On Capitalism and Inequality
Progress and Poverty Revisited
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The evidence is mixed. The main virtue of capitalism is its emphasis on competition as a driver of innovation and, thus, of economic growth. It is true that economic growth has accelerated in recent centuries, and it is true that billions of people have been lifted from poverty. But it is not necessarily true that intense "winner take all" competition in the marketplace is the explanation for growth. Neoclassical economic theory posits that self-interest is the primary motive for all economic decisions, leaving little room for cooperation and even less for altruism. The theory applies to an unrealistic "model" of human behavior, known as Homo economicus or "economic man", whose characteristic activity is buying or selling.
The reason for using the adjective word "social" - as in socialism" or "social service" or "social democracy" -- is, essentially, to deny those postulates of standard economic theory. Real humans are not rational utility maximizers (whatever that is) and very often do things that are not in their own personal best interests. This can happen because other interests, such as family loyalty, professional, religious, or patriotic duty, may take precedence. Real people rarely behave like Homo economicus, who has rivals but no friends. He (or she) does not trust anyone, hence cannot cooperate with others, and can never create, or live in, a viable social system (or marriage). Yet social systems, ranging from families and tribes to firms, cities, and nations do (and must) exist or civilization cannot exist. A viable social system must not allow "winner takes all". It must reallocate some of the societal wealth being created by competitive activities to support the young, the old and the weak, because all of those people have equal rights, if not the same luck or the same skills.
Both competition and cooperation have important roles to play. A hybrid capitalism involving both is the only viable solution. The book ends with a specific suggestion, namely Universal Basic Income, or UBI.