 Alright, welcome everyone to Not Related, the biggest brain podcast out there. In this episode we're going to talk about capitalism, socialism, and democracy, which are not just three abstract nouns, they are also a book written by Joseph Schumpeter, who's a guy you probably haven't heard of, and a book you probably haven't heard of, but it's one of those books that 80 or so years later is just such a density of hot takes that I think is still worth evaluating. So as always, I am Luke Smith, your host. If you have any comments about this episode, send them to lukeatlukesmith.xyz, donations, paypal.me slash lukeimsmith, that's imism microphone, and we'll also be reading donations and comments from the last episode, which was on Julian Jane's origin of consciousness in the breakdown of the bicameral mind that will come in the middle of the show. So for now, let's go ahead and jump into it, shall we? So capitalism, socialism, and democracy. Now first off, with a book with a title, so abrasive, not abrasive, but just sort of out there, we might as well put our cards on the table, so to speak, put out a disclaimer, because obviously if you have a book with this kind of title on these topics, everyone's going to come to the table with a kind of political axe to grind. This is just going to happen, and I'll go ahead and tell you if you're looking for zingers from this book, you might find some of them, but you'll probably be disappointed. And I say that not because it's a bad book, not at all, but this is one of those books that is written with such a level of subtlety that it's almost like it's written on an unknown level of irony. So it's the kind of book that while it has a lot of insights, Shumpeter is keeping his cards close to his hand. You know what I mean. Shumpeter is the kind of guy who doesn't want to wear his politics on his sleeve, and although he does have his own views, they're the kind of things that you have to really shuffle through the bushes for. So I'll go ahead and give you the literal arguments of the book, the hot takes, well, or at least at the superficial level. Shumpeter is going to argue that capitalism is great, but it's also going to collapse very soon. He's going to argue that monopolies are not that bad. In fact, they're not bad at all. And market competition ultimately doesn't matter, entrepreneurs do. He's also going to argue that socialism is inevitable. And it's also democratic, but it's not necessarily something worth looking forward to. And he's also going to deflate the ideology of democracy. Not so much that he is anti-democratic, but well, we'll just wait for that. We'll wait for those takes. So Shumpeter, I should go ahead and say, again, this book is written at an unknown level of irony. Many people have read it, and even at the time, it wasn't really clear what Shumpeter's actual opinion was about the whole thing. Because as I said, he's going to argue he seems to be a fan of what he calls capitalism. But of course, he's also saying that it is going to soon come to an end. We'll get into the specifics in a second. What I think the general consensus is that Shumpeter is what we would call nowadays sort of a black-pilled conservative. He almost is one of the first people to have caught that kind of post-war conservative defeatism, where he wants to sort of die nobly. He has his views, he thinks that they're right, but he also thinks they're going to lose, and there's nothing he can do about it. That's the sort of attitude with which this book is written. Now even if you're a socialist yourself, even if you could totally hate someone of Shumpeter's political disposition, the book is written in a way that no one is going to put it down. And I'm not saying that it's particularly exciting. I mean in the sense that there are a lot of times where people read books they don't agree with, and they put them down and discussed. This isn't the kind of book that you're going to do that for, even if you don't necessarily agree with Shumpeter's takes. Because again it's written at such a subtle level. Also this is the kind of book. Now I originally read it around 10 years ago, and this was back around the financial crisis. Now during the financial crisis a lot of people, this is a book that a lot of people name dropped because at that period a lot of people were sort of looking through the economic past for people with insight, you know sort of new economic paradigms. People were grasping at straws as to what kind of thing we're going to glom onto next. So the name droppers of the New York Times and all these other, I don't know, pseudo-intellectual publications would name drop this book, read the first 100 pages, maybe read the first 50 pages or something, quote from it profusely, and then sort of leave it at that. So that's how I first encountered this book. And I originally, I was like that, I read the first 100 pages, thought it was interesting. But as time progressed, I ended up reading this book several times. And each time, even as I re-read it to do this podcast, you still find little gems of insight. So anyway, let's go ahead and, before we get into the actual content of the book, which I've alluded to already, I might as well provide a little bit more context of the time that this was written in. So again, this was first published, I think, in 1942. Now the context of the field of economics at the time was in a pretty significant shift. Now on one side, you have, of course, a lot of socialist movements during the period. Now of course, the Soviet Union existed. There were communist almost revolutions in different parts of Europe and other countries. So you had that as a background. In Schumpeter, it's pretty clear that he's not a big fan of socialism. Additionally, there was the rise of Keynesian economics, which if you don't know, this is economics associated with John Maynard Keynes. This arose in the English-speaking world in the 30s. Now John Maynard Keynes wrote his general theory, I want to say 35, I'm not quite sure, but he had a huge influence on the field of economics. There's a huge sort of sea change, not just because Keynes had a novel economic theory, or at least in part, but also because he was very socially connected to the, I guess, intelligentsia at the time. And he was a very charismatic guy. And he had a view of economics that he contrasted in, well, he put in contrast to what he calls classical economics. And in his construal, classical economics is what we would think of as being more libertarian, as we would call nowadays, in the sense of free trade, free markets, no government intervention. Keynes had a view of economics, however, in which there was a natural tendency in the macroeconomy for depressions. In that we don't have to go into the specifics of his theory, because it's not too germane here. But the idea was that there is a lack of effective demand, and this necessitates government funding to alleviate. Again, we won't go into the specifics. If you don't know what we're talking about, just take it at that. But Schumpeter was very much opposed to this view as well. And he was also very much opposed to things that either implemented Keynes's theory or were consistent with it, like, for example, the New Deal, which actually started before Keynes, but that's not so important. Now Schumpeter was an Austrian, well, he was an economist from Austria. There's also a school of economics called the Austrian School of Economics. He was not one of those. He was loosely associated with them. He had a lot of connections, not just with them, but other schools of economics. But he himself is the kind of guy who really cannot be categorized in any particular view. In a lot of ways, when you read capitalism, socialism, and democracy, you see that despite the fact that he is very much against socialism, not viscerally, but he's generally against it. He actually draws a lot from Marx himself. He actually, the first several chapters is actually really praising. It might be ironically praising, but praising Marx as a economist, sociologist, really a general theorist, even as a prophet. I think there's a chapter called Marx the Prophet. So Schumpeter takes a lot from Marx. He takes some from the historical schools of economics. So he really has a very unique view. All right, so let's go ahead and get into the actual content of the book. Now again, Schumpeter is pessimistic. He's a proponent of capitalism, but he thinks that in the end capitalism is going to come crashing down. He's going to make an argument later on that's going to be not dissimilar from the argument of Marx or other so-called scientific socialists in which capitalism comes to an end due to the material conditions that it creates. But in the short term, he's very much an advocate of capitalism and he thinks that it's not only created enormous amounts of wealth, but it has created an equalization of well-being for everyone in society. So on one side on the numerical side, which is not the side that Schumpeter thinks is very important, but some people care about this kind of stuff, he argues that capitalism will probably continue producing the same growth in terms of economic well-being that it has for the past 100 years into the future. He says specifically that he prophecies around... Prophecies. Prophecizes around an increase in the GDP of about 2% per year on for 80, 90, 100 years as far as capitalism will survive. Now with the Great Depression, this sounds like a sort of a strange pronouncement to make, but it's a pronouncement that ended up being very much true. Now additionally, more importantly than that for Schumpeter, is the fact that capitalism is... It changes the material structure of society in a way that can't be measured by just money or wealth alone. Now some people have critiqued capitalism saying that it is an economic system where there is inequality or sometimes it might even increase inequality or something like this. But Schumpeter makes the argument that in reality, if you don't look at the numbers and you look at the actual material reality, the actual lifestyles of people, you see that if anything capitalism has drastically decreased functional inequality between people. So he writes, There are no doubt some things available to the modern workmen that Louis XIV himself would have been delighted to have, it was unable to have, modern dentistry for example. On the whole however, a budget on that level had little that really mattered to gain from capitalist achievement. Even speed of traveling may be assumed to have been a minor consideration for so very dignified of a gentleman. Electric lighting was no great boon for anyone who has the money to buy sufficient numbers of candles and pay servants to attend them. It is the cheap cloth, the cheap cotton, the rayon fabric, boots, motor cars and so on, that are the typical achievements of capitalist production and not as a rule improvements that would mean much to a rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within reach of factory girls in return for steadily decreasing amounts of effort. So Schumpeter has this as a general counter critique for people who have the idea that, well capitalism causes inequality or something like this because again his idea is that private property and entrepreneurship are precisely those things which make the changes in production that would result in more efficiently made products produce at a cheaper price. It's not just about taking, it's not just about seizing the means of production and passing on more savings to the worker or something like that. It's an issue of active development in private property that causes these changes. Now anyway, Schumpeter has this optimistic view of the change in capitalism but he also responds to some other critiques. Now at the period there were a lot, there was the development of, I guess what you could call market competition theory. There were a lot of people who had different theories of how efficient markets work or perfectly competitive markets. Now if you take economics 101 nowadays, you'll learn about perfect competition. Now what perfect competition, it's a theoretical thing and what perfect competition means is that an industry is perfectly competitive if it has an infinite number of firms, theoretically of course, but an extremely large number of firms, products that aren't really different in any particular industry and all firms sell different products and what happens is because there are so many firms and they all sell products that are basically the same to consumers, gradually prices will be as low as absolutely possible. They'll be basically at the break net, break neck. That's not what I mean, break even point of production. So there are no economic profits. What that means is the prices are going to be as low as possible for consumers. Now this is what you learn when you take economics 101 and I think again, it's called a perfect competition. So a lot of people hear this and they have the idea that perfect competition is perfect. It's something that we should all strive for and there are a lot of theories at the time that consisted in assuming this. So Edward Chamberlain had written his theory of monopolistic competition a little bit before Schumpeter had wrote this, had wrote this, had written this and Joan Robinson, who's an interesting character in herself, Robinson wrote the economics of imperfect competition. Again, before Schumpeter's book, she actually praised Schumpeter's book as well. Robinson was a socialist herself and a lot of the rhetorical turn of her economic views specifically on competition was that capitalism is inefficient because it is not actually perfectly competitive. The reality of capitalism is that there are really only a few firms in an industry or those firms produce highly differentiated products. Now, if you don't know what that means, differentiated products, I should explain that. That just means that products have a particular brand when a company makes it or they're slightly different. Now the reason why that's bad for perfect competition is that that means that a company can sell a unique product, they have a functional monopoly in that and thus people, they can sort of be a little bit more, I guess, more stringent with how they price that. So for example, Apple is a good example. Apple makes computers, but they make specifically Apple computers and because of the brand that they've cultivated and the memes they put out about how great Apple products are, they can pretty much charge three or four times as much as what another company can. So that is not good, perfect competition. Now, in Robinson's view, she as a socialist thinks that perfect competition is more or less the ideal. Capitalism is not succeeding in this. We need some kind of government intervention or collective management of society to improve this. Shumpeter, on the other hand, he agrees with this with the facts on the ground about this. He thinks that capitalism does tend towards monopoly. He thinks that not just monopoly, but what I think you'd learn in economics 101 as a monopolistic competition. And that's a model where there are different firms that sell products that are loose substitutes of each other. So Apple has their own brand of computers, Dell has their own brand of computers, and they're loosely equivalent, but they're not exactly the same. Now, Shumpeter's view is that this is actually, we should really not think of perfect competition as being perfect. It's really just an abstraction that doesn't exist. In the real world, we have monopolistic competition and this is a good thing. Now, his point, I'll read this here, and this is on page 83. A system, any system, economic or other, that at every given point in time fully utilizes its possibilities to the best advantage may yet in the long run be inferior to a system that does so at no point in time because the latter's performance to do so may be a condition for the level of speed of long run performance. So what he's saying here, if you didn't immediately digest what he's saying, his point is, okay, so you can look at synchronically what a perfectly competitive market looks like and say that this is economically efficient. It's what's best for consumers and producers at the same time. It maximizes all the marginal everythings. It's perfectly good, but the reality is even if it's efficient at every point in time doesn't necessarily mean that it's good over long periods of time. His point is that profits have a very important role in an industry. So if a firm or an industry doesn't make profits, you can't take those profits and put them into research and development. You can't use them to hedge against disaster. You can't really do anything. I think a lot of people in, I guess, public parlance have this idea that when a corporation gets profits, it all goes to plating the CEO's hot tub with gold and diamonds and stuff like that. That's not how it is at all. Most of it goes into reinvestment in its own firm to make capital more effective, to make things more efficient, and really to drive down costs later on in the future. Or as I said, to hedge against disaster. Hold on to that, put it in some kind of financial. Financial, who knows what? Just keep that money, use it when you need it because sometimes disaster strike, a dustball happens, an economic downturn happens, and you need that to draw on that money. Now, in a perfectly competitive system, in a perfectly competitive industry, you don't have that fallback and you also really don't have any kind of research and development or future changes in the industry. So for example, if one industry that people typically think of as being highly perfectly competitive is traditional commercial farming, I mean before Monsanto or any of the stuff, like individual farmers were pretty close to being perfectly competitive because they had products that were pretty much all the same. They couldn't differentiate them. And that is not necessarily a good market to be in. You're not, you don't have much control over what you can sell your product for because there's so much competition, there's not much you're accomplishing. And it's really not an industry that is going to survive very well. Or it's going to survive, but it's going to survive, I guess at subsistence level, which isn't necessarily the best. So Schumpeter objects to this, I guess equilibrium based view of the economy. And Schumpeter in a lot of ways is very much against even the concept of equilibrium in the real world. Now, most economists deal with finding the optimal prices and by checking your marginal revenue and stuff like this. And if you don't know anything, if you haven't taken economics one-to-one or something, it's not particularly important. But generally the idea is, we want perfect competition or we want economic efficiency. But Schumpeter's view is that these things don't really even exist, especially in an economy where there are constant changes. Prices are, we think of prices as being in terms of money but prices are in terms of money, but they're indirectly in terms of how much everything else is in society or how efficient everything else is made and stuff like this. So whenever you have any kind of changes in the economy, you have this spilling over of constant shifts in price levels and there is no such thing as an equilibrium in real life. You're never going to find that optimal point. The reality for Schumpeter is constant dynamism and constant change. And monopolistic competition and more monopolistic industry structures have arisen because they are more effective at surviving than a perfectly competitive industry. It's not just, you might say, oh, well it's good for the corporations. Well, yeah, it is good for the corporations but over the long term, it's good for the industry and good for consumers as well. That's the point that he's sort of trying to draw home here. But of course it is an almost ironic point and I think that's part of Schumpeter's style because he's doing what nowadays we call agreeing and amplifying. He's taking an argument that's usually used against capitalism, for example, that it's monopolistic and there are so many profits and he's actually saying, no, that's really a good thing when you actually think about it. Don't think about it in terms of the mathematics of perfect competition and the autistic diagrams that you make in Econ 101 nowadays. Don't think of it in those terms. Think of it in terms of what he calls the perennial gale of creative destruction. Now, what does that mean? That's actually a turn of phrase that Schumpeter uses all the time, perennial gale of creative destruction. Creative destruction is one of the terms that Schumpeter, well, he's definitely credited with coining but it's the concept that I think is most fundamental to his view of capitalism. Now, it's pretty much exactly what it sounds like. Now, of course, it's not like creative destruction. Let's go destroy things. Let's like burn buildings down. That's not what capitalism is supposed to be about. But his view is that really the competition that happens, while we do have these monopolistic markets, the real competition comes from creating totally new ways of producing products, not just in developing new things but totally like paradigmatic shifts in how industries are constructed. Things like, you know, inventing the internet, inventing the steam locomotive, things like this. So his view of industries in particular is that they are monopolistic. But creative destruction describes the fact that over time, you have new industries based on new technologies and new innovations based on the work of entrepreneurs that come to replace those industries that already existed, the recalcitrant industries that are either degenerate or nonproductive in some sense. So for him, the change is not, or the goal of capitalism is not necessarily stagnation and economic growth within confines of some economic mold. That's not what he thinks is important. What he thinks is being important is the constant creative destruction, the creation of new kinds of ways of producing totally new products, thus replacing those things that used to occur. That is creative destruction. And it's a good thing. It's a good thing to totally replace these industries that, for example, you know, the industry of horse and buggy rental. Totally an industry which no longer exists because it's functionally obsolete. You have Uber nowadays or something like that. So this is his core view. It's not the competition that happens inside of a market, but it's the grand over time, well as he says, the perennial gale. Over time you have these massive industry shifts and that is the real substantial change, the real substantial good of a free market capitalist society. Now Schumpeter actually quotes from Marx on this because he thinks that one of the good things about Marx's analysis is that Marx notices that capitalism is not a stable social system in the way that feudalism or imperial China would be. It's not about keeping some kind of social environment and manicuring it and really constancy over generations. Capitalism is about constant flux. It's about constant change. But also capitalism gradually breeds intellectual changes and this is one of the things that Schumpeter gets into. Now I said before that Schumpeter argues in effect that capitalism is hoisted by its own petard. It's destroyed by things that it puts in place. What exactly is this? Now in Schumpeter's view, this is the first seeds of it is a kind of materialistic rationalism. That is what happened during the rise of capitalism which Schumpeter originally traces to city-state Italy. But you could trace it to different places. It doesn't really matter. But one of the big changes that happens in the late medieval period into the Renaissance period as private industry begins is a kind of rationalization of economic life. While in smaller societies and tribal societies or even peasant societies in Europe, people's economic relationships were also social. So you might have been a baker, you made bread. You would sell some of that bread. But if you know the cobbler or if you know the smith and you probably have some arrangement with them, you give them this, they give you that, that isn't necessarily on the books. It might just be sort of impersonal. And a lot of the economic relationships people were involved in were at a very social level or they directly knew everything that was going on. It was, or maybe there was no money mediating the exchanges whatsoever and money was used in contact with foreigners. Now, Shumpeter's view is that as things changed and as people started to use money to mediate their economic life, they adopted gradually the mentality that's necessary for that kind of life. And that is a more rationalistic one. Now for Shumpeter, this is something that at the beginning is something very good because it means that people are being more efficient with their daily life. It means they're really assessing everything they do in economic terms and I guess is creating a kind of critical mold. But it becomes pathological at a point. In fact, he actually notes some specific things. Things like, for example, getting married and having children. It used to be that of course, well, even today in normal societies, you get married and you have children because that's what's expected. That's what causes continuity of your society. That's just what happens. You don't think about it. It's just an obligation. That's what happens. But in post capitalist societies, what happens is that people take this rationalism and even apply it to these kind of social domains. People even say, well, I could have a child but that would cost this much money next year and this much money that a year after and it would cost all this and I'd have to get a babysitter and stuff like this. I mean, you hear this stuff all the time where you actually see the divide very much in America nowadays because these people who middle class people or I guess 30 year old boomers all have this idea of, well, I have to be making this amount of money and they're always rationalizing the having marriage and having kids and stuff like this but lower class people are just like, they just have children. It just happens and they ended up taking care of them and they work it out. And Schumpeter's view is that what's happened with the capitalist mentality is that we have this rationalist mentality where we're overthinking all of our social relationships to a degree that's bad and it also drains the heroism out of life. That is, you no longer, there's sort of, well, the quote that he actually uses is the stock exchange is a poor substitute for the holy grail. That is, as you have this rationalistic society that gradually comes to be in Europe and in America you lose contact not just with, well, you really just lose contact with your social roots. You don't have that connection to what was required of you in previous ages. People believe in religion less, they rationalize everything and they don't even believe in the holy grail in whatever hermetic interpretation of what that is supposed to actually be. So that is the absolute state of modernity and it was bad enough at Schumpeter's time and frankly it's only gotten a little worse now. So we should have a vision of Schumpeter's view of capitalism's collapse so far because you have this rationalizing mindset which is already undermining social institutions. But the last missing piece of the puzzle is the, I guess what you could call the vanguard class of socialism in Schumpeter's view. Now, Marx or traditional socialists or so-called scientific socialists had the view that there would be a proletarian revolution. This would be caused inevitably from the accumulation of capital which over time would gradually drive down wages and more people would be unemployed, et cetera, et cetera. And these people would inevitably have to revolt against capitalism and impose a new economic system. This is a gestalt of the traditional Marxist view. Now, Schumpeter takes that on its head and Schumpeter's idea is it's not that an underclass will revolt against capitalism, but an overclass. And Schumpeter's view, one of the things about our rationalizing society is that it creates far more quote, educated unquote people than we actually need and that is in the actual real world, in the private economy. We need entrepreneurs, we need people with high agency who are willing to take risks and do things and create new methods of production, which might not necessarily be too heroic, but it's the kind of thing that has a huge impact on improving people's wellbeing. But what happens in our society is because we don't really know how to, I guess, train that. One of the things that's very common is people just continually go to college. They'll get master's degrees nowadays, even if they don't necessarily know what to do with their degree. Now Schumpeter has a lot of choice words for intellectuals, as he calls them. On page 147, he says intellectuals are, in fact, people who wield the power of the spoken and written word and one of the touches that distinguish them from other people who do the same is the absence of direct responsibility for practical affairs. This touch in general accounts for another, the absence of firsthand knowledge of them, which only actual experience can give. The critical attitude, arising no less from the intellectual situation, is an onlooker, in most cases also as an outsider, then from the fact that his main chance for asserting himself lies in his actual or potential nuisance value should add a third touch. So anti-capitalism arises because capitalism produces this class of overeducated people that don't have a place to go. You probably know so many people in your life exactly like this, people who went to college, maybe they majored in whatever studies or English or something that, frankly, is absolutely useless, and it's not just that they didn't learn anything, it's that college changed them psychologically. They went in, they have this expectation of things given to them, they have this idea that college is going to make them more valuable and work, but their sense of entitlement becomes enormous, they become unpersonable. Sometimes it changes their social and political views that makes them, frankly, pathological and antisocial. This is something that's normal. I mean, it was true in Shumpeter's day, but now it's insane, it's like, hold my beer. What kind of world are we living in nowadays? So what happens is now your English major comes out of college and expects an $80,000 an hour job for I don't even know what kind of jobs these people would want, and when that doesn't work out, they become extremely hostile to the society that they live in and they'll get a job at BuzzFeed nowadays or some kind of minor journalist institution. But that's one of the things that I think Shumpeter definitely understands, but I think a lot of people don't, is there are a lot of the intellectual class in the West in a lot of ways, Shumpeter understands this, is not formed out of people who want to be there. There are some people, for example, I, when I was younger, I deliberately wanted to be a professor and that's sort of the career choices I made, but a lot of the people who are professors or graduate students are not like that. Same thing with journalists. They are in that situation because they went to college, they didn't necessarily learn anything, they became psychologically unemployable and positions either in journalism or in the permanent bureaucracy are places for people like this to go where they have no other institutional function. They just sort of are there, they are rigorously defending the system in whatever or the system meaning the anti-capitalist sort of a grievance mongering system in that sense. So this is how Shumpeter understands it and frankly, it's only gotten more extreme nowadays. The way he puts it, this is page 153. All those who are unemployed or unsatisfactorily employed or unemployable drift into vocations in which standards are least definite or in which aptitudes and requirements of a different order count. They swell the host of intellectuals in the strict sense of the term whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment and it often rationalizes itself into that social criticism, which as we have seen before is in any case the intellectual spectators typical attitude towards men, classes and institutions, especially in a rationalist and utilitarian civilization. Now Shumpeter has created, this is the fall of capitalism for him. It is the intellectuals, the unemployed intellectuals who bring it down. And in his view, intellectuals, I mean, and frankly, this is my view as well, intellectuals are just less competent versions of normal people. They're not there necessarily because they're smarter. They're there because, you know, this selection process that Shumpeter mentions. So this is his ironic take on the Vanguard class. And I think this is about time for a break. So I'm gonna take a little break. I'm gonna come back, read your donations from last time and of course emails and responses have respond to them. And then we'll go through the rest of the book, is views on socialism and democracy. All right, we're back. That was quick. Well, quick for you at least. So let's go ahead and start out with some donations. Again, if you have any comments about this episode, email them to luke.lukesmith.xyz. And if it's a good comment, I might read it out on air. It's not really on air if it's a podcast, but whatever. You can also send donations to paypal.me-lukesmith. That is M as in matrix. All right, so anyway, donations. Vook sends $10, great podcast. Always wanted to read more about big brain topics, but I haven't had the time. Really enjoyed the recap. Thank you, Vook for the $10. $24.08, interesting amount from Sebastian, says simply spend it wisely. Mr. Smith, thank you, Sebastian. And I'll also say don't donate just like $1 or $2 on PayPal or even less than a dollar. And I'm not saying that because I'm greedy. I'm saying it because if you do that, it's literally just a donation to PayPal. Like I get such a small sliver of low amounts. For example, I got a donation from Will and it was 14.88 rubles, which is only like a quarter. And PayPal gets most of it. It would be like six cents for me. So I'm not gonna accept low donations. I'm just gonna pick up a nickel in a penny. And I'm gonna count that as this donation. But yeah, just as a reminder, every once in a while, someone will donate like $1 a lot of times. And just like, don't do that. Just donate one larger donation. But you know, that's just, I don't necessarily want a fun PayPal. Okay, so now on to the comments from last episode. And remember that was on Julian Jane's origin of consciousness in the breakdown of the bicameral mind. So the outpouring was actually unexpected for this episode. I will say because usually when I put up something on my YouTube channel, that's a little bit different. Very few people will watch your comment or something. But this was way more than I was expecting. A lot of people said, wow, this really shook up my week. This has really made me think really something different. And so lots of people, a lot more support than I expected to doing a topic that was so out there. But I'm happy about that. So let's read some specific comments. Rudy says, do you think there's a way to lose consciousness? Or in other words, revert to the bicameral mind through social factors or otherwise. I'd have to say in Jane's theory, consciousness, our internal world is a kind of mental habit, I guess. So losing consciousness in that sense would be like losing a kind of mental habit. You might compare it to like forgetting a language. Theoretically, I could imagine that happening. But I think it's something, it's a kind of thing that would be very difficult to, it'd probably be a difficult habit to kick. I'll just say that. So other comments, Pepe Bryan says, me marrow, next episode, me marrow, assuming there's going to be a next episode this time. Well, you spoke too soon, because here we are. Martin says, excellent podcast, Luke, have you read Nietzsche's Birth of Tragedy, the Dionysian and Apollonian concepts as portrayed in the book are definitely seem bicameral and hallucinogenic. No, I haven't read that. I actually have a lot of Nietzsche's books, including that one, but that is the one that I have not read. So when I read your comment, I pulled it off the shelf, put it on my desk, so I might leaf through it eventually. So that's that. Oh, and you know what? There's a bad comment I want to read. This one's pretty funny. Well, embarrassing, but instructive comment. Emilius Rex says, Jane's entire approach is philosophically confused. To be conscious is to be aware. Many animals are conscious. I wonder how he accounts for that. Well, first off, I don't know how you know that animals are conscious, but I mean, I'm not saying they're not, but it's just an interesting thing to state categorically, as if it's like some kind of evidence. The comment goes on, of course. Can anyone here seriously entertain the thought that someone acts just like us, but is not conscious? Because we have accounts of life pre-collapse. And guess what, they're pretty similar. Well, maybe you didn't listen to the podcast. The whole point is life before a collapse is totally different. Religious structure is totally different. Social structure is totally different. That's the whole point of the book. The comment goes on, imagine someone ducking out of the way of a bird that's flying towards them, but saying, that guy wasn't actually conscious at all. Well, it's funny you say that because there is a condition in the world called blindsight. Now blindsight, if you don't know about this, it's a condition where someone's eyes do in fact work in some sense they see things, but they're not consciously aware of their sight. That is, the eyes will send a message to the brain, but only the unconscious portions of the brain. So for example, if in this situation, if a bird flies at someone with blindsight, their brain actually does react to it. They do have this sort of reflex of moving out of the way, but they're not conscious of it. They don't even know what exactly happened. They just know that their body jumped away. And it's sort of like if you touch a hot stove or something like that. So I don't really see how that's an argument, but I realized that this post is probably satire in the last paragraph, which I'll read out now. All of the philosophical groundwork for this was done by Wittgenstein and Ryle and a few others, ascribing consciousness to, ascribing consciousness is a matter of acknowledging certain behavioral criteria. Wrong! How can anyone think that? Okay, maybe I should give the background to this. So first off, ascribing consciousness is not a matter of behavior. It has nothing to do with consciousness and behavior are utterly unrelated. We can very easily imagine some kind of being that is conscious, which doesn't have any behavior. It might just sit there. You can be conscious without behavior. And in the same way, you can imagine a zombie or a machine which has behavior, but no consciousness. Now, people who are wondering, why would someone think something crazy like this? There is a very particular school of thought in psychology. In the old days, it was called behaviorism. But the references to Wittgenstein and Ryle sort of show a philosophical, I guess, flag-waving of this. But the idea is, well, the scientific, quote-unquote scientific idea behind it was that consciousness is something that is not empirically objectively observable. And so what they would do is, since they wanted science to be objective, is either ignore consciousness altogether or try to speak about consciousness in only in terms of behavioral actions and stuff like this. So people like this would make arguments to the effect that, well, if things don't have behavior, they don't have consciousness. They don't exist because, well, there's no empirically observable behavior. Therefore, consciousness can't happen. Now, this might sound like a crazy idea, but again, Wittgenstein is a person you hear from quite a lot. It's one of the most, Wittgenstein is probably the most overrated philosopher of the 20th century, contributed absolutely nothing to philosophy. I'll go ahead and say that. And I guess he's in the same way that a lightbulb is for a nat. He is for all pseudo thinkers nowadays. Just immediately, because he's an eccentric person. We'll just say that. Aside from this, there are people nowadays, one of the most popular being Daniel Dennett, who, in one way or another, has this sort of behavioristic view of looking at consciousness. And his theory of consciousness amounts to simply denying that consciousness actually exists, that you don't actually have pains, you don't actually have feelings, you don't actually have any of this stuff. And the only meaningful way to talk about any of this stuff is to talk about it in terms of behavior. Now this is, again, it's like the absolute state of scientific reductionism, because it's based, again, on this assumption that science has to be empirically observable. And if you have that, I mean, that's nice in principle, but when you're dealing with something like consciousness, which the 100% of it is subjective. There's no way of showing someone your interior world. You can describe it indirectly, but that's not quite the same. And something, when it comes to stuff like consciousness, some kind of autistic view of science, which insists on observable behavior, is just utterly unequipped. And this is a philosophical problem that people have to deal with, but it's another level of absurdity to pretend that behavior is consciousness or that there is no consciousness without behavior, it's just false. You'll see people arguing this, they don't believe it because they've been rationally convinced of it. They believe it because in an autistic objective worldview, it is the only thing that they can say. So that's just what I have to say. I will say one additional comment. There's a comment on NPCs, right? So you hear a lot about NPCs nowadays, non-player characters. This is a meme that's been floating around even within the last week since I did my podcast. And it's the idea, right? What if some people out there, they're not actually conscious, they're actually NPCs, they don't actually think. Now the only situation in which that philosophical view is acceptable is if the people who are endorsing it are in fact NPCs, they are not actually conscious for whatever reason. Now in Jane's view of consciousness, mind you, that might actually be a possibility in the same way that our consciousness is different from the mental environment of a bicameral person, might be that there are people out there who just don't develop consciousness or they operate in a different ways. So if someone like this doesn't know what isn't consciousness and doesn't understand what the word consciousness really means, doesn't understand that it is subjectively viewable experiences because they don't have subjectively viewable experiences, I understand if they support the views of Wittgenstein or Dennett or any of these sort of behaviorists. I don't want to call Wittgenstein a behaviorist, but I think that people of that pseudo-philosophical disposition will quote from both behaviorists and Wittgenstein. But anyway, so that's about all the... Oh, one more, one more comment. This is an email from Severin. He says, you've stated multiple times that you're generally not a proponent of going to college slash uni. Now I'd be interested in knowing your opinion on universities of applied science. They've been very successful, especially in German speaking countries. They teach both theory and practical knowledge. Well, I haven't been to one. I'm not gonna opinionate, opinionate a pine on one. The reason I say what I say about college is because I've been there, I know all about them. I know exactly how it affects the human psyche as did Schumpeter, interestingly enough. So I don't have any strong opinions on universities of applied science or what do they call them, vocational schools in America. I mean, I don't hear anything particularly bad about them, but I'm not categorically against them. So my critique of universities doesn't necessarily apply to those. All right, now back, back to capitalism, socialism and democracy. Again, by Joseph Schumpeter, here's part two. As we talked about several minutes ago, we went over Schumpeter's view of creative destruction, his view of monopolistic competition, his idea that while inequality exists in capitalism, material production, material changes, lower functional inequality. And we also talked about how, despite the fact that he likes what capitalism has done, he projects its demise, not a demise from below, but from above, destroyed by a hostile elite, an elite created by capitalism, overeducated by capitalism, but ultimately hostile to it. So you can already tell that his argument is drowning in irony. Again, because he's taking, he's agreeing and amplifying with a lot of the things that socialists at the time were saying, they were saying capitalism is monopolistic. He's saying, you know what, it is. In fact, that's a good thing. They were saying that capitalism is going to fall. He's saying, well, yes, it is, but only because it's just so great. And this is usually why people classify Schumpeter as a kind of ironic conservative. Now, he keeps that irony up into his sections on socialism. That is, it begins, well, exactly as the following, he asks, can socialism work? Of course it can. And you sort of get the feeling as you read on that maybe he doesn't exactly mean what he's overtly saying. Now, first off, as a little more background to the socialism thing, he mentions early on the, well, there's a debate during this period as to whether a socialist economy can actually survive. Now, of course, the Soviet Union existed and was doing its own thing, actually having quite a mess at the particular period. But of course, he's writing during Second World War anyway. But there was quite a lot of debate among economists as to whether a socialist economy was even possible. Now, Schumpeter mentions, and of course, many of you will know about the work of Ludwig von Mises, who had a particular critique of socialism that I think people should probably be familiar with, but it's one of those things that's so misunderstood. I think that we should state it overtly here because now Ludwig von Mises, who now is typically thought of as a kind of libertarian, basically every libertarian will love this guy. He wrote a book called Human Action among other things, but he had a particular critique of not just socialism, but any kind of controlled economy. And it's called the economic calculation problem. Now, it's misunderstood for a lot of reasons. Now, a lot of people will misunderstand to mean something like he's trying to say, well, people will interpret it to mean that the economic calculation problem just means that socialist economies don't know what price is to set or we need to have the math to be able to calculate marginal revenue or something like this. That's not really what it's about. Now, Mises' idea was in effect, and I actually sort of mentioned this earlier, not in these words, but I mentioned the idea earlier in this podcast, and that is the economy is full of prices and each price is defined, is built of billions of different facts about the world. So if you look at the price of a computer, that price is based off all of the things that are inside of it, the demand, the availability of all those things, how many of those things there are. So for example, if magnesium is rare and you need magnesium in your computer, that's gonna increase the price. So every little thing your computer is made out of is partially going to have a say in what price it is. And also on the demand side, your view of computer, the particular computer, the advertising about a computer, all this different stuff, all of it plays into the price of a good. In fact, even when you walk down a grocery store aisle and even if you don't touch anything, you are in effect affecting the prices because your decisions to buy something or not buy something are tacitly influencing by negation, in effect, the price. So Mies' argument is that prices are composed of billions of facts about the world. All of them are interconnected, all of them are related. And when you have a socialist economy, any kind of economy where you either set prices or you either change prices with ceilings or something or you just manually set prices based on what you think they're going to be, in Mies' idea, that's something inherently instable. Because if you set one price wrong, it's going to affect the prices of all the things that go in it, even if you don't have a real price economy. It's going to affect, you're gonna have shortages or you're going to need more or less of something depending on how you've mispriced that. And the problem sort of is compounding, it's snowballing. If you misprice one thing, it's going to gradually cause problems in everything that's connected to it. So this is the calculation problem. So this was a debate that was raging at the time. And here's the thing with Schumpeter's argument. Schumpeter brushes it aside. He doesn't wanna talk about it because ultimately I think his editorial stance is, again, one of sort of poking fun at socialism on its own playing field. Now, he then goes into what he calls his own blueprint of socialism. Well, not really his own, but a potential blueprint of socialism. And that is how can a command economy actually work? Now, what he does here, I will abbreviate it here, but I'll say what he in effect says, it doesn't say this explicitly, but he says that socialism can work. But socialism can work in so far that it is a cargo cult capitalism. That is he creates a blueprint in which there are socialist credits instead of money. There is a central planning board instead of say a corporation. There are delegated responsibilities in the same way you might have a corporate hierarchy or something of the sort. And decisions are actually made in a socialist planning environment in the same way that you would make them in a private firm. In fact, he doesn't necessarily say that there will be profits in the way that capitalist economies are on, but he implies that there will be incentives put in place that precisely mirror those incentives. So this is the interesting thing about Schumpeter's argument. He's saying that socialism can survive, but when you look at his version of socialism and when you look at the version of socialism that is arising in the Soviet Union at the time, or well, I should say later, again, this is during World War II that he's writing this. You see something that's not necessarily dissimilar from capitalism. It's just sort of renamed. Instead of having money, you have this kind of social credit, et cetera, et cetera. Now, whether this argument is entirely sarcastic or not, it's interesting to note, it has come true in a lot of senses. For example, this is really exactly what you see in China and other quasi-command economies in the East Asia region. That is, you have a nominally socialist communist country in China, which in effect, I mean, does anyone really think it's a communist country anymore? In a lot of respects, they have a lot less economic regulation on some things than the United States does, not in everything, but it's a place where they're really all, even if organizations are run by the state, they're run in a way identical to the way that they are run in any kind of capitalist society. So this, in essence, is Schumpeter's core satire. He's saying, in effect, I mean, notice how he's set this up. He said at the beginning of the book that the optimal way that capitalism should be construed is one in which we don't have perfect competition. We don't have a lot of decentralized businesses that all focus, all make the same product and they're all competing and they all have extremely low prices. No, he's saying, first off, capitalism, in essence, is big business capitalism. That's how it is. It's robber-bearing capitalism. That's how it really is. It's mostly monopolistic. You have creative destruction that creates and destroys firms as necessary. That's the nature of capitalism. And a socialist economy is really the same thing. It's just renamed. That is, instead of having a monopoly for every industry and capitalism, you really just have the same in a socialist economy. Now, in essence, this is to draw back on this socialist calculation debate for a second. This has been something that's noted of the socialist calculation debate, that it doesn't just apply to socialism. It actually, even if you have a business that is so big that it controls a lot of production from raw materials upward, they have the same kind of calculation debate because they have to manually set a lot of these prices. They're not determined in markets. So really, a lot of times people think about economies as being in terms of, is it a company owned by the private or owned by the public? But Schumpeter is saying, in effect, that they're really the same thing. They follow the same incentives. And if you want something that is going to produce a society that is constantly increasing production or having economic wealth, all you have to do is put the same kind of system, an isomorphic system in place that gives the same incentives. It doesn't matter if it's public or private or owned by everyone or owned by just one person or anything. That doesn't matter as long as the incentives are still there. And in capitalism and socialism, so-called, they're going to converge on similar structure. Capitalism converged on this big business kind of capitalism where you have large monopolistically competitive firms. And socialism, for him, is going to converge in the same way. Now the central irony, the part of the book that really gets almost like laugh, no, as I said at the beginning, I should say this again. As I said at the beginning, even if you are a die-hard socialist, you can read this book and you can internalize it and you can be like, you know what? I understand the intuitions. But there are some parts that honestly get to such a ludicrous degree of satire that it's pretty funny. But one of his arguments that he makes, and this is in the chapter on the human element, he addresses some of the problems some people have argued that in socialist economies, people won't be adequately incentivized to work because who takes out the trash, so to speak. Now, Schumpeter, for the same reasons that I just said, says that you can put the same incentives in place in a socialist economy. But he actually says, in a lot of ways, socialism is better than big business capitalism for particular reasons. Now, this is on page 215. He says, the socialist management will find it much easier to use whatever tools of authoritarian discipline it may have. There will be no government to interfere. Intellectuals as a group will no longer be hostile. And those individuals who are will be restrained by a society that once more believes in its own standards. A society will in particularly be firm in its guidance of the young. And to repeat, public opinion will no longer countenance. What it will consider semi-criminal practice. A strike would be mutiny. So if you think about what Schumpeter is saying here, he's saying, you know what, big business capitalism and socialism are the same except socialism has these extra good things. They can crack down on strikes. They can indoctrinate the young with their values. They don't apologize for their viewpoints. They can argue for it on a strong ethical footing that people believe in. Intellectuals are not constantly trying to undermine socialism. And of course, in any kind of publicly controlled organization, you can police it publicly and you don't need, there's no separate government above economic organization. Now when a capitalist society, there are private firms that do what they want and sometimes of course get regulated by the government. In a socialist economy, that dynamic isn't there because the business interest, which is in fact the government itself has no form of regulation on it. None whatsoever, only the indirect parts of democracy, which we'll talk about in just a second. So this is sort of the idea of Schumpeter. His idea is that yes, socialism can work. And in fact, in the Soviet Union, it is working. And even today in communist China, it is working. And in fact, in China, socialism is working so well. It's creating such an enormous growth rate because it is just like big business capitalism. It has all the benefits of that. But they can also crack down on dissent. They can crack down on unions. They can have an authoritarian state because there is no difference between the private and the public sphere. They are all owned by the same people. They're all controlled. And so you really have what exactly we have in a place like China. So we have now covered Schumpeter's views on capitalism and socialism. Be they explicit, be they a little subtle and possibly ironic. Now, I'm not done with this book, but I wanna draw this episode to a close briefly. I think what I'm going to do is next episode, I have another book that I really wanna do. I might either put that one up next or I might do a capstone to this. Possibly bringing in from another book on democracy because the end of this book is going to be on democracy itself. Schumpeter has a lot to say about it. A lot of stuff that, it's not so much that people don't say, but people don't even consider democracy. People never evaluate democracy critically in any of the societies we live in, but Schumpeter very much does. So the next episode we're gonna talk about that and there's another book that I'll probably draw from. And I think we'll have one episode on democracy. That might be the next one. That might be the one after the next, depending on what progress I make on the other book that I wanna cover in the next episode. So this is gonna be pretty much all for now. As a reminder, Schumpeter's view on capitalism and socialism is of course capitalism is a dynamic system. It tends to monopoly. It tends to be creatively destructive or destructively creative, however you wanna think about it. And economic models that work in equilibria aren't very useful. He does think that capitalism as a negative point forces the rationalization of society, which means the increasing of an intellectual class that can undermine it. And while he is subtly against socialism, there's a sense in which he views socialism as a kind of continuation of capitalism, at least in his interpretation. Now he does in his section on democracy, which we'll talk about next time, he does talk about other varieties and other parties of socialism, things that are closer to what you might call syndicalist. So we might talk about that later, but that's gonna be in the next episode. So again, if you have any comments about this episode or questions, send them to luke at lukesmith.xyz. And if they're insightful, I might read them out and respond to them in the next episode. Additionally, you can, of course, you know the drill, send any donations to paypal.me slash, wait, yeah, paypal.me slash lukemsmith, that is M as in Mexico. So thanks for listening, and I will see you guys next time. I really need some outro music. If anyone has any ideas for outro music or intro music, I might be looking for something like that, just because why not? Or really something to do in the break. Yeah, that's a good idea. So if you have any ideas, feel free to email me. But see you next time.