Capitalism myths? Or truths? 


In your most recent Editor's Note you mention two "pernicious" myths about capitalism: Capitalists want competition and Capitalists want to create jobs.

While both the former and latter may be myths, they are both the opposite of pernicious.

A capitalist operating in a free market with 100 percent market share will be forced to use his profits to continue innovating his product to keep his prices low in order to keep out competition. As a capitalist increases market share in an industry this forces other capitalists to enter increasing competition and exerting downward pressure on prices.

The primary goal of any capitalist is to maximize his own wealth. Job creation is a positive effect of capitalism. By allowing capitalists to keep what they produce resources in an economy are allocated more efficiently.

Here's a simple example: A capitalist purchases a machine that can do the work of 10 workers. The capitalist then lays off 10 workers. The capitalist can now sell his widget at a lower cost.

This increases the demand of widgets. He can now sell more widgets to a retailer. The retailer then hires more sales people. The manufacturer of the machine now hires more employees to deal with the increased demand of the machine.

The end consumer of the widget now has more discretionary income in his pocket to spend in other sectors of the economy.

The problem with monopolies are not private sector monopolies, but government coerced monopolies and any other private firm with special government protection keeping out competition.

Education, higher education, The Federal Reserve System, health care (which has been a government run cartel for decades). Fannie Mae and Freddie Mac. TVA. just to name a few.

All government-coerced monopolies have two things in common: Ever-increasing costs and ever-decreasing efficiency.

Asa Stone


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