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reading # 1 - good capitalism, bad capitalism, and the...

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good capitalism, bad capitalism, and the economics of growth and prosperity William J. Baumol Robert E. Litan Carl J. Schramm Yale University Press New Haven & London
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Copyright © 2007 by Yale University. All rights reserved. This book may not be reproduced, in whole or in part, including illustrations, in any form (beyond that copying permitted by Sections 107 and 108 of the U.S. Copyright Law and except by reviewers for the public press), without written permission from the publishers. Set in Postscript Galliard Oldstyle by The Composing Room of Michigan, Inc. Printed in the United States of America. Library of Congress Cataloging-in-Publication Data Baumol, William J. Good capitalism, bad capitalism, and the economics of growth and prosperity/ William J. Baumol, Robert E. Litan, Carl J. Schramm. p. cm. Includes bibliographical references and index. ISBN 978-0-300-10941-2 (cloth : alk. paper) 1. Capitalism. 2. Entrepreneurship. I. Litan, Robert E., 1950– II. Schramm, Carl J. III. Title. HB501.B372 2007 330.12 9 2—dc22 2006036191 A catalogue record for this book is available from the British Library. The paper in this book meets the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources. 1 098 76 5 4 321
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93 Growth failed to respond to any of the (standard macro) formulas because the formulas failed to take heed of the basic principle of economics: people respond to incentives. —William Easterly, The Elusive Quest for Growth, p. 143 Throughout most of recorded history and in almost all societies, accumulation of wealth has been a primary goal of enterprising individu- als. In the vernacular familiar to American readers, individuals have pur- sued one of the two primary roads to acquire wealth: increasing the size of the pie and taking one’s fair share from the increase, or simply taking more of the pie, whether or not it grows. Until the time of the Industrial Revo- lution, the second of these options—redistribution of what was already there—was pursued overwhelmingly. That fact, ultimately, explains why the economic growth achieved by industrial countries in the last two cen- turies is unparalleled in previous history, ancient or recent. There are straightforward reasons why redistribution rather than growth has for most of human history been the preferred method of wealth-accumulation. Perhaps the most obvious is that it looks easier sim- ply to acquire riches by taking them away from others who are weaker. In- deed, when unrelenting dangers lurked from every side, violence was un- derstandably deemed a manly, heroic activity. More than that, in such an environment there was little certainty that the fruits of the other avenue to wealth—contribution to production and growth of the economy—would 5 GROWTH AT THE CUTTING EDGE
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accrue preponderantly or even in any substantial part to the individuals who endeavored to make those contributions.
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reading # 1 - good capitalism, bad capitalism, and the...

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