Capitalists need big potential rewards to take the risks that give the rest of us jobs.
----------- I think it is vital to not dismiss the Stossels off hand. In most cases, there will be at least something that viewers are likely to agree with. If they didn't, Stossel wouldn't be on the air long. And academics will be perceived as arrogant assholes if our reply is categorically dismissive.
What I think you can communicate to people is that risks and outcomes are relative. For you or I, the risks and outcomes of starting a small business are categorically different than for wealthy capitalists. We typically must put up a house for collateral, maybe forego health insurance (or must buy it at very high rates), and we are likely to place our families' current and future welfare in jeopardy. In addition, small business owners with the best intentions are likely to offer little in terms of financial rewards to any employees. So you may substitute greater personal respect, inclusiveness in decisions, autonomy over scheduling and work pace. That is if you care about the work a handful of others do for you. The risks of failure for small entrepreneurs are substantial, and the negative outcomes may be catastrophic. Success also means little more than a fleeting senses of security (depending on the business cycle or time of year, etc.), and a relatively small measure of expansion. I don't mean to belittle the personal impact of even meager success. I would choose this over being an employee for a private business any day.
It is no accident that the wealthy and their yes men, include mainstream economic theory, cast their arguments in terms of individual entrepreneurship.
Although capitalists are exposed to risks as well, some that share the same categories as risks to small entrepreneurs (like dealing with employees, exposing wealth to the market), the risks are rewards to capitalists are fundamentally different. What are the risks of failure to capitalist investors? The protection of financial wealth by the Federal Reserve (lender of last resort during domestic bank failures, and maintenance of relatively high real returns for financial instruments), the IMF's protection of overseas investors, the market manipulating power of monopoly corporations, tax system control among the rich, the decreasing likelihood that big corporations actually go bankrupt and cease to exist (instead of simply reorganizing), and the huge gulf between upper management pay and economic performance, all reduce the risk of "investment" for wealthy capitalists. These risks are simply passed on to tax payers (current and future). Thus, it appears that the institutional structure of our political economic system protects the wealthy from risk. This may not have been so in the past, but it sure appears so now.
Even in the face of risk, what are the personal impacts of investment failure for the rich? I would guess there is little impact besides some reduction in net worth. Is their health in danger? Will their kids be shut out of college? Will they be in line at the welfare office, excuse me the temporary aid to families who had better get a job or else office. I doubt it. Its many times more likely that you or I will end up in such a line because a capitalist was reducing their risk.
I think these are points most folks can relate to. The risks and outcomes of exposing oneself to the market vary considerably. Risks involve the probabilities of success or failure. Outcomes are the effects of success or failure.
In addition. I have said nothing about the relative risks of "choosing" employment. The average employee takes on much more personal risk than a capitalist, although maybe less risk than being an entrepreneur, and receives little in terms of outcomes if successful. The rewards for work success are: keeping your job, so you do it all over again the next day? Remember, occupational illnesses and injuries are leading causes of morbidity and premature mortality in the US. Furthermore, as Peter Dorman so clearly points out in Markets and Mortality, lower paying jobs are the most risky, and workers' comp will offer little help if you are injured. Making more money? Maybe, until higher-ups feel you make too much relative to a 25 year old. Becoming wealthy? Fat chance. Yet, failure can be devastating.
By the way, once you declare personal bankruptcy, you cannot do so again for 7 years. I don't believe there are any restrictions on businesses, since dissolution ends the "life" of the firm (one of the effects of treating corporations like individuals).
Jeff