Capitalism Beyond the Crisis -

Interesting takeaways quoted from this recent Amartya Sen's book review:

(begin quote) "Indeed, early advocates of the use of markets, including (Adam) Smith, did not take the pure market mechanism to be a freestanding performer of excellence, nor did they take the profit motive to be all that is needed.

....The insufficient regulation of financial activities has implications not only for illegitimate practices, but also for a tendency toward overspeculation that, as Adam Smith argued, tends to grip many human beings in their breathless search for profits. Smith called the promoters of excessive risk in search of profits "prodigals and projectors"—which is quite a good description of issuers of subprime mortgages over the past few years.

....As it happens, these problems were already identified in the eighteenth century by Smith, even though they have been neglected by those who have been in authority in recent years, especially in the United States, and who have been busy citing Adam Smith in support of the unfettered market. " (end quote)

Along with this justification that Adam Smith would encourage government intervention, Sen presents prespectives from other economists like Keynes and Pigou, about how the present crisis donot call for a true Keynesian style "new capitalismm" but do demand a new understanding of older ideas and perspectives - esp importance of non market initiatives and the non profit values that came from them, and need for government involvement in basic healthcare.