If we look at the history of the world,
a huge fraction of the improvements in
standard of living have come because
private businesses have created new
products, have given people jobs,
have generated profits that
raise people out of poverty and
allow them to live fruitful and productive
lives with reasonable standards of living.
We can have much more of that,
and it will have beneficial effects
around the world if we step back
from the excessive regulation and
have a much more capitalistic system.
My name is Jeff Miron, and I'm Director of
Undergraduate Studies in the Department of
Economics at Harvard University.
I wanna talk about three
myths about capitalism,
the first is that being pro-capitalism
is the same as being pro-business.
Nothing could be farther from the truth.
The point of capitalism is to make
sure that businesses have to compete
vigorously against each other and
that benefits consumers.
It's not good for the businesses per se
because they have to work really hard, so
many businesses understand this,
and they hate capitalism.
They are constantly trying to get
government to erect various rules,
restrictions, regulations that help them,
but they're not in
the interest of the consumers.
So pro-capitalism is good for consumers.
That's whom we're
ultimately trying to help.
A second myth is that capitalism generates
an unfair distribution of income.
What true capitalism does is
rewards people who are productive,
people who work a lot of hours,
people who have a lot of talent.
People who come up with good ideas,
they get big rewards under capitalism, and
people who don't do those
sorts of things get less.
The one negative one might be
concerned about is that some people
are not able to earn very
much left on their own, and
so very reasonable people support
some anti-poverty spending.
But that's completely different
than interfering with capitalism.
Regulating prices, limiting quantities,
imposing all sorts of things on
businesses, those make the economy less
productive, give us a smaller pie.
And make it even harder for
us to operate programs,
which help those who are less fortunate.
The third myth is that
capitalism was responsible for
the recent financial crisis and
the recession.
That, again, is almost exactly
the opposite of what is true.
First of all, nobody who is being
intellectually honest thinks that we had
unbridled, serious capitalism
before the crisis hit,
before the subprime build up occurred,
before we had all the housing problem.
We had enormous government
interventions that subsidized risk,
enormous government interventions that
encouraged an overinvestment housing.
If one's going to try to
draw any conclusions,
it seems to suggest much more clearly
that interfering with capitalism
generates financial crises,
generates recessions.
Because what we experienced was
directly related to the incentives for
excessive risk taking, the incentives for
overinvestment housing that
were created by government.
The private sector responded
to those incentives, so
of course, the private sector can't be
completely absolved of being involved.
But in the sense of causing,
it is the bad policies that caused it,
not what the private sector or
capitalism did by itself.
Most importantly, whenever government
bail out people who took excessive risk,
it encouraged people to do
more of that in the future.
And we unfortunately went a huge way in
that direction via the TARP, and via all
the Federal Reserve policies, which
helped Wall Street and the risk takers
not have to pay the true price for all
the excessive risk taking they engaged in.
