What’s so wrong with socialism?


As a concept, socialism is appealing. It’s idyllic, it seems to diminish unfairness, promote the less-fortunate, favor equality, all good things. So what’s the problem?

The true problem with socialism is an economic one. It’s about simple math.

Socialism seeks to operate an economy, or society on the whole, by rules and regulations set by a small group of people in power.

Conservatives mainly criticize socialism as a system that misplaces incentives. While humans do operate by incentive, and socialism does skew incentives, this is not the most helpful critique. Socialistic regimes have imposed different forms of incentives throughout history, like fear of torture and death, to coerce their people into desired action.

There is also a basic problem with the idea that a few people should hold so much power over many. Regardless of the purity of a person, power generally corrupts. But, like the incentive criticism, this is not the most basic problem of socialism. The truth is, even under the most compassionate, just, caring leadership in the history of the world, socialism would still be doomed to fail.

The problem of socialism is, at its most basic, a problem of pricing. A truly free market is an incredibly efficient way to set prices and wages. Whenever there is too much of a good, demand (prices) goes down, and businesses and people react by creating less of that good. Whenever there is a shortage of a good, demand (prices) goes up, and businesses and people create more of that good. In a free market, this happens quickly, automatically, and constantly. Communication stems from millions of data points (decisions, knowledge, people) occurring every second of every day accurately determining what people want and delivering those goods.

When a government or ruling body steps in to set prices or fix wages (the standard operating procedure of socialism) instead of letting the market make a determination based on supply and demand, that body is bound to fail. Any group of people, regardless of their level of training, IQ, ambition, morality, etc. can never have a complete understanding of the millions of data points, decisions, and knowledge swirling within the market every second. A few people simply can’t know as much as the several billion people on earth collectively know.

Because of this, a set price or a fixed wage will necessarily result in waste (too much of a good) or lack (too little of a good). This state of mispricing, given enough time, will result in the collapse of society.

An example of wage-fixing can be seen in modern-day minimum wage policies. Minimum wage is an attempt to promote justice and protect the less fortunate from evil greedy companies; an understandable inclination, but unfortunately a worthless solution. In a free market, wages increase naturally (with bumps along the way) as demand for labor increases. In socialism, wage-fixing makes it difficult or impossible for some businesses to hire employees at a price they can afford, even if potential employees would be glad to work for such wages. At worst this creates an insane situation where businesses aren’t allowed to hire people who want to be hired, at best the market is inhibited and incentives are skewed (business may be more likely to hire contract employees or part-time employees to avoid additional costs required by regulation). A much more effective way to thwart greedy capitalists is to give the market space to create better jobs.

Socialism, as economic practice, will always necessarily fail. No group of people can ever possess the collective information of the entire market, and so they will never be able to accurately allocate resources and set prices.

Count the cost: social justice


Costs are not fun. Instead of counting them we tend to ignore them, to our own detriment. Thomas Sowell, in his book The Quest for Cosmic Justice, presents the case for counting costs in the arena of social justice. American’s today are obsessed with justice, objectively a good thing, but it’s important to be clear about what we mean by ‘justice.’ Sowell notes that instead of the traditional concept, we’ve become more and more enamored with a cosmic, god-like, concept of justice. Traditional justice is the right to a fair trial, it’s a process, it follows a set of rules, and it’s divorced from outcomes. A prime example of traditional justice exists in sports: everyone is measured by the same set of rules while the outcome is up for grabs. It doesn’t matter where a player has come from, what advantages or disadvantages they’ve benefited from or had to overcome, justice in the game is only concerned with whether or not players are fairly and equally evaluated according to the rules. That’s traditional justice. Cosmic justice, on the other hand, is unsatisfied with disparate outcomes. The fact is that some people, through no merit of their own, benefit from growing up in healthy and/or wealthy families with great access to education and opportunities while others, through no fault of their own, are inhibited by growing up in dysfunctional and/or poor families with limited access to education and opportunities. The term ‘privilege’ has been popularized in reference to this. Instead of creating a fair set of rules universally applicable, cosmic justice is concerned with promoting equal outcomes. Most of us would agree that the fact that some people are born into bad situations is not ideal and seems unfair, so the pursuit of cosmic justice feels right. The important question is not about fairness though, the question which must be considered is, what’s the cost?

The costs of traditional justice are straightforward. We pay taxes to fund judges, courthouses, law enforcement, prisons, etc. Our taxes fund the system of law. We elect rulers and authorities who (ideally) structure fair laws to the benefit of the people. It’s scalable and achievable, albeit imperfectly. The costs of cosmic justice are much more nebulous and far-reaching. One example can be seen in the concept of reparations, forcing people today to pay for injustices done in the past, even generations in the past. It’s not fair that people were subject to slavery and served other people, for free, often for fear of their own lives. It’s not fair that families were separated from each other. It’s not fair that people were denigrated, stripped of their dignity and freedom, treated like livestock, even hunted like animals. The whole thing reeks of evil and we feel a desire to fix it. It seems like reparations could be helpful for righting past wrongs, or the least it’s better to do something than nothing. In order to execute this urge to right past wrongs, a whole other set of questions must be answered: Who gets paid? Who has to pay? How much? For how long? At what point or amount will the reparations be sufficient to remedy the incredible injustice of slavery? Who will decide all of this? Who has the insight and understanding to fairly distribute the reparations? Reparations, and social justice more broadly, is not merely a question of morality (an incredibly divisive question on its own), it’s a question of reality. The cost of social justice is beyond the scope of humanity to conjure, let alone pay. We can’t understand the depth of the injustices we seek to remedy, and if we could we would still never be able to apply an appropriate amount of money to achieve ultimate justice. Money has nothing to do with justice! The fact is that injustice exists in our world. The question is, as Sowell states, “What lies within our knowledge and control, given that we are only human, with all the severe limitations which that implies?” (P21) Social justice is not something humanity is equipped to adjudicate, we are not God.