Book Bits | 13 June 2015

The Next Financial Crisis and How to Save Capitalism
By Hossein Askari and Abbas Mirakhor
Summary via publisher (Palgrave Pivot)
The financialization of the economy – the rapid growth of the financial sector relative to the real sector and their decoupling – has brought a number of interrelated problems which have contributed to growing income and wealth inequality. In this work, Hossein Askari and Abbas Mirakhor assert that it is time to make a bold change by putting our financial house in order and on a better path. Patchwork solutions such as higher capital requirements for banks and better regulations, supervision and enforcement are important, but at best they will only delay another inevitable financial crisis with devastating fallouts. The authors identify the prevalence of debt financing as the heart of the problem, and advocate for a fundamental reform of the financial system that reduces the supremacy of debt and increases the fraction of reserves in fractional reserve banking.

Functional Inefficiency: The Unexpected Benefits of Wasting Time and Money
By Peter S. Wenz
Review via Publishers Weekly
The solution to reducing unemployment? Inefficiency, according to philosophy professor Wenz’s (Take Back the Center) bold manifesto, which poses seemingly paradoxical solutions to America’s economic ills. While labor inefficiency would appear to doom the U.S. economy by making American workers even more expensive than they already are, Wenz points out that European countries have strong labor unions and reduced work weeks, and they still enjoy favorable trade balances. True, the European approach requires more socialistic practices than American voters would likely support: government-provided daycare, medical care, and leisure, paid for by significantly higher taxes. But Wenz contends that we already tolerate rampant inefficiency. Americans pay significantly more for health care than people in other countries do, with inferior outcomes. Americans drive private automobiles rather than developing efficient systems of public transportation. And Americans promulgate a consumerist culture that, if fully embraced by the developing world, threatens the whole planet.

Going for Broke: Deficits, Debt, and the Entitlement Crisis
By Michael D. Tanner
Summary via publisher (Cato Institute)
In Going for Broke: Deficits, Debt, and the Entitlement Crisis, Michael Tanner, a nationally recognized expert on entitlements, health care reform, and social welfare policy, examines the growing national debt and its dire implications for our future and explains why a looming financial meltdown may be far worse than anyone expects. Many politicians on the left and right know entitlements are unsustainable but fear the consequences of reforming them. In contrast, Tanner offers effective reforms to Social Security, Medicare, and Medicaid-changes that will improve our lives as well as prevent a fiscal meltdown.

Will College Pay Off?: A Guide to the Most Important Financial Decision You’ll Ever Make
By Peter Cappelli
Essay by author via Time
There are many good reasons why attending college to prepare you for specific jobs is a bad idea. The first one, which is pretty basic, is that it’s almost impossible when picking a college to predict what the job market will look like years later at graduation, especially recognizing that only 40% of full-time students graduate in four years. What will you do with that casino management degree if gambling is down the year you graduate and casinos aren’t hiring? You might well be better off with a broad, liberal arts degree.

The Economics of Race in the United States
By Brendan O’Flaherty
Summary via publisher (Harvard University Press)
Brendan O’Flaherty brings the tools of economic analysis—incentives, equilibrium, optimization, and more—to bear on contentious issues of race in the United States. In areas ranging from quality of health care and education, to employment opportunities and housing, to levels of wealth and crime, he shows how racial differences among blacks, whites, Hispanics, and Asian Americans remain a powerful determinant in the lives of twenty-first-century Americans. More capacious than standard texts, The Economics of Race in the United States discusses important aspects of history and culture and explores race as a social and biological construct to make a compelling argument for why race must play a major role in economic and public policy. People are not color-blind, and so policies cannot be color-blind either.

Capitalism without Capital: Accounting for the crash
By Alan Shipman
Summary via publisher (Palgrave Macmillan)
An unusual consensus has developed among economists that the ‘long boom’ before 2008, and the subsequent crisis and recession, resulted from a global excess of capital. Over-supply of saving drive down capital costs, encouraging excessively risky investment and preventing the scrapping of outmoded plant. Capital’s inexorable growth is also blamed for a prolonged squeeze on wages, rising elite wealth and worsening global inequality. This book explores the obvious clash between such arguments and actual measurements of capital, which show a small and shrinking ‘productive’ component, and a deepening disconnection between capital accumulation and economic growth. It traces the conflict to the continued absence of consistent definitions or measurements of capital, and neglect of the complex connection between aggregate capital and wealth. Capital ‘gains’ and ‘losses’, and the growing domination of income statements by balance sheets, undermine attempts to sidestep the problem by reconstituting economics as a system of flows.