# Posted 2:36 PM by Ariel David Adesnik  

ECON AVALANCHE: I want to start this post with a big shout out to all of you who have shared your thoughts on some of the very basic economic questions I am just starting to grapple with. I am much obliged.

The first response I want to talk about is the one from your favorite sociologist and mine, Kieran Healy. Kieran heads straight for the jugular and questions my fundamental premise that "rapidly increasing inequality is an inevitable feature of capitalism," given that entreprenuers always reap the lion's share of the return on their investments.

As I understand it, Kieran's main argument is that top executives have rigged the American economy to ensure that "middle-managers and workers [are] being forced to bear a much larger part of the risk inherent in the capitalist enterprise" even though top executives still take home the lion's share of the profits.

Sounds improbable to me, but I'm going to take Kieran's argument seriously, since his position reflects the good professor's extensive reading on the subject, a bibliography of which is included in his post.

[Btw, don't forget to check out Kieran's clever comment about my post on Marx.]

Next we come to Kevin Drum's own response to my post (which he sent along via e-mail rather than posting it on the web). Kevin says

Good post. At least you addressed the main point of my post, instead of dodging it, as so many have done...

I completely agree that in a pure free market economy the rich get richer faster than anyone else -- and our transition to a service economy has made this even worse. That's the basic problem of monopoly in a market economy, and it's roughly what we had in American a hundred years ago. I much prefer regulated capitalism, which harnesses the genius of the marketplace but also reins in the worst of its excesses.

"Regulated capitalism" is an interesting phrase, since regulation entails everything from the existence of a central bank to the establishment of a Scandinavian welfare state.

Whereas progressives tend to think of regulation as their rallying cry -- while conservatives denigrate it as a wrench in the capitalist works -- the fact is that even the most committed free marketers have accepted the existence of extremely powerful regulatory bodies such as the Federal Reserve Board.

In fact, I think there's an argument to be made that the simple existence of a legal system with the power to enforce contracts is a pervasive form of regulation. Whereas some might argue that the existence of contract law is the foundation on which the market rests rather than an imposition on it, the existence of market economies in places such as China shows that markets can operative with remarkable vigor regardless of whether contracts can be reliably enforced.

In short, the point I'm trying to make is that regulation is always a question of "how much", not "whether or not".

Anyhow, I'm going to cut off this post right here since I have to run out to meet a friend. This evening I'll start putting up all the great responses that are now waiting in my inbox. Hasta luego!

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