Good faith critique of my definition of capitalism
i have been working on definition of capitalism and i want GOOD FAITH critique.
Capitalism is an economic system defined by the private ownership of the means of production and the profit motive of the agents who hold that ownership.
It requires markets - price-mediated exchange, as its operating mechanism, but is conceptually distinct from markets themselves: it neither requires, nor tends to sustain, the classically free conditions of those markets.
i place great emphasis on the definition and conditions of a classically free (numerosity of roughly-equal agents, low friction, price as a pure function of supply and demand) as opposed to to a lassiez faire market (no government intervention), they are not the same.
Left to operate absent exogenous checks, capitalism structurally erodes those conditions, converging markets toward oligopoly rather than preserving them, i will explain the mechanism below.
Within this system, profit-motivated agents are incentivized to seek not only profit (return earned through productive contribution) but economic rent - value extracted purely from ownership and market position, independent of productive contribution, with the barriers created by function of market share and size.
because rent is depended on market share incentives are aligned to concentrate markets, however not all markets offer the same rent .
The magnitude of rent obtainable from a given increase in market share is a function of these parameters i have identified - capital intensity, economies of scale, demand inelasticity, and switching friction which are simultaneously the constituents of barriers to entry.
Because rent-derived resources can be reinvested into strengthening those same barriers (economies of scale, wage suppression via monopsony power, influence over the regulatory and labor environment), increased concentration is both a reward the market provides and a cause of further concentration — a self-reinforcing loop. (this is a source of good in a free market because they encourage capital production but will also end up killing the free market.)
This loop is bounded only by two things:
(1) contestability :new-entrant competition or disruption that redefines the competitive basis rather than contesting incumbents on existing terms whose force is itself a decreasing function of the same three barrier parameters
(2) external check : (regulation, antitrust, institutional constraints on capture), whose effectiveness depends on how insulated they are from capture by rent-derived influence rather than being automatically exogenous.