Reading Notes: Saving Capitalism: For the Many, Not the Few

Author:  Robert B. Reich

Format: Audible

Subject:  Capitalism

Rating: 7/10


Economics to be a pretty captivating subject, so long as it doesn’t get too deep into theory.  I also enjoy listening to ideas that are somewhat counter to my own.   Its an exceptionally effective way to broaden one’s views.  Reich’s writing is based on the idea that we spend most of our time debating the wrong question:  Free Market versus Government.  He argues that (rightly so,) that the Free Market cannot exist without the government, and that the real question is how should the laws that govern the free market be determined.

Reich focuses a lot of his attention on laws governing bankruptcy, property,  and contracts have changed over time.  He highlights those changes as specifically helping corporations and the wealthy while weakening the every day citizen.  Reich truly believes that capitalism can exist in a manner that is much more beneficial to the masses. His final call to action is that Americans don’t have to accept things the way they are.

What I liked Most About the Book:  It served as an excellent reminder that the free market is fundamentally a human construct.

Memorable Quotes:

  • The idea of a free market separate and distinct from government has functioned as a useful cover for those who do not want the market mechanism fully exposed. They have had the most influence over it and would rather keep it that way. The mythology is useful precisely because it hides their power.
  • Government doesn’t intrude on the free market. It creates the market.
  • The free market does not exist in the wilds beyond the reach of civilization. Competition in the wild is a contest for survival in which the largest and strongest typically win. Civilization, by contrast, is defined by rules; rules create markets, and governments generate the rules.
  • Economic historian Karl Polanyi recognized, those who argue for less government are really arguing for a different government—often one that favors them or their patrons
  • Moreover, people who believe the game is rigged are easy prey for political demagogues with fast tongues and dumb ideas.

The $555,000 Student-Loan Burden

The Wall Street Journal has a story about a Medical Student who now owes over $555,000 in student loan debt.  Michelle Bisutti originally borrowed $250,000 to cover medical school, but her balance quickly ballooned as she deffered loan payments and defaulted during her residency.

While student loan debt of $500K is rare, balances of $100K+ are becoming more and more common.

The Importance of Signaling

Statistics students are aware of the bias that wording has on poll results.  Here is an example of such an effect.

Note that majorities in both wordings support the right of gays to serve; the biggest difference is in the “strongly support” number.

Hat Tip to Marginal Revolution.

The Economics of Living in a Walkable Neighborhood

A study conducted by CEOs for Cities suggest that neighborhoods that are accessible to amenities, services, and public transportation by foot, command higher housing prices than those that are not.  The website actually rates neighborhoods from a scale of 1-100 based on their walk-ability.

Conway has an average score of 43 and my apartment has a disapointing score of 5.  Meanwhile a friends apartment in Burbank, CA scores an impressive 75.

Should More People Voluntarily Default on Their Home Mortgage?

This NY Times article makes a case that people who owe significantly more on their mortgage than their home is worth might be better off to walk away, even if they can afford the payments.  The Wall Street Journal ran a similar article a few weeks ago.

The idea is that many people who bought homes with little or no down payment during the market’s peak could walk away and rent a similar home for a fraction of the price.  The additional savings could significantly increase their financial well-being by sacrificing their credit.

John Courson, the president of the Mortgage Bankers Association disagrees and questions what kind of “message” homeowners who voluntarily walk away will send to family, kids, and friends.   He  correctly cites that foreclosures futher depress surrounding home prices.