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OPAR, Chapter Eleven
by Jimmy (Jimbo) Wales

Date: 21 Dec 1993
Forum: Moderated Discussion of Objectivist Philosophy
Copyright: Jimmy (Jimbo) Wales

What is Capitalism? What are the facts of reality that lead us to claim that capitalism is the only moral economic system? How should a proper defense of capitalism be conducted? What are the proper relationships between ethics, politics, and economics? What are some of the leading objections to capitalism, and how can they be answered? These are the questions that first come to my mind as I approach this chapter. Peikoff answers some of these questions, and his answers vary in quality. I will discuss each of them in turn, and then point out what I take to be the most glaring error in Peikoff's book.

1. What is capitalism? What are the facts of reality that lead us to claim that capitalism is the only moral economic system?

Peikoff apparently thinks that political conclusions on economic questions may be reached a priori without looking at any empirical evidence produced by economics. Peikoff seems to think that we look at man's nature to produce ethical maxims, then proceed from there to deduce the correct politics, and as a particular application of that politics, come up with the correct economic system. But this ignores some crucial facts of reality. Facts about economics play an important "feedback" role in our formulation of proper political principles. Socialism is an impossible economic system -- attempts to implement it lead to widespread death and suffering. Therefore, socialism is incompatible with the requirements of a rational morality. To attempt to reverse the implication is simply confused.

2. How should a proper defense of capitalism be conducted?

Peikoff addresses this point effectively. For a more comprehensive treatment of the issue, from the standpoint of showing why the "purely economic" argument often given by economists does not work, see Tibor Machan's Capitalism and Individualism. Tibor argues very effectively against the implicit Hobbesian egoism of many economists. But for our current purposes, the primary point that needs to be made has been made very well by Peikoff: a proper defense of capitalism is a _moral_ defense of capitalism.

I do think that Peikoff runs a serious risk by attempting (as he does) to disqualify the claims of some anti-capitalists by discrediting their epistemological foundations. The ugly open secret of free market economics viewed from an Objectivist perspective is that many of the leading free-market economists have astoundingly bad epistemology. Consider Friedman's well-known positions on methodology. Consider Hayek's Kantian skepticism. Consider von Mises's a priorism. If bad epistemology is sufficient grounds to discard an argument, I fear that we must know very little about economics indeed.

3. What are the proper relationships between ethics, politics, and economics?

The subject matter of this chapter is intimately tied to that of the previous chapter. Peikoff's claim is that "Politics is to economics as mind is to body, or as an abstraction is to one of its concretes. Politics identifies the principles that should govern every social field. [...] Morality determines politics, as its application to organized human interaction -- and politics then determines economics, as *its* application to the field of production and trade." (Peikoff, OPAR, 378.) Peikoff is here speaking of economics as a _normative_ discipline. He is viewing economics as a part of politics which in turn is viewed as a part of ethics in general.

I am personally unclear about the hierarchical relationships among ethics, politics, and economics. I am inclined to say that the relationships among these three are significantly more complex than Peikoff makes them out to be. Consider for example Peikoff's view of the _purpose_of the science of economics: "to identify how the principles of a proper politics actually work out in regard to men's productive life (and what happens to production under an improper system)." This seems inverted to me. The purpose of economics, qua positive science, is to identify how the principles of politics actually work out in regard to men's productive life, whether those principles are proper or not. My point is that knowledge gained through a serious study of economics will serve as crucial inductive evidence in discovering and formulating which principles of politics _are_ actually proper. Peikoff's formulation seems to presume that proper political principles can be formulated or discovered prior looking at reality.

4. What are some of the leading objections to capitalism, and how can they be answered?

Peikoff deals with this question primarily in his section "Opposition to Capitalism as Dependent on Bad Epistemology" (pp. 406-412). His approach here is similar to his defense of the axioms on pp. 9-10: he envisions an opponent and produces a hypothetical argument in which the opponent immediately starts making blatantly false claims. In this case, Peikoff's patsy resorts to fallacious appeal-to-authority, subjectivism, denial of the validity of theory as such, and skepticism about knowledge... all without stopping to catch a breath, apparently. And Peikoff claims that "All the objections raised against capitalism depend on the above kind of epistemology." (p. 408)

All? Peikoff is wrong.

If our opponents in the economics profession (and there are many, particularly if we include those who are merely _mostly_ in favor of individual rights and capitalism) were this stupid or dishonest, then anyone could undertake a comprehensive defense of capitalism to easily refute them for any honest person to see without any prior training. But the real situation is that there are a great many economists who think that they have valid reasons for endorsing certain kinds of economic intervention. Their objections are much more sophisticated and complex than "my definition is endorsed by three Nobel laureates."

Because Peikoff does not go into any of the controversies of modern economics, and may not even have any idea what sorts of issues are pressing in economics, I will not take up space here with my own musings about what the leading objections to capitalism are, and how these might best be answered. Suffice to say that many of the traditionally 'Austrian' insights about dynamics, information, transactions costs, incentives, etc. have been adequately captured in the models of modern economists. These models may produce "policy implications" (usually via a gross non sequitur) that are statist. None of the economists doing this work are as stupid as Peikoff's demonstration would hope that they would be.

Peikoff's most glaring error

I am really shocked by an absurd paragraph on page 407:

"The opposition to capitalism often involves an element of evasion. But often it does not; the opponents are sincere; they are, one must say, honestly stupid -- and it is a self-made, epistemologically induced stupidity. Intellectuals of this kind are deaf to facts (though unfortunately never dumb); they come to political conclusions by the same means they impute to capitalists in regard to the setting of prices: they do it by whim." This paragraph is so blatantly in contradiction to the Objectivist view of evasion that I cannot understand at all how Peikoff could make such a claim. Peikoff is here saying that intellectuals (who are presumably not retarded, illiterate, or very young (see "Fact and Value")) who exhibit self-induced stupidity, are deaf to facts, and who come to political conclusions by whim are NOT EVADING and are HONEST! Now, just to make clear my objection: I do not doubt that there are opponents to capitalism who are honest. Indeed, it is my position that opposition to capitalism is often dependent on much more than just bad epistemology, dishonesty, etc.. What I am complaining about is the idea of evasion Peikoff is endorsing here.


p. 61, quoting Rand: "Evasion is the act of blanking out, the willful suspension of one's consciousness, the refusal to think -- not blindness, but the refusal to see; not ignorance, but the refusal to know." How is this supposed to be different from 'self-induced stupidity',and 'deafness to facts'?

p. 267: "Honesty is the refusal to fake reality, i.e. to pretend that facts are other than they are."

I have two tentative hypotheses to explain Peikoff's odd statement. First, Peikoff would like to have his cake and eat it too. He would like to say that any ordinary person can just see that laissez-faire capitalism is the best system. This would allow him to proceed from ethics to politics to economics in his fashion, with earlier results driving later results without feedback. But at the same time, he does not want to condemn as evil all the economists who do advocate some form of mixed-economy. But if it is OBVIOUS that capitalism is right, then surely no professional economist could fail to be aware of it. Then they must be evading and therefore evil. So, to spare them this moral judgment, Peikoff invents a new notion of honest self-induced deafness to facts and whimsical conclusion drawing.

Second, proper attribution of moral responsibility to those advocating false ideas is a major topic (indeed, THE major topic) of the infamous Peikoff/Kelley debate. I cannot help but wonder if Peikoff's stated view of evasion here is somehow tied to that dispute in a manner I have completely failed to understand. This paragraph seems to endorse a position which is not Kelley's as I understand it, but which is also certainly not the view espoused in Peikoff's "Fact and Value."

My only other hypothesis is that my book is printed incorrectly.

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