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kmroetzer's review against another edition
4.0
Infuriating, but a good read. Also, pair with viewing the Inside Job
lmplovesbooks's review against another edition
3.0
sort of a history of economics (only as far as Adam Smith) - will need to interloan in the future
surviving's review against another edition
5.0
There are books out there on the Great Recession that are daring tales of people who challenged the conventional wisdom and made a killing, or those who got greedy and arrogant and lost huge treasures. This book isn't one of those.
In this book, Cassidy explains—perhaps more clearly than most anyone else—how we got into this mess in the first place. It was, at its root, a problem of perverse incentives and a powerful belief in the self-regulating, self-healing properties of the market. People like Alan Greenspan, the former head of the Federal Reserve, seem to have imagined that the economy was like Wolverine from the X-Men: He can get flung off a building and get a huge gash in his arm, and it quickly sews itself shut and heals over with not a scar showing.
In this book, Cassidy explains—perhaps more clearly than most anyone else—how we got into this mess in the first place. It was, at its root, a problem of perverse incentives and a powerful belief in the self-regulating, self-healing properties of the market. People like Alan Greenspan, the former head of the Federal Reserve, seem to have imagined that the economy was like Wolverine from the X-Men: He can get flung off a building and get a huge gash in his arm, and it quickly sews itself shut and heals over with not a scar showing.
ssmcclay's review against another edition
5.0
I don't quite recall the ins-and-outs of this but I enjoyed it at the time. A good primer on the subject, written shortly after the GFC in 2008, placing it in historical context.
beefbroccoli's review against another edition
5.0
This is an engaging, well-written, and clear book about the history of economic theories. It was written back in 2009 after the subprime mortgage crisis, but it still is very applicable to right now in 2024 when people are increasingly worried about "end stage capitalism" and "crony capitalism". An important book to read and I really enjoyed it despite knowing very little about economic theory.
Economists like Milton Friedman have long insisted that the best way to ensure prosperity is to scale back government involvement in the economy and let the private sector take over. When properly functioning, free markets reward hard work, innovation, and well made affordable products and punish companies that make shoddy products, thus ensuring society's resources are allocated to productive uses. Free markets are therefore more efficient than other systems like communism which lacks an incentive structure. A free market that benignly self-regulates as above is a great thing.
But Cassidy shows, through multiple examples, that market failures (speculative bubbles, environmental pollution, rampant inequality, anticompetitive behavior on the part of big companies exploiting monopoly power, health insurers refusing to insure sick people) are primarily the consequence of decisions taken by private companies in an environment of minimal regulation. Bad economic policy play a huge role in this (Cassidy is very critical of Greenspan walking us into two bubbles in a decade - dot.com and housing). Market failures are especially endemic in the fields of healthcare, technology, and finance; these sectors cannot be treated like other sectors that function decently without government supervision like the airlines. Reality-based economics (championed by Keynes, Akerlof, Stigliz, Pigou, Minsky) appreciates that laissez-faire economics may work in some things but in many more it is inapplicable. They believed that capitalism, if left without active supervision "fine tuning", could lead to a slump, instability and possibly another Great Depression, even fascism. Concepts like "rational irrationality" (Keynes), "negative externalities" (Pigou), disaster myopia (Minsky), and representative heuristic (Kahneman and Tversky) are also introduced.
The final part of the book focuses on the subprime mortgage crisis and its contribution to the 2007-2008 global financial crisis. Cassidy explains it very clearly, laying the blame at Wall Street (taking large amounts of risk and dumping it on regular people who do not know better; CEOs inflating their firm's equity capital), the Fed (with the most scorn for Greenspan), and Congress (pursuing a policy of easy money plus deregulation, authorizing bailouts that provide an extensive safety net for big financial firms). He is also critical of the Obama administration for not putting Wall Street in its place... as the financial system is now dominated by a handful of firms too big to fail but can take on as much risk as they please because the taxpayer will be there to bail them out.
Economists like Milton Friedman have long insisted that the best way to ensure prosperity is to scale back government involvement in the economy and let the private sector take over. When properly functioning, free markets reward hard work, innovation, and well made affordable products and punish companies that make shoddy products, thus ensuring society's resources are allocated to productive uses. Free markets are therefore more efficient than other systems like communism which lacks an incentive structure. A free market that benignly self-regulates as above is a great thing.
But Cassidy shows, through multiple examples, that market failures (speculative bubbles, environmental pollution, rampant inequality, anticompetitive behavior on the part of big companies exploiting monopoly power, health insurers refusing to insure sick people) are primarily the consequence of decisions taken by private companies in an environment of minimal regulation. Bad economic policy play a huge role in this (Cassidy is very critical of Greenspan walking us into two bubbles in a decade - dot.com and housing). Market failures are especially endemic in the fields of healthcare, technology, and finance; these sectors cannot be treated like other sectors that function decently without government supervision like the airlines. Reality-based economics (championed by Keynes, Akerlof, Stigliz, Pigou, Minsky) appreciates that laissez-faire economics may work in some things but in many more it is inapplicable. They believed that capitalism, if left without active supervision "fine tuning", could lead to a slump, instability and possibly another Great Depression, even fascism. Concepts like "rational irrationality" (Keynes), "negative externalities" (Pigou), disaster myopia (Minsky), and representative heuristic (Kahneman and Tversky) are also introduced.
The final part of the book focuses on the subprime mortgage crisis and its contribution to the 2007-2008 global financial crisis. Cassidy explains it very clearly, laying the blame at Wall Street (taking large amounts of risk and dumping it on regular people who do not know better; CEOs inflating their firm's equity capital), the Fed (with the most scorn for Greenspan), and Congress (pursuing a policy of easy money plus deregulation, authorizing bailouts that provide an extensive safety net for big financial firms). He is also critical of the Obama administration for not putting Wall Street in its place... as the financial system is now dominated by a handful of firms too big to fail but can take on as much risk as they please because the taxpayer will be there to bail them out.
teagan821's review against another edition
4.0
Fantastic theoretical and critical account of the 2008 Financial Crisis by first backing up to economic theory since the 18th century and following how it progressed and shaped our fiscal and monetary policy in the U.S. (and perhaps the broader Western world). I can tell you I would have NOT understood this book had I not taken two economics courses in college, but I'm glad I did and I'm glad I chose to read this book. This should be required reading in all colleges teaching economics/financial crises. The 2008 Crisis was so much more complicated, even in just the mechanisms in which big banks failed, than simply subprime mortgages and The Big Short.
I agree with Cassidy's angle that the "idolatry of free market capitalism" doesn't capture the nuances of real life (rational irrationality, externalities, lack of full information, prisoner's dilemma, etc.) and ultimately fails us as a guiding economic principle. Highly recommend to anyone interested in economics or working in the financial sector.
I agree with Cassidy's angle that the "idolatry of free market capitalism" doesn't capture the nuances of real life (rational irrationality, externalities, lack of full information, prisoner's dilemma, etc.) and ultimately fails us as a guiding economic principle. Highly recommend to anyone interested in economics or working in the financial sector.
bearprof's review against another edition
5.0
Very good read on economics and the financial crisis of 2008/9. Intellectually rigorous without being too academic.
rosaliereadsbooks's review against another edition
challenging
informative
slow-paced
3.0
An extremely thorough history of market failures that culminates in the 2008 credit crisis. Super interesting and informative, although a very advanced read.
teokajlibroj's review against another edition
5.0
A fantastic compilation of the flaws of the market and how it can fail. I highly recommend it to anyone who wants to understand the financial crash and as an antidote to libertarian or conservative false claims. It is very readable, but might cause slight problems for people with no prior knowledge of economics or economic thought.
masta_g3's review against another edition
3.0
The book focuses on the concept of 'rational irrationality' and how it emerged throughout economic history. On the second part the author provides a detailed description of the 2008 global financial crisis, which he eventually ties back to 'rational irrationality'. A Keynesian book, in the end.