Economics After the Crisis: Objectives and Means (Lionel Robbins Lectures) [Hardcover]

In this short (96 pages excluding introduction) book, Lord Turner sets forth three major arguments in three chapters: 1) Contrary to conventional economic understanding, increases in economic growth beyond some level of per capita GDP will not necessarily produce meaningful increases in welfare or happiness; 2) Some forms of increased market liberalization (especially in financial markets) does not produce greater efficiency and instead can create unjustifiable instability and inequality; 3) The field of economics should move from simplified models that do not reflect reality and instead become a moral science that incorporates lessons from history, politics, and philosophy.

These arguments include a number of nuanced qualifiers but a highly simplified, one sentence summary of his conclusion would be: "In advanced economies, because of the decreased marginal gains in utility from increased economic growth, and because of the large decreases in utility from sharp recessions, markets should be regulated to provide stability and equality rather than be left free to pursue growth as the ultimate end of economic activity." Proponents of lightly regulated free markets will likely disagree with most of this book, but I think they will find Turner's efforts scholarly, well-thought out, and fairly presented. Turner relies heavily on the work of others, and even if a reader is not impressed with this book, there are several studies and books cited that may lead to works that otherwise would not have been encountered because many of those sources are from British authors not normally cited in U.S. books on economics.

There are a few downsides to note. The price is somewhat high for such a short book. Because so much of the argument builds from the early assumption of decreasing marginal gains from prosperity, if a reader disagrees with this assumption then reading until the end of the book may not be worthwhile. Turner admits that he has no answers or suggestions for how to recapture growth following economic recessions, an admission that makes the title a bit misleading. There are also a few moments of carelessness that can be distracting. For example the word "gtowth" appears in place of "growth" three times on page 1. The same quote from Keynes ("slaves of some defunct economist") is used at least three times which is a lot for a book of only 96 pages. Other than these minor errors, the book is very well-written and deserving of a read from even those hostile to its arguments. 4 1/4 stars.

Turner's work is masterful -- he's one of the few (actually, I don't know of any other) who has the skill set to drill down from several perspectives -- all necessary for a proper analysis, and to cogently and elegantly document his P.O.V. Why haven't I seen him on Charlie Rose or any of the top interview shows in the U.S.? It's rumored that he's a candidate for head of Bank of England. If this should happen, I shall have gained the first ray of hope about the world's financial future I've had in years. Bravo, Adair! Good work!

Growth has been the focus and holy grail of economic policy. GDP has been the measurement of success according to economists and bureaucrats. Turner believes this is wrong. Page 3 "We have no good reason for believing that additional growth in average income as measured by national income accounts, will necessarily and limitlessly deliver increased happiness, well-being, welfare, or whatever we define as the objective."

Economic policy has pushed for an ever increasing GDP. But we know that 1% have grown their income and thus GDP, while masking all the loss of income by the rest. So using GDP numbers to define success is false. Page 77 "GDP figures are almost useless as measures of long -term changes in human well-being. Even as measures of long-term changes in what we think they measure (`real income') they are highly imperfect, because they depend on conventions and assumptions that are to a degree arbitrary."

Stock brokers never recommend "sell". They just say to "hold" or "neutral". Similarly, the money and government people never say "depression". They just say "slow growth". Ditto for admitting the inflation we all see in our monthly bills.

The delusions of this crowd about insurance protecting risk if something should invalidate their sacred models is now legendary. Page 52 "The IMF's Global Financial Stability Review on April 2006 noted with approval that credit derivatives `enhance the transparency of the market's collective view of credit risks and thus provide valuable information about broad credit conditions and increasingly set the marginal rive of credit'". Page 53 "It is now obvious that this dominant ideology was wrong, failing to allow for the potential downside of the instability that increased financial complexity might produce. And it failed to consider this possibility because it was based on the assumption that financial markets are rational and equilibrating, rejecting or ignoring the Keynes/Minsky insight that financial market can be subject of self-reinforcing swings of irrational exuberance and then despair."

The book likes to quote Lionel Robbins a lot. Page 77 "Both the concept of world money and national money income have strict significance only for monetary theory."

Turner reminds us that income does not directly relate to a person's happiness once basic necessities are taken care of.
Turner's point: Activities to increase the GDP number will not repair the damage. It is looking in the wrong direction.

I agree with all of the above. But I already knew those facts and lots of previous books were far more convincing. Turner uses lots of charts and statistics but its just not going to change minds. EXCEPT fellow college professors who missed the boat. Perhaps that is why there are all those rave reviews above.