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Capitalism or Charity

In an ideal capitalist society, a pretty straightforward hypothesis for how to do the most good is: make the most money you can. (If this doesn’t make sense to you, you aren’t familiar with the basic pro-capitalist claims. If you’re interested, Time Will Run Back is a good book to start with. It’s a novel about the leaders of a socialist dystopia trying to solve their problems and thereby reinventing capitalism.)

Instead of earn to give, the advice could just be earn.

What’s best to do with extra money? The first hypothesis to consider, from a capitalist perspective, is invest it. Helping with capital accumulation will do good.

I don’t think Effective Altruism (EA) has any analysis or refutation of these hypotheses. I’ve seen nothing indicating they understand the basic claims and reasoning of the capitalist viewpoint. They seem to just ignore thinkers like Ludwig von Mises.

We (in USA and many other places) do not live in an ideal capitalist society, but we live in a society with significant capitalist elements. So the actions we’d take in a fully capitalist society should be considered as possibilities that may work well in our society, or which might work well with some modifications.

One cause that might do a lot of good is making society more capitalist. This merits analysis and consideration which I don’t think EA has done.

What are some of the objections to making money as a way to do good?

  • Disagreement about how economics works.
  • Loopholes – a society not being fully capitalist means it isn’t doing a full job of making sure satisfying consumers is the only way to make much money. E.g. it may be possible to get rich by fraud or by forcible suppression of competition (with your own force or the help of government force).
  • This only focuses on good that people are willing to pay for. People might not pay to benefit cats, and cats don’t have money to pay for their own benefit.
  • The general public could be shortsighted, have bad taste, etc. So giving them what they want most might not do the most good. (Some alternatives, like having a society ruled by philosopher kings, are probably worse.)

What are some advantages of the making money approach? Figuring out what will do good is really hard, but market economies provide prices that give guidance about how much people value goods or services. Higher prices indicate something does more good. Higher profits indicate something is most cost effective. (Profits are the selling price minus the costs of creating the product or providing the service. To be efficient, we need to consider expenses not just revenue.)

Measuring Value

Lots of charities don’t know how to measure how much good they’re doing. EA tries to help with that problem. EA does analysis of how effective different charities are. But EA’s methods, like those of socialist central planners, aren’t very good. The market mechanism is much better at pricing things than EA is at assigning effectiveness scores to charities.

One of the main issues, which makes EA’s analysis job hard, is that different charities do qualitatively different things. EA has to compare unlike things. EA has to combine factors from different dimensions. E.g. EA tries to determine whether a childhood vaccines charity does more or less good than an AI Alignment charity.

If EA did a good job with their analysis, they could make a reasonable comparison of one childhood vaccine charity with another. But comparing different types of charities is like comparing apples to oranges. This is fundamentally problematic. One of the most impressive things about the market price system is it takes products which are totally different – e.g. food, clothes, tools, luxuries, TVs, furniture, cars – and puts them all on a common scale (dollars or more generally money). The free market is able to validly get comparable numbers for qualitatively different things. That’s an extremely hard problem in general, for complex scenarios, so basically neither EA nor central planners can do it well. (That partly isn’t their fault. It doesn’t mean they aren’t clever enough. I would fail at it too. The only way to win is stop trying to do that and find a different approach. The fault is in using that approach, not in failing to get good answers with the approach. More thoughtful or diligent analysis won’t fix this.)

See Multi-Factor Decision Making Math for more information about the problems with comparing unlike things.

Elliot Temple on January 10, 2023


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