Markets are good for some activities, but for others they are actively harmful. There are a lot of jobs that people want to do, and all you have to do is give them a decent salary and whatever tools are necessary, and they’ll work hard. A good example is curing cancer, or, indeed, most medical research. People love the idea of helping people and saving lives. As long as they know that, if they do cure whatever it is, they can move on to curing something else (i.e., their economic welfare is not dependent on not solving the problem), they’ll bust their asses.
On the other hand, if the profit motive is involved, some problems don’t get solved. If you’re a pharmaceutical company, you don’t want to cure diseases: You want to sell a pill, shot, or treatment that people have to take over and over again. You want to develop palliatives, not cures. Using for-profit companies to try and cure something, including Covid, is deranged. It would cost them hundreds of billions of future profits if they actually cured the plague or cancer, or anything else.
This is also why, when they do come up with actual cures, they price them massively high. After all, you only get to sell a cure once to each patient.
People like doing useful work. What you have to pay people for is to do bullshit work, and the more bullshit it is, or the more harm it does, the more you have to pay them. Meanwhile, work that is good and useful is underpaid, or not paid for at all, because our economy tries to free ride on the fact that people will do that work for less or nothing.
Doesn’t quite work — because no matter how idealistic you are, you need to eat, pay rent, and sock away some savings, and so work that is genuinely important goes undone, and Wall Street pays multi-billion dollar bonuses.
Capitalism thus often optimizes for activities that are actively harmful, or unnecessary, and actively makes it hard to work on what is important and good.
StewartM
With for-profit healthcare, there is also other mal-aligned incentives:
1) If a patient comes in with good health insurance, or has the personal ability to pay, the incentive is to over-treat the patient, and run up the biggest damn bill possible in order to maximize profit.
2) If the patient is indigent, and/or has poor health insurance, the incentive is to under-treat the patient (“take two Advil and go home and stop bothering us”).
That is exactly the outcome the US health care system produces, over-treating those who can pay and under-treating those who cannot, and the result is an overall pricey system with poor outcomes. This should not be unexpected given what the system actually incentivizes.
Astrid
The long Steve Keen interview makes the point that capitalism may have already gone past it’s inflection point on productivity. More productivity is not bringing better outcomes but worse ones.
The solution to capitalism’s overproduction problem isn’t to grow the population and force markets into existence. It should be to implement fairer sharing of real wealth (including free time), reduce demand, and reduce production capacity in an equitable manner. The only reason we don’t have 8 hour work weeks is because our rulers can extract wealth and power from our misery and the population is too stupid to imagine a better world.
https://lexfridman.com/steve-keen/
bruce wilder
In bureaucracies, including for-profit business enterprise, it is usually a big mistake (from a social welfare perspective) to pay calculated bonuses or piecework at any level and the consequences just get worse and worse the further up the hierarchy of authority and responsibility one goes.
People will naturally game any system where keeping score is linked directly to payouts. If the relation of employee to production is simple enough, the consequences socially and economically may not be catastrophic. Most restaurants survive the subtle corruption of tipping the server. Spif’ing the staff at a retail store is rarely the cause of anything worse than reputational damage from abuse of trust and that may be lost in the noise.
Where paying bonuses or piecework “works” it requires constant attention and deep involvement of supervisors (who rarely want to work that hard — bonuses are decadent at low levels of management because they are treated as a substitute for management effort, when they only work passably well reinforcement of such effort.
Paying large bonuses to powerful executives at the top of bureaucratic enterprise is borderline insane. They have too much control over management information systems — to trust the accuracy of any data filtering up thru the hands of the bonused is a faith unfounded in reason.
Paying fu money to top executives who win a tournament of ladder-climbing sociopaths is wrong on many levels.
Society at large should want conservative leaders of long tenure who value their status and reputation in the community as much as their wealth and income at the head of great enterprise. A self-destructive society pays out vast sums to the best and brightest to fool, trick and prey upon the general run of humanity; calling that destructive activity, “finance”, or pretending that “efficient allocation of capital” is accomplished by a casino does not redeem such decadence.
Trinity
“Capitalism thus often optimizes for activities that are actively harmful, or unnecessary and actively makes it hard to work that is important and good.”
I think you mean “makes it hard to work on what is important and good.”?
Trinity
This is a really, really important point to make, Ian, because it’s foundational to everything that is going on (and even more so because it doesn’t require mentioning politics or economics). It’s another facet on how their activities can’t be sustained.
The fires in the western US are killing firefighters, who are some of the real heroes of today. Firefighters are dying, getting maimed, and all for what? Preventing loss of property that never should have been built in many of those places in the first place. There were reports that the earlier North Texas fire started due to heat, although I can’t seem to find that AP report anymore.
They’ve created multiple, negative-impact feedback loops that unfortunately will be sustained. It’s their legacy. Hopefully history will burn them in return.
marku52
I’ve been reading a fascinating book “How Will Capitalism End” by Wolfgang Streeck. He posits that capitalism and democracy have an oil and water relationship, in that democracy favors a “moral justice” approach (“Everyone should have housing and health care”) and capitalism responds with “economic justice” (You have all of that you can afford”). Now capitalism, and in particular neoliberalism has vanquished all opposition. Counter to what you might think Streeck thinks this puts neoliberal capitalism on its last legs.
He posits 5 problems that neoliberal capitalism is unable to fix by itself. Some of them, because they are inevitable outcomes of capitalism—How could capitalism possible fix a problem that it is designed in its nature to produce? The five are stagnation, inequality, plundering of the public domain, corruption, and global anarchy.
Streeck’s thesis is that, even without a competing ideology, capitalism will fail simply because its stops working. Inequality is baked into its DNA. Climate change? Hah! Corruption- because neoliberalism is always looking for profit, and profit is found in bending the rules and creating a market where there wasn’t one before. “Why can’t I sell organs? Children? Cocaine?” Capitalism has always required a global hegemon to facilitate trade, to insure that the rules of capital are respected, and to provide a global currency. The British Empire fit this requirements once, to be replaced by the US. And the US is visibly failing horribly at this. Others are noting.
Streeck was writing almost 10 years ago. How have things gone since then.? All these problems have gotten worse–much worse. The USD was already decreasing in usage for trade before the US stole multiple billion USD from Russia. Stagnation?–we’ve got Stagflation! Inequality rockets up, as usual. Corruption is horrible, and out in the open. Climate change will never be solved by an ideology that deifies individual wealth. Globalization is already in reverse. The Davos crowd no longer confidently predicts how everyone will follow them on the way to technical utopia. In the US, a raving heretic “Free trade is bad! Trade wars are easy to win! Immigration is terrible!” won election to highest office. In the Eurozone, the tensions between the indebted south and the mercantilist north has only been worsened by the incompetently designed sanctions regime. In France, LaPen nearly won. Drahgi is gone, as is Johnson. More to come.
And we are well on the way to a world where there are multiple poles of influence. No hegemon. Neoliberal capitalism is offering no benefits to most of the developed world.
Perhaps it is grinding to a halt?
Stephen K
Great article Ian! I would add that education is another endeavor that falls into this category. Consider the various schemes like charters and vouchers. While these are often promoted to the public by appeals to elitism, racism, and religious sensibilities, from an economic POV, they are just barely-accountable private schools taking public money. So it should not be terribly surprising that the administrators and corporate backers of these “schools” often do quite well for themselves while rarely doing better than traditional public schools, and often doing much worse, because of course they have an incentive to spend as little as possible on teachers and infrastructure to maximize their personal payout.
Willy
I had a conservative try to sell me that envy is worse than greed and thus socialism is worse than capitalism. Retard.
Envy is a weak force quickly dissipated, closely related to resentment. I mean, if your brother got rich quick through some late-stage capitalist scheme and constantly bragged about it, you’d be envious. But you’d be a lot less envious if his scheme yielded social benefit and he happily paid all your rent.
But greed is like gravity. The more it accumulates the more it wants until it’s like some black hole devouring everything nearby while spewing out toxic radiation as a byproduct. Good luck stopping greed when it gets up to supermassive power.
Cultural values need to change. We should start there before hitting bottom, which is how most retards seem to need it. (I couldn’t work black holes and dependency issues together since I’m not so good with the mixed metaphors.)
We can’t keep allowing retards with their “individualism” mantras to help create individual islands of powerlessness, which is how most black holes seem to need it. I’ve heard that in the cultural world, it only takes a small percentage to influence the rest. We need to make the common wisdom wiser.
StewartM
Willy
I had a conservative try to sell me that envy is worse than greed and thus socialism is worse than capitalism. Retard.
What conservatives call “envy” is the righteous and justifiable animosity and anger generated when someone cheats you out of your just rewards. Say, you do a job with someone, and they promise to split the pay 50/50, but afterwards they tell you the total pay was $100 (and they give you $50 for your half) when they hide the fact that the total pay was $500 of which they kept $450 for themselves.
Isn’t that what has happened in the US and the West at-large, really? Workers work harder for less money, while the top 1 % rake in bulk of the rewards for someone else’s
hard work. Conservatives and libertarians use the word “envy” as doubleplusgoodspeak to avoid calling it was this really is, ‘theft’.
Ché Pasa
Re: for profit health care.
Let’s remember that the United States was a profoundly unhealthy country from its founding till well into the 20th century. For the most part, health care was an expensive crapshoot. So many docs were little more than quacks that were in it for the money. Hospitals were where you went to die; so many patients never got out alive. Charity hospitals and wards — where they existed — were hell holes. Public health was an oxymoron until late in the 19th century, and even then, it was primitive and punitive and wasn’t always effective.
It wasn’t until the near elimination of many chronic diseases — whooping cough, diphtheria, tuberculosis, cholera, polio, etc. — through often draconian measures, all the things that people have been complaining about wrt to Covid and much worse — that public health became respected. I
Improving the health of the masses and limiting infant and maternal mortality was good for society and business, but it wasn’t directly profitable, and so, when the major health issues like bad water, tainted food, and any number of chronic diseases were mostly solved, the health care industry began to boom; people including doctors could get rich from restricting care (as they always had done) to those who could/would pay. Public health practices weren’t needed any more. So they’re mostly shelved except in the third world.
All kinds of expensive treatments are available now. The Market, you know. PhRMA is on the warpath against the drug pricing provisions of the reconciliation bill. Same as it ever was (“Socialized Medicine!”) only a lot more of it than ever before.
Willy
@StewartM,
I was trying to avoid the “envy” I have towards my big medical establishment in-law who got rich selling a medical company which he didn’t build. Didn’t last long.
Through connections, BIL was hired, rose to top management and helped his college buddies (I mean partners), “bookwork” the place to look attractive to large corporate buyers who didn’t know (or care) that the actual quality of services offered were being made secondary to apparent appearances and short-term profits and the clientele was starting to notice with public reviews of increasing anger and frequency.
He rationalizes his helping ruin a once-valuable asset to the community, a fair and balanced capitalist resource, by telling himself (and others) that this is the way the system works, and if he didn’t do it somebody else would.
Indeed. I’ve seen similar done to an aerospace subcontractor, a composites manufacturer, and a property management firm. If you build it, the shysters will come to buy it and figure out even more ways to refine its money extraction schemes, otherwise known as “theft”.
I just saw a “And Now This” video detailing how Kristen Sinema traded progressive values for wealth and power. I think she did so because inside most of us, is a greedy and corrupt asshole just waiting to emerge. I think the only thing keeping the greedy asshole from power is our culture. That check/balance doesn’t come from within an individual and was part of humanities successful evolution as a species.
Speaking of being envious of unchecked medical/pharma power and their money extraction rackets, it‘ll be interesting to see what happens with California’s insulin production idea. Since big medical/pharma will do whatever they can to avoid being undercut and exposed by government options, I forsee big money flowing into discrediting anything related to state made insulin.