Capitalism is not a program of action designed to facilitate economic activity, but a model used to describe it. It depicts the consequences of the freedom to pursue economic self-interest. These include everything from markets to anonymous shareholder-owned companies, their interactions, and the individual and collective results of them. Many celebrate the accomplishments of this system, and others condemn the presumed costs entailed in achieving them. But it is worth pointing out that the model does not advocate the pursuit of self-interest . . .
Thursday, January 29, 2009
As we have observed, trade flourishes in an environment where there is trust in one’s partners – confidence that understanding is mutual and everyone will keep their word. It is also important to have an infrastructure of legal protections, to which recourse can be taken when there is disagreement about whether that has been accomplished. . .
Wednesday, January 28, 2009
Peter Drucker used to argue that the purpose of a business is to create a customer. He encouraged executives not to try to explain their businesses to their customers, but to let their customers – and potential customers – explain their businesses to them. The business should then organize itself around the results. Capitalism is the ideal vehicle for facilitating this process. . .
Tuesday, January 27, 2009
One of the problems with crises is that they create great uncertainty. We are still debiting the causes, nature, and resolution of the Great Depression. It should come as no surprise, then, that we remain so unsure about the reasons for, extent of, and way out of the present one, But one thing we do know is that crises attract experts. . .
A society with a liquid capitalist economy allocates resources to countless endeavors, most of which fail. Some earn an economic return, and are kept afloat, typically from the cash flow they generate from current operations. But the economy as a whole tends to cut off new investments in the many efforts that fail to meet that threshold, diverting them instead into growing the really superior performers, or funding yet newer, more promising ideas. When we discuss the phenomenal creativity unleashed by capitalism, which has delivered such breathtaking reward for, quite literally, the whole world, we should recall that it comes at a cost. . .
At the heart of the debate between capitalism and progressivism over the organization of our societies and economies is the question of information: what it is, who can generate it, who can understand it, who owns it, and who can be entrusted with acting on it. These aren’t as easy to figure out as you might think. But hard core progressives think they are . . .
Thursday, January 22, 2009
Capitalism is often thought of as strictly an economic concept. But it is arguably more properly seen as the economic manifestation of a cultural one. In fact, as we’ve noted here before, Edmund Phelps, a Nobel Prize winner in economics, draws a clear distinction between what is sometimes called Anglo-Saxon capitalism as it is practiced in the U.K., the U.S., and Canada, and what he gently refers to as the Continental system of mainland Europe. The dominance of these economic regimes in their respective areas is not a coincidence. . .
