Saturday, October 31, 2009

Joseph Heath's "Filthy Lucre"


I thoroughly enjoyed this book. It is written by a non-economist, a philosopher, and it has the right tone and topics to appeal to me. He points out the foibles of the economists (something which most economists are loathe to do) and it takes up a nice stance between the crazy right and the crazy left (pointing out fallacies in their thinking). It is an excellent book to get you thinking about the economy, economic theory, and political arguments about the economy.

The author takes the eminently sensible position that capitalism is the only system of organizing economics that has been shown to work. But he willingly shows you all the flaws in capitalism in operation and freely admits the needs for regulation. This is refreshing because most ideologues of left and right fail this test miserably.

Here's a sample:
In the decades immediately following the Second World War, many firms in Western Europe were either nationalizedor created under state ownership, not because of natural monopoly or market failure in the private sector, but out of a desire on the part of governments to have these enterprises serve the broader public interest. ...

But something strange happened on the road to democratic socialism. Not only did many of these corporations fail to promote the public interest in any meaningful way, many of them did a worse job than regulated firms in the private sector. ...

We tend to think of these problems as the primary rationale for the privatization of many state-owned enterprises during the neoconservative backlash of the '80s. But this is incorrect. The "public interest mandate of state-owned enterprises was abandoned by socialist, liberal, and conservative governments long before that wave of privatization. ...

The most widely accepted explanation for this extraordinarily perverse outcome is that, during the heyday of public sector ownership, government simply lost control of the managers of these companies -- or else never had it to begin with.
He then goes on to point out that even 'normal' corporations have a similar loss of control by stockholders because of the 'principal-agenct problem'. The book is chockablock full of these insights and discussions. It is a wonderful read, a 'must' read.

3 comments:

Unknown said...

I had the idea that "government run agencies always fail" line that the right uses going around in my reasoning the other day since the line had been used on me after commenting on a blog post. It occurred to me that many corporations fail and go bankrupt and the capitalist system is still run by humans with their problems. I don't see the justification that is used against government social programs just because there is graft and corruption, since this exists in all human activities. Especially in light of the fact that the government has stepped in and saved the biggest corporations throughout the history of this nation.

Unknown said...

PS I like this book and I have successfully ordered the last book that you recommended to me in the comments section several posts back. I will be trying to read this one, too. thanks

RYviewpoint said...

Thomas, I think you will be pleasantly surprised. The book devotes 6 chapters to fallacies on the right and 6 chapters to fallacies on the left. So it covers the spectrum. I found it highly educational and I've been reading this kind of stuff for decades.

I get frustrated when I read a book like this because I think of myself a "informed" but I realize that here's a guy who knows a heck of a lot more than I do. That's fun because it opens me up to new ideas. But it is frustrating because it means I'm not as up on things as I thought. To make myself feel better I say to myself "but this guy teaches this kind of material in a university, so he has lots of kids asking probing questions all the time that forces him to be on his toes".

This book is definitely one of the top 5 I've read this year. So I'm pretty confident you will enjoy it. (Plus, you get a little bit of "Canada" thrown in because the guy sprinkles his examples with US and Canadian examples. For those of us who live in the Great White North it is always nice to read something that recognizes that we exist. Most American authors never show much awareness of things outside the US.)