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Economía evolucionista y el futuro del capitalismo - A. Heertje

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Samuel Hutter

on 30 October 2012

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Transcript of Economía evolucionista y el futuro del capitalismo - A. Heertje

Capitalism, socialism and democracy
after fifty years From Schumpeter to Stiglitz Innovative activity, if it exists at all, is concentrated
in large monopolistic firms that block potential competition

The incentive to carry out the entrepreneurial function
is threatened by:

disintegration of the bourgeois family
the tendency of departing from traditional arrangements
the calculation in terms of individual advantages and disadvantages Evolutionary economics
and the future of capitalism Schumpeter's model
of the decay of capitalism "[A] socialist form of society will inevitably emerge
from an equally inevitable decomposition of capitalist society"

"[V]alue judgements about capitalistic performance are of little interest. For mankind is not free to choose."

Schumpeter agreed with Marx on some points "Creative Destruction is the essential fact about capitalism"

Basic question: why has the entrepreneur to disappear?

A stationary state will emerge that will introduce socialism Automatization of progress

Main role of monopolistic firms

Disappereance of small and medium-sized firms

Atmosphere of universal hostility to the capitalist order

Unemployment caused by intellectuals via the educational process

Once the entrepreneurial function has been bureaucratized, entrepreneurs disappear and socialism emerges Rate of total production as
sole measurement of entreprenurial activity

Even when the emergence of new technical knowledge is mechanized and the decision-making progress
is hampered by bureaucracy, decisions still take place
in a world of financial risk and uncertainty

Schumpeterian entrepreneurs will be punished by the market, that is, by competitors Is the essence of entrepreneurial function really
the exploitation of new technical possibilities
or new opportunities in general?

Schumpeter identifies entrepreneurial activity
with innovative activity

Kirzner points out that alertness to information,
awareness of new opportunities and response
to possibilities are the essential entrepreneurial components in human action

Since entrepreneurship is an individualistic characteristic,
it will never be a matter of routine The solution to social problems has to be found in new technology, new resources of energy and new types of investment

Creativity is needed to solve social problems According to Heertje, the fact that public authorities
and not only the market determines what is socially acceptable does not harm entrepreneurial activities

He hints at the impossibility of dealing with matters privately in the "complex modern world"

Preference of individuals expressed outside the market
has to be taken into account Schumpeter introduced the term 'methodological individualism'

Democracy: "that institutional arrangement for arriving
at political decisions in which individuals acquire the power
to decide by means of a competitive struggle for the people's vote" The future of capitalism is very promising if the entrepreneurs remain in a position to respond to challenges

Alertness is not programmable

It is possible that society will suffer when trying to make profits, especially if competition does not work properly.
Restraints are needed to mantain the social optimum

Schumpeter was wrong in predicting the decay of capitalism Socialism can work and is even a more efficient alternative to capitalism

There is nothing wrong with the logic of socialism

Absence of business cycles and unemployment

Bureaucracy is not an obstacle but a complement
to democracy under socialism In view of the 1980's recession,
the rejection of Schumpeter's view was remarkable

Schumpeter was right in pointing out:

the appereance of an army of critical intellectuals that would attack private property
the growth of the public sector
the increase in taxes
and government intervention Since the 1980's recession (first half of the 1990's):

the role of the public sector has been restricted
public deficits have been reduced
regulation has been diminished
decentralization and privatization have become aims of policy
serious attempts to reduce the tax burden
collapse of socialism in Eastern Europe Schumpeter conceived innovations as separate of inventions

Inventions as exogenous factors without economic implications

Later he presented the view that invention and innovation
are products of giant firms with strong market positions

Invention being the product of investment
in research and development Schumpeter's name is linked to:

technical change
the foundation and entry of new firms
the role of creativity in entrepreneurship
the dynamic significance of monopoly, bureaucracy and methodological individualism
an Austrian view of welfare

How could Schumpeter come up with a theory according to which capitalism evolves into socialism? Paradoxical conclusion that Schumpeter did not reflect enough
on the factors behind innovation

Individuals remain creative even if others prefer the status quo
and to become victims of routine

He overlooked that technical change enables to establish
small scale firms

Schumpeterian hypothesis: the monopolistic market structure
is the price to pay for technical change

Monopolistic firms are more innovative than competitive firms

50 years after his book, the world is confronted
with the Schumpeterian paradox of the transition
from socialism to capitalism The development and application of new technology must become the driving force behind social change

Markets and firms are the backbone of the process
of discovery of new technology
and methods of organization Schumpeter is the economist of discontinuity

Emphasis on major innovations by way of jumps
of fundamental qualitative changes in economic life

The economic process is looked at as an unpredictable combination of a self-organizing system and a self-disturbing mechanism,
where minor changes in initial conditions
cause major unforseen developments after some time The choice of leadership and the fiduciary responsibility impose constraints on the government

Fallacies concerning the public and private sectors:

the misconception that nationalized industries act
in the public interest
the widespread belief that publicly run firms are
of necessity incompetent and that government
is always inefficient
the combination of the overestimation of the powers
of direct control and the underestimation
of the powers of indirect control
the Coase fallacy: "there are some who believe
that individuals can voluntarily get together
to resolve any inefficencies without
government intervention" Stiglitz's fundamental non-decentralizability theorem:

efficient market allocation in general
cannot be obtained without information
"It is only under exceptional circumstances
that markets are efficient" Advantages of the state in correcting market failures:

the power to tax
the power to prescribe
the power to punish
lower transaction costs

There are also public failures

The absence of well-defined property rights
might not be the central problem to be dealt with
in order to arrive at efficient solutions

An ideal government could do better running
an enterprise itself than through privatization

The differences between public and private production has been exaggerated

It is the lack of ability to adapt to change in technology that caused the end of socialism in Eastern Europe Government has the power to forbid competition

Stiglitz suggests less use be made of this power

Myths about markets and market socialism

Importance of the role of government in arranging
the rules of the game to arrive at a proper
balance of public and private economic activity

Inflation has to be kept in check

Essential to create new institutions
and new enterprises

Competition is far more important than privatization

Privatization without competition may end in disaster Non-reproducible goods:

prices cannot be explained
demand is completely unpredictable

Reproducible goods:

they have a natural price,
determined by the reprodution costs
Main arguments Evaluation The future
of capitalism Conclusion Schumpeter's 1942 book Capitalism, Socialism and Democracy after 50 years Where Schumpeter went wrong Schumpeter and discontinuity
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