The Future of Capitalism Revisited

Abstract. This essay deliberates on the future of capitalism or, more specifically, the mixture of command and market likely to characterize the modern economy two to three decades on. I start by discussing global trends in the supply and demand for market and non-market goods and the collateral demand for institutions, arguing that the value of non-market goods can be expected to rise relative to market goods, because of the relative fixity of supply of some nonmarket goods (esthetic environmental goods, e.g.), limited substitution possibilities and the high cost of achieving appropriate institutional change. Growing tension between, on the one hand, the demand for non-market goods and the ability of the economy to produce such goods will drive change in the nature of capitalism. If institutions are unable to deliver, if the U.S. economy proves rigid, lacking in ability to adapt, then we can expect bureaucratic resolutions costly in terms of forgone growth. If, however, institutions can adapt in market-friendly way, we can expect continued growth and more efficient production of both market and non-market goods.