Socialism is an insurance policy bought by all the members of a national economy to shield them from risk.  But the result is to shield them from knowledge of the real dangers and opportunities ubiquitous in any society.  Rather than benefiting from a multiplicity of gifts and experiments, the entire economy absorbs the much greater risk of remaining static in a dynamic world.  In a capitalist economy, with more of  the risks borne by the individual citizens and entrepreneurs, and thus vigilantly appraised and treated, the overall system may be more stable.

The crucial difference, however, is that the capitalist, by giving before he takes, pursues a mode of thinking and acting suitable to uncertainty.  The socialist makes a national plan in which existing patterns of need and demand are ascertained, and then businesses are contracted to fulfill them; demand comes first.  One system is continually, endlessly performing experiments , testing hypotheses, discovering partial knowledge; the other is assembling data of inputs and outputs and administering the resulting plans.

Socialism presumes that we already have most of the knowledge we need to accomplish our national goals. Capitalism is based on the idea that we live in a world of unfathomable complexity, ignorance, and peril; and that we cannot possibly prevail over our difficulties without constant efforts of initiative, sympathy, discovery and love.  One system maintains that we can reliably predict and elicit the results we demand. One system maintains that we must give long before we know what the universe will return. One is based on empirically calculable human power; the other on optimism and faith.  These are the essential visions that compete in the world and determine our fate.

From the new edition of Wealth and Poverty by George Gilder

HKO

One can reduce risk by buying insurance or by increasing knowledge.  The risks of polio was not reduced by buying insurance, but by creating  a cure.

When the drive to reduce risk comes at the expense of  expanding entrepreneurial knowledge, progress slows and longer term risks increase.  Short term risks with higher prices create opportunities to solve problems rather than insure against them.

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