Saturday, 2 March 2019

Entrepreneurialism and genetics

Naive libertarians sometimes argue that all that is needed for entrepreneurialism to flourish is for the state to get out of the way. The "market" (that is, entrepreneurs) will always provide everything that is demanded.

Examples of state-led development, such as in early Soviet Russia, or Singapore under Harry Lee, or South Korea under Park Chung-hee, are dismissed by libertarians. "They would have developed even faster without direct state involvement."

I don't think this is true. However, it does touch on an important truth.

There is a deep connection between capitalism and evolution. "Capitalism is what people do when the state gets out of the way." There are many cases where this is true. In Communist countries, the state actively prevents entrepreneurship. Under capitalism, capital flows inevitably to those who can best use it. Natural selection kills businesses which are making worse use of capital, in a discovery process that makes what consumers want.

But this is not always true. I would say, "capitalism is what some people do when the state gets out of the way." Entrepreneurs do not take every profitable opportunity, because there are not enough entrepreneurs. Being an entrepreneur is a disposition, and behavioural traits are genetic. Plenty of people are not entrepreneurs by nature. Some countries have fewer entrepreneurs than others, and some countries have none.

The error here is the libertarian error of humanism: of treating humans as special and qualitatively different from other animals. Mises made this error explicity in "Human Action" (and not just in the title!). It is more accurate to view humans as on a spectrum of animal intelligence. We are just unusually intelligent animals, and some humans are more intelligent than others. Some animals are more intellligent than some humans! Not all humans are the same, and some are more entrepreneurial than others. (There is a correlation between intelligence and entrepreneurialism.) Some races lack entrepreneurialism entirely, and just repeat the behaviour patterns of their ancestors in an unchanging society. Some societies change much more slowly than others. Yanomami tribesmen would not become superb entrepreneurs if you dumped them in California or London. Entrepreneurialism, capitalism is a behaviour pattern, a genetic disposition. Ants do not have it. Not all humans have it.

Speaking generally, we can say that when the state gets out of the way, people act according to their nature. But their nature is not necessarily capitalist.

That is why development in Singapore, South Korea and early Soviet Russia may have been helped by government intervention. It is not implausible. In a society lacking in entrepreneurs, if the few entrepreneurs control the state, they can use their power and intellect to direct large sums of capital.

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