Ha-Joon Chang’s Excellent 23 Things

23 Things They Don't Tell You About CapitalismLast week I read Ha-Joon Chang’s exceptional 23 Things They Don’t Tell You About Capitalism. Frankly, I’m smitten with Chang. Andrea claims I have some kind of man-crush on Paul Krugman. There is no doubt that I am very impressed by this ability to make economics[1] understandable, his insightful explanations of what is going on now, and his breezy writing style. But he is distinctly more conservative than I am. What’s more, he is more in the mainstream of economics and more committed to a lot of its questionable paradigms. Chang is different.

As the title of this book indicates, he discusses 23 myths of economics—free market economics, to be specific. Everyone should read this book, especially conservatives. I have a feeling that most conservatives would find the book compelling, because it shows that a lot of the “free market” rhetoric that is taken for granted on both the right and left in this country is nothing more than mythology. It will provoke that great conservative question, “You mean they’ve been lying to me all these years?!”

In the first chapter Chang takes on the very idea of a free market. He also discusses a repugnant attitude that we see among free market economists that they are just following the facts:

So, when free-market economists say that a certain regulation should not be introduced because it would restrict the “freedom” of a certain market, they are merely expressing a political opinion that they reject the rights that are to be defended by the proposed law. Their ideological cloak is to pretend that their politics is not really political, but rather is an objective economic truth, while other people’s politics is political. However, they are as politically motivated as their opponents.

Later as an example showing that people in rich countries are overpaid relative to people in poor countries, he presents bus drivers in Sweden and India. The Swedish bus driver makes 50 times as much as the Indian, but most likely the Indian is actually a better driver given the poor roads and unexpected obstacles like cows. Regardless, who could believe the Swedish bus driver is really 50 times as productive as the Indian?

He goes on to quote Warren Buffet:

I personally think that society is responsible for a very significant percentage of what I’ve earned. If you stick me down in the middle of Bangladesh or Peru or someplace, you’ll find out how much this talent is going to produce in the wrong kind of soil. I will be struggling thirty years later. I work in a market system that happens to reward what I do very well—disproportionately well.

Chang especially hates this idea that we live in an information or post-industrial world. Here he provides the example of Switzerland:

[M]any people think that Switzerland lives off the stolen money deposited in its bands by Third World dictators or by selling cowbells and cuckoo clocks[2] to Japanese and American tourists, but it is actually one of the most industrialized economies in the world.

One issue close to my heart is this idea that the United States is the richest country in the world. We’re number one! We’re number one! These are the cries of a dying empire. But Chang notes that a big part of this perception outside the United States has to do with our inequality:

One reason why we get that impression is that the US is much more unequal than the European countries and therefore looks more properous to foreign visitors than it really is—foreign visitors to any country rarely get to see the deprived parts, of which the US has many more than Europe.

What is most impressive about 23 Things They Don’t Tell You About Capitalism is that Chang goes after all of the counter arguments. Many times while I read it I thought, “Yeah, but…” And the next thing in the book would be an argument that destroyed that counter argument. The book is also highly readable. I can’t recommend it highly enough.

Here are the 23 Things:

  1. There is no such thing as a free market
  2. Companies should not be run in the interest of their owners
  3. Most people in rich countries are paid more than they should be
  4. The washing machine has changed the world more than the internet has
  5. Assume the worst about people and you get the worst
  6. Greater macroeconomic stability has not made the world economy more stable
  7. Free-market policies rarely make poor countries rich
  8. Capital has a nationality
  9. We do not live in a post-industrial age
  10. The US does not have the highest living standard in the world
  11. Africa is not destined for underdevelopment
  12. Governments can pick winners
  13. Making rich people richer doesn’t make the rest of us richer
  14. US managers are over-priced
  15. People in poor countries are more entrepreneurial than people in rich countries
  16. We are not smart enough to leave things to the market
  17. More education in itself is not going to make a country richer
  18. What is good for General Motors is not necessarily good for the United States
  19. Despite the fall of communism, we are still living in planned economies
  20. Equality of opportunity may not be fair
  21. Big government makes people more open to change
  22. Financial markets need to become less, not more, efficient
  23. Good economic policy does not require good economists

[1] Economics makes my brain hurt:

[2] This short speech from The Third Man apparently was written by Welles himself instead of Graham Greene. Similarly, in Jaws, the best speech was written by Robert Shaw. You can watch it on YouTube.