As I alluded to in an earlier post, no economic system is purely capitalistic or socialist– there are an infinite number of potential combinations (this is analogous to sociology’s proposal that no person is purely masculine or feminine). This is not to say that one combination can clearly be superior to any other; though, at any given time, there might be one system combination may produce more output than another. Furthermore, there may be other metrics than the dichotomy that I have just posited. Surely, there are numerous types of economic organization that we have long forgotten or have yet to discover.
Some systems, even a few currently in existence, fail to expand past their current boundaries because of scalability issues. We know that issues with moral hazard and adverse selection often lead to the downfall of interpersonal and interfirm relationships; at the very least, they can put considerable strain on these same relationships. In the market, insurance companies and banks have to find contractual work-arounds and screening devices to limit these problems. Depending on the constraints and the desired outcomes, not all economic systems are created equally. Some systems may perform better for a certain task, at a certain time.
This poses a number of questions:
- What are these outcomes?
- What metrics do we use to measure the economy?
- Are these metrics correct?
- What is the goal of the system?
- What is the paradigm that governs the system?
- What are the base ideas of the system?
- How do these ideas change the system?
- What are the marginal changes of black swans?
- Are averages overrated? (I think so)
- What is inequality, and by what metric do we determine inequality?
- What are the feedback loops in each economic system?
- How do stocks and flows change these?
- Which feedback loops have increasing returns to scale vs those that have diminishing return to scale?
- What about returns to scope?
- How can open ended evolution systems help us find the answers? (In a way that DSGE is unable to do?)
- What are the ultimate ends of the society?
- Was George Bernard Shaw correct when he stated that socialists were just communists without courage?
Upcoming, a look at the Soviet economy via Janos Kornai.