Book Review - People, Power, and Profits - Joseph Stiglitz

If you are following along here at all, you must realize by now that I read a LOT - I mean, A LOT. And, as Jude says, that latest book is always the very best one I have ever read - and YOU should read it. Well, this one is NOT the very best one - but it is a damned good one. I highly recommend it. This is not really a book review - more like encouragement to read the thing. I got my copy from the digital local library - and am debating whether to buy a copy for my family to peruse when they have some time. We shall see. 
 People, Power, and Profits: Progressive Capitalism for an Age of Discontent

Why Is This Book Important?

The author. Joseph E. Stiglitz is a progressive economist, Nobel prize winner. He has held some significant positions around economics - like chief economist of the World Bank, and the like. He knows what he is talking about. He is also very hopeful. And, frankly, I needed that. Humankind: A Hopeful History is the most hopeful thing I have read of late - but it is a bit short on the pragmatics, especially in the realm of economics. The Deficit Myth is really excellent for understanding the Modern Monetary Theory - but it is light on social programs and politics. 

Stiglitz hits them all - and well

And the book is not that dense - more than 20% of the pages are references to other authors and research on how this stuff works. This is not an extended opinion piece.

Highlights

Here are a few highlights from the introduction to tempt you. I started to write my own summary - but the author's is much better. 
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First, markets on their own will fail to achieve shared and sustainable prosperity. Markets play an invaluable role in any well-functioning economy and yet they often fail to produce fair and efficient outcomes, producing too much of some things (pollution) and too little of others (basic research). And as the 2008 financial crisis showed, markets on their own are not stable. More than 80 years ago, John Maynard Keynes explained why market economies often have persistent unemployment and taught us how government could maintain the economy at or near full employment.
. . . 

Capitalist economies have thus always involved a blend of private markets and government—the question is not markets or government, but how to combine the two to best advantage. When applied to the subject of this book, there is a need for government action to achieve an efficient and stable economy with rapid growth, and to ensure that the fruits of that growth are shared fairly.
. . . 

Secondly, we need to recognize that the wealth of a nation rests on two pillars. Nations grow wealthier—achieving higher standards of living—by becoming more productive, and the most important source of increases in productivity is the result of increases in knowledge. Advances in technology rest on scientific foundations provided by government-funded basic research. And nations grow wealthier as a result of good overall organization of society, which allows people to interact, to trade and to invest with security. The design of good societal organization is the product of decades of reasoning and deliberation, empirical observations on what has worked and not. It has led to views about the importance of democracies with the rule of law, due process, checks and balances, and a host of institutions involved in discovering, assessing, and telling the truth.

Third, one must not confuse the wealth of a nation with the wealth of particular individuals in that country. Some people and companies succeed with new products that consumers want. That is the good way to become wealthy. Others succeed by using their market power to exploit consumers or their workers. This is nothing more than a redistribution of income; it does not increase the nation’s overall wealth. The technical term in economics is “rent”—rent-seeking is associated with attempting to get a large share of the nation’s economic pie, in contrast with wealth creation, which strives to increase the size of the pie. Policymakers should zero in on any market in which there are excessive rents because they are a sign that the economy could perform more efficiently: the exploitation inherent in excessive rents actually weakens the economy. A successful fight against rent-seeking results in redirecting resources into wealth creation. 

Fourth, a less divided society, an economy with more equality, performs better. Particularly invidious are inequalities based on race, gender, and ethnicity. This is a marked shift from the view that was previously dominant in economics, which held that there was a trade-off, that one could only have more equality by sacrificing growth and efficiency. The benefits of reducing inequality are especially large when inequality reaches the extremes that it has in America and when it is created in the ways that it is, for instance, through exploitation of market power or discrimination. Thus, the goal of increased income equality does not come with a bill attached.

Fifth, government programs to achieve shared prosperity need to focus both on the distribution of market income—what is sometimes called pre-distribution—and redistribution, incomes that individuals enjoy after taxes and transfers. Markets don’t exist in a vacuum; they have to be structured, and the way we structure them affects both the distribution of market income and growth and efficiency. Thus, laws that allow abuses of corporate monopoly power or that enable CEOs to take for themselves large fractions of corporate income lead to more inequality and less growth. Achieving a fairer society requires equality of opportunity, but that in turn requires greater equality of incomes and wealth.
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OK. You are on your own now. Give the book a shot. Get it at the library. Ask me for a copy. Whatever works.