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On topics such as ethics and how a society should be structured, many "philosophers" (Objectivists, etc) propose a laissez-faire system with little to no government intervention and a largely free-market economy.

But this is known to not work. See the credit crisis, or literally another other major crisis in world economic history. I know laisses-faire proponents get really happy when they read introductory economics books and learn the first theorem of welfare economics, but these theorems take as assumptions certain things which just aren't true. The real world economy is not free of externalities, there's not perfect competition or symmetric information, the agents are not rational, they're largely speculative and stupid, and these two last aspects (asymmetric info + irrationality) alone could destroy an enitre economy. again, see credit crisis.

So how does it philosophically make sense to support a laissez-faire economy when it just doesn't work?

The credit crisis was solved by stimulation packages. This would not have been possible if the government was not as big as it is.

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closed as primarily opinion-based by Philip Klöcking Mar 19 '18 at 13:15

Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise. If this question can be reworded to fit the rules in the help center, please edit the question.

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    Can you give a reference on capitalism is “known not to work”? Crises don’t necessarily demonstrate capitalism doesn’t function — maybe it even functions by these sorts of breakdowns – Joseph Weissman Mar 18 '18 at 12:29
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    Can you give a name of such a (contemporary) philosopher? Even a short trip to a law library will make clear that there are all sorts of business laws and regulations which are essential for a modern economy; and large businesses are heavily involved, through lobbyists and outside law firms, in helping to craft these laws and regulations. In fact, large businesses may prefer a certain amount of such legislation and rule- making since small firms may not be able to afford to comply and it serves as a barrier to entry. – Gordon Mar 18 '18 at 12:32
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    Now if we look at what happened in 2007-2008 with the rescue of the capitalist class by our government, we may be right to have misgivings. Why? Because it has created a moral hazard, particularly if banks and investment houses expect another rescue. Here, we don't necessarily need the government to protect us; private investors should take into account this moral hazard when they invest because the next crash can come sooner and be far worse than the last one. Keep in mind, laissez-faire would say let the big bankers go bust. These questions are complicated. – Gordon Mar 18 '18 at 12:56
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    Define "does not work" please. – MichaelK Mar 18 '18 at 18:33
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    Flagging this for moderator intervention since the whole post hinges on the personal subjective claim "Laissez-faire capitalism does not work". There is a fundamental difference between "does not work" and "does not produce the kind of results that I — personally — am pleased with". – MichaelK Mar 19 '18 at 10:56
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On topics such as ethics and how a society should be structured, many "philosophers" (Objectivists, etc) propose a laisses-faire system with little to no government intervention and a largely free-market economy.

Yes, they do. They have written books about this stuff. If you want to know about their ideas, you could read what they have to say.

But this is known to not work.

You think it doesn't work. You could be wrong.

See the credit crisis, or literally another other major crisis in world economic history.

There are many accounts of the credit crisis from a free market perspective. See, for example, "The financial crisis and the free market cure" by John Allison. The US government is trying to run the banking system to serve government priorities. To do this, the US government issued fiat money and credit like it was going out of fashion. The government also made rules they thought would make financial institutions do what the government wanted. In so doing, they created perverse incentives that led to problems. The government exacerbated these problem by trying to make up those losses for some favoured financial institutions.

I know laisses-faire proponents get really happy when they read introductory economics books and learn the first theorem of welfare economics, but these theorems take as assumptions certain things which just aren't true. The real world economy is not free of externalities, there's not perfect competition or symmetric information, the agents are not rational, they're largely speculative and stupid, and these two last aspects (asymmetric info + irrationality) alone could destroy an enitre economy. again, see credit crisis.

Free market economics in the Austrian tradition doesn't assume perfect competition or symmetric information. Nor does it assume a person is rational except in the sense of having a purpose and using means that he imagines (rightly or wrongly) will achieve that purpose.

For example, see this criticism of the idea of perfect competition:

https://mises.org/wire/perfect-competition-%E2%80%9Cgobble%E2%80%9D-degook

See also this criticism of the idea of asymmetric information:

https://mises.org/library/note-canard-asymmetric-information-source-market-failure

Ayn Rand also issued a collection of essays about free markets called "Capitalism: The Unknown Ideal" and Rand largely accepted Austrian economics.

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Those who are unaware of the problem of externalities suffer from a false consciousness, but this can be corrected through education and self-education, and turn into a true consciousness of our situation.

Regulations (like good environmental legislation) force businesses to "price-in" externalities so that today's consumer pays the true cost for the goods he buys, instead off-loading environmental costs to future generations.

So this is within our system that we can make rational decisions to implement regulations to help deal with the problem of externalities.

I mentioned bringing a false consciousness to a true consciousness. This requires a lot of effort today. This is a process of "Bildung", a process of education and self-cultivation. It's not easy for people to do this because the world is so complicated. Many things have to be considered.

For instance, look at this new Japanese bullet train. It is more efficient and will save energy. Now this firm developed the train under a system of capitalist competition. Even though the government probably kicked in some money even if just for basic research or financing.

Capitalism does seem to be able to improve efficiencies through the process of competition, and we must keep this in mind. https://www.cnn.com/travel/article/shinkansen-supreme-n700s-japan/index [sorry, expired link. This referred to the Shinkansen Bullet Train]

So we have the good with the bad. I like to think of the modern economy as Frankenstein on steroids. We created this monster economy, and now it turns around to potentially oppress us. This theory, in relatively modern times, is associated with Marx (we alienate a part of ourselves that comes back to haunt us), but ultimately, as far as the modern concept of alienation itself, to Hegel in his philosophy of nature, which no one studies.

The German word Entausserung, translated as alienation, I think properly means externalization. And this makes sense. The monster-economy we created goes out, meets his limits in the world, we learn something, and try to bring our monster home again in a more human form, and on a more human scale.

(This is much like the Biblical story of the prodigal son. He goes out into the world, I.e. he externalizes himself, he meets his limits, he learns something, he comes home again a wiser man.)

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Capitalism is generally given such vague terms that it means any use of money. There are no completely 'capitalist' systems. Even the US has a mixed economy, the UK has more state run industries and interventions, all the way to China & Cuba, and even North Korea now allows some state-independent traders. So it's a spectrum. So too with being 'laissez fair'. A lot of ideology and temperament gets mixed up with peoples stances about where we should be or go on the spectrum, which obscure where people want to get, with advocacy for the direction they want change in (eg. smaller government, not no government).

There have been Darwinian arguments to go in that direction, that the selection process creates value/fitness and interference undermines it. The US spends far far more than most countries on R&D, in a relatively free market system. A lot of innovation happens there, though many argue the strength of Silicon Valley is in 2nd chances to entrepreneurs, not harsh selection.

In the US it is usually a moral, not a practical or evidence based argument that is made - Obamacare is rejected for 'unfairness' to a small minority, or rewarding 'profligacy', and the fact US healthcare is much more expensive and worse than Canada's or the UK's, is ignored. Ayn Rand and others identify positive moral qualities in competition. You have to engage with values, not just evidence, to take these arguments on. Unless you Holland or Denmark, where you just get on with following the evidence..

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As I understand it, there are just two primary known economic systems - capitalism and socialism. Of course, they come in different flavors, including communism (extreme socialism) and what I call "free market capitalism" on the other end of the spectrum.

So some philosophers might advocate capitalism as (in their opinion) the lesser of evils.

But keep in mind, also, that there's a lot of propaganda in philosophy. In plain English, some of the philosophers who cheer for capitalism may actually be propagandists.

It would be interesting to make a list of philosophers who are notable capitalists with another list of philosophers who are equally passionate about socialism. What are their credentials - and political connections? What other socio-political issues do they discuss, and do their opinions generally along with the political Left or Right?

Karl Marx, of course, was a big fan of socialism, and I think most people would agree that he was essentially a leftist. Ayn Rand, on the other hand, was very right-wing, promoting capitalism as a virtual religion. Nor was she a friend of workers - or American Indians.

Those are just anecdotal examples, but if you put together a list of philosophers with particular economic-policy leanings, I suspect you might learn some interesting things.

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