The Social Benefits Of Irrational Anti-Capitalism

I don’t know if I actually believe the premise of this post, or if it’s just me trying to steel-man a brand of anti-capitalist rhetoric that really gets my goat. On the bright side, if I can’t tell the difference between these two, it’s at the least a good indicator of successful steel-manning.

The first has to do with the outrage against price gouging. My eye-rolling instinct when people complain about extortion and profiteering is to defer dogmatically to the supply-demand curve. Business is more expensive now. Everything is harder. Manpower, raw materials, logistics. Reserves are dwindling, and marginal contribution is approaching negative, at this point I lose money on every additional unit I produce. If I don’t raise prices, my only option is to shut down production. That’s a deadweight loss for society. I’d like to produce, and there are consumers who’d like me to produce. If we had perfect communication, I’d signal my willingness to pay a 100% premium for my chunky peanut butter that is nowhere in stock, and happily fork it over as the factory cranks out some additional product. As long as the price increase is commensurate with the increase in marginal cost that maintains profit or doesn’t allow it to take too much of a dip, it isn’t extortion. What’s extortionate profiteering is the increase of profit for no increase in marginal cost, or disproportionate increase of profit. Producers could operate at an equilibrium that is below the equilibrium production quantity, and therefore keep prices higher than it would be if they ramped up production. In a free market, this would quickly be corrected by other producers increasing production to absorb the excess demand. In clumsy disorganized chaotic nonfree markets like India, this is prevented. If I walk into a traditional retail shop, I’m going to be charged not by microeconomic principles, but by bazaar law, ie the shopkeeper will give me a shit-eating grin and say ‘you see my friend, these are tough times…but for you I give good price.’ (Apparently I learned all my shopping experience anecdotes from Hollywood movies set in Morocco and Egypt).

This is where anti-capitalist rhetoric starts to become confusing. A supermarket will charge me what it charges everybody. I never walk away with a sense of injustice or resignation. Amazon will not price-gouge me by collapsing supply and gleefully locking its diamonds inside the vault waiting for prices to inflate. Big capitalist firms are my best bet for the fairest outcome in trade. They do this because they have reputations to maintain, regulatory oversight to assuage, and a single-point scale and size that focuses and draws all enemy fire should the battlelines be drawn. And yet like clockwork, when there is the idea of increasing prices to incentivize companies to put in that extra effort of getting us product in a severely inconducive pandemic environment, we start the anti-capitalist barrage despite the fact that it is big business that is acting against its interest to protect itself from anti-capitalist barrage, and all the extortion and profiteering we’ve personally experienced came from the unorganized alternatives to our capitalist empire.

Enter Steelman. Suppose we admit that Amazon and other capitalist behemoths are far superior to our inefficient, unaccountable, huckster traditional businesses. Suppose we like the fact that we can send irate emails to Big Basket customer service because one potato was slightly smushed, demanding a refund and a letter of apology from the CEO, successfully, while the only reason we had to buy a potato off BB was the vegetable cart sold us carefully assembled clumps of clay painted like potatoes and promptly disappeared. Suppose I enjoy that the stupidity premium I used to pay by not knowing what a potato looks like, is now borne by a company. That would make anticapitalist rhetoric irrational, but does that mean it makes it unnecessary? There is a claim that would make it both irrational as well as necessary. That the fear of irrational behavior is what drives the superior experience we get from Amazon. That if this irrationality went away, and we all expounded the benefits of big business, all those benefits would go away too. If there were no anti-capitalist bias, would Amazon still refrain from giving me a shit-eating grin during the pandemic and charging me based on how much it felt I knew about the interior integrity of a potato?

The easy market answer to this is yes, it would. That I would be annoyed about the potato, and would just walk over to its top ecommerce competitor Borneo known for a better service. Amazon is incentivized to improve my experience in order to compete with Borneo. This makes sense for obvious requirements, like my potato needing to be an actual potato. Noone needs to tell me to need that. But what about a company whose potatoes are individually sung to by a kindly old lady, secretly increasing its vitamin content. I wouldn’t switch to Borneo because I didn’t even know I needed this. Worse, Borneo would not exist, and the untold benefits of sung-to-potatoes would be lost to society. The minute there’s an irrational bias against potatoes that haven’t been sung to, Borneo has come into existence. When it comes to the reputation of Amazon, is it the potato itself or the singing to the potato? In one case, its benefit is self-evident, and requires only a competitive market. In the other, its benefit is socially constructed, and the market could not have brought this into existence. In this pandemic, everyone is losing, we’re asking that big business lose more than we do. It’s not an unreasonable request, but neither is their refusal. Except, they haven’t refused. Swiggy is delivering without price-gouging despite assuredly having to pay their employees more, put in an order of effort more to ensure compliance practices and secure painful bureaucratic approvals. They aren’t being benevolent. They have a ton of fixed costs of debt and depreciation and need production to be worked at high capacities. But demand is certainly far less elastic now and equilibrium prices would be far higher, they could afford to charge more even if they’re chasing only quantity sales. The difference is they have a customer service department, and a twitter account, and VC funding that is quick to draw irrational flak from anticapitalist loudmouths. Irrational but necessary? This is an uncomfortable possibility for me, because that means I personally benefit from the presence of irrational anticapitalist rhetoric, while loudly decrying the irrationality of anticapitalist rhetoric.

Let’s say we want to build a society that provides for its weakest members. The law of diminishing returns means society would be better off by constantly cycling excess resources from inefficient places where they aren’t utilized to the pockets of people living in poverty where the marginal utility of that single additional $ is immense. In situation A, 100 people each have $10 each. They need 5$ to be happy. Taking my own example, if I have $5 left over, I will spend at least 2 more on inefficient consumption that doesn’t bring me much pleasure. I save 1, and gamble 2, thinking it’s extra cash anyway. I give 0 to charity. In situation B, 99 people have $7. 1 dude gets $307. I’ll give him some randomly selected name, let’s say Gill Bates. Me and my 98 friends take our $7, maybe consume inefficiently until 6 and save the rest. Gill Bates spends as much as he can possibly dream of spending, and still finds $250 left over. There is literally nothing left in the world to buy. So he gives it to charity, and buys goodwill instead.

So far, I’ve always used this as support for a system that ruthlessly funnels resources towards its most efficient producers, tending to concentrate talent, output, and therefore money to a small group of billionaires. Not really support, but defense against its criticisms. Economies of scale are real, and we don’t want markets to artificially make them go away. If output is facilitated at its most efficient level, the overall utility for society is at a higher equilibrium curve, consumers win when WalMart comes in, reduces waste across the value chain, streamlines logistics, and cuts out an army of inefficient middle-men and rent-seekers. But I’ve missed out a vital point in favor of the criticisms, the fact that Gill Bates being a billionaire is better for charitable services than 100 middle-class people is contingent on a non-obvious result, that goodwill can be bought in the market. It isn’t counterintuitive in itself, altruism is an adaptive trait we’ve developed for the reward of respect, admiration and prestige. Still, it’s non-obvious in a market scenario that depends on individuals making decisions based on rational self-interest. Goodwill remains a marketable commodity in society precisely because we allow our evolutionary cultural tendencies to integrate into market dynamics. The charitability of Gill Bates isn’t the potato, but the singing to the potato. I concede that. A superior market outcome as a direct result of our irrational bias against billionaires and the market. But will the anticapitalists concede that in an ideal society, it would be the potato?

Now that I have a steelman for anticapitalism (or atleast steeler than before), I still need the final word here. Maybe irrational anti-capitalism has benefits, but that doesn’t mean it’s satisfying. It’s a conveniently depersonalized way of saying ‘people are evil, rewarding them for being good is not enough, we have to actively punish those who don’t do good, even if they aren’t doing harm’. It seems a quick step from here to agents deprioritizing being good and prioritizing being seen as good. What happens when every company spends all its resources singing to my potato and zero resources on the actual potato? I get a happy, emotionally fulfilled potato whose look, taste, and cost I absolutely hate. The commodification of goodwill mean all its value is slowly wrung out, repeatedly, until it becomes devoid of meaning, just like the potato metaphor. The fact that this irrational behavior has led to a more optimal social equilibrium does not mean it is not sub-optimal to something else. We aren’t great at maintaining transitivity of choices. We could prefer coffee to tea, tea to hot chocolate, and hot chocolate to coffee, in a way that nobody will understand. We somehow prefer our local store to the government, Amazon to the local store, but the government to Amazon? In the ideal society, there are only potatoes, and no singing to potatoes. Consumers understand the value of products, and value the understanding of products. A perfectly competitive market in this environment delivers an optimal solution that no irrationality can improve. Until then, I’ll stay on hold with the Amazon helpline till I get my apology.

A novel insightful exercise to determine the pragmatic difference in intellectual payoff between a novel insight and an obvious fact mistaken for novel insight.