100% Pure Socialism and Capitalism each convey unstable long-term extremes. Raw socialism will snuff out productive growth and innovation as individual entrepreneurship gives way to reliance on big government, run by bureaucratic elites. It simply removes incentives to innovation. Raw Capitalism will produce powerful capital holders that naturally steer societal rules to their own benefit at the expense of others. Both systems result at their extreme in consolidation of power and natural ‘projection’ of that power. There likely isn’t a person around that wouldn’t be ‘corrupted’ to some degree by such opportunity for power. Few people that project their power for their benefit and that of their family and friends would even see it as ‘exploitation’. There is a natural instinct to take care of oneself and one’s family first and foremost above all else. Power and wealth entrench that safety net.
In each case, concentration of power in elites results in conditions that increase their benefit/cost (B/C) ratio much more aggressively than other over time. In the long-term, those not in the elite class experience flat to declining B/C ratios. Each system incrementally increases decoupling in B and C over time, until the system is strained and breaks. We saw this in the collapse of socialist/communist economies in the 20th century and we are seeing the strains on capitalism today, with increasing cries for socialism.
Sustainable economies and societies couple B and C across all citizens. Each pursues their own freedom and through their economic contribution increases their B/C cost ratio. They are also accountable to the society they live in. Think of a Robinson Crusoe economy. Each citizen must pay a share of taxes to cover necessary government costs. Necessary government costs are those determined by an engaged and educated democratic electorate. Unfortunately, many government costs don’t meet this condition. It’s dangerous if we end up with back-and-forth swings from socialist to capitalist and back again as each is taken to it’s limits. History has shown that this is not a desirable situation.
Is there a more balances approach? It’s time to be open minded given the polarization we see today. Causal Economic Theory suggests that we try what we might call a “Causalist Economy”. This has never truly been done, and it’s pure form would require a lot of change from current conditions, so in a pragmatic sense, it must be tested and analyzed further. Here we want to start the discussion and analysis.
What does a Causalist Economy look like? In it’s pure theoretical form (just as in traditional economics we may look at ‘perfect competition’ in its pure theoretical form), a Causalist Economy would entail:
- Free markets for goods/services and risk.
- Tax adjustments to account or externalities impacting other citizens (ex. like an environmental impact).
- Minimal professional political class (via term limits etc.)
- Valuefare (workfare where citizens can work as many hours as they want each week for a livable wage).
- Balanced trade (absence of subsidies and tariffs and non-trade barriers).
- Zero % money supply growth (monetary policy always distorts) and deflation (as prices drop due to technology innovation).
- A legal system that keeps B and C tightly coupled (i.e. people bear the costs and benefits of their actions).
- Balanced government budgets (fiscal policy is not a viable macroeconomic tool, but rather a distortion)
- Taxes are based on use of taxes, not just people with more paying more.
- Flat tax allocations for spending that benefits all citizens.
- User fee taxes where users are identifiable.
- No income, consumption or wealth taxes.
This is short list of some of the more impactful elements 0f a Causalist Economy based on the principle of Causal Coupling (making sure that B and C are coupled across agents in society).
As with all new theories, the practicality of some of these more radical components need further debate. Our goal here is to start and carry on those discussions, seeking better economic outcomes in today’s turbulent times that beg for new ideas.
We welcome your insights.