Friday, April 05, 2013


Randall Holcombe writes about "Crony Capitalism: By-Product of Big Government" in the current Independent Review (gated, but wait for it or look at this similar piece by Randy). The article is a useful guided tour through the relevant writings of Acemoglu, Baumol, Becker, Coase, Downs, etc. Randy also mentions that the academic literature has not given enough attention to crony capitalism.

As of this morning, Google Scholar shows 105,000 hits for "market failure" and 28,200 for "government failure" and only 9,940 for "crony capitalism."

Most of Holcombe's essay makes the point that expansive government is not the antidote but, more pluasibly, the cause of cronyism.  This is why Francis Fukuyama was so wrong about the "end of history."  Cronyism replaced communism in Russia and crony capitalism is practically unassailable in the democratic West.

The writings and arguments that Holcombe cites are widely available and clear.  But post-2008, it is still not widely accepted that cronyism was largely responsible for the mess (here and abroad), and that it is not the way to get us out.