Friday, July 26, 2013

Capitalism, Nastiest Of Men

The quote of "Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all" was not made by an economist, but was someone interpretations of economic theory. It was sort of like a restating of Adam Smith's "invisible hand of the market" comment in his own words.

First of all the economist like Adam Smith and John Maynard Keyes were just trying to figure out how the economy worked. They were just trying to figure out how it is that all of us could just be going about our lives and how everything could just work out.

However, they did start off with the rather silly premise that people always acted sensibly and reasonably and that everyone always did what was in their own best interest. (This is, of course, also assuming that people really knew what was in their own best interest.)

We know now that their premise is not true. People do all sorts of weird and wonderful things for weird and wonderful reasons. For example, recent studies have shown things like people hate to lose money more than they like to win or gain money. Also, for some reason, most of us think an item is worth more once we own it than before we own it.

Daniel Kahneman was one person who won a Nobel Prize for his work showing that people do not act like the early economist thought that they did. See a bit of a write up on him at Encyclopedia of Economics. Even Wikipedia has some information on loss aversion.

Yes, Canada is a capitalist society. However, it is also a democratic society and a socialistic society. Capitalism is still just a market system no matter what and currently seems to be working well in China with their Communist system (or probably more actually, their dictatorial system). Market systems go back a long way in China, they just never had capitalistic market system.

On my other blog I am today writing about Evertz Technologies (TSX-ET, OTC-EVTZF)... continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

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