Tag Archives: Capitalism

Yuval Noah Harari’s “Sapiens—A Brief History of Humankind”

Homo appeared roughly 2 million years ago in Africa and Homo sapiens roughly 200’000 years ago in East Africa. Harari divides his account of the last 70’000 years into four parts: The cognitive revolution (language), the agricultural revolution (about 10’000 years ago in today’s Turkey, Iran, Levant), the unification of humankind (through money, empire, and religion), and the scientific revolution. According to Harari, Sapiens developed more efficient strategies for cooperation than other species and in particular, Neanderthals (which sapiens eradicated around 30’000 years ago). The rest is history, i.e., evolutionary biology and cultural history.

On his website, Harari summarizes:

Homo sapiens rules the world because it is the only animal that can believe in things that exist purely in its own imagination, such as gods, states, money and human rights.

Starting from this provocative idea, Sapiens goes on to retell the history of our species from a completely fresh perspective. It explains that money is the most pluralistic system of mutual trust ever devised; that capitalism is the most successful religion ever invented; that the treatment of animals in modern agriculture is probably the worst crime in history; and that even though we are far more powerful than our ancient ancestors, we aren’t much happier.

According to Harari, the agricultural revolution fostered population growth but made life harsher for most humans (due to less varied diet, harder work, infectious diseases)—and for the animals that Sapiens domesticated; religion, empires, money and trade fostered globalization and unification; the scientific revolution arose from Europeans’ admission of ignorance, and it was intertwined with imperialism and capitalism; whether humankind has become happier over time is unknown but doubtful; and we may soon confront a singularity:

Physicists define the Big Bang as a singularity. It is a point at which all the known laws of nature did not exist. Time too did not exist. It is thus meaningless to say that anything existed `before’ the Big Bang. We may be fast approaching a new singularity, when all the concepts that give meaning to our world—me, you, men, women, love and hate—will become irrelevant. Anything happening beyond that point is meaningless to us (p. 461 in the Vintage 2015 edition).

Other tidbits:

  • Settlement of Australia (“The Flood”), America, New Zealand: 45’000, 16’000, 800 years ago. Each settlement was associated with mass extinction of species.
  • “[F]iction has enabled us not merely to imagine things, but to do so collectively” (p. 27). “Ever since the Cognitive Revolution Homo sapiens has been able to revise its behaviour rapidly in accordance with changing needs. This opened a fast lane of cultural evolution, bypassing the traffic jams of genetic evolution.” (p. 36).
  • “The Agricultural Revolution was history’s greatest fraud. … These plants domesticated Homo sapiens, rather than vice versa” (p. 90). The revolution bred worries about the future. Food surpluses brought rulers and elites, palaces and temples, politics, wars, art and philosophy (p. 114). One `imagined order’ with three classes and two genders—the Code of Hammurabi—dates from 1’776 B.C. (p. 117). Writing, archiving, cataloguing (invented by Sumerians around 3’500 B.C.) preserves information about imagined social order; this is critical because the information is not preserved in DNA. Script undermined holistic thought. Hindus invented `Arab’ numerals around 800 AD (pp. 137–146).
  • Cognitive dissonance, contradictory beliefs are necessary to maintain any human culture (p. 184). Over the last 10’000 years, thousands of `human worlds’ have collapsed to a single one (p. 186). Three universal (imagined) orders: Money, empire, religion (p. 191). “Money is the most universal and most efficient system of mutual trust ever devised” (p. 201). Empires are stable, inclusive, not that bad (p. 219). Religious norms are founded on a belief in a superhuman order (p. 234). “Much of ancient mythology is in fact a legal contract in which humans promise everlasting devotion to the gods in exchange for mastery over plants and animals” (p. 236). Polytheist and animist religions recognize a supreme power in the background, devoid of biases and interests (p. 238). Humanist religions worship Homo sapiens. Liberal humanism believes in the humanity of the individual. Socialist humanism believes in the humanity of the collective. (Both build on Christian tradition). Evolutionary humanism (e.g., Nazism) believes that humankind can evolve or degenerate  (pp. 256–263).
  • Science started from the admission of ignorance; observation and math; and the acquisition of new powers (p. 279). Social stability requires that certain `scientific results’ are a dogma or that basic truths are non-scientific (p. 282). With the capitalist system and the industrial revolution, science, industry and military technology intertwined (p. 294). “[S]cientific research can flourish only in alliance with some religion or ideology. The ideology justifies the costs of the research” (p. 305). Science and empire supported each other (ch. 15, 16). The scientific revolution and the idea of progress fostered credit; this reinforced each other (p. 346). The industrial revolution has been a revolution in energy conversion (p. 379) and it was a second agricultural revolution (p. 382). Animal suffering, consumerism (ch. 17). The national time (p. 396). State and market replace family and local community (p. 398). “The state and the market are the mother and the father of the individual” (p. 402). “The nation is the imagined community of the state” (p. 406). The world is safer than ever, and war does not pay any more. Have humans become happier? Answer 1: “Lasting happiness comes only from serotonin, dopamine and oxytocin” (p. 436). Answer 2: Meaning. But “[p]erhaps happiness is synchronising one’s personal delusions of meaning with the prevailing collective delusions” (p. 438). Answer 3: Feelings are not to be trusted; of key import is whether people know the truth about themselves (p. 443). Intelligent design and extreme inequality (ch. 20).

Wikipedia points to critical scholarly reception.

Marx was Right—Partly

According to René Scheu in the NZZ.

Die zehn «Massregeln» für die «fortgeschrittensten Länder», in die das «Kommunistische Manifest» mündet, lesen sich aus heutiger Sicht wie ein sozialdemokratisches Programm, dem auch viele softbürgerliche Politiker sogleich vorbehaltlos zustimmen würden. Starke Progressivsteuer, Geldmonopol der Nationalbank, Zentralisation des Transportwesens, nationale Industriepolitik, Verstaatlichung des Bauernstandes und unentgeltliche Erziehung aller Kinder gehören längst zu den Errungenschaften avancierter Wohlfahrtsstaaten – damit sind wohlgemerkt bereits sechs der zehn Punkte erfüllt….

Marxens Kritik zielt nicht auf den Unternehmer und Eigentümer als solchen, sondern auf den Bourgeois, der auf der faulen Haut liegt und auf Kosten anderer lebt. …

Der Verfasser des «Manifests» ist kein Moralist, sondern ein geradezu passionierter Ökonomist der ersten Stunde.

And according to The Economist:

  • Modern “capitalism” often reduces to rent seeking: The Economist mentions “corporate bureaucrats”, “management consultants”, “professional board members”, “retired politicians (who spend their twilight years sponging off firms they once regulated)”.
  • It is global (WEF).
  • It has a tendency towards monopoly (Google, Facebook, …).
  • It yields an army of casual workers (gig economy).
  • But Marx overestimated poverty and underestimated reform.

Isaiah Berlin: Karl Marx and his Environment.


On their blog, Stephen Cecchetti and Kermit Schoenholtz voice doubts regarding the usefulness of universal central bank digital currency (U-CBDC). They argue:

… in an effort to retain their deposit base, commercial banks would surely raise the interest rate they offer to their customers relative to the rate on U-CBDC. … the introduction of U-CBDC would cause a substantial fraction of deposits to shift to the central bank, with the remainder prone to exit in a period of financial stress.

… if the Federal Reserve were to issue U-CBDC, we expect that this would not only hollow out the U.S. commercial banking system, but also destabilize the financial system in a range of countries.

… what would the central bank become? As its U-CBDC liabilities grow, its assets will need to expand as well. And, since commercial banking will have shrunk, so will the sources of private credit. At this point, the central bank turns into a commercial lender. It will become the state bank. In the allocation of funds, it will substitute increasingly for the discipline of private suppliers and markets, inviting political interference in the allocation of capital, slowing economic growth.

The problem with this argument is twofold: First, it disregards the possibility of liability substitution: Deposits may be replaced by other forms of bank debt. Second, bank balance sheet length is equated with lending capacity. But empirically, one is far from a perfect predictor of the other. For example, some countries rely much more heavily on bank credit than others, without obvious implications for intermediation and investment.

… we are compelled to ask what problem it is that U-CBDC is designed to solve. There seem to be three possibilities: the inability of monetary policymakers to set interest rates much below zero; the fact that paper currency is a vehicle for criminality; and the need to broaden financial access. On the first, we currently see little political support for interest rates that go meaningfully below zero. … As for criminal use of paper currency, as we argued in a recent post, there is a strong case for eliminating anything bigger than the equivalent of a U.S. 20-dollar note, but doing so does not imply a need for U-CBDC. Finally, there is financial access. Here, we see technology as providing solutions outside of the central bank [e.g., India’s program of providing costless, no-frills accounts].

Indeed, none of these arguments makes a convincing case for CBDC (especially since only the first one directly relates to the monetary system). But there are two more convincing arguments. First, it is preposterous to have governments prohibit citizens from using cash—the legal tender—for large transactions, and to force them into using privately issued money instead. Opening the central bank’s balance sheet to the public is a more liberal approach than restricting access to financial institutions.

Second, private money creation puts the central bank at a second mover disadvantage, effectively forcing it to serve as lender of last resort during liquidity crises or even as provider of bailout funds. Since the central bank is obliged to safeguard the payment system it cannot escape this disadvantage; regulatory measures—to the extent that they work and do not cause more harm—may alleviate moral hazard but cannot solve the time consistency problem completely. The more payments are conducted using CBDC the less can the banking sector and its customers dictate monetary policy.

To conclude, we see very little upside for central banks to issue retail digital currency. Instead, we see an enormous risk to the commercial banking system and political challenges for central banks. In the end, we wonder: would capitalism survive the introduction of U-CBDC? It may, but we are not at all sure.

As argued above, threats to capitalism also lurk in other corners.

God and Money

In the NZZ, Thomas Fuster comments on the Catholic church’s critical perspective on capitalism.

Der Theologe Martin Rhonheimer hat schon recht: Die Kirche stellt die falsche Frage. Zu ergründen gälte es nicht, wie Armut entsteht, zumal Armut dem ursprünglichen Zustand des Menschen entspricht. Fragen sollte sie sich, wie Wohlstand entsteht. Täte sie dies, hätte der gewinnorientierte Unternehmer, der mit seinen Investitionen zahllosen Menschen ein Auskommen ermöglicht, wohl einen besseren Ruf beim Klerus.

Ayn Rand‘s “Atlas Shrugged”

Ayn Rand‘s master work about mind, productive man and his liberation. More than a thousand pages long but rarely tiresome (except for John Galt’s radio speech) the novel blends thriller with common economic sense and Rand’s philosophy of objectivism.

The economics makes sense—incentives matter and give rise to a trade-off between efficiency and equity; but it is crude—market failure is neglected. The most interesting element in the incentive problem faced by the government sponsored “looters” and “leeches” is the sanction of the victim.

The philosophy (as summarized at the end of the paperback) is less convincing; it certainly does not follow from the economics. Much more on objectivism on the website of the Ayn Rand Institute.