Phelps on Capitalism

Interviewed by the FT Ned Phelps has this to say:

Phelps feels that he is at the stage in his career “where I can afford
to be as radical as I want to be. And so I am having a lot of fun
thinking about capitalism and trying to imagine how economics would
have to be re-written to capture the heart of that kind of system.”
Traditional economics, he explains, sees the world as if it were a
plumbing system. “It’s basically rooted in equilibrium – things work
out as people expect them to do.” Capitalist reality, however, “is a
system of disorder. Entrepreneurs have only the murkiest picture of the
future in which they are making their bets, and also there is
ambiguity, they don’t know when they push this lever or that lever that
the outcome is going to be what they think it is going to be – there is
the law of unanticipated consequences. This is not in the economic text
books, and my mission, late in my career, is to get it into the text
books.”

Phelps is clearly getting at many of the ideas emphasized by the Austrians, Hayek, Schumpeter and among the moderns my colleague Peter Boettke.