Simon Johnson — Saving Capitalism from Economics 101

All across the United States, students are settling into college – and coming to grips with “Econ 101.” This introductory course is typically taught with a broadly reassuring message: if markets are allowed to work, good outcomes – such as productivity growth, increasing wages, and generally shared prosperity – will surely follow.

Unfortunately, as my co-author James Kwak points out in his recent book, Economism: Bad Economics and the Rise of Inequality, Econ 101 is so far from being the whole story that it could actually be considered misleading – at least as a guide to sensible policymaking. Markets can be good, but they are also profoundly susceptible to abusive practices, including by prominent private-sector people. This is not a theoretical concern; it is central to our current policy debates, including important new US legislation that has just been put forward....

Fitting post on Labor Day (US holiday celebrating working people). Worth reading in full. Unfortunately it is about saving capitalism from its excesses rather than overhauling it.

Why is capitalism in need of an overhaul. The term, "capitalism," explains it.

"Capitalism" is a socio-economic system that favors capital (property ownership) over the other factors of production, land (environment) and labor (those that work for a living). This "market-based" system is institutionally based, and as such politically based.

Classical liberalism was about reducing government intervention in the economy. Neoliberalism is about government capture through politics in order to favor the interests of capital.

Politics is influenced by a simplistic understanding of conventional economics, which has been called "economism" to distinguish it from economics. Econ 101 is more about promoting economism more than teaching economics in terms of models that are substantiated by events.

Project Syndicate
Saving Capitalism from Economics 101

Simon Johnson |  professor at MIT Sloan, former chief economist of the IMF, senior fellow at the Peterson Institute for International Economics, and co-founder of the blog, The Baseline Scenario