The Next Wall Street Collapse

Jonathan Kirshner in the Boston Review:

ScreenHunter_04 Feb. 23 12.52 …the economy is poised to head down the same road that led to the recent collapse. This is the dispiriting conclusion of four recent books by particularly well-positioned observers. Nouriel Roubini can take credit for getting the crisis almost exactly right, long before it hit; this alone should make his Crisis Economics (coauthored with Stephen Mihm) required reading. Nobel laureate Joseph Stiglitz reprises his role as one of the world’s foremost critics of “market fundamentalism” in Freefall. Richard Posner is closely associated with the free-market “Chicago School” of economics, and, as such, his bracing and intellectually admirable A Failure of Capitalism demands attention. (Posner explores similar themes in a recent academic work, The Crisis of Capitalist Democracy.) Simon Johnson, former Chief Economist at the International Monetary Fund (IMF), and James Kwak, a businessman and consultant, wrote the best book of a fine bunch. Their 13 Bankers is a brilliant, important, and extremely unsettling work. Four big lessons emerge from these analyses.

Keynes was right and classical economics wrong. The economist John Maynard Keynes argued that the market has its limits. Most markets work well most of the time, but financial markets left alone are prone to dysfunction, and an economy stuck in a rut can stay in a rut for some time. Thus the necessity of the stimulus.

More here.