Sir, Gary Becker and Kevin Murphy say that “a world that is mainly capitalistic is the ‘only game in town' that can deliver further large increases in wealth and health to poor as well as rich nations” (“Do not let the ‘cure' destroy capitalism”, March 20). If the choice is real world capitalism or real world communism, there is no contest. But it is not. The choice is between varieties of capitalism, and the variety that Profs Becker and Murphy want – with steadily freer markets and more private supply worldwide – is questionable on many grounds.
For one thing, it is misleading to sing the praises of capitalist growth since 1980 without mentioning the “golden age” of the mixed economy from 1945 to 1973. Indeed, economic growth was faster in 1950-73 than in 1973-2000 in six out of seven world regions (Asia excluding Japan being the exception).
For another, they posit that the people who have made losses in current conditions “have a strong incentive to correct their mistakes the next time” – and therefore that “many government actions have been counterproductive” by shielding actors from the consequences of their mistakes. But we have seen repeatedly that the mechanism from “current losses” to “avoiding mistakes the next time” breaks down in bubble dynamics, when it becomes swamped by euphoria, extrapolative expectations, and herding behaviour.