From Positive, To Zero, To Negative-Sum Capitalism
December 17, 2012

Capitalism, with its property rights and free markets, has been a great motor for economic wealth creation, technological advancement and bettering the lives of millions of people. One of the great institutional benefits of capitalism is that, by and large, it aligns private to social incentives. That is, people pursuing their private benefits usually increase social welfare as well.

This is simply Adam Smith's invisible hand. By creating products and services consumers want, entrepreneurs are creating economic activity, jobs, shareholder wealth, and these societal benefits multiply when much of the created incomes and wealth gets spend, increasing demand for other products and services.

As Friedrich Hayek explained in what is one of the most important economic publications of the past century (Hayek's "The use of knowledge in society", it is the distributed nature of knowledge and information that makes centralized solutions distinctly second best. Capitalism works because it manages to link this distributed nature of knowledge and information with the incentives to make productive use of these. [Read on here]