economist

It illuminates many puzzles. Central is that of the ideas that dominated post-war Western (especially Anglo-Saxon) policy making. That is, until economists came through who could do the maths (rather than things like Edgeworth boxes) who ran the show? Why were people like Wesley C. Mitchell, Arthur Burns and others, who played dominant roles in US conomic policy-making, so very different in approach and attitude to what followed once Samuelson and others had effected the mathematical revolution.

The crucial point made is that both institutionalists and the necoclassicals they fought were swept away by the post-war mathematicisation of economics. In this sense, neo-institutionalists are no more modern-day institutionalists than neo-classicals are modern classical economists. The failed institionalist attempt to create a basis for economics that would start from a fresh examination of the massive amounts of data that was coming available sits beside the gathering evidence that modern econometrics, co-integration and all, in effect does little more. Thus the massive tensions remain, for example between the exogenous preferences assumptions that penetrate economics as taught, and the need to address such issues as the data presents them.

A great book.

Adam Fforde

WONDERFUL!!!!!!!!!!!!!

Some of these vignettes, however, detract from the focus of the book. Martin's research seems to have uncovered a multitude of stories about Greenspan's jazz colleagues, Ayn Rand, and other figures in Greenspan's life, which seemed less than necessary in telling Greenspan's story.

Readers only interested in the workings of the Federal Reserve Bank or the economics behind the decisions that Greenspan made in his life of public service are advised to find a different book. Although he does give a rough overview of what was at stake in each of the crises that Greenspan faced at the helm of the CEA and then at that of the Fed, Martin does not go into much economic detail. This omission perhaps makes the book more accessible, but the omission is disappointing, nevertheless.

Here is one humorous example (page 225), about Greenspan changed his seating position at the FOMC meeting table.

"Then there's the table flap. Since 1977, the FOMC has conducted its business around a twenty-seven-foot-long table fashioned out of Honduran mahogany, with a center section made of black granite. It weighs two tons. Since becoming Fed chairman, Greenspan had always sat at the head of this table. But in November 1998, attendees at one of the Fed's periodic public meetings noticed that he had moved to a spot in the middle.

"The hubbub began immediately. What did it mean? Was Greenspan sending a message about increased 'collegiality' at the Fed? Turns out the move was for the sake of acoustics. 'Given the speed of sound, the advice arrived too late and inadvertently we got behind the curve,' joked Greenspan, during a meeting of the Fed's Board of Governors."

I'd recommend this book to anyone interested in economics.

William Easterly is a Senior Advisor in the Development Research Group of the World Bank. In his first book, he asks why trillion dollars of foreign aid to the countries of the "third world" since WWII have caused essentially no improvement in the quality of life for the people in these countries. I found the writing lucid and the many real stories of poverty and corruption both emotionally powerful and insightful.

Emphasizing a key mantra of economics -- people respond to incentives -- he details the long list of foreign aid tactics that have failed: capital investment (machines, factories, roads), education, birth control, loans, and loan forgiveness. Not that any of the tactics are bad, but rather they are ineffectual in a country lacking key social, political, and economic infrastructure.

Easterly then describes in detail the factors at play in driving growth: increasing returns (Leaks, Matches, Traps), creative destruction through technology, luck, governments kill growth, government corruption, and class and race conflicts.

Easterly shows that achieving economic growth is very difficult, but he does a great job of identifying the key systemic issues that poor countries must address.

Perhaps surprisingly, Easterly's model applies equally well to the economic disparities that exist within countries, even "rich" countries like the United States. The increasing returns model says that highly-skilled people will prefer to live and work with one another ("Matches"), as each of them will be more productive for being around other highly-skilled individuals. So this explains, for example, why areas like Silicon Valley, having once achieved critical mass, continue to grow. And why low-income inner-city and rural areas remain depressed ("Traps").