First, read Posner's blog post: "Capitalism."
Most public discussion of economics presents the idea that we have only two choices: free, unrestricted, unregulated capitalism on the one hand, or heavy-handed, over-regulated, even "socialist" government intervention on the the other. In his discussion of "The Nirvana fallacy" and the "reverse Nirvana fallacy" Posner explains an idea I have wanted to see injected into public discourse for years: there exist more than only two answers - more than a choice between unrestricted free-enterprise or "socialism." In between these we find something called "modern liberalism." Posner's post treats us to a reasoned and thoughtful defense of modern liberalism (although he never uses those exact words).
We can look at specific examples. I like to use Hong Kong: you have more millionaires per capita than any other place in the world, lots of small independent businesses, no homeless beggars all over the place, public works projects and government housing subsidies for lower-paid workers. Not that Hong Kong has no problems or provides a boiler-plate for everyone to follow. It's just that free-market forces with some controls actually works. We need to be able to tweak the "controls" for local situations without the simplistic call to do away with them entirely whenever even just one fails to work as well as we'd like.
But that's not all. In addition to a clear and well reasoned defense of more than two answers, a person holding federal office in the U.S. actually wrote the following:
The institutional structure of the United States is under stress. We might be in dangerous economic straits if the dollar were not the principal international reserve currency and the eurozone in deep fiscal trouble. We have a huge public debt, dangerously neglected infrastructure, a greatly overextended system of criminal punishment, a seeming inability to come to grips with grave environmental problems such as global warming, a very costly but inadequate educational system, unsound immigration policies, an embarrassing obesity epidemic, an excessively costly health care system, a possible rise in structural unemployment, fiscal crises in state and local governments, a screwed-up tax system, a dysfunctional patent system, and growing economic inequality that may soon create serious social tensions. Our capitalist system needs a lot of work to achieve proper capitalist goals.I wonder how many people will pay attention?