I've noted before the paradox of Blairism - that people who were so keen that Labour should modernize in the 1990s are now themselves out-of-date. Philip Collins' piece in the Times today shows what I mean.

He contends that the profit motive and business are forces for good. Like many claims in the social sciences, this is very true up to a point. My problem is that the extent to which it is true is less widespread now than it was a few years ago. I mean this in three senses.

First, as Akerlof and Shiller have pointed out, the profit motive doesn't only incentivize good things such as the creation of jobs, products and services but also bad ones such as fraud:

Competitive markets by their very nature spawn deception and trickery, as a result of the same profit motives that give us our prosperity (Phishing for Phools p165)

I suspect that this problem has increased in recent years because of two trends. One is secular stagnation: if it's harder to make money legitimately firms will turn to shadier means. The other is a decline in moral restraint. Philip is entirely right to say that markets have always been "regulated by a moral sense". But this regulation has diminished - perhaps because of the decline of religion, the rise of "neoliberalism" or because lower top tax rates have tipped the balance of incentives towards money-grubbing and away from maintaining self-respect. Whatever the reason, it might be no accident that the examples Philip gives of "capitalism for the common good" come from the 19th century rather than the 21st.

Secondly, the profit motive doesn't just incentivize innovation and investment. It also disincentivizes it, if firms believe it won't make a profit. Again, this problem might be more pressing than a few years ago. Firms might have wised up to the old fact that innovation has always had low returns, and their lack of investment might be due to a fear that future technical progress and creative destruction will render current investment unprofitable. In his speech this week Liam Byrne complained (pdf) this week about capitalists' short-termism without considering the possibility that such short-termism might be a rational response to uncertainty about the pace and direction of creative destruction.

Thirdly, if capitalism does overcome the problem of low investment - perhaps through a burst of animal spirits - we face a new danger. This is that robots and AI might make many of us redundant (pdf), leading to a world of massive wealth for robot owners and poverty and demoralization for millions of others. Personally, I suspect this is a small danger - but the small risk of a horrible outcome cannot be ignored.

My point here is not to decry the profit motive. It has a place. But that place must be circumscribed not only by the regulation of predatory capitalism but also by greater socialization of investment to exploit and develop new technologies and by a more widespread ownership of capital - via worker ownership, a sovereign wealth fund or more widespread participation in equity markets.

Now, I would like to think that my beef with Philip is one of those glass half-empty/half-full arguments. But I fear it might not be. In failing to see the limits of the value of the profit motive, Philip might be embodying the vice of the Blairites - a tendency to live in the past and fail to see that social democracy must, again, be modernized.