The year that’s nearly over has taken the world on one heck of a ride, quite often for the wrong reasons. The good news is that the publishing world has continued to mint great books, including several in the finance and economics category that have appeared in CapitalSpectator.com’s weekly Book Bits column. Before we bid adieu to 2022, let’s review some of the highlights on these pages. Here are ten books from the year’s archives – titles that for one reason or another caught your editor’s eye. Five today, followed by another five on December 31. Happy reading!
● Nomad Century: How Climate Migration Will Reshape Our World
Review via Datebook
In “Nomad Century: How Climate Migration Will Reshape Our World,” science writer Gaia Vince (“Transcendence” and “Adventures in the Anthropocene”) addresses how the climate chaos of the coming century will influence where and how we live. The essence of her thesis is simple: “People will have to move to survive.”
The complexity arises in the details: Vince suggests that of the roughly 8 billion people on the planet today, around 3.5 billion will be forced to move north within the next 50 years because “hotter temperatures combined with more intense humidity” will have made their environment unlivable. Which brings us to the thorniest question in this scenario: How? The sheer complexity of such a move is staggering.
● Leveraged: The New Economics of Debt and Financial Fragility
Moritz Schularick (editor)
Summary via publisher (U. of Chicago Press)
The 2008 financial crisis was a seismic event that laid bare how financial institutions’ instabilities can have devastating effects on societies and economies. COVID-19 brought similar financial devastation at the beginning of 2020 and once more massive interventions by central banks were needed to heed off the collapse of the financial system. All of which begs the question: why is our financial system so fragile and vulnerable that it needs government support so often? For a generation of economists who have risen to prominence since 2008, these events have defined not only how they view financial instability, but financial markets more broadly. Leveraged brings together these voices to take stock of what we have learned about the costs and causes of financial fragility and to offer a new canonical framework for understanding it. Their message: the origins of financial instability in modern economies run deeper than the technical debates around banking regulation, countercyclical capital buffers, or living wills for financial institutions.
● Escape from Model Land: How Mathematical Models Can Lead Us Astray and What We Can Do About It
Review via The Economist
The author calls on data geeks to improve their solutions to real-world issues, not merely refine their formulae—in other words, to escape from model land. “We do not need to have the best possible answer,” she writes, “only a reasonable one.” Before there is a statistical model, she notes, there is a mental version. Data scientists need self-awareness and empathy as well as mathematical skill.
● The Illusion of Control: Why Financial Crises Happen, and What We Can (and Can’t) Do About It
Review via Foreign Affairs
“Not another book about financial crises!” one is tempted to exclaim. Fortunately, this is an exceptionally provocative and original addition to an ample literature. Drawing on the historical record, Danielsson explains why regulators have not been more successful at limiting financial instability. They tend to focus excessively on exogenous risks (shocks coming from outside the financial system) while neglecting endogenous risks—the destabilizing responses of the participants in financial markets to those same exogenous shocks and, no less, to regulatory action. Having been encouraged in the wake of past crises to develop numerical measures of financial risks, regulators tend to place excessive confidence in the accuracy of those numbers, which are better at predicting the last crisis than the next one, given the ever-changing nature of the financial system.
● A Monetary and Fiscal History of the United States, 1961–2021
Alan S. Blinder
Q&A with author via Bloomberg
Q: What are some of the lessons from history for today’s policy makers?
A: There are numerous episodes in history of fiscal overshoot, too much demand stimulus. One is with Lyndon Johnson and the Vietnam War. Another one is Richard Nixon over-stimulating the economy quite deliberately to get elected. There was too much fiscal stimulus again this time. But the quantitative dimension in causing the inflation we’re dealing with is greatly exaggerated. It caused some but not close to most.
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