Socialism: The Arguments For and Against

In one line

Socialism is defended because it identifies inequality as a product of institutions rather than of nature and proposes to change the institutions, and it is attacked because common ownership destroys the information and the incentives a modern economy runs on, and because the power required to bring it about is dangerous to hold.

In the wording a student can write in an exam: socialism is supported on the grounds that its account of the causes of inequality is more accurate than the liberal one, that formal freedom without material means is empty, that cooperation is both more humane and more efficient than competition, and that its record in producing welfare states, labour protection and public services is substantial; and it is criticised on the grounds that central planning cannot solve the problem of economic information, that common ownership destroys incentives, that the concentration of economic and political power in one set of hands threatens liberty, and that its account of human motivation is over-optimistic.

The arguments in favour

1. Its diagnosis is accurate. The claim that inequality is largely produced by institutions rather than by differences of natural talent is supported by the evidence that outcomes correlate far more strongly with the circumstances of birth than with anything a person did. That is a factual claim and it is the strongest thing socialism has.

2. Formal freedom without means is empty. Chapter 600 showed that this criticism of liberalism was strong enough to change liberalism itself.

3. Cooperation is undervalued. A great deal of what is most valuable is produced cooperatively, and the competitive model both misdescribes it and damages it.

4. Markets fail, systematically and predictably. Monopoly, information asymmetry, external harms such as pollution, public goods that nobody has an incentive to provide, and the exploitation of unequal bargaining power are not accidents but structural features, and each is a reason for collective provision or control.

5. Political equality does not survive economic inequality. Equal votes coexist with grossly unequal influence over what is decided, which is chapter 60's structural power and chapter 840's ethical decay.

6. Its record is substantial. The eight hour day, the prohibition of child labour, workplace safety, social insurance, public health services, universal schooling, pensions and paid leave were won by socialist and labour movements against opposition, and are now so completely accepted that their origin is forgotten.

7. It supplies an answer utilitarianism cannot. Because it attends to distribution rather than to totals, it addresses the defect chapter 660 identified as decisive.

The arguments against

The economic calculation problem

The most serious objection, and an answer that gives it properly is a strong answer. It is due to Mises and Hayek and it is not an objection about incentives.