The Dynamics of Capitalism

48 Pages Posted: 15 Dec 2009 Last revised: 22 Feb 2010

See all articles by Frederic M. Scherer

Frederic M. Scherer

Harvard University - Harvard Kennedy School (HKS)

Date Written: 2010

Abstract

This paper, written for a larger compendium edited by Dennis Mueller, examines key dynamic features of capitalistic economies and how prominent economists such as Schumpeter, Marx, Keynes, and von Mises perceived them. The emphasis is on the growth in real per capita income achieved by capitalistic economies during the past two centuries. A Gedankenexperiment exploring what might have happened if the growth experience began earlier, in the year 800, shows how astonishing the record has been. Technological innovation, in large part endogenous to the capitalist system, is a key explanation for the growth achieved. A briefer discursion deals with breaks in growth trajectories, notably, in the form of business downturns and business fluctuations more generally. They are shown to be small relative to the longer-term growth pattern. An equally important issue is how the gains from growth have been distributed. Contrary to Marx's "immiserization" prediction, the gains have for the most part been widely shared among capitalists and workers alike. However, stagnation of real income growth for American production workers since the 1970s introduces new and troubling questions, several of whose provisional explanations are investigated.

Keywords: capitalism, Industrial Revolution, science and technology

Suggested Citation

Scherer, Frederic M., The Dynamics of Capitalism (2010). HKS Working Paper No. RWP10-001. Available at SSRN: https://ssrn.com/abstract=1523309 or http://dx.doi.org/10.2139/ssrn.1523309

Frederic M. Scherer (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1154 (Phone)
617-496-0063 (Fax)

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