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Capitalism and Innovation

 
Jefe
 
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Jefe
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13 September 2021 12:28
 

https://www.statista.com/chart/19312/most-innovative-economies-in-the-world/

Top 10 most innovative economies:
#1 South Korea
#2 Singapore
#3 Switzerland
#4 Germany
#5 Sweden
#6 Denmark
#7 Israel
#8 Finland
#9 Netherlands
#10 Austria

Showing 2021.

 

 
 
weird buffalo
 
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weird buffalo
Total Posts:  2027
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13 September 2021 12:32
 
EN - 13 September 2021 11:48 AM

The profit motive is just that: it is what motivates innovation

EN - 13 September 2021 11:48 AM

Anyway, the USA is my argument that a capitalistic system leads to the best economic outcome. We just need to reform our tax system.

These are not the same statements.  I started this off by addressing the first.  “Best economic outcome” is also highly subjective.  The economic model for the USA is also how we got global warming (it’s not the only place responsible, but the economic model was used in other countries that contributed significantly as well).  So, by one subjective standard, this economic model has put the entire species at risk of extinction… which I would argue is not “best”.

You still haven’t demonstrated that the profit motive is good at producing useful innovations.  The 11th most innovative company on the list you linked was Monster Beverage.  I’d love to hear the argument about why the innovations they’re making are good for us as a society.  Is it purely that they are profitable, and profit is good?  What if that profit comes at the expense of the health of millions of Americans?  Is that profit still good?

 
Jefe
 
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Jefe
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13 September 2021 12:33
 

https://www.visualcapitalist.com/world-most-innovative-economies/

From Feb 2020:

#1 Germany
#2 South Korea
#3 Singapore
#4 Switzerland
#5 Sweden
#6 Israel
#7 Finland
#8 Denmark
#9 USA
#10 France

There’s a chart at this site that shows fluctuation, year by year, and how innovation waxes and wanes over time.

It would be interesting to see if innovation is more or less encouraged under various policies and practices.

I.e. would an atmosphere of science denial and mistrust foster greater impetus to innovate?  Would an atmosphere of value proposition strengthen or weaken innovation in research and development?
Is profitability a motivator for expansive innovation, or does it result in more targetted research, and competitive censorship via patent hoarding and monopolization?

[ Edited: 13 September 2021 12:37 by Jefe]
 
 
EN
 
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EN
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14 September 2021 08:46
 

Here are excerpts from an article on ways the profit motive inspires innovation.

https://www.bartleby.com/questions-and-answers/q-how-does-profit-motive-affect-innovation-and-economic-productivity/288c129b-d6fd-45b7-a6f1-013749f5a05e

Let’s say a person, working for a corporation that is dedicated to making profit, comes up with an idea to make a better widget. He has a choice: he can reveal his idea to his employer, or he can go the route of private ownership and capitalization. That is, he can take his idea to a venture capitalist or a financial institution to get backing, then quit his job, get a patent (if necessary), and work like the devil to bring his idea into reality. Either route he chooses, his innovation came from the profit-making system of capitalism. It was the overall environment of capitalism that led to the innovation.

Sure, people can come up with good ideas in a socialist system, or in no system at all.  But just look at the track record of innovation in a completely socialist system (USSR, for example) and a capitalistic one. Granted, most modern economies have both capitalistic and socialistic elements, but it is capitalism that creates the wealth, the capital, that leads to the innovation scenario mentioned above and its development.

Capitalism is superior in that it is more aligned with basic human nature and psychology (self-interest), and also comports more with Western ideals of private property, freedom, and individualism.  Its excesses can be tempered with a fair tax structure and regulation.  Furthermore, the very wealthy in the USA tend to be quite philanthropic (Bill Gates, for example), so they can give back to society both in taxes and charitable donations. When put under proper governmental umpiring, it rocks!  It provides the freedom and incentive to accomplish good for the benefit of all.

Of course, nobody is going to convince anyone in this argument, so I think I’ll stop here and give you guys the last word.  I’m motivated by profit to go back and finish my work.

 
nonverbal
 
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nonverbal
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14 September 2021 09:20
 
weird buffalo - 13 September 2021 12:27 PM
nonverbal - 13 September 2021 10:07 AM
weird buffalo - 13 September 2021 09:55 AM
nonverbal - 13 September 2021 09:01 AM
weird buffalo - 13 September 2021 08:11 AM

A free market system does NOT have to be capitalist.

If you’re going to argue FOR capitalism. you must argue FOR CAPITALISM.  You cannot rely solely on the idea of a free market, because other free market systems exist.  If you want to tell us why CAPITALISM improves innovation, then you have to demonstrate that CAPITALISM improves innovation.

A definition of capitalism from the IMF.

The essential feature of capitalism is the motive to make a profit. As Adam Smith, the 18th century philosopher and father of modern economics, said: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Both parties to a voluntary exchange transaction have their own interest in the outcome, but neither can obtain what he or she wants without addressing what the other wants. It is this rational self-interest that can lead to economic prosperity.

Capitalism is the idea that we should organize our economy around ownership and profit.  That’s it.  That is what capitalism is.  Ownership and profit are the most important principles to organize an economy.

American Indians had a free market society too.  One in which mutual benefit and communal sharing were prioritized.  Still a free market.  People were free to choose to engage in transactions or not.  The goal of the system was different from capitalism though.  Still free, but it was not organized around ownership and profit.

Can you refer to a current or past nation or county or city that exemplifies a free-market economic approach which excludes capitalism? Just curious.

Perhaps read the full post?

Historically, capitalism was invented in the 16th century.  Just prior to that, mercantilism shared a lot of similar qualities, but it prioritized the national system over private ownership, and the two were somewhat mixed for a time.

So, any economic system in which people engaged in trade with each other, without a government force requiring them to engage in that force, is a free market system.  In effect, the entire of all economic activity in North America pre-contact with Europe was a free market system that was not capitalism.  Most of Africa, India, and Asia would fall under this definition as well for long periods of history. (Not always, since sometimes powerful people took over and mandated certain behaviors)

The European serf system would not, since serfs were under obligation to work, even if paid.  After certain rights and freedoms are enshrined/recognized though, even just after the first couple waves of the black death, the overall system hadn’t changed, but people had more rights to conduct their labor as they saw fit.

I think it’s interesting to note, that the English Commons (the communal land used to graze sheep and cattle) existed and worked for hundreds of years.  It wasn’t until capitalism was introduced that the Tragedy of the Commons became a thing.

Please let me know whenever at some point you’ll post fully. Also, wasn’t an implied capitalism in play prior to the 16th century? Never? Or does it require the coining of a term to actuate something so basic?

I’ve explained the differences.  Please highlight some statements and tell me what isn’t making sense to you.  I’ve already explained it… so, just asking me to do that again isn’t helpful.  What parts of my explanations so far doesn’t make sense to you?

My three questions in Reply #10—boldfaced above—were as specific as any other questions I’ve ever asked. Your implication of vagueness on my part is sincere, no doubt. Right.

 
 
Antisocialdarwinist
 
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Antisocialdarwinist
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15 September 2021 18:01
 

From The Times

Compared with the United States, G.D.P. per person in 2019 was 14 percent lower in Germany, 24 percent lower in France and 26 percent lower in the United Kingdom.

Economists disagree about why European nations are less prosperous than the United States. But a leading hypothesis, advanced by Edward Prescott, a Nobel laureate, in 2003, is that Europeans work less than Americans because they face higher taxes to finance a more generous social safety net.

In other words, most European nations use that leaky bucket more than the United States does and experience greater leakage, resulting in lower incomes. By aiming for more compassionate economies, they have created less prosperous ones. Americans should be careful to avoid that fate.

Where the “leaky bucket” is:

Providing a social safety net is like using a leaky bucket to redistribute water among people with different amounts. While bringing water to the thirstiest may be noble, it is also costly as some water is lost in transit.

In the real world, this leakage occurs because higher taxes distort incentives and impede economic growth. And those taxes aren’t just the explicit ones that finance benefits such as public education or health care. They also include implicit taxes baked into the benefits themselves. If these benefits decline when your income rises, people are discouraged from working. This implicit tax distorts incentives just as explicit taxes do. That doesn’t mean there is no point in trying to help those in need, but it does require being mindful of the downsides of doing so.

 

 
 
Jefe
 
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Jefe
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15 September 2021 18:52
 
Antisocialdarwinist - 15 September 2021 06:01 PM

From The Times

Compared with the United States, G.D.P. per person in 2019 was 14 percent lower in Germany, 24 percent lower in France and 26 percent lower in the United Kingdom.

Economists disagree about why European nations are less prosperous than the United States. But a leading hypothesis, advanced by Edward Prescott, a Nobel laureate, in 2003, is that Europeans work less than Americans because they face higher taxes to finance a more generous social safety net.

In other words, most European nations use that leaky bucket more than the United States does and experience greater leakage, resulting in lower incomes. By aiming for more compassionate economies, they have created less prosperous ones. Americans should be careful to avoid that fate.

Except, they don’t really pay tons more in taxes.
I know it’s a favoured myth in the US that the pay less taxes than lots of countries, but it’s not really true.
The truth is that these countries choose to allocate their tax revenues in different ways than the US does.

https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

France
Corp:  26.5% (on profits over €38,120) 15% (not over €38,120)
Individual: 0% to 49% (45% + 4% tax on high incomes, or incomes over €500,000)

Germany
Corp: 29.65%
Individual: 14% (€9,169 are free of income tax) to 47.475% (45% income tax + 5.5% solidarity surcharge based on the total tax bill)

UK
Corp: 19%
Personal: 32% (20% Income Tax + 12% Class I NI) (0% Income Tax on first £12,570) up to 54% (40% Income Tax for £50,271 to £150,000 + 12% Class I NI for £797 to £4189 pm + 2% Class I NI for over £4189 pm) 59% (over £150,000)

US
Corp:  24.6% + 0–12% W-2 // 30.5% + 0-12% 1099 (state/local)
Personal: 10% (federal) + 0% (state) + 0%–3% (local) (federal standard deduction of 12.000 USD for most) up to 51.6% in Portland, Oregon (37% federal tax[+ 9.9% state tax + 4.7% city tax

The UK has lower corporate taxes, France is comparable, Germany slightly higher.
All of the upper marginal personal tax rates in all four countries are in the 45-51% range depending on earnings, regions and states and plateaus. 

HOWEVER - of these four countries, only does the US have for-profit health insurance - essentially and additional private corporate tax on private citizens in addition to federal and local governmental taxes.

The average annual cost of health insurance in the USA is $7,470 for an individual and $21,342 for a family as of July 2020, according to the Kaiser Family Foundation.

***Some of this may be covered by employers, and these numbers do not include deductible costs payable by the individual prior to receiving coverage.

There’s probably a fair amount of tax evasion in all four countries by the wealthy, as well.

 
 
weird buffalo
 
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weird buffalo
Total Posts:  2027
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15 September 2021 20:36
 
Antisocialdarwinist - 15 September 2021 06:01 PM

From The Times

Compared with the United States, G.D.P. per person in 2019 was 14 percent lower in Germany, 24 percent lower in France and 26 percent lower in the United Kingdom.

Economists disagree about why European nations are less prosperous than the United States. But a leading hypothesis, advanced by Edward Prescott, a Nobel laureate, in 2003, is that Europeans work less than Americans because they face higher taxes to finance a more generous social safety net.

In other words, most European nations use that leaky bucket more than the United States does and experience greater leakage, resulting in lower incomes. By aiming for more compassionate economies, they have created less prosperous ones. Americans should be careful to avoid that fate.

Where the “leaky bucket” is:

Providing a social safety net is like using a leaky bucket to redistribute water among people with different amounts. While bringing water to the thirstiest may be noble, it is also costly as some water is lost in transit.

In the real world, this leakage occurs because higher taxes distort incentives and impede economic growth. And those taxes aren’t just the explicit ones that finance benefits such as public education or health care. They also include implicit taxes baked into the benefits themselves. If these benefits decline when your income rises, people are discouraged from working. This implicit tax distorts incentives just as explicit taxes do. That doesn’t mean there is no point in trying to help those in need, but it does require being mindful of the downsides of doing so.

 

The last part is not always true.  For example, in the UK, healthcare is paid through taxes, and is for the most part free for those using the system.  So, you get the same health care regardless of income.  Earning more money does not reduce how much free health care you get.  This is something the nordic countries have done with a lot of social services as well.  Everyone is entitled to use them, regardless of income.

It’s actually a key component to how Europe was able to implement a lot of those programs.  By making them available to everyone, and not just the “needy”, it both removed the social stigma of accessing those programs and the problems of arguing over who qualified as “needy”.

I would argue for the same concept if we ever implemented a UBI.  We could cap the UBI based on income, but then we’d need more people to administer the program and verify people’s eligibility, and most likely it would only affect 1-5% of the population, but admin costs would likely be equal or greater.  I’d rather just cut rich people the same check and save the money on admin costs.

 
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