- Introduction: The Good, The Bad, And The Ugly
The financial crisis that began in 2008 and its lingering aftermath have caused many intellectuals and politicians to question the virtues of capitalist systems. This book analyzes both the strengths and weaknesses of capitalist systems. The volume opens with articles on the historical and legal origins of capitalism. These are followed by articles describing the nature, institutions, and advantages of capitalism: entrepreneurship, innovation, property rights, contracts, capital markets, and the modern corporation. The next set of articles discusses the problems that can arise in capitalist systems including monopoly, principal agent problems, financial bubbles, excessive managerial compensation, and empire building through wealth-destroying mergers. Two subsequent articles examine in detail the properties of the “Asian model” of capitalism as exemplified by Japan and South Korea, and capitalist systems where ownership and control are largely separated as in the United States and United Kingdom. The volume concludes with an article on capitalism in the twenty-first century by Nobel Prize winner Edmund Phelps.