Butting Heads (and iPhones): Economists Robert Gordon and Joel Mokyr Duke it Out in the Wall Street Journal

Photo Credit: WSJ.comNorthwestern Professors of Economics Robert Gordon and Joel Mokyr just can’t seem to get along.

In this past weekend’s edition of The Wall Street Journal, the two voice some distinctly adverse ideas about technological innovation in the twenty-first century – on the one hand, its success, and on the other, its stagnation.

Professor Mokyr, author of The Gifts of Athena: Historical Origins of the Knowledge Economy and co-author of The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times is an economic historian who’s altogether positive about the economic direction of the world-at-large. But this isn’t just blind optimism; in fact, it’s due in large part to the rapid rate of technological innovation. Mokyr notes that “new tools have led to economic breakthroughs,” and that since the field of technology is vast and unremitting, we’re hardly in danger of economic collapse.


“The divergent views are more than academic. For many Americans, the recession left behind the scars of lost jobs, lower wages and depressed home prices. The question is whether tough times are here for good. The answer depends on who you ask.”


But Professor Gordon, a macroeconomist and author of the forthcoming book Beyond the Rainbow: The American Standard of Living Since the Civil War (Princeton), and of the best-selling textbook, Macroeconomics, is hugely skeptical of such theories. He asks us to compare useful and revolutionary objects, like the flushing toilet, to the newest iPad; the former, already invented, is indispensable. Everything created thereafter is simply excess – the cherry on top, if you will. And, as new developments become only incrementally more advanced than their predecessors, technological progress will slowly grind to an anticlimactic halt.

The op-ed also gives some interesting background on both Gordon and Mokyr and tries to posit the origins of their respective beliefs, whether positive or negative. Despite their conflicts, the two can concede to one point: that the twenty-first century is unarguably the best time to be born, and the revelation is certainly an encouraging one.

Princeton at Hay Festival


Hay on Monday evening
Blackburn at Hay
Simon Blackburn talks to Rosie Boycott
Mitton at Hay
Jacqueline Mitton broadens our knowledge of the solar system
Bethencourt at Hay
Francisco Bethencourt discusses “Racisms”

Last week was an important week in the British literary calendar–the week of Hay Festival! Set in beautiful Hay-on-Wye on the Welsh Borders, and running since 1988, the festival attracts thousands of book and culture enthusiasts from around the world every year. This year’s line-up was as strong as ever: with names such as Toni Morrison, Richard Dawkins, Stephen Fry, Mervin King, Jeremy Paxman, Simon Schama, Sebastian Faulks, William Dalrymple, Benedict Cumberbatch, Bear Grylls, Max Hastings, Rob Brydon, Bill Bailey and Dame Judi Dench (to name but a few to catch my eye in the jam-packed programme), 2014′s Festival could not fail to enthrall and delight anyone who walked its muddy paths.

And of course, Princeton University Press authors have been gracing the Hay stages this year, with a variety of wonderful events. From Diane Coyle, explaining GDP to us in plain English (and lo0king very stylish in her Hay wellies) to Michael Wood (translator of Dictionary of Untranslatables) discussing words that defy easy–or any–translation from one language and culture to another, to Ian Goldin’s talk about globalization and risk (The Butterfly Defect), last weekend got off to a great start.

Then, earlier in the week, Jacqueline Mitton (author of From Dust to Life) took a gripped audience on a journey through the history of our solar system in her “John Maddox Lecture”.  On Tuesday, Rosie Boycott spoke to Simon Blackburn about his book Mirror, Mirror–a fascinating conversation which covered everything from psychopathic tendencies displayed in senior management to whether Facebook is really that damaging to the young. Francisco Bethencourt, meanwhile, managed to squeeze a history of racisms into an hour and gave us lots to ponder.

If all this leaves you wishing you’d been there, there is still more to envy! Later in the week, Roger Scruton, Will Gompertz and others discussed the value of a Fine Art degree – does contemporary art celebrate concept without skill? On a parallel stage, renowned historian Averil Cameron (author of Byzantine Matters) convinced us that an understanding of the Byzantine era is just as important as studying, say, Rome or Greece. Finally, Michael Scott (author of Delphi), whom it is almost impossible to miss on the BBC these days, delivered a talk about Delphi: A History of the Center of the Ancient World on Friday.

Whether you swoon for science are potty for poetry, whether you want to dance the night away in a frenzy of jazz or are hoping to meet your favourite on-screen star, Hay Festival offers something new and exciting every year.

Quick Questions for Ignacio Palacios-Huerta, author of Beautiful Game Theory: How Soccer Can Help Economics

5-28 Palacios-HuertaIgnacio Palacios-Huerta is a Professor of Management and Strategy at the London School of Economics, and is the current Chair of the Management department there. He received a B.Sc. in Economics from the University of the Basque Country in Bilbao, Spain, and an M.A. in Economics from the University of Chicago, where he also completed his Ph.D. in Economics. Palacios-Huerta is also the Head of Talent Identification at the Athletic Club de Bilbao and is a Senior Fellow at the Ikerbasque-Basque Foundation for Science at UPV/EVU.

Dr. Palacios-Huerta is a contributing editor of In 100 Years (MIT), an engaging text that draws on the expertise and imagination of ten prominent economists to “present their ideas about the world of the twenty-second century,” considering topics like “the transformation of work and wages, the continuing increase in inequality, and the economic rise of China and India,” among others. He continues to produce scholarship on economic theory and has several articles, like “Consumer Inertia, Choice Dependence and Learning from Experience in a Repeated Decision Problem” (Review of Economics and Statistics), up for publication in 2014.

Now, on to the questions!

PUP: What do you think is the book’s most important contribution?
Ignacio Palacios-Huerta: In recent decades, economics has extended across many fields and areas previously considered to belong to sociology, political science, psychology, and several other sciences. What distinguishes this book is that its basic idea is just the opposite: it is not what economics can do for area or field X, but what X can do for economics. And so it takes exactly the opposite route. In the book X is, of course, soccer. And the idea is to attempt to obtain and present novel insights into human behavior using data and settings from soccer. This is what distinguishes this book from other economics books and from other books on the study of sports, and I think it is its most important contribution. After all, if the economic approach is applicable to all human behavior, then any type of data about human activity is useful to evaluate economic theories.

What is the biggest misunderstanding that people have about what you do? (I.e., is it anthropology? Economics? etc.)
I think this picture (taken from N. Gregory Mankiw’s blog) captures quite well a number of misunderstandings:

What+Economits+Do[1]

What are you reading right now?
A novel by Ramiro Pinilla, Aquella Edad Inolvidable, a biography of British graffiti artist Banksy by Will Ellsworth-Jones, and Seven Deadly Sins: My Pursuit of Lance Armstrong by David Walsh.

What was the most influential book you’ve read?
I would say, for different reasons, these three books are tied in first place:

Economic Theory by Gary S. Becker; A Treatise of Human Nature by David Hume; and The Passions and the Interests by Albert Hirschman (Princeton).

Describe your writing process. How long did it take you to finish your book? Where do you write?
The actual writing took me around 4-5 months, but I was thinking about it for a long time, probably around 3-4 years, collecting data, developing experiments, running the different empirical tests, and reading and keeping relevant stories and anecdotes in my mind to make the book as engaging as possible.

What was the biggest challenge involved with bringing this book to life?
Lack of time: time to think, and time to work and write.


“The idea is to attempt to obtain and present novel insights into human behavior and data settings from soccer. [...] I am interested in pushing the economic approach to human behavior.”


Why did you write this book?
Two reasons. First, as indicated in the first question, there is a clear aspect that distinguishes this book from other economics books and from other books on the study of sports. To the best of my knowledge this is the first book that takes this novel approach, and so I felt that, from this perspective, there was a genuine chance to present a unique contribution. Second, I am interested in pushing the economic approach to human behavior. And so, if any type of data about human activity is useful to evaluate economic theories, what could possibly be most appealing to a wide audience than data from sports, and in particular data from the world’s most popular sport?

Who do you see as the audience for this book?
Anyone interested in economics, anyone interested in sports, and anyone who thinks that he or she might perhaps become interested in economics and/or in sports, especially if he or she has a curious or scientific mind.

How did you come up with the title or jacket?
The title was a suggestion by the initial editor of the book at Princeton University Press, Richard Baggaley, and by my colleague at the London School of Economics, David De Meza. They both, independently of each other, had the same suggestion. And as soon as they suggested this title, I thought it was great. I really liked it and instinctively knew that it would be the title of the book.

With respect to the jacket, it was a suggestion by an excellent designer at Princeton University Press. I suggested some ideas, and one of them was distantly related to the one in the final jacket since it contained a “bicycle kick.” But the jacket is more striking and spectacular than anything I could have come up with. I really like it.

________________________________________________________________________________________________________________________________________________________

Ignacio is the author of:

5-28 Palacios-Huerta BGT Beautiful Game Theory: How Soccer Can Help Economics by Ignacio Palacios-Huerta
Hardcover | 2014 | $35.00 / £24.95 | ISBN: 9780691144023
224 pp. | 6 x 9 | 30 line illus.| eBook | ISBN: 9781400850310 |Reviews Table of Contents Introduction[PDF]

Quick Questions for Diane Coyle, author of GDP: A Brief but Affectionate History

Coyle_GDP_author photoDiane Coyle is an economist specializing in the economics of new technologies and in competition policy. She has missions to improve both the public understanding of economics and the teaching of economics to new generations. A Visiting Research Fellow at the Smith School of Enterprise and the Environment, University of Oxford, her previous books include The Economics of Enough and The Soulful Science: What Economists Really Do and Why It Matters.

We have just published GDP: A Brief but Affectionate History (“[A] little charmer of a book…” according to the Wall Street Journal). 

She writes an awesome blog called The Enlightened Economist that should be on your daily must-read list.

Now, on to the questions!

 

What inspired you to get into your field?

A brilliant tutor. I went to university with the aim of becoming a philosopher, planning for a career sitting in Parisian cafes thinking deep thoughts. But Peter Sinclair, now Professor of Economics at the University of Birmingham, inspired me with his enthusiasm for economics and its power to explain and perhaps even improve the world.


The way people think of ‘the economy’ has changed so much over time.


What is the biggest misunderstanding people have about what economists do?

Most people think that economics is mainly macroeconomic forecasting, and they think most economics is based on the assumption that we are all selfish and ultra-rational, and only care about money. A generation ago, a narrow approach to economics did dominate the subject, and there are still some economists who don’t see anything wrong with the reductionist version, but most of the economics practiced today is far, far more in touch with the ‘real world’. Unfortunately, the update hasn’t yet reached economics textbooks and courses – hence the importance of the INET CORE curriculum project.

What would you have been if not an economist?

A dancer – not that I’d have been good enough!

What was the most interesting thing you learned from writing GDP?

It was that the way people think of ‘the economy’ has changed so much over time. We have Angus Maddison’s figures based on calculations of GDP going back through time, but up until the mid-20th century this was not how people thought about the aggregate economy. GDP and Keynesian macroeconomics co-evolved.

What do you think is the book’s most important contribution?

To demystify GDP, which most people hear as gobbledygook on the news; and to remind or tell them that how we measure economic activity is the result of many conventions and judgments. There is no natural object called GDP out there – it is a human construction, and what it measures is not well-being or social welfare, but simply a specific definition of economic activity.

Describe your writing process. How long did it take you to finish your book? Where do you write?

I fit the research around day to day life but need to find chunks of time for writing. This means my patient family are used to me spending a couple of hours every day tapping away at my laptop when we’re on holiday. I managed one (short) book once on maternity leave, typing one handed with the baby on the other arm.


There is no natural object called GDP out there – it is a human construction.


Do you have advice for other authors?

Just start. Write a lot and read a lot, as writing is a craft skill. Read George Orwell on the English language if that’s the language you’re writing in. And for non-fiction, you have to find a system for organizing the ideas and material – I always find this the hardest part and there’s always a stage when I have pieces of paper with headings laid out over the floor of my study.

What are you reading right now?

Thomas Piketty’s Capital in the 21st Century, and The Infatuations by Javier Marias.

What is your next project?

I’m helping out on that project. I’m writing a new public policy economics course to teach to undergraduates at the University of Manchester. In terms of research, I’m interested in two aspects of digital change: the continuing reshaping of supply chains, through both organizational and geographic change; and the implementation of public policy. There’s no point doing a wonderful economic analysis of a policy issue if you don’t also think about the political economy and practicality of implementation.

 


 

bookjacket GDP: A Brief but Affectionate History
Diane CoyleHardcover | $19.95 / £13.95 | ISBN: 9780691156798
168 pp. | 5 1/2 x 8 1/2 | 2 halftones. 2 line illus. 2 tables.eBook | ISBN: 9781400849970

Reviews

Table of Contents

Sample the Introduction[PDF]

 
 
 
 
 

Forecasting & Business Charts [Slideshow]

The slideshow below, assembled by Walter Friedman, author of Fortune Tellers: The Story of America’s First Economic Forecasters, brings together several forecasting and business charts from the early twentieth century.

More information on many of these charts and the forecasters themselves is in Friedman’s book which you can sample here. If you would like to download a PDF of these images and captions, please right click and save this file.

Fortune Tellers 2
Fortune Tellers 1
1 The Babson Compositplot, 1921
2 Irving Fisher's Diagram of the Equation of Exchange, 1912
3 Irving Fisher's Diagram of the Equation of Exchange, 1912
4 John Moody's View of the Economy, 1904
5 James H Brookmire's Barometer, 1907
6 Brookmire's Barometer Chart
7 Harvard Economic Service Chart
Karl Karsten's Map of Business Conditions
9 Brookmire's Cycle Chart of Business and Banking
10 Malcolm Rorty's Depiction of the Business Cycle
11 Babson's Map of the United States for Merchants and Bankers, 1911
12 Brookmire's survey of business conditions in the United States

A new type of forecasting

The years from the turn of the century to World War I were a fertile time for many business analysts, including the scientific management exponent, F. W. Taylor. While some experts sought to improve the inner workings of firms, other tried to make sense of the very atmosphere in which business operated.

Who were the Fortune Tellers?

After the Panic of 1907, economic forecasters began producing newsletters.

Roger W. Babson published Babson’s Reports, which featured the Compositplot of ups and downs. In 1909, John Moody, who is today remembered for his credit rating company, started his own weekly market report. In 1910 Irving Fisher, a pioneer of mathematical economics, published the first of several charts, intended for economic prediction, in the Journal of Economics. Around this same time, James Brookmire, the son of a grocer in St. Louis, founded the Brookmire Economic Chart company and began publishing forecasts on a regular basis.

The most influential forecasting chart of the period belonged to the Harvard Economic Service, which, in 1922, founded a weekly newsletter that featured its A-B-C curve. Along with these charts were other efforts to map economic activity, including Malcolm Rorty’s sketch of the business cycle and several attempts to capture the geography of business within the U.S.

The Babson Compositplot, from 1921

The large shaded areas marked A, B, C, D, E, F, and G, represent depressions below and expansions above the “normal” line. Babson believed that areas of expansion (B, for instance), would be equal to areas of recession (C, for instance) that followed. The chart also contained a wealth of other information, including stock prices, bond prices, and commodity prices.

Source: Roger W. Babson, Business Barometers Used in the Accumulation of Money (Wellesley Hills, Mass: Babson Institute, 1921), insert.

Irving Fisher’s Diagram of the Equation of Exchange for use in forecasting, 1912

While Fisher did not produce a forecasting chart, he did create a diagram to illustrate the Equation of Exchange (MV + M’V’ = PT), which he depicted showing a mechanical balance. The left side of the balance symbolized the left side of the equation, with a small weight standing for M, the money in circulation, and a larger bank book standing for M’, deposits in checking accounts. The distance to the left of the fulcrum of the weight represented the velocity of circulation (V) and the distance of the bankbook, the velocity of circulation of bank deposits (V’).

(continued in the next slide)

Irving Fisher’s Diagram of the Equation of Exchange for use in forecasting, 1912

The volume of trade (T) was represented by a tray on the right, with the index of prices (P) at which these goods were sold, represented by the distance of the tray to the right. The diagram showed the changes in the values for all the components of the Equation of Exchange from 1896 to 1911. To predict the future, Fisher thought, one needed to look especially at recent changes in the bank deposits, which, if rising rapidly, indicated a coming crisis.

Source: Irving Fisher, “‘The Equation of Exchange,’ 1896-1910,” The American Economic Review 1:2 (Jun 1911): p. 299.

John Moody’s view of the economy

In this 1904 chart, Moody encapsulates a firm-centered view of the economy, in this case showing the dominance of the Morgan banking interests and Rockefeller’s Standard Oil. Moody wrote at the top of the chart, “The large circle in the center of the chart indicates the dominant position of the Trust-formed industries of the Nation; directly linked to and representing this dominant force we find two groups of capitalists, the Standard Oil, or Rockefeller, and the Morgan groups.” Moody’s diagram resembled something of a family tree of capitalism.

Source John Moody, The Truth about The Trusts: A Description and Analysis of the American Trust Movement (New York: Moody Publishing Company, 1904), between pages viii and ix.

James H. Brookmire’s Barometer, close-up

James H. Brookmire’s Barometer depicted three indexes of economic sectors—business activity, the stock market (an index of thirty-two stocks), and banking resources. The small print reads, “Condition of business, banking, and the stock market in February, 1907, foretelling the panic of October, 9 months later.”

Source: The Brookmire Economic Chart Company, A Graphic Record of Fundamental, Financial and Business Conditions Since 1885 (St. Louis: Brookmire, 1913).

Brookmire’s Barometer Chart

Here, Brookmire combined his barometer with a chart of values over time for general business (a black line), average stocks (in shaded line), and banking (in sold red).

Source: The Brookmire Economic Chart Company, A Graphic Record of Fundamental, Financial and Business Conditions Since 1885 (St. Louis: Brookmire, 1913).

Harvard Economic Service Chart

Harvard Economic Service Chart, like Brookmire’s Barometer, was a leading indicator model. Persons believed that Group A (representing stocks) forecast Group B (representing business activity); in turn Group B forecasted Group C (representing banking). In this way, the three indexes together created a view of overall business conditions and, in Person’s words, “future tendencies.” The graph above showed historical values from 1903 to 1908.

Source: Warren M. Persons, “The Index: A Statement of Results,” Review of Economic Statistics 1:2 (April 1919): 112.

Karl Karsten’s “Map of Business Conditions”

Economist Karl Karsten showed American states in relative proportion to their population and shaded according to condition of “business activity,” with the darkest states (New Hampshire and Vermont) representing poor levels. The chart revealed the relative geographic distribution of business activity and population—still very weighted toward New England, Pennsylvania (with the rise of the steel industry in Pittsburgh), and Illinois (with the growth of Chicago and its meatpacking plants and grain industry).

Source: Karl Karsten Papers, Library of Congress, Washington, D.C.

Brookmire’s Cycle Chart of Business and Banking

This chart shows how the ups and downs of business activity tended to deplete and then free up banking resources. As business activity ran from “normal” to “prostrate,” banking resources climbed from “normal” to “abundant” and even “plethoric.” When business activity subsequently climbed to “feverish” and “hazardous,” at the peak of the cycle, banking resources fell to “overextended” and even “critical.”

Source: The Brookmire Economic Chart Company, A Graphic Record of Fundamental, Financial and Business Conditions Since 1885 (St. Louis: Brookmire, 1913).

Malcolm Rorty’s depiction of the business cycle

In this graph, capitalist economies had four discernible phases: revival, prosperity, liquidation, and depression. Above each of these four, Rorty included a list of economic conditions common to each to help readers determine the end of one phase and the start of the next. Note that the chart showed an especially sharp drop of business activity during times of liquidation or crisis.

Source Rorty, Some Problems in Current Economics (1922).

Babson’s Map of the United States for Merchants and Bankers, 1911

The map showed regions where failures were increasing (shown in squares) and business declining (shown in circles).

Brookmire’s survey of business conditions in the United States

Regions were color-coded to indicate whether crop production was good, fair, or poor. Cities were marked with stars if they were numerous business failures, with diamonds if they held dull opportunities for salesmen, and ampersands if the opportunities for salesmen were improving.

Source: The Brookmire Economic Chart Company, A Graphic Record of Fundamental, Financial and Business Conditions Since 1885 (St. Louis, Mo., 1912).

Fortune Tellers 2 thumbnail
Fortune Tellers 1 thumbnail
1 The Babson Compositplot, 1921 thumbnail
2 Irving Fisher's Diagram of the Equation of Exchange, 1912 thumbnail
3 Irving Fisher's Diagram of the Equation of Exchange, 1912 thumbnail
4 John Moody's View of the Economy, 1904 thumbnail
5 James H Brookmire's Barometer, 1907 thumbnail
6 Brookmire's Barometer Chart thumbnail
7 Harvard Economic Service Chart thumbnail
Karl Karsten's Map of Business Conditions thumbnail
9 Brookmire's Cycle Chart of Business and Banking thumbnail
10 Malcolm Rorty's Depiction of the Business Cycle thumbnail
11 Babson's Map of the United States for Merchants and Bankers, 1911 thumbnail
12 Brookmire's survey of business conditions in the United States thumbnail

 

 

New book trailer for Eswar Prasad’s THE DOLLAR TRAP: How the U.S. Dollar Tightened Its Grip on Global Finance

This just in:
Check out the new book trailer for the eagerly-awaited new book THE DOLLAR TRAP: How the U.S. Dollar Tightened Its Grip on Global Finance, by Cornell and Brookings economist Eswar Prasad, due out the first week of February.

New Economics and Finance Catalog!

Be among the first to browse and download our new economics and finance catalog!

Of particular interest is The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton. In The Great Escape, Deaton—one of the foremost experts on economic development and on poverty—tells the remarkable story of how, starting 250 years ago, some parts of the world began to experience sustained progress, opening up gaps and setting the stage for today’s hugely unequal world. Deaton takes an in-depth look at the historical and ongoing patterns behind the health and wealth of nations, and he addresses what needs to be done to help those left behind. Demonstrating how changes in health and living standards have transformed our lives, The Great Escape is a powerful guide to addressing the well-being of all nations.

Also be sure to note Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change by Edmund Phelps. In this book, Nobel Prize-winning economist Edmund Phelps draws on a lifetime of thinking to make a sweeping new argument about what makes nations prosper—and why the sources of that prosperity are under threat today. Why did prosperity explode in some nations between the 1820s and 1960s, creating not just unprecedented material wealth but “flourishing”—meaningful work, self-expression, and personal growth for more people than ever before? Phelps makes the case that the wellspring of this flourishing was modern values such as the desire to create, explore, and meet challenges. These values fueled the grassroots dynamism that was necessary for widespread, indigenous innovation. Most innovation wasn’t driven by a few isolated visionaries like Henry Ford; rather, it was driven by millions of people empowered to think of, develop, and market innumerable new products and processes, and improvements to existing ones. Mass flourishing—a combination of material well-being and the “good life” in a broader sense—was created by this mass innovation.

And don’t miss out on An Uncertain Glory: India and its Contradictions by Jean Drèze & Amartya Sen. The deep inequalities in Indian society tend to constrict public discussion, confining it largely to the lives and concerns of the relatively affluent. Drèze and Sen present a powerful analysis of these deprivations and inequalities as well as the possibility of change through democratic practice.

Even more foremost titles in economics and finance can be found in the catalog. You may also sign up with ease to be notified of forthcoming titles at http://press.princeton.edu/subscribe/. Your e-mail address will remain confidential!

 

Peter Dougherty and Robert Shiller off to the Nobel prize ceremony

Looking dapper in their tuxedos, 2013 Nobel in Economics co-winner Robert Shiller (r) and Princeton University Press Director Peter Dougherty (l) prepare for the awards ceremony today at the Stockholm Concer Hall in Sweden. Shiller, along with fellow economists Eugene Fama and Lars Peter Hansen (also a PUP author), were awarded the prize in October. Read all about winners of the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013, as it is officially called, on the official website.

dougherty nobel

The Fifth Anniversary of the Lehman Brothers Bankruptcy

The Fifth Anniversary of the Lehman Brothers Bankruptcy and Our Top 10 Books on Banking

Since the economic downturn in America, people have been paying much more attention to what is going on with their government, their spending, and most certainly their banks. As today is the fifth anniversary of the Lehman Brothers filing for bankruptcy (the largest bankruptcy filing in the history of the United States), we here at the Press thought we would help you all out a little by suggesting some of our best publications on bank failures, economic regulations, and financial crises. Fun topic for a lazy Sunday, right?
Click on the titles below to learn more about them, and don’t forget to check back tomorrow for an exclusive excerpt from our newest banking book this year: The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It by Anat Admati and Martin Hellwig.

The Banker's New Clothes1) The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It
By: Anat Admati & Martin Hellwig
What is wrong with today’s banking system? The past few years have shown that risks in banking can impose significant costs on the economy. Many claim, however, that a safer banking system would require sacrificing lending and economic growth. The Bankers’ New Clothes examines this claim and the narratives used by bankers, politicians, and regulators to rationalize the lack of reform, exposing them as invalid.

2) DeDebt's Dominionbt’s Dominion: A History of Bankruptcy Law in America
By: David A. Skeel Jr.
David Skeel provides the first complete account of the remarkable journey American bankruptcy law has taken from its beginnings in 1800, when Congress lifted the country’s first bankruptcy code right out of English law, to the present day.

 

3) HowHow Big Banks Fail Big Banks Fail and What to Do about It
By: Darrell Duffie
How Big Banks Fail and What to Do about It examines how large dealer banks (like J.P. Morgan and Goldman Sachs) collapse and how we can prevent the need to bail them out.

 

4) UnWhysettled Account: The Evolution of Banking in the Industrialized World since 1800
By: Richard S. Grossman
In Unsettled Account, Richard Grossman takes the first truly comparative look at the development of commercial banking systems over the past two centuries in Western Europe, the United States, Canada, Japan, and Australia. Grossman focuses on four major elements that have contributed to banking evolution: crises, bailouts, mergers, and regulations.

 

Rochet_Why11115) Why Are There So Many Banking Crises? The Politics and Policy of Bank Regulation
By: Jean-Charles Rochet
Almost every country in the world has sophisticated systems to prevent banking crises. Yet such crises–and the massive financial and social damage they can cause–remain common throughout the world. Jean-Charles Rochet, one of the world’s leading authorities on banking regulation, makes the case that, although many banking crises are precipitated by financial deregulation and globalization, political interference often causes–and almost always exacerbates–banking crises.

6) AppAppeasing Bankerseasing Bankers: Financial Caution on the Road to War
By: Jonathan Kirshner
The financial world values economic stability above all else, and crises and war threaten that stability. Appeasing Bankers shows that, when faced with the prospect of war or international political crisis, national financial communities favor caution and demonstrate a marked aversion to war.

 

7) CodCodes of Financees of Finance: Engineering Derivatives in a Global Bank
By: Vincent Antonin Lépinay
Codes of Finance takes readers behind the scenes of the equity derivatives business at one of the world’s leading investment banks before the crisis, providing a detailed firsthand account of the creation, marketing, selling, accounting, and management of these financial instruments–and of how they ultimately created havoc inside and outside the bank.

 

Balancing the Banks8) Balancing the Banks: Global Lessons from the Financial Crisis
By: Mathias Dewatripont, Jean-Charles Rochet & Jean Tirole
Translated by: Keith Tribe
Bringing together three leading financial economists to provide an international perspective, Balancing the Banks draws critical lessons from the causes of the crisis and proposes important regulatory reforms, including sound guidelines for the ways in which distressed banks might be dealt with in the future.

 

9) BankBanking on the Futureing on the Future: The Fall and Rise of Central Banking
By: Howard Davies & David Green
Banking on the Future provides a fascinating insider’s look into how central banks have evolved and why they are critical to the functioning of market economies. The book asks whether, in light of the recent economic fallout, the central banking model needs radical reform.

 

10) Banksprincetonlogo and Politics in America from the Revolution to the Civil War
By: Bray Hammond
Bray Hammond investigates into the role of banking in the formation of American society. Hammond, who was assistant secretary of the Board of Governors of the Federal Reserve System from 1944 to 1950, presents this 771-page book with a definitive account of how banking evolved in the United States in the context of the nation’s political and social development.

BOOK FACT FRIDAY – The Federal Reserve & Ben S. Bernanke

k9928“The Federal Reserve was founded 1914, and concerns about both macroeconomic stability and financial stability motivated the decision of Congress and President Woodrow Wilson to create it. After the Civil War and into the early 1900s, there was no central bank, so any kind of financial stability functions that could not be performed by the Treasury had to be done privately.” -Ben S. Bernanke, from chapter one of The Federal Reserve and the Financial Crisis

In 2012, Ben Bernanke, chairman of the U.S. Federal Reserve, gave a series of lectures about the Federal Reserve and the 2008 financial crisis, as part of a course at George Washington University on the role of the Federal Reserve in the economy. In this unusual event, Bernanke revealed important background and insights into the central bank’s crucial actions during the worst financial crisis since the Great Depression. Taken directly from these historic talks, The Federal Reserve and the Financial Crisis offers insight into the guiding principles behind the Fed’s activities and the lessons to be learned from its handling of recent economic challenges.

Ben S. Bernanke is chairman of the U.S. Federal Reserve. He has served as chairman of the President’s Council of Economic Advisors and as a member of the Board of Governors of the Federal Reserve. Before his time in public service he was a professor of economics at Princeton University. His many books include Essays on the Great Depression and Inflation Targeting (both Princeton).

The Federal Reserve and the Financial Crisis
by Ben S. Bernanke

We invite you to read chapter one online at: http://press.princeton.edu/chapters/s9928.pdf

Happy Tax Day!

Today, paying taxes is just something we do. For the most part, we are compliant with taxes and rush to the post office to send them in so we can go enjoy our tax day freebies thanks to companies trying to put some joy into (and get some profit out of) this non-holiday.

Our colonial forefathers would probably use any expletive rather than the word ‘happy’ in front of the word ‘tax’. Read up on what the sentiment around taxes used to be like and how it helped start a revolution.

Taxation in Colonial America by Alvin Rabushka

Taxation in Colonial America examines life in the thirteen original American colonies through the revealing lens of the taxes levied on and by the colonists. Spanning the turbulent years from the founding of the Jamestown settlement to the outbreak of the American Revolution, Alvin Rabushka provides the definitive history of taxation in the colonial era, and sets it against the backdrop of enormous economic, political, and social upheaval in the colonies and Europe.

Rabushka shows how the colonists strove to minimize, avoid, and evade British and local taxation, and how they used tax incentives to foster settlement. He describes the systems of public finance they created to reduce taxation, and reveals how they gained control over taxes through elected representatives in colonial legislatures. Rabushka takes a comprehensive look at the external taxes imposed on the colonists by Britain, the Netherlands, and Sweden, as well as internal direct taxes like poll and income taxes. He examines indirect taxes like duties and tonnage fees, as well as county and town taxes, church and education taxes, bounties, and other charges. He links the types and amounts of taxes with the means of payment–be it gold coins, agricultural commodities, wampum, or furs–and he compares tax systems and burdens among the colonies and with Britain.

This book brings the colonial period to life in all its rich complexity, and shows how colonial attitudes toward taxation offer a unique window into the causes of the revolution.

Zoltan Acs on “Why Philanthropy Matters”

…For wealth to invigorate the capitalist system it needs to be “kept in rotation” like the planets around the sun, and for this task American philanthropy is very well suited. Examining the dynamics of American-style capitalism since the eighteenth century, philanthropy achieves three critical outcomes. It deals with the question of what to do with wealth–keep it, tax it, or give it away. It complements government in creating public goods. And, by focusing on education, science, and medicine, philanthropy has a positive effect on economic growth and productivity. Individuals such as Benjamin Franklin, Andrew Carnegie, Bill Gates, Michael Bloomberg and Oprah Winfrey have used their wealth to establish institutions and promote knowledge, and philanthropy has given an edge to American-style capitalism by promoting vital forces–like university research–necessary for technological innovation, economic equality, and economic security.

Philanthropy is therefore an invisible, underappreciated force for progress in American-style capitalism–the secret ingredient that fails to get mentioned in economic accounts of capitalism…

Source: “Why Philanthropy Matters” at History News Network

 

Zoltan Acs has a great article on the themes of his forthcoming book Why Philanthropy Matters over at History News Network.

bookjacket

Why Philanthropy Matters
How the Wealthy Give, and What It Means for Our Economic Well-Being
Zoltan J. Acs