Peter Thiel's Zero to One talks about why Thiel thinks competition alone is not creator of wealth.

The Cato Daily Podcast did a 19-minute show on this topic shortly after we talked about this.
https://www.cato.org/multimedia/cato-...

Viable collectivistic societies presumably have mechanisms to dissuade laziness/etc, such as ostracism and emphasis on reputation. I can imagine that being workable. I believe east Asian cultures may have some of those mechanisms, someone correct me if I am wrong.

You are absolutely right that the credo of socialism is not workable, but I would qualify that with "in individualistic societies". It is quite possible that most societies are individualistic, so, socialism wouldn't work for most of them. However, I think a society might exist (at least theoretically) which may successfully practice it.

So, one of my criticism of Atlas Shrugged would be that it assumes individualism is the only thing that can ever exist. Nature shows (at least to me) that this may not be the case.

By the way, I am individualistic myself, so, socialism wouldn't be for me. However, I can place myself in the opposing position and see how someone might subscribe to it. The solution is to separate the two groups so they don't directly interact and "we shall have peace."

I am sure competition compels companies to innovate, but it is not the only impetus to innovation.

Competitors usually have to spend double the capital (or more) for the same R&D.

To see AR's view of competition in a laissez-faire capitalist market, see Dagny's conversation with Andrew Stockton in Part III chapter 1 (page 723-724 in my hard-back copy)

I would argue that production, especially production excess (less consumption) is the key to wealth creation. Although, freedom and transportation would be helpful. However, if you are relying on economies of scale for super effective production then isolation does indeed have a negative effect.

I'm not sure that avoiding competition ensures efficiency. When there is no competition, the tendency is to rest on you laurels.

Competition tends to improve the product. If there were no competition, I don't think the current Mustang and Camaro, for instance, would be the cars they have become.

I don't see the connection between corporate competition and war. Competition between nations, perhaps, but that is a completely different topic.

Socialistic institutions can work to the extent that the members are ethical and willing to pull their weight. Even some families don't function very well, and I have some family members I can very easily do without.

The problem, as you say is when the state gets involved. When you have a large population, the number of unethical people can be quite large.

Also, when your credo is "from each according to his ability, to each according to his need" the human tendency is to suppress ability, and inflate need. This is what AR illustrated with the 20th Century Motor Company.

I would avoid competition at all costs for the sake of efficiency, however, I do understand that sometimes it is impossible to avoid it.

I think competition being the only possible incentive for improvement must be one of those misconceptions. Increasing profit is certainly another one. Sometimes a company can exhaust their market, so, they can innovate and sell version 2.0 all over again. The universe presents plenty of challenges, we don't need to make things more difficult for ourselves.

I would say that government has the monopoly on force, so, GM and Ford aren't allowed to fight wars. My point was, war is bad and competition is the beginning stage. Competition should not be something to be proud about.

You seem to advocate an economy where each industry consists of a single monopoly, thus eliminating "harmful" competition. However, this seems to be a recipe for stagnation. Where is the incentive for improvement?

I don't think competition necessarily leads to "total war". If that were the case, GM and Ford would not have time to build cars, because they would be too busy building weapons to fight each other!

I don't think AR was "confused" about socialism. She was familiar with it up close and personal. Socialism might work in an ideal society where no one takes advantage, but in any population there are those who want to "work the system.". See the chapter in AS about the 20th Century motor company (Part I chapter 10).

You could also read another AR novel, "We the Living". Spoiler alert - no happy ending.

I agree with DriveTrain’s comments.
I think people moving people, ideas, and goods freely is the key to wealth creation, so isolation is the way to poverty. The Gulch in the book is a metaphor for the idea that if you people are not free, people will stop producing and we’ll all be worse off for it.

Advertiser intent may be the problem. They purposefully engage in questionable activities, which I am sure they understand but still do anyway.

I would argue that there are infinite number of new products that can be created. The probable reasons why they don't exist are as follows:

1. Everybody is too poor because too many resources are being squandered. The population is able to support a limited number of industries and products.
2. Too large population for available resources, so, only a small number of viable business "slots" are available. People are forced to fight over those "slots" via competition.
3. Only a limited capital is available to develop new products, so, there are not many products yet just because there is not much capital for development.

The truth is probably all of the above and more.

My point regarding competition, or even very indirect competition, is that you've got to realize that it creates varying amount of damage for both parties. You might still need to do it, but, you have to be careful. An economy is supposed to be friendly place where everybody benefits from cooperation. Even friendly competition is a step on a path to total war, and war is extreme waste of resources.

I don't find a big distinction between socialists and looters/moochers. From what I've read of Ayn Rand, she seemed to feel the same way. Similar for capitalist & productive.

I agree that advertiser promises are not the real problem. The problem is consumer gullibility.

I haven't had any issues with insurance companies, but I know some people do. I do my best to deal with reputable companies, and not just whoever sends me a low-ball price thru the mail. And there is a good bit of insurance fraud that goes on as well, driving up premiums for honest rate-payers. That's just theft, any way you look at it.

Your competition example seems to indicate producing a similar product at a similar price. I don't know who would start a business under those conditions. You would either build a premium product, which would command a premium price (Think Tesla) or you would build a product at a low price that would allow for high volume (Think Toyota Corolla). If you build a better (or cheaper) mousetrap, you succeed. Will some of your competitors fail? Possibly. Kind of like industrial Darwinism. Their employees can then go to work for you making better or more affordable products.

"Completely new" products are very few and far between. Almost all new products are improvements on other products. Even JG's motor was just a new way to generate electricity. Rearden Metal was a new steel alloy. A Tesla is just a better and much more expensive electric car.

One example where competition can be harmful would be the case of a large company artificially reducing prices, able to lose money temporarily or on one product line. In this case, a smaller company, with less flexibility, is put out of business, allowing the larger company to establish a monopoly.

I've got the impression that Atlas Shrugged was more anti-socialist and pro-capitalist rather than pro-productive-people and anti-looters/moochers.

I don't think advertiser promises are the problem. It is wealth destroying activity (most of the time), kind of like selling heroin.

I think the checkups for insurance thing is not terribly problematic. What is problematic is sleazy insurance companies constructing misleading contracts in such a way that they can weasel out of paying for claims. I guess it goes both ways, customers can screw over companies as well.

I would love to hear about the wrong assumptions I have made regarding competition. It seems pretty clear to me that one should try to avoid competition, unless absolutely necessary.

There are lots of forms that the antagonists could take (and even more today than in 1957). AR chose to focus on the looters and moochers.

Ponzi schemes, and advertizing, really, fall int the "buyer beware" category. There is no substitute for doing your homework. And using your mind. Is the seller promising something "too good to be true"?

Insurance, as you note, can be helpful. My problem comes when people want insurance to cover routine expenses. My car insurance doesn't cover oil changes. Why should my health "insurance " cover dental checkups?

Someone else may be able to address your comments on competition. My econ is rusty (one class 45 years ago). I think you made some pretty broad assumptions that may not be justified, at least not in all cases.

As far as predatory and parasitic, you don't get much worse than Wesley Mouch.

By the way, Thanks for bringing this stuff up. It's the kind of discussion I like to see here in the Gulch.

You are right, but I am already considering things like train speeds into it. Faster train means less time spent by passengers. This savings would be mentally subtracted from train fare by ticket buyers, allowing train operators running on Rearden metal lines to charge more money. I use "cheaper" to mean less man hours spent in all parts of the system. Savings would be felt in many parts of the economy.

Regarding the motor, just removing fuel logistics would create huge time savings for everybody. So, I would agree, it would indeed create a huge amount of wealth.

So, you have no argument from me regarding those two inventions. The thing is, not all inventions have these properties.

I am not a fan of the "altruists" in the book, or in real life, especially ones that use someone else's money for their altruism. However, when I analyze the economy, I can observe certain activities in it that are harmful. I want to stop them not because I am an altruist. I want to stop them because they cause harm to me individually. It just so happens that this harm is done on a huge scale, transferring a little bit of wealth away from many while giving a large amount of wealth to a small number and burning a part of it as overhead of the process. Some of these activities are outlawed but some are not. The perpetrators might even be Ayn Rand fans!

Here are some examples:
- Ponzi schemes
- Advertising
- Insurance

Everybody agrees to participate in a ponzi, so, initially it doesn't look problematic. However, it generates no new wealth and has a large overhead, so, it is a net wealth loss for society. The wealth wasted on it could have been instead used more productively and eventually could have indirectly increased my own by a little bit.

Advertising can accelerate generation of new wealth in some specific situations, but I would argue most it is a huge drain on society. What happens is you get bidding wars between competitors for advertising space. This makes advertisers rich but hurts both competitors because they would bid up their ad costs to a point at which they are no longer generating profits. I would rather see that money going into new product development or decreased prices. Advertisers are probably going to squander this money anyway on figuring out how to spam us with ads some more. Even if they don't squander it, they have overhead which is mostly a waste. if there were not so much needless demand for ads, there would be less of them and everybody would be happier.

Insurance services are quite useful. However, I have observed a lot of fraud in the insurance industry. It is extremely hard to detect, which is why a lot of smart perps are into it.

I don't mind competition, however, it sometimes is at least partially harmful. If you are going to create competition for someone without offering a better product, you would be bidding down the price for the product. You will invest some amount of money into the endeavor. You will burn your investment because you will not be able to get ROI (due to no profit). You will cause issues for others in the economy because your competitor will lose part of their customer base and will have to downsize. The product will be cheaper, so, this will cause some shifts in the markets of alternatives as well. I guess the customers will get to keep more of their money, so, maybe it is not so bad. However, your investment capital could have been better applied in development of some completely new product that could have generated much more wealth, so, there would be loss there. Even if you had a better product, it wouldn't be better by that huge of a margin, so, you would at least be partially causing problems.

By the way, my understanding of altruism, especially in the book, is that at least some of the altruists are actually not altruists. They use the cover of altruism to create a situation that benefits them at the cost of others, basically a type of scheme like I describe above. I would like to see a novel like Atlas Shrugged but with altruists replaced by parasitic/predatory antagonists. The plot doesn't even need to change that much. And this is one of my criticism of Atlas Shrugged. IMHO Ayn Rand missed the mark.

I am willing to hear any reasonable criticism of the ideas above. If I have messed up somewhere, I would like to know about it.

Cheaper is not the only measure of value. For instance the Rearden metal used for the JG Line allowed speeds to be increased. Although not mentioned in the book (beacuse it was written in 1957) the JG motor would also be "clean" energy, carbon free. Apparently that is worth a premium to some people.

As for "it will hurt other parts of the economy much more." That sounds like the comment that Oren Boyle, Jim Taggart, or Wesley Mouch might make. I think it was Floyd Ferris in the movie (I can't find it in the book, but maybe someone else knows) who said: "If Rearden metal IS good, then it's a social danger." Meaning suppliers of inferior products would be adversely impacted.

Right, but there would not be any reason to order for such a high price if the existing currently used alternative was cheaper. My argument is that the invention has to make something more economical. That's not necessarily true for all possible inventions. I see all these people investing into all kinds of crap, and it is pretty clear that their stuff will never make ROI, or if it does it will hurt other parts of the economy much more.