1780 . AEA; capital and its ism

General impression from reading all the abstract from Chicago is that the range of topics and a slightly deeper sense of the matter was stronger than last year’s meeting in SF. However it still gives  the impression of many boats in small ponds each surrounded by a small number of like-minded colleagues, each trying to float their boat a little higher. Noah Smith tweeted a lot from the meetings and it shows that the sessions can be mildly  newsworthy.


Capitalism is the elephant in the room, not only in Chicago but in most of academic economics. It is mostly assumed that economics is within the framework of capitalism, but we don’t discuss it much. As most know the word “capitalism” was first used b Marx, but the word capital has a much longer and deeper history beginning as a word with cap, head, in latin, as a new head of cattle. So “capital” begins with the extension, growth, of the herd and hence has deep roots. Rome, and Greece before it, were basically cattle ranch economies, nad out modern system has evolved, less than we think, from that organic beginning. “Inequality” for example is important, but like taking the temperature of a dying animal without discussing the disease.

The modern situation is that capital, the excess produced beyond immediate consumption, is the production of all the generations of humanity. Why should all that effort later on be owned by just a few?

The result of course is that wealth and power concentrate – and we call this system capitalism. But we don’t study it. Don’t even allow ourselves to be curious about it. In physics the goal if to understand everything physical – the unified theory. This motivates the strategy of dealing with everything electrical, gravitational and sub atomic particles and everything else even hinted at. In economics the reverse has been the strategy – to strip out most of what normally is meant by economics and deal only with the remaining physics like systems. The result is we really have very little effort going into trying to understand what the system we call capitalism seems to refer to.

An example I’ve tried to use before. Apple. Its current wealth is the mixing together of public patents, publicly educated employees, operating in a private compound accessible through publicly financed infrastructure, etc. But that wealth would not exist if it were not for the participation of nature providing the raw materials and the activity of the “customers” who buy and use the stuff apple makes. This is a group effort of many people, where the fruits are then owned by a very small percentage of all those participants.

This is a crazy system. Totally unjustifiable except as the outcome of a rapacious historical process. If we really tried to understand capital and capitalism, we would quickly find ourselves in new territory.

PS, feedback encouraged, Without it probably I grow dumber, with it I might grow a bit smarter.

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