Magic is defined as the
power to influence by using mysterious forces. The magician on stage bewilders
his audience because he knows things about the set-up that the audience does
not.
Capitalism is like magic
because its powers are seeped in qualities that appear to be mysterious to the
majority of the population. Even very prescient minds like those of Adam Smith,
David Ricardo and John Stuart Mill were nowhere near envisioning just how this miracle
of capitalism would take form.
The magic of capitalism,
to the nascent enquirer, is that it appears on the surface to depart from the
rubric of one of humanity's great laws - the law of diminishing returns. This
is why so many people see capitalism as a zero sum game, and are so regularly
confused by the fallacy of the fixed pie - it can be quite counterintuitive.
After all, if I have more of something, doesn't that mean someone else needs to
have less?
Sometimes, yes. If I buy
the last packet of cookies in the local corner shop, the person behind me might
have to wait until more stock is delivered. If I give you 2 slices of my pizza,
I will only have 6 slices left instead of 8. Nature adheres to similar
regularities: one barrel of oil sold in the market is one less barrel of oil in
the ground. A potato farmer who digs up his yield has fewer potatoes in the
soil.
But imagine a potato field
whereby every time the farmer dug up his yield he ended up with more potatoes
in the soil than before he started. And suppose that after digging up his mysterious
additional yield he found that there were even more potatoes than previously
before. If this process kept occurring, we would rightly infer that the farmer
has a magic potato field.
Capitalism is like the
magic potato field. It is not just a trading of goods and services -
it is, at heart, a trading of ideas and innovations, and they do not yield
diminishing returns; they proliferate in number, rather like (and also because
of) populations increase because of exchanges of DNA through sex. When people think up ideas
that go on to become light bulbs, combustion engines, stethoscopes, mousetraps,
cat's eyes, cars, helicopters and space stations - the opposite of diminishing returns
happens - we enjoy the law of increasing returns.
This is why capitalism is
rather like magic - a non-supernatural miracle, if you like. The more we
increase our prosperity, our progress and our standard of living, the more we can
increase it further; the more ideas we have, the more ideas we will have; the
more jobs we create, the more jobs we can create; the more we innovate, the
more innovation becomes possible; and the better our standard of living gets,
the better it can become.
Not only is this why
capitalism is like magic - it is just about the only thing in the world of its
kind: where individuals who pursue improvement for their own lives, simultaneously
make everyone else better off by doing so. It is the great human cooperative;
the greatest democracy; the greatest antidote to corruption and tyranny; and
the greatest celebration of talent, diversity, individual sovereignty and
equality (yes, equality) the world has ever seen or probably will ever see.
That so many people are
its enemy; that they so willfully misunderstand it, distort it, cherry pick at it,
formulate so many confused arguments against it, and call for interventions
that retard its gravitas, stifle opportunities and impede its magical effects
on fellow humans is one of biggest regrets we as a species should have.
