Knjiga Alana Blinderja “After the Music Stopped“, ki jo je nekdanji predsednik Bill Clintom označil kot “masterpiece”, spada med Top-10 mojih najljubših ekonomskih knjig leta 2013. Blinderja ne zanimajo toliko vzroki za krizo, čeprav podaja verjetno najbolj precizno in briljantno kroniko razlogov za krizo, temveč se, kot nekdanji podpredsednik Fed, posveča predvsem načinom in politikam, kako iz recesije. Spodaj je izvrstna recenzija knjige, ki jo je napisal Brad DeLong iz UC Berkley.

Alan Blinder is the latest economist out of the gate with an analytical account of the recent economic downturn. His 2013 After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead (New York: Penguin) is, I think, the best of accounts–at least the best for those without the substantial background and experience in finance needed to successfully crack the works of Gary Gorton. It is the best for four reasons:

1. The narrative is very good–it is, from my perspective at least, clear and correct.
2. Alan Blinder has a deep understanding of macroeconomics–thus he can place the events in context, and explain just how it was that the housing boom and its crash had such catastrophic effects on the American economy while, say, the dot-com boom and its crash did not (and was in fact a net plus for the U.S. economy as a whole: a lot of research and development got done, a lot of useful business-model experimentation took place, and a lot of very valuable twenty-first century virtual infrastructure got built–the housing boom brought us no analogous benefits).
3. Alan Blinder has a very clear sense of the policy options, both in the past and now: what did work, what would have worked, what might have worked, and what would still work were we to try it to get us out of the current fix we are in.
4. As noted, the book is very readable, even for those who have not been marinated in finance enough to grasp the technicalities and even for those who find topics like “the fall of the rupee” sensational and interesting. For those who do and have worked in or near Wall Street or it equivalent, I recommend Gary Gorton. For everybody else, I recommend Alan Blinder.

The topic is certainly enormously important. The economy is today, still, four and a half years after the crash of 2008, six years after the emergence of the first signs of significant trouble in Wall Street, and seven years after the peak of the housing boom, deeply depressed.

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Alan Blinder shares the consensus of reality-based economists that debt accumulation–whether the Federal Reserve buying or the U.S. Treasury issuing–is not our most serious problem right now. Yes, there is a possibility that someday–perhaps tomorrow–those who are presently buying the $1.1 trillion/year of new Treasury issues and holding the $1.0 trillion/year of new reserve deposits at the Federal Reserve will decide that they would rather do other things with their income than buy the flow of Treasuries and absorb the flow of reserve deposits. But when they switch to buying other things, they buy either property abroad–in which their counterparties then must spend their dollars and so boost U.S. exports–or buy corporate bonds which fund business investment–in which their counterparties boost spending on capital goods–or they buy goods and services directly–which boosts spending on consumption goods. The switch of the flow of expenditure away from soaking up Treasury bond issues and reserve deposit creation is the same thing as the economic recovery which boosts employment, production, and tax revenue, and so eliminates the deficit. The question of how the U.S. will finance its deficit after savers decide to switch away from accumulating more Treasuries and reserve deposits is a question that fails to understand how the circular flow of purchasing power and economic activity works. There are definite real problems associated with managing an economy near full employment in order to make the most of opportunities to sustain long-run economic growth. But it is much more pleasant to have those economic problems than to have our current economic problems.

I had always thought that policy makers well understood the basic principle of macroeconomic management. It was that the government’s proper role was to adjust the circular flow in order to make Say’s Law that (potential) supply creates its own (effective) demand true in practice, even though it was not true in theory. The government’s job was to tweak asset supplies so that there were sufficient liquid assets, sufficient safe assets, and sufficient financial savings vehicles that the economy as a whole did not feel under pressure to deleverage, and so push production below potential output. This principle has gone out the window. The working majority of the Federal Reserve believes it has extended its aggressive expansionary policies to if not beyond the bounds of prudence. As Blinder writes: “The epic hawk-dove battle within the Federal Open Market Committee still rages. The Fed’s hawks seem more worried about the inflation we might get than about the high unemployment we still have. I’m rooting for the doves.” But even the doves fear that their policies are already imprudent.

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What Should Economists Do?

As U.S. policymakers cling stubbornly to wrongheaded policies, what can economists do? In such an environment, they can no longer realistically expect to push policy toward an appropriate posture. So what else should occupy their time? What, then, should economists who seek to better the world do? We can no longer realistically expect to push policy toward an appropriate posture. So what else should occupy our time?

At this point in the Great Depression John Maynard Keynes turned away from focusing on influencing policy to attempt to reconstruct macroeconomic thought by writing the General Theory so that the next time the crisis came economists would think about the economy in a different and more productive way than they had over 1929-1933. Up until 2009, I would have said that he had succeeded and been correct when he wrote to George Bernard Shaw at the start of 1935 that:

I believe myself to be writing a book on economic theory which will largely revolutionize–not I suppose, at once but in the course of the next ten years–the way the world thinks about its economic problems. I can’t expect you, or anyone else, to believe this at the present stage. But for myself I don’t merely hope what I say–in my own mind, I’m quite sure…

But today it is clear that the task was only half-done, if that. The same ritual incantations to summon the Confidence Fairy to appear and shower the blessings of prosperity on the economy that were made by the Herbert Hoovers and Andrew Mellons and Ramsay MacDonalds and Stanley Baldwins of the 1930s are now being made repeatedly and ever-more frantically.

At the London School of Economic on March 25, 2013 Lawrence Summers called for the twin reconstructions of macroeconomic thought on the one hand and of the institutions and orientation of central banking on the other–of macroeconomics so that economists could understand and advise and turn policy makers away from their incantations to the Confidence Fairy to more useful tasks, and of central banking so that never again would central bankers find themselves without the confidence to use the necessary tools to maintain prosperity.

But none of us are smart or bold or arrogant enough to try be a Keynes. Alan Blinder, however, seeks to do the second half of his task: to write a book that is both a popular history of the financial crisis and the downturn for those who cannot crack the books of Gary Gorton and his ilk, and to lay out prescriptions for how to keep us from having, in a generation, to once again suffer the pain of having our knuckles rapped by the fan of Lady Bracknell.