Conversations about Capitalism

In the latest issue of Reason Magazine, economist Deirdre McCloskey has a beautifully-penned article about Galbraith, Schumpeter, economics and rhetoric. Definitely worth a read, particularly the parts about Galbraith’s zingers and Schumpeter’s three great ambitions.

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8 Responses to Conversations about Capitalism

  1. cba says:

    agreed, a good read. unfortunate she chooses to grind her own axe in the closing paragraphs — to be expected, I guess.

  2. Patrick says:

    That was some pretty mild axe-grinding!

    A great read, thanks.

  3. Sean says:

    Her axe-grinding (aka bias) pervaded the entire article. To trivialise the great challenges to capitalism, especially the last one ‘environmental decay’ as mere fads is disgraceful.
    And to ignore Galbraith’s other work (other than a passing reference to the affluent socity) takes the indsutrial state out of context.
    We are experiencing some extreme forms of
    “Private affluence, public squalor” right now.

  4. Patrick says:

    extreme forms‘ – surely not that extreme in this time of, generally speaking, greater across-the-board prosperity than pretty much ever before?

    mere fads‘ – amen to which. Unfortunately, I think you may have leapt to a conclusion there. The ‘mere fad’ (your words, note) of which she writes is not environmental decay, but the idea that it is somehow the fault, if not the actual design, of capitalism.

    A stupid fad, in fact.

    But my favorite line, and one which hints at doing justice to Andrew’s superlative:
    Schumpeter became permanently suspicious of state power. Galbraith became permanently delighted with it.

  5. cba says:

    That line was one of my favourites, too.

    But let me be clear on the axe grinding. I don’t care one way or the other about her attitude to capitalism. I just find it tiring that every time she writes something, she never misses an opportunity to stick it to the profession. I quote:

    “An economics that doesn’t acknowledge talk and its creativity may be in some pointless sense “exact,” but it doesn’t illuminate the world we have, the world admired by Schumpeter and zinged by Galbraith, of entrepreneurs—in the market, the corporation, the government, the laboratory, the street. Capitalism, like democracy, is talk, talk, talk all the way down.”

    Clearly a cry for more story telling in economics (but isn’t that what sociology is for?) That last sentence, in particular, is especially vacuous as a grounds for critique of modern economics.

  6. Patrick says:

    Hmm. Either she didn’t express herself as clearly as she might, or I just understood her to mean what I myself thought 🙂

    I understood her to mean that capitalism’s great genius is feedback and interaction. Capitalism is a permanent and evolving conversation, which is why Galbraith who preferred listening to himself was so dumb when it came to capitalism.

    Today’s AFR has something on the back page which mentions how Galbraith’s theory that corporations could manufacture demand at will through advertising and thus had perverted the laws of supply and demand (sounds kinda like Chomsky after reading intro eco 101) came out just after the Ford Edsel.

    That damn evidence, again!

  7. Ames Tiedeman says:

    We cannot sustain 800 bilion a year trade deficits. We cannot export our way out of this mess. The only answer is a sharply lower dollar to drive manufactruing home and to lower the trade deficit. The dollar has much farther to fall. What you are seeing is a long term effort (it will take 20 years) to get the trade deficit back under 1% of GDP. We are currently running a trade imbalance of nearly 6% of GDP. No nation can do this. The IMF would be stepping in to help any nation if its trade impalance went to 6% of GDP becuase its currency would collapse! The U.S. is different, but still we cannot sustain a trade deficit of this magnitude. People must understand, when we buy an item from say China, we pay in dollars. The Chinese company we just bought from them goes to an Exchange Bank in China and converts those dollars to Yuan. The Chinese banking system (Chinese Government) is now sitting on the dollars. They can either 1, buy oil, 2, buy Treasuries, 3. buy U.S goods, 4. buy U.S. Corporations, 5. other. Over time if we (the U.S. ) contiue to run a trade deficit we could simply be completely bought and controlled by foreigners. Warren Buffet has explained the situation as being like a rich Texas farmer who loses a small piece of his land year after year and never notices for a while. When he then notices, tragedy sets in because he no longer controls his land. So in sum, we need to get the trade deficit way down. This is why the Fed has abandoned the dollar. It wil be going down for the next 20 years. That is how long it is going to take to correct this imbalance mess.

  8. Verdurous says:

    Andrew,

    My you’re reading some interesting magazines lately. Reason magazine. Crikey. But there again, the hardest, but perhaps most important task in knowledge aquistion is to read material we diagree with. So I had a squizz. Not a bad article.

    For something altogether different – did you catch Dani Rodrick’s blog article on “the new canon”?

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