ECONned
 Hardcover edition | |
| Author | Yves Smith |
|---|---|
| Language | English |
| Genre | Finance |
| Publisher | Palgrave Macmillan |
Publication date | 2010 |
| Publication place | United States |
| Media type | Print (Hardback) |
| Pages | 368 |
| ISBN | 978-0-230-62051-3 |
| OCLC | 928874354 |
ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalismis a 2010 non-fiction book byYves Smith,the pseudonymous founder of theNaked Capitalismblog. Smith was approached to write the book after her blog attracted a growing readership during the2008 financial crisis.[1]
Content
[edit]The book describes how the deregulation of the financial industry and the systemic incentives for managers to "loot"limited liabilitycompanies led to the build-up and eventual collapse of thecredit bubbleduring the 2000s. Smith argues thatfree marketeconomists hold much of the blame for the2008 financial crisisdue to their outsized (and unchecked) influence over policy makers. In particular, she takes issue with faux empirical approaches used by economists and the masking of complex social phenomena in simple mathematical equations, based on assumptions that are openly acknowledged to be wrong or in error. The book makes the case that overreliance on the assumption of a "self-correcting" free market led to a period of unregulated speculation, accounting tricks, and public looting.
Reception
[edit]The book was reviewed inMonthly Review,[2]inContemporary Sociology,[3]inCentral Banking[4]and byThe Guardian,[5]theSouth China Morning Post,[6]Benzinga[7]andScienceBlogs.[8]
Richard Du Boff, writing inMonthly Review,likened the book to a "Baedekerfor the economics profession ", adding that at the outset," Smith promises to explain to the reader 'how the widespread adoption of largely unproved but widely accepted economic theories led to policies that produced the global financial crisis that began in 2007... [and] how ideologies defend themselves even as evidence against them mounts.'"[2]According to Du Boff, the "capstone chapter ofEconnedshows, better than anything written to date, how three interrelated types of innovations in aderegulated financial sector—securitization(most dangerously in the form ofcollateralized debt obligationsor CDOs),repurchase agreements(repos), andcredit default swaps—created a shadow banking system that led to the credit crisis of 2008 and economic breakdown in 2009. "[2]Du Boff continued, "Econnedcomes with a compendium of topics that add real value to this book—onstructured finance(the basis of CDOs),neoclassical economicsand the incoherence of its demand function,Gaussian distributions(hijacked for false promises of estimating the odds of default in large groups of securities), and shortingsubprimebonds in large quantities. "[2]
Neil Fligstein, writing inContemporary Sociology,said Smith's book would be of interest to sociologists inasmuch as she "places part of the blame for the crisis on the economics profession. She argues that the development of modern economics has produced an attitude towards markets that underestimates exactly the kind of problems that were created by financial market innovations."[3]According to Smith, regulatory failures were the result of the use of economic theory by policymakers who never really understood the kind of financial markets they were creating—a kind of "cognitive regulatory capture whereby policymakers came to share the decision-making premises of the financial community."[3]Even so, Fligstein continues, Smith does not blame economists: "This book tries to view the financial markets as a system (something which is lacking in almost all of the current books)."[3]Following the repeal of theGlass-Seagall Act,this system encouraged predatory behavior by firms, financial products designed to lack transparency, and a focus on transactions.[3]
Steven Poole,reviewing the book forThe Guardian,said Smith discussed "subprime, greedy bankers and the like, with often riveting results [...] She initiates the reader elegantly into the jargon (eg a" repo haircut ", notHarry Dean Stanton's barnet), and has a gift for summing up pages of crunchy analysis with a vivid précis, calling the post-bailout rules in the US "a looter's wet dream", and that country itself (after a former IMF official) "a banana republic in denial."[5]
In his review inThe South China Morning Post,titled "Brutal truth about the biggest con game of all", Kevin Rafferty said, "If you only read one book on the global financial crisis, it should beEconnedby 'Yves Smith', an entertaining, thorough and damning indictment of the way that Western economists, bankers and politicians together messed up—and are still messing up—the global financial and economic system. "[6]
References
[edit]- ^Davies, Rob (Jan 2011)."Yves Smith".Credit.Vol. 12, no. 1. pp. 52–54 – via ProQuest.
- ^abcdDu Boff, Richard (2010)."A History of the Great Bust – Still With Us".Monthly Review.Vol. 62, no. 4. pp. 55–62.Retrieved2023-07-18– via ProQuest.
- ^abcdeFligstein, Neil (2011)."The Banks Did It".Contemporary Sociology.40(2): 140–142.ISSN0094-3061.
- ^Sinclair, Peter (2010-08-17)."Review of Econned: How Unenlightened Self Interest Damaged Democracy and Corrupted Capitalism".Central Banking.Retrieved2023-07-24.
- ^abPoole, Steven (2010-06-25)."Et cetera".The Guardian.ISSN0261-3077.Retrieved2023-07-19.
- ^abRafferty, Kevin (2010-04-05)."Brutal truth about the biggest con game of all".South China Morning Post.Retrieved2023-07-24.
- ^Bougearel, John (2010-08-07)."Econned by Yves Smith: A Book Review".Benzinga.Retrieved2023-07-25.
- ^mikethemadbiologist (April 8, 2010)."Economics as a Social Science: A Review of ECONned by Yves Smith | ScienceBlogs".scienceblogs.com.Retrieved2023-07-24.
External links
[edit]- ECONnedArchived2010-11-24 at theWayback Machine,atPalgrave Macmillan(official book site)