Generalizations about the economic and social outcomes of economic systems are common, but most are based, as I argue below, on a mistaken view about causation. The problem is sometimes compounded by bias: by selecting a favorable criterion of assessment, it is easy to tailor one's conclusions about the superiority of one system, even though other criteria of assessment might lead to the opposite results. In this chapter, I present a new way of viewing economic systems and their outcomes and employ these ideas to analyze the performance of the four different types of industrial capitalism defined in Chapter 4.

First, we will clear the decks by debunking the conventional wisdom that capitalism is a necessary condition for political freedom. Then the serious work begins with a brief exploration of the problem of causation, which is the key to assessing the economic and social performance of a nation. The subsequent empirical analysis can then be easily carried out, and it yields some unexpected results. The chapter ends with a brief survey of the economic crisis in many industrial capitalist nations that started in 2007/2008.

Capitalism and Freedom?

One alleged outcome of capitalism is, as many have claimed, political freedom. Since the early 1960s, however, the relationship between capitalism and freedom has been, for the most part, a relatively closed topic for economists.