65 of 67 people found the following review helpful
The best single account of the crisis,
This review is from: Crisis Economics: A Crash Course in the Future of Finance (Hardcover)
Nouriel Roubini predicted the financial crisis of 2007-9, and in some detail. This made him extremely unusual among macroeconomists. 'Crisis Economics', written in collaboration with the financial journalist Stephen Mihm, gives Roubini's historical and theoretical perspective on those events, an analysis of where we are now and concrete suggestions for the future from a non-ideological, pragmatic perspective.
Roubini's central insight, informed by his reading of economic history, is that there is nothing unusual about crisis in the economy. On the contrary: he argues against Nassim Taleb's 'black swan' model of unpredictable extreme events that the recent crisis was eminently predictable precisely because it resembled in its course so many other crises in the past. Roubini's is a 'white swan' theory - crisis is normal and inseparable from capitalism - though he agrees with Taleb that within that paradigm crisis can and should be managed and mitigated.
Roubini begins by offering an historical overview of crises caused by an asset bubble that boiled over into the rest of the economy. He argues that the current generation of macroeconomists were fooled, with few exceptions, by an unusually extended period of relative stability (and their own predilections) into believing that stability was the normal state of the economy.
The author then moves from his detailed - and fascinating - account of historical crises to consider how economists have modelled crisis in the past and more recently. Again, this historical perspective reveals significant irrational and extra-economic influences on the question of which model became dominant in academic economics, and why its dominance left economists so unprepared for the crisis of 2007-9.
There follows a detailed analysis of the novel aspects of that crisis, with particular attention paid to the structure of remuneration in the financial sector, the growth of a largely uncontrolled 'shadow banking sector', the unusual degree of interconnection between the parts of the system, and the failures of existing regulation. From this, Roubini moves to an account of the course of the crisis itself, at every stage pointing up the regularity and typicality of its process, and then to a consideration of how a US housing market bubble burgeoned into a 'global pandemic' - and why this might not be the best metaphor for the crisis. For Roubini, this was not an example of global 'infection' from a rogue American economy. As the crisis unfolded, it merely exposed similar structural problems that had grown up independently in other sovereign states. Finally, we are given a view of the truly epic levels of government intervention that were deemed necessary to contain the crisis, whether this was wise, and what this implies for the future.
Roubini then offers detailed policy prescriptions for the future: a series of 'first steps' to address the most glaringly dangerous features of the current system, followed by a systematic overhaul of the financial system and world economic governance. He concludes with an analysis of the near- and medium-term prospects which draws attention to immediate dangers - such as one or more sovereign debt crises, and the possible collapse of the EMU - and a more insidious problem: that the real lessons have not been learned, so that there is a real danger that the system that generated the crisis will not be reformed, for reasons of political convenience and economic dogmatism.
This is an excellent book. Written for the intelligent general reader, highly readable, with no reliance on graphs or mathematics, it offers the best single account of the crisis I have encountered. It is highly recommended.
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Showing 1-3 of 3 posts in this discussion
Initial post: 3 Mar 2011 08:31:46 GMT
Very helpful review - have bought the book. :-) Thank-you!
In reply to an earlier post on 3 Mar 2011 13:06:02 GMT
Paul Bowes says:
Hope you find it worthwhile. Other books on the same subject are in my Listmania list, 'Economics in a time of crisis'.
Posted on 9 Oct 2011 18:07:11 BDT
Karl Marx predicted this current crisis in 1841.
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