How Society Works

Added: 2026-05-11

[00:00:00][music] [music] Hey everybody, it's James Lindseay and you're listening to New Discourses Bullets, where I give a short bullet point-like summary of a single topic relevant to woke that we all need to know about so we can defeat it. And I don't want to talk about anything too uh big or small today, just how society works. And if um you know parents out there are listening, this is probably a good one for your teenagers to hear.

[00:00:34]We're really going to talk a little bit about ideas that were presented by an economist, a very famous theorist and economist in the 20th century named Friedick Hayek. I'm not going to go into Hayek in detail. I'm just going to kind of talk a little bit about this, but we're actually going to talk about and what I said, I really mean it, how society works. like this is the answer to how society works. So when I say a society here, what I actually mean is what Frederick Hayek referred to as the extended society. That was his term. So I'm not talking about something small, just like he wasn't talking about something small. What we're actually talking about is a society that is large enough to be uh composed of effectively lots of strangers. And so we're not talking about a small community or a small commune or a neat little organization that calls itself a society. We're talking about a society at large. And he refers to this, like I said, as the extended society. And the idea in an extended society is most people are strangers. Now, every society has to solve a particular problem that we could call I don't know what Hayek calls it, but I might call it. I don't know if this is a real name for it even, but I might call it the problem of collective action. Now, this isn't an appeal to collectivism, which is a philosophy that approaches a solution to the problem of collective action. But what it basically boils down to is that societies achieve things through the activity of all of the people collectively, not necessarily working as a collective, but collectively.

[00:02:17]um that are very difficult to achieve individually or even in small groups.

[00:02:24]Just take for example uh the idea maybe you've seen some of these videos especially some of you younger people out there maybe you've seen some of these videos where somebody goes through the process of trying to make a cheeseburger from scratch. They're going to raise the wheat. So they're going to grow the wheat. They're going to harvest the wheat. They're going to uh dry and grind the wheat to make the flour.

[00:02:46]They're going to make the bread to make the buns, but simultaneously they're going to uh raise the cattle.

[00:02:54]They're going to uh get the milk to make the cheese, maybe to make some butter as well for the bun. They're going to get the beef. They have to slaughter the cow. They have to process and butcher the meat. Have to grind the meat. They have to uh like I said, make the cheese, which is its own process. Maybe depending on the kind of cheese, age the cheese, they're going to grow the vegetables for the the garden as it's called or the salad as it's called in some other countries on the burger.

[00:03:27]Maybe they're going to have to make pickles from scratch. So, they're going to have to grow the cucumbers, they're going to grow the lettuce, they're going to grow the onions, they're going to grow the tomatoes, they're maybe going to pickle the cucumbers. And they have to do this such that everything is also timed so that you have the bread and the cheese and the vegetables and the meat all at the same time. And then you can go and take those ingredients and cook them and end up with a burger. And what you find out is that this is enormously difficult and expensive and timeconuming to the point where nobody in their right mind would ever produce a cheeseburger.

[00:04:03]But as it turns out, if you have people who are in or are making uh or growing vegetables, you have people who are making bread, you have people who are making cheese, and you have people who are raising beef cattle and preparing and butchering beef, then what you can actually do is go to the grocery store where you have a uh single market that's aggregating from lots of different producers and go ahead and purchase those ingredients pretty cheaply, relatively speaking. I think a lot some of those videos, I don't know how they calculate it, but they they calculate that it's like $1,7 or $1,800 that goes into making a cheeseburger from scratch, but we think of a cheeseburger as like a $10 item depending on where you're buying it. We'll just plus or minus, you know, order of magnitude. Maybe you can get one for a little bit less. Maybe it's 20 depending on where you're where you're buying it. Maybe you're in New York City or something. But at any rate, um we don't think of it as this big deal. A cheeseburger is not a big deal. And the reason is because of collective action.

[00:05:03]And it doesn't require a collective to do it. You have the society doing this.

[00:05:08]You have various different parts in the society. Some that are raising beef, some that are growing grain, some that are making bread, some that are making cheese, some that are raising vegetables, some that are uh transporting those things to a central location. Some of uh some who are are uh selling those things to make it convenient, blah blah blah. And what you end up with is something very simple and very straightforward. um to to get a cheeseburger. Milton Freriedman, another famous economist, gave an example of how what actually goes into making a pencil.

[00:05:39]How do you get the graphite, the wood, the blah blah blah? How do you put it all together, the rubber for the eraser?

[00:05:44]And it turns out it's an enormously complicated logistical problem to do from scratch. Unless you had for whatever reason the ability to go buy rubber and wood and graphite and metal that might be laying around for other reasons that somebody decides to innovate and figure out, well, if I take this kind of sheet metal and wrap it with this way and pinch it, it'll make the the little metal piece on the back of a pencil. I can get graphite that's used for a wide variety of purposes and put it into the middle of the pencil by this process, you know, blah blah blah.

[00:06:16]It turns out that the everything and it was a long introduction to society.

[00:06:22]Everything we take for granted in a good life, a high quality of living, uh a high standard of living I should say in a good society is the result of collective action. And societies have to figure out how to solve this problem. So how does society work? Well, there are only so many ways you can get lots of people to do things that kind of come together to make solutions. Number one, you can incentivize them to do so. That could be by and when I say incentivize, I mean by you you can create reasons that they would want to do it that don't include coercion and force. Another way is that you can force them to do it. You can centrally plan an economy and require people to do it. And a third way you might approach that is by brainwashing people to believe it's their duty to do so. And this gives kind of three different models. One is a freedombased model that's based off of economic incentives. We might call that free enterprise. Another of these models uh is authoritarian where you're going to have a command economy as it's called. And a third one is totalitarian where you're actually going to transform the way people think so that they participate in society in a collectivist way. They believe in the collective and sacrifice themselves to the collective because they've been remade to believe that that's the way they're supposed to work. They're not. In practice, they usually get forced, but they're not just being forced. There's an attempt to make them believe in this collective action problem. And so free societies, good societies, the ones that actually perform best in the world, the ones that actually produce the highest levels, the ones that come out with the best stuff, the highest levels of innovation, the highest uh life satisfaction um scores and so on, operate off of free enterprise, which creates incentive structures, which boils down to this.

[00:08:09]This is basically the secret sauce of a free enterprise society is that there's this thing called the profit motive which is that you're allowed to control your own property. The society is set up around the idea of protecting your ability to have your own property and thus set the terms upon which that property will change hands. So, if you are the one who made the bread for the burger, you get to decide how much it costs to take the bread out of your hands, and you're going to set a price where you profit. You go away with more than you had, at least from your own perspective, uh, by keeping the bread to yourself.

[00:08:54]And the person who bought the bread almost miraculously bought it because they wanted the bread badly enough to where the bread itself was worth more than whatever they used to buy it.

[00:09:05]Whether that was money, whether you bartered and traded something, uh, or whatever, it doesn't really matter what the the means of exchange are. So when you have a society that's set up around protecting individuals and their rights to own property and control the terms of exchange, we call that a free enterprise society. And what you end up with is something called the profit motive. Now the profit motive gets absolutely denigrated in socialist systems whether those are communist or Marxist type socialist whether they're progressive socialist or whether they are um national socialist or fascist uh those are all socialist programs and the profit motive is seen as evil. It's seen as selfish. It's seen as putting the individual ahead and your own self-interest ahead of the collective.

[00:09:55]And so you're the their claim is that you're not solving the collective action problem because you're working for yourself and enriching yourself. And the claim is at the expense of the collective or at least at the expense of other members of the collective, but usually the collective entirely.

[00:10:11]Communists say it's at the expense of the class that's doing the actual labor.

[00:10:16]um different kinds of uh Marxists in today's world will might say that it's racist exploitation or sexual exploitation or whatever else. Fascists say you're doing you're collecting your profit at the expense of the national community and the national socialists as a type of of of fascists say the same thing. The Nazis would explicitly say that it's at the expense of the folk and the folk community which is to also say the race and the needs of the race. So you have different ideas here. But this is actually incorrect because uh you don't actually have to have people deliberate. This is the magic. This is the whole magic of society guys. This is how society works. You don't actually have to have people care about other people's problems in order to incentivize people to solve other people's problems or more accurately to provide solutions to other people's problems that they themselves can gain access to and use to solve their own problems. In short, everybody wants to solve their own problems. Very few people want to solve other people's problems. Very few people are motivated to solve other people people's problems.

[00:11:26]You probably would not go through the trouble of creating a hamburger restaurant or a cheeseburger restaurant in order to provide the world with cheeseburgers. You would probably do so to provide uh a product you know how to produce where people will pay you for it and make you profit. So you can be motivated for you. you you no no there's no cheeseburger shaped hole in your heart where you feel like you have this mission to provide the world with cheeseburgers and to distribute cheeseburgers uh to the to the world and therefore you're going to make a cheeseburger shop. No. you're probably going to reason that you can make pretty good cheeseburgers and you like doing it and you're pretty good at making them.

[00:12:05]Uh, and you're efficient at it and you've got a neat, you know, angle on it, they taste good or whatever, and that people will come and pay for that because you can maybe make a better or more convenient or both cheeseburger than they can, okay, for themselves. So they're willing to part with the extra money to save the trouble or to get the flavor experience that they're not as able to to create for themselves. So that's called having an angle in the market. So it turns out you aren't motivated necessarily to solve the other person's problem of their hunger or their desire to have a cheeseburger or their desire to have a really good cheeseburger. You're motivated by the fact that you have a self-interest in selling something to provide to the to the community in a way that the community will pay you so that you can go make money. Now, what's the point of your money? As I covered in an episode of the New Discourses podcast called the problem-solving theory of value, money is just a symbolic means by which you can go participate in the economy to get things to solve your own problems. Maybe you're great at making cheeseburgers, but you got to get the ingredients.

[00:13:09]That's a problem you have to solve. So, you need money to buy the ingredients.

[00:13:13]Maybe you have other things going on in your life. Maybe you're like off on the side. You're a DJ or something and you've got to get that, you know, new mixer board or whatever to get the sound that you want to do cuz that's your thing. You got to get some money for that. And so, the cheeseburgers are a vehicle to make the money to get the DJ equipment or whatever it happens to be.

[00:13:31]And that's a silly example, but it's not. That's called life. And um you want to get money to solve your problems. But people want to make money.

[00:13:43]So they create things that solve problems in general, whether they know what your problems are or care about your problems or not.

[00:13:51]So therefore, you have this whole system where people are producing things that are useful to one another, setting the terms of exchange so that they can make a profit and engaging in an economy so that they can. And getting people to provide the means for people to solve problems they don't even know or care about is the secret sauce of a productive, successful society or what Hayek called an extended society. Now, Hayek had an additional point which is that that socialist economies fail because or centralized economies fail.

[00:14:25]Governmentrun economies fail because they try to solve the problems of a society. They try to know how much to produce, where to distribute, what to source and what from, where, etc. in a centrally planned system. And the idea is, well, everything's so complicated.

[00:14:41]We need central planners to figure out what everybody needs and how to get it there. We can't trust that it'll just get there. And Hayek says, "No, no, no.

[00:14:48]That's not how it works. Individuals pursuing their own needs and interests and looking for their own opportunities in the niche of the economy, which is like an ecosystem of uh trade, are going to be incentivized to fill the various niches and to uh to to understand what they themselves need, what they themselves want, what they themselves can produce and provide and how much of it to provide. Therefore, the actual disagregated information of the extended society participating in a free enterprise economy has vastly more and is employing vastly more information than any centralized authority can possibly collect or control or work with. So therefore, the socialist society cannot gather the necessary information that's come that comes up from everyday people having everyday problems that they're looking to solve that they're working with each other to solve in the processes of producing, buying, selling, and trading. And so there's this information problem, but there's something deeper here. And that deeper thing is actually it's even deeper than Hayek pointed out. It's not just about economics. It's not just about uh about rational self-interests.

[00:16:00]So, but this is the secret sauce by the way. The secret sauce of the free enterprise society is that it turns creating the capacity for other people to solve their own problems into a self-interested situation. You have a profit motive. You are self-interested to come up with ways that you can provide something by which other people out there can solve their problems. You don't have to know those people. You don't have to care about those people.

[00:16:23]You don't have to know what their problems are. or you don't have to care about their problems. Sometimes you will, sometimes you won't. The guy creating metal, let's assume pencils don't exist yet. The guy creating that gauge of of metal, whatever metal it is that's on that little back end of the pencil before the eraser that holds it in that, you know, wraps around the wood and is dented into the wood or car, what is it? Uh, punctures into the wood to hold it and holds the eraser on the other end. That little piece of metal probably was used for something else until somebody innovated the idea of, "Oh, we could buy that strip of metal, wrap it around, and punch it this way, and it'll hold the eraser on the back of the pencil. So, you don't even have to produce the thing that somebody needs to solve the problem." The guy had a problem. He wanted to figure out how to put an eraser on the back of a graphite pencil. That little strip of metal was probably being made and existed for something else. And he could buy that.

[00:17:14]And if it didn't, if he didn't innovate off of an existing product, then he could innovate off of raw materials or create the the process or the machine to do it to make the thing that he needs himself from a raw material and then he's going to go to a raw material supplier. So this ability to solve problems that you don't even know other people have. This is the solution, the real solution to the collective action problem uh is is actually at the dead center of why free enterprise works and socialism of all types does not work.

[00:17:43]Doesn't matter if it's Marxist, doesn't matter communist or whatever. It also does so left-wing socialism. It also does egalitarian equalitarian socialism doesn't work because it can't solve the problem of collective action. It tries to force it and can't do it. It also explains why command economies are less efficient and less successful and why totalitarian systems don't work. So, let's quickly like compare off of those now that we know how society actually works. People are incentivized through their own self-interest to provide potential solutions to other people's problems.

[00:18:16]Other people have those problems and they come look for solutions sometimes that are readymade and sometimes that they can innovate with in order to solve the problems that they have and they can trade on their own terms and that gives you the economy. And Hayek is right that you're exchanging more information that way in real time about what people need, how much they need, where they need it than any centrally planned economy can deal with. People are incentivized by the profit uh incentive to make as much as people will buy, but not more because if you make too little, you leave money on the table. If you make too much, you wasted money making stuff people wouldn't buy. So you're incentivized in each case as a producer to produce and sell exactly the amount that the market around you demands. Isn't this all really neat? Sounds magical. It's not magical. It's actually just disagregated. All right. Now, what about the socialist programs? The socialist programs basically believe that they can solve the collective action problem either by force. So that's a command economy. They can force people to uh care about other people's problems and produce solutions to them. That's the deeper thing. It's not just about information exchange. As brilliant as Hayek is and as accurate as he is about the information exchange problem, there's something deeper. And this is why AI is not going to be able to solve the socialist problem. Even if you did have a supercomputer that could crunch out massive amounts of uh allocation and distribution and and supply and demand uh information, you still can't get down to the deeper problem, which is how do you incentivize people? How do you make people want to solve other people's problems? The free enterprise profit motive system says we secure their property and let them profit from figuring out ways to produce things that people can use to solve their own problems because they care about their own problems. It's really neat.

[00:20:08]The socialist economy says, "Well, we're going to force them." Well, that's a command economy. Okay. Well, let's say it's just a regular command economy.

[00:20:14]We're going to force people to do it.

[00:20:16]Well, that works as far as it works, but people resent being forced to do things.

[00:20:20]It also stifles innovation because you're doing what you're told. You're not thinking in particular, you're not thinking outside the box. You're thinking very much inside the box. The box is given to you. It says, "Make this many pencils and this many cheeseburgers." So, you make this many pencils and this many cheeseburgers. And it never occurs to you to make something completely different that solves one of these kinds of problems better in a completely new and different way. This never occurs within the command system.

[00:20:49]So you lose almost all of your innovation because you're simply being told what to do and you're not flexing that muscle. But what about the totalitarian system? What's their solution? It's not just to force people against their will, which will burn out, which will wear out in the authoritarian model, but the totalitarian model, the communist model, the literal communist model is that they are going to teach people to want to work for the collective. And when they remake man himself to want to work in favor of the collective as though it's all one giant happy family, then people will do that and therefore the collective action problem will will will be solved because everybody will wish to contribute to the collective. And this doesn't work because it doesn't work to remake who people are. You can like or hate human nature, but we are as we are. We are more motivated by self-interest. And we are closer to our own problems than we will ever be to other people's problems.

[00:21:50]And we're not going to operate in other people's interests. No matter how hard they try to remake us, no matter how much they say that this would work better or believe that this would work better on paper. So the communist model is literally to brainwash and remake people. It is a totalitarian system. It gets inside your every aspect of your life, total control of your life to remake you into the kind of person who solves the collective action problem.

[00:22:14]Isn't it just better to let people do whatever they think is best and watch the collective action problem solve itself through lots of mutually reinforcing and interacting self-interests with people who actually are solving their own problems. So, what about the Nazis? They don't like Marxism. They aren't going to remake people into believing in you know working for the society and wanting to contribute to the collective except that they do actually. The collective is now the folk which is a people or a nation.

[00:22:43]It is actually a racial people group that forms a political entity called a nation. So the folk actually is something you are meant in the Nazi program to sacrifice yourself for.

[00:22:55]That's when they talk about all this Nazi heroism. If you've read any Nazi stuff, you'll know they're always talking about the heroic individual. The heroic individual in the Nazi system sacrifices himself for the good of the folk as it's instituted through the state. So, you're still going to force people in this case uh in somewhat different means than by the communists.

[00:23:17]You're going to force people to believe that their actions are only meaningful when they're done in the name of the people and of the state, which is the same as a communist program. and you're going to remake people to act in the interests of others. So, the totalitarian system isn't just going to blandly force [snorts] people to do whatever it is that the command economy wants. That's where Hayek's information problem really comes into play, but it also wears people out. It's better to let people pursue their own interests sometimes, which means just getting a job that you don't like that's in your interest. Why? Because you want money so that you can buy stuff or make stuff or make your way up a stepping stone to something that you do like to do.

[00:23:56]In the totalitarian system though, the goal is actually to transform who you are on a mental and spiritual level into somebody who wants to solve the collective action problem because you believe it's your duty as a human being to solve the collective action problem.

[00:24:11]Those are the different models. That one doesn't work. Human beings aren't wired that way and will never be wired that way. Even ants aren't wired that way.

[00:24:18]They're only wired that way to sacrifice themselves for the particular hive that they're in. the one particular nest which has a queen which is one giant extended family. But you go to a you go 50 feet across your yard to another antill and those ants are not the same ants. And when those two ant hills encounter each other, they go to war with each other over the same resources.

[00:24:40]So they are absolutely not there's no idea that you're going to solve the collective action problem by turning people into some kind of drones that think that they can operate in one giant society. And the reason is because you don't know most of the people in this society. Most of the people are strangers and you do not know what their problems are. You do not care what their problems are. Even if you did know something about them and their problems outside of the abstract, you don't care about them or understand them or have the imperative to solve their problems the way you do to solve your own problems. So the free enterprise system allows people to profit from creating solution pathways to other people's problems. And that's how society works.

[00:25:23]So if you want to live in a society that works with a high standard of living, that's what you have to defend. That's job number one. You cannot look to the government to figure out a collective action solution that they're going to force people or brainwash people or transform people into upholding. You cannot procilitize people into being other than they actually are. You can however secure individual rights and the ability for people to participate in a collective problem-solving activity where the collective problem solving is done by each person pursuing his own need, his own self-interest, and his own solutions to his own problems that are present, [music] immediate, important, and close to his own life.

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