Economics is an inexact science, to put it mildly. One reason, of course, is that so many economists have ideologies and defend them rather than test them. Another is that it is a science, like astronomy, that resists real-world experimentation. Astronomy deals with masses and distances that cannot be replicated on earth (except, these days, in computer models). Economics deals with real people, who aren’t inclined to be treated like lab rats.
So both sciences often have to rely on natural experiments, those that just happen along. When Einstein in his general theory of relativity (1915) predicted that massive objects bend light, there was no way to test it in the laboratory. But in 1919 there was a total eclipse of the sun (a very massive object). With the sun’s immense light output (800 trillion trillion watts—that’s quite a light bulb) temporarily blocked, Sir Arthur Eddington, was able to take photographs of stars in close proximity to the sun’s position that were not exactly where they should have been, according to the star charts. Instead, their light had been shifted slightly, exactly as Einstein’s theory had predicted.
In 1945, both Germany and Korea were divided into two areas, one under western, capitalist control, and one under communist control. Four decades later, West Germany and South Korea were thriving, first-world countries, creating wealth and spreading it widely across the socioeconomic spectrum. East Germany (which disappeared in 1989) and North Korea (unfortunately still with us) were hellholes of poverty and tyranny.
Today we have another natural experiment testing whether socialism or capitalism works better. In 1973, Chile was rescued from communism under Salvador Allende with a military coup and economic (and eventually political) reforms began. At that point Chile’s economic freedom as among the lowest in the world. Venezuela’s in 1975 was among the highest. Today the economic freedom of the two countries is reversed. So are their economic situations. In the 41 years since 1975, the Venezuelan economy has shrunk by 17 percent. Chile’s has grown by 287 percent. By virtually every measure Chile’s situation has radically improved, while Venezuela’s has sharply deteriorated.
I was in Chile in 1973, shortly before the coup, and Santiago, the capital and largest city, was a sad and bedraggled place. Potholes were everywhere, public transportation was mostly ancient buses, none of which seemed to have functioning mufflers. Today, Santiago is gleaming, with a world-class metro, second among Latin American countries only to Mexico City in size, dazzling skyscrapers (including the tallest in Latin America), and excellent highways. It is in every way a first-world city, the proud capital of what has become a first-world country. In Venezuela, the country is sinking into chaos and ever increasing poverty, despite having the largest oil reserves in the world.
So thanks to natural experiment in economics, it is now capitalism 3, socialism 0.
(By the way, one of the troubles with being a socialist, other than the mental gymnastics required to defend the indefensible, is having to explain socialism’s unbroken record of failure to produce prosperity (or even avoid poverty) except for a small minority at the top, the Nomenklatura, to use the Russian term. But Bernie Sanders has figured out a way to handle the situation: Insist on not talking about it because he’s running for president.)