Cancelling Capitalism?

Grow the Pie’s defense of capitalism is a tremendous contribution, albeit one which Edmans himself downplays. While the author largely bills his work as one aiming to correct the factual record about profitmaximization— while providing pointers for managers and policymakers—Edmans reaffirms the validity and viability of corporate capitalism as an ideology that, in practice, advances human welfare. Injecting this viewpoint into the academic debate is critically important at a time when voices of stakeholderists seem the loudest. Sociological research long ago confirmed that societal expectations (as often shaped by academic discourse) have real impact on our social systems and institutions. Popularly, the phenomenon is recognizable as the “Oedipus effect.” Renowned economist George Soros translated that concept into economics, giving us good reason to think that what people are told about capitalism from the so-called experts will, in turn, dictate the shape of our markets and economy for many years to come. These are not petty stakes. Souring on capitalism prematurely, or based on factual inaccuracy, risks discarding decades of economic institution building. Between the lines, one could read Grow the Pieto admonish its readers not to forget that capitalism has raised standards of living globally and fuels the innovation that enables human progress. The main goal of this Review is to highlight what I see as Edmans’s most important contribution in writing Grow the Pie—to explain why profits are prosocial—and then to expand the connection between his analysis to law and macroeconomic policy. The Review thus urges that Grow the Pieprovides a compelling foundation for considering why our existing legal frameworks should support the status quo, as enabling free-market capitalism, and proposals for radical reform should be abandoned. Ultimately, and ideally, this Review will draw attention to the ways in which Edmans’s data synthesis provides a compelling defensive of a free-market corporate law landscape, influencing the trajectory of U.S. corporate law and financial regulatory reform in the next few years