Political Authority Shapes Capitalism with Visible Human Agency

The distinguishing contribution of my theory of capitalism is the third level of political authority. Recognizing the role of human agents, those within government in particular, is central to articulating a more accurate theory of capitalism as well as to understanding the realities of capitalist societies.

As the theories of North but especially of Friedman demonstrate, capitalism is often defined without a notion of human agency let alone government. Most commonly, capitalism is understood in Friedman-like terms as the process by which economic markets utilize the “invisible hand” of the price mechanism to spontaneously coordinate supply and demand between actors competing for particular goods and services. However, in practice, the visible hands of human agents are implicated in the process as they guide the invisible hand of the pricing mechanism. Specifically, the invisible hand can only align individual and societal priorities if the institutional foundations of capitalism have shaped those markets so that individual costs and benefits reflect those of society rather than those of an unruly mob or powerful elites. The pricing mechanism cannot come close to achieving an optimal coordinating role absent the effective work of the visible hand of government, often through legislative processes such as a par-liament.⁴¹