A Capitalism for the People: Recapturing the Lost Genius of American Prosperity Paperback – February 11, 2014

Zingales has written a wonderful book as documented in the other reviews here. Rather than repeat what they say I will point out areas where his perspective misses important points or where he makes errors.Business school professors generally pay little attention to smaller businesses even though those businesses are very important to the national economy. Big companies can afford to pay consulting fees and the graduates of top business schools tend to find employment directly or indirectly in the big business sector. Smaller companies, say less than $50 million in sales, have little political influence because they lack the means and sophistication to lobby for their interests. They do have one advantage because they can often fly under the government's radar and operate outside the letter of the law or even primarily in the underground economy. One wonders if he is undervaluing the Italian economy given that Italy is famed for having a strong underground economy as well as a vibrant small business sector.Zingales, in searching for counters to crony capitalism and undue political influence, places excessive faith in lawyers and courts. For example he suggests: "Wouldn't it be nice if we could sue a lying politician?" Of course the problem with that is that the courts are mostly accessible to the very same crony capitalism forces as the lobbying arena. Although on occasion the little guy wins justice in the courts, that is very much the exception. Zingales is a fan of class action lawsuits but he does not grapple sufficiently with the fact that class action suits have mostly become a vehicle to enrich lawyers rather than obtain justice.Zingales is a business school professor at the University of Chicago. As such he is operating in one of the less intellectually corrupt parts of academia. Much of academia in the United States suffers form the same faults that Zingales sees in Italian society. Employment and promotion depend on knowing powerful people and hewing to a party line. It speaks loudly that the vast majority of professors are dedicated democrats. Universities are businesses with bottom lines and are heavily dependent on the government for various subsidies and grants. The the current student loan bubble is an example of how this can go wrong and how universities lobby against the interests of their students in order to gain financial advantage.Zingales seems to admire lobbying by environmental groups and speaks admirably of publications by environmental groups that shame polluters. What he misses is the crippling effect on the economy of environmental groups that promote superstitious fear of technology. Examples include the destruction of nuclear energy, outlawing exploration for oil in large parts of the country, unreasonable fear of advances like genetically modified plants, promotion of global warming fears, etc. In general environmental groups are ignorant promoters of junk science - modern day luddites.Zingales uncritically accepts statistics promoted by the left that supposedly showing a decline in real income for various groups in American society. For example: "In the past decade, the real income of the median family dropped by 7 percent." The fallacy with such statistics are many. The size of the median family (actually household) shows a long term decline and thus with fewer potential earners the median income can be expected to decline even as people become richer. As taxes become more onerous it becomes less attractive for both spouses to work since if one stops working it reduces the tax bite at the highest marginal rates. Transfer payments like food stamps or the earned income tax credit may be ignored in such statistics. There are many technical objections to these statistics as described by Alan Reynolds in his book Income and Wealth. Most of all the idea that people are getting poorer is inconsistent with my own anecdotal observation.Zingales uses the case of the supposed health harm from second hand smoke (I am not a fan of smoking) to demonstrate the positive effect of academia."The turning point came in 1986 with another surgeon general's report, this one focusing on the damage of secondhand smoke and saying that smokers were causing health damage to nonsmokers, what in economics we call a negative externality. This is the situation in which social norms are most effective. Fifteen years later, the anti-smoking norm had become so widespread that even my eight-year-old son had fully absorbed it....Despite one of the most massive disinformation campaigns ever organized, the truth prevailed. While lobbying by health groups contributed to the release of key government reports, these reports would have been unthinkable without the scientific work underlying them."The problem with this is that his example is completely wrong. The scientific case against second hand smoke is extremely weak - it's nearly impossible to collect data to prove the case one way or the other. In any case it is very clear that the adverse health effects, if any, are extremely small and not a big problem deserving of a huge government effort. The "truth" did not prevail. A manufactured health danger prevailed and academics who know better keep quiet lest they be attacked by anti-smoking interests.A similar academic corruption is involved in global warming. Although the evidence for a looming global warming disaster is extremely weak and comes from faulty computer models, scientists in the field have been bought or intimidated and dare not say anything against the prevailing golden goose.

Zingales argues that the United States is the country where capitalism has the strongest populist foundation, and that this is by far the largest factor in its economic success. He cautions that government policies in the present and recent past are ignoring this unique advantage by favoring businesses rather than markets, and they risk eroding this healthy attitude. Finally, he offers suggestions for improvements. These are not just directed at politicians, who, however well-meaning, are too deeply caught in a system of perversely broken incentives to fix it by their own power. They are mostly for us, the people, who still have the ultimate power to push for such reforms. This is why you should read this book.The book has two parts. In the first, Zingales presents the socio-historical roots of America's love for free market principles, contrasting them with the injustice and suffering imposed by the "crony capitalism" of government-supported monopolies. He then makes a frighteningly clear and well documented analysis of the last twenty years of economic policies, including the current crisis, the widening income gap, the growth of lobbying, the difficulties of regulations. This is the best and probably the least controversial part of the book. Political economy is not an exact science, and there are many ways of interpreting intentions and events. But Zingales's explanation is among the simplest, clearest, and most consistent, and should be taken seriously.In the second part, he proposes fixes. These span many areas, from banking regulation to tax code, from lobbying to education. While it may be easy to disagree with individual proposals, it is harder to discount the underlying principles. For instance, regulation needs to be simple, at the expense of being "optimal" in an economic sense. The Dodd-Frank financial reform bill of 2010 is 2300 pages long. Its size and complexity make it virtually impossible to understand its implications, except possibly for a small set of experts. Government regulators belong to such sets, and are subject to the "capture" effect: their incentives become aligned with those of the industries they regulate. Thus Zingales only offers fixes that are simple and easy to verify.I liked this book because I find that a debate at this level is almost completely absent from U.S. politics (never mind other countries), and yet it is badly needed. Zingales's effort to bring it back are vital, I think, to the well-being of this nation, and indirectly to the rest of the world, where those who have been looking at the U.S. as a role model have begun to seriously wonder.

I rated this book 5 stars for two reasons: 1) Luigi Zingales has identified the most fundamental problem facing our economic system and society; which, if addressed, would increase the success of the US and all its citizens in the future. 2) The book not only identifies the problem, but has a set of practical approaches to address it. The fact that his analysis and solutions should appeal to entire political range from the Tea Party to Occupy Wall Streeters shows that progress is possible in a strongly bipartisan climate. I think the book is interesting, easy and even fun to read (certainly not a boring economics text!) and is backed up by adequate references and research. Although the ideas here are not all new, he makes a compelling presentation of them from the perspective of someone who, from his childhood in Italy, has seen what happens when cronyism is unchecked. This description, coupled with his proposals for improving the situation, make this a must read book. The hard part is getting Congress, lobbyists, unions, and companies to all give up power to reduce the cronyism that makes it easier to get favored treatment from the government than it is to create a competitive business. It can only be done with pressure from voters to implement policies outlined in the book. I found the book uplifting in that it shows there is hope for the country if we change before it is too late.

This book, like all other publications by this famous and prominent author, is a brilliant example of truly independent, powerful, unbiased, and insightful economic and political analysis. He has captured the true meaning of capitalism and free market economy. He has clearly identified and explained the key threats to a solid and prosperous capitalist society which should be "pro-market" and not "pro-business." This book is a "must read" for all people interested in true capitalism, free-market economy, merit-based society, real democracy and avoiding the risk of a crony-capitalist system. This book, as well as, many other articles and publications of the same author have deeply inspired my new book titled "Predictable and Avoidable. Repairing Economic Dislocation and Preventing the Recurrence of Crisis" published by Ashgate Gower Publishing (November 2013)

Um excelente livro.

Molto buono ed interessante vedere ciò che traspare vivendo all'estero, dove anch'io (e la considero una fortuna che mi ha molto arricchito)ho vissuto, Stati Uniti inclusi.Certo vedere come viene condotta la campagna elettorale in Italia è deprimente e non capisco (o forse purtroppo lo capisco) perchè non si mostrino semplici cifre...

Maybe crony capitalism can explain some puzzles of US economy. Fall in productivity an/or gini coeficient up when digital economy is booming.

Excelente libro