Capitalism Creates Scarcity of resources Artificially? A Rebuttal.

I’ve lately frequented the facebook page called Still Laughing at ‘Anarcho’-capitalism (SLANCAP), which is maintained by self-described anti-capitalist anarchists. They believe the that phrase Anarcho-capitalist is an oxymoron, and, as far as I can tell, they believe the that the phrase anti-capitalist Anarchist is redundant. Hence, they feel no need to specify the flavor of Anarchy to which they subscribe. I’ll call them anti-capitalist Anarchists, redundant as that may be.

Maybe I’ll get into the merits of these labeling choices another time. Suffice to say here that I have learned a great deal about anti-capitalist Anarchist objections to capitalism by following the SLANCAP facebook page. The authors of the page have yet to change my mind about how I think the world ought to work, but they have convinced me to pay more attention to the self-congratulatory rhetoric the libertarians and anarcho-capitalists often employ without realizing they’re doing it.

The page admins have launched a traditional website at slancap.com for anyone interested. I think I’m good for trolling only the facebook page for now, whereupon I recently spotted the following video about scarcity. Capitalists and anti-capitalist Anarchists will never come to an understanding about scarcity until they each learn to understand how the other uses the term. This is yet another a definition problem, at the core. Here is the post:

I appreciate this anti-capitalist gentleman’s polite, constructive criticism. Here are a capitalist’s, rebuttals, responses, and apologies. This is going to be a long response, so I’ll sum up the main rebuttals first, and then I’ll launch into details afterwards. The rebuttals are:

  1. Anti-capitalist Anarchists use the word scarcity differently than capitalists do.
  2. Private property and markets create the illusion of abundance where, in reality, there is not enough of each commodity to satisfy all demand.
  3. Describing private property as “an unlimited amount of property that [the owners] never personally interact with” does injustice to those who interacted with the property in the first place to increase its utility.
  4. Where dwellings go unsold, unused, and vacant, owners have a capitalist financial incentive to let others use the dwellings in exchange for maintenance services, and many property owners have begun to do just that.
  5. Government manipulation of incentives away from those of the capitalist price system, often at the behest of an economically naive populace, is why so many people built so many houses so uneconomically in the first place.

1. Anti-capitalist Anarchists use the word scarcity differently than capitalists do.

First, let’s distinguish between how this gentleman uses the scarcity, and how capitalist would use the same word. Here is the dictionary.com entry for the word scarce, in pertinent part:

Scarce [skairs] adjective, scarc·er, scarc·est.

1. insufficient to satisfy the need or demand; not abundant: Meat and butter were scarce during the war. 2. seldom met with; rare: a scarce book.

This gentleman uses definition #2, as has every other anti-capitalist I’ve ever met. Consider his reasoning at 0:24 in the video:

A homeless person living in the city, who doesn’t have food or shelter, isn’t [un]able to access them because there isn’t an abundancy of food or shelter in the city. Food could be just around the corner in the shops, but he can’t access it because it’s someone else’s private property.

His argument is that food is not seldom met with.  To the contrary, his argument continues, shoppers and homeless people alike meet food regularly at their local shops. Food, therefore, is abundant, despite capitalists’ contentions that it is scarce—or so the argument goes. That’s fair enough, under definition #2. Capitalists like myself, however, never use definition #2 when we discuss scarcity in political economics. We always use definition #1. We say precisely that the quantity of food is insufficient to satisfy all demand, notwithstanding how frequently it is met with.

2. Private property and markets create the illusion of abundance where, in reality, there is not enough of each commodity to satisfy all demand.

The gentleman in the video observes correctly that store owners regularly pile apples, oranges, and bananas as high as an elephants eye. It does not follow, however, that such tall stores of food would satisfy all demand if offered to the public, free for the taking. Private property and the price system require shoppers to economize, to take only what they are willing and able to pay for, and to leave the rest for others. In that way, private property and the price system enable the artificial illusion of abundance where there is really scarcity—scarcity, that is, under definition #1.  If the store owner changed his policy to offer all food to the public, free for taking, shoppers and the homeless alike would consume more, and then watch helplessly as the apparent abundance disappeared like a dream upon waking.

The gentleman seems under the mistaken impression that giant stores of food—apples, oranges, bananas, bread, etc., each piled high as an elephant’s eye at your local supermarket—are the abundant gifts of a munificent mother nature. This is not the case. The food in these stores is the product of the toil of many people, and if those people can’t count on receiving a proper return for the food items they produce, then they will be less likely to produce those items in the future. They will devote their efforts instead to other more gratifying pursuits. Giant piles of food at the supermarket are not a constant. They are not a given. Their continued replenishment depends on the satisfaction of those who built them, and that’s what the security of private property rights offer.

3. Describing private property as “an unlimited amount of property that [the owners] never personally interact with” does injustice to those interacted with the property in the first place to increase its utility.

The gentleman’s other allegation of faux scarcity arises from land use. At the start of the video, he described capitalist private property in land in a way that I felt was uncharitable. He described it as:

…an unlimited amount of property that [the owners] never personally interact with.

In my opinion, this does not fairly represent of how land comes into ownership in the private property system. The following account may be tough for those unaccustomed to thinking like capitalists to parse. Try to do your best with it, and leave me some feedback so I know how I did.

In the capitalist system, and especially in “Anarcho-capitalist” system that I try to represent, the chain of title to land must begin with personal interaction with the land. That interaction brings with it the right to enjoy the fruits of that interaction. Understand the limits of this title. I agree with Murray Rothbard’s formulation, from The Ethics of Liberty:

Some theorists have maintained—in what we might call the “Columbus complex”—that the first discoverer of a new, unowned island or continent can rightfully own the entire area by simply asserting his claim. (In that case, Columbus, if in fact he had actually landed on the American continent—and if there had been no Indians living there—could have rightfully asserted his private “ownership” of the entire continent.) In natural fact, however, since Columbus would only have been able actually to use, to “mix his labor with,” a small part of the continent, the rest then properly continues to be unowned until the next homesteaders arrive and carve out their rightful property in parts of the continent. …

A modified variant of this “Columbus complex” holds that the first discoverer of a new island or continent could properly lay claim to the entire continent by himself walking around it (or hiring others to do so), and thereby laying out a boundary for the area. In our view, however, their claim would still be no more than to the boundary itself, and not to any of the land within it, for only the boundary will have been transformed and used by man.

My understanding of the American system is that, quite often in American history, physically defensible title to land has been conferred upon those who built only boundaries around land without transforming the land within. I consider titles to those lands to be invalid, and I would therefore expect to agree with the self-styled Anarchists, at least to that extent, on the illegitimacy of much American-style private property.

Given, however, that the first owner did actually interact with the land, that owner may then sell the land, with its improvements, to others who may then use them or not use them as they please. To get the money to buy the land, subsequent purchasers must have either contributed some things of value to the economy, or they must have been fortunate enough to have had others (perhaps industrious relatives) do so on their behalf. The purchaser can not just take an improved lot of land without first having given into the economy. So, from the “Anarcho”-capitalist perspective, excluding others from improved, yet unused, land is excusable in light of the prior giving into the economy and prior personal interactions with the lands undertaken by the owners in the chain of title, all of which have made the existence and holding of more highly valued land possible.

In the case of building dwellings on some land, and then excluding others in need from those dwellings, there would be no empty dwellings to argue about without a prior giving, and a prior interaction, on the parts of the owners of that land. In short, by building a dwelling and leaving it vacant, the builder does not leave any homeless person in a worse position than had builder not built the dwelling at all. Subsequent purchasers of the dwelling similarly leave the homeless in no worse position, where, under the capitalist system, either they or someone in their stead has given into the economy prior to exercising control over the land.

4. Where dwellings go unsold, unused, and vacant, owners have a capitalist financial incentive to let others use the dwellings in exchange for maintenance services, and many property owners have begun to do just that.

After either improving the land by building a dwelling on it, or having paid those who did so, any land owner who then excludes others from such dwellings and leaves them vacant does so only at an opportunity cost. Renting out the property to others, even for so much as a nickel above the cost of maintenance, is in the financial interest of the land owner. Understand, however, that this financial interest must compete against other interests, such as holding out for potentially higher returns, which might favor leaving the property vacant. Although builders and bankers may rightfully keep a dwelling vacant while holding out for higher bidders, the wiser among them understand when to cut their losses. Consider these passages from a June 2013 segment of Chicago Tonight:

The video is non-embeddable, but click above to enjoy it at chicagotonight.wttw.com.

The video is non-embeddable, but click above to enjoy it at chicagotonight.wttw.com.

Martha Biggs lives in one of the [Anti-Eviction Campaign’s] so-called “takeover homes” in Grand Crossing on the South Side. It’s a foreclosure technically owned by Deutsche Bank.

“It’s cheaper to fix the building than to tear it down,” Biggs explains. “If you don’t want the gangbangers in the building, move a homeless woman in it with children. She’s going to keep them off her doorstep because she wants somewhere to stay.” …

… So, is this work legal? The answer: yes and no. The campaign has an interesting –sometimes friendly, sometimes antagonistic – relationship with banks, who technically own the houses they’re taking over.

“We basically negotiate with the banks and say, ‘Man, look, we’ll fix this property up, we’ll keep this grass cut, all we asking for is this lady don’t have to sleep in her car or don’t have to be homeless.’” Biggs said. “Nine times out of 10, they agree. They say, ‘Well, as long as she don’t mess this property up.’ But nine times out of 10, the property’s already messed up because you left it abandoned for four years.” …

… The way Biggs sees it, homeless people are keeping up the property in exchange for some temporary shelter. “A homeless woman who ain’t got nothing to do can cut your grass, can keep the front of your house looking good,” Biggs said. “You, sitting in the bank, I don’t think you can do that.”

So, nine times out of 10, according to this activist, banks understand when to cut their losses and claim the benefits of letting others use and keep up a vacant property. That’s just good business, and the capitalist marketplace will reward those who follow this good business practice—and its not just the marketplace rewarding this behavior. The tenants reward this behavior by actually providing the upkeep that the banks want, and the tenants deserve credit for their contributions to the economy.

Sometimes it takes an organization like the anti-eviction campaign to make banks realize this untapped, mutually beneficial profit opportunity, so I congratulate the Anti-Eviction Campaign, and I wish them continued success in this aspect of their work. Of course, there still are plenty of vacant houses, so the question remains: Why haven’t more bankers taken greater advantage of this profit opportunity? That demands further investigation on my part, but finding further government intervention preventing the practice would not surprise me. The writers of the Chicago Tonight segment were ambiguous as to the legality of the practice, and I’m curious to discover what exactly what laws are at play.

5. Government manipulation of incentives away from those of the capitalist price system, often at the behest of an economically naive populace, is why so many people built so many houses so uneconomically in the first place.

Finally, the Anarchist gentleman in the video at the top of this post observed that:

In the United States, one in seven houses are empty when one in 400 people are homeless. There’s more than enough homes for all the homeless people in America, but they can’t access the homes, because if they went in there without paying rent, that would devalue the assets of the property owners, and thus the use of State violence to defend the property that isn’t even being used is more important and deemed more moral in that society than a homeless person’s use of that shelter.

To argue that, “There are plenty of houses for all homeless people, therefore there is such an abundance of houses to satisfy all demand for housing,” is incorrect in my assessment. That argument ignores the just demands of the builders, investors, and owners of the houses, who expect to receive returns on their investments. Their demand counts, as far as capitalists are concerned. As we have seen, the property owners initially satisfy their own demand for the houses by keeping them empty and holding out for higher bidders than homeless people. Eventually, however, the wiser owners will learn cut their losses and open their properties to lower bidders. The question is: Understanding in retrospect that these houses were poor investments from the start, who built them in the first place, and why? In my experience, the anti-capitalist anarchists perform only the most superficial evaluation of why things appear in abundance yet go unused.  The assumption in this case seems to be that houses are products of nature that sprout up like weeds, and it is only the misanthropic capitalists who forcefully exclude others from these gifts of natures bounty. I assure you that is not the case.

The fact is that the housing market, like the similarly important health market, is constantly bombarded with government interference so that to call it a market is really a fallacy. Housing has been a regular target for government interlopers since Roosevelt’s New Deal, and they interlope way beyond the simple enforcement of capitalist claims of private property. There is little sign of them letting up. Here is a little slideshow I found through the American Enterprise Institute that covers only a few of governments more recent and thorough interventions:

The government’s plan, apparently, is to buy public approval by subsidizing the housing market, using the various political tools at their disposal. At the level of intervention demonstrated in the slideshow, distinguishing private investment activities based on reactions to meaningful price information from private investment activities based on government manipulations of market incentives is nigh impossible. Basically, government manipulation of the housing market signaled a false demand that drove investors to build countless houses that nobody could afford. In the absence of this intervention, investors would have been more responsive to market demand, and they would have rather built things that more people could actually afford. They could have built smaller houses, but they could also have been a number of things the buying public might have found useful. It’s hard to say exactly what the economy would have looked like had the government not interfered so extensively, and anti-capitalists play that inconvenience to their benefit. Capitalists would contend that market would have been more responsive to consumer demands in the absence of this interference.

The anti-capitalist Anarchists believe that wherever there are capitalist markets and private property gone unused, a Gestapo of some kind will naturally emerge to enforce the allegedly unfair property claims through violence. That’s a fair criticism, although the anti-capitalist anarchists seem blind to the same potential weakness in their own preferred, imposed order. To argue that a violent rights-enforcement apparatus is the natural product of private property is one thing. To argue further that governments who manipulates incentives as thoroughly as the American government has are natural products of private property is another thing entirely. The latter does not follow in my opinion. Governments that interfere the way the American government has are largely a product of an economically naive populace that advocates such intervention upon against the admonishments of libertarian capitalists.

In conclusion, I do not agree with the gentleman anti-capitalist, but I appreciate his polite, constructive criticism. I am now better familiar with a common criticism of capitalism

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