Richard Nelson Seminar: Capitalism as a Mixed Economic System
Introduction: Many factors are stimulating discussion and argument about what reforms are necessary if capitalist economies are to work effectively to meet human economic needs in the 21st century: concerns about global warming, the recent financial crisis, the continuing rise in the costs of medical care, stubborn pockets of poverty in many nations with high average incomes, and others. However, almost no one is seriously proposing that capitalism, as a kind of economic system, be abandoned, and something significantly different put in its place. That kind of argument died out with the end of the cold war. Today, there seems to be broad consensus that there are no real alternatives to capitalism.
But what is “capitalism” anyway? The now extensive literature on comparative capitalisms shows that the economies of countries that generally are considered to be capitalist differ in important ways. (Hollingsworth et al, 1997, provides a good general discussion. See also the chapters by Berglof and Odagiri in this volume.) Also, individual capitalist countries themselves obviously have changed greatly over the years.
However, there would appear to be two core characteristics broadly shared by all countries that call themselves capitalist. First, these economies make extensive use of market organization, broadly defined, to govern the production and distribution of goods and services. Second, this practice is supported by broad ideological agreement that market organization is the best way to govern economic activity.
A central argument of this essay is that, in countries that consider their economies basically capitalist, the conception that market organization is the best mode of economic governance is much simpler and more coherent than the complex and variegated way that economic activity actually is governed, which involves a wide range of non-market elements. This is both a source and a consequence of a continuing political debate about the appropriate governance of various economic activities and sectors. -Richard Nelson