Better Capitalism

Better Capitalism

Robert E. Litan
Carl J. Schramm
Copyright Date: 2012
Published by: Yale University Press
Pages: 288
https://www.jstor.org/stable/j.ctt32bn9q
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  • Book Info
    Better Capitalism
    Book Description:

    In the wake of the Great Recession and America's listless recovery from it, economists, policymakers, and media pundits have argued at length about what has gone wrong with the American capitalist system. Even so, few constructive remedies have emerged. This welcome book cuts through the chatter and offers a detailed, nonideological, and practical blueprint to restore the vigor of the American economy.

    Better Capitalism extends and significantly expands on the insights of the authors' widely praised previous book, Good Capitalism, Bad Capitalism, co-written with William Baumol. In Better Capitalism, Robert E. Litan and Carl J. Schramm focus on the huge-but often unrecognized-importance of entrepreneurship to overall economic growth. They explain how changes in seemingly unrelated policy arenas-immigration, education, finance, and federal support of university research-can accelerate America's recovery from recession and spur the nation's rate of growth in output while raising living standards. The authors also outline an innovative energy strategy and discuss the potential benefits of government belt-tightening steps. Sounding an optimistic note when gloomy predictions are the norm, Litan and Schramm show that, with wise and informed policymaking, the American entrepreneurial engine can rally and the true potential of the U.S. economy can be unlocked.

    eISBN: 978-0-300-18469-3
    Subjects: Economics, Business, Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. PREFACE
    (pp. vii-x)
  4. 1 TOWARD BETTER CAPITALISM
    (pp. 1-34)

    It was not an American who coined the word “capitalism,” which has long been used to describe the U.S. economy. That honor falls, ironically, to capitalism’s most famous critic, Karl Marx, who inveighed against an economic system he believed was dominated by a few “capitalists”— owners of buildings, equipment, and the dreaded corporations—whom he believed exploited the masses.

    But Marx the wordsmith was cleverer than Marx the economist. The emerging economic system that he decried for enslaving the poor turned out instead to be the greatest anti-poverty force the world has ever known, lifting living standards for ever-growing numbers...

  5. 2 TOWARD A NEW UNDERSTANDING OF THE ECONOMY: AN ENTREPRENEURIAL SYNTHESIS
    (pp. 35-55)

    There are silver linings to economic crises. They tend to cause a major rethinking of economics itself. Fortunately, there is already evidence that the Great Recession and its aftermath are having this effect.

    Given the relative stability of the U.S. economy in the twenty-five years preceding this traumatic event, macroeconomics—that part of economics which deals with the performance of the overall economy and had once attracted some of the profession’s brightest stars—had become much more theoretical (and esoteric) and of less interest to most economists and even less to the wider public. The best evidence for this perhaps...

  6. 3 TOWARD A MORE ENTREPRENEURIAL ECONOMY
    (pp. 56-84)

    There are fundamentally two very different ways to generate more successful firms, and hence to spur economy-wide growth. Continuing the baseball analogy introduced in the last chapter, one can have more “at bats”—namely, encourage more people to launch their own firms—or increase the national batting average—namely, find ways to increase the percentage of new firms that successfully scale.

    Of the two strategies, we believe the more likely route to success is to raise the entrepreneurial batting average. As shown in the last chapter, the number of new firms launched annually has been relatively stable over the past...

  7. 4 UNLEASHING AMERICA’S ACADEMIC ENTREPRENEURS
    (pp. 85-107)

    Among the many miracles of modern medicine are the various methods for releasing drugs in measured amounts, over time, at the right targets. Few of these achievements would be possible without the genius of Robert Langer, a celebrated biomedical engineer at MIT. Langer is responsible for an incredible 750 patents, the author of over 1,000 technical articles, and the most widely cited engineer in history. He has founded numerous companies and his innovations have been licensed to many others.

    While Langer may be America’s, and possibly the world’s, leading “rock star” scientist, the United States fortunately has many more. Stanford...

  8. 5 IMPORTING ENTREPRENEURS
    (pp. 108-123)

    “Give me your tired, your poor, your huddled masses yearning to breathe free”—famous words by Emma Lazarus that are engraved on the pedestal of the Statue of Liberty and which are cited repeatedly as evidence of America’s welcoming attitude toward immigrants. In recent years, however, those attitudes have shifted significantly and depend on who those immigrants are.

    Legal immigrants, who are heavily restricted in number by law, are still for the most part accepted here, especially (although not universally) if they are coming to the United States to study or already have skills. Yet the welcome mat is largely...

  9. 6 IMPROVING ENTREPRENEURIAL FINANCE
    (pp. 124-148)

    Ask most entrepreneurs what one thing they want and think they need most, and the answer you will probably get is simple: money—preferably not their own, ideally at a low price (a low rate of interest if a loan, or only a small piece of their company if equity). Our experience and academic research indicate that this is wrong. As we discussed in Chapter 3, what is most important for entrepreneurs is having the rightnetwork—which mayleadthem to sources of money, but equally if not more important, to potential partners, mentors, employees, suppliers, and customers.

    Still,...

  10. 7 TOWARD SUSTAINABLE GROWTH
    (pp. 149-170)

    The history of economic growth is heavily intertwined with the history of energy. Our modern way of life, not to mention continued improvements in our well-being, would not be possible without being able to harness nature’s fuels in ever more sophisticated ways. To “make things go,” to make it possible for increasingly innovative machines and computer chips to do the work of human beings, we must also advance our utilization of energy resources.

    More precisely, the transportation sectors throughout most of the world are totally dependent on one single oil-based fuel, gasoline. People in developed societies in particular—their homes,...

  11. 8 AVERTING FUTURE ECONOMIC CRISES
    (pp. 171-200)

    In 1911, the brand-new passenger liner theOlympic, sister of the ill-fatedTitanicand the only one of the trio of sister ships that did not sink, was steaming out of her home port of Southampton, England, bound for New York. It was a bright, sunny day, and the sea was glassy and calm. The busy port teemed with ships, but that was nothing new for an experienced captain and crew. The great liner crept along at a glacial five knots, in keeping with maritime regulations.Olympic’s crew kept their eyes on the one other really large vessel in the...

  12. 9 ENTREPRENEURSHIP AND THE OPPORTUNITY SOCIETY
    (pp. 201-226)

    Up to this point, we have discussed in some detail the virtues of faster growth, outlined ways to achieve it, and highlighted the major threat to its being realized. It is now time to address a question that we imagine many readers have asked themselves at some point along the way: how do we know that the benefits of added growth will be broadly distributed across the population and not narrowly concentrated in just a few—perhaps only the high-growth entrepreneurs we have been counting on to move our economy ahead?

    We do not know. That is because the answer...

  13. 10 CONCLUSION: THE POLITICAL ECONOMY OF GROWTH
    (pp. 227-232)

    Since the Great Recession, policymakers and voters in developed economies, including the United States, justifiably have been preoccupied with wanting a rapid recovery, even though we believe it is now also widely understood that this expansion will be slower and more gradual than after previous postwar downturns. This is because the recession of 2008–9 was the deepest of this era, but also—more importantly, at least in the case of the United States—American consumers and financial institutions were heavily leveraged going into the financial crisis that precipitated the large drop in output. Consumers therefore understandably have been cautious...

  14. NOTES
    (pp. 233-244)
  15. BIBLIOGRAPHY
    (pp. 245-254)
  16. INDEX
    (pp. 255-263)