Tuesday, June 16, 2020

The Problem With Capitalism is People are Irrational

A Capitalist Society is, in effect, a Libertarian Society. You're free to make as much money as you want to or free to lose it all. And if you're not astute you will lose it all.

Many people complain that the capitalist system is flawed - designed to fleece people of their money. The game is rigged, they claim, and you can't get ahead, so why bother trying?  It should be abolished and replaced with something else, like communism or socialism.  Sadly, those systems have been proven to be worse than our existing system, which is really not pure capitalism, but a hybrid of socialism and capitalism.  But I digress.  Already.

As you might imagine, the people making this argument are people who didn't do very well in our capitalist system.  These are people who make very foolish choices with their money, which is to say, 90% or more of the population.  Maybe, even, 99%.  This included me when I was much younger - or even today, although less often (I think, anyway).

Managing money, even on a day-to-day basis is something that is very difficult to do. There are always bright shiny objects that we would like to buy, and few of us want to save for tomorrow when we can spend it today.

Thus, as I've said time and time again in this blog, no one took away our money, we willingly gave it away.  Those evil one-percenters didn't steal from us, we gave to them. We give to them when we buy shiny objects we don't need and food that we really shouldn't be eating. We give to them when we invest in sketchy investment schemes or buy stupid things like timeshares. We give to them when we blindly believe in MLM schemes and put belief before logic.

Yes, maybe the car salesman pushing a lease deal is evil. Maybe the guy selling the MLM scheme is evil too - although chances are he's probably your neighbor. And maybe the person at the timeshare sales seminar is really evil as well. But we chose to listen to these people and take their advice even though our gut feeling tells us these are raw deals.

And that's the big problem with Capitalism.  Adam Smith's invisible hand assumes we're all rational players in the marketplace - always doing things in our best interests and not acting emotionally.  But the reality is people are pretty crazy.  They'll do stupid things like go to a casino or even gamble online.

I noted in my previous posting that people are idiotically investing in bankrupt Hertz stock, as if somehow it'll magically increase in value. And the guy pushing this is a former sports betting impresario. Betting on sports is probably one of the dumbest things you can do, betting on sports online even dumber.  How is guaranteed annual income going to help idiots like that?   They'll just gamble it all away.  We need to outlaw idiocy, and that is hard to do.

Everyday my spam box fills up with messages from online casinos claiming I've already won some money or something stupid like that.  And of course, you have to be dumb to go into casino and gamble with your income. But to me, it seems even dumber to go to an online casino where there is no assurance that anybody will pay you at all. After all, who are these people and where are they located?  Even if you won, how could you possibly collect?

But apparently, a lot of people don't think about these things as evidenced by the fact that there are so many of these spam messages. Someone must be clicking on these and thinking it's a great bargain. And you do run into people like this.   These are the same people who fall for Nigerian scams, or think they are going to buy a $10,000 trailer for $800 on Craigslist.  These are the same people who willingly hand over 10% of their pre-tax income to some stupid church.   These are superstitious people - if not believing in some idiotic religion, than in chankras or auras or past lives, aliens or whatever other bullshit some con-man is selling in a book.

"There's a sucker born every minute" as P.T. Barnum supposedly said.  Years after my Craigslist Scam posting, I go on Search Tempest and find well over 100 postings, nationwide, for the same Casita travel trailer (retail value, $10,000) being advertised for $812, offered with two bedrooms, a slide-out and a bath-and-a-half (neat trick in a 17-foot trailer).   Someone must be sending these folks money, otherwise they would not be doing it.   And yea, you can "flag" those postings, but the next day, 100 more appear.

So, what's the answer?   Abolish the free-markets because so many people are idiots?   Or try to police the markets so that raw deals are outlawed?   Or do we try to educate people to spot raw deals and not bite on them?  Do we "redistribute the wealth" by taxing the "rich" and handing everyone a $1000 every month? Or maybe there is no problem - it is the survival of the fittest in the world, regardless of the social system imposed.   Those who make stupid mistakes have to pay, often with their lives, or at least their financial lives.

Just questions, I don't have answers.   Although I think what will happen is "all of the above" because we already live in a system that hands out money to people in the form of free food, free cell phones and even free healthcare.   And we try to outlaw the most egregious deals, for example, with Elizabeth Warren's ill-fated Consumer Protection Agency.   But how can we outlaw bad deals and educate people when the very people such agencies are trying to help vote for politicians who want to cripple such agencies?   At what point do you give up on helping people who not only are too dumb to be helped, but actively resist help?

Your friend gets into an MLM scheme and you try to warn them to no avail.   They finally figure it out and say, "why didn't you warn me?" and then the next week, they tell you they found a new MLM scheme that for sure will make them rich!   At what point do you realize that they are driving their car off a cliff, and you'd better not be in the back seat.

Is giving money away to people going to solve the problem, or are the same idiots who squander their hard-earned cash going to squander the money given to them for free?   Without some checks and balances in place, people are going to be ripped-off of their free money in short order.  Today's experiment with virus money illustrates this is the case.

I think there will always be decent hard-working poor people - the poor will always be with us, as Jesus said.   And so long as we look out for one another, maybe they can get by our society.   Maybe the problem isn't capitalism or that we need to hand out free money, but that we need to look after each other.  Maybe we can teach people to handle money better - and outlaw bad bargains and shitty deals.

Maybe.  In the 1960's we had a robust middle-class.   But back then there were no online casinos - in fact, the only casinos were in Las Vegas, and at $400 a ticket, who could afford to fly there?   There were no government lotteries, payday loans, check-cashing stores or other raw deals.  Car leasing was unheard of, unless you ran a corporation that leased fleets of them.   We outlawed raw deals mostly because we knew they victimized people.  And other raw deals simply didn't exist, because people were more skeptical of them.

Timeshares - didn't exist until the 1970's.   Atlantic City casinos?   You know who was involved with that - again, the 1970's and 1980's.   Lotteries?  Indian Casinos?  Payday Loans? All recent inventions, and all correlating with a decline in the middle-class of America, who willingly gave away their money to these raw deals, because they thought of them as "normal" as they became prevalent and thus a normative cue.

MLM schemes?  They were illegal.  Joe Friday would slap the cuffs on you if you tried to sell soap that way.  But that was 1968, not today.  Today, anything goes, and we now eat our own young, starting them out with overpriced and worthless educations paid for with student loans.

Of course, old Joe Friday today is viewed as the enemy - so there's that, too.   We celebrate criminality and violence as if it was a cultural value.

The problem, I think, isn't Capitalism, or the 1%'ers or whatever.  The problem lies in all of us.  In the bible-thumping voters who vote for politicians who screw them financially while promising to reverse social reforms (they never accomplish the latter, of course, to insure their re-election).  In the "investors" who breathlessly tell us they are going to make big bucks in stocks, or gold, or bitcoin, or whatever, but mostly end up just losing it all.  In the lottery players and casino gamblers who don't understand the first thing about the laws of probability or the first thing about money.  Or the true-believers who believe they can pray their way to wealth by tithing 10% to Pastor Cashflow.  20-something kids living in their parents' basements in the suburbs, playing video games all day long and posturing themselves as "radical activists" who set fire to a McDonalds to "stick it to the man".

How can you help such people?  By handing them more money?   It is we who are the problem, when we behave irrationally.

The source of most of the problems in the world can be found by looking in a mirror.   And if you are willing to do so, unflinchingly and honestly, you may find it possible to solve many of your own problems - far more effectively than by pining for massive social change, which is not likely to occur.