Saturday, January 28, 2012

American Capitalism - John Kenneth Galbraith

Galbraith basically repeated the same ideas over and over through his academic career, and also as a novelist. American Capitalism is one of John Kenneth Galbraith's first books, and consequently, is not among the best ones. Galbraith would deploy his ideas fully in The New Industrial State, which is actually a very long volume. So, if you need to get a grasp of Galbraith's ideas, American Capitalism is a decent substitute. (actually, quite honestly, the best thing to get a grasp of anyone's ideas is Wikipedia; here is the entry on Galbraith)

The only interesting thing about American Capitalism is the concept of countervailing power, which basically refers to the idea of concentrating buyers or suppliers to counteract the market power of their counterparties (here is a more complete explanation by Christopher M. Snyder from Dartmouth). Countervailing power is an interesting concept from the point of view of competition policy. Galbraith argues that modern markets can never be perfectly competitive, so the solution to monopolies doesn't lie in anti-trust regulations, but in creating  and enforcing all kinds of monopolies so that they check and balance each other. This is a terrible idea. In the end, the people who would end up paying the costs of this scheme are the least organized ones: the customers.

I've reviewed some books by Galbraith over the last months, and I've had enough of him, at least for the medium term. I don't think that reading Galbraith has any value today other than for the economic historian. Galbraith's thoughts have become the creed of the Democratic Party, and his arguments are repeated by people like Krugman in ways that make more sense for the current generation. But The Nation thinks that reading Galbraith is one of the best things you can do with your time. Here's  their review of Galbraith's works.

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