The Programmed Prospect Before Us

Review of Mindless: Why Smarter Machines Are Making Dumber Humans by Simon Head
Basic Books, $26.99

1.

The entire thesis of Simon Head’s arresting new book is contained in the subtitle. It goes all the way back to Adam Smith’s telling observation that the division of labor in a pin factory, while doing wonders for productivity (output per worker), would make workers as “stupid and ignorant as it is possible for a human creature to be.” This was because no worker needed to know how to make a pin, only how to do his part in the process of making a pin. Artisan production was on the point of becoming industrial production; industrial production would destroy work skills.

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Inventing the World’s Money

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order
by Benn Steil
Council on Foreign Relations/Princeton University Press, 449 p., $29.95

1.

Do we need another book on Bretton Woods, the conference in 1944 in New Hampshire that established a new monetary system following World War II? The answer is yes. The two excellent existing histories of Bretton Woods, by Richard Gardner (1956) and Armand van Dormael (1978), are now dated. New historical materials have become available. Since the crash of 2008 the arcane subject of the world’s money has become urgently relevant. So a fresh look at the famous conference is warranted.

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For a National Investment Bank

By Robert Skidelsky and Felix Martin

President Obama is in a bind. He knows that the economic recovery is fragile and dependent on continued fiscal stimulus—hence the bipartisan deal on further tax breaks he brokered in December. But he also knows that the tolerance in Washington for deficits of close to 10 percent of Gross Domestic Product is running out. In the short term, the politics of the new Congress will not allow them; and in the long term, the President’s own National Commission on Fiscal Responsibility and Reform has warned against them.

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The World Finance Crisis and the American Mission

Fixing Global Finance
by Martin Wolf
Johns Hopkins University Press, 230 pp., $24.95

1.

By common consent, we have been living through the greatest economic downturn since World War II. It originated, as we all know, in a collapse of the banking system, and the first attempts to understand the resulting economic crisis focused on the reasons for bank failures. The banks, it was said, had failed to “manage” the new “risks” posed by financial innovation. Alan Greenspan’s statement that the cause of the crisis was the “underpricing of risk worldwide” was the most succinct expression of this view.[1] Particular attention was paid to the role of the American subprime mortgage market as the source of the so-called “toxic” assets that had come to dominate bank balance sheets. Early remedies for the crisis concentrated on bailing out or refinancing the banks, so that they could start lending again. These were followed by “stimulus packages,” both monetary and fiscal, to revive the real economy.

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Book Review: Can You Spare a Dime?

The Ascent of Money: A Financial History of the World
by Niall Ferguson
Penguin, 442 pp., $29.95

The historian Alan Taylor used to say, mischievously, that the only point of history is history. The idea that one could use it to predict the future, still more to avoid past mistakes, was pure illusion. Niall Ferguson’s The Ascent of Money, a history of financial innovation written as a television documentary[1] as well as a book, offers a neat test of Taylor’s theory. Ferguson can claim some powers of anticipation. History convinced him in 2006 that the good times could not last “indefinitely.” This was an insight to which the Nobel Prize–winning mathematical economists who devised the Black-Scholes formula—the complicated model for pricing share options used by the highly leveraged firm Long-Term Capital Management, which famously crashed in 1998—were oblivious. Their formula persuaded them that a massive sell-off could occur only once in four million years.

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Gloomy About Globalization

Making Globalization Work
by Joseph E. Stiglitz
Norton, 358 pp., $26.95; $15.95 (paper)

1.

Making Globalization Work is the third of Joseph Stiglitz’s popular, and populist, books.[1] Like Jeffrey Sachs, Stiglitz is an economist turned preacher, one of a new breed of secular evangelists produced by the fall of communism. Stiglitz wants to stop rich countries from exploiting poor countries without damaging the springs of wealth-creation. In that sense he is a classic social democrat. His missionary fervor, though, is very American. “Saving the Planet,” one of this new book’s chapter headings, could have been its title.

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Winning a Gamble with Communism

By Force of Thought: Irregular Memoirs of an Intellectual Journey
by János Kornai
MIT Press, 461 pp., $40.00

The Hungarian János Kornai is the most famous, and certainly the most influential, economist to have emerged from postwar Communist Europe.[1] His reputation is based on three books, Overcentralization, Economics of Shortage, and The Socialist System, which knocked away the intellectual foundations of the publicly owned, bureaucratically planned economy. In one sense, he was in the line of critics of central planning such as Ludwig von Mises and Friedrich von Hayek, who had argued in the 1930s that it could not be efficient. But Kornai was the first of these critics who wrote from the concrete experience of a centrally planned economy. His books were a stylized rendering of an actually existing socialist economy, not an imagined one, written by someone who—while cultivating extensive contacts with Western scholars and holding, from the mid-1980s, a dual appointment at Harvard University—elected to stay and work in Hungary right through the postwar years.

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