Part I: The Concept of Capitalism:
Describing the elephant:
So, what is "capitalism,"anyway? For two centuries, whole library shelves have been filled with efforts to answer that question. However, there is evidently always so much left unexplained. Theorists resemble at best the blind men describing the elephant by the part they find themselves examining.
Bruce R. SCott demonstrates conclusively one major shortcoming of most efforts. The focus is too narrow. It inevitably leaves out much of the elephant. Scott provides a sholarly explanation of the inherent ineptness of narrowly focused modern economics and its mathematical versions. Government and private institutions and political policy sometimes facilitate and sometimes hinder market mechanisms and do much that is destructive or absolutely necessary. Only with the broader interdisciplinary scope of political economy, including sociology, law, political science and institutional administration, can valid explanations be developed for such vital phenomena as 1) economic growth or decline, 2)the business cycle, 3) the underperformance of many social democratic economic systems, and 4) the many failures of economic development policy.
The Futurecasts book review at [...] covers a sampling of other issues raised by Scott that cannot be adequately analyzed within the narrow focus of modern economics, including 1) market disciplinary mechanisms and administered alternatives, 2) financial oligarchs, 3) Constitutional constraints on federal economic policy, 4) stakeholder capitalism, 5) how markets are "tilted," 6) industrial policy, 7) abuse of the economic commons, 8) government enterprises, and 9) competition in political markets. As might be expected, the author and Futurecasts have some agreements and some disagreements on these issues.
However, Scott's book is clearly the most important book Futurecasts online magazine has reviewed in its dozen year history. It is scholarship at its rigorous best. With impeccable logic, Scott raises interdisciplinary issues of fundamental importance that economists must address or risk irrelevance.
Indirect governance through regulated competition:
The capitalist system is characterized by Scott as "indirect governance through regulated competition" both in economic and political markets. Scott explains the interdependence of the political and economic markets and how they influence each other. Competitive economic markets provide economic discipline and accountability through the trading process, and competitive political markets provide political discipline and accountability through the election process.
Strenuous efforts are always directed at tilting the political and economic markets in favor of narrow interests. However, in the U.S., both markets have robust procedures that have enabled them to perform often surprisingly well despite constant efforts to bias their outcomes. They have repeatedly recovered from periods of political or economic excess. Scott notes that the political markets are unbounded by natural constraints. However, the checks and balances wisely included in the Constitution impose considerable obstacles to political excess and, most important, political entities are dependent on the wealth generated by the economic markets for their revenues.
Government authorities in the courts, administrative agencies and especially in the legislatures possess the power to shape economic markets as they wish. However, they lack the economic resources or knowledge possessed by participants in the economic markets. It is an economically, politically and legally empowered civil society working through the political markets and the courts that maintains limits on political excess.
Thus, the maintenance of competitive capitalist markets that meet the broad economic needs of the people and the nation depends on the political markets and courts functioning properly to assure that both political and economic markets work for the people instead of just for the politically influential and economically powerful. This, Scott explains at great length and in great depth, is the stuff of political economy.