Property Rights and the Liberating Effect of Generalized Increasing Returns: A Reassessment of the New History of Capitalism and the Economics of Slavery

In recent years, the literature on the New History of Capitalism has challenged the positive-sum nature of private property rights and market processes. Among its strongest criticisms of capitalism is the notion that the rise of Western economic development has been predicated on slavery and other associated institutional arrangements (i.e., colonialism and imperialism). The purpose of this chapter is to reassess this claim in a twofold manner. I do so by clarifying two concepts in economic theory that are often conflated. First, I argue that the conclusions of New History of Capitalism are premised on a conflation between private property and privilege, which are mutually exclusive institutional concepts. This conflation begets an additional conflation between rent-seeking (i.e., competition over privileges) and profit-seeking processes (i.e., competition over property rights). By failing to identify slavery (as well colonialism and imperialism) with rent-seeking, the New History of Capitalism fails to realize its negative-sum effects, rendering its narrative about Western economic development vacuous. Secondly, the New History of Capitalism conflates the distinction between economics of scale and generalized increasing returns. The implication of this conflation misdirects away attention from the emancipatory effects of the generalized increasing returns, which can only be realized within a framework of private property rights. Finally, through a set of case studies, I will demonstrate the emancipatory effects of generalized increasing returns in terms of economically enfranchising marginalized groups of individuals, the result of which is harness their creative powers by realizing the gains from social cooperation under the division of labor.

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