Capitalism and Society

The capitalist system is of great interest and importance in view of its outstanding dynamism relative to that of other systems tried in the past century. Yet the established body of economic theory—intertemporal, information-theoretic and game-theoretic—does not incorporate key elements of the capitalist dynamic: business innovation as distinct from technological advance and the contributions of entrepreneurs and financiers to the innovation process. As a consequence, established theory cannot capture the core of the dynamism. In fact, it contradicts the existence of such dynamism: capitalism is an evolving, unruly, open-ended system while the theory implies a deterministic future however buffeted it is by stochastic shocks.

The Center on Capitalism and Society  aims to further understanding of the mechanisms of capitalist dynamism and the satisfactions it gives. Today’s established economics—the economics dominant in classrooms, banks and governments—misconceives the modern economy. This disconnect has consequences for how we understand history, how we make policy, and how we view capitalism. Its explanations fail and mislead at important junctures in modern history. Until economics is grounded on the basic character of modern economies—the ignorance, the uncertainty, and the new ideas for speculation and innovation—it limits and distorts our view. In capitalist economies, new commercial ideas are the driving force. The implementation of many of them is boundless because either they do not require technological advance or they induce the advance they need. Their formation, development and adoption lifts a capitalist economy's performance in most dimensions: productivity and pay, job creation and how rewarding the jobs are—mental stimulation, intellectual development and personal growth. Yet such new ideas raise difficulties owing to Knightian uncertainty about their value. Our task is to model the processes by which the entrepreneurs and financiers of capitalist economies generate and select new ideas for try-out and the ways in which consumers and producers manage to evaluate the new products and methods. With such models we can see better how one fabric of economic institutions might give better performance than another.

This publication (supported by a generous grant from the Kauffman Foundation) provides an outlet for scholarly work that advances the goals of the Center, especially for those articles whose length, subject matter, approach, etc. might preclude publication in a standard journal. We want to provide a stimulating forum for discourse of ideas that may not be proven beyond a reasonable doubt. Accordingly, we will publish papers along with the commentary of a reviewer, leaving room for “agreement to disagree.”