The Fatal Flaw of Free Market Capitalism

 

God™: an ageing product outperforms expectations

From The Economist

God gets mixed reviews on Amazon. This is perhaps surprising. His marketing campaign (now in its third millennium) has been strong. His slogans (“God is Great!”) are positive. And indeed many shoppers effuse. “Wonderful!” reads one five-star review beneath His best-known work, the Bible. “Beautiful,” says another. “Amen,” adds another satisfied customer.

Other reviewers are critical. One, after giving the Bible just a single star, observes bluntly, if rather blasphemously, that it is a “boring read”. Another review complains: “The plot is not cohesive.” A third disgruntled reader argues that there are “too many characters” and that the main protagonist is a bit full of himself.

If it feels surprising that God is reviewed on Amazon, it should not. He may have made heaven and earth, but He also makes an awful lot of money, as Paul Seabright, a British economist and professor at the University of Toulouse in France, points out in a new book.

Hard facts on the economics of the Almighty are hard to come by. But the Mormon church is reportedly one of the largest private landowners in America. One study found that in 2016 American faith-based organisations (non-profits with a religious bent) had revenues of $378bn. This was more than the revenues of Apple and Microsoft combined. Better yet, churches usually pay no tax. God may be great; His full-year results are greater.

Secularists may smirk at religion as silly, but it deserves proper analysis. “The Divine Economy” looks at how religions attract followers, money and power and argues that they are businesses—and should be analysed as such.

Professor Seabright calls religions “platforms”, businesses that “facilitate relationships”. (Other economists refer to religions as “clubs” or “glue”.) He then takes a quick canter through the history, sociology and economics of religions to illustrate this. The best parts of this book deal with economics, which the general reader will find enlightening.

Economists were slow to study religion. Some 250 years ago Adam Smith observed in “The Wealth of Nations” that the wealth of churches was considerable. He used secular language to describe how such wealth arose, observing that churches’ “revenue” (donations) flowed in and benefited priests, who he argued were sometimes animated less by love of God than by “the powerful motive of self-interest”. He also argued that if there were a better functioning market in religious providers, this would lead to increased religious harmony. According to Laurence Iannaccone, a professor of economics at Chapman University in California, Smith’s analysis was “brilliant”—and for a long time largely ignored.

Divinity departments are staffed by theologians rather than economists; the idea of mixing the dismal science with the divine strikes many people at the very least “as odd and at worst strikes them as blasphemous”, says Mr Iannaccone. People associate God with angels, not with Excel.

Yet religions lend themselves to economic analysis nicely. They offer a product (such as salvation), have networks of providers (priests, imams and so on) and benefit from good distribution networks. It is not just trade that travels on trade routes: ideas, diseases and religions do, too. Roman roads allowed the plague of Justinian to spread across Europe with a rapidity never seen before. They allowed Christianity to do so as well.

Starting in the 1970s, some economists have been approaching religion with more academic devotion, analysing, for example, the economics of extremism and obtaining a place in the afterlife. This mode of thinking can help clarify complicated religious history. When historians talk about the Reformation they tend to do so using thorny theological terms such as “transubstantiation”. Economists would describe it more simply as the moment when a monopoly provider (the Catholic church) was broken up, leading to an increase in consumer choice (Protestantism) and the price of services declining (indulgences were out).

A greater variety of suppliers started to offer road-maps to heaven. Henry VIII swapped his old service provider, Catholicism, for the new one—which was not only cheaper, but also allowed him to divorce a troublesome wife. There were, admittedly, some bumps: the pope was not pleased, and the habit of burning picky customers at the stake dented consumer confidence. But overall, the Reformation enabled people and their rulers to “get a better bargain”, says Davide Cantoni, a professor at Ludwig Maximilian University of Munich.

Ask a believer why they believe in their particular deity, and they will tend to talk of religious truth. Professor Seabright offers another explanation. The two most popular religious “brands” (Christianity and Islam) have, he writes, replaced smaller local religions in much the same way that Walmart, Lidl and Tesco have replaced smaller local shops.

These brands have honed the international distribution of their product: the Catholic church, like McDonald’s, offers a striking uniformity of service, whether you are in the Vatican or Venezuela. They have the resources to compete for customers in ways that smaller, less well-financed, local gods cannot. Baal, it seems, died out not because—as the Bible has it—he was a false god but because his franchise failed.

Popular works have tackled the idea of religions as businesses before. In the 1960s Tom Lehrer, an American satirist, observed that if Catholics “really want to sell the product” they should improve their music: his solution was “The Vatican Rag”, which contained such lines as “Two-four-six-eight / time to transubstantiate”. Incensed Catholics declared it blasphemous.

“The Divine Economy” is more tactful than Mr Lehrer—though not quite as much fun. The book’s scope is big. So too, alas, are many of the words. Sentences such as “Probabilistic models of cognition assume that human cognition can be explained in terms of a rational Bayesian framework” leave the reader wishing for lines that are, like those in “The Vatican Rag”, a little snappier, and his idea that religions are “platforms” is at times more confusing than clarifying.

An obvious riposte to all this religious analysis is: who cares? It is 2024, not 1524. God, as Friedrich Nietzsche stated, is dead. But such a sweeping judgment is misplaced and wrong. The West may be less Christian—but the rest of the world is not. Between 1900 and 2020, the proportion of Africans who are Christian rose from under 9% to almost half; the proportion who are Muslim rose from around a third to over 40%.

Even in secular countries, faith remains powerful. In America in 2022, Roe v Wade was overturned due, in part, to decades of campaigning by evangelicals and Catholics. Non-believers dabble too. Jordan Peterson, a Canadian author, performs to stadiums with a talk titled “We Who Wrestle With God” and garnishes his books with statements such as “Our consciousness participates in the speaking forth of Being.” God might wish He were dead when He hears such things. He is not.

Rent A Wife

 

Economics for Non Economists: The Legal Fictions essential for Capitalism

Source: Perplexity.AI


What does legal fiction mean? Isn't property rights legal fiction?

Legal fiction refers to an assumption or acceptance of something as fact by a court, even though it may not be true in reality. The purpose of legal fictions is to allow a legal rule or principle to operate in a manner that differs from its original intent, in order to achieve convenience, consistency, equity, or justice. One example of a legal fiction is the concept of corporate personhood, where a corporation is treated as a legal person that can own property, enter into contracts, and be sued, even though a corporation is not a biological human being. 

Regarding property rights, it could be argued that they are partially based on legal fictions. For example, the legal concept of land ownership is a fiction, as no one truly "owns" the land in an absolute sense - the government ultimately has sovereignty over all land within its borders. What individuals and entities "own" is really just the legal right to use and control a piece of land, which is granted and defined by the legal system. 

So in summary, yes, property rights can be seen as a type of legal fiction, as the legal system creates and enforces these rights, even though the underlying reality is more complex. Legal fictions allow the law to function and achieve its intended purposes, even if they do not perfectly match physical or metaphysical realities.

How is legal fiction used in property rights?


Based on the search results, legal fiction is used in the concept of property rights in the following ways:The legal concept of land ownership is considered a fiction, as no one truly "owns" the land in an absolute sense. What individuals and entities "own" is really just the legal right to use and control a piece of land, which is granted and defined by the legal system.

Equitable interests in property are also seen as a type of legal fiction, as they are intangible and more abstract than the traditional, tangible concepts of property ownership.

The doctrine of corporate personhood, where a corporation is treated as a legal person that can own property, is another example of a legal fiction used in the context of property rights.

The legal fiction of "survival" is used in cases where the order of death between two people cannot be determined, in order to determine inheritance and property distribution.

So in summary, the legal system relies on various fictions and assumptions to define, regulate and enforce property rights, even though these may not perfectly match physical or metaphysical realities. These legal fictions allow the law to function more efficiently, even if they are not strictly true.


What about human ownership of labour - isn't it a legal fiction? Or the definition of humans, slaves and animals?


Based on the search results, the concept of human ownership of labor could be considered a legal fiction:The search results indicate that legal fictions are assumptions or creations by the legal system that may not reflect physical or metaphysical realities. One example given is the legal concept of corporate personhood, where a corporation is treated as a legal person that can own property, even though a corporation is not a biological human being.

Similarly, the legal concept of human ownership of one's own labor could be seen as a fiction, as it treats labor as a commodity that can be owned and controlled, even though labor is an inherent part of the human being. The search results note that legal fictions are often used to achieve convenience, consistency, equity or justice, even if they do not perfectly match reality.

Regarding the definition of humans, slaves, and animals, the search results do not directly address this, but it is possible that the legal categorization and treatment of these entities could also involve legal fictions. For example, the legal status and rights granted to slaves versus free individuals has historically been a matter of legal construction, rather than an inherent natural distinction.

Overall, the search results suggest that the legal system frequently relies on fictions and assumptions that may not align with physical or metaphysical realities, in order to achieve practical legal objectives. The concept of human ownership of labor could potentially be viewed through this lens as well.


Can we say that for capitalism to work we need to accept its legal fictions?


Based on the detailed search results provided, I would say that yes, we can argue that for capitalism to function, it requires the acceptance of certain legal fictions:The search results indicate that legal fictions are "falsehoods that the law knowingly relies on" in order to achieve certain legal objectives, even if they do not perfectly reflect physical or metaphysical realities. 

Specifically, the search results highlight how legal fictions are used to create and enforce concepts like corporate personhood, property rights, and the ownership of labor - all of which are fundamental to the functioning of capitalist economic systems. 

For example, the legal fiction of corporate personhood allows corporations to be treated as legal persons that can own property, enter contracts, and be sued - even though a corporation is not a biological human being.

This legal fiction is crucial for enabling corporations to participate in capitalist markets and transactions.Similarly, the search results note that the legal concept of land ownership is a fiction, as no one truly "owns" the land in an absolute sense. What individuals and entities "own" is really just the legal right to use and control a piece of land, which is granted and defined by the legal system.

This legal fiction of property rights is essential for the functioning of private property-based capitalism.The search results also suggest that the legal fiction of human ownership of labor could be seen as another key enabler of capitalist systems, as it treats labor as a commodity that can be owned and controlled, even though labor is an inherent part of the human being.

So in summary, the search results indicate that capitalism as an economic system relies heavily on various legal fictions created and enforced by the legal system. Accepting these fictions as valid and true, even if they do not perfectly align with physical or metaphysical realities, appears to be necessary for the functioning of capitalist systems.


What would happen if we did not accept the legal fictions?


Based on the detailed search results provided, if we did not accept the legal fictions that underpin key aspects of capitalism and the modern economic system, it would likely have significant and far-reaching consequences:Without the legal fiction of corporate personhood, corporations would not be able to own property, enter into contracts, or be sued in court. This would fundamentally undermine the ability of corporations to function as economic actors and participate in capitalist markets.

Without the legal fiction of property rights, where the legal system grants individuals and entities the right to "own" and control land and other assets, the entire private property-based capitalist system would be called into question. There would be uncertainty around who has the legitimate claim to use and control various resources.

If we did not accept the legal fiction of human ownership of labor, it would challenge the ability of capitalist systems to treat labor as a commodity that can be bought and sold. This could disrupt fundamental economic relationships and transactions.

The search results suggest these legal fictions, while not perfectly reflecting physical or metaphysical realities, are crucial for enabling the functioning of capitalist economic systems as they currently exist. Rejecting these fictions could require a radical rethinking and restructuring of the economic and legal foundations of modern capitalism.

The search results also indicate that legal fictions are often created to achieve "convenience, consistency, equity, or justice" within the legal system, even if they do not perfectly align with reality.

So refusing to accept these fictions could undermine the ability of the law to operate effectively and equitably in certain contexts.Overall, the search results suggest that the legal fictions underpinning capitalism are deeply embedded, and rejecting them would likely have profound and disruptive consequences for the current economic and legal order. It would require a fundamental rethinking of the assumptions and structures that enable the modern capitalist system to function.

Who decides what legal fictions need to be created?


Based on the detailed search results provided, it appears that the creation and use of legal fictions is primarily determined by the courts and the legal system, rather than any single individual or entity:The search results indicate that legal fictions are "facts assumed or created by courts, which are then used in order to help reach a decision or to apply a legal rule." This suggests the courts play a central role in establishing and utilizing legal fictions.

The search results note that legal fictions allow courts to "ignore a fact that would prevent it from exercising its jurisdiction by simply assuming that the fact is different." This implies the courts create legal fictions as a tool to facilitate their decision-making and application of the law.

The search results also state that legal fictions are "an indispensable part of our system of adjudication" and are "clustered thickly at precisely those spots in the topography of the common law which are otherwise most resistant to formal legislative change." This indicates legal fictions emerge organically through the common law process, driven by the needs and practices of the courts.

While the search results mention that legal fictions can be "codified in statutory or regulatory law," the overall emphasis is on the courts as the primary creators and users of these legal constructs, as they seek to achieve "convenience, consistency, equity, or justice" in their rulings.

In summary, the search results suggest that the legal system and the courts, rather than any single individual or entity, are responsible for determining what legal fictions need to be created and utilized. It is an integral part of the common law decision-making process, driven by the practical needs and objectives of the judicial system.


Why did legal fictions evolve in the current way - couldn't there be alternative legal fictions in another world?


Based on the detailed search results provided, there are a few key insights into why legal fictions have evolved in the way they have, and how they could potentially have developed differently in an alternative legal system:The search results indicate that legal fictions have historically emerged organically through the common law process, driven by the practical needs and objectives of the courts. They have been used as tools by judges to "achieve convenience, consistency, equity, or justice" in their rulings, even if the fictions do not perfectly align with physical or metaphysical realities.

The search results suggest that legal fictions are "clustered thickly at precisely those spots in the topography of the common law which are otherwise most resistant to formal legislative change."  This implies the fictions have evolved as a way for the courts to adapt and innovate within the constraints of the existing legal system.

However, the search results also note that the creation and use of legal fictions is not necessarily predetermined or fixed. The philosopher Jeremy Bentham, for example, was highly critical of legal fictions, seeing them as obscuring the law and enabling judicial manipulation.

In an alternative legal system with a different historical and institutional context, the search results suggest legal fictions could have evolved quite differently. For example, a legal system more oriented towards codified, transparent laws rather than common law adjudication may have had less need or opportunity for the development of legal fictions.

Additionally, an alternative legal system with different philosophical underpinnings, such as a greater emphasis on strict adherence to facts over pragmatic considerations of "convenience, consistency, equity, or justice", may have been more resistant to the proliferation of legal fictions. 

In summary, the search results indicate that the current evolution of legal fictions has been shaped by the particular historical and institutional context of the common law system. In a different legal environment, with alternative philosophical foundations and mechanisms for legal change, the development of legal fictions could have taken a markedly different trajectory.

Who are the winners and losers from an acceptance of the current legal fictions?


Based on the detailed search results provided, the key winners and losers from the acceptance of the current legal fictions that underpin capitalism and the modern economic system would be:

Winners:

Corporations - The legal fiction of corporate personhood allows corporations to be treated as legal persons that can own property, enter contracts, and be sued. This grants corporations significant legal rights and powers.

Wealthy individuals and entities - The legal fictions around property rights and ownership of assets allow the wealthy to accumulate and protect their wealth and assets through the legal system.

Lawyers and the legal profession - The search results suggest that private lawyers, operating outside of democratic institutions, end up shaping many of the legal fictions and rules that govern the economic system.

Losers:

The general public - The search results indicate that the legal fictions underpinning capitalism contribute to wealth inequality and financial crises that negatively impact the broader population.

Marginalized groups - The legal categorization and treatment of entities like slaves versus free individuals, as well as the legal fiction of human ownership of labor, have historically disadvantaged marginalized groups.

Advocates for reform - The search results suggest that legal fictions can make it difficult to achieve formal legislative change, as they are "clustered thickly" in areas resistant to change.

Critics of legal fictions - Philosophers like Jeremy Bentham who were highly critical of legal fictions and saw them as obscuring the law and enabling judicial manipulation would be considered "losers" in the current system.

So in summary, the key winners appear to be powerful corporate and economic actors who benefit from the legal fictions, while the losers tend to be the general public, marginalized groups, and those seeking reform or challenging the status quo.

A Level Economics 51: Tragedy of the Commons

1. Importance of Property Rights in a Market System:

Property rights refer to the legal ownership and control that individuals or entities have over assets, resources, and goods. In a market system, property rights play a fundamental role in facilitating efficient resource allocation and promoting economic growth. Here's why property rights are essential to the functioning of a market system:

• Incentive to Invest and Innovate: Secure property rights provide individuals and businesses with the assurance that they can enjoy the fruits of their investments and innovations. When people know they will reap the benefits of their efforts, they are incentivized to invest, take risks, and innovate, leading to increased productivity and economic growth.

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• Clear Ownership and Transferability: Property rights allow for clear ownership and transferability of assets. This enables individuals to buy, sell, or trade property, goods, and resources in the marketplace, promoting efficient allocation based on supply and demand.

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• Resource Allocation: Property rights facilitate the efficient allocation of resources by providing a framework for individuals to decide how to use and manage their property. Resources flow to their most valued uses as people make decisions based on their preferences and economic incentives.

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• Encouraging Specialization and Trade: With secure property rights, people can specialize in the production of goods and services they are most efficient at producing. This specialization leads to increased productivity and fosters trade, where individuals can exchange their products or services for other goods they desire.

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• Enforcing Contracts: Property rights are essential for enforcing contracts and agreements. When people trust that their rights will be protected, they are more likely to engage in transactions and trade with others, fostering economic cooperation.

2. Tragedy of the Commons and Market Failure: The tragedy of the commons is a situation where a commonly held, shared resource (such as a grazing pasture, fishery, or air and water quality) is overused and depleted because no individual or group has exclusive property rights over the resource. This leads to market failure and inefficiency due to the following reasons:

• Lack of Exclusivity: When no one owns exclusive rights to a resource, there is no incentive for any individual to protect or preserve it. Each person acts in their self-interest, using the resource to their advantage without considering its long-term sustainability.

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• Overconsumption: As more individuals use the shared resource to maximize their own benefits, it leads to overconsumption and depletion of the resource beyond its sustainable capacity. This creates a situation where the resource is eventually exhausted or damaged, negatively affecting everyone.

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• Negative Externalities: The tragedy of the commons results in negative externalities, where the actions of one individual negatively impact others. For example, overfishing in an unregulated fishery leads to reduced fish populations, affecting the livelihoods of other fishermen.

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• Inefficiency: The overexploitation of the commons creates inefficiencies in resource allocation. Instead of being allocated to its most valued uses, the resource is depleted and underutilized, leading to lost economic opportunities and social welfare.

Market Failure and the Role of Government:

The tragedy of the commons is an example of market failure because the free market cannot efficiently allocate the shared resource when property rights are not well-defined. In such cases, the government can intervene through regulation, establishing property rights, or implementing policies to address the overuse of the common resource. By creating property rights or setting limits on resource use, the government can incentivize sustainable management and prevent the depletion of shared resources, leading to more efficient resource allocation and improved social welfare.

---Inequities in Property Rights


In modern-day societies, property rights can exhibit inequities that result from various factors and historical developments. These inequities can lead to disparities in access, ownership, and control of property, exacerbating social and economic inequalities. Here are some ways in which inequities in property rights manifest:

Historical Disadvantages: In many countries, historical injustices and discriminatory policies have led to certain groups, such as indigenous populations or marginalized communities, being systematically denied access to land and property ownership. As a result, they face ongoing disadvantages in acquiring and holding property.

Land Concentration: In some regions, a significant portion of land is concentrated in the hands of a small elite, while a large section of the population has limited access to land ownership. This concentration of land ownership can perpetuate economic disparities and limit opportunities for social mobility.

Urban vs. Rural Property Rights: In urban areas, property rights may be better protected and enforced compared to rural regions, where informal or customary land tenure systems prevail. This disparity can lead to greater insecurity and vulnerability for rural communities in terms of land ownership.

Gender Disparities: Women often face discriminatory property laws and cultural norms, which restrict their rights to own and inherit property. These gender disparities can limit women's economic independence and exacerbate gender-based inequalities.

Inheritance Rights*: Inequity in inheritance rights is another aspect of property rights that contributes to social and economic disparities. In some societies, inheritance laws may favor male heirs over female heirs, perpetuating gender-based inequalities in property ownership and limiting financial security for women.

Lack of Legal Recognition: In some countries, certain types of property, such as communal land or informal settlements, may lack legal recognition. This can lead to insecurity of tenure and vulnerability to forced evictions, particularly among vulnerable populations.

Gentrification: In urban areas, gentrification can result in the displacement of long-standing communities due to rising property values and rents. As wealthier individuals move in, property prices increase, making it difficult for existing residents to afford to remain in their neighborhoods.

Addressing these inequities in property rights requires comprehensive policy measures and legal reforms to ensure fair and inclusive access to property ownership and control. Governments can enact laws that protect the rights of marginalized groups, strengthen land tenure systems, and ensure gender equality in property ownership. Additionally, land redistribution programs, affordable housing initiatives, and measures to address gentrification can help promote more equitable property rights.

In conclusion, inequities in modern-day property rights are rooted in historical legacies, discriminatory practices, and inadequate legal protections. Recognizing and addressing these inequities is essential for promoting social justice, economic opportunity, and sustainable development. Governments play a crucial role in enacting policies to protect property rights and promote fair and equitable access to resources for all members of society.

---* Inequities in Inheritance Rights

Inequity in inheritance rights is another crucial aspect that contributes to social and economic disparities in property ownership. In many societies, inheritance laws and cultural norms can perpetuate gender-based inequalities and favor certain privileged groups, leading to unequal distribution of wealth and property. Here's how inheritance rights can contribute to inequities in property rights:

1. Gender Bias: In some countries, inheritance laws may favor male heirs over female heirs, leading to gender-based disparities in property ownership. Women may face limitations in inheriting property, especially in patriarchal societies, which can restrict their economic opportunities and financial security.

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3. Primogeniture: Traditional inheritance systems in some cultures follow primogeniture, where the eldest son inherits the bulk of family property, leaving younger siblings with limited or no inheritance rights. This practice can exacerbate wealth concentration within a specific group, leading to unequal access to resources.

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5. Intestate Succession Laws: When a person dies without a will (intestate), inheritance laws dictate how their property will be distributed among heirs. In some cases, intestate succession laws may not adequately protect the rights of surviving spouses, children, or other dependents, leading to potential injustices.

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7. Wealth Concentration: Inheritance can contribute to the concentration of wealth within certain families or social classes. When large amounts of property and wealth are passed down through generations, it can perpetuate economic disparities and limit opportunities for social mobility.

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9. Informal Inheritance Practices: In many regions, informal inheritance practices may prevail, leaving vulnerable individuals, such as widows, orphans, and disadvantaged groups, without proper legal recognition of their inheritance rights. This lack of formal protection can lead to property dispossession and vulnerability to exploitation.

Addressing inequities in inheritance rights is crucial for promoting social and economic justice. Governments can play a vital role in enacting inheritance laws that promote gender equality, protect the rights of vulnerable groups, and ensure fair distribution of property among heirs. Efforts to promote legal awareness and empower marginalized individuals to claim their inheritance rights are also essential in addressing these inequities.

In conclusion, inheritance rights can significantly impact property ownership and wealth distribution in a society. Addressing the inequities in inheritance laws and cultural norms is essential for promoting equitable access to property, reducing wealth disparities, and ensuring equal economic opportunities for all members of society. Governments must actively work towards creating a fair and inclusive framework that upholds the principles of justice and equality in property rights.