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The Morality of Capitalism, part 1: Capitalism is Good

The last time we encountered Prager "University", we were looking at an overly simplified video extolling the benefits of a flat tax. Today we're going to look at Prager's overly simplified video extolling the moral virtues of capitalism.

Economics professor Walter Williams delivers the sermon summary. He begins by stating that not only is capitalism not immoral, it's actually morally superior to any other economic system. He offers an example of the free market in action, and it's really the best part of the video.

The free market calls for voluntary actions between individuals. There's no coersion. In a free market, if I want something from you, I have to do something for you.

Let's say I mow your lawn and you pay me $20. What does that $20 really mean?

When I go to the grocer and say I would like to have four pounds of steak, he in effect says to me, "You want a lot of people to serve you. Ranchers, truckers, butchers, and packagers. All these people have to be paid. What did you do to serve your fellow man?"

"Well," I say, "I mowed my fellow man's lawn."

And the grocer says, "Prove it." Then I offer him the $20.

Think of the money that you've earned as a certificate of performance. It's proof that you served your fellow man.

People accuse the free market of not being moral because they say it's a zero sum game—like poker, where if you win, it means that I have to lose.

But the free market is not a zero sum game, it is a positive sum game. You do something good for me, such as give me that steak and I'll do something good for you, give you $20. I'm better off because I value the steak more than I value the $20 and the grocer is better of because he valued the $20 more than he valued the steak. We both win.

This is free market capitalism at its best. And at its best, capitalism is not immoral at all. It's not a zero sum game; at its best, capitalism has spread more wealth to more people than any other economic system we've ever known. Voluntary actions between individuals in the late Middle Ages gave European societies a robust middle class, which in turn provided support for arts and sciences, culminating in what we now know as the Renaissance.

At its best, capitalism is not about greed or hunger for power. It is about recognizing that when we each look after our own interests, we'll have a better chance of getting our needs met than if we outsource that task to a central planner. At its best, capitalism truly is a win-win system.

But the realities of human society often put us in a position where we are not able to make voluntary transactions with other individuals. Walter Williams rightly recognizes the danger of government coercion, but he neglects to acknowledge a host of other problems that can disrupt a free market. We'll look at a few of these problems in a future post.

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