This chapter examines distorted views of capitalism, challenging the popular view that capitalism is a villainous perpetuator and government a saintly corrector of cronyism and inequality. These misperceptions result not only in a distorted understanding of the institutional structure that underlies capitalism and the mechanisms in which income is distributed, but also lead to perilous reform prescriptions that undermine the ability of capitalism to improve individual and societal well-being. A theory is outlined that links an economy’s institutions to the type of capitalism, entrepreneurship, and inequality to emerge in society. Institutions that constrain the discretionary authority of government incentivize productive entrepreneurship and facilitate free market capitalism, giving rise to a market-determined income distribution and opportunity for economic mobility. An examination of available evidence suggests that countries whose institutions are more consistent with economic freedom exhibit less inequality than those in where government is more prominent.
Daniel L. Bennett and Richard J. Cebula
Daniel L. Bennett, Richard J. Cebula and Robert Boylan
In this exploratory eclectic study for the year 2005, we find that the nominal median new house price in any given state was an increasing function of the state’s per capita income, the net immigration rate, the average January temperature, and the degree of urbanization. In addition the evidence strongly suggests that the nominal median new house price in any given state was found to be a decreasing function of both the crime rate and labor market freedom. We believe there is good reason to argue that labor freedom has a significant impact on interstate home price differentials. Our findings suggest that for a one unit increase in labor freedom, ceteris paribus, there is a 23 percent decrease in the interstate home price differentials.