Reconciling capitalism with HBD

A question is, how does one reconcile the deterministic aspects of HBD with the ‘free will’ presupposed by capitalism? Don’t these contradict each other to some degree.

Form an HBD standpoint, I am of the opinion that capitalism rewards individual exceptionalism, especially cognitive exceptionally, better than any other economic and political system. A person with a 130- IQ can become an engineer and potentially make a lot of money, whereas in a Communist country such opportunities may not exist. That’s why America is such a magnet for high-IQ foreigners, who flock to America’s most prestigious companies and institutions of higher learning. The free market and private property provides a financial incentive for everyone (including the best and brightest) to live to their full cognitive potential, benefiting everyone through consumer goods, job creation, and innovation (such as food processing, medicine, electricity, and infrastructure). Obviously, not all high-IQ people choose this route: some go into academia or non-profits. Soviet Russia still produced many mathematicians.

The belief that capitalism implies an equal playing field is a false idealization of capitalism. Jefferson said ‘all men are created equal,’ but he didn’t mean it literally, but rather ‘equal’ in the eyes of God–as in the wealthy and ennobled being afforded the same ‘natural rights’ as the poor. But that is where it ends–it makes no assurances, such as biological equality, beyond those natural rights. Capitalism means private, for-profit ownership of companies, in contrast to state ownership. It means everyone, with the ‘rule of law’, can compete and keep their winnings, but some will win and others will lose; some will have more, some will have less. And smarter people, by virtue of being born with genes that are auspicious to success, will tend to rise to the top in such systems. But everyone benefits in the form of rising standards of living and innovation in the form of cheap and abundant consumer goods. Contrary to popular belief, Cold War Russia, unlike Ukraine after the Russian Revolution, was not destitute (Russia’s steel-based economy held its own for many decades) and people weren’t starving to death, but living standards were poor relative to the United States due to various economic controls and other factors. Even though unemployment was low, purchasing power was poor, meaning that workers derived very little personal utility from their labor and there was always scarcity.

But what about the noblesse oblige of the rich to the poor. If millions of people by virtue of their genes are condemned to failure in a capitalist system, what is the solution. But America has a large welfare state, paid mostly by the wealthy, who also tend to have above-average IQs (as shown by the correlation between income and IQ). I’m not opposed to all welfare, but welfare isn’t free. Social democracy and capitalism still consist, although onerous taxes and regulation may be an impediment. Without the economic contributions of the exceptional, a welfare state as large as America’s is impossible. Mitt Romney was harshly criticized (even by the right) for merely stating the fact that half the country does not pay income taxes. Who pays for the welfare programs? The other half. What about Norway, which is a favorite example by the left of how capitalism and generous welfare programs can coexist. I think Norway is somewhat of an overly charitable assumption, because of its tiny population, low corruption, high trust, high-IQ, and large oil sovereign wealth fund. But part odd the problem is that poverty has a biological component, which cannot be rectified with more social programs.

Capitalism can seem unfair, no question about it. It may seem unfair how Michael Jordan makes millions of dollars every year by merely wearing a specific brand of shoe. Or how being at the ‘right place at the right time’ can make a huge difference. Or how IQ plays such a big role in socioeconomic outcomes. But many other things are also random and unfair, and far worse: you could have been among the 10% of the world’s population that perished under the rule of Genghis Khan, or one of the tens of millions murdered by Stalin and Mao [just ignoring for a second the logical impossibility of someone who is dead complementing their nonexistence 200 years later]. Or among the hundreds of millions in Africa, China, or India, living in squalor. One can make the argument that the West’s post-WW2 economic and social complacency and prosperity (what Steven Pinker calls ‘the long peace’) has created more envy, because instead of fighting for survival, people are comparing their relative social status [1]. But it needs to be emphasized that capitalism (as in entrepreneurship) rewards the exceptional, not the mediocre, the competent, or even the above-average. [Asset-based capitalism (buy & holding stocks, bitcoin, real estate, etc.) is my favorite type of capitalism because you can still be very successful, by investing in existing successful stuff instead of having to create it yourself…this is far easier, but you need initial capital to get started (but the same applies to entrepreneurship, too).]

But America’s post-2009 winner-take-all capitalism, in which an increasingly small percentage of wealth in concentrated in few hands, is still capitalism because the wealth is privatized. However, if the government plays a more active role in enabling these corporations and individuals to maintain their monopoly on wealth, then it may begin to creep into socialism. But pure socialism means government intervention and socialization of profits, but in regard to the latter America is very far from that.

Regarding exceptionalism, the unfairness of capitalism, and HBD, how does one explain wildly diverging outcomes between seemingly equal people? All else being equal, why are some so much more successful than others? HBD has the answer, to some degree. Someone with an IQ of 120 can do 99% of the job as someone with an IQ of 140, but that 1% makes the difference between success and mediocrity. This probably also applies to athleticism and major league sports, music, acting, and probably anything else where ability follows a normal distribution or power law.

[1] This is why when Jordan Peterson talks about “millions being lifted out of poverty in the 21st century,” it doesn’t do much to assuage class envy, because relative wealth matters more than absolute wealth. Peterson admits in a later lecture that such envy is potentially a big problem.