Book Reviews: 'Economics After The Crisis' And 'Money And Sustainability'

"Money and Sustainability," by Bernard Lietaer, Christian Arnsperger, Sally Goerner, Stefan Brunnhuber, Triarchy Press, 2012

The essential link between "Economics After the Crisis" by Adair Turner and "Money and Sustainability" by Bernard Lietaer and his co-authors is the agreements that the authors arrive at independently: conventional economics is bankrupt, at last revealed by the financial crises of 2008 still reverberating in recessions in real economies worldwide.

Lord Adair Turner who oversaw Britain's Financial Services Authority typifies the elite, top-down view in this slim volume of essays based on his Lionel Robbins Memorial Lectures in 2012. Lord Turner's analysis is worth our attention since he may be tapped as the next head of the Bank of England. He catalogues all the aspects of policy failures and how many were rooted in the many assumptions of conventional economic theory that proved wrong: from "efficient markets" and "rational actors" to the many "externalized" costs. These blinded policy makers, asset managers, corporate executives and accountants to these ignored threats overhanging balance sheets, institutional portfolios and GDP-measured national accounts. Turner pinpoints erroneous discount rates, ignoring of avoided costs, insights of other disciplines and scientific research.

Much of this critique is now commonplace and widely accepted since brain scientists, endocrinologist and behavioral psychologists invalidated much of conventional economics. In addition, economic theories from left to right took much of finance, debt money-creation and credit-allocation as given. Yet many financial models took invalid economic assumptions as their basis, such as general equilibrium, "market completion," and the normal distribution "bell curve" model in statistics.

Lord Turner points to finance, his regulatory bailiwick and how it became a bubble driven by such assumptions and the fact that "making money is the raison d'etre of the financier." Yet he does not dig further into the nature of money, the politics of its creation and how credit is allocated - crucial for his job! Nor does Turner offer much to those looking for deeper reforms such as the need for financial transaction taxes, circuit breakers to curb high frequency trading, separating retail banking from investment banking, curbing derivatives and leverage - making this book less useful. Read more.

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