Economic History

The Shock Doctrine: The Rise of Disaster Capitalism

Naomi Klein's The Shock Doctrine advances a truly unnerving argument: historically, while people were reeling from natural disasters, wars and economic upheavals, savvy politicians and industry leaders nefariously implemented policies that would never have passed during less muddled times. As Klein demonstrates, this reprehensible game of bait-and-switch isn't just some relic from the bad old days. It's alive and well in contemporary society, and coming soon to a disaster area near you.

"At the most chaotic juncture in Iraq'' civil war, a new law is unveiled that will allow Shell and BP to claim the country's vast oil reserves… Immediately following September 11, the Bush Administration quietly outsources the running of the 'War on Terror' to Halliburton and Blackwater… After a tsunami wipes out the coasts of Southeast Asia, the pristine beaches are auctioned off to tourist resorts… New Orleans residents, scattered from Hurricane Katrina, discover that their public housing, hospitals and schools will never be re-opened." Klein not only kicks butt, she names names, notably economist Milton Friedman and his radical Chicago School of the 1950s and 60s which she notes "produced many of the leading neo-conservative and neo-liberal thinkers whose influence is still profound in Washington today." Stand up and take a bow, Donald Rumsfeld.

There's little doubt Klein's book--which arrived to enormous attention and fanfare thanks to her previous missive, the best-selling No Logo, will stir the ire of the right and corporate America. It's also true that Klein's assertions are coherent, comprehensively researched and footnoted, and she makes a very credible case. Even if the world isn't going to hell in a hand-basket just yet, it's nice to know a sharp customer like Klein is bearing witness to the backroom machinations of government and industry in times of turmoil. --Kim Hughes

Liar's Poker: Rising Through the Wreckage on Wall Street

The Wisdom of Crowds

In this fascinating book, New Yorker business columnist James Surowiecki explores a deceptively simple idea: Large groups of people are smarter than an elite few, no matter how brilliant–better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.

With boundless erudition and in delightfully clear prose, Surowiecki ranges across fields as diverse as popular culture, psychology, ant biology, behavioral economics, artificial intelligence, military history, and politics to show how this simple idea offers important lessons for how we live our lives, select our leaders, run our companies, and think about our world.

The Wisdom of Crowds


I


If, years hence, people remember anything about the TV game show Who Wants to Be a Millionaire?, they will probably remember the contestants' panicked phone calls to friends and relatives. Or they may have a faint memory of that short-lived moment when Regis Philbin became a fashion icon for his willingness to wear a dark blue tie with a dark blue shirt. What people probably won't remember is that every week Who Wants to Be a Millionaire? pitted group intelligence against individual intelligence, and that every week, group intelligence won.

Who Wants to Be a Millionaire? was a simple show in terms of structure: a contestant was asked multiple-choice questions, which got successively more difficult, and if she answered fifteen questions in a row correctly, she walked away with $1 million. The show's gimmick was that if a contestant got stumped by a question, she could pursue three avenues of assistance. First, she could have two of the four multiple-choice answers removed (so she'd have at least a fifty-fifty shot at the right response). Second, she could place a call to a friend or relative, a person whom, before the show, she had singled out as one of the smartest people she knew, and ask him or her for the answer. And third, she could poll the studio audience, which would immediately cast its votes by computer. Everything we think we know about intelligence suggests that the smart individual would offer the most help. And, in fact, the "experts" did okay, offering the right answer--under pressure--almost 65 percent of the time. But they paled in comparison to the audiences. Those random crowds of people with nothing better to do on a weekday afternoon than sit in a TV studio picked the right answer 91 percent of the time.

Now, the results of Who Wants to Be a Millionaire? would never stand up to scientific scrutiny. We don't know how smart the experts were, so we don't know how impressive outperforming them was. And since the experts and the audiences didn't always answer the same questions, it's possible, though not likely, that the audiences were asked easier questions. Even so, it's hard to resist the thought that the success of the Millionaire audience was a modern example of the same phenomenon that Francis Galton caught a glimpse of a century ago.

As it happens, the possibilities of group intelligence, at least when it came to judging questions of fact, were demonstrated by a host of experiments conducted by American sociologists and psychologists between 1920 and the mid-1950s, the heyday of research into group dynamics. Although in general, as we'll see, the bigger the crowd the better, the groups in most of these early

experiments--which for some reason remained relatively unknown outside of academia--were relatively small. Yet they nonetheless performed very well. The Columbia sociologist Hazel Knight kicked things off with a series of studies in the early 1920s, the first of which had the virtue of simplicity. In that study Knight asked the students in her class to estimate the room's temperature, and then took a simple average of the estimates. The group guessed 72.4 degrees, while the actual temperature was 72 degrees. This was not, to be sure, the most auspicious beginning, since classroom temperatures are so stable that it's hard to imagine a class's estimate being too far off base. But in the years that followed, far more convincing evidence emerged, as students and soldiers across America were subjected to a barrage of puzzles, intelligence tests, and word games. The sociologist Kate H. Gordon asked two hundred students to rank items by weight, and found that the group's "estimate" was 94 percent accurate, which was better than all but five of the individual guesses. In another experiment students were asked to look at ten piles of buckshot--each a slightly different size than the

A Splendid Exchange: How Trade Shaped the World

The Long Tail: Why the Future of Business is Selling Less of More

"The Long Tail" is a powerful new force in our economy: the rise of the niche. As the cost of reaching consumers drops dramatically, our markets are shifting from a one-size-fits-all model of mass appeal to one of unlimited variety for unique tastes. From supermarket shelves to advertising agencies, the ability to offer vast choice is changing everything, and causing us to rethink where our markets lie and how to get to them. Unlimited selection is revealing truths about what consumers want and how they want to get it, from DVDs at Netflix to songs on iTunes to advertising on Google. However, this is not just a virtue of online marketplaces; it is an example of an entirely new economic model for business, one that is just beginning to show its power. After a century of obsessing over the few products at the head of the demand curve, the new economics of distribution allow us to turn our focus to the many more products in the tail, which collectively can create a new market as big as the one we already know. The Long Tail is really about the economics of abundance. New efficiencies in distribution, manufacturing, and marketing are essentially resetting the definition of whats commercially viable across the board. If the 20th century was about hits, the 21st will be equally about niches.

The Panic of 1907: Lessons Learned from the Market's Perfect Storm

"Before reading The Panic of 1907, the year 1907 seemed like a long time ago and a different world. The authors, however, bring this story alive in a fast-moving book, and the reader sees how events of that time are very relevant for today's financial world. In spite of all of our advances, including a stronger monetary system and modern tools for managing risk, Bruner and Carr help us understand that we are not immune to a future crisis."

-Dwight B. Crane, Baker Foundation Professor, Harvard Business School

"Bruner and Carr provide a thorough, masterly, and highly readable account of the 1907 crisis and its management by the great private banker J. P. Morgan. Congress heeded the lessons of 1907, launching the Federal Reserve System in 1913 to prevent banking panics and foster financial stability. We still have financial problems. But because of 1907 and Morgan, a century later we have a respected central bank as well as greater confidence in our money and our banks than our great-grandparents had in theirs."

-Richard Sylla, Henry Kaufman Professor of the History of Financial Institutions and Markets, and Professor of Economics, Stern School of Business, New York University

"A fascinating portrayal of the events and personalities of the crisis and panic of 1907. Lessons learned and parallels to the present have great relevance. Crises and panics are as much a part of our future as our past."

-John Strangfeld, Vice Chairman, Prudential Financial

"Who would have thought that a hundred years after the Panic of 1907 so much remained to be written about it? Bruner and Carr break significant new ground because they are willing to do the heavy lifting of combing through massive archival material to identify and weave together important facts. Their book will be of interest not only to banking theorists and financial historians, but also to business school and economics students, for its rare ability to teach so clearly why and how a panic unfolds."

-Charles Calomiris, Henry Kaufman Professor of Financial Institutions, Columbia University, Graduate School of Business

Banana: The Fate of the Fruit That Changed the World

A gripping biological detective story that uncovers the myth, mystery, and endangered fate of the worldÂ’s most humble fruit

To most people, a banana is a banana: a simple yellow fruit. Americans eat more bananas than apples and oranges combined. In others parts of the world, bananas are what keep millions of people alive. But for all its ubiquity, the banana is surprisingly mysterious; nobody knows how bananas evolved or exactly where they originated. Rich cultural lore surrounds the fruit: In ancient translations of the Bible, the “apple” consumed by Eve is actually a banana (it makes sense, doesn’t it?). Entire Central American nations have been said to rise and fall over the banana.

But the biggest mystery about the banana today is whether it will survive. A seedless fruit with a unique reproductive system, every banana is a genetic duplicate of the next, and therefore susceptible to the same blights. Today’s yellow banana, the Cavendish, is increasingly threatened by such a blight—and there’s no cure in sight.

Banana combines a pop-science journey around the globe, a fascinating tale of an iconic American business enterprise, and a look into the alternately tragic and hilarious banana subculture (one does exist)—ultimately taking us to the high-tech labs where new bananas are literally being built in test tubes, in a race to save the world’s most beloved fruit.

The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--and Why You Can Never Buy a Decent Used Car!

“The economy [isn’t] a bunch of rather dull statistics with names like GDP (gross domestic product),” notes Tim Harford, columnist and regular guest on NPR’s Marketplace, “economics is about who gets what and why.” In this acclaimed and riveting book–part exposé, part user’s manual–the astute and entertaining columnist from the Financial Times demystifies the ways in which money works in the world. From why the coffee in your cup costs so much to why efficiency is not necessarily the answer to ensuring a fair society, from improving health care to curing crosstown traffic–all the dirty little secrets of dollars and cents are delightfully revealed by The Undercover Economist.

“A rare specimen: a book on economics that will enthrall its readers . . . It brings the power of economics to life.”
–Steven D. Levitt, coauthor of Freakonomics

“A playful guide to the economics of everyday life, and as such is something of an elder sibling to Steven Levitt’s wild child, the hugely successful Freakonomics.”
–The Economist

“A tour de force . . . If you need to be convinced of the everrelevant and fascinating nature of economics, read this insightful and witty book.”
–Jagdish Bhagwati, author of In Defense of Globalization

“This is a book to savor.”
–The New York Times

“Harford writes like a dream. From his book I found out why there’s a Starbucks on every corner [and] how not to get duped in an auction. Reading The Undercover Economist is like spending an ordinary day wearing X-ray goggles.”
–David Bodanis, author of Electric Universe

“Much wit and wisdom.”
–The Houston Chronicle
From Publishers Weekly
Nattily packaged-the cover sports a Roy Lichtensteinesque image of an economist in Dick Tracy garb-and cleverly written, this book applies basic economic theory to such modern phenomena as Starbucks' pricing system and Microsoft's stock values. While the concepts explored are those encountered in Microeconomics 101, Harford gracefully explains abstruse ideas like pricing along the demand curve and game theory using real world examples without relying on graphs or jargon. The book addresses free market economic theory, but Harford is not a complete apologist for capitalism; he shows how companies from Amazon.com to Whole Foods to Starbucks have gouged consumers through guerrilla pricing techniques and explains the high rents in London (it has more to do with agriculture than one might think). Harford comes down soft on Chinese sweatshops, acknowledging "conditions in factories are terrible," but "sweatshops are better than the horrors that came before them, and a step on the road to something better." Perhaps, but Harford doesn't question whether communism or a capitalist-style industrial revolution are the only two choices available in modern economies. That aside, the book is unequaled in its accessibility and ability to show how free market economic forces affect readers' day-to-day.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
From Bookmarks Magazine
Harford exposes the dark underbelly of capitalism in Undercover Economist. Compared with Steven Levitt’s and Stephen J. Dubner’s popular Freakonomics (*** July/Aug 2005), the book uses simple, playful examples (written in plain English) to elucidate complex economic theories. Critics agree that the book will grip readers interested in understanding free-market forces but disagree about Harford’s approach. Some thought the author mastered the small ideas while keeping in sight the larger context of globalization; others faulted Harford for failing to criticize certain economic theories and to ground his arguments in political, organizational structures. Either way, his case studies—some entertaining, others indicative of times to come—will make you think twice about that cup of coffee.
Copyright © 2004 Phillips & Nelson Media, Inc.

Good Guys and Bad Guys: Behind the Scenes with the Saints and Scoundrels of American Business (and Everything in Between)

A fascinating collection of profiles by one of AmericaÂ’s leading business journalists

For three decades, in major publications such as Texas Monthly, Esquire, Fortune, and now The New York Times, Joe Nocera has reported on the people who dominate the business world, for better or worse. Everyone from Warren Buffett to T. Boone Pickens to George Steinbrenner to Ken Lay has fallen under his microscope.

Now, in this collection of his best work, he explores how we define good guys and bad guys in business and concludes that things are often not what they seem.

It turns out that there are surprisingly good qualities in classic villains like junk bond king Michael Milken and notorious stock analyst Henry Blodget. And some business celebrities who are widely admired, such as Steve Jobs, are not quite the good guys they appear to be on the surface.

Good Guys and Bad Guys also offers a fresh perspective on some of todayÂ’s biggest controversies, such as global warming, AppleÂ’s iPhone, CEO compensation, the tobacco industry, short sellers, and much more.

Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve

No matter who you are-investor, trader, homeowner, 401(k) holder, or CEO-you are bound to feel the impact of Alan Greenspan's “Age of Ignorance” for years to come.

According to MSN Money columnist William A. Fleckenstein, Greenspan's nearly 19-year career as Federal Reserve Chairman is even worse than anyone imagined. Labeled “Mr. Bubble” by the New York Times, Greenspan was nothing less than a serial bubble blower with a long history of bad decision-making. His famous “Greenspan Put” fueled the perception of a Goldilocks economy-but, as this explosive exposé reveals, the bear has finally caught up with Goldilocks.

Using transcripts of Greenspan's FOMC meetings as well as testimony before Congress, this eye-opening book delivers a timeline of his most devastating mistakes and weaves together the connection between every economic calamity of the past 19 years:

• The stock market crash of 1987
• The Savings & Loan crisis
• The collapse of Long Term Capital Management
• The tech bubble of 2000
• The feared Y2K disaster
• The credit bubble and real estate crisis of 2007

Fleckenstein explains just how far-reaching Greenspan's mess has been flung, and presents damning evidence that contradicts the former Fed chief's public naiveté concerning shifts in the market and economy. He also points to a disturbing fact, that throughout his career, Greenspan not only made costly mistakes, but made the same ones-over and over again. And not only was he never able to recognize or admit to those mistakes, he constantly rewrote his own history to justify them.

Greenspan's Bubbles offers a lock-stock-and-barrel portrait of a flawed but fascinating man whose words and actions have led a whole generation astray, and whose legacy will continue to challenge us in the years ahead.