Saving Capitalism from the Capitalists

"At the risk of offending every economist friend of mine who has ever written a book, this is my favorite title of any economics book, the one I most wish I had come up with. And it’s an excellent book, too. The basic thesis is that capitalists—like the CEOs that run major corporations—do not actually like competition or markets. They like to be insulated from competition, to receive subsidies from the government, and inside the corporation it is more like Soviet-style central planning than the stereotypical American capitalism. Rajan and Zingales hate this. But they love markets, competition and capitalism, and see capitalism as a powerful force for allocating resources and propelling innovation. This leads them to want to save “capitalism” from the “capitalists”. I have met a lot of CEOs in my life and I have to say this idea resonates with me. I often find myself more excited about markets and capitalism than they are. In some respects, Rajan and Zingales’ argument comes out of the notions of regulatory capture developed by James Buchanan and popular with the laissez faire crowd at the University of Chicago (where Rajan and Zingales were) and elsewhere. The argument was industries would capture their regulators and use them to protect incumbents. The solution proposed by Buchanan was very limited government with very little regulation. They go beyond simplistic analysis. They appreciate the ways in which government needs to be active if it wants to save capitalism from the capitalists, including active competition policy, financial regulation, a social safety net, and investments in education. The framing and specifics defy some of the typical left-right characterizations."