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C00002 00002	REPAIRING THE DEFECTS OF SOCIALISM
C00014 00003	see commun[w76,jmc]
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REPAIRING THE DEFECTS OF SOCIALISM


	Capitalism as practiced in the United States, Western
Europe and Japan works better than socialism as practiced
in the Soviet Union, Eastern Europe, China and Cuba.
Taiwan works better than China, West Germany better than
East Germany and South Korea better than North Korea.
While economic statistics are the usual basis for this
claim, the best evidence is that all the socialist countries
control emigration and none of the capitalist countries do.
Nevertheless, socialism has strong intellectual attraction,
because it seems plausible that a planned economy should
work better than an unplanned one, it sems more just that
rewards should not be based on inherited position, and it
seems better to many people that people should work for the good of
all rather than for the good of an employer.

	My thesis is that socialism might potentially work better than
capitalism, but in order to do so it must overcome certain defects that
are dear to the ideology of most socialists.  In fact, after I get through
improving socialism the free enterprisers might like it better than the
socialists do.

	The main fault of socialism is the politicization of
decisions that should be administrative or contractual.  We
can see this best in the institutions in the U.S. that have
a socialist character - the regulatory agencies and the
social welfare system.  These agencies make decisions that
effect the interests of many groups - take, for example,
the Federal Power Commission and its regulation of the price
of natural gas.  Leaving the result aside, consider the procedure
whereby the result is reached.  Hearings are held in which
various interests are represented.  A representative of a city
says that the people are poor and can't afford to pay more
for gas.  A representative of the gas producers says that a
higher price is needed to stimulate production.  The decision
is often the resultant of the political strengths of the various
groups.  Moreover, the lawyers representing the groups argue
for the most obvious and immediate interests of the groups.
You will not persuade a lawyer for a New England town that if
he keeps the low rates he is arguing for, it may happen that
demand will be stimulated and production discouraged to the
point where a shortage will occur that will cause the main
industry of his town to be cut off and the citizens of the
town to become unemployed.  I don't wish to argue that the
lawyers for the other side in this case are necessarily better
although they can often get their clients, being fewer, to see
farther ahead.

	Socialist sentiment wants to extend this kind of
procedure to all institutions.  Should not the students
have a say in running the university?  Should not the workers
run the factory?  Should not the faculty of a university
control appointments?  Why should there be administrators?
Should
not decisions be made by those who will be directly affected
by them?

	The answer to all these questions is NO, especially
to the last.  The worst group to make decisions is often those
directly affected if their immediate interests are in conflict
with those of the social institution that they are part of.
If the faculty ran Stanford University according to its
immediate interests, it might decide to liquidate it,
walk off with $500,000 apiece, perhaps then getting jobs
in other universities.  The motto %2"No man should be the
judge in his own case"%1 is usually more applicable than that
asserting %2"Decisions should be made by those directly affected."%1
The catch in all these cases is that we are talking about
institutions that are created for the benefit of people who
are not directly involved in the operation of the institution.
Factories produce goods for all, and universities must maintain
the ability to provide education for people yet unborn as well
as provide an environment for scientists to make discoveries
that may benefit people yet unborn.

	One of the criticisms of socialism is that government
does things badly.  Two reasons are given.  One is the afore-cited
fact that government decisions become politicized.  The other is
that government employees don't have the same motivation to do
a good job as those in private industry.  My opinion is that the
former is the more important and is often the cause of the latter.
The reason government employees are often badly motivated is the
politicization of their conditions of employment.  For example, they can
and often do politick for lax employment policies.

	In support of this, there is little complaint about how
the U.S. Coast and Geodetic Survey makes maps.  I suppose there
isn't much politicking about how to make maps and which maps to
make.  Perhaps the employees don't work as hard or imaginatively
as some in private industry, but at least they don't need a legal
monopoly like the Postal Service does.  The most important fact
is that the making of maps is rather uncontroversial, so neither
lobbyists nor Congressional committees nor "public interest" lawyers
play a very active role.

Socialism has the following problems

1. Lack of opportunity for free enterprise.
Under capitalism free enterprise is a rare event.  Nevertheless
it is of extreme importance for the progress of society.
Remember that throughout human history, progress has been episodic,
new technology and new customs have been introduced rarely and
slowly, and many societies have suppressed almost all innovation
for hundreds of years.  Fortunately not all societies have
suppressed innovation all the time, and the laggard societies
have had to import innovations or be overwhelmed.  Both outcomes
have occurred, so even survival hasn't been sufficient motive
to make some societies innovate.

(above needs revision.  New restaurant are formed all the time).

2. Imposing inadequately tested grandiose solutions.

3. It puts politicians in management positions requiring technicians.

4. The situation in which an individual has a lot of money of his
own with which he can do great things but which he can lose utterly
is hard to duplicate.  It can lead to feats of hard work, leadership
and innovation much less frequently achieved in organizations
where investments are decided collectively.  The fact that the
attempts fail more often than they succeed is regrettable, but
in some areas society may be greatly advanced by a single success
in 100 attempts.

Of course, this is the standard romantic view of capitalism.
It would be important to be able to check it objectively.  The
fact that socialist countries haven't been innovative could be
due to other faults of their systems.  There are, of course, plenty
of anecdotes.

	One such anecdote that seems worth recounting is the development
of integrated circuits by Texas Instruments, now a giant firm.  (Need
to check the facts about how small they were.)  The point is that the
possibility of integrated circuits and their usefulness had been realized
for a number of years.  The Defense Department had supported a number
of projects.  These projects were unsuccessful and the small private
Texas Instruments project succeeded.  The reason why the much larger
amount of Government money didn't succeed was probably that
there was a consensus on what was the most promising approach, and
that consensus was mistaken.  The TI people couldn't get Government
support for their idea, which happened to be the right one.
see commun[w76,jmc]