It was fine Very neoliberal but I guess I should have expected that from the title Information is somewhat interesting but policy proposals are a bit far fetched and seem to have little evidence behind them. I know you have to be guilty of a particular species of nerdism to enjoy longish books on economic policy So be it This is a mostly wonderful read with a series of prescriptions for restoring both capitalism and democracy Zingales is an Italian born economist at the University of Chicago, and, of course, a free marketeer His key point is that we seem to be heading into a semi toxic, pro business, anti competitive environment, built on subsidies and lobbying and on preserving the success of the already successful This pro business trend is destructive of a genuinely creative and meritocratic free market He wants to rescue the market from both crony capitalism and over regulation His prescriptions strike me as very smart but also as political long shots They include 1 reforming and simplifying the tax code to outlaw subsidies to businesses 2 a tax on lobbying and 3 a new 3 part regulatory architecture to keep the regulators from tripping over each other, from being captured by the industries they re trying to regulate, and to clearly specify their mandates. Born In Italy, University Of Chicago Economist Luigi Zingales Witnessed Firsthand The Consequences Of High Inflation And Unemployment Paired With Rampant Nepotism And Cronyism On A Country S Economy This Experience Profoundly Shaped His Professional Interests, And In He Arrived In The United States, Armed With A Political Passion And The Belief That Economists Should Not Merely Interpret The World, But Should Change It For The BetterIn A Capitalism For The People, Zingales Makes A Forceful, Philosophical, And At Times Personal Argument That The Roots Of American Capitalism Are Dying, And That The Result Is A Drift Toward The Corrupt Systems Found Throughout Europe And Much Of The Rest Of The World American Capitalism, According To Zingales, Grew In A Unique Incubator That Provided It With A Distinct Flavor Of Competitiveness, A Meritocratic Nature That Fostered Trust In Markets And A Faith In Mobility Lately, However, That Trust Has Been Eroded By A Betrayal Of Our Pro Business Elites, Whose Lobbying Has Come To Dictate The Market Rather Than Be Subject To It, And This Betrayal Has Taken Place With The Complicity Of Our Intellectual ClassBecause Of This Trend, Much Of The Country Is Questioning Often With Great Anger Whether The System That Has For So Long Buoyed Their Hopes Has Now Betrayed Them Once And For All What We Are Left With Is Either Anti Market Pitchfork Populism Or Pro Business Technocratic Insularity Neither Of These Options Presents A Way To Preserve What The Author Calls The Lighthouse Of American Capitalism Zingales Argues That The Way Forward Is Pro Market Populism, A Fostering Of Truly Free And Open Competition For The Good Of The People Not For The Good Of Big BusinessDrawing On The Historical Record Of American Populism At The Turn Of The Twentieth Century, Zingales Illustrates How Our Current Circumstances Aren T All That Different People In The Middle And At The Bottom Are Getting Squeezed, While People At The Top Are Only Growing Richer The Solutions Now, As Then, Are Reforms To Economic Policy That Level The Playing Field Reforms That May Be Anti Business Specifically Anti Big Business , But Are Squarely Pro Market The Question Is Whether We Can Once Again Muster The Courage To Confront The Powers That Be I loved the first half of the book and disagreed greatly with some of the proposals at the end The first half of the book lays out the problem of political cronyism subverting our democracy and our capitalist markets From bank lobbying to the revolving door to money in politics it s an excellent account He also makes a particularly convincing case of the problems by showing the promise of American meritocracy in contrast with Italy s system But when he goes to suggest fixes to the problem, he seems to want to use capitalism to fix the problems capitalism created On some of the points, I wholeheartedly agree on regulating financial markets and making banks smaller and manageable, but on some, he seems to oppose government interventions that might be very helpful He s right that the government can t fix most things and is likely to be a terrible manager, but we have to compare apples to apples utopias with utopias In other words, perfect capitalism should be contrasted to democratic governance and not shitty governments with perfect markets or vice versa All in all, I recommend this book. One of the greatest misconceptions bought into by many people, including our political leaders, is the notion that being pro market is equivalent to being pro business All too often, and especially in Europe, the folks who champion free markets end up making common cause with the interests of big business, either out of genuine confusion or as a bulwark against socialist politicians that would substitute government run enterprises for private sector ones While this ma be understandable on some level, it is extremely short sighted, as Luigi Zingales demonstrates in this important new book Increased concentration of economic power in the hands of huge corporations, abetted by the increased power and influence of central governments, destroys the efficiency and prosperity arising from truly free and open competition, increases the potential for corruption, and gives free markets a bad name while perpetuating a system that ignores them Zingales writes from a unique perspective a professor of economics at the University of Chicago, with a strong bias in favor or freedom and market based solutions, who arrived a couple of decades ago from Italy, where he saw crony capitalism as the driving economic force in the land Having escaped a system where, as he puts it, Who you know mattered that what you know, he has come to have grave concerns about the drift of America toward a crony capitalist system, and seeks to find solutions to prevent this The book is segmented into two parts a description of the problem and some proposed solutions The first part is the stronger of the two, as it is far easier to make the case than provide workable solutions, which are easily picked apart His detailing of the rise of corporate lobbying, and industry s realization that a far higher ROI can be realized on investing money in influencing legislators than on simply competing in teh marketplace, is both compelling and depressing Zingales highlighting of the incest between government administrations especially the last 3 and Wall Street banks is particularly illuminating regulatory and legislative capture are fairly pouring out of thee pages as he documents the ways in which Wall Street bankers conflate their interests with that of the nation, requiring massive bailouts despite the moral hazard this creates Here, there is not just the typical cynical gamesmanship, but also a sense of groupthink, in which no one in leadership roles at the Treasury Dept seems to have any economic experience or network outside of Wall Street, which simply reinforces their views Additionally, the loopholes built into the Bankruptcy Reform Act, the Dodd Frank Bill, and a number of others drafted and signed under Clinton, Bush and Obama are shown to have direct benefits for the biggest financial players, while decreasing utility and efficiency for consumers The solutions area is a tougher road for Zingales, as he is rightly skeptical of government intervention after demonstrating the ways in which the collusion of business an government are the problem However, it s clear that government has to do something, and the main idea here is to return to simplified regulation, which may have been a blunt instrument think Glass Steagal , but had the advantages of being clearer, with fewer loopholes to exploit and less complexity to allow for regulatory capture Drawing fewer, but brighter, lines that industry can t cross prevents some efficiencies from being realized, but also makes it easier to enforce rules evenly, and allows for fewer appeals to expert regulators who may simply be between jobs in the very industries they regulate Zingales lobbying criticism yield fewer satisfactory ideas, as there doesn t appear to be an easy way to curb lobbying within the Constitution, but the notion of shaming those who use lobbying to promote narrow self interest may not have much force, I m afraid And his discussion on education, while pointed in it s highlighting of the system s failures, is not detailed enough in its call for greater competition to convince the skeptical though i happen to agree with his conclusions Still, the biggest idea to come out of Zingales work is not a new one It s a return to the ideals of Adam Smith, who understood that markets work wonders but businessmen will try to collude once they have the advantage, and the role of government should be to prevent this, not to facilitate it I would have liked to see a stronger call for reduced government, since the size and influence of government is the very thing that makes regulatory and legislative capture feasible However, the points about tax and regulatory simplification address this point More interestingly, Zingales calls for a greater emphasis on an ethical framework in business, especially in business schools he is a professor at Chicago Booth, where I received my MBA , permeating through the generalized course of study He suggests that a normative ethical approach be applied throughout a curriculum, not quarantined in a separate ethics class where it can be safely isolated He also suggests that schools show disapproval of alumni who make fortunes by less than admirable but still legal means such as gambling enterprises and high frequency trading The infusion of an ethical sensibility that creates strong social norms around free market behaviors, and frowns upon lobbying and rent seeking, is a useful application of a libertarian approach to re animiating the enterprising spirit of American capitalism While the proposed solutions could use further expansion, Zingales has provided a tremendous public service in establishing the stark difference between advocating for free markets and advocating for business interest, and lights the way forward for those who seek to support the former, even at the expense of the latter. I ve found that when it comes to conservatives talking about issues relating to Capitalism they tend to fall into two camps The majority camp insists that Capitalism has no problems, and that government is the problem They defelect all charges of market failure to be by products of too much regulation The smaller camp admits that there are issues to deal with that income inequality is an issue That unregulated markets are a mistake That market failure is real and needs to be addressed That Capitalism has started to not work for everyone, and needs to be course corrected.Luigi Zingales is in this smaller camp, and he has than a few good ideas on potential solutions.I was very skeptical about this book when I picked it up any book recommended by Paul Ryan is immediately suspect , and took to it very slowly To be fair, I never totally took to the book I finished it disagreeing with the author on 3 key issues 1 Healthcare will never have a free market solution2 The importance and necessity of a Value Added Tax3 The importance of unions for employee representationZingales would disagree heavily with me on these three issues, but they are all but footnotes in the books arguments I m with him on the big issues, such as reorganizing regulators to address their 3 key issues price stability, investor protection, and systematic risk move to a system that rewards whistle blowers to address finance crime A reward for tips and a percentage of fines for corporate crimes of say, 10 15 percent would do this nicely controlling the power lobbying and campaign contributions with a progressive tax on donations Which also leads too introducing a piguot tax on externalities simplying the tax code, and reducing our reliance on the income tax reducing or eliminateing differences between capital income and personal income fixes to how companys focus on short term gains at the expense of long term growth All of this is just a part of the ideas he brings up, read the book to get the whole story I just finished the book, and I already want to read it again I feel that if conservatives could take a nuanced look at economics as Zingales does we would not be in the political quagmire that currently plagues real economic reform.Perhaps we could even find solutions that everyone could be ok with Someday, I hope we can get there.Check this book out I ll be rereading it at some point soon. Not what I thought, but betterWhen I first heard about this book I thought it be mostly spouting ideas I agree with And, while I agree with much of this book it is only after it challenged some of my ideas about markets This book has an ideology, but one that sits in the middle of most others I hear. I have written about A Capitalism for the People here First off, a note about the author He s an economist He speaks that language For those of us who don t speak that language, parts of this book can be hard to follow Luckily, most of the time, he provides some kind of definition or example which non economists can grasp.He s also Italian he s named Luigi, after all and grew up there, emigrating to the US as an adult So, he brings a certain perspective to the party.The biggest problem with the economic system in the US isn t capitalism It s Crony Capitalism Where, instead of a vibrant marketplace with lots of competition, there are one or a handful of players who have basically divvied everything up and are NOT actively competing Sometimes, it s because the chosen few have managed to kill off all of the competition Sometimes, it is because they gained enough power that they were able to capture the regulatory or lawmaking bodies and tilt the playing field in their favor Either way, we re dealing with a captured market, not a free market Every company out there is seeking to capture their respective market After all, cut throat competition, as found in a free market, doesn t leave much room for profits Without profits, where is the room for sky high salaries for those at the top In case you haven t guessed, these are hallmarks of a captured market A free market favors innovation, lower prices and better products A captured market favors nearly identical product lines, nearly identical prices, a glacial pace of innovation and high profit margins So, for companies who are competing in a marketplace, there s pressure to either crush the competition, so you capture the entire market, or at least reach some sort of unofficial detent, so everyone can stake out their respective turfs and maximize profits.So far, I have to say I m sold on his explanation He calls out Silvio Berlusconi, former Prime Minister of Italy, as a perfect example of Crony Capitalism at work.We need a meritocracy, where hard work and good ideas give you and advantage Competition is what allows this No competition No meritocracy People decide that luck, not hard work, gets you ahead And people or likely to want to slack and leach off whatever welfare systems exist What s the point Italy is there The way you get ahead is by carrying the bag for those at the top It s who you know, and what they owe you, that gets you any measure of success.The I read, the it sounds familiar He s got a nice long row of nails and he s smacking every one of them on the head.He proposes a variety of ways to kill the capture and return competition to the market I particularly like Pigouvian Taxes For example tax the hell out of anything which is harmful to the environment or harms the population at large Don t like paying that tax Quite doing the harmful thing Taxes on cigarettes are an example of this Taxing the short term loans held by a bank is a little harder for me to understand, but those short term holdings, and the volatility in them, were a large cause of the latest financial crisis Taxing them would drive less interest in that, promoting the holding of longer term loans much less volatile as a way to earn money Again, don t like paying the tax Quit doing that which is harmful to the environment or the population.No tax credits, incentives, etc Just tax the undesirable activities.If you eliminate all of the subsidies going to oil and coal, solar and wind have no trouble at all competing in the market The price of gasoline would go up, prompting people to look for alternatives hello electric cars, or alternative fuels The price of electricity would go up, prompting people to look for alternatives to the local utility company hello small scale wind and solar panels on rooftops Trying to get subsidies for wind and solar, in the face of much better financed lobbying for subsidies for oil and coal, is a losing proposition Kill all the subsidies let competition sort it out The people who are fighting this the hardest are the ones who have the most to lose from having to get out there and compete.What s the best source for information about corporate wrongdoing Hint it isn t regulators Or even watchdog groups It s whistleblowers within those companies If we celebrate whistleblowers, and pointedly protect them from retaliation, along with stigmatizing corporate malfeasance, we stand a much better chance of keeping organizations on their toes in terms of legal compliance And think of all the money we could AVOID spending on regulators, which frequently end up being captured by the organizations they re supposed to regulating.Plenty of good ideas in this book Some of them are wishful thinking in many places, the manipulators and loophole seekers are just too ingrained to be overcome.At least we re not as bad as Italy. This is a thoughtful collection of essays by a University of Chicago Booth finance professor addressing the recent financial crises and the subsequent efforts at reform What makes this book different from others in this line is the author s focus on crony capitalism The author starts with the general proposition that the problem in the financial crises is that big business and government are in bed with each other and that because of this, the workings of the free market are severely impaired, leading to the crisis His intention is to be pro market without being pro business He begins the book by noting problems of corruption in his native Italy and then making the point that the US was in danger of becoming like Italy if there wasn t significant reform The idea that the problem with big business is not the anticompetitive behavior that comes with size but the ability to effectively lobby the government into a favorable regulatory arrangement is the major contribution of the book in my opinion.The second half of the book is about potential solutions and is less successful than the first half There is borrowing from other areas, such as research in educational reform Much is also said about the importance of business schools, business ethics, and social norms On the whole, however, these suggestions come across as much tentative and less promising than the sharp exposition of the issues in the first half That is OK, however The critical policy responses to these issues will no doubt evolve This book brings the critical issues together in a manner that is effective and yet uncommon in the large literature on financial crises to date The writing is also excellent and fairly easy to follow The author is especially effective in tying a clear economic logic to the points that are made This makes the book sound reasonable.
Luigi G Zingales is a finance professor at the University of Chicago Booth School of Business, and the author of two widely reviewed books Saving Capitalism from the Capitalists 2003 is a study of relationship capitalism In A Capitalism for the People Recapturing the Lost Genius of American Prosperity 2012 , Zingales suggests that channeling populist anger can reinvigorate the power of c
- 336 pages
- A capitalism for the people
- Luigi Zingales
- 11 May 2019 Luigi Zingales