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Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity [Hardcover]

by William J. Baumol, Robert E. Litan, Prof. Carl J. Schramm
3.8 out of 5 stars  See all reviews (28 customer reviews)

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Book Description

May 22, 2007 0300109415 978-0300109412 1
In this important book, three prominent economists propose that there are different varieties of capitalism in the world today--some good for economic growth, others decidedly bad. Writing in an accessible style, William J. Baumol, Robert E. Litan, and Carl J. Schramm documentfour different varieties of capitalism and identify the conditions that characterize Good Capitalism—the right blend of entrepreneurial and established firms, which can vary among countries—as well as the features of Bad Capitalism. They examine how countries catching up to the United States can move faster toward the economic frontier, while laying out the need for the United States itself to stick to and reinforce the recipe for growth that has enabled it to be the leading economic force in the world. This pathbreaking book is a must read for anyone who cares about global growth and how to ensure America’s economic future.

Editorial Reviews


"In our lifetimes, humans passed a remarkable milestone. Most people now live in a capitalist economy. This is not, however, the end of history. As the authors of this path breaking book show, there are several distinctly different types of capitalism and it takes a mixture of two of these types to get all the economic, social, and political benefits that capitalism affords."—Paul M. Romer, STANCO 25 Professor of Economics in the Graduate School of Business at Stanford University
(Paul M. Romer)

Good Capitalism, Bad Capitalism tells us that capitalism comes in different flavors, and some of those flavors taste very much better than others. One of these forms of capitalism, entrepreneurial capitalism, is a special treat. It leads to growth and prosperity. The other forms are to be avoided; they lead to stagnation. This new view of the wealth of nations offers a guide to economic policy in all countries, from richest to poorest. This is a daring book with big, bold, important ideas.”—George Akerlof, University of California, Berkeley, Nobel Laureate in Economics, 2001 
(George Akerlof)

"Good Capitalism, Bad Capitalism helpfully moves the debate on from competing national models to the underlying structures that shape the relative effectiveness of different sorts of capitalism."—The Economist
(The Economist 2007-07-07)

About the Author

William J. Baumol is Harold Price Professor of Entrepreneurship and academic director of the Berkley Center for Entrepreneurial Studies in the Stern School of Business, New York University, and senior economist and professor emeritus at Princeton University. Robert E. Litan is vice president for research and policy at the Kauffman Foundation and senior fellow at the Brookings Institution. Carl J. Schramm is president and chief executive officer of the Kauffman Foundation and a Batten Fellow at the Darden School of Business, University of Virginia.

Product Details

  • Hardcover: 336 pages
  • Publisher: Yale University Press; 1 edition (May 22, 2007)
  • Language: English
  • ISBN-10: 0300109415
  • ISBN-13: 978-0300109412
  • Product Dimensions: 9.4 x 6.4 x 1.1 inches
  • Shipping Weight: 1.2 pounds
  • Average Customer Review: 3.8 out of 5 stars  See all reviews (28 customer reviews)
  • Amazon Best Sellers Rank: #98,358 in Books (See Top 100 in Books)

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Customer Reviews

3.8 out of 5 stars
3.8 out of 5 stars
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Most Helpful Customer Reviews
69 of 73 people found the following review helpful
4.0 out of 5 stars Four Competing Models of Capitalism August 11, 2007
The distinguished authors of this slim volume attempt to answer the age-old economic question of why some countries prosper and others stagnate. This question has been explored by others, most recently by David S Landes in The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor and Jared Diamond in Collapse: How Societies Choose to Fail or Succeed. Landes and Diamond sought cultural and geographical explanations for economic growth and prosperity. The current authors are skeptical of those explanations, and look more toward capitalist institutions. They have identified four models of capitalist economy.

The first is capitalism guided by the state, otherwise known as mercantilist capitalism. This model has been favored in Asian countries, where the state controls the banks and other financial institutions. The states underwrite low wage export oriented businesses to produce goods primarily for the world market. The problem with this kind of pratice is that governments tend to overinvest in favored industries and underinvest in those needed for their domestic use. States are also notoriously slow in responding to the demands of a changing marketplace.

Secondly, there is oligarchic capitalism. This is when a wealthy elite uses the state as its personal fiefdom. This was the case of Russia shortly after the fall of the Soviet Union. However, the oligarchs are now in retreat, Putin is moving the country toward state-guided capitalism. Both of these models can work for a period of time.
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8 of 8 people found the following review helpful
4.0 out of 5 stars Very interesting book January 19, 2008
I thought that this book was an interesting take on how government policy can promote or hinder economic growth. I like how they combine together developed countries with undeveloped countries (although there is far more focus on the former). Most books on this subject focus exclusively on the one or the other.
Others have summarized the book well, so I will cover only a few points. I like how they show that there is not one type of capitalism, but many. I would have liked it if they broke down the State-Guided Capitalism a bit more. It seems to me to be a little broad a generalization to lump Japan, Denmark, France, Greece and Poland all into the same category.
A little more analysis of the Oligarchic capitalism would also be nice. It is not clear to me what metric was used to show that economic wealth was concentrated in the hands of a few and that government policy is only for their benefit. Some people claim that USA and Japan also have that problem, so how do we differentiate.
And their focus on USA as the form of entrepreneurial capitalism (mixed with big corporation) makes the book a bit lopsided. It is not clear that there are really other nations in that category, so how do you know how much of it is American culture and how much is institutions.
What I like best about this book is how they offer different perscriptions for different countries based on their category. And they also tailor their advise to reform around the margins and to avoid taking on powerful interests with radical reform.
Overall, I would recommend this book.
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9 of 12 people found the following review helpful
4.0 out of 5 stars Educational - Should Be Read By All August 25, 2007
Baumol et al are strong defenders of capitalism, crediting it with the growth of average American purchasing power by 10X over the last 100 years, and the only real hope for improvement in the future. "Good Capitalism, Bad Capitalism," however, exposes readers to a closer ad more objective look at capitalism than most had already experienced. There are four versions, per the authors, with some good and some bad.

Another valuable insight is that "innovative" entrepreneurs (producers of a new product or service, or creators of new methods for producing an existing product/service), not "replicative" entrepreneurs are the key to rising standards of living. Most successful economies have a mix of innovative entrepreneurs and larger, more established firms that refine and mass produce the innovators' products.

Four elements contribute to an economic growth machine. 1)A relatively easy means of forming a business; business abandonment is also easy. 2)Society rewards socially useful entrepreneurial activity. 3)Government discourages activity that aims to divide up the economic pie rather than increase its size (eg. criminal behavior; lobbying and frivolous lawsuits to transfer wealth). 4)Government ensures openness to trade, and provides effective anti-trust enforcement.

Several commonly held essentials for economic success are actually myths. For example, the existence of hard-working individuals is not sufficient - Russian and Asian immigrants do much better in the U.S., despite having been frustrated in their native land. Geography is also not the key - look at Singapore, and to a lesser extent, Thailand. (Some contend that tropical climate and diseases precludes economic success.
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Most Recent Customer Reviews
5.0 out of 5 stars Interesting reading
Great insight as to what it takes to grow a "new" economy. Great suggestions for what could be done to stimulate future growth.
Published 2 months ago by yoda
4.0 out of 5 stars Which face of capitalism is the prettiest?
The authors try to provide answer to the question: which type of capitalism is apt to deliver long-run economic growth? Read more
Published 8 months ago by Koo Tat Kee
4.0 out of 5 stars Not All Capitalism is Created Equal
Some of the reviews note that this book is really targeted towards a particular frame of free market, GDP-growth driven economics. Read more
Published 18 months ago by Marc Korman
4.0 out of 5 stars Excellent Reading
William Baumol and his partners have written an excellent book on capitalism. The arguments and the evidence are compelling. Read more
Published 21 months ago by Carlos
5.0 out of 5 stars Good Capitalism
This book is very informative, and easy to read. For the person who is just learning social sciences, the text allows you understand and comprehend the principles of economics. Read more
Published on February 16, 2011 by Marty55
5.0 out of 5 stars Good Capitalism
It is a must read for those interested in developing their country. I think the theoretical approach is appropriate especially for Latin American countries. Read more
Published on November 26, 2010 by Ernesto G Marin
3.0 out of 5 stars A Bland Survey that Misses the Mark
It is said that too many cooks spoil the broth. Each one wants to add his particular flavor to the recipe, causing the end product to become tasteless. Read more
Published on October 11, 2010 by Etienne ROLLAND-PIEGUE
4.0 out of 5 stars different capitalisms: my capitalism is better than yours
The fall of the USSR was a big win for capitalism over socialism. However, it turns out that capitalism is not a homogenous economic system. Read more
Published on September 19, 2009 by V.H. Amavilah
4.0 out of 5 stars James Young's Review of Baumol et al's Good Capitalism, Bad Capitalism
Customer Video Review
Length: 9:07 Mins
Published on December 10, 2008 by Arthur M. Diamond, Jr.
3.0 out of 5 stars Baumol on Capitalism
This book is a description of the different ways in which advanced and emerging economies include the concepts of capitalism in their policies. Read more
Published on September 30, 2008 by Jack Behrman
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