Albert Einstein made the following assertions just prior to his death: “The economic anarchy of capitalist society as it exists today is in my view the main cause of our evils. Production is carried on for profit, not for use.” (Re-printed in Ideas and Opinions by Albert Einstein, 1949).
To “fight” against a Nobel price? That’s a challenge!
Einstein made this assumption in his essay on Socialism published 1949. To be honest I am wondering how he would react today, during the era of the new economy: he would definitively go for anarchy!
I would like to reply to Einstein’s words by focusing on two points: anarchy and production for profit.
My basic assumption is that it does not exist an economic anarchy: economy is being linked and interrelated to so many constant and variables, that there must be some organisation and some “power” organisation (power should be read here as control). Anarchy is supposed to be a world made of strong characters with a common goal, mostly personal freedom and without recognition of any external control over it. The “power” which does actually strive economy is profit, margin, optimisation. In other words: benefits.
This links us to the second point, the production for profit. Einstein was assuming in his original paper, that a “pure capitalistic society cannot exist”, cause otherwise capitalist would get all profits and labour would have to be for free. Economy is intended to grant profits not only to “capitalist” but also to workers, even if of different kind and size.
As we are talking about “economy”, we have to talk about income, profit but also about analysis and optimisation.
Managerial economics, for example, has the goal to provide us with instruments and tools to analyse, understand and optimise each kind of pattern related to economic fields, not only to capitalistic countries.
With the games theory we ca, for example, study the behaviour of our competitors and (thanks to the combination of psychological structures) we can evaluate and force which is the best strategy not to get a maximum profit in a predatory way, but is cooperative way, not obliging our competitors to have them and us out of the game. I would like to make a reference also to the prisoners dilemma, a theory which can be transferred directly to managerial decision processes.
Thanks to formulas as IRR, WAAC and DCF calculations we are able to analyse the feasibility of a project by being able to forecast expenses and revenues. Similar types of future returns can be get by the different regression tools.
The clue words are, in my understanding: Analysis and optimisation. If, for example, we can see that some industrial clusters are concentrated in one area and this area has success, economic success; there must be a reason. We can act in two ways: simple accept it or getting involved in trying to understand and outline the mechanism behind and replicate it by “rendering ” it useful to be applied also in other areas.
Economy is a pot of rules and mechanisms which are analysing not only profit, but also use, cooperation and international competitiveness. The only “uncertain variable” is to be able to understand which tool to use, i.e. which one is the most appropriate for the ongoing situation.
Finally a personal note to Einstein: A bit of anarchy could be hidden is this last described decisional process; but, don’t you agree on that, that people are smart enough to get the point? As you stated once: all is relative. People are not. This makes the difference”