NachtholmI'm sure our well-read friend who quoted Adam West himself will be familiar with this idea, but here I go anyways.Did you mean me? Did you mean Adam Smith? Adam West is the guy who played Batman.
NachtholmCapitalism has a major flaw with it. This is the fact that without a frontier (or extreme underclass) to strip for resources and labor Capitalism will fall apart. The invisible hand only functions when there are more resources to be had, as the market is a naturally expanding creature. Without expansion, Capitalism will slowly move towards stagnation which will result in a massive concentration of power. At this moment Capitalism ceases to be Capitalism and reverts to Mercantilism (Or what passes for capitalism today). As such, Capitalism is a self defeating system, completely unsustainable in a world of finite resources. This is despite the fact that the major reason Capitalism exists is to distribute the admittedly finite resources of our world. As it stands though, Capitalism, flawed as it is, happens to be the best system we have at the moment.Scarcity of resources is what fundamentally drives of all of economics. As you say, the market exists to allocate resources across competing uses by using price mechanisms. To claim that capitalism and the invisible hand cannot exist when there are finite resources is self-contradictory.In any case, it's true that there is an ultimate limit to how much society can grow given the natural resources we have available. This is unavoidable. However, natural resources are not the only factor of growth. Human resources such as quantity of labour and quality of education; capital infrastructure such as roads and power; and technological innovation such as developments in science, engineering, or even management or entrepreneurship all help to increase productivity and overcome economic stagnation. Read up on Robert Solow's neoclassical growth model.Now, it may very well be the case that increases in productivity are not keeping pace with increases in consumption. If so, then yes, our growth is unsustainable. Steady state economics provides an interesting alternative, but I'll have to look more into it. My initial impression is that I'd rather have unsustainable growth than inequitable stagnation.
NachtholmThus, the best we can do for Capitalism as a system is to regulate and restrict the movements of markets in order to prevent the kind of market concentration which results in the reversion to Mercantilism. An example of this done successfully would be the Glass-Stealgle Act (R.I.P.), which prevented banks from taking the money deposited to savings and checking accounts and using it in overly risky investments. This law also forced the separation of investment banking companies and savings and loan banks (aka the bank you deal with in most cases). Capitalism as a suicidal system requires a firm guiding hand to ensure that all participants (both consumers and producers) are playing by the same rules, and furthermore preventing anyone from "winning" the giant, real-life game of Monopoly (or more frequently Oligopoly).The only two solutions to the problem of diminishing frontiers that I can see are either the return of slavery or the invention of the Star Trek replicator which will function to completely remove the issue of finite resources. Of course, who knows what a world without the pressure of finite resources would be....This is a tricky issue. As a laissez-faire guy I'm wary of government intervention. The government does have a role to play in the economy, and that does include strict regulation of monopolies and oligopolies, but taking care not to do more harm than good is a fine line to walk.In regards to banking, fractional reserve banking is normal and plays a very important role in modern economies, despite its inherent instability. As with capitalism, I'm inclined to support it until there's a better alternative.