Sunday, October 21, 2007

Not dismal

William Baumol, Robert Litan and Carl Schramm have written Good Capitalism, Bad Capitalism. and the Economics of Growth and Prosperity. They enumerate four types of capitalism: state-guided capitalism, oligarchic capitalism, big-firm capitalism and entrepreneurial capitalism. They show that the last is the best but that the modern U.S. has aspects of the last two.

The book has the flavor of a textbook. It contains nothing that is new or original but it packages a lot for the uninitiated. The trouble is that it does not make a compelling read. Perhaps it requires the spark of an exciting professor who assigns the book to students but elaborates to keep them interested.

In the Appendix, the authors acknowledge that their common sense story is largely missing from high-brow economics. They claim that this is because most of what they write about is not easily available in terms of useful data series.

I am note sure that I buy this. The Austrian critique of neo-classical economics comes to mind. Why focus on a world of equilibria when all of the interesting stuff has nothing to do with boring equilibia? Why focus on a world of efficient allocations when the interesting stories are how the many inefficient allocations generate signals and inspire actions that move the system towards better allocations? Nothing dismal about that.