Why capitalism works
September 23, 2026My view of capitalism is that you create an ecosystem where you have a free market, so society rewards you for adding value. Maybe its true that in the olden times, when leverage was scarce and favouritism was high - only the rich were educated, only the rich had access - opportunities were only available to the bourgeoisie. But as time has continued, and education has been democratized, and opportunities have started to become more egalitarian, that is no longer the case. So anyone can add value, and anyone that adds value gets rewarded. Society is driven by the incentive to do good, to innovate and create, to work hard, etc. Therefore it is a positive sum system.
Workers owning the means of production is a noble idea. While that in itself might be enough incentive to produce more of something, you have removed the incentive to innovate. In a free market, your market value will be floated based on supply and demand. If you think you're getting shafted by an employer, leave. If all employers agree on your wage, thats how valuable you are. The market is an approximate representation of what society needs and values. It may not always be right - and if you spot an inconsistency, you should bet against it.
Where communism could work
I could see communism working in societies with little to no innovation. Where productivity is a linear function of inputs and outputs. At this equilibrium, the owners are getting rich and not contributing. The workers are getting shafted. There is a divide and nothing can change.
The power law changes the math
But when you think of the power law, and how new creations can greatly increase the overall pie for everyone, what you absolutely want to do is incentivize people to create, and build your society around such incentives. You cannot do this by giving the workers the means of production, because you destroy those incentives. Capitalism is the best case scenario here, assuming you veer towards more equal opportunities on basics such as education, food, shelter, etc., because some of those workers will leave and decide to do their own thing, and maybe thats successful and leads to new jobs and new types of jobs.
The law still has a job
Of course, you want there to be some amount of regulation. If I develop AIDS medicine, I shouldn't be allowed to exploitatively charge people (sorry Martin). As a big company, I also shouldn't be allowed to 'cheat' in the game by raising capital to drive my prices to 0 so my competitors die, and then bring them back up and more. The law should define this.
None of this makes capitalism good. It makes it aligned. It pays people for enlarging the pie, and it keeps paying them for as long as they keep enlarging it. Thats a mechanism I want, and its one I want pointed at more people - which is why the guardrails matter as much as the market.