Skip to main content

The Laws of Capitalism

Daron Acemoglu and James Robinson have written a critique of Thomas Piketty's Capital in the Twenty-First Century - it is available here (hat tip - Graham Brownlow). Like his hero Karl Marx, Piketty attempts to uncover the general laws of capitalism. The following quotation provides a summary of Acemoglu and Robinson's critique:
But Like Marx, Piketty goes wrong for a very simple reason. The quest for general laws of capitalism - or any economic system - is misguided because it is a-institutional. It ignores that it is the institutions and political equilibrium of a society that determine how technology evolves, how markets function, and how the gains from various different economic arrangements are distributed. Despite his erudition, ambition, and creativity, Marx was ultimately led astray because of his disregard of institutions and politics. The same is true of Piketty.

Popular posts from this blog

The Failure of Herstatt Bank

As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press . 

The Great Depression

Marginal Revolution University has a great video on the Great Depression.