It's been said that capitalism is the worst economic system, except for all the rest.

The power and success of capitalism come from the fact that it tends to channel self-interest in ways that benefit society. A capitalist produces what people want, because that's what people will buy. If he's not able to produce one thing efficiently enough to compete with others who produce things that fill the same need or desire, he moves on to something else. Thus, more than under any other system, as much as possible of what people need and want most gets produced as efficiently as possible.

And to a degree, the wealth gets spread around well too -- those who add the most value to the system though their efforts and ingenuity get to enjoy the most value.

But there's one big problem with capitalism -- whether through lack of opportunity or lack of ability, some people aren't able to produce enough to cover their needs, much less their wants. So governments step in and redistribute some of the wealth.

But there's a problem with that too -- they often do it badly.

Sometimes they give too much, motivating people to be unproductive so that they can live off the dole. Sometimes they try so hard to avoid giving too much that they give too little. Sometimes they try so hard to be fair that they fail to redistribute wealth to those who would use it most productively...

A little personal story: when I first started college, I lived at home and had a part time job. Since I had lots of discretionary time, I spent a lot of it on valuable activities like studying, participating in the honors program and student government, etc. I loved school.

After a few years, I transferred schools and moved away from home. That necessitated getting a full time job. Since I no longer had any discretionary time to speak of, I studied a lot less (often doing the minimum amount required to get good grades rather than learning as much as possible while I had the opportunity), was only slightly involved in extracurricular activities, and that not all of the time. My health suffered and I got really sick of school pretty fast.

So I went into the financial aid office and asked what my options were. They asked how much I'd earned the previous year. I told them. They told me I'd hardly be eligible for anything. So I looked into scholarships a little, but most of the scholarships I found information about were either only available to people not making much money or to incoming freshmen.

I went back to work and stayed at the same job (which got progressively less pleasant over the years) until I graduated after a total of 7 years (including a half year I took off of school to recover what I would guess was probably clinical depression brought on by the extinguishing of the light at the end of the tunnel when I tried to switch jobs once).

How much more would I have been able to accomplish at school if I hadn't had to work full time through the last 4 years, both in terms of learning and involvement in extracurricular activities? How much sooner would I have been able to graduate and enter the workforce?

My point is not to complain about financial aid being given to those who wouldn't be able to go to school at all without it. I'm just saying that there are gaps in the system. Yes, there are merit based scholarships. The fact that I didn't put more effort into getting one before starting college is my own fault. The fact that they're so much harder to get after your freshman year is, in my opinion, a problem.

Anyway, what I'm getting at is that we would benefit from taking, in part, a capitalistic approach to our "socialistic" activities -- investing where the potential return is the greatest. If someone proves they can earn money but wants more education, let's invest in their education and make them even more productive.

The title of this post is "Charitable Capitalism: Fostering, Guiding and Rewarding Effort", so now I want to get to the "effort" part. Success is not determined only by ability and intelligence -- in fact, gifted people often fail while those less gifted succeed because the gifted never learn to put forth the effort necessary to succeed. I would guess that effort is far more important than intelligence or other native abilities in determining a person's productivity.

To foster effort and ensure that it's channeled in productive directions, we should help those who've proven their willingness to put forth effort to maximize their productivity by helping them, when needed, to gain more education and training.

But what of those who aren't willing to put forth the effort? We should look for ways to help them find motivation.

Some people may be unmotivated because the role models in their lives have been unmotivated. Their circumstances may have led them to believe that a better life is not possible -- they may never have been given a glimpse of a greater vision. I see some of the young people around me making really stupid decisions, and I can only think that they do it because they have no vision of how their lives could be better than what they've grown up around. In fact, they're ending up worse off than their parents.

How exactly can we build a system that matches resources to the combination of need and effort, and recognizes opportunities to provide motivation? Good question.