TOOLBOX for CAPITALISM AND DEMOCRACY

1. TOOLBOX for CAPITALISM AND DEMOCRACY • PART I: Laissez-Faire • Many sellers, many buyers • Bilateral, voluntary exchange • Invisible Hand (competition) • Economic liberty protects political liberty • Big Government is a threat to Liberty • Government as Umpire • Indivisibility of Decisions by the State • Externality: Burden of Proof on the State • Homo economicus • “Revealed Preferences” • Caveat Emptor • Capture Theory • Perversity Thesis • Rewards should reflect productivity • Cash benefits, vouchers preferred • PART II: Liberalism • Transgression of dollars on rights • Exchanges born of desperation • “Fuzzy right to survival” • Equality vs. Efficiency? • Pressure Effects • Match Effects • Mixed Economy • Second Best Markets • The THREE Efficiencies: Smithian, Keynesian, & Schumpterarian • Homo sociologicus • Consumer Sovereignty vs. Market Circularity • Bounded Rationality • Boundary Violations, Blocked exchanges, “Embeddedness” • Power, Information Asymmetries • Regulated Competition, Incentive Regulation • Irreversibilities • Exit vs. Voice • PART III: Democratic Left • Political Equality vs. Economic Liberty • Clash b/w Democratic and Property Rights • Economic Power  Political Power • Self-regulating Egalitarian Order vs. Corporate Capitalism • Circularity in Politics • “The Economy produces people” • Homo republicanus • “Privileged Position of Business” • Self-Governing Enterprises (Ownership, Control, Community) • Economic Democracy • Democracy trumps Guardianship • Principle of Affected Interests • Strong Democracy preferred to Thin • “Free Spaces” (Citizen’s Politics) THE POWER OF INSTITUTIONS • Part IV: Political Institutions • Quis Custodet? (“Who watches the watchers?”) • Pluralism (No one rules) • Public Choice Theory (Politics is [Necessary BUT] Futile) • Ruling Class, Investment Theory (The Rich/Political Investors Rule) • Part V: Corporations • Obedience to Authority; the Power of Context (Milgram) • Corporate Chartering • Corporate Personhood • Tyranny of the Bottom Line • Free Riding, Bailouts, Subsidies • Global Reach of Corporations • Part VI: Behavioral Assump.s • Maximizing vs. Satisficing • Prospect Theory; Framing; Anchoring; Endowment Effects • Availability heuristic • Adaptability, Hedonic Treadmill • Status Seeking (Frog Pond) • Anomie (Double edged sword of constraints)