produces more than 100 million pounds of pumpkins each year.
• Adam Smith: “To widen the market and to narrow the competition is always the interest of the dealers…”
• The best argument for markets is not the perfection of the price mechanism; it’s the imperfection of the world.
• An old English tradition: the reason the faces of leaders are put on postage stamps: allows citizens to thumb leader’s noses whilst they lick their hinder parts.
• It’s not a good idea to give more discretion to bureaucrats, it’s the train to tyranny. Foolishness and bluntness is the nature of law, not a perversion of it. The Thing itself is the Abuse! (Edmund Burke).
• Democracy, without checks against the majority, is tyrannical. “Imagine if all of life were determined by majority rule. Every meal would be a pizza. Celebrity diets and exercise books would be the only thing on the shelves at the library. And—since women are a majority of the population, we’d all be married to Mel Gibson.” P.J. O’Rourke.
• Josh Billings: “I honest believe it is better to know nothing than to know what ain’t so.”
• It’s forgotten that Japan’s Ministry of International Trade and Industry, in an attempt, to streamline and rationalize the auto industry, limited it to two companies: Toyota and Nissan. All others were told to direct their energies to motorcycles. One loner didn’t listen, named Soichiro Honda.
• Munger describes himself as a “directional” libertarian: if a policy cuts spending or increases liberty, he’s for it, even if it isn’t a real libertarian policy. I’m a conservative for ideological reasons, and a Republican for pragmatic ones, same thing.
May 21, 2023
In a collection of essays written over ~15 years (2005-2019), Munger evaluates capitalism and importantly its alternatives. While markets may not be perfect, it is necessary we evaluate them against their real world alternatives rather than a fictional perfect system. Interesting and entertaining throughout!
August 8, 2020
Collection of essays on economics from Michael Munger.
December 14, 2022
Good book by Munger on a number of key economic issues with many great examples. But the key to the book is that capitalism is sustainable and best lets people prosper.
Displaying 1 - 6 of 6 reviews