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Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity 1st Edition

3.9 out of 5 stars 31 customer reviews
ISBN-13: 978-0300109412
ISBN-10: 0300109415
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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.

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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: 3.9 out of 5 stars  See all reviews (31 customer reviews)
  • Amazon Best Sellers Rank: #1,555,788 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

Format: Hardcover
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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Format: Hardcover
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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Format: Kindle Edition Verified Purchase
While there are some good ideas here, the book is wordy, repetitive, and disorganized. Many sentences contain statements, defenses, and caveats, along with parenthetical comments, which reduces impact and meaning. The occasional subtle grammar error is one consequence -- a common fault of these types of sentences, forcing authors into hypercritical proofing. The main topics are introduced, then repeated, then repeated again, to the point where the author states, 'the reader will anticipate our views on this.' And another repeat ensues. From the standpoint of the major themes, they are not thoroughly substantiated, and sometimes even brought into question by the evidence. Whether state-guided capitalism is competitive, for example, is supported while the authors think it is being rejected when the advantages of state-supported engineering schools, build-up of infrastructure and ports, and encouragement of foreign investments are discussed. A reader gets to the point where 'state-guided' seems to be defined as the parts of state-guided the authors don't like. They ignore the details of state-guided policies of developing and developed economies, and simply cite a few anecdotal cases to support their views, failing to see that you could cite similar failures in U.S. tax codes if you wanted to. The net result of all this is a lot of bland academic discussion of truisms where the potential existed for something much more detailed and insightful.
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Format: Hardcover
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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