Selected as a Financial Times Best Book of 2013Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government (...) spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer. That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we austerity for what it is, and what it costs us. (shrink)

ABSTRACT Nassim Taleb rightly points out that although people may acknowledge in the abstract that the world is uncertain, they still behave as if a large enough sample size is all that is needed to predict, and model, the future. He also rightly notes that ever‐increasing quantities of information are relevant only in simple situations, such as in predicting the range of human height, but are misleading in more random arenas, such as financial markets. However, while Taleb decries the use (...) of narratives for falsely forcing the facts to fit a given story, we need narratives in order to make sense of a complex world. Further, Taleb fails to take sufficient heed of the fact that human narratives themselves become objects that act on subjects in an ever‐increasing web of complexity. (shrink)

ABSTRACT Nassim Taleb rightly points out that although people may acknowledge in the abstract that the world is uncertain, they still behave as if a large enough sample size is all that is needed to predict, and model, the future. He also rightly notes that ever?increasing quantities of information are relevant only in simple situations, such as in predicting the range of human height, but are misleading in more random arenas, such as financial markets. However, while Taleb decries the use (...) of narratives for falsely forcing the facts to fit a given story, we need narratives in order to make sense of a complex world. Further, Taleb fails to take sufficient heed of the fact that human narratives themselves become objects that act on subjects in an ever?increasing web of complexity. (shrink)

Santhi Hejeebu and Deirdre McCloskey's rebuttal to Karl Polanyi's Great Transformation begs several important questions. Yes, commerce can be found throughout human history—but is that the same as saying that people have been equally capitalistic at all times? If not, then how did modern capitalism come into being? Hejeebu and McCloskey portray capitalism as having evolved gradually, indeed quite naturally, rather than being a contingent product of politics. Not inconsistently, Hejeebu and McCloskey radically distinguish between what people “think” and what (...) they “do"—that is, between their ideas and their actions. This distinction, too, suggests that human action is ahistorically capitalistic—whatever human agents at different times and places might think. (shrink)