Tuesday, August 31, 2021

Domestic Non-Financial Debt and its kissing cousins

Thomas Palley writes about debt relative to GDP in his PDF, Financialization revisited: the economics and political economy of the vampire squid economy. He refers to "Domestic non-financial sector" debt in Table 1, and to "domestic non-financial debt" in the text, both on page 31.


A search at FRED for domestic non-financial debt turns up, among other things, two quarterly series bearing the title "Domestic Nonfinancial Sectors; Debt Securities and Loans; Liability, Level":

  • TODNS which is seasonally adjusted, and 
  • TCMDODNS, which is not seasonally adjusted.

The debt I usually use is TCMDO (All Sectors Debt), which is not seasonally adjusted. So here I will use the "not seasonally adjusted" version of Domestic Non-Financial debt.


The components of All Sectors debt (TCMDO) are

"Rest of the world" debt is small, by the way: usually near 3% of All Sectors debt. Since 2008, however, it has doubled.

Where I use the word "debt" FRED pretty consistently uses "debt securities and loans" in the titles of data series. Sometimes, however, they seem to use "credit" and "debt" interchangeably. For example, when I started using FRED, the title of the TCMDO series was "Total Credit Market Debt Outstanding". Today, the title of that series is "All Sectors; Debt Securities and Loans; Liability, Level". But it is still listed under "L.1 Credit Market Debt Outstanding".

Many of these debt series titles say "Liability". I take this to mean, for example, that the "Rest of the World" series tells how much debt is owed to creditors in the US by the rest of the world, and not what we owe to the rest of the world. 

One of the other data series I'm looking at just now (QUSPAMUSDA) bears this note:

Credit is provided by domestic banks, all other sectors of the economy and non-residents. The "private non-financial sector" includes non-financial corporations (both private-owned and public-owned), households and non-profit institutions serving households as defined in the System of National Accounts 2008. The series have quarterly frequency and capture the outstanding amount of credit at the end of the reference quarter. In terms of financial instruments, credit covers loans and debt securities.

Little tidbits like that turn out to be quite useful sometimes. Usually though, for me it turns out like Oh, I read something about that, somewhere...

The components of Domestic Non-Financial debt are

The components of the Non-Financial Business component are


Start with Domestic Non-Financial debt. Subtract the Federal Government component, and the State and Local Governments component. You are left with Total Credit to Private Non-Financial Sector (QUSPAMUSDA). Something that should be true actually turns out to be true.

But you never know.

Sunday, August 29, 2021

The phrase "supply creates its own demand" was used in 1860

Google Ngrams says the phrase can be found in 1843... Maybe in 1845.

Here's the image. (The image says zero smoothing but appears to show smoothing 3. At smoothing zero there is a short spike at 1845.)

Here's the site.

The earliest reference they turn up is from 1860. 



From 1860: The Covenanter, page 304

The first use of the phrase "supply creates its own demand" was in reference to grog-shops? Wouldn't that be just perfect!!

This one is attributed by Google Books to 1886. If that was correct, this find would be a big deal. Keynes wouldn't have written it: he was born in 1883.

Here's the search result:

No, but it uses the phrase "tacitly assuming". It's probably Keynes. 

It is Keynes. Brad DeLong provides the evidence:

Here's the snippet, for what it's worth:

The whole of item (2) may be found on the last page of the PDF at DeLong's site.

 From 1897: Imperial Fresno, page 110 

"The market for good dried figs is unlimited".

Friday, August 27, 2021

The Improv Economy

I'm hard at work on parts two and three of my response to Palley's paper. Between naps and stuff.

Meanwhile, this excerpt will make you weak in the knees. From Financialization revisited: the economics and political economy of the vampire squid economy by Thomas Palley.

Beginning on page 34:

... the details of how the system works reflect an improvisational response [by the Fed] to the emergent problems of increasing proclivity to instability and stagnation.11  The former has required the Federal Reserve to become the de facto guarantor of the financial system. The latter has it acting as macroeconomic resuscitator via a process of pushing asset prices ever higher.

As regards instability, the system has repeatedly shown itself fragile and unstable, both domestically and internationally. Moreover, that proclivity to instability emerged earlier in the process. In the US, there has been the 1987 stock market collapse, the 1998 Long Term Capital Management crisis, the 2001 technology stock market bubble, the 2007 house price bubble, and the 2008 financial crisis. Internationally, there has been the 1990-94 Swedish financial crisis, the 1992 Sterling crisis, the 1994 Mexico crisis, the 1997 East Asia crisis, the 1998 Russia crisis, the 1999 Brazil crisis, and the 2000 Argentina crisis. The IMF (Leaven and Valencia, 2018) has documented that country systemic currency and banking crises also increased significantly in the neoliberal era (post-1980).

As regards stagnation, that proclivity became especially clear after the 2008 financial crisis when the US economy had difficulty picking itself off the floor despite massive financial assistance from fiscal policy and the Federal Reserve. However, the proclivity to stagnation was also visible long before to those open to seeing it. Thus, the Reagan business cycle (1981 – 1990) was followed by an extended weak recovery that coined the expression “jobless recovery”. Similarly, though the 2001 recession was short and shallow, the recovery was slow to pick up and did not launch robustly until 2004.

After the 2008 financial crisis, the recovery was so feeble it was labelled stagnation, and it also triggered a new set of [improvised] policies ...


In case you are wondering how this all came about, Palley handles that topic in the remarkable Footnote 11:

The chief architect of the current system was Federal Reserve Chairman Alan Greenspan (1987 – 2005), who took over from Paul Volcker (1979 – 1987). In 1979, Volcker initiated the great disinflation by implementing high real interest rates. Volcker viewed high inflation as an existential threat, but recognized finance’s inclinations to speculation and instability and was always a supporter of regulation. That was evidenced in the Dodd-Frank Act (2010), passed after the 2008 financial crisis, in which he advocated for the “Volcker rule” that stopped banks from engaging in short term speculative trading on their own account. That contrasts with Greenspan, who was an avowed neoliberal and partisan proponent of financial deregulation.

A few pages later, Palley sums up his thinking:

The repeated crises and the Federal Reserve’s interventions take place within a system. That system encourages crisis and the Federal Reserve has been instrumental in creating the system (Palley, 2005). The central bank has given intellectual support and policy legitimacy to the financialization paradigm, and has a fulcrum operational role. Simply claiming it is now doing its best to manage the economy is disingenuous to the point of dishonesty.

Wednesday, August 25, 2021

The good: Thomas Palley's "Financialization revisited"

"Financialization revisited: the economics and political economy of the vampire squid economy" by Thomas Palley. 

Download page: https://www.postkeynesian.net/working-papers/2110/

Maybe the best economics I ever read.

"... a safety net for financial capital has been in the making for four decades, and it has increasingly displaced the post-World War II system that aimed to create a safety net for labor."
-- Thomas Palley


Thomas Palley can write. And Financialization revisited is in English: Nothing is laid out in those gibberish equations that I always skip until I have to just stop reading. Instead, he uses diagrams: flow charts showing economic interactions.

Moreover, Palley's paper presents some of the best economics I've ever read.

One of the first things he gets to is the definition of "financialization". He provides three definitions, with sources:

  • Krippner: "profits accrue primarily through financial channels";
  • Epstein: "the increasing role of financial motives, financial markets, financial actors and financial institutions"; and
  • Palley: "domination of the macro economy and economic policy by financial sector interests."

All of the above.

As an example of good writing, I turn to page 10. One of the effects of financialization, Palley writes,

is the change in the income composition of GDP. That composition is illustrated in Figure 3 which shows a tree diagram describing the functional distribution of income. Financialization has been associated with an increase in the capital share at the expense of the labor share. Within the capital share, interest payments have increased at the expense of profits. Additionally, the financial sector share of profits has increased at the expense of the non-financial sector’s share of profits. Within the wage share, the share paid to the managerial and professional class has increased at the expense of the share paid to workers non-managerial workers. The latter constitute about eighty percent of employment in the US economy. This wage share redistribution is reflected in the increased inequality of personal income distribution.

The effect of financialization on income composition fills the paragraph. On my first read, I went thru that paragraph three times, more captivated each time. But Palley's diagram really does help the reader (me) see what he's showing us:

In this diagram, financialization pushes income leftward.

Another example of Palley's good writing, from page 14:

The seventh column in Figure 1 concerns financialization’s impact on capital accumulation, which is closely connected to its impact on growth as accumulation is a critical determinant of growth.

He could have ended the sentence at the comma. Instead he adds something more, to make sure we understand that capital accumulation is "a critical determinant of growth." I'm not an economist. I often need to be reminded of such things. 

I'm especially glad to see confirmation of that crucial connection, as I rather recently blogged about Carroll Quigley, stressing exactly that point. Now I have second-source confirmation.

Palley's writing is good because it tells me what I need to know.


One more example of Palley's writing. Page 16:

In particular, central banks are a critical part of the financialization landscape. Not only have they been involved in the deregulation of finance which has structurally facilitated financialization, they are critical to the financialization cycle. When the economy crashes, central banks are called upon to put a floor under financial markets. Thereafter, when the economy gets trapped in stagnation, central banks are called upon to reflate asset prices and jump-start a new cycle of lending.

In the first sentence there is an observation. The second makes sense of the observation, providing two specific ways in which centralbanks are a crucial part of "the financialization landscape." The remaining sentences expand the thought further, providing examples to show how centralbanks are "critical to the financialization cycle."

First, Palley makes an observation. Then he makes sense of it. Then he provides relevant examples. By the end of the paragraph, we are convinced the observation in the opening sentence is correct.

Good writing.

It was a typo in my notes: "centralbank". But I couldn't bring myself to correct it. It's not just a bank. It's not just a special kind of bank. It's a totally different animal, the centralbank. From now on.

Palley's Business Cycle

Paul Krugman writes of two kinds of recession:

... there’s a definite change in the character of recessions after the mid-1980s. Before then, recessions were basically brought on by the Fed, which raised interest rates sharply to curb inflation ...
Since then, however, inflation has been well under control, and booms have died of old age — or more precisely, they have died because of overbuilding and an excessive level of debt.

A definite change in the character of recessions: a significant thought, surely.


Thomas Palley, page 15:

Palley (2005) argues financialization has created a new business cycle driven by household borrowing and asset price inflation. The theoretical framework for such a cycle is developed in Palley (1994, 1997a).    Descriptively, the new business cycle is characterized by much longer upswings, combined with much sharper downturns that are triggered by bursting of asset price bubbles and by accumulated debt burdens that undermine AD. Moreover, the cycle is prone to instability, which calls for policy interventions that put a floor in place and reset the economy.
A most significant thought.

Palley fills a few blanks (page 5):

... financialization transforms neoliberalism. In particular, it fills the aggregate demand (AD) gap created by neoliberalism. As observed by Palley (2013, p.6): 

“The neoliberal model undermined the income and demand generation process by shifting income from wages to profit and by widening wage inequality. That created a growing structural AD gap, and the role of finance was to fill that gap.” 

That filling is accomplished by borrowing and asset price inflation, both of which are facilitated by financial market deregulation. Filling the demand gap also leads to the creation of a new business cycle (Palley, 2005) in which central banks become the guarantors of the system, and that guarantee is exercised by underwriting and inflating financial asset values ...

And page 18:

The “borrowing” and asset price inflation associated with provision and use of debt finance initially strengthens AD , but ultimately weakens AD via the resulting debt burdens and income distribution effects. That compels fresh policy interventions to jump start the process anew. This pattern has repeated in the four full U.S. business cycles of the financialization era (1981 - 1990, 1991 - 2000, 2001 - 2008, 2009 – 2020).

The pieces of his idea fit together so easily, so perfectly, that I was tempted to adopt the explanation immediately -- something I never do.

Very good writing. And a most interesting idea.


I notice Palley's paragraph that describes Figure 3, quoted above, ends up at inequality. I notice his new type of business cycle emerges in part from inequality arising from the neoliberal policy. And I notice on page 28 Palley saying

Debt is the key instrument of the vampire squid economy whereby income is redistributed to upper income groups...

I want to mention, therefore, the topic of inequality.

I wrote a post in 2014 that opened with these words:

Lots of activity lately on the topic of income inequality, as I noted the other day. But do you really suppose we could have such inequality without all the debt? I don't.
In comments, somebody quoted my question and replied:

I would say this is exactly backwards.

So I said debt explains inequality, and the reply was inequality explains debt. Oh, well. 

Palley handles the topic so much better. Thomas Palley says Debt is the key instrument, the primary mechanism by which income is redistributed upward. I can live with that. If you want to reduce or prevent the inequality, you have to keep debt within workable bounds. Don't let an imbalance arise. Don't let debt gain on GDP:

Graph #1: GDP (red) and All Sectors Debt (blue) on a Log Scale
Red and Blue run Parallel until the Latter 1970s
Then Debt Starts Gaining on GDP

"Debt," Thomas Palley says, is "the vehicle for extracting value from households and corporations." He says things so very well.

Plus, he thinks about the same things I think about. He explains what I think, better than I do. And he fills gaps in my thinking, gaps I didn't even notice. I will be reading more of Thomas Palley.

Thursday, August 19, 2021

No matter what

No matter what you want to do, it takes money to do it. So if you want to change the world, it's gonna take money. 

No matter what your plan is, you're gonna need money.

Every day my wife gets junk mail from another group with a good cause, seeking a contribution from her. Every group has its own purpose, and the purpose never has anything to do with the economy, except of course that they all need money.

As things stand now, these groups are competing against each other for her dollars. This is zero-sum.

If instead these groups could agree on a plan to fix the economy, and support this plan in addition to their own individual cause, there would at least be hope that all their causes could be solved.

Yes of course the plan I'm thinking of to fix the economy is my plan. The wrong plan cannot fix it, as we should have learned by now. But don't miss the point: If the economy is fixed, their causes of concern start going away. If it isn't, the near-term result is an increase in social-cause junk mail. The longer-term result is the collapse of social order, continued economic decline, and  eventually  the fall of civilization.

The point is that if they get together on an economic plan -- any economic plan -- they are showing their commitment to solving the problem that created the causes they focus on. Without such a commitment, the whole social cause junk mail system is a plan with no path to victory.

That's my point. But don't forget: The wrong plan cannot fix the economy.

Tuesday, August 17, 2021

To emphasize the point:

If we fix the economy, we don't have to worry about civilization. If we don't fix the economy, worry about civilization isn't going to help.

Sunday, August 15, 2021

The economy and civilization

I spent July writing about the economy and civilization, and half of June or more working up to it, and half of August so far trying to disentangle myself from all that. Every morning I try to write, and by the next morning I have to abandon what I wrote and start again. Meanwhile, I can't even bring myself to read the July posts and tie up loose ends.

The other day I googled the economy and civilization but I couldn't read any of that, either.

Eh, I get like this sometimes.

What I do want to say is that if we could fix the economy, we wouldn't have to worry about civilization. And that if we don't fix the economy, worrying about civilization isn't going to help.


That's it, I guess. I thought I had more to say.

Friday, August 13, 2021

The 2020 recession is over at last

I noticed last night that the FRED graphs no longer come with a note about the most recent recession not being officially terminated.

What I noticed first was how narrow the 2020 recession bar is:

Graph #1

This isn't exactly "new" news, I see:

The dates they give at FRED:

Recession start: 2020-02-01

Recession end: 2020-04-01

It was two months long. That's gotta be a record for short recessions.

So much for the "two consecutive quarters" thing.

Wednesday, August 11, 2021

The foot in David Ricardo's mouth

"I cannot conceive it possible, without the grossest miscalculation, that there should be a redundancy of capital and of labour at the same time."

Monday, August 9, 2021

The "Greatest Age" in context

Keynes called it the "marginal efficiency of capital", but Keynes makes my head spin. So does the Wikipedia page. For the moment, I'll just call it the expected rate of return. Expected, because you figure it before you even make the investment. Rate of return because you want to know if it looks like a good investment.

More accurately -- the "featured snippet" nails it -- the marginal efficiency of capital is the rate of return expected on a new capital asset over its lifetime.

I'm thinking now, the "efficiency" of capital is the rate of return you get. You consider the "marginal" efficiency because you are focused not on all the capital that exists, but on the new capital asset you may decide to invest in. Just the new one. Evidently, that's what "marginal" means.

The expected rate of return on new investment has to be higher than the rate of interest you are getting on your money in the bank. If the expected rate of return is less than the rate of interest, you are better off leaving your money where it is, collecting interest. So then you decide not to make the investment, and the pace of investment slows.

Or, if you plan to fund the investment by borrowing, the rate of return you expect to get has to be more than the rate of interest you'll have to pay on the borrowed money. If not, you will lose money by investing. So again then, you decide not to make the investment, and the pace of investment slows.

Using the abbreviation "MEC" for the technical term "marginal efficiency of capital", the Wikipedia page offers a summary of what I'm trying to say:

The MEC needs to be higher than the rate of interest for investment to take place.

Remember when the economy went bad, back in 2007-08? The Fed lowered interest rates as far as they could go. Among other things, they wanted to make the rate of interest lower than the "MEC", to boost the economy by stimulating investment.

During the "greatest age" of investment,  the rate of return  the "MEC" was high relative to the rate of interest. That's what made it the greatest age. 

Near the end of chapter 21 of the General Theory, Keynes listed several factors which contributed to making the MEC unusually high in the nineteenth century:

During the nineteenth century, the growth of population and of invention, the opening-up of new lands, the state of confidence and the frequency of war over the average of (say) each decade seem to have been sufficient, taken in conjunction with the propensity to consume, to establish a schedule of the marginal efficiency of capital which allowed a reasonably satisfactory average level of employment to be compatible with a rate of interest high enough to be psychologically acceptable to wealth-owners.
That's all one sentence. The MEC was high in the 19th century. In his next sentence, Keynes points out that interest rates were low in the 19th century:
There is evidence that for a period of almost one hundred and fifty years the long-run typical rate of interest in the leading financial centres was about 5 pet cent., and the gilt-edged rate between 3 and 3 1/2 per cent.; and that these rates of interest were modest enough to encourage a rate of investment consistent with an average of employment which was not intolerably low.

"Modest," he says, interest rates were "modest" in the 19th century. Low, relative to earlier times. Paul Schmelzing's graph shows a trend of decline in interest rates since the 1300s, confirming the view that interest rates were relatively low in the 19th.

In two sentences, Keynes tells us that in the 19th century, interest rates were unusually low and the MEC was unusually high at the same time. These factors combined to create an unusually strong "inducement to invest", he said, making the 19th century "the greatest age of the inducement to investment". Thus the title of today's essay.

Historians sometimes refer to "the long nineteenth century". We can do that here, if you are troubled by Keynes cramming "almost one hundred and fifty years" into the 19th.


What made the Greatest Age special?

Keynes opens the General Theory by explaining the significance of the words "general theory" in the title of the book. His intent: "to contrast the character of my arguments and conclusions with those of the classical theory", he says, "... upon which I was brought up":

I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case...

As I read it, Keynes is not saying the classical theory is wrong. He says it is right, but it only applies sometimes. It only applies when the conditions are right. It only applies to the 19th century.

In recent times, you may have heard that Keynesian economics explained the good economy that followed the Second World War, but it could not explain the severe inflation of the 1970s. Well, that story appears to have been modeled after a story Keynes had in mind when he was writing the General Theory: classical economics could explain the good economy of the 19th century, but it could not explain the severe unemployment of the Great Depression.

I love that kind of ironic twist.

We have already noted several factors identified by Keynes, which contributed to the strong inducement to invest during the long 19th century. I want to go back now to that first Keynes quote, where he listed the factors that made the 19th century unique:

  1. the growth of population 
  2. and of invention, 
  3. the opening-up of new lands, 
  4. the state of confidence 
  5. the frequency of war [and] 
  6. the propensity to consume ...

Let that sit a moment, while I take you back to Carroll Quigley's The Evolution of Civilizations, which came up more than once in my "July 2021" posts. On page 146 Quigley lists his "seven stages" of civilization. On page 149 he lists the four types of expansion that occur in the "expansion" stage:

  1. increased production of goods, eventually reflected in rising standards of living;
  2. increase in population of the society, generally because of a declining death rate;
  3. an increase in the geographic extent of the civilization, for this is a period of exploration and colonization; and
  4. an increase in knowledge.

Keynes's factor "1" (population growth) is Quigley's "b". Keynes's "2" (invention) goes with Quigley's "d" (an increase in knowledge). Keynes's factor "3" (territorial expansion) is Quigley's "c". And Quigley's "a" (increased production) is the reason Keynes mentions the 19th century in the first place. The lists are similar. The features described by Keynes and those described by Quigley are very much the same. Both describe a favorable investment environment.

Second, the timing matches up. On page 145, Quigley identifies three periods of expansion in Western civilization:

the first about 970-1270, the second about 1420-1650, and the third about 1725-1929.

The third period is just over 200 years in length. That's a bit long, even for a long 19th century. However, the nineteenth century is entirely contained within Quigley's third period. So is Keynes's "greatest age".

James R. Crotty uses World War I as the point of transition from 19th to 20th century capitalism in Keynes's work. Keynes does the same in his 1936 book. For example:

  • He refers to the "post-war experiences of Great Britain and the United States" to describe problems arising from an inadequate inducement to invest (see the fascinating chapter 16, section iii -- but read it slowly).
  • In a powerful paragraph (chapter 2, section vi) Keynes points out a flaw in the argument of "Post-war economists". 

Taking the first year of World War I (1914) as the last of the "almost one hundred and fifty years" of the Greatest Age, that Age would have started soon after 1764, around the time Adam Smith started writing The Wealth of Nations.

The "greatest age" dates may vary somewhat, depending on the source. Even Crotty at one point refers not to World War I but to 1920 as "the line of demarcation". At this later date, though, the period of almost 150 years which constitutes for Keynes the "greatest age" of investment is still entirely contained within Quigley's "Stage of Expansion". 

As for the differences of timing, remember that Keynes and Quigley were not measuring the same thing. Keynes's dates are based on interest rates, with an eye on investment. Quigley's are based the expansion of civilization. They are definitely related, investment and the expansion of civilization, but don't expect a glove-like fit. Anyway, as Quigley says (page 128): "it should be remembered that the dates given for historical periods are only approximate."


Third, as Wikipedia summarizes the view of Keynes, "unemployment arises whenever entrepreneurs' incentive to invest fails to keep pace with society's propensity to save". Quigley (pages 140-141) makes a similar argument, saying "our modern economic system cannot produce and consume what it produces unless it also invests" because "savings reduce the flow of purchasing power". Both writers point to the same process as the cause of the trouble: Saving interferes with economic progress unless investment spending adequately compensates.

In sum, Keynes and Quigley agree on three points:

  • The economic process: for growth to occur, investment must sufficiently offset saving.
  • The timing: The "greatest age" of Keynes occurs entirely within Quigley's third expansion of Western civilization.
  • The economic environment: Keynes and Quigley describe similar factors that made that time unique.

This is no coincidence. Keynes was fully aware of the connection between civilization and the economy.

Tuesday, August 3, 2021

The nature of capitalism

From "History of capitalism" at Wikipedia:

  • From the "Historiography" section:
    The historiography of capitalism can be divided into two broad schools. One is associated with economic liberalism, with the 18th-century economist Adam Smith as a foundational figure. The other is associated with Marxism, drawing particular inspiration from the 19th-century economist Karl Marx. Liberals view capitalism as ... Marxists view capitalism as ...
  • From the "Origins" section:
    The origins of capitalism have been much debated (and depend partly on how capitalism is defined). The traditional account, originating in classical 18th-century liberal economic thought and still often articulated, is the 'commercialization model'. This sees capitalism originating in trade. Since evidence for trade is found even in paleolithic culture, it can be seen as natural to human societies. In this reading, capitalism emerged from earlier trade once merchants had acquired sufficient wealth (referred to as 'primitive capital') to begin investing in increasingly productive technology. This account tends to see capitalism as a continuation of trade, arising when people's natural entrepreneurialism was freed from the constraints of feudalism, partly by urbanization. Thus it traces capitalism to early forms of merchant capitalism practiced in Western Europe during the Middle Ages.

The "Origins" paragraph describes the "liberal" (not Marxist) view. The "Historiography" paragraph associates that view with Adam Smith.

Their explanation ("capitalism emerged ... once merchants had acquired sufficient wealth") reminds me of Smith's Book 1 Chapter 6, the when people have accumulated stock part:

In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another...

As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of the materials...


I have a bit of trouble with Wikipedia's "Origins" paragraph, with the summary/overview sentence: "This account tends to see capitalism as a continuation of trade," they say, "arising when people's natural entrepreneurialism was freed ...."

The word "continuation" makes me uncomfortable. They don't say it, but I read them to mean that capitalism will continue to continue. But this is an assumption that must be pointed out and examined, because it is not true. For unless the process is understood and the economy is properly managed, the cycle of civilization assures that capitalism will come to an end, and that what comes next -- including the end of capitalism -- will be brought on by the "continuing" evolution of capitalism.

Capitalism is the process of accumulating wealth. Capitalism is a process. It is not a state of being. It is a state of change.