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Rating: 
Summary: Entertaining Look at the Limits of Free Market Economics
Review: I am quite accustomed to having scholars in other fields point out the follies of most economic theories. Seldom have I seen the questioning sword come from an economist. The novelty was quite rewarding.
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).
Professor Kay also has some valuable things to say about the problems for America with the American Business Model (greed is overtaking effectiveness for leaders) and the future of economics (economists need to rejoin the real world).
If you are an economist, you will probably find this book to be very elementary. If you took a single economics course, you will find this book approachable and an entertaining way to catch up on what's happened in the field since you studied it. If you have never taken economics, this book will teach you most of what you need to know about public policy with regard to economics.
Those who believe in efficient financial markets should be sure to read this book. You need to change your thinking!
Although this book will probably not be referred to as long as The Wealth of Nations, I hope that economists will learn from its arguments and style to make their work more helpful to the rest of us.
Rating: 
Summary: Illuminating if a bit dense
Review: John Kay is one of those writers with the rare knack for making economics understandable, and his skills are in full display in this book. Kay offers a sophisticated critique of the assumption that markets can, on their own, guarantee prosperity, and he shows how culture and institutions play a crucial role in driving economic growth. At the same time, he rejects facile attacks on capitalism, arguing convincingly that markets remain the most powerful engine of prosperity ever invented. Kay's style is generally quite readable, but at times here -- more so than in his FT work -- he gets bogged down in theory and detail, and there are ponderous passages to wade through. On the whole, though, this is illuminating stuff, and anyone interested in understanding why some parts of the world are rich while others are poor should take a look.
Rating: 
Summary: A book for social democrats and europhiles
Review: New Keynesians, Europhiles, and those who like to set up a straw-man model of the American economy and then have at it will like this book a great deal. Mr. Kay has an elegant and confident style that inspires belief that his pronouncements are the way things are. He does not have much use for the Chicago school of economics, nor of the idea that small government and lower taxes can add vibrancy to an economy. He is a Social Democrat who sees little difference between Mao, Stalin, and the management at Ford Motor Company.
This idea is so strange as to seem laughable to me. Mao and Stalin brutalized entire peoples and mismanaged entire countries. Ford, an international company, is still a miniscule part of the American economy and any mismanagement it might engage in has much more limited effects. Employees who dislike working at Ford and consumers who become disenchanted with its products have other places to work and other products to buy. The citizens of the USSR and China had no such option.
Mr. Kay also says, strangely, that European productivity is higher than that in America but really doesn?t explain the way the measurement is made nor the effect the recently higher Euro against the Dollar has played in that measurement. I am not declaring him wrong, I simply would like to have a more complete demonstration of his claim.
A most egregious mistake he makes, like many who dislike capitalism, is to equate greed with self-interest. He claims that many people do things that are not directly related to acquisition or more money or material goods and claims this to be a proof that people don?t act as capitalism claims. Adam Smith and other explainers of the capitalist model and any of us who believe it in always talk about rational self-interest NOT naked greed, which is a form of irrationality. That people want to build concert halls or have parks or shelters for the indigent is not irrational nor against a person?s self-interest. However, opponents of capitalism need to have greed as the straw man to knock down however silly the claim that it is a foundational principle of capitalism.
Does the book explain why some nations are rich but most remain poor as the subtitle promises? I think that Hernando Desoto?s ?The Mystery of Capital? is much more convincing. But I have my own beliefs, and while I am a fan of European history and culture, I think that Socialism has cost Europe a great deal. However, you may believe differently and if you do, you will likely enjoy this book more than I.
Rating:
Summary: A book for social democrats and europhiles
Review: New Keynesians, Europhiles, and those who like to set up a straw-man model of the American economy and then have it will like this book a great deal. Mr. Kay has an elegant and confident style that inspires belief that his pronouncements are the way things are. He does not have much use for the Chicago school of economics, nor of the idea that small government and lower taxes can add vibrancy to an economy. He is a Social Democrat who sees little difference between Mao, Stalin, and the management at Ford Motor Company. This idea is so strange as to seem laughable to me. Mao and Stalin brutalized entire peoples and mismanaged entire countries. Ford, an international company, is still a miniscule part of the American economy and any mismanagement it might engage in has much more limited effects. Employees who dislike working at Ford and consumers who become disenchanted with its products have other places to work and other products to buy. The citizens of the USSR and China had no such option. Mr. Kay also says, strangely, that European productivity is higher than that in America but really doesn't explain the way the measurement is made nor the effect the recently higher Euro against the Dollar has played in that measurement. I am not declaring him wrong, I simply would like to have a more complete demonstration of his claim. A most egregious mistake he makes, like many who dislike capitalism, is to equate greed with self-interest. He claims that many people do things that are not directly related to acquisition or more money or material goods and claims this to be a proof that people don't act as capitalism claims. Adam Smith and other explainers of the capitalist model and any of us who believe it in always talk about rational self-interest NOT naked greed, which is a form of irrationality. That people want to build concert halls or have parks or shelters for the indigent is not irrational nor against a person's self-interest. However, opponents of capitalism need to have greed as the straw man to knock down however silly the claim that it is a foundational principle of capitalism. Does the book explain why some nations are rich but most remain poor as the subtitle promises? I think that Hernando Desoto's "The Mystery of Capital" is much more convincing. But I have my own beliefs, and while I am a fan of European history and culture, I think that Socialism has cost Europe a great deal. However, you may believe differently and if you do, you will likely enjoy this book more than I.
Rating:
Summary: Analysis of the intersection of culture and economic theory
Review: The subtitle to this book describes the content succinctly - "Why Some Nations are Rich but Most Remain Poor". Author John Kay, a prominent British economist, postulates that one of the reasons is due to cultural factors. These cultural norms may both free and confine the society when it comes to prosperity. If international trade benefits both rich and poor countries then why do poor countries remain poor? In a brilliant exposition of economics he argues that it is not the free markets and constant search for materialistic acquisition that has made America prosperous but it is largely a factor of the various institutions we have in place. That is one reason why many countries have been unsuccessful in trying to emulate the American economic machine. If our success were based entirely on free markets then bringing them to other countries would allow them to prosper, but they often do not. If you were taught the traditional Adam Smith and Keynesian economic models you will be delighted with this additional perspective on the international market and why our models often don't work in other countries. By the same token the models that work in their cultures may not work at all in ours. A fascinating read and a fresh view of international economics, "Culture and Prosperity" is a highly recommended book.
Rating:
Summary: Analysis of the intersection of culture and economic theory
Review: The subtitle to this book describes the content succinctly - "Why Some Nations are Rich but Most Remain Poor". Author John Kay, a prominent British economist, postulates that one of the reasons is due to cultural factors. These cultural norms may both free and confine the society when it comes to prosperity. If international trade benefits both rich and poor countries then why do poor countries remain poor? In a brilliant exposition of economics he argues that it is not the free markets and constant search for materialistic acquisition that has made America prosperous but it is largely a factor of the various institutions we have in place. That is one reason why many countries have been unsuccessful in trying to emulate the American economic machine. If our success were based entirely on free markets then bringing them to other countries would allow them to prosper, but they often do not. If you were taught the traditional Adam Smith and Keynesian economic models you will be delighted with this additional perspective on the international market and why our models often don't work in other countries. By the same token the models that work in their cultures may not work at all in ours. A fascinating read and a fresh view of international economics, "Culture and Prosperity" is a highly recommended book.
Rating:
Summary: The mystery of prosperity
Review: The title and the cover design of this book are extremely attractive. So are the introductory chapters that start with the description of the hypothesis based on the title. This evokes further interest and the soon we find ourselves reading topics that are a rare combination of economics, literature and culture.
There are examples of people in different continents whose income levels in dollar terms vary astronomically. Those who live in poor countries earn less despite good academic qualifications while even a not so educated farm worker in a rich country like Sweden is paid handsomely. The book attempts to solve this mystery.
There are only nineteen countries with a combined population of about 1 billion that are "rich". These countries spring back to prosperity within a short time even when they are flattened by bombs - Germany and Japan for example. It is interesting to note that these nineteen countries have many similarities - statistically atleast - in terms of economic policy, honesty of people, climate, etc. Switzerland tops this list. These "rich" countries are not dependent on their natural resources and have significant trade in value added products and services between them. The rest of the world is just not able to catch up. ( Even the oil kingdoms do not appear in the list of rich in terms of per capita GDP). The book goes on to explain that it is disciplined pluralism with a combination of economic, social and political institutions that is responsible for such success.
Let us then look at the "poor". Pakistan for example has nuclear weapons capability, but a weak public health care system. Can a nation boast of technology when people die from disease ?. This discussion goes on. The next logical step for poor countries would be to exactly replicate the policies of the rich as a quick and sure road to prosperity. Here the author feels that the process needs to evolve over long periods and cannot be transplanted. This is perhaps a very controversial view and can generate a healthy debate.
There are several chapters meant to explain the concepts stated in the hypothesis on prosperity. The bulk of these are devoted to economics while politics and social systems do appear with some icing of art and literature. One might be tempted to visit France and also develop an interest in paintings, Van Gogh, to be specific.
I found every chapter very interesting particularly in the style and simplicity of explaining complex economic issues without the aid of mathematical tools - free markets, perfect competition, economic rent, consumer surplus, central planning, monopolies, and a host of other key topics of economics and wealth generation. Economics is treated as a subject of allocating scarce resources among competing ends. Nobel laureates in economics are quoted liberally adding to the richness of the discussion. The glossary of economic terms provides a good reference.
Having enjoyed the reading on various economic concepts and issues, finally there appears to be a disconnect between from where we started and how the book concludes. Despite this shortcoming the book can be considered a great collection of ideas on a very important global issue.
Rating:
Summary: A description of how complex comparative economics is
Review: There have been many arguments put forward as to why some nations seem forever destined to remain poor and others, primarily European in cultural heritage, are prosperous. Those arguments range from the extreme believers in absolutely free markets as the reason for wealth to the relentless and continuous exploitation of the poor as the reason for poverty. As is nearly always the case when there are two extremes, the truth is somewhere in the middle, with each nation having different reasons for their economic performance. However, there are some general reasons, and Kay cites them with examples.
The first requirement for prosperity is a government whose members are not concerned solely with increasing their personal wealth. Although there are many others that he could have used, Kay cites the example of Joseph Mobutu in the Congo (Zaire). In terms of natural resources, the nation is extremely wealthy, but under Mobutu the country, with the exception of his cronies, was completely bankrupted. Kay also places a lot of blame on Western institutions that supported the Mobutu regime, lending billions of dollars that have largely vanished with no physical evidence remaining. Organized mineral production in the country has largely ceased.
In general, the countries of sub-Saharan Africa all suffer from the problem of greed and weak, incompetent government. In an excellent quote, Tom Friedman states, "Come to Africa- it's a freshman Republican's paradise. Yes, sir, nobody in Liberia pays taxes. There's no gun control in Angola. There's no welfare as we know it in Burundi, and no big government to interfere in the market in Rwanda. But a lot of their people sure wish there were." These examples also demonstrate that free markets are not the answer. Some of the freest markets in the world are in these countries, where bandits rule by controlling mining and then sell their ill-gotten gains to the highest bidder. Government leaders also readily sell their decisions to the one willing to pay the most. It is very sad to note that in many of these countries, economic productivity is now lower than it was when they were still under colonial rule.
Stable governments with honest leaders are also not enough. Kay cites the example of Tanzanian President Julius Nyerere, one of the few honest leaders to emerge in sub-Saharan Africa. Nyerere ran a government largely free of corruption and tried to develop factories and a stable economic infrastructure. Under his rule, Tanzania was considered one country that could possibly rise from the muck that is the disaster of Africa. Unfortunately, despite all of the aid and advice from Westerners, the GDP of Tanzania was lower when Nyerere retired than it was when he took office. One giant factory designed to supply the entire country with shoes was a disaster and never operated at more than 5% of capacity before it was closed.
Kay also has a true sense of history, something often lacking in modern commentators on economics. He reminds us that the early industrial revolution in England was very hard on the social structure, people and the environment. Thousands were herded into slums to provide the labor pool, and left to fend for themselves when they were no longer needed. Children were forced to work very long hours at dangerous jobs that required someone of their size and dexterity. Westerners travel to sweatshops in third world countries and are strongly critical of the conditions they find. It is often forgotten that the conditions they find are much better than when Europe industrialized. The reality is that economic conditions eventually dramatically improve, it just takes some time.
In examining the conditions that lead to a country being prosperous, Kay concludes that the following conditions must hold: * Stable, honest government.
* Laws that clearly define property rights and that are enforced in an even-handed way.
* A sense of community, where people do not blindly follow the path of personal self-interest.
* A spirit of innovation, where new ideas are constantly generated, tried in small experiments and then only executed in the large when they have passed the initial tests. Kay also spends a great deal of time on the American stock market bubble fueled by the dot-com craze of the nineties. His statements and conclusions regarding the behavior of the American economy will not please those who praise it as the model of efficiency. He considers the descriptions of the American economy to be vastly oversimplified and even whether they accurately describe how it functions.
I enjoyed the book, especially the examples of economic successes and failures. So much so, I wished there had been more of them. A large section is spent on describing the fundamentals of markets, which I largely skimmed. One thing is very clear. In performing a comparison of the economic performance of countries, you realize how complex economic productivity is. Those who argue that all will be well if only free markets and democracy take hold are misguided and/or simple-minded. Societies and cultures are extremely complex and Kay demonstrates that even well intentioned actions can be detrimental.
Rating:
Summary: Informative and entertaining
Review: This excellent book is an illuminating introduction to the key economic issues of our time. I had never imagined that a book on economics could be interesting, yet this work has shown me not only that the label of `the dismal science' is unjustified, but also that the workings of the market economy can be explained with wit and lucidity. Highly recommended.
Rating:
Summary: Informative and entertaining
Review: This excellent book is an illuminating introduction to the key economic issues of our time. I had never imagined that a book on economics could be interesting, yet this work has shown me not only that the label of 'the dismal science' is unjustified, but also that the workings of the market economy can be explained with wit and lucidity. Highly recommended.
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