I appreciate hearing your perspective on this article.

My bringing together the terms ‘free market’ and ‘capitalism’ concerns specific elements described by Adam Smith in both The Wealth of Nations and The Theory of Moral Sentiments as well as the various works by Friedrich Hayek (most notably The Road to Serfdom). The two terms are not the same, though I would push back against the notion that they are not compatible.

You present an interesting lineage of capitalism, with a great emphasis on central banking. I would trace the history of capitalism (one might call it proto-capitalism) back much farther. By the time of the Italian Renaissance, notable families developed what we might consider the first real banks (‘banco’ referring to the tables these money lenders used). The development of trade in the Mediterranean, introduction of Hindu-Arabic numerals, development of double-entry bookkeeping, and emergence of proto-industrial centers (ex: Florence being dominated by the wool industry, utilizing migrant wage laborers) are all important developments in the development of nascent capitalism.

The Maddison Project, which continues the work of British economist Angus Maddison, offers a glimpse of historical GDP for various countries based on surviving data. This information goes back centuries and reveals the economic power of Italy during the Renaissance. The faulty element here is, of course, that ‘Italy’ was little more than a geographical expression at the time, not a unified political entity. Nevertheless, the data is still valuable in showing the emerging standard of living to a greater or lesser degree during the time.

Modern banking owes a great debt to the Italian Renaissance (they also gave us the word ‘bankrupt’). Italian banks were not centralized entities (though the famous Medici family did gain control of the city of Florence under Cosimo il Vecchio).

Much of the later theory was predicated on earlier practices. Adam Smith’s work came at a time when early industrialists were going bankrupt trying to defend patents in the early days of patent law. More importantly, though, his works emphasized the importance of government being pro-market, not pro-business. Adam Smith recognized the value of labor as well as the information contained in each transaction which composes the vast web of supply and demand.

More recently, Friedrich Hayek and Nassim Taleb have written extensively on the limits of human knowledge with respect to complex systems, such as markets. It was their work which inspired, or partly inspired, my original article.

“No human mind can comprehend all the knowledge which guides the actions of society.” -Friedrich Hayek, The Constitution of Liberty (1960)

Capitalism is the private ownership of the means of production for profit. The central banking to which you refer (and its alignment with the central government) is not the central feature. I do think we can both agree that government aligning itself with large banking institutions and multinational corporations has strong negative consequences for society. I would cite Nassim Taleb’s arguments for decentralization (spreading risk) and skin in the game as great stabilizing forces.

The real problems in a capitalistic society, I would argue, are due to crony capitalism. With the increasing centralization of the federal government in the US, for example, there has been a rise in lobbyists and housing prices in the Greater DC metro area. The solution is not to increase the powers and responsibilities of government but to decrease the power of Washington DC by giving greater power back to the states and municipal governments.

John Locke is an interesting thinker, though I use his ideas sparingly. The English Common Law System is the greatest legal development in history, tracing its origins back to German and Norse Pagan societies (see Icelandic Althing). Locke offered theoretical articulations during a later stage of development with some valuable insights. However, this recent emphasis on the Enlightenment as a major rupture with the past (made popular by people like Steven Pinker) is not consistent with the historical evidence. Locke is an important thinker but is probably best cited on occasion rather than given the centrality often seen in high school government classes. A touch of Locke goes a long way. Just as one might season eggs with salt or pepper, one should season an understanding of English Common Law with only a pinch of Locke.

Though we have different political perspectives, I think we can agree that major banking institutions are a great threat to both the individual and the stability of society (something Thomas Jefferson recognized in the early days of the American Republic). I would argue, though, that increasing the power of the central government to regulate banks would just lead to more bribery and bailouts at the top. Nassim Taleb famously said that ‘it is much easier to macrobull***t than to microbull***t.’ The ‘wining and dining’ of Washington will always go on (and will, indeed, become only more problematic if the government is given more power). My critiques of top-down interventions are based, in part, on this insight from Taleb. I would also state that those who do the regulating will inevitably end up being those you would probably not want doing the regulating.

John Locke is an interesting thinker, though I use his ideas sparingly. The English Common Law System is the greatest legal development in history, tracing its origins back to German and Norse Pagan societies (see Icelandic Althing). Locke offered theoretical articulations during a later stage of development with some valuable insights. However, this recent emphasis on the Enlightenment as a major rupture with the past (made popular by people like Steven Pinker) is not consistent with the historical evidence. Locke is an important thinker but is probably best cited on occasion rather than given the centrality often seen in high school government classes. A touch of Locke goes a long way. Just as one might season eggs with salt or pepper, one should season an understanding of English Common Law with only a pinch of Locke.

Though we have different political perspectives, I think we can agree that major banking institutions are a great threat to both the individual and the stability of society (something Thomas Jefferson recognized in the early days of the American Republic). I would argue, though, that increasing the power of the central government to regulate banks would just lead to more bribery and bailouts at the top. Nassim Taleb famously said that ‘it is much easier to macrobull***t than to microbull***t.’ The ‘wining and dining’ of Washington will always go on (and will, indeed, become only more problematic if the government is given more power). My critiques of top-down interventions are based, in part, on this insight from Taleb. I would also state that those who do the regulating will inevitably end up being those you would probably not want doing the regulating.

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Artist | Content Creator | Pantheist | Bohemian | Philosopher | Juggler | Anti-Authoritarian, Pro-Decentralization/Localism| http://www.instagram.com/kevinshau/

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