Back Issue Volume 16 | No 1 
Is Capitalism Eternal?

Richard Posner's Democratic Pragmatism and the Problem of Ignorance | Ilya Somin

Abstract: Richard Posner's Law, Pragmatism, and Democracy urges that political and legal decision makers should be guided by what he calls "everyday pragmatism," rather than by "abstract" moral theory. He links his conception of pragmatic government to Schumpeter's unromantic view of democracy. Posner argues that judicial review should be based on a combination of pragmatism and adherence to this limited conception of democracy, rather than sticking closely to "formalist" theories of adjudication, which demand strict adherence to traditional legal norms. However, Posner's consequentialist pragmatism fails to provide an adequate guide to judicial decision making, because it does not give us any criterion for deciding which consequences are desirable. His Schumpeterian theory of democracy, too, is problematic because it does not sufficiently consider the shortcomings exposed in recent scholarship in political science and economics.

Is Capitalism Eternal? | Dennis H. Wrong

Abstract: Several scholars have observed that in contrast to "socialism," "capitalism" was not an ideology promoted by a social class or movement but an economy that emerged "spontaneously" from particular historical conditions. Since the decline of the Soviet Union, no new version of socialism has been promulgated, although complaints about the inequalities of capitalism inevitably persist and will certainly continue. Capitalism, if not "eternal," remains a highly probable form of economy under conditions of economic surplus, extensive division of labor, urbanism, and the absence of fully centralized state power. An inevitably wide variation in its forms will certainly endure and in no way amounts to the "end of history," as a few writers have suggested.

Is Socialism Really "Impossible"? | Bryan Caplan

Abstract: In the 1920s, Austrian-school economists began to argue that in a fully socialized economy, free of competitively generated prices, central planners would have no way to calculate which methods of production would be the most economical. They claimed that this "economic calculation problem" showed that socialism is "impossible." Although many believe that the Austrian position was later vindicated by the collapse of the Soviet bloc, the Austrian school's own methodology disallows such a conclusion. And historical evidence suggests that poor incentives—not lack of economic calculation—were the main source of the economic defects of "really existing socialism."

From Hayek to Keynes: G.L.S. Shackle and the Ignorance of the Future | Greg Hill

Abstract: G.L.S. Shackle stood at the historic crossroads where the economics of Hayek and Keynes met. Shackle fused these opposing lines of thought in a macroeconomic theory that draws Keynesian conclusions from Austrian premises. In Shackle's scheme of thought, the power to imagine alternative courses of action releases decision makers from the web of predictable causation. But the spontaneous and unpredictable choices that originate in the subjective and disparate orientations of individual agents deny us the possibility of rational expectations, and therewith the logical coherence of market equilibrium over time.

Authority in the Firm (and the Attempt to Theorize It Away) | David Ciepley

Abstract: The classical case for market society appeals to the complementary goods of economic liberty and maximum wealth. A market society overgrown with economic firms, however, partly sacrifices liberty for the sake of wealth. This point was accepted by prewar theorists of the economic firm, such as Frank Knight and Ronald Coase, and the attempt to moderate, or compensate for, the constriction of economic liberty was a central struggle of the Progressive Era. Since World War II, however, neoclassical economists have tried to assimilate the firm to the theory of market exchange. Because they have failed, issues of authority and control have recently reassumed their place at the center of the theory of the firm.

The Great Transformation in Understanding Polanyi: Reply to Hejeebu and McCloskey | Mark Blyth

Abstract: Santhi Hejeebu and Deirdre McCloskey's rebuttal to Karl Polanyi's Great Transformation begs several important questions. Yes, commerce can be found throughout human history—but is that the same as saying that people have been equally capitalistic at all times? If not, then how did modern capitalism come into being? Hejeebu and McCloskey portray capitalism as having evolved gradually, indeed quite naturally, rather than being a contingent product of politics. Not inconsistently, Hejeebu and McCloskey radically distinguish between what people "think" and what they "do"—that is, between their ideas and their actions. This distinction, too, suggests that human action is ahistorically capitalistic—whatever human agents at different times and places might think.

Polanyi and the History of Capitalism: Rejoinder to Blyth | Santhi Hejeebu and Deirdre McCloskey

Abstract: Mark Blyth's rebuttal to our constructive critique of Polanyi "blithely" takes for granted the accuracy of Polanyi's now-outdated historiography of capitalism—by means of a loose, overly expansive definition of capitalism that question-beggingly equates it with modernity. Blyth emphasizes the need to view markets as "socially embedded," with which we agree—but he appears not to take account of the individual self-interest that is thus embedded. Similarly, he asserts a priori the role of ideas in history, in parallel to the economists he condemns (unfairly) for reading ideas out of history a priori. All of this poorly serves the cause of extracting Polanyi's welcome emphasis on social embeddedness and on the empirical from the ideological and methodological certitudes and errors in which The Great Transformation placed them.