Peter Boettke links to Ken Rogoff on the prospects for capitalism. I basically agree with everything that Rogoff says, and I think this point is particularly important: "Today’s capitalist systems vastly undervalue the welfare of unborn generations. For most of the era since the Industrial Revolution, this has not mattered, as the continuing boon of technological advance has trumped short-sighted policies. By and large, each generation has found itself significantly better off than the last. But, with the world’s population surging above seven billion, and harbingers of resource constraints becoming ever more apparent, there is no guarantee that this trajectory can be maintained."
I would underemphasize the "resource constraint" point - those are precisely the problems that capitalism does deal with so well - and focus more on discontinuous, catastrophic problems (some of which are clearly related to our resource use, to be sure). Either way, a major problem is something that I've previously called "temporal autarky" - the stubborn illusion of linear time prevents us from transacting with future generations or even future versions of ourselves. What economists call "intertemporal choice" is actually a bit misleading. The "choice" we model isn't really intertemporal at all - it's all contemporaneous choice with present transactors acting as agents for their future selves. Intertemporal choice is as much a principal-agent problem as it is a standard consumer choice problem.
This is recognized by the liberal tradition. Adam Smith, Thomas Jefferson, Thomas Paine, and many others all recognized how the present coerces the future (or how the past coerces the present), and they identified it as a real problem for liberal society. I don't have any easy answers to this, but I do have some thoughts in the comment section of Boettke's post (he asks for insights into institutional arrangements to deal with the issues Rogoff raises).
I always also like Richard Rorty's spin on these problems - citing Hans Blumenberg (it starts at about 2:20):
Unfortunately I agree with Dierdre McCloskey insofar as I think there are a lot of economists who are ardent Platonists, who see capitalism more as a metaphysical thing than anything else, and who are less likely to deal with these sorts of problems or practice a methodology that can address these sorts of problems.
Brian BuetlerWas Right!
20 minutes ago