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Calculated Risk & False Dichotomies

 A lot of modern-day talk in the business and personal development world is inundated with platitudinous advice and contradictory dogmas that you’re expected to take a side on.  This is nothing new.  Peddling simple answers to tough questions will always sell more books than telling people that there is no clear-cut path and that a lot of life is simply a balancing act that takes time and energy to figure out.  

Among the most popular dogmas and false dichotomies are: “it’s better to be an irrational optimist than a rational pessimist”, or “work smarter not harder” or “The Obstacle is the Way”.

“There is no easy path” is something that largely holds true but to assume that no effort can be wasted is equally naive to thinking you can bypass the need to work hard by being “smart”.  To make a claim as simplistically formulaic as “The Obstacle is The Way” is also patently bunk when we consider that the reward for any given task is so vastly disproportionate to its difficulty, that the correlation is virtually non-existent.  

For instance, unless people are paying you to do so, trying to beat the market is a fool’s game, given the difficulty of the task, the time commitment required and the measly 2-3% difference in returns when people actually succeed.  Taking a year to learn a trade like plumbing might take a lot of work but when you run the numbers between that and obtaining a 4-year liberal arts degree, you’ll likely find a huge disparity between the median incomes and their associated cost (both in time and money).

It would be interesting to run a regression analysis between a fair metric of “effort” and lifetime earnings or ROI.  I’d suspect the disparities to be so large that the correlation would be close to 0, thus proving my point.

The dichotomy between optimism and pessimism is particularly flawed because it all depends on the individual, not their “risk tolerance” (a dumb concept), but rather which side of the spectrum they tend towards.  Too much optimism and boldness are what cause people to be naive and get wrapped up in multi-level marketing schemes or purchase overpriced timeshares.  Too much pessimism can cripple you from taking action and cause you to fall into a cycle of self-fulfilling prophecies.

For instance, if you’re applying to jobs and you see that they’re looking for applicants with experience you don’t have, the pessimist won’t even bother applying at all, disqualifying themself before the race even begins, despite having virtually nothing to lose.  To “air on the side of boldness” would be good advice for this individual but bad advice for the guy who’s feeling tempted by the “business offer” from the old classmate he hasn’t spoken to in years. The latter has stuff to lose.

When navigating your way through choices and opportunities, rather than asking “is it better to be optimistic or pessimistic”, a much better (but deceptively simple-sounding) question to ask is this:

What do I stand to lose and what do I stand to gain from taking this action?  

This question varies tremendously in difficulty to answer depending on what you’re trying to accomplish.  Large insurance companies pay big money for actuaries whose sole job it is to answer these types of questions.

This principle holds doubly true for how you should invest your money—a particularly tricky question when factoring in all of the variables.

Of course, you should only invest in what you know and avoid speculative bets.  And of course the average person would probably be better off investing in a few carefully selected index funds and holding cash than they would trying to beat the market.  But even with this approach, there are risks, opportunity costs and externalities to consider. “Playing it safe” is a deceptively tough field to navigate.

We don’t know what the market will look like in 20 years.  Are we living in a market bubble? Probably. Is the S&P 500 price overinflated from the fed printing money and holding interest rates at exceedingly low levels since the housing crash?  Probably.  Will the market continue to grow at a consistent rate of 7-8% a year for the remainder of your life?  I have no clue.  Will the Austrian’s be proven right and will all this demand-side, modern monetary theory-driven policy cause overexpansion and misallocation of resources that lead to something far worse than in ‘08?  I have no clue.

In light of this, you could choose to buy gold or hold cash.  In this case, by holding cash, it’s guaranteed to depreciate a rate of approximately 2% percent a year, if we go by the CPI.  Given that the CPI is a terrible measure of inflation, in that it fails to account for bubbles, grotesquely rising housing costs and (if you’re American) grotesquely rising medical costs; we can assume the rate of inflation to in fact be much higher than 2%.  Holding cash comes with opportunity costs.

In this case, you could buy gold, it might pay off.  Gold has consistently outperformed the market since ‘08. 

https://www.macrotrends.net/2608/gold-price-vs-stock-market-100-year-chart [Gold in orange DJI in blue]

If you’re looking at gold as a hedge against inflation, however, it’s been counterintuitively found to perform rather badly during periods of high inflation (see the article below for details).  There are no sure things.

https://www.thestreet.com/mishtalk/economics/gold-is-not-a-function-of-the-us-dollar-nor-is-gold-an-inflation-hedge

The obvious answer, in this case, would be to “diversify” your portfolio, however, this is way more difficult to do than most people realize; in today’s world where the not so free market’s performance is almost entirely determined by the actions of the fed, simply holding index funds doesn’t mean you’re diversified anymore.  There are no simple answers, this stuff takes homework.

The point is, there are always tradeoffs and there is no one-size-fits-all answer for when to be bullish and when to be pessimistic.  As I said before, much of life is a careful balancing act that ultimately comes down to what you have to gain vs what you have to lose. Understand how probability works and use it to your advantage.  

This is the crux of calculated risk-taking.  Once you grasp this you see that there is no “high” or “low” risk tolerance, only people who understand the probability game and people who don’t.  Again, this doesn’t mean there’s a one-size-fits-all formula, given that everyone is working with different time horizons and disposable income levels but the principle remains the same.  

Knowing what you stand to win and knowing what you stand to lose.

An Econ Reading List

The Following is an adaptive list of books that I believe influenced my views pertaining to economics and financial markets.  A lot of the books on this list are deeply contradictory in terms of ideas and methodology and this isn't an accident, I want you to challenge yourself, read everything and then come to your own conclusions.  This is the way I did it.  

Not all of these are strictly speaking "economics books" however, this is also not an accident; a working knowledge of history, geopolitics, technology, and evolutionary psychology are just as vital to understanding global economic trends as is your ability to work with macroeconomic models.  

Listed in no particular order.  Here you go.

Zero to One by Peter Thiel

Why Nations Fail by Daron Acemoglu and James A. Robinson

Basic Economics: A Citizen’s Guide to the Economy by Thomas Sowell

Economics in One Lesson by Henry Hazlitt

Economics for Real People by Gene Callahan

Austrian Economics – A Primer by Eamonn Butler

The Case Against the Fed by Murray Rothbard

What Has Government Done to Our Money? by Murray Rothbard 

Anatomy of the State by Murray Rothbard

The Road to Serfdom by Friedrich Hayek

Planned Chaos by Ludwig Von Mises

The Virtue of Selfishness by Ayn Rand

Antifragile by Nassim Taleb

The Black Swan by Nassim Taleb

History of Western Philosophy by Bertrand Russell

The Selfish Gene by Richard Dawkins

The Manifesto of the Communist Party by Karl Marx and Frederich Engels

Superintelligence by Nick Bostrom

The Intelligent Investor by Benjamin Graham

Milton Friedman and Bill Buckley on The Topic of Conscription and Civic Responsibility: Ethics and Economic Feasibility

Yesterday I discovered an old interview from 1990 of Milton Friedman on The Firing Line with Bill Buckley where they debate the merits and feasibility of implementing a nationwide year of non-military national service. This was the subject of Buckley’s new book, Gratitude: Reflections on What We Owe to Our Country, where he proposes a system whereby people over the age of eighteen would be called upon to complete a year of national-service work, be it in hospitals, national parks, etc.

Friedman being fervently against any notion of collectivistic government policy, naturally, takes issue with Buckley’s book and provides a number of arguments as you’ll see in the video.

What is interesting is that Buckley appears to have come up with an idea for an alternative to military conscription that is very similar to what I proposed in my last article (Conscription and Civic Responsibility: An Alternative Proposal), both in terms of application and motivation.

The conservative columnist renews his call for a year of voluntary national service for young people eighteen and over, in areas such as health, day care, and the environment, to strengthen their feeling and appreciation for their nation

(Blurb, Gratitude: Reflections on What We Owe to Our Country)

In response to Friedman’s argument that such an initiative would be an overreach of government and an infringement to civil liberty, Buckley’s position is one that I share – Given that there are already government mandatory education requirements which we are all, for the most part, compliant with – the year of national service shouldn’t be such a radical idea and should be thought of as a small extension of our national schooling system.

“I base my position on the fact that nobody denies that the state has the right to insist that we learn how to read and write.”

(Buckley, min 3:45)

Unsurprisingly, Friedman holds no punches and is quick to retort that he in fact doesn’t think it’s moral for the state to force people to learn to read or write and has said in print that he is fully opposed to compulsory education. Whether or not you agree, you have to credit him for his consistency.

Unlike with my own proposal, Buckley maintains that his idea for national service would not be mandatory but there would be strong “incentives” to participate. Friedman claims it would be impossible to implement a program like this and maintain that it’s “voluntary”, in any meaningful sense of the word. On this point, I agree with Friedman, however, as I made clear in my last article, I was never dissuaded by the ethics of it in the first place.

While I side more with Buckley on this debate, I also don’t think Buckley’s plan could work. For reasons I explain in my previous article, the conditions I set for my program were quite intentional and a “philanthropic tone” to the jobs as Buckley prescribes is not, in my opinion, a condition that would yield the greatest social effect.

"Can you explain to me why it’s more of a national service if a young man takes a job to clean latrines in a hospital than it is if he takes a job to be a clerk in a Safeway?"

(Friedman, min 12:30)

I make a case for why I believe having people to work normal jobs (like Safeway clerk) for a summer would likely be of greater benefit than forcing people to clock a certain number of volunteer hours or at these supposedly “philanthropic” jobs. (Of course, Friedman would reject the premise that the government should be allowed to force us to do any job we don’t want to, Safeway clerk included.)

Regardless, it’s interesting to see that people have been dabbling with this idea for such a long time; the pros and cons of nationwide conscription as well as the potential for alternative options. I look forward to seeing what will come in the future.

Conscription and Civic Responsibility: An Alternative Proposal

 Many countries like Austria and Israel have mandatory military service.  Friends of mine, from these countries, who partook all reported that it was an overwhelmingly positive experience.  

They got to step outside their comfort zones, maybe learned some practical skills but most importantly, were granted an experience by which they can connect to all their fellow compatriots.  Almost like a rite of passage into citizenship.  

Even when it sucked, most would tell you that they wouldn’t have traded it for anything.

In a time of growing socio-economic tensions, when we find ourselves more divided than ever, politicians will talk a big game and attempt to put a bandaid on the problem with empty promises and moral posturing.

To truly promote tolerance and build unity, a much more drastic but practical solution is required.  And I believe conscription would be a good start.

It’s unlikely, however, that Canada would ever mandate this.  Too many people with (perhaps justifiable) anti-war sentiments.  It would never pass.  

Though, I believe this stance to be rather counterintuitive.  

When everyone is forced to share the burden in wartime it incentivizes a call to action, forcing us to feel the weight and the human cost associated. For this reason, I believe anyone with a fervent anti-war agenda should also favour the draft.

However, it is also important to note that in the last forty-years war has changed.  Advancements in military intelligence, use of drones and general shift towards non-violent trade wars has drastically undermined the need for military manpower.  Changes in structure to the world economy and the globalization of trade has also greatly decreased overall incentives to go to war.  

A trend that I hope will last.

In light of this, I’d like to, instead, propose an alternative to military conscription that may yield even more practical results.  

A Mandatory, Two-Summer, Work-Experience Program

My alternative would, by design, focus less on technical training but rather on developing character and a sense of national unity.  Something I believe to be highly neglected in our current school curriculum.

It won’t matter where you came from, everyone will have had the shared experience of being forced to participate.

Even if you end up in a field, like computer programming, where your need to interact with others is fairly limited and you never put to use anything you learned during these two summers, you’ll still forever be a part of that collective experience that all Canadians went through.

I’d contend that this mandate would do more to strengthen national unity than any superficial government motions or moral lecturing could ever hope to achieve.

In some places, Ontario for instance, you’re required to complete forty-hours of volunteer work to graduate.  This is all fine and well but is ultimately too light in effort required to have any meaningful impact.  

I want you to work real jobs and get paid for it. 

With volunteering, by definition, you are working for free, no one has to pay you for your labour and so a lot of students get away with half-heartedly going through the motions while they bank the hours.

In reality, we live in a capitalist society and whether you like it or not, the work you do must be of a standard that is valuable enough to your employer that they deem it worthwhile to keep paying you. Otherwise they will let you go. 

In the real world no one owes you anything.

You’ll be held to the same standards as normal employees and paid the same as normal employees.  You’ll find out very quickly where a haughty attitude gets you.

There could perhaps be some leeway regarding the period over which your work may be completed, however, I have designed it so that it can be done over the course of two summers, so as not to interfere too much with your education.  

Israel has successfully instituted a two year service minimum, so I think two summers is quite a conservative timeframe.

# 1. A Mandatory Summer working in Customer service (equivalent to 320 hours): 

This could vary from food service, waiting tables, retail or help desks.  Anything where you find yourself dealing directly with customers.  

Experience being on the other side.  You’ll learn what it’s like to deal with people from a subordinate position.  You’ll learn to empathize with people who do it for a living.

Let’s be frank, people can be jerks.  Oftentimes this isn’t intentional but it can be very easy to lose sight of the fact that you’re dealing with another human being if you haven’t been in that same position yourself.

In the process, you’ll also build confidence in your ability to communicate with people, learn sales skills and overcome your shyness.

It won’t matter whether you’re the son of a deadbeat dad or a successful lawyer.  You’ll all have had the same shared, maybe crummy experience, of having been forced to work in customer service for a summer.

# 2. A Mandatory Summer Working in Manual Labour (equivalent to 320 hours):  

There is a stigma around blue-collar work which I believe to be highly unfair.  A lot of these jobs pay extremely well and are vital for our economy.  Where would we be without the farmers who grow our food or the people who build our roads and infrastructure?  

I know many highly-intelligent people who choose to do these jobs simply because they prefer to work with their hands.  Some people just aren’t suited to being bureaucrats.  

At the very least, this way, you’ll be able to try it and find out for yourself.

Coinciding with growing levels of physical inactivity amongst our youth, I firmly believe that much of our angst, apathy and existential dread comes from a surplus of comfort and too much free time.  

Learn to do real work and literally sweat for your dollar.  I think you’ll find that after a day of hard labour, a lot of your worries about the meaning of life and crises of identity will have amounted to little more than petty quibbling.  You’ll cultivate an appreciation for the things you have and you’ll enjoy your leisure all the more.

Try telling me that my saturday night off, eating pizza and watching movies with friends is “meaningless” after a week spent stacking cash, working in the hot sun.

Whether you work in landscaping, farmwork, construction or a lumber yard; it doesn’t matter.  You’ll learn that your body isn’t made of glass and that getting dirty won’t kill you. You’ll find out that you have it in you to make a living the way that your ancestors did.  

This can only build your confidence.

Note:  I am drawing mostly from second-hand experience here.  Regrettably, I have never worked in manual labour, in a strict sense.  Consequently, I still don’t like being dirty and I don’t like getting sweaty beyond the controlled parameters of my gym. 

In squabbles of manly one-upmanship, I might boast about having 17-inch biceps or being able to bench over 300lbs but If someone tells me I have “soft hands”, all I can do is bow my head and admit defeat.

The real reason we should do this: Skin in the game

Some parents will inevitably protest.  They would rather their children not work in labour jobs which may be dangerous.  The reality, however, is that someone needs to do these jobs and a certain amount of risk is unavoidable in life.  

This also inadvertently draws light on the much more serious issue of avoidable risk and the problems related to workplace safety standards and labour laws.

Like during war times, I firmly believe that If the people with money and power are forced to share the burden and know that their children will also have to work these jobs they will be strongly incentivized to improve the legislation.

Note that I am saying this as someone who is generally skeptical of government intervention in matters of business:  Fiscal policy and regulation has a tendency to benefit lobbyists and lawmakers, not the people it claims to protect.  I believe that when in doubt, a laissez-faire approach is better than bad regulation.  

Ultimately, politicians are ruled by money and money is amoral.  With this in mind, I can’t possibly think of a better, no appeals to moralism, practical way of assuring lawmakers act in the interest of the people than this.  

As Nassim Taleb would say, there is no substitute for (in this case, literal) skin in the game.

Either way it’s a win.

Economic Feasibility:

A certain amount of market disruption can be expected but nothing that couldn’t be managed and adapted to.  These types of jobs are always in demand and the majority of people ages 18-20 find themselves doing this type of work anyway.

Spurring productivity in youth who otherwise wouldn’t be working will only boost GDP.  

Any labour surplus this policy creates could likely be rectified through stimulus and new subsidies for these types of businesses.  The cost of which would pale when compared to that of paying new military recruits with public money every year. 

New and creative service industries would come up, as a result, spurring an influx of tourism and foreign direct investment.

Online databases would be created, listing all the available jobs for you to meet the requirements.  Thus, new jobs would be created, helping both you and employers all while lowering overall unemployment

It’s important to note that historically, well-funded public education up to high school, not post-secondary, has been found to yield the best economic returns.  We should be investing in the skills necessary for citizens to become effective members of the workforce not in producing armchair intellectuals and bureaucrats.

Remember that this is for the common good.

You’ll have plenty of time later on to pursue your career-relevant internships in the public sector or a nonprofit, where you can make money being useless.  

In conclusion

The legal ramifications of failing to comply with this mandate would need to be strict.  Of course, there would be exemptions made for those with certain disabilities but stringent measures would need to be put into place so that the wealthy and well connected won’t just be able to buy their way out or sleep through a summer “working” at their dad’s factory.  

Only time could tell how this mandate would ultimately affect the economy, but I’d remind you that the main objective was never an economic one.  

Rather, the goal remains to help bridge the social gap between the rich and poor, the powerful and the vulnerable; to incentivize responsible legislation and to foster the general notion that we are all in this together.

The Ethics of Marxist Economics: A Breakdown

I wrote the following essay a while back in an attempt to deconstruct the Marxist view of political freedom; in the essay, I draw quotes from Marx that can be found in The Paris Manuscripts of 1844.  I decided to share this essay now because I believe it provides a good follow-up to the previous article I wrote on Marxism, back in August.  On that note, I hope you guys find it to be an enjoyable and illuminating read and I look forward to hearing your comments. – YT

From the dawn of the twentieth century, the way in which Karl Marx’s ideas took the world by storm is a clear indication that they touch on something very important and very human.  With the widespread and pervasive alienation brought forth by extreme levels of social inequality as well as feelings of disenchantment towards the elite and ruling class, Marx’s ideas still hold powerful sway in modern times.  Perhaps no thinker in history is as polarizing as Marx, and whether his writing inspires feelings of hope or anger, it is undeniable that Marx’s vision of societal freedom does address very real societal issues and concerns.  It is when we put theory into practice, however, that Marxism proves to be incompatible with human nature; ultimately, it fails to grasp the intimate relationship between political freedom, private property, and individualism.  Marxist critiques of capitalism, as an impediment to freedom, are mostly not invalid in and of themselves and it would be hard to argue with any intellectual honesty that free markets actually provide an even playing field for everyone.  It is when we look at the comparative costs of putting Marxist theories into practice and the real price we pay for socioeconomic equality of outcome, that it becomes clear that Marxism is fundamentally at odds with real political freedom.

Most concepts of political freedom ultimately boil down to ways of preserving people’s natural rights.  Political freedom for the citizen will usually entail some iteration of the following points: The right to live free from frustration, the threat of violence or coercion.  Freedom and the ability to do as one wishes without interference from the state; assuming it does not impose upon the same rights for others. In most accounts, political freedom will also involve, to varying degrees, the citizen’s right to actively participate in the governing of their nation or municipality, usually through some sort of democratic system.  While most political theorists fundamentally want the same thing, the means and methods by which they believe we ought to achieve and preserve these values can vary radically from one theorist to another. 

This was no different for Karl Marx, the German philosopher and political economist who founded the eponymously named school of thought called Marxism – which served as the philosophical underpinning to the economic system of communism.  Marx believed that the acceptance of socioeconomic inequality was incompatible with real political freedom.  He believed that so long as a person’s labour could be exploited for profit, he could never be truly free to be himself.  Marx’s view of freedom is centered largely on the notion that existence precedes over essence and that capitalism is an inherently oppressive essentializing force, in the way it forces us to take on roles that we otherwise wouldn’t in order to survive.  An idea which would later be elucidated by the existentialist philosopher Jean-Paul Sartre in his 1945 lecture Existentialism Is a Humanism.

 For this reason, Marx wanted to create a classless society, a utopia, by which no one would ever find themselves subject to frustration under the power of another individual by virtue of their socioeconomic standing.  In a world where the bourgeoisie owns the means of production, the proletariat can never improve their station in life and are thereby forced to sell their labour to survive.  For Marx, the pathway to liberty would require us to free ourselves from the chains of the capitalists who own the means of production.  Marx believed that the exploitation of the working class’s labour is what ultimately leads to alienation.  The only path for the proletariat to become truly free would be in uniting as workers and seizing the means of production from the capitalist bourgeoisie and building a communist utopia.  

the true resolution of the strife between existence and essence, between objectification and self-confirmation, between freedom and necessity, between the individual and the species. Communism is the riddle of history solved, and it knows itself to be this solution. (Marx, The Paris Manuscripts, 43)

As an alternative to capitalist price theory, Marx proposed instead that we follow his Labour Theory of Value, which is based on the idea that our economy should essentially reward everyone equally according to the amount of labour that they put in.  This is in stark contrast with the Austrian school’s notion that prices are largely irrational and value is subjective and thereby only the market can determine prices, based on supply and demand.  The amount of labour that went into something is only a potential factor in creating something of value, it is not worth anything in and of itself.  For instance, someone could invest hours of labour into building ornate, handcrafted yoyos but if no one wants to buy them then they are ultimately still worthless; the labour that went into producing them means nothing in a capitalist system.

“The worker is not at all in the position of a free seller vis-à-vis the one who employs him…. The capitalist is always free to employ labor, and the worker is always forced to sell it. The value of labor is completely destroyed if it is not sold every instant. Labor can neither be accumulated nor even be saved, unlike true [commodities]… “Labor is life, and if life is not each day exchanged for food, it suffers and soon perishes. To claim that human life is a commodity, one must, therefore, admit slavery.” (Marx, The Paris Manuscripts, 9-10)

Labour, to Marx, is to be viewed as fundamentally unique to other assets and commodities.  With the COVID-19 pandemic, much of our current socio-economic discourse has been dominated by talk of who the “essential workers” are.  With a majority of the population being either temporarily laid off or told they could work from home; this has drawn criticism towards our modern political economy as the workers we’ve deemed most essential, like grocery store clerks and healthcare workers, tend to predominantly fall in the lower quadrant of the socioeconomic hierarchy.

It would be hard to argue that the baker or the farmer is any less important for our society than the financier, yet this is not reflected in their pay scales.  Someone might make the case that the economies of Canada and the United States could not function without capital markets and that the net economic benefits produced via the financier’s savviness in allocating investor capital, is in fact far beyond what one baker can contribute to our economy.  The question of whether that should entitle him to more money for the same amount of labour output is still unclear.  Even if the more specialized or skilled labourer is less easily replaceable and can thus leverage his position for more money, should he be allowed to do this?  Under communism, Marx would contend that a man should not be punished for his preference for baking, nor should another man be overly rewarded for his love of numbers.  

Some will try to make the case that the wealthy work harder than the poor; let us assume for a second that this is true. Does the CEO who earns eight-hundred-thousand dollars each year work twenty times as hard as the elementary school teacher who earns forty? Almost certainly not, in fact, behind closed doors, most CEOs would probably admit, that their gardener works harder than they do.  The strongest argument put forth in justification of this type of massive income inequality is in support of entrepreneurship.  There has been ample evidence put forth by economists that entrepreneurship is and always will be, the primary vehicle for a nation’s economic growth and technological innovation.  Daron Acemoglu and James Robinson make a truly compelling case in their book Why Nations Fail, that a country’s economic success can virtually always be narrowed down to the effectiveness of their policy and institutions in creating a climate that is conducive to entrepreneurship.  In a truly capitalist economy, entrepreneurs who invest their time and capital into their business are fully liable to suffer the consequences of their failures. There is no real safeguard for their investment, and they will normally lose everything.  Thus, for people to want to become entrepreneurs, despite the overwhelming risks, there must also be the incentive of a potential for huge reward, should they succeed. Without these conditions, no one would do it.  Thus, the entrepreneurs who must suffer the losses from their failures must in turn also be free to capitalize on their successes.  Without these incentives, both negative and positive, no one would try to come up with new or innovative business ideas and no one would care if their business is running inefficiently or losing money.  This standard would be impossible to maintain without strong laws preserving the individual’s rights to private property; without this, the incentives would be gone.  This is also why the role of the entrepreneur can’t simply be shifted over to the state-sponsored bureaucrat; any motivation to optimize our industry’s production and efficiency would be gone and any progress in the realm of research and development would probably come at a considerably slower rate.  The best we could hope for in such a case is the status quo.  Ultimately, Marx failed to recognize the importance of capitalistic incentives, entrepreneurship, and the validity in reaping the rewards for one’s risks and efforts.

While this argument mostly holds true for the Chief Executive Officers (CEOs) and venture capitalists who themselves took the risks. Granted not all entrepreneurs started from the same place, if you’re a fry-cook who managed to save ten grand over the course of a few years to finance your idea, your margin for error is considerably less than the entrepreneur who could procure a small loan of a million dollars from his father.   We must also consider the CEOs and business owners who have inherited these positions, or as Marx would put it, the means of production.  One would be hard-pressed to find anyone who could argue that these people earned it.  However, what to do about this brand of income inequality is more complicated than it would appear on the surface.  It is human nature to keep things within the family and those with money tend to find ways around nepotism laws and inheritance taxes.  Should the son of the CEO be unable legally to assume the role when he grows up?  Possibly, but what measures should be made to prevent this from happening?  It’s hard to imagine a way of effectively dissipating this type of patricianship and implementing such legal restrictions without seriously impeding upon one’s fundamental rights to private property, among other freedoms.  For this reason, state coercion would appear to be an inexorable precursor to a Marxist political system.

Any time we try to redistribute the wealth within a society according to what seems fair on the surface, the question should always be, at what cost and who will ultimately end-up paying it?  Marx claims that in a capitalist society only those with money, who own the means of production, can be free.  While it would be difficult to deny that money certainly aids and abets freedom, what is the alternative?  In a capitalist economy, money is needed to acquire things we desire and thus is necessary for certain types of freedom.  Liberty isn’t black and white but rather it is a spectrum that we all fall somewhere along and where we land on that spectrum is contingent on a multitude of factors, not just socioeconomic but also how we were raised, what hand we were dealt genetically, etc.  This idea also presupposes that the “means of production” are a singular and static fixture within our planet and not something that is constantly changing, growing, and adapting at different scales.  Was it not individuals who built the so-called means of production in the first place?  It is undeniable that those privileged enough to inherit means of production are at an advantage but, so long as everyone holds the same legal rights to buy and sell private property, everyone has at least a fighting chance of improving their material station in life under capitalism.  Under communism no one does.

Marx not only claims that in a capitalist society only those with money can be free, he also tries to make the case against capitalist greed by stating that individuals ought to adopt the virtues of asceticism and reject capitalist materialism to be happy. 

“the raising of wages gives rise to overwork among the workers. The more they wish to earn, the more must they sacrifice their time and carry out slave-labor, completely losing all their freedom, in the service of greed. Thereby they shorten their lives. This shortening of their life-span is a favorable circumstance for the working class as a whole, for as a result of it an ever-fresh supply of labor becomes necessary. This class has always to sacrifice a part of itself in order not to be wholly destroyed…  To develop in greater spiritual freedom, a people must break their bondage to their bodily needs — they must cease to be the slaves of the body. They must, above all, have time at their disposal for spiritual creative activity and spiritual enjoyment” (Marx, The Paris Manuscripts, 7)

The statement above almost presupposes that Marx knows that we can never expect great material wealth for the masses to come about through communism. This is somewhat self-contradictory since one of his main critiques of the capitalist system is that he believes it to be virtually impossible for the proletariat to get ahead, materially, so long as the bourgeoisie own the means of production.  Since the capitalists never strictly forced anyone to work, then why not just live like an ascetic in a capitalist society and allow those who should choose to work more to do so?  This argument put forth by Marx could have been valid if we presupposed that under communism we wouldn’t have to work as much as under capitalism to have our basic needs met, however, Marx had no way of knowing whether or not this would be true.  Historically speaking, this could not be further from the truth when we consider the numerous famines that ensued in the Soviet Union after the rise of communism.  Even into the 1980s, people of the Soviet Union regularly saw certain types of food disappear off the shelves for periods of time. Contrary to today, in the capitalist West, where obesity, brought forth by a literal surplus of calories, is considered a major problem in impoverished communities.

While Marx’s vision of freedom may still fall within the purview of negative liberty, according to theorists like Eric Nelson, the principles he espouses would certainly appear to be at odds with the virtues championed by strict negative liberty supporters like Isaiah Berlin, who warned against the dangers of state-sponsored coercion.  Berlin warned us in his short essay the Temple of Sarastro of the dangers of creating a utopia as a means of procuring societal freedom.  He argued that such ambitions inevitably lead to this type of coercion and this would tragically hold true when we consider the vast bloodshed that came fourth under communist regimes. Estimates vary greatly depending on the study, with numbers ranging as high as one-hundred-and-sixty-two million worldwide but, in 2017, historian, Stephen Kotkin was quoted saying that communism had killed at least sixty-five million people since the Bolshevik Revolution in 1917.

To some degree, the institutional use of force as a means of protecting freedom for the masses is unavoidable, even a laissez-faire capitalist economy is dependent on a strong justice system to protect private property and function as it should.  A key ethical difference between Marxism and capitalism is the degree to which the economic system’s function is reliant on the institutional threat of violence.  Capitalism may very well be inherently evil and oppressive, as Marx says

Competition is merely the expression of the freedom to exchange, which itself is the immediate and logical consequence of the individual’s right to use and abuse all the instruments of production. The right to use and abuse, freedom of exchange, and arbitrary competition (Marx, The Paris Manuscripts, 17)

There is something to be said for the fact that all this capitalist oppression comes about, remarkably so, without the use of violence.  It is human nature to be greedy and to want to accumulate wealth.  Because Marxism tries to fight this, it is incongruent with human nature, and thus it will always require considerably more force to implement and maintain than the capitalist system which merely exploits it.

 

To what extent Marx was an idealist whose notions simply could not hold up in practice or a truly sinister manipulator who preyed upon the helpless by creating a common enemy out of the bourgeoisie is open to debate.  Marx viewed communism as the inevitable endgame for society after capitalism would inevitably run its course.  Ironically, even Marx would appear to have underestimated the limitlessness of human greed.  Today in the West with more of our basic needs met than ever before we have only become more consumeristic with production shifting to meet ever-increasing conspicuous demands.  This shows that capitalism is inescapable; humans will always be consumers with new and changing demands and someone will always step up to the plate to supply them.  This is why, without fail, black markets have always emerged in communist countries.  Capitalism is unavoidable.

When left unchecked, free markets and untethered rights to private property can certainly lead to forms of crony and gangster capitalism.  Capitalism may even be inherently essentializing and oppressive but to say that it is more so than Marxism would appear to be fundamentally untrue.  By striving for equality of outcome, we ultimately kill any incentives for people to become entrepreneurs by not only failing to reward them for their risks – but far worse than that – we preclude them from reaping the rewards that they manifested themselves from the fruits of their risk-taking.  Humans will always try to compete and outperform each other and by restricting this we are engaging in an oppressive practice that is essentializing in nature.  By holding equality of outcome as the highest priority, Marxists are fighting with human nature and must transgress the fundamental principle of non-interference so that people conform to its principles.  This inevitably leads to the suppression of freedoms far worse than anything we have seen under capitalism.  It is for these reasons that Marxism is fundamentally at odds with real political freedom and why working towards equality of opportunity may be the best goal for our society.