23 Things They Don't Tell You About Capitalism Summary

 

 23 Things They Don't Tell You About Capitalism in a Single Sentence: This book sheds light on some of the unintended consequences of free-market capitalism and suggests ways to make the world a more equitable place for everyone.

Listen to economic gurus on television or read about them in the newspaper, and you'll hear them imply that there is just one theory to follow: free-market economics. Allowing supply and demand to rule the roost is at the heart of this strategy. Financial freedom is highly prized in this society.

Despite the fact that it seems pleasant, this point of view has numerous flaws. Not only is it not based on sound scientific principles, but it also contains several misconceptions about how society and the economy actually work. Even though there are other options, the media never mentions them, which is sad.

Learn all about the flaws of capitalism in Ha-Joon Chang's 23 Things They Don't Tell You About Capitalism. In addition, you'll acquire a sense of how these problems can be solved and what a better society they could create for everyone.

Capitalism has taught me a few intriguing things, and here are three:

1. It is based on the false assumption that people make rational financial decisions, yet government intervention can be helpful.

2. Many people are worried that politics will interfere with the economy, but this is already happening and working well.

3. Our issues aren't caused by capitalism; they are caused by the way we design it.
Get ready for an economics crash course! All aboard!

Lesson #1: Businesses take advantage of people's irrational financial decisions, but government economic planning can help.

In the late 1990s, Robert Merton and Myron Scholes were awarded the Nobel Prize in economics for their work. They began testing their hypotheses in the real world by basing them on the premise that people always make logical financial decisions. These two, on the other hand, failed to achieve their financial goals and went broke.

Despite our best efforts, most of us are irrational when it comes to money. Free-market economics has many of the same flaws as their ideas.

In actuality, making reasonable decisions necessitates taking into account every potential factor. When we consider all possibilities and other paths, we arrive at the finest decisions. For the most part, we can't have access to such a wide range of data when it comes to making financial decisions. There is no rationale for our decisions since they are constrained by our own restricted rationality.

We could make better decisions if the government intervened and set economic restrictions. Given just the options that we can comprehend, our economic viability would be enhanced. Doing this isn't entirely outlandish, either. The government already restricts the use of illegal drugs and dangerous vehicles to protect us.

Lesson #2: Governmental economic planning can be quite beneficial, despite some people's misgivings about it.

People are debating whether or not government intervention in the economy is warranted at this time. The Soviet Union's failure to implement this policy is cited by free-market economists as evidence that it does not work. It's possible you'll hear that if it fails in one place, it will fail elsewhere. As it turns out, this isn't true.

If given sufficient authority, a government can effectively steer the economy. Having too much power was an issue in the Soviet Bloc. It can go a long way to get a little help from the state, which typically knows more about the economy than individual businesses do.

Consider LG's experience in South Korea. In the beginning, the company had planned to enter the textile industry, but the government had a better idea. With their help, LG was able to move into the electronic field and become a well-known and profitable business.

Government intervention in the market has occurred in the United States in the past. It's possible that the aerospace, biotech, and internet industries wouldn't be as successful without their assistance.

Lesson #3: What's wrong with capitalism? It's not the idea itself, but rather how it's implemented in the real world.

There are both positive and negative aspects to our current economic outlook. The advantages of capitalism are undeniable. People's desire to generate money leads them to innovate and create new inventions that benefit society. Capitalism is also responsible for ensuring that we have enough plumbers and not too many rock stars in the economy.

Imagining capitalism as a vehicle is a good analogy. The car is more likely to crash and cause damage and injuries if no one is wearing a seat belt or applying the brakes. However, if they're built safely, cars can open up a world of possibilities for their owners.

Similarly, in economics. Free-market capitalism can be deadly if we allow the market to run wild. We can, however, make the system more secure, equitable, and better if the state only has a small say in it.

Bounded rationality, which states that humans are better at making decisions when they have a limited number of possibilities, comes back into play here. Our politicians could make a big difference if they had a little more influence. Leaders, for example, could instruct banks to avoid making dangerous investments. Our world could be a better place if we improved our system in these simple ways.