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New to Misaligned Markets? Here's an overview of the ideas behind the project.
Misaligned Markets is an exercise in thinking publicly about the social and economic structures of our world. I do my best thinking in dialogue with others, so I invite subscribers to join me as collaborators and interlocutors. My goal is to create mental models that encapsulate how market capitalism functions, to inform how we talk about economics and public policy. Subscribe, comment, or email me. I’d love to hear from you!
Great, another person talking about capitalism
Yeah, I know. But I promise I’m at least a little original. Don’t believe me? Read and give feedback on the core ideas I’m bringing to the public sphere.
Why do you say “market capitalism?”
I take a diagnostic approach to political economy, where I look at components within a system to better understand the function of the whole.
What we call capitalism is better seen as a metastable system consisting of:
- Capitalism: structures that codify and enforce ownership.
- Markets: a resource distribution mechanism.
These are the fault lines of the system, and friction between them shapes capitalism’s evolution.
What do you mean? The antebellum United States, post-Meiji Restoration Japan, the New Deal United States, and modern-day Nordic countries are examples of capitalist societies with markets. Market capitalism is best seen as a continuum where aspects like property rights enforcement, market concentration level, and regulatory regime structure shape an economy.
Key ideas
The four paradoxes of capitalism
Capitalism as a stack (still in progress)
Okay, what does “market” capitalism do in your view?
Market capitalism optimizes for:
1. The accumulation of capital
Capital growth becomes both the measure and goal of success, regardless of whether real value is created.
At the firm level:
- The Dutch East India Company reinvested profits from each voyage to finance the next.
- Amazon operated at a loss for many years, recycling its earnings into infrastructure and market share.
At the macro level:
- The dot-com bubble showed how exuberance can inflate valuations detached from productive capital. Some of that excess, in the form of fiber cable investment, would later fuel the growth of Web 2.0 companies.
2. The exploitation of structural asymmetries within capitalism, markets, and the world
Actors who leverage knowledge of relative advantages are rewarded with pricing power and profit. Sometimes this asymmetry drives actual progress; sometimes it hides harms.
Market capitalism at its best:
- Intel was among the first semiconductor firms to operationalize Moore’s Law into a competitive advantage
- Starting in the 1970s, Japanese automakers ate market share from US car companies through higher quality and fuel efficiency.
and at its worst:
- General Motors promoted tetraethyl lead as a gasoline additive that boosted performance while knowingly poisoning tens of millions over a century. Internal notes show GM and its partners rejected safer alternatives like ethanol because they couldn’t be monopolized.
Exploiting the structure of capitalism enables:
The offensive expansion of property rights through enclosure and commodification
This expands what private actors can own and profit from, while restricting competition and access.
examples
- British Enclosure Acts converted shared lands into private estates, forcing subsistence farmers into wage labor.
- Digital Rights Management (DRM) transforms ownership into licensed access
- This is why your car spies on you, sells your data, and raises your premiums.
- Patent trolling monetizes innovation indirectly, turning legal rights into rent streams.
The defensive use of property rights to externalize risk, debt, and liability.
Legal and financial instruments shift costs off balance sheets, allowing strategies with high social or environmental fallout to appear efficient.
examples
- Collateralized debt obligations (CDOs) in the 2000s sliced and sold mortgage risk until it “vanished” from view
- Special Purpose Vehicles (SPVs) isolate losses in expendable subsidiaries, letting parents claim stability while debts sink elsewhere.
- Forced arbitration uses contract law to privatize accountability, isolating legal risk from public scrutiny.
- Patent mining and other rent-seeking tactics turn ownership into litigation leverage rather than productive activity.
Key ideas
Differentials / Gradients (still in progress)
Read: The lethal economics of corporate kung fu
Then: Capitalism runs like a computer (and it's being hacked)
Why does market capitalism function this way?
ELI5:
“Society” is a large organization that commissions explorers to venture into the wilderness and bring back resources that might improve life within its walls. It’s fine if several explorers find the same thing; the organization is happy to pay for duplicates if they’re useful.
But the organization can’t easily tell who’s bringing back good things. Some explorers return with soothing remedies, well-crafted tools, and healthy sources of food. Others bring bright powders and pass off useless trinkets or poisonous plants with clever tricks. The problem is that the organization judges discoveries by how exciting they sound when presented, not by what they actually do once used.
Even if only a handful of explorers bring back harmful resources, this can make many lives worse off. Yet the search continues. The organization keeps sending out expeditions because searching is the only way it knows to produce what it needs.
My hypothesis:
Market capitalism is a system embedded within society, culture, law, ecology, and the wider world. Within this environment, it seeks to discover and amplify exploitable advantages through the profit motive—diffusing knowledge, but not necessarily wisdom. Over time, the path of least resistance will lead market capitalism to cannibalize itself as an ever-expanding amount of low-cost, high-externality opportunities for profit become abundant.
Market capitalism is a brute-force optimizer. If it had a “personality,” it’d be:
- “blind” it can’t tell good advantages from bad ones. It will even select for ideas that undermine itself so long as they generate profit (e.g., abuse of property rights).
- “dumb” it can’t remember what it has already done. It forgets incomplete solutions, rediscovers old mistakes, and reproduces familiar harms under new names.
- “greedy” it favors results with immediate returns, regardless of their long-term costs.
- “wasteful” it floods the zone with redundant and sometimes costly solutions; some good and some bad. The process never stops and will keep going until something breaks.
This makes it a weak-link system. Even if most activity is “honest,” optimization produces a distribution of outcomes. At the tail end of that distribution, harmful outliers can have substantial impact and might even undermine the system. Sadly, likely doubles as a solution to the Fermi paradox.
Key ideas
Read: What do AI alignment fears reveal about market capitalism?
Metastable? Optimizer? Why do you talk like that?
There are Bay Area rationalists in my life that I’ve gotten into debates with. I’m not a rationalist, but I realized the cybernetics, control theory, and optimization dynamics they used to describe AI perfectly describe capitalism. This, ironically, brought me in sync with some economists who use evolutionary optimization and cybernetics to talk about capitalism. See Philip Mirowski, for example.
Key ideas
Runaway optimization (“Mammon”)
Read: Beyond greed: Mammon as an analogy for maloptimization and wicked problems
Then: When optimization goes wrong: Caught in Mammon’s Grasp
How does useful information diffuse in market capitalism? [in progress]
Humans naturally cooperate by sharing and imitating good ideas. Many of our best innovations are anti-rival; they only become more valuable the more people use them (like language or open knowledge). Market capitalism can mirror this dynamic when the profit motive aligns with public goods or government-funded research. But as public investment recedes and firms grow more extractive, this coordination falters and the “baton” of innovation gets dropped.
Key ideas
- The great relay race
- (contrast with) “Competition is for losers”