Economics and Capitalism

1. Economics and Capitalism

2. Scarcity • The “Schools and Hospitals argument” • Rival goods • Incentives • Adam smith • -Self interest • -Invisible hand • Exploitation • Game theory

3. Scarcity • All economics boils down to one thing, there are limited resources on the planet and lots of people want them. • Debates on economics usually have a lot to do with who gets those resources. • The aim in an economics based debate is to show that your method or desired location of allocation is the best. • You can do this by showing that it is either the fairest or the most efficient.

4. Schools and Hospitals • There is one argument in debating that gets used by novices more than anyone. • “We shouldn’t implement this motion because it will be expensive and we can use the money for better things such as schools and hospitals.” • It’s a terrible argument; when you are in a debate you always assume that, as the government, you have decided whatever you are debating is more important than schools an hospitals.

5. Rival goods • If a debate requires you to prioritise one service over another: • THW prioritise the funding of certain university subjects over others. • You are well within your right, and in fact it’s encouraged, to explain how universities can only afford so many lecturers (scarcity) and therefore you need to prioritise the ones that are more important to the state. • A medical lecturer is a rival good to an arts lecturer, the state would prefer doctors to artists therefore it is fine to prioritise.

6. Incentives • People are fairly predictable, they respond to incentives and try to avoid things with disincentives. • When you want to ban something you attach a disincentive to it. • When you want people to do something you simply need to attach a large enough incentive to it, for example if you want people to eat healthier foods you can subsidise them.

7. Adam Smith • Adam Smith was a philosopher/economist who had two important ideas (he had others): • The self interested nature of people. • The invisible hand of the market. • His ideas were developed upon at a later date by Friedman at the Chicago school of economics, but debaters only really need the basics so we wont go too far into all of this.

8. People • Adam Smith’s theories required people to always act in their own self interest, he required them to be driven by the desire to gather more money to themselves. • He believed that this nature of the self led to good outcomes: • The more efficient services and companies survive. • The removal of state control, he believed people could do a better job in a lot of areas. • Finally he believed that people acting in their self interest is in the interest of others, more money = more taxes.

9. The invisible hand • This is the most famous part of Smith’s theory. • Smith advocated a lack of government control and interference in markets. • Smith suggests that markets always regulate themselves, and that the government has to avoid doing it for them. • Smith continues by saying that government intervention is the cause of economic failure.

10. Exploitation • A number of economists have suggested that capitalism is always exploitative, most notably Karl Marx. • Marx suggested that labour was always exploited by capital. • He suggested that the more a worker produces the larger the division becomes between those with the means of production and the workers. • He suggested that the worker is exploited in this system for one key reason…

11. The lack of alternative • Workers in a capitalist society have no choice but to work. • It is not possible to survive without taking a job, and once you do it is undesirable to leave the work place due to the knowledge of the unemployed workers that will replace you. • Clearly the workers have no choice in society but to be slaves to those with capital and the means of production. • Because those with capital know this they can exploit the workers by giving them unfair wages and no stake in the products they produce.

12. The other option • Under a socialist structure Marx believes that the state will function in a way which is fairer. • He believes the best way to achieve this is through nationalisation of certain industries and the rest should be made into cooperatives. • Cooperatives are when the workers own shares (usually a controlling share) in a company and therefore get to choose their wages and the direction of the company.

13. The problems with that • Nationalised industries generally perform worse than a competitive capitalist market. • A lack of competition leads to industries not being as efficient or innovating as they would be if they had to fight to survive (Self interest). • Cooperatives are unfortunately led by a group of self interested workers who will want the company to pass profits to them. • This leads cooperatives to run at break even, which is bad for the country because a break even company creates no growth.

14. Game theory • This comes up every now and then, I’ll explain it briefly (very) and you will at least know what is being said when it comes up. • All decisions in markets and life can be seen as a game: • The game is played by both players simultaneously, however there is a time delay between 1 acting and the other responding. Once one acts the other can see the choice they made and act accordingly. Nash Equilibrium