Self-interest represents the seeds that blossom into economic growth.

Questions about Capitalism

Jan 4, 2012 • Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic History, Economic Thinkers, Innovation • 114 Views    No Comments

Can capitalism survive?

In a Project Syndicate article, Harvard professor Ken Rogoff said, probably. But the “Anglo American paradigm” might evolve into another kind of capitalism.

What threatens Anglo-American capitalism? Dr. Rogoff lists 5 challenges.

  • pollution
  • rising health care costs
  • inequality
  • financial upheaval
  • the welfare of future populations

What might replace today’s dominant form of capitalism? Good Capitalism Bad Capitalism names 4 categories (pp. 60-61) of capitalism:

  1. “state-guided” where government dominates
  2. “oligarchic” where small groups have power and affluence
  3. “big-firm capitalism” dominated by giant enterprise
  4. “entrepreneurial capitalism” with innovation from small firms the dominant force

And finally, sort of like cars, discussing the best vehicles for growth, financial journalist David Wessel says there are the U.S., European, Japanese export-driven, Chinese, and Latin American models of capitalism.

The Economic Lesson

This takes us to the three basic economic questions that every country needs to answer:

  1. What will be produced?
  2. How will goods and services be produced?
  3. Who will receive income?

The different forms of capitalism (and combinations of these forms) provide different answers to the 3 economic questions. Good Capitalism Bad Capitalism considers combinations that lead to beneficial economic growth and those mixtures that are “bad.”

An Economic Question: How does the U.S. capitalism model answer the three basic economic questions?

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