The general definition of capitalism presented in Chapter 2 allows us to investigate the origins of capitalism, but it does not take us very far in understanding how current capitalist economic systems operate or perform. We need to distinguish between different types of capitalism, and to do this we must get detailed information on the institutions that channel the production and distribution of goods and services. At this point, most analysts stop and, after clearing away the brush, arbitrarily pick one or two key institutions with which to identify particular forms of capitalism. Using this type of ad hoc procedure, however, makes it difficult to link the distinguishing criteria with the full range of other economic institutions and organizations that structure the society in question. Although such a procedure is useful for some purposes, a more comprehensive approach is required.

The discussion below focuses on the industrialized OECD nations. I look at forty different institutions to explore how they are related, that is, which are complementary and which are substitutes for each other. This type of analysis can be most conveniently implemented by using a statistical technique called cluster analysis, which is explained below. The final results yield four distinct types of capitalism. In further chapters, we will compare their underlying cultural values, their economic performance, and their capacity to make people happy.