Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor (2004) by John Kay [Dr.Soc]

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As Culture and Prosperity suggests, economics has a limited ability to predict and explain human behavior. Many other fields do better. One problem is that much economic analysis assumes what does not exist: everyone considers only economic factors in their decisions; perfect information exists; circumstances are in a stable state; and so forth. Many economists proudly proclaim that it doesn't matter whether or not their work predicts anything accurately or not. All that matters is that the math is correct.

In Culture and Prosperity, the nominal topic is explaining why people in some countries enjoy more prosperity than those in other countries. Actually, that subject takes up less than a quarter of the book. So if that's your main interest, you may find this book to be a little overkill.

To answer the question posed in the topic, you take a brief tour through the history of economic thought from Adam Smith through to the latest theorists and Nobel Prize winners in economics. If you find all of that more than you want to know, just pick up the argument in part five after reading the opening examples.

One of Professor Kay's strengths is that he uses interesting human examples to make his points. He also avoids math for those who find that challenging. Further, he minimizes the use of jargon. It's an unusually clear argument.

Essentially, he concludes that the driving forces in developing prosperity are division of labor (harking back to Adam Smith), more effective organizations (teams can do more than individuals), having individuals and companies make many decisions rather than relying on central planning (pluralism), and creating scarce talents that have value to many others (seeking economic rents). It also helps to have a culture that favors honesty, an interest in being productive, and other social values that are constructive. Many other items play some role.

But his basic points are important for governments: Give up on planning your economies – seek to facilitate the conditions that lead to prosperity instead; Don't assume that the American way to prosperity can be dropped down into any country without the other characteristics of American society (the reasons why Russia has done poorly).





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