fatvegan

The only way a society can use it's resources optimally is through perfect price discrimination or if the government is in charge. It's impossible for a profit driven system to invest and produce at the right levels unless businesses are able to charge every individual the most they are willing to pay. If there's imperfect price discrimination, then investment will be too low. If there's no price discrimination, but the business earns profits by raising prices then investment will be too low, and production will be too low. The government can capture all the benefits of any investment (since theoretically the government and the rest of us are the same agent). Effectively, it can price discriminate perfectly. So the reality is that the government is the only institution that will ever be able to afford to invest at the right level. And I haven't used anything but classical economic theory to conclude that.

That isn't to say at all that the government should be in charge of everything. If it knew what the right level was, it could do it. But it will never know. My point is that capitalism has a large amount of friction, in the form of profits. They slow everything down. And mean there is less of every good thing than there probably should be. I don't believe government control is a good option. But capitalism needs to prove itself in every market. Profits mean it's starting from behind, and there's no reason that the extra information it brings will enable to overcome that handicap. From experience we would generally say that capitalism can overcome it, but we can't take that for granted. Even though I think we mostly do.

Then there's the issue of social equity, which is a whole other bowl of tofu.