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Socialism and Capitalism

Updated: Dec 23, 2023

In this intelligence lecture I will explain how the economy works using the theory of neurological intelligence. The economy is one of the most important intelligences that we have ever created, yet it is surprisingly easy to understand. You have participated in an economy, so everything will probably be very familiar to you.

This explanation will use the ideas explained in the posts The Basics of Neurological Intelligence, Meta Ethics, and How can I know what is true? You should go read them if you want a better understanding of this explaination.


As a review the theory of neurological intelligence states that all intelligences, including the economy, are constructed from little pieces of intelligence called neurons, although, these little pieces of intelligence are not nessesarily intelligent themselves. Each neuron has three distinct aspects to it. They have an identity, an orientation, and a relationship type. A neuron is anything with the right combination of these characteristics. Neurons also follow a system of ethical principles. These principles can either stem from the idea that morality comes from relationships, or the idea that morality comes from identity.


An economy is a system of trade. Three things need to be in place for an economy to work. There must be a supply of things to trade. This makes the economy complete. There must be competition, this makes the economy behave consistently. And finally there must be a steady demand for the goods and services. This makes the economy stable. The law of supply and demand is as follows: In a purely competitive market if there is high demand for a good or service the price will be high, and if there is a high supply of the good or service the price will be low. The price of the good or service will fluctuate until it stabilizes at a point where the quantity supplied at that price equals the quantity demanded at that price.

Level 1: Work

The foundation of economics is that property can be used and traded. The first set of ethics of intelligence describes the role of property in the economy.


The first identity ethic states that a neuron's behaviour should be determined by its own values. Having privately owned property is how people in an economy follow this ethic because the actions of people in an economy are partially determined by the property that they own. Private property is anything that a single person or corporation owns. Some examples of private property are a factory, your house, and your car.

Social Contracts:

The first relationship ethic states that the actions of neurons should be determined by their relationships with other neurons. Having publicly owned property is how people in the economy follow this ethic because their actions are partially determined by the property that they collectively own with other people. Public property is property that is owned by everyone. Some examples are public areas like parks, and government buildings.

However, an economy wouldn't have much to offer anyone if it were only a bunch of people that own things. An economy gets its power when people use the property that they own as a means for production of goods or services. This requires labor, which is performed by workers.

The first type of neurons in the economy are workers. According to the theory of neurological intelligence the first identity of intelligence is the collective identity, and the first relationship is the role play relationship. A worker's job title is their collective identity because their title doesn't distinguish them from any other person with that same title, and the job that a worker does is the role that they play in the economy.

Labor is how the economy obeys the second pair of ethics of intelligence.

Virtue Signalling:

The second identity ethic states that when a neuron reacts to other neurons its reaction should be guided by its own interests. A worker who sells their labor is following this ethic because they are gaining personal property from their labor.

Common Good:

The second relationship ethic states that a neuron should react to others in a way that benefits all of the neurons. When a worker performs volunteer labor they are following this ethic because they are working to help others, and not for a reward.

Of course purchased labor can still be done while helping others, and when performing volunteer labor you can be rewarded in other ways than being paid, so all labor will be done with a mixture of these two ethics in mind.

Even though your labor will be inspired by both ethics there are two different economic systems which emphasize the opposing sets of ethics. In my other posts I have explained how there are different orientations that a neuron can have, and these systems support the two different orientations, with people oriented against the economy in capitalism, and people oriented for it in socialism.


In a capitalist economic system people are told to be greedy, and that their motivation for working should be to get personal gain. In capitalism people are oriented against the economy, because they are expected to get what they can from it instead of helping it improve. Capitalists tend to consider most things that can be owned as private property.


In a socialist society people are incouraged to work for the purpose of helping others, they are encouraged to help the economy to prosper and achieve its goals. Socialists tend to consider more things to be public property, with the most extream form of socialism, called communism, which considers that everything that can be used to produce goods or services to be public property.

The flaw with this level of economics is that the economy is not able to adapt. For the economy to adapt you need the owners of property to make decisions on how it should be used.

Level 2: Ownership

An economy needs to be controlled by someone. The owners of property are the ones who decide what it gets used for. They are the second level neurons of the economy. According to the theory of neurological intelligence a second level neuron should be unique, having an individual identity, and they should have personal relationships. Owning a business makes a person unique because they get to fill in an economic niche, and it gives them a personal relationship with others, because the choices they make with their property will affect how the other people in the economy behave.

The reasons for adjusting the uses of your property are explained by the third pair of ethics of intelligence.


The third identity ethic states that a neuron should adjust the way they interact with other neurons as they see fit. In our economy people earn money, and they can use that money for whatever purpose they desire. People can also use property that they own for any purpose they desire.


The third relationship ethic states that a neuron should negotiate with other neurons to determine their most beneficial actions. People who own property can find the best use of their money either through profit seeking, or by negotiating with other people.

In a market the value of a good or service is whatever the customer is willing to pay. So if a person seeks to make more profits this often means that they are doing what more people find valuable. However this is not nessisarily true in a non-competitive market. For instance if someone has a monopoly they can raise their prices without increasing the percieved value of their goods or services simply because their customers have no other option but to pay for it.


In capitalism people are told to be greedy so that through profit seeking they can get the money they need to do whatever they want. Therefore the negotiation ethic is just a means to an end, and not the end itself. Capitalists are told that having control over how they want to spend their excess money is true freedom, and that if someone wasn't able to gain as much money as them that it is because of their own personal failures.


In socialism the use of public property is negotiated and determined by demand. Socialists are told to be selfless and to labor for the good of others even when they don't see immediate rewards. Under communism all means of labor are publicly owned and the profits of that labor are distributed equitably to each person according to their needs. The only autonomy that a person has under this system is over that portion of the profits that they are allotted.

A problem with this level of the economy is that a person has no more influence on the economy than over what they own. If many people in a communist system want to combine their resources there is no mechanism to do this, and if a capitalist wants to tell others how to use their property there is no mechanism for this to happen either.

Level 3: Democracy and Marketing

People can make use of property that is not their own through democratic means, and through marketing. Making use of these tactics gives you a representative identity, because you represent some cause that you are marketing, and the people behind that cause. You also become a leader because you are trying to direct other people on how they should act. These are the third types of identity and relationships. The fourth pair of ethics of intelligence explain the why people should market their ideas, and why they should support democracy.


The fourth identity ethic states that a neuron should change its behaviour in order to promote the thing it represents. In economics you can do this by using some of the property you have for marketing and making a name for yourself. When you market yourself and your cause, others are more likely to use their own money or property to help that cause, thus you can extend your economic power beyond what you own.


The fourth relationship ethic states that neurons should adjust their behaviour in order to accommodate for other neurons that they represent. In economics this can be realized through a democracy. In a democracy people give up some of their property, often in the form of taxes, so that it can be pooled together with a small amount of everyone else's property and put to a good cause. People are allowed to decide on these causes either through a direct democracy, where each decision is voted on by all the people, or through a democratic republic, where the people vote in a leader that they trust to make decisions for them.


In a capitalist economy business owners will market their products and their brand in order to get more sales. They might also ask their customers for feedback so that they can better cater to their needs.


In a democracy people work together to accomplish great things. Usually democracies also have campaigns in order to get more people on board with the ideas of different groups who want to be in power. Democracies often help their citizens by providing a social safety net and guaranteeing peoples rights. In this way democracies uphold a form of the negotiation ethic.

One issue with this level of economics is that there is not yet any accountability for the way that you use other people's property. This means that a person could misuse the property of others without anyone knowing. For instance a company or a government could use propaganda in order to convince people to join their cause, but not divulge that their cause is evil. Or a democracy could misuse funds that were supposed to go to helping its citizens.

Level 4: Accountability

The leaders in an economy need to be held responsible for their actions. There are two reasons to report your actions corresponding to these two ethics.

Self Reflection:

The fifth identity ethic states that a neuron should report its own motivations for its actions to the neurons that wanted it to act. A person in the economy can follow this ethic through reporting the profits that they have been making.


The fifth relationship ethic states that neurons have a duty to report their actions to the neurons that influenced them to make those decisions. In the economy people can be held accountable for their use of other people's property through several different means. Sometimes they are required to report their actions, and sometimes the media is used to shed light on their activities.

The final identity and relationship of intelligences is the moral identity, and the ministering relationship. When economic and political leaders are held accountable for their actions they gain the moral identity, and they become ministers because they are expected to help others through their actions.


A business can be understood as trustworthy when it properly discloses information about its profitability. Public corporations are required to disclose their profits and other indicators for success so that investors can know whether they are comfortable with trusting their money to that company. Businesses also record and report accidents. They are required by law to exercise due diligence to ensure that the fewest amount of accidents possible happen.


Governments are considered corrupt when their officials take bribes from outside sources. It is usually required for politicians to have no conflict of interest which would stop them from helping their citizens. Government leaders also have to hold true to the promises they make or they will be voted out of office.

The problem with this level of economics is that there isn't yet any way of correcting the mistakes that people have made. This is addressed by the final two ethics of economics.

Repentance: When a property owner finds that they have been using their property in a way that is ineffective or harmful they should make the nessisary changes in order correct it, or they should be punished for their actions.

Mercy: When property is being misused it is required that the victims of the misuse of property are compensated.

Differences in Economic Strategies

Capitalism focusses on the use and trade of private property, but there is no guarantee that a person owns private property. This creates class distinctions in societies. The lowest class are the people who are not allowed to own property. These people have no power in the economy and are often treated as though they are someone else's property. Historically there have been three groups of people that often could not own property: slaves, prisoners, and women. The next highest class is the people who can own property, but are unemployed. The next class is the working class, and the final class is the capitalist class. The people in this class do not need to work, and instead have other people work for them. These classes correspond to the ability to obey the first three ethics of the economy.

Karl Marx was a German philosopher who invented the theory of communism, as well as conflict theory in sociology. He noticed that capitalism naturally resulted in class distinctions, and that these classes would naturally conflict with each other resulting in wealth disparity. He was mostly focussed on the conflict between the working class and the capitalist class. These classes naturally are in conflict because capitalists get their profits by paying their workers less than the amount that they deserve. So capitalists will pay their workers the lowest amount they can negotiate. However if workers are not payed enough they will not be able to pay for the goods and services offered by the capitalist class. When this happens it is called an economic bust. The only way that the economy gets out of economic busts is through worker revolutions, such as unionizing or going on strike, or through government intervention. This repeats itself and is responsible for the capitalist boom and bust cycles.

In a communist economy all property used for economic growth is owned collectively. This means that there can not be any class distinctions because everyone owns property. When their are no class distinctions, there are no boom and bust cycles, and there is very little if any wealth gap. The purpose of socialism is to help the people in a society meet their needs. It does not seek to give anyone power over others. A socialist system does well when people are committed to helping and caring for each other.

Capitalism on the other hand is designed to help private property owners to have power and influence in the economy. It does not care whether this will actually help or hinder the economy or the people in it. Capitalists are rewarded for being greedy and self centred, which is why power and wealth in a capitalist system always accumulates into the hands of a few very rich people.

If the greed of private property owners goes unchecked for too long they will gain power over entire sectors of the economy, this is called a monopoly. This destroys competition, one of the basic needs of an economy, and removes all benefits that a capitalist system could offer people.

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