When I heard Warren speak about the crisis in capitalism, I asked to sit down with her to explore her theory of the case. I interviewed her in her Washington, D.C., office. The transcript of our conversation has been lightly edited and condensed.

Franklin Foer: All the investment bankers who have voodoo dolls of you might be a bit surprised that you recently described yourself as “capitalist to the bone.” What did you mean?

Elizabeth Warren: I believe in markets and the benefits they can produce when they work. Markets with rules can produce enormous value. So much of the work I have done—the Consumer Financial Protection Bureau, my hearing-aid bill—are about making markets work for people, not making markets work for a handful of companies that scrape all the value off to themselves. I believe in competition.

Foer: To what end?

Warren: Markets create wealth. Okay, so I used to teach contract law, and if you really want to go back to first principles: On the first day, I used to take my watch off and I would sell it to someone in class. We’d agree on a price, $20. Then the question I always asked the students was: What did the buyer value the watch at? Much of the class would say $20.

That’s not the right answer. All we know is that the person would rather have the watch than have the $20 bill. What did you know about the value I placed on it? Exactly the inverse. I’d rather have the $20 bill than have the watch. Now, most people think the benefit of markets is: I walked away with a $20 bill, great, which I valued more highly than the watch, and you walked away with the watch that you valued more highly than the $20, but look at all the excess value there.

Maybe you wanted that watch because it completed your fabulous watch collection or you desperately needed a watch or it was so attractive to you that the value you placed on it would be in the hundreds of dollars. You got all that surplus value, and me, I really needed that $20. I had an investment opportunity over here for that $20 that has yielded a manyfold return for me. That’s how markets create additional value.

Foer: But markets right now are doing a good job of producing wealth. Yes?

Warren: Right.

Foer: In your description, that’s markets working.

Warren: The problem is that when the rules are not enforced, when the markets are not level playing fields, all that wealth is scraped in one direction. For example, leading up to the financial crash, there were a lot of mortgage brokers out there selling mortgages. Wow, did they get rich doing it. Families thought they were buying a product they could afford, whose payments they understood. Many of them lost everything. That’s a market that clearly was not working. The Consumer Financial Protection Bureau, after it passed, the first thing we did there at the bureau was to put new rules in place about mortgages. Not so that you could control the mortgage market, but so that the market would work.