Book Bits For Saturday: 9.17.2011

Confidence Men: Wall Street, Washington, and the Education of a President
Review via The New York TImes
A new book claims that President Obama’s response to the economic crisis was hampered by a White House economic staff plagued by internal rivalries, a domineering chief adviser and a Treasury secretary who dragged his feet on enforcing decisions with which he disagreed.
The book, by Ron Suskind, a former Wall Street Journal reporter, quotes White House documents that say Mr. Obama’s decisions were routinely “re-litigated” by the chairman of the National Economic Council, Lawrence H. Summers. Some decisions, including one to overhaul the debt-ridden Citibank, were carried out sluggishly or not at all by a resistant Treasury secretary, Timothy F. Geithner, according to the book.

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies
By Judith Stein
Summary via publisher, Yale University Press
In this fascinating new history, Judith Stein argues that in order to understand our current economic crisis we need to look back to the 1970s and the end of the age of the factory—the era of postwar liberalism, created by the New Deal, whose practices, high wages, and regulated capital produced both robust economic growth and greater income equality. When high oil prices and economic competition from Japan and Germany battered the American economy, new policies—both international and domestic—became necessary. But war was waged against inflation, rather than against unemployment, and the government promoted a balanced budget instead of growth. This, says Stein, marked the beginning of the age of finance and subsequent deregulation, free trade, low taxation, and weak unions that has fostered inequality and now the worst recession in sixty years.
Street Freak: Money and Madness at Lehman Brothers
By Jared Dillian
Review via Bloomberg
One grim night before Lehman Brothers Holdings Inc. (LEHMQ) imploded, trader Jared Dillian drank himself into a frenzied scream, hugged his cat and downed half a bottle of the only drug on hand: Tylenol PM, he says.
“I could not even kill myself properly,” he rages in his disturbingly candid memoir, “Street Freak: Money and Madness at Lehman Brothers.”
The cause of Dillian’s distress wasn’t Lehman’s collapse; that drama unfolded some six years later. His despair reflected something much more common and corrosive about markets. His job, index arbitraging, had been automated by a computer program.
“The diabolical index arb robots had taken over my trade,” he writes in the mocking voice familiar to readers of his financial newsletter, the Daily Dirtnap.
Impact Investing: Transforming How We Make Money While Making a Difference
By Antony Bugg-Levine and Jed Emerson
Excerpt via publisher, Jossey-Bass
Impact investing recognizes that investments can pursue financial returns while also intentionally addressing social and environmental challenges. Despite, or perhaps because of, this simplicity, it can seem threatening to some people. Many mainstream investors reject the idea that they should pay attention to the social impact of their investing, insisting instead that these considerations be left to governments and charities. And for their part, most traditional philanthropists reject the idea that they should use their investments to advance their mission or that businesses generating profits have a right to stand alongside philanthropy and civil society in the noble work of promoting equality and justice.
But impact investing is not a modern aberration. The idea that our investment decisions can have an impact on the wider world beyond financial return did not begin when Jed first described ‘‘blended value’’ in 2000 or when Antony was part of the group that coined the phrase ‘‘impact investing’’ seven years later. In many ways, it reconnects with a centuries-old tradition that held the owners of wealth responsible for the welfare of their broader community.
The Quest: Energy, Security, and the Remaking of the Modern World
By Daniel Yergin
Review via The Economist
Providing sufficient energy to seven billion increasingly affluent humans without burning up the planet may be humanity’s greatest challenge. “What is at stake”, writes Daniel Yergin, “is the future itself.”
Mr Yergin’s previous book, “The Prize”, a history of the global oil industry, had the advantage of an epic tale and wondrous timing. Years in the making, it was published, to critical and popular acclaim in 1990, two months after Saddam Hussein invaded Kuwait, thereby putting Saudi Arabia’s oilfields in peril. “The Quest”, as its more open-ended title suggests, is a broader and more ambitious endeavour. It is, first, an account of the many ways in which people have sought to produce energy—by burning fossil fuels, harvesting the wind, brewing biodiesel and trapping the sun’s heat. It is also an analysis of the increasingly fraught political context in which this business is conducted, especially with regard to three big and longstanding fears: energy scarcity, energy security and, more and more, the environmental ruin that energy can cause.
Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers
By Ellen E. Schultz
Review via Publishers Weekly
The retirement crisis is no accident, claims Wall Street Journal investigative reporter Schultz; large companies have played a significant role in its creation to protect the wealth of its top executives. When GE, IBM, Verizon, and others slashed pensions and medical benefits for millions of American retirees, they pointed fingers everywhere but at themselves–but who was really at fault? Pension funds were not bleeding the companies of cash. GE hadn’t contributed a cent to the workers’ pension plans since 1987, but still had enough money to cover all current and future retirees. Executive pensions at GE, with a $6 billion obligation, are a drag on earnings. These are largely hidden, however, lumped in with the figures for regular pensions. Schultz’s methodical cataloguing of these abuses paints a highly unflattering picture of companies that cut benefits to boost earnings, lay off older workers who are entering the years in which their pensions will spike, inflate retiree health benefits to boost profits, lobby for laws that keep the system inequitable, hoard death benefits, and fire whistle-blowers.
Erasing the Invisible Hand: Essays on an Elusive and Misused Concept in Economics
By Warren J. Samuels, Marianne F. Johnson and William H. Perry
Summary via publisher, Cambridge University Press
This book examines the use, principally in economics, of the concept of the invisible hand, centering on Adam Smith. It interprets the concept as ideology, knowledge, and a linguistic phenomenon. It shows how the principal Chicago School interpretation misperceives and distorts what Smith believed on the economic role of government. The essays further show how Smith was silent as to his intended meaning, using the term to set minds at rest; how the claim that the invisible hand is the foundational concept of economics is repudiated by numerous leading economic theorists; that several dozen identities given the invisible hand renders the term ambiguous and inconclusive; that no such thing as an invisible hand exists; and that calling something an invisible hand adds nothing to knowledge. Finally, the essays show that the leading doctrines purporting to claim an invisible hand for the case for capitalism cannot invoke the term but that other nonnormative invisible hand processes are still useful tools.