Capitalism in a Democracy - Is That the Third One?

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I used to defend capitalism. But then I realized capitalism in a democracy tends towards cronyism. The capitalist that results when it interfaces with democracy is disgusting. It bails out Wall Street losers, subsidizes big agriculture. These are things you and I oppose. We're not politically important. And so the capitalism we observe in the world around us is cronyist. So let's just hang on. Is that the three things?

Economist and political scientist Michael Munger of Duke University talks about industrial policy with EconTalk host Russ Roberts. Munger argues that in a democracy, the default outcome for industrial policy is crony capitalism--attempts to improve on that outcome either by appointing experts or eliminating cronyism are going to fail for political reasons. The conversation concludes with a discussion of the reliability of Munger's claim and what options are left for dissatisfied reformers.