The Quest for General Laws of Capitalism Is Misguided because It Ignores the Key Forces Shaping How an Economy Functions

Economists have long been drawn to the ambitious quest of discovering the general laws of capitalism. David Ricardo, for example, predicted that capital accumulation would terminate in economic stagnation and inequality as a greater and greater share of national income accrued to landowners (1817). Karl Marx followed him by forecasting the inevitable immiseration of the proletariat. In his tome, Capital in the 21st Century, Thomas Piketty emulates Marx in his title, his style of exposition, and his critique of the capitalist system (2014). Piketty is after general laws that demystify our modern economy and elucidate the inherent problems of the system—and point to solutions.

But the quest for general laws of capitalism is misguided because it ignores the key forces shaping how an economy functions: the endogenous evolution of technology and of the institutions and the political equilibrium that influence not only technology but also how markets function and how the gains from various economic arrangements are distributed. Despite his erudition, ambition, and creativity, Marx was led astray because of his disregard of these forces. The same is true of Piketty’s sweeping account of inequality in capitalist economies.

--Daron Acemoglu and James A. Robinson, "The Rise and Decline of the General Laws of Capitalism," in Anti-Piketty: Capital for the 21st Century, ed. Jean-Philippe Delsol, Nicolas Lecaussin, and Emmanuel Martin (Washington, DC: Cato Institute, 2017), Kindle e-book.