Corporations are sociopaths

Corporations are sociopaths, they are ruthlessly selfish and will do anything they can in order to increase profit. They're not people, and so cannot be held accountable the same way people can (through jail, social pressure, etc).

Yet, when properly bridled, corporations will create productivity growth and innovation as their means to create profit. Innovation and productivity growth create persistent standard of living improvements for humanity.

So the key to Capitalism is properly bridling corporations so they drag humanity forward.

Why Capitalism works

Greed and selfishness (part of human nature) are harnessed to incentivize individual and corporate to pursue profit.

Profits are competed away because incumbents are constantly challenged by startups. This keeps keeps incumbents from becoming too powerful.

Capitalism relies on free markets which create fair and organic price discovery. Meaning everyone gets the best price and no one gets screwed.

This dynamic environment creates an equilibrium where all the activity pushes prices down.

Why Capitalism is good for us

If a person or corporation can offer a better product or service then they can make a profit. Merit gets rewarded.

For the shrewd operator, that profit can be re-invested to increase productivity (creating more of their wares for lower cost) or invested in another enterprise that can attempt to do the same.

This is a virtuous cycle (literally) that lowers prices over time, increasing everyone's standard of living.

Even better about Capitalism is that almost capitalism is highly effective, whereas almost socialism and almost communism always end up killing and enslaving millions of people.

When you don’t have Capitalism (planned economies in particular) you get slavery, starvation, and death.

When Capitalism fails

All failure modes for capitalism have to do with the elites becoming too powerful and being able to use their power to abuse the citizenry.

Power concentration: when big players can use their bigness to keep startups out, that reduces competition. When there's not enough competition, then corporations can take shortcuts to profit that don't involve increasing productivity or creating something novel and good that people want.

They tend to create monopolies that raise prices and reduce quality to take a larger profit without contributing to society.

Capitalism fails to be good for humanity when the monopolies don't get busted. Capitalism also fails when corporations can use the power of the state to lock out competition through regulation (regulatory capture). High barriers to entry are a way to create a monopoly without doing anything that would trigger traditional monopoly busting.

Unpriced negative externalities: there are side effects to our actions. Burning coal creates pollution, that pollution has healthcare impacts on people.

Many pesticides are poisonous to humans, yet we spray them on our foods, and they create healthcare impacts on people.

Carbon emissions are changing the temperature of our planet, which has all sorts of impacts on people.

These are negative externalities, and often those that contribute to the problem pay no cost for the side effects of their actions. This means that the people causing the problems continue their actions unabated because they have no reason to.

Capitalism fails to be good for humanity when these costs are not shifted onto the people causing them.

(So far) the state is the only entity that has the capability to properly keep Capitalism working for the good of humanity by: A) promoting intense competition (B) pricing negative externalities so we pay the true cost of our consumption.

When the state doesn’t do its job, then we get Crony State Corporatism which exists to benefit the elite.

Why corporations are necessary

For capitalism to work, people need to be able to pool resources and labor for the benefit of all involved.

Corporations allow people to take a risk, try something out, and if it works: owners get rewards with profits and workers get wages.

If a corporation fails, then there are very limited downsides to the humans involved. Founders of a failed startup don't go to jail for failing to give investors a return on their money, and no one loses their house to cover the investors' losses. Only criminal behavior results in jail time or personal liability.

This is a tremendous gift to entrepreneurship. This incentivizes entrepreneurs to continuously take shots at incumbents to bring the mighty down and re-establish a beneficial equilibrium.

The key to Capitalism is bridling these corporations so that they only do the good stuff and have limited ability to do harm.

Bridled via incentives

The most effective way to keep corporations on track is by incentives. Direct control of corporations by the state creates all the problems of planned economies, with very limited upside.

Incentives can be:

1.  Bans (jail time for decision makers, prohibitively high fines, etc) on what is deemed harmful: dumping toxins in the water supply for instance
2. Taxes or fines for behavior that’s deemed “bad” but not intolerable: tariffs on foreign goods, taxes on tobacco, taxes on air pollution, etc
3. Subsidies for things that aren’t profitable in the market today, but are desirable: tax rebates for having kids, subsidies for onshoring production, or renewable energy projects, etc
4. Backstops and handouts: banks and car companies in 2008, Fannie Mae and Freddie Mac, etc

Some incentives are better than other incentives

1. Bans are good when the citizenry nearly unanimously agree they’re bad things: monopolies, murdering people, poising water supplies, stealing, breaking agreements, etc. They’re bad when the people can’t agree if they’re intolerable (abortions, smoking, carbon emissions). 
2. Taxes to discourage behavior generally suck because they don’t change human nature and they create a dependence in the government on that revenue. For example gas taxes are critical items in US state revenue numbers, and as EVs have displaced gas cars they're having budget issues.
   
   Taxes to price externalities are one of the only good uses. The best form is to not spend the revenue from these taxes but instead return the revenue as a tax rebate to the citizens. This creates the cost math to incentivize producing things while avoiding causing the negative externality, while not actually costing the people anything extra.
3. Subsidies generally suck unless they’re baked in to be temporary: wind projects just aren’t very profitable in the market without subsidies even after decades of subsidies.
   
   Solar, on the other hand, has been a success, subsidies helped spawn an industry that’s now getting cheaper on its own and is cheaper than alternatives even without subsidies.
   
   Best to bake a sunset clause into subsidies so the market doesn't get dependent on the handout.
4. Backstops and handouts generally create moral hazard: banks learn they don’t have to learn from their bad behavior leading up to 2008, real estate folks get unlimited risk mitigation, etc.

Picking incentives should be focused on what’s the most effective way to keep corporations in high-levels of competition, increasing productivity, inventing new things, and reducing harm to the citizenry. That generally means banning bad behavior and pricing externalities via taxes.

Corporations should be bridled, not worshipped, nor vilified

Collectivists are correct that when corporations get too powerful, they corrupt the state and use it to enrich themselves at the expense of the people.

Capitalists are right that a planned economy kills people, and cannot effectively improve the lives of its citizens over the medium and long term.

Corporations should not be worshipped as something that must be fed without regard to its impact on humanity. And they should not be vilified because corporations are a key component of how we all work together for the benefit of humanity.

Corporations should be managed via thoughtful incentives, in a way that will drag humanity forward into a prosperous and abundant future.