What do you think?
Rate this book
Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong
In the aftermath of the Financial Crisis, many commonly held beliefs have emerged to explain its cause. Conventional wisdom blames Wall Street and the mortgage industry for using low down payments, teaser rates, and other predatory tactics to seduce unsuspecting home owners into assuming mortgages they couldn't afford. It blames average Americans for borrowing recklessly and spending too much. And it blames the tax policies and deregulatory environment of the Reagan and Bush administrations for encouraging reckless risk taking by wealthy individuals and financial institutions. But according to Unintended Consequences, the conventional wisdom masks the real causes of our economic disruption and puts us at risk of facing a slew of unintended-and potentially dangerous-consequences.
320 pages, Hardcover
First published May 7, 2012
53 people are currently reading
549 people want to read
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 30 of 46 reviews
June 21, 2020
Conventional wisdom tells us that the cause of the financial crisis was simple: malignant banks lowered their lending standards to profit off vulnerable clients and the government refused to regulate the banks, those leading to the rise in subprime loans. But is this narrative really correct? Conard presents the reader with a different story that is backed up with dozens of footnotes: the government, in conjunction with Congress, pressured banks to lower their lending standards and forced Fannie Mae and Freddie Mac to make quotas for low-income clients, thus forcing them to make bad loans. Conard also presents evidence showing the reader that the proposals offered to mitigate the crisis (tax increases and stimulus) actually are counterproductive. Very good book and I enjoyed Conard’s follow-up book as well!
June 12, 2012
Alternates between stone-cold brilliant and totally self-serving. I think Conard is just straight-up wrong on the EMH and his contention that no one really could have seen the crisis coming, but his macro-level explanations of the macro-economy are novel, non-obvious, and compelling. If 4.5 stars was possible, this would get it - I consider it essential reading for anyone with any interest in the economy.
April 25, 2014
In Unintended Consequences: Why Everything You've Been Told About the Economy is Wrong, Edward Conard officially attempts to debunk myths concerning how the US economy actually functions, while in reality he advances a tired, dated philosophy of the merits of inequality, greed, intense competition and social Darwinism. If you are under the age of 50, not likely to converse with a geriatric relative in the near future, not an economics geek, and live in the real world, you will probably not be able to relate to the contents of this book at all. While there is some good information in the book, especially when he addresses how the US economy experienced rather spectacular growth despite running up large debts and trade deficits, much of the rest of the book defies logic, reason, sound economics, everyday observations and common sense. Conard gained his “expertise” as a partner at Bain Capital Management between 1993 and 2007, and has degrees from Harvard and the University of Michigan. He has done a lot of research and statistical analysis, but his conclusions are distorted by his underlying Social Darwinist perspective, which calls the entire work's validity into question. Here is a quote from the introduction: “Darwinian survival of the fittest largely governs the economy. It tests real-world alternatives against fierce competition for scarce resources – food and sex in the case of biology, customers and capital in the case of economics.” I suppose the validity and veracity of that assertion depends upon one's definition of “scarce.” While the competition is real enough (although not absolutely necessary), the scarcity is artificial and illusory. With a global population that has more than doubled in the last century and a half and is now rapidly approaching seven billion people, all aggregated in one interconnected global economy, neither sex nor potential customers can be said to be especially scarce. If anything, both may be a bit too common! Over half of all food produced is not consumed... and the global population continues to grow, so, apparently, famine and starvation aren't so widespread as to limit population growth. In biological terms this is known as a“relative abundance” of food. If anything this points to artificial surpluses, overproduction of food, and inefficiencies in food storage and distribution – overabundance instead of scarcity. But what about capital? Capital is assets put to economic use. Assets can include machinery, buildings and financial instruments (like money, stocks and bonds). Basically anything that isn't labor but can be used to produce something is capital. OK... we just experienced a building boom followed by a recession where the values of all real estate declined and there were too many available buildings relative to demand... when one has too much of something terms like “overabundance”, “glut” and “surplus” are applicable... “scarce” is not. So no scarcity of buildings. What about machinery? Later on in the same book, Conard boasts about how outsourcing and “offshoring” of production between 1990 and today has created an abundance of inexpensive mass produced goods, including production machinery... so, by his own admission, no scarcity there. What about money, stocks and bonds? Money, stocks and bonds can literally be created out of nothing, as needed, any time. Any market-wide or economy-wide scarcity of any of these three financial instruments is either an aberration or has been intentionally created to produce a certain effect or range of effects. So no scarcity there... no scarcity at all. “Fierce” economic competition is a product of capitalism, one of many schemes by which economies can be structured and directed, and the intensity of capitalist competition is artificial, optional and relative and not natural, obligatory and absolute. It is because capital is created by debt and obligation, and capital is required for production, that intense economic competition exists. One cannot honestly equate an entirely artificial system which has directed the activities of some of the members of a single species for a few hundred years to a natural, organic process which has directed the development of all known life for the past three billion years. The phrase “delusional hubris” comes to mind. I'm not saying that economic competition is bad, nor am I denying its existence, just that it isn't, as Conard suggests, dictated by some inviolable natural or physical law.
Later in the book Conard suggests that eliminating the minimum wage and dramatically lowering the average wage which laborers are paid in the US is one way to grow the economy. I suppose he means by reversing the trade deficit, attracting foreign capital investment... basically “priming”, which is producing value-added goods for export (it worked for Japan and is currently working for China). In the US this would be economic suicide, and it would lead to a long term global economic depression. Consumers drive our economy, and ours is the world's largest consumer economy, one which supports a large complex global system of production and distribution. If our consumers like something, there is a good chance that consumers elsewhere will too. If one has the capacity to produce for our entire market, then one also has sufficient economy of scale to produce for the world. Our standards are as high as nearly everyone else's (with the possible exception of some European nations), so little to no retooling would be required. The demand of our consumers drives global production. One of the reasons our economy is in trouble is because, even at current wage and price levels (relative prices have rarely been lower, by the way), “our reach exceeds our grasp.” For some time now, collectively, our consumers have had more demand than current capacity to purchase (we want stuff we can't pay for), and have been purchasing goods using relatively high interest unsecured credit (buying stuff with credit cards), and purchasing relatively illiquid secured assets with credit, assets that have had either inflated relative values and/or whose relative value has depreciated over time (went deep in debt to buy too much house for too much money, or went into debt to purchase automobiles, electronics or other items which depreciate in value over time). What would happen if wages dropped dramatically? Since our consumers are generally our wage earners, our capacity to consume would drop dramatically, but demand would remain constant. This would mean a whole lot of broke frustrated consumers who would then have to default on their current debts and dramatically scale back consumption to subsistence levels. This in turn would effect both domestic services and international production and finance. Domestic producers would continue to be employed, but both their per hour wage and the number of hours they worked per week would drop (less global demand for produced goods due to less capital circulation). The service workers who once depended upon the wages from providing services to these productive folks would be out of work because the producers could no longer afford to pay them. Such service workers are like 40% of our economy. An infusion of capital would keep the economy from entering a critical death spiral, but no capital would be available due to consumer defaults which would cripple or kill many existing financial institutions. So, with most of the service and financial sectors out of work (which amounts to like half of our workers), then it gets really bad and stays that way for a long time... So, yes, the US economy would eventually end up producing a lot of inexpensive high quality goods for export and run a trade surplus, but only after twenty years of misery, unemployment and depression.
Donald Moser explained money to me this way: “Money is like force in physics. In order for it to work it has to be applied... it has to circulate... it has to move. Money that just sits there has potential energy... money that circulates has kinetic energy. It is the velocity of money, its function as a medium of exchange, that allows its transformative potential to be realized. When it moves it works, when it doesn't it doesn't. If an economy were a body money would be its blood. If the blood doesn't flow the organs are starved and begin to atrophy. And that is exactly what happens during a depression... the organs of the economy atrophy... they are starved of capital and die.” Radically lowering the wage base of a nation of consumers is like starving a body of blood, or levering a great weight into place and then fixing it there... the blood stops flowing, and the weight gets stuck... the patient gets sick and toxins accrue in the blood, and the potential of the stone to lift persons and objects is arrested until some great effort pries it loose.
More of his Social Darwinist mumbo-jumbo, this time about cooperation and competition (with my comments in parenthesis):
“Lions around the carcass don't invite others to enjoy the spoils – they fight to keep them out... (a rather vivid metaphor which does not actually conform to observed pride behaviors) Money doesn't motivate us as much as status does (ah, his first sociological comment with any merit)It's primal (actually it is sociological, a common but not universal human trait which varies in form from one culture to another rather than a universal fixed action pattern). Skill doesn't win sought after mates; relative skill does, and then only if the differentiation is large enough to be recognized... In everyday life, people buy fancy cars, expensive suits, and homes with large entertainment spaces they rarely use in order to display their success. Men seek beautiful women – even unintelligent, unfriendly ones – for the recognizable status of having attracted a desirable mate. Academics seek recognition for their intellectual prowess. It's all the same. Money is just a means to these ends. That's not to say that status is the only motivator, only that money and status are powerful motivators – the most powerful motivators – of economic risk-taking, and that money is the predominant way talented people pursue status. Few people have enough talent to pursue status in alternative ways, and the economy does not offer many such opportunities. It's not so much the rewards per se that motivate people, but the lack of status that comes from not having achieved them. The cost of shame is far greater than the value of success.”
I will refute each statement in the order in which he makes it.
Humans aren't lions. While lions live in extended family groups called prides, their behaviors are less cultural and more instinctive, and they are less “social” mammals than are we. Instead of coordinated pack behaviors involving strategy, communication and tactics, lions will, en masse, rush selected prey. A group of lions brings down larger prey by persistent pursuit, mobbing, biting and scratching until the prey is brought down and killed. There is no deft maneuvering into position, hamstringing, or any of the other pack behaviors associated with more social and intelligent animals, such as wild dogs, wolves, meat-eating cetacians (dolphins and orcas) and people. Lions are the sharks of the savannah, well adapted to their particular environment but relatively stupid, venal and vicious. Of course, if one has a preconception that humans are generally stupid, venal and vicious, one will see in them lions. It is all a matter of perception, and this guy's perceptions are distorted by his underlying Social Darwinist views.
Relative status is a huge motivator among ignorant and unenlightened humans living in hierarchical societies. “Relative status” implies that you are aware of how others perceive you, the value that certain members of a group have assigned to you, and that you actually care. Since one can never fully see oneself through another's eyes, this becomes a recursive reflection or projection of self-assessment; a sort of comparative ego extension, like metaphorically waving one's genitals around in a room full of mirrors – pretty ridiculous. Even more absurd is caring about the assessments of others; unless those assessments could kill or seriously injure you it really isn't worth worry or even a moment's consideration. Unfortunately, ignorance abounds (but is finally beginning to diminish), relatively few humans are enlightened (although the number is growing), and the majority of humans remain trapped in hierarchical societies (although, as a percentage it is gradually declining). It is far from primal (derived from “being of first principles”), and is actually a secondary or tertiary trait which developed relatively recently in the history of the species. Among pastoral nomads, the ancestors from whom most of us descend, there is little or no differentiation in status. Everyone in a nomadic group has roughly the same set of skills and abilities, “leadership” is relative, contingent, tentative and ephemeral, there is little difference in lifestyle between a “leader” and a “follower”, and accumulated goods are all purposive, frequently shared, and kept to the bare minimum that is practicable (as a nomad must move everything that he or she owns frequently, and too many possessions decreases speed and increases difficulty of travel). There is little differentiation in status among subsistence farmers in villages, because, again, everyone has roughly the same knowledge, skills and capacities. “Leadership” remains relative, tentative, contingent and ephemeral. It is only once surpluses have been achieved, specialization has occurred and leisure begins to develop that a society can support castes or classes, and that stratification can begin in earnest. Still, it takes quite some time for this to be fully developed into a hierarchy and for such an unnatural system to become the traditional unquestioned culture of a people. In humans the process took nearly 200,000 years. If this were actually a primal trait humans would long ago have been extinct. We would have competed ourselves right out of existence. It is only by cooperating in the face of adversity and putting the needs of the group ahead of those of the individual that we have survived.
Developing relative, recognizable skills is important, provided that those skills are useful and result in something which serves the legitimate needs of the group. Those skills should be developed for their own sake, but if it takes recognition before the group and the awarding of special status in order to stimulate individuals to develop such skills, then it should be done. As for mating, I've had several long-term relationships, and at least four women have expressed a desire to breed with me. I don't have an especially novel or impressive skill set, I'm a pretty average guy in most ways, and for much of my life I was kind of an asshole. A lot of the guys that I know who are married or partnered or have kids roughly fit the same description, so his statement about developing relative skill sets doesn't conform to what I've observed. In my experience, if you are kind and caring, have a sense of humor, aren't a complete idiot or hideously deformed and can hold down a steady job, you will have many opportunities to mate. The expensive material status symbols and “bling” are unnecessary and wasteful... unless your ideal mate is shallow, materialistic, easily impressed and more interested in a cash machine than a human with whom to mate. If that is what you are looking for, then by all means work your ass off to acquire, “fancy cars, expensive suits, and homes with large entertainment spaces.” “Men seek beautiful women – even unintelligent, unfriendly ones – for the recognizable status of having attracted a desirable mate.” Wow, I barely know where to begin on this one. I've never given a damn what my women have looked like, and perhaps that is why I've been with so many amazing, talented, intelligent and funny women. The opinions and perceptions of strangers and most other people stopped mattering to me a long time ago, and I've generally been happier, more content and fulfilled for it since. Most of the guys I know who are happily married did not choose their mates based on appearance, but upon the substance of their characters, and how well their personalities and goals meshed. Common orientations and interests seem to be good indicators of a successful partnership. Physical attraction is great when one is younger, and for short-term “hook ups”, but marriage and long-term relationships are not about sex, at least not the deeply fulfilling relationships, and I don't know anyone over the age of 25 who would stay in a relationship with someone simply because they were “hot.” There has to be some deeper connection, there has to be something more. One does not form a life-long partnership to awe the dudes or to impress strangers with one's status, unless one has extremely low self-esteem, one is quite shallow, or one dwells in a state of perpetual adolescence. Mr. Conard really needs to open his eyes and his mind, leave the narrow confines of the corporate boardroom and take a long walk in the real world. And then he dwells on money and status some more... blah, blah, blah... and gets to the crux. There are few economic alternatives in a conventional capitalist system to money for either achieving or expressing status: it is that which confers status, that which rewards achievements, and that which can be traded for things associated with status (the status trappings, some of which were previously mentioned... or as I like to think of them, “the status trap”). So, let me get this straight: in order to impress people you don't need to impress, whose perceptions and opinions you can never really know with any degree of certainty, you spend time and money obtaining skills and developing talents, and then more time working and honing your skills and talents, so that you can buy stuff that you really don't need, to visually and/or tangibly display your relative social status, so that you can feel better about yourself and who you are, which actually has little to do with your status trinkets. This is sort of like joining a cargo cult and then having to negotiate a difficult and dangerous obstacle course to get down to the beach where you have to compete with others for an opportunity to collect things that you don't need and can't use, which take up space you could be using for something else in your home, and risk possible loss or theft of these things to some similarly status conscious cultist. This is completely insane. Why not just like yourself, or better yet, stop caring? And that fear/shame manipulative bullshit about “feeling a loss of status,” that is old-school in group/out group stuff. “I'm currently included in the group, but, if I fail to conform in some way or live up to a certain set of expectations I may disappoint people and let them down to the point where I'm seen as more of a liability than an asset and I might be expelled from the group, and the group may cease being part of my identity, diminishing my sense of self.”
Later in the book Conard suggests that eliminating the minimum wage and dramatically lowering the average wage which laborers are paid in the US is one way to grow the economy. I suppose he means by reversing the trade deficit, attracting foreign capital investment... basically “priming”, which is producing value-added goods for export (it worked for Japan and is currently working for China). In the US this would be economic suicide, and it would lead to a long term global economic depression. Consumers drive our economy, and ours is the world's largest consumer economy, one which supports a large complex global system of production and distribution. If our consumers like something, there is a good chance that consumers elsewhere will too. If one has the capacity to produce for our entire market, then one also has sufficient economy of scale to produce for the world. Our standards are as high as nearly everyone else's (with the possible exception of some European nations), so little to no retooling would be required. The demand of our consumers drives global production. One of the reasons our economy is in trouble is because, even at current wage and price levels (relative prices have rarely been lower, by the way), “our reach exceeds our grasp.” For some time now, collectively, our consumers have had more demand than current capacity to purchase (we want stuff we can't pay for), and have been purchasing goods using relatively high interest unsecured credit (buying stuff with credit cards), and purchasing relatively illiquid secured assets with credit, assets that have had either inflated relative values and/or whose relative value has depreciated over time (went deep in debt to buy too much house for too much money, or went into debt to purchase automobiles, electronics or other items which depreciate in value over time). What would happen if wages dropped dramatically? Since our consumers are generally our wage earners, our capacity to consume would drop dramatically, but demand would remain constant. This would mean a whole lot of broke frustrated consumers who would then have to default on their current debts and dramatically scale back consumption to subsistence levels. This in turn would effect both domestic services and international production and finance. Domestic producers would continue to be employed, but both their per hour wage and the number of hours they worked per week would drop (less global demand for produced goods due to less capital circulation). The service workers who once depended upon the wages from providing services to these productive folks would be out of work because the producers could no longer afford to pay them. Such service workers are like 40% of our economy. An infusion of capital would keep the economy from entering a critical death spiral, but no capital would be available due to consumer defaults which would cripple or kill many existing financial institutions. So, with most of the service and financial sectors out of work (which amounts to like half of our workers), then it gets really bad and stays that way for a long time... So, yes, the US economy would eventually end up producing a lot of inexpensive high quality goods for export and run a trade surplus, but only after twenty years of misery, unemployment and depression.
Donald Moser explained money to me this way: “Money is like force in physics. In order for it to work it has to be applied... it has to circulate... it has to move. Money that just sits there has potential energy... money that circulates has kinetic energy. It is the velocity of money, its function as a medium of exchange, that allows its transformative potential to be realized. When it moves it works, when it doesn't it doesn't. If an economy were a body money would be its blood. If the blood doesn't flow the organs are starved and begin to atrophy. And that is exactly what happens during a depression... the organs of the economy atrophy... they are starved of capital and die.” Radically lowering the wage base of a nation of consumers is like starving a body of blood, or levering a great weight into place and then fixing it there... the blood stops flowing, and the weight gets stuck... the patient gets sick and toxins accrue in the blood, and the potential of the stone to lift persons and objects is arrested until some great effort pries it loose.
More of his Social Darwinist mumbo-jumbo, this time about cooperation and competition (with my comments in parenthesis):
“Lions around the carcass don't invite others to enjoy the spoils – they fight to keep them out... (a rather vivid metaphor which does not actually conform to observed pride behaviors) Money doesn't motivate us as much as status does (ah, his first sociological comment with any merit)It's primal (actually it is sociological, a common but not universal human trait which varies in form from one culture to another rather than a universal fixed action pattern). Skill doesn't win sought after mates; relative skill does, and then only if the differentiation is large enough to be recognized... In everyday life, people buy fancy cars, expensive suits, and homes with large entertainment spaces they rarely use in order to display their success. Men seek beautiful women – even unintelligent, unfriendly ones – for the recognizable status of having attracted a desirable mate. Academics seek recognition for their intellectual prowess. It's all the same. Money is just a means to these ends. That's not to say that status is the only motivator, only that money and status are powerful motivators – the most powerful motivators – of economic risk-taking, and that money is the predominant way talented people pursue status. Few people have enough talent to pursue status in alternative ways, and the economy does not offer many such opportunities. It's not so much the rewards per se that motivate people, but the lack of status that comes from not having achieved them. The cost of shame is far greater than the value of success.”
I will refute each statement in the order in which he makes it.
Humans aren't lions. While lions live in extended family groups called prides, their behaviors are less cultural and more instinctive, and they are less “social” mammals than are we. Instead of coordinated pack behaviors involving strategy, communication and tactics, lions will, en masse, rush selected prey. A group of lions brings down larger prey by persistent pursuit, mobbing, biting and scratching until the prey is brought down and killed. There is no deft maneuvering into position, hamstringing, or any of the other pack behaviors associated with more social and intelligent animals, such as wild dogs, wolves, meat-eating cetacians (dolphins and orcas) and people. Lions are the sharks of the savannah, well adapted to their particular environment but relatively stupid, venal and vicious. Of course, if one has a preconception that humans are generally stupid, venal and vicious, one will see in them lions. It is all a matter of perception, and this guy's perceptions are distorted by his underlying Social Darwinist views.
Relative status is a huge motivator among ignorant and unenlightened humans living in hierarchical societies. “Relative status” implies that you are aware of how others perceive you, the value that certain members of a group have assigned to you, and that you actually care. Since one can never fully see oneself through another's eyes, this becomes a recursive reflection or projection of self-assessment; a sort of comparative ego extension, like metaphorically waving one's genitals around in a room full of mirrors – pretty ridiculous. Even more absurd is caring about the assessments of others; unless those assessments could kill or seriously injure you it really isn't worth worry or even a moment's consideration. Unfortunately, ignorance abounds (but is finally beginning to diminish), relatively few humans are enlightened (although the number is growing), and the majority of humans remain trapped in hierarchical societies (although, as a percentage it is gradually declining). It is far from primal (derived from “being of first principles”), and is actually a secondary or tertiary trait which developed relatively recently in the history of the species. Among pastoral nomads, the ancestors from whom most of us descend, there is little or no differentiation in status. Everyone in a nomadic group has roughly the same set of skills and abilities, “leadership” is relative, contingent, tentative and ephemeral, there is little difference in lifestyle between a “leader” and a “follower”, and accumulated goods are all purposive, frequently shared, and kept to the bare minimum that is practicable (as a nomad must move everything that he or she owns frequently, and too many possessions decreases speed and increases difficulty of travel). There is little differentiation in status among subsistence farmers in villages, because, again, everyone has roughly the same knowledge, skills and capacities. “Leadership” remains relative, tentative, contingent and ephemeral. It is only once surpluses have been achieved, specialization has occurred and leisure begins to develop that a society can support castes or classes, and that stratification can begin in earnest. Still, it takes quite some time for this to be fully developed into a hierarchy and for such an unnatural system to become the traditional unquestioned culture of a people. In humans the process took nearly 200,000 years. If this were actually a primal trait humans would long ago have been extinct. We would have competed ourselves right out of existence. It is only by cooperating in the face of adversity and putting the needs of the group ahead of those of the individual that we have survived.
Developing relative, recognizable skills is important, provided that those skills are useful and result in something which serves the legitimate needs of the group. Those skills should be developed for their own sake, but if it takes recognition before the group and the awarding of special status in order to stimulate individuals to develop such skills, then it should be done. As for mating, I've had several long-term relationships, and at least four women have expressed a desire to breed with me. I don't have an especially novel or impressive skill set, I'm a pretty average guy in most ways, and for much of my life I was kind of an asshole. A lot of the guys that I know who are married or partnered or have kids roughly fit the same description, so his statement about developing relative skill sets doesn't conform to what I've observed. In my experience, if you are kind and caring, have a sense of humor, aren't a complete idiot or hideously deformed and can hold down a steady job, you will have many opportunities to mate. The expensive material status symbols and “bling” are unnecessary and wasteful... unless your ideal mate is shallow, materialistic, easily impressed and more interested in a cash machine than a human with whom to mate. If that is what you are looking for, then by all means work your ass off to acquire, “fancy cars, expensive suits, and homes with large entertainment spaces.” “Men seek beautiful women – even unintelligent, unfriendly ones – for the recognizable status of having attracted a desirable mate.” Wow, I barely know where to begin on this one. I've never given a damn what my women have looked like, and perhaps that is why I've been with so many amazing, talented, intelligent and funny women. The opinions and perceptions of strangers and most other people stopped mattering to me a long time ago, and I've generally been happier, more content and fulfilled for it since. Most of the guys I know who are happily married did not choose their mates based on appearance, but upon the substance of their characters, and how well their personalities and goals meshed. Common orientations and interests seem to be good indicators of a successful partnership. Physical attraction is great when one is younger, and for short-term “hook ups”, but marriage and long-term relationships are not about sex, at least not the deeply fulfilling relationships, and I don't know anyone over the age of 25 who would stay in a relationship with someone simply because they were “hot.” There has to be some deeper connection, there has to be something more. One does not form a life-long partnership to awe the dudes or to impress strangers with one's status, unless one has extremely low self-esteem, one is quite shallow, or one dwells in a state of perpetual adolescence. Mr. Conard really needs to open his eyes and his mind, leave the narrow confines of the corporate boardroom and take a long walk in the real world. And then he dwells on money and status some more... blah, blah, blah... and gets to the crux. There are few economic alternatives in a conventional capitalist system to money for either achieving or expressing status: it is that which confers status, that which rewards achievements, and that which can be traded for things associated with status (the status trappings, some of which were previously mentioned... or as I like to think of them, “the status trap”). So, let me get this straight: in order to impress people you don't need to impress, whose perceptions and opinions you can never really know with any degree of certainty, you spend time and money obtaining skills and developing talents, and then more time working and honing your skills and talents, so that you can buy stuff that you really don't need, to visually and/or tangibly display your relative social status, so that you can feel better about yourself and who you are, which actually has little to do with your status trinkets. This is sort of like joining a cargo cult and then having to negotiate a difficult and dangerous obstacle course to get down to the beach where you have to compete with others for an opportunity to collect things that you don't need and can't use, which take up space you could be using for something else in your home, and risk possible loss or theft of these things to some similarly status conscious cultist. This is completely insane. Why not just like yourself, or better yet, stop caring? And that fear/shame manipulative bullshit about “feeling a loss of status,” that is old-school in group/out group stuff. “I'm currently included in the group, but, if I fail to conform in some way or live up to a certain set of expectations I may disappoint people and let them down to the point where I'm seen as more of a liability than an asset and I might be expelled from the group, and the group may cease being part of my identity, diminishing my sense of self.”
September 12, 2012
In Unintended Consequences, Edward Conrad (former Managing Director of Bain Capital), did a weird thing. He wrote a fairly interesting and engaging argument about what went wrong in the housing crisis. He makes a compelling case that the fundamental problem was basically a bank run, and that government interventions should have focused on that aspect of things, by guaranteeing investments and thus lowering the panic level. But then, for some reason, Conrad decided to sandwich this relatively strong narrative in the middle of an instruction book for plutocrats to continue screwing the poor. And, for good measure, he mixed in some truly weird partisanship.
Read the rest of the review at Source4Politics.
Read the rest of the review at Source4Politics.
September 17, 2015
Great explanations, cuts at ideologies on both sides.
USA promotes risk taking and innovations. Manufacturing is a dead end for the US. This grows the economy.
One thing the author makes crystal clear, the beneficiaries of “predatory” lending is the borrower, not the lender.
Investors appetite for CDOs, RMBS, fueled the housing bubble. And they knew what they were buying. This is a counter argument to Michael Lewis explanations in the Big Short.
No, it was not banks taking advantage of investors on subprime related securities. In fact, they (banks) held 40% of subprime debt.
Giving money to the poor, i.e. income re-distribution, from the rich, stifles investment, and the poor are more likely to consume the money.
Investment, risk taking, and innovation are a key reasons to the US economy out pacing the rest of the world
Paul Krugman repudiated repeatedly in this book. (which I always like). So is Dodd-Frank regulation, and Obamacare.
USA promotes risk taking and innovations. Manufacturing is a dead end for the US. This grows the economy.
One thing the author makes crystal clear, the beneficiaries of “predatory” lending is the borrower, not the lender.
Investors appetite for CDOs, RMBS, fueled the housing bubble. And they knew what they were buying. This is a counter argument to Michael Lewis explanations in the Big Short.
No, it was not banks taking advantage of investors on subprime related securities. In fact, they (banks) held 40% of subprime debt.
Giving money to the poor, i.e. income re-distribution, from the rich, stifles investment, and the poor are more likely to consume the money.
Investment, risk taking, and innovation are a key reasons to the US economy out pacing the rest of the world
Paul Krugman repudiated repeatedly in this book. (which I always like). So is Dodd-Frank regulation, and Obamacare.
June 24, 2012
I give it a 3 because it tries to take the defense of an under-represented side of the debate, and brings up a number of good suggestions.
It may be worth buying if you are interested in back of the envelope calculations and justification that innovation of a "few" benefits the "many".
But on the core of his argument ("inequality is the necessary condition of innovation so don't increase taxation of the top of the pyramid"), the author is not convincing.
The main issue is that he mixes together entrepreneurs and their financial backers, and then applies the logic of financial backers to entrepreneurs. It is a highly questionable approach.
It may be worth buying if you are interested in back of the envelope calculations and justification that innovation of a "few" benefits the "many".
But on the core of his argument ("inequality is the necessary condition of innovation so don't increase taxation of the top of the pyramid"), the author is not convincing.
The main issue is that he mixes together entrepreneurs and their financial backers, and then applies the logic of financial backers to entrepreneurs. It is a highly questionable approach.
April 17, 2024
I have too much to say about this book. Firstly, I think everyone should read it.
I think it was clear that the original subtitle was meant to be "Why Everything You've Been Told About the (2008) Financial Crisis is Wrong," but was expanded to "The Economy," because the author adds in a lot of extra ranting about the Obama administration that is largely unconnected to his main points about the Financial Crisis. But the theory is founded in basic macro-economics, so expanding the subtitle to "everything you've been told about the economy" ... ends up not making sense. This isn't too important - just that the subtitle is misleading.
Really, Conard is most coherent where he's railing against *media narratives* about the Financial Crisis—that narratives about corporate greed and predatory lending were overblown, and that what actually happened in 2008 was largely a crisis of investor confidence and a run on the banks, in which sub-prime lending played a role was was not ultimately responsible for financial collapse.
At first, reading those points, I thought this book held a lot of water—that maybe he overlooked a few substantial and significant factors, that he only paid lip service to the entire developing field of behavioral economics, that maybe the core theory was not quite perfectly air tight, and that his position against income redistribution was highly arguable, but understandable—but it was a reasonably well-thought, though conservative, thesis.
In these first sections, he makes a few somewhat disturbing off-handed comments that seem extremely conservative, about which I questioned the relevance to this core idea, but I pressed on thinking his logic somewhat sound. Later, his big ideas about how we should move forward from the Financial Crisis make it clear that the somewhat disturbing off-handed comments were central to his conclusions—that what he's actually detailing is a comprehensive anti-populist political manifesto for the Right which scapegoats immigrants and explains why the mainstream GOP would do and say *absolutely anything* (Trump) in exchange for a few percentage points off the marginal tax rates for corporations and the wealthy.
By the end—as he takes his equity market economic theories and throws them, ranting, against his own ill-informed notions of Obama administration policies, minorities and immigrants—I found his arguments to be riddled with holes, circularly logical and proven largely by fallacies of tautology. While I'm not personally for the overthrow of the capitalist organization of society, any leftist would find Conard's arguments irrefutable proof that conservative, capitalistic "centrism" is actually a radically twisted moral philosophy founded on perverse social darwinism. The core idea: the rich are better than the poor, *because* they are rich.
And really - he says this directly: That the poor don't deserve money because all they do is consume—while rich people invest 40% of their money. Look, even though rich people consume 60% of their money, *that* consumption is super important, because it motivates rich people. Poor people aren't motivated, because they're poor. (Tautology: They wouldn't be poor if they were motivated.)
Maybe if Conard had received a liberal arts education—oh yeah, he says we're some combination of stupid, morally irresponsible and selfish for getting liberal arts degrees—he would know that his pseudo-intellectual bullshit is just another re-packaging of the pseudo-intellectual Ayn Rand.
This asshole wrote a thesis founded on an abstract equity-market-based theory of innovation without studying or understanding the processes of innovation—a developing science that was already mainstream in the 2000s—at all. He basically chalks up innovation as perfectly random but responsive to how much money you can throw at it. His perspective lends way too much credence to the idea that the performance of the stock market is equal to the performance of the economy. He mentions the fact that the large tech giants—his ideal innovators—are so large and have such massive, largely idle cash stacks that they can basically operate outside of this interconnected economic theory, but he doesn't seem to think that could possibly have much impact or be indicative of the limits of his equity-market-based theory of innovation. He actually thinks MBAs and accountants drive innovation—something most people would laugh at—well, because they get paid a lot. And fundamentally, he thinks liberal arts educations facilitating contact with different ideas, perspectives, arts and cultures and have *nothing* to do with innovation. He also suggests that government spending cannot produce innovation—only private equity can—after basing his thesis of equity-driven innovation on companies expounding on the innovation of the internet... History: the first workable prototype of the internet was funded by the U.S. Department of Defense.
And his baseless theory of innovation is critically important—because he says this free cash flow of equity investment, the rich getting richer and more comparatively rich and increasing income inequality actually powers the engine of innovation and process that makes life better for all human beings on earth. Again, he has no %$&^#@! idea how innovations happen.
Here's a tautology for him: This guy is an absolute idiot, because he's an abject moron.
Having a 2020 perspective on this 2012 book is particularly interesting—Conard eventually got what he wanted under the Trump administration, though Trump achieved it through populism and threw up trade barriers which Conrad explicitly railed against. The GOP backed Trump because it got them what Conrad wanted, and they assessed the trade-off of global trade barriers to be worth it, I guess, though those trade barriers and the increased geo-political uncertainty from the Trump administration directly and significantly negatively impacts whatever benefit in stock prices and investment we might've seen from the lower taxes and repeal of Dodd-Frank.
I find it odd that the mainstream GOP accepted this trade-off and that they single-mindedly pushed for these tax cuts despite not really needing to, from the standpoint of their equity-driven economic success measures. The stock market had returned to previous levels by 2012 and went on to have excellent years in 2013 and 2014.
Conrad projected that the recession might be permanent until they made his changes. He acknowledged but discounted the idea that investors and businesses just like policy consistency, and he really thought that Dodd-Frank and Obamacare would cripple the economy and employment "maybe permanently." In 2020, we know he was wrong.
Conrad fundamentally misunderstood Obamacare—he swallowed the GOP narrative—overestimated Dodd-Frank, and underestimated fiscal stimulus. And the final years of the Obama administration—where we were already out of recession, growing healthily, with stock market investment high and unemployment low, despite doing everything wrong, according to Conrad—make his arguments look all the more ridiculous.
I think it was clear that the original subtitle was meant to be "Why Everything You've Been Told About the (2008) Financial Crisis is Wrong," but was expanded to "The Economy," because the author adds in a lot of extra ranting about the Obama administration that is largely unconnected to his main points about the Financial Crisis. But the theory is founded in basic macro-economics, so expanding the subtitle to "everything you've been told about the economy" ... ends up not making sense. This isn't too important - just that the subtitle is misleading.
Really, Conard is most coherent where he's railing against *media narratives* about the Financial Crisis—that narratives about corporate greed and predatory lending were overblown, and that what actually happened in 2008 was largely a crisis of investor confidence and a run on the banks, in which sub-prime lending played a role was was not ultimately responsible for financial collapse.
At first, reading those points, I thought this book held a lot of water—that maybe he overlooked a few substantial and significant factors, that he only paid lip service to the entire developing field of behavioral economics, that maybe the core theory was not quite perfectly air tight, and that his position against income redistribution was highly arguable, but understandable—but it was a reasonably well-thought, though conservative, thesis.
In these first sections, he makes a few somewhat disturbing off-handed comments that seem extremely conservative, about which I questioned the relevance to this core idea, but I pressed on thinking his logic somewhat sound. Later, his big ideas about how we should move forward from the Financial Crisis make it clear that the somewhat disturbing off-handed comments were central to his conclusions—that what he's actually detailing is a comprehensive anti-populist political manifesto for the Right which scapegoats immigrants and explains why the mainstream GOP would do and say *absolutely anything* (Trump) in exchange for a few percentage points off the marginal tax rates for corporations and the wealthy.
By the end—as he takes his equity market economic theories and throws them, ranting, against his own ill-informed notions of Obama administration policies, minorities and immigrants—I found his arguments to be riddled with holes, circularly logical and proven largely by fallacies of tautology. While I'm not personally for the overthrow of the capitalist organization of society, any leftist would find Conard's arguments irrefutable proof that conservative, capitalistic "centrism" is actually a radically twisted moral philosophy founded on perverse social darwinism. The core idea: the rich are better than the poor, *because* they are rich.
And really - he says this directly: That the poor don't deserve money because all they do is consume—while rich people invest 40% of their money. Look, even though rich people consume 60% of their money, *that* consumption is super important, because it motivates rich people. Poor people aren't motivated, because they're poor. (Tautology: They wouldn't be poor if they were motivated.)
Maybe if Conard had received a liberal arts education—oh yeah, he says we're some combination of stupid, morally irresponsible and selfish for getting liberal arts degrees—he would know that his pseudo-intellectual bullshit is just another re-packaging of the pseudo-intellectual Ayn Rand.
This asshole wrote a thesis founded on an abstract equity-market-based theory of innovation without studying or understanding the processes of innovation—a developing science that was already mainstream in the 2000s—at all. He basically chalks up innovation as perfectly random but responsive to how much money you can throw at it. His perspective lends way too much credence to the idea that the performance of the stock market is equal to the performance of the economy. He mentions the fact that the large tech giants—his ideal innovators—are so large and have such massive, largely idle cash stacks that they can basically operate outside of this interconnected economic theory, but he doesn't seem to think that could possibly have much impact or be indicative of the limits of his equity-market-based theory of innovation. He actually thinks MBAs and accountants drive innovation—something most people would laugh at—well, because they get paid a lot. And fundamentally, he thinks liberal arts educations facilitating contact with different ideas, perspectives, arts and cultures and have *nothing* to do with innovation. He also suggests that government spending cannot produce innovation—only private equity can—after basing his thesis of equity-driven innovation on companies expounding on the innovation of the internet... History: the first workable prototype of the internet was funded by the U.S. Department of Defense.
And his baseless theory of innovation is critically important—because he says this free cash flow of equity investment, the rich getting richer and more comparatively rich and increasing income inequality actually powers the engine of innovation and process that makes life better for all human beings on earth. Again, he has no %$&^#@! idea how innovations happen.
Here's a tautology for him: This guy is an absolute idiot, because he's an abject moron.
Having a 2020 perspective on this 2012 book is particularly interesting—Conard eventually got what he wanted under the Trump administration, though Trump achieved it through populism and threw up trade barriers which Conrad explicitly railed against. The GOP backed Trump because it got them what Conrad wanted, and they assessed the trade-off of global trade barriers to be worth it, I guess, though those trade barriers and the increased geo-political uncertainty from the Trump administration directly and significantly negatively impacts whatever benefit in stock prices and investment we might've seen from the lower taxes and repeal of Dodd-Frank.
I find it odd that the mainstream GOP accepted this trade-off and that they single-mindedly pushed for these tax cuts despite not really needing to, from the standpoint of their equity-driven economic success measures. The stock market had returned to previous levels by 2012 and went on to have excellent years in 2013 and 2014.
Conrad projected that the recession might be permanent until they made his changes. He acknowledged but discounted the idea that investors and businesses just like policy consistency, and he really thought that Dodd-Frank and Obamacare would cripple the economy and employment "maybe permanently." In 2020, we know he was wrong.
Conrad fundamentally misunderstood Obamacare—he swallowed the GOP narrative—overestimated Dodd-Frank, and underestimated fiscal stimulus. And the final years of the Obama administration—where we were already out of recession, growing healthily, with stock market investment high and unemployment low, despite doing everything wrong, according to Conrad—make his arguments look all the more ridiculous.
March 19, 2020
It shall require a second listen, and probably buying a printed copy, before I can totally grasp some of the first two chapters on the risk factor involved in the US economy. But this seems a pretty solid work on what may have gone wrong in leading up to the recent financial crisis and the after affects. Plenty of blame to go around, but it is just possible that nobody in particular is to blame for how it all came together. We are not yet out of the woods. His most solid recommendation, in my mind, is to assess our elected officials at least in part on their willingness to discuss risk factors in the economy and how they would legislate or execute to that end.
This was even better the second time. My initial review stands. However, regarding elected officials I am totally of a mind that there are almost none of them that would even understand most of it. For example, just today I read the one-line reasons of the 34 Senators who will likely sustain an Obama veto of the Iran deal. Within their own words (flawed but an important step, better to support a deeply flawed, this deal is no about trusting ..., ... no one trusts Iran) they betray that their party affiliation is the only thing that matters; so, if we expect economic improvement, it is not to come from elected officials who cannot cut anything, and think $17T debt is somehow sustainable.
This was even better the second time. My initial review stands. However, regarding elected officials I am totally of a mind that there are almost none of them that would even understand most of it. For example, just today I read the one-line reasons of the 34 Senators who will likely sustain an Obama veto of the Iran deal. Within their own words (flawed but an important step, better to support a deeply flawed, this deal is no about trusting ..., ... no one trusts Iran) they betray that their party affiliation is the only thing that matters; so, if we expect economic improvement, it is not to come from elected officials who cannot cut anything, and think $17T debt is somehow sustainable.
July 18, 2012
This book has 2 basic points: one is that the financial crisis was caused not by the banks but by investors' irrational exuberance. I agree with that. The other one is that to get out of the crisis, we must cut benefits to the poor and cut the tax rate of the rich. He claims that the rich invest a lot more of their money in new ventures and businesses. Sounds to be he would want to return to the Dicksonian time in London! I can't agree with that...
November 2, 2012
This is probably the best of the books we've listened to on the financial crisis. Some of it was a little bit beyond me, but I learned a great deal from it.
I liked that the author was non-partisan in his approach and that he covered what we've done right in the economy, what we've done wrong and where we need to go from here. A couple of his suggestions were wacky, but others quite good.
I liked that the author was non-partisan in his approach and that he covered what we've done right in the economy, what we've done wrong and where we need to go from here. A couple of his suggestions were wacky, but others quite good.
January 18, 2013
This is written by Edward Conard who was an executive at Bain Capital. Well informed in the trickery of finance, this is a revealing book for those of us living somewhere in the vast ocean of "middle class." Bottom line up front: Good book and I recommend reading, but it points a finger of blame at just about everyone except banks for the financial crisis of 2008 that devestated so many of us.
Conard sets out to explain what happened in the Fiscal Crisis of 2008. Interestingly he capitalizes "Fiscal Crisis" throughout the book. This capitalization suggests that the crisis is now a named event and not a blip in the economic continuum.
What I liked was the banker's perspective of the finance industry and how the economy is all linked in a greater whole. The United States is portrayed as a massive economic empire. Building factories in China is no longer exporting jobs, it's employing a cheap labor pool that allows US citizens to devote more time and energy to innovation. Innovation is the coal and steel of the new economy. Taxation takes many forms. When the rich are taxed at higher rates, we (the middle class and poor) pay more for goods and services. When the rich are taxed less, they spend more on investments and innovation, creating more goods and services and we are taxed more. Where unions are prevelant, union-driven wages and benefits are factored into prices of goods and services artificially inflating the prices and in effect becoming a de facto tax on consumers.
Conard subscribes to Reagan-esque trickle down economics and I almost believed that I should pay higher taxes so the rich could continue "innovating" and presumably buying yachts and luxury cars so people like me could have a job -- building yachts and luxury cars.
To summarize, I recommend reading this book. The reader will still not know what side to take. The reader will gain a better understanding of how finance works. The lessen of "Unintended Consequences" is that people are selfish and greedy and the only person looking out for your best interests is YOU.
Conard sets out to explain what happened in the Fiscal Crisis of 2008. Interestingly he capitalizes "Fiscal Crisis" throughout the book. This capitalization suggests that the crisis is now a named event and not a blip in the economic continuum.
What I liked was the banker's perspective of the finance industry and how the economy is all linked in a greater whole. The United States is portrayed as a massive economic empire. Building factories in China is no longer exporting jobs, it's employing a cheap labor pool that allows US citizens to devote more time and energy to innovation. Innovation is the coal and steel of the new economy. Taxation takes many forms. When the rich are taxed at higher rates, we (the middle class and poor) pay more for goods and services. When the rich are taxed less, they spend more on investments and innovation, creating more goods and services and we are taxed more. Where unions are prevelant, union-driven wages and benefits are factored into prices of goods and services artificially inflating the prices and in effect becoming a de facto tax on consumers.
Conard subscribes to Reagan-esque trickle down economics and I almost believed that I should pay higher taxes so the rich could continue "innovating" and presumably buying yachts and luxury cars so people like me could have a job -- building yachts and luxury cars.
To summarize, I recommend reading this book. The reader will still not know what side to take. The reader will gain a better understanding of how finance works. The lessen of "Unintended Consequences" is that people are selfish and greedy and the only person looking out for your best interests is YOU.
July 28, 2012
I came to this book with high hopes. From the reviews and advertisements, I had been led to believe that this would be a clear exposition of the roots of our economic problems, and -- more usefully -- a road map for how to get out of them. I was disappointed.
First, let it be said that Mr. Conard knows his subject and, I think, understands it at a level most people never reach. This knowledge, while admirable, is a curse, because for whatever reason, he has not been able to transfer his understanding to paper in terms that I, at least, can readily follow. It's very frustrating; much of the book is a fog, occasionally penetrated by flashes of light where one sees clearly, or perhaps recognizes arguments that have already been made more clearly by others. I can't put my finger on why his sentences and paragraphs don't scan, but they don't. Perhaps a better editor would have helped.
Certainly there's not much doubt about where Mr. Conrad's head and heart are. I think I'm there with him, but I guess I'll never know how he got there.
First, let it be said that Mr. Conard knows his subject and, I think, understands it at a level most people never reach. This knowledge, while admirable, is a curse, because for whatever reason, he has not been able to transfer his understanding to paper in terms that I, at least, can readily follow. It's very frustrating; much of the book is a fog, occasionally penetrated by flashes of light where one sees clearly, or perhaps recognizes arguments that have already been made more clearly by others. I can't put my finger on why his sentences and paragraphs don't scan, but they don't. Perhaps a better editor would have helped.
Certainly there's not much doubt about where Mr. Conrad's head and heart are. I think I'm there with him, but I guess I'll never know how he got there.
March 5, 2015
Another reviewer made a great analysis, that this financial expert took one view -- that the problem was a bank run and under-regulation in certain fields like housing -- and placed those arguments into a completely different narrative ... one that essentially said it was OK to screw the poor, anyone who studies anything besides computers/engineering/business is a drain on society and doesn't deserve to make a living wage, cheap consumer goods will solve all problems, and CEOs deserve to make a lot of money. I've read a lot about the financial crisis, and this book just made me MAD ... especially since the lack of regulation issue was caused by this entire class of financial experts through bad legislation at the end of the Clinton era that was put into practice during W's time and ignored by regulators. Just ... made ... me ... mad.
August 14, 2012
Conrad addresses the economy as it stands in 2010. In his introduction he implies that previous administrations are to blame for today's economic woes. The book itself is not written for the average non-college educated person. Implications are made in the book that high wages, big business, and investors from Wall Street can cure the problem. It also implies that the only debt that should be counted is debt on a final loan in any series of loans. There are some actual facts presented. It does give an analysis of the USA's current economic problems.
December 8, 2018
There were some very insightful ideas presented in this book. The author often oversimplifies some of the ramifications of economic changes, for example, the ease with which humans transition between jobs in different fields. That said, it's a well thought out dive into the drivers of the crisis and misaligned incentives both micro and macro.
December 2, 2012
A lot of the arguments in this book were wonky enough to be over my head, and I didn't find the rest very convincing. Conard makes plenty of commonsensical points and then overextends them and seems to paper over inconvenient contrary evidence. Not recommended.
August 22, 2012
Don't say a word about the economy until you have read, no studied this.
Brilliant book. At times a tough read. I wish Washington understood the things he does.
Brilliant book. At times a tough read. I wish Washington understood the things he does.
December 1, 2025
NOTE: I read this book when it came out in 2012, but didn't have goodreads then. This is a personal review I wrote at the time.
A mess of a book that is fairly unoriginal and mostly serves as propaganda for people of Conard's class, (and perhaps an attempt to work through some cognitive dissonance) though in his scatter shot style he does hit a few successful points. Overall, it's a fascinating look into the mind of a big finance person.
SPOILERS AND WAY TOO MUCH NERDY ANALYSIS AHEAD:
This book is kind of a mess. It doesn't really have a coherent flow and isn't well composed. It feels kinda scatter shot, like Conard just wrote whatever was in his head at that time. Points sometimes contradict each other and lots of what he says is fairly mundane and standard economics. Considering it was supposed to shatter everything we knew, big swing and a miss. Maybe it speaks to hubris and he truly thought this was esoteric knowledge he was dispensing.
This book is fundamentally about the following three premises:
1: Inequality is good. So we shouldn't do anything about taxing it. Even charitable donations are bad (because that removes $ that could be invested, which boosts the economy.) He literally says Bill Gates and Warren Buffet are robbing the middle class by giving to charity.
2: The free markets are always good, period. So don't mess with them. Even if it means offshoring labor and wages lagging our productivity. Markets are always right and best. To mess with it harms risk taking and incentive and then we'd end up with low growth like low risk Europe and Japan.
3: The 2000s financial bubble was good, nothing was done wrong. There was no predatory lending and the smart financial people know what they're doing and drive the economy, so we shouldn't regulate it. What REALLY went wrong in 2008 is people panicked and ran to pull their money out of banks and the government let some big banks fail which added to the panic. So what should be done is the FDIC should provide full, unlimited insurance and always guarantee a bank's survival "It is illogical, even irresponsible, not to save the banks" and short term, risk averse capital needs to be guaranteed so it can be put to use.
Wait what? If this sounds like Conard is saying the problem was not enough government intervention...he is. The failure of banks was "not a failure of free markets. It's a consequence of a logical policy decision" aka the decision to let the banks who made risky loans and lost market confidence fail and not bail them all out. He praises a 2001 regulation that closed a loophole yet he spares no opportunity to bash Dodd-Frank and regulation of any kind but wants, it would seem if you take his logic to its conclusion, full government backing of the whole banking sector. He is a fierce advocate of free markets, and proud of American effort noting how since the 1980s "Europe went to the beach and Japan stagnated, Americans went to work" but bankers should be allowed to do literally anything without any loss from risk.
Isn't a free market is based on failure and success? Risk means possible failure but we learn from it and reward those who succeed, those who don't have to fail. That is the point. He praises tech giants that we produced but those came in a world of many failures. That is how it works but for banking, the failure part should be removed. ONLY spending, no downside, no real risk. His free market works best by gov guarantee. I cannot make any sense of this except it has to be propaganda, for people like him.
Dont limit us in any way, dont tax us, dont let us fail.
You dont need to know economics to see the result of this policy. A small number of people becoming very very rich via perpetual bailouts no matter how reckless they are. A protected class. Socialism for the rich. But its OK because they are smart and know best and they drive the economy so its best for you. Its not really a bailout because they did nothing wrong. It was just panicky people! So its the peoples fault really not the banks! You cant let them fail if its just a bank run when they did nothing wrong and people are silly. Once you pierce the econ jargon and get to the heart you can see this is all quite silly and clearly just an attempt to justify and benefit Conard and his class, that they should be a protected aristocracy. People like Conard and his good friend Mitt Romney...running for President this year and a recipient of Conard's $. Coincidental timing I am sure.
Outside that lots of it is generic and stale "free market is best" stuff and normal economics. Conard also makes some unexpected points...mostly he advocates for Keynesian/liberal policies to help offset a recession. Conard states we can use fiscal stimulus to offset a decline: the gov can borrow money to perhaps invest in infrastructure as a way to deploy idle labor, and the loss of future infrastructure spending will "pay back the borrowing without tax increases. You don't have to believe in Keynesian spending multipliers to see why this could work"
OK you dont have to believe in it, but that is textbook Keynesianism. Maybe by dropping that line he hoped people would just ignore this and let him get away with it? He goes farther! Conard says the government could borrow idle cash balances and use it to purchase goods such as cars, keep them in stockpile and sell later. This feels like bold, direct government action. Conard also states the government could even print money to buy securities to sell later, well that's just QE and to hear him use the words "print money" is mind blowing. But dont worry this isnt Keynes, he makes that clear because Keynes was consumption driven all this is to make sure people feel comfortable and invest. Its all investment. This is flat out stupid, no other way to say it. Here's a quick econ lesson: Y = C + I + G + NX (Y=GDP, C=Consumption, I=Investment, G=Government Spending, NX = net exports). Keynesianism says in a downturn you can increase G and this boosts Y, and as things recover you can pay it back later either directly or through increased growth. This is literally what Conard is saying...just it wont be all about boosting not C but I. But anyone can see this is all irrelevant in the big picture.
SO we have a book where a fierce free market champion, anti-government, anti-Keynesian advocates for banking being a protected class, fully and permanently backed by government with no strings attached, and in downturns where the lowly regular people get impacted as they wait for their overlords to get back investing, you can just use Keynesian policy, and go big with it. Conard better practice yoga because these are some real knots he's tied himself into.
For this I give the book a 2 and not 1 because Conard wants socialism for the rich, but at least instead of rugged capitalism for the rest he will throw them some scraps, even advocating for Keynesian policy (while denying it is). It's almost comical, and frankly I get some joy from Conard accidentally admitting finance, and the immense wealth its created for people like him, is basically dependent on government. The fact he sees this and the mental gymnastics he goes through to not say this is honestly hilarious.
A mess of a book that is fairly unoriginal and mostly serves as propaganda for people of Conard's class, (and perhaps an attempt to work through some cognitive dissonance) though in his scatter shot style he does hit a few successful points. Overall, it's a fascinating look into the mind of a big finance person.
SPOILERS AND WAY TOO MUCH NERDY ANALYSIS AHEAD:
This book is kind of a mess. It doesn't really have a coherent flow and isn't well composed. It feels kinda scatter shot, like Conard just wrote whatever was in his head at that time. Points sometimes contradict each other and lots of what he says is fairly mundane and standard economics. Considering it was supposed to shatter everything we knew, big swing and a miss. Maybe it speaks to hubris and he truly thought this was esoteric knowledge he was dispensing.
This book is fundamentally about the following three premises:
1: Inequality is good. So we shouldn't do anything about taxing it. Even charitable donations are bad (because that removes $ that could be invested, which boosts the economy.) He literally says Bill Gates and Warren Buffet are robbing the middle class by giving to charity.
2: The free markets are always good, period. So don't mess with them. Even if it means offshoring labor and wages lagging our productivity. Markets are always right and best. To mess with it harms risk taking and incentive and then we'd end up with low growth like low risk Europe and Japan.
3: The 2000s financial bubble was good, nothing was done wrong. There was no predatory lending and the smart financial people know what they're doing and drive the economy, so we shouldn't regulate it. What REALLY went wrong in 2008 is people panicked and ran to pull their money out of banks and the government let some big banks fail which added to the panic. So what should be done is the FDIC should provide full, unlimited insurance and always guarantee a bank's survival "It is illogical, even irresponsible, not to save the banks" and short term, risk averse capital needs to be guaranteed so it can be put to use.
Wait what? If this sounds like Conard is saying the problem was not enough government intervention...he is. The failure of banks was "not a failure of free markets. It's a consequence of a logical policy decision" aka the decision to let the banks who made risky loans and lost market confidence fail and not bail them all out. He praises a 2001 regulation that closed a loophole yet he spares no opportunity to bash Dodd-Frank and regulation of any kind but wants, it would seem if you take his logic to its conclusion, full government backing of the whole banking sector. He is a fierce advocate of free markets, and proud of American effort noting how since the 1980s "Europe went to the beach and Japan stagnated, Americans went to work" but bankers should be allowed to do literally anything without any loss from risk.
Isn't a free market is based on failure and success? Risk means possible failure but we learn from it and reward those who succeed, those who don't have to fail. That is the point. He praises tech giants that we produced but those came in a world of many failures. That is how it works but for banking, the failure part should be removed. ONLY spending, no downside, no real risk. His free market works best by gov guarantee. I cannot make any sense of this except it has to be propaganda, for people like him.
Dont limit us in any way, dont tax us, dont let us fail.
You dont need to know economics to see the result of this policy. A small number of people becoming very very rich via perpetual bailouts no matter how reckless they are. A protected class. Socialism for the rich. But its OK because they are smart and know best and they drive the economy so its best for you. Its not really a bailout because they did nothing wrong. It was just panicky people! So its the peoples fault really not the banks! You cant let them fail if its just a bank run when they did nothing wrong and people are silly. Once you pierce the econ jargon and get to the heart you can see this is all quite silly and clearly just an attempt to justify and benefit Conard and his class, that they should be a protected aristocracy. People like Conard and his good friend Mitt Romney...running for President this year and a recipient of Conard's $. Coincidental timing I am sure.
Outside that lots of it is generic and stale "free market is best" stuff and normal economics. Conard also makes some unexpected points...mostly he advocates for Keynesian/liberal policies to help offset a recession. Conard states we can use fiscal stimulus to offset a decline: the gov can borrow money to perhaps invest in infrastructure as a way to deploy idle labor, and the loss of future infrastructure spending will "pay back the borrowing without tax increases. You don't have to believe in Keynesian spending multipliers to see why this could work"
OK you dont have to believe in it, but that is textbook Keynesianism. Maybe by dropping that line he hoped people would just ignore this and let him get away with it? He goes farther! Conard says the government could borrow idle cash balances and use it to purchase goods such as cars, keep them in stockpile and sell later. This feels like bold, direct government action. Conard also states the government could even print money to buy securities to sell later, well that's just QE and to hear him use the words "print money" is mind blowing. But dont worry this isnt Keynes, he makes that clear because Keynes was consumption driven all this is to make sure people feel comfortable and invest. Its all investment. This is flat out stupid, no other way to say it. Here's a quick econ lesson: Y = C + I + G + NX (Y=GDP, C=Consumption, I=Investment, G=Government Spending, NX = net exports). Keynesianism says in a downturn you can increase G and this boosts Y, and as things recover you can pay it back later either directly or through increased growth. This is literally what Conard is saying...just it wont be all about boosting not C but I. But anyone can see this is all irrelevant in the big picture.
SO we have a book where a fierce free market champion, anti-government, anti-Keynesian advocates for banking being a protected class, fully and permanently backed by government with no strings attached, and in downturns where the lowly regular people get impacted as they wait for their overlords to get back investing, you can just use Keynesian policy, and go big with it. Conard better practice yoga because these are some real knots he's tied himself into.
For this I give the book a 2 and not 1 because Conard wants socialism for the rich, but at least instead of rugged capitalism for the rest he will throw them some scraps, even advocating for Keynesian policy (while denying it is). It's almost comical, and frankly I get some joy from Conard accidentally admitting finance, and the immense wealth its created for people like him, is basically dependent on government. The fact he sees this and the mental gymnastics he goes through to not say this is honestly hilarious.
August 23, 2018
I started reading this about ba year and a half ago, but stopped when some of the authors views drove me nuts. I threw the book across my bedroom and left it unfinished for a very long time.
I just decided to stomach the last 80 pages or so to finally finish it. I've learned a lot since a lot since I started reading this book a long time ago, and all of it is againt the book, it's ideas, the data used to support those ideas, and the offensive loaded language used at every possible opportunity.
I don't give this one star because at the end of the day, it doesn't deserve it. You can tell Edward worked very hard writing this thing. It's well written and constructed.
It's just so wrong on a policy perspective
I hate this book for that reason. But I can still respect the work that went into it.
If you can buy this book for a dollar or two, or get it for free from the library, and are looking to hear the perspective from a conservative, this book will work for you.
Just be prepared to throw it across the room once or twice.
I just decided to stomach the last 80 pages or so to finally finish it. I've learned a lot since a lot since I started reading this book a long time ago, and all of it is againt the book, it's ideas, the data used to support those ideas, and the offensive loaded language used at every possible opportunity.
I don't give this one star because at the end of the day, it doesn't deserve it. You can tell Edward worked very hard writing this thing. It's well written and constructed.
It's just so wrong on a policy perspective
I hate this book for that reason. But I can still respect the work that went into it.
If you can buy this book for a dollar or two, or get it for free from the library, and are looking to hear the perspective from a conservative, this book will work for you.
Just be prepared to throw it across the room once or twice.
August 15, 2021
I wonder if Conrad still believes what he wrote back then. I would summarize the book as "Tout est pour le mieux dans le meilleur des mondes possibles" ("All is for the best in the best of all possible worlds.")
Conrad sees the exporting of American jobs to China as being good. Selling mortgages to poor people who don't understand what they are entering into - good. Big payoffs for the wealthy while wages stagnate for forty years - good.
I assume he supports tax cuts instead of social spending but I wonder how the rest of the last four years sits with him.
Conrad sees the exporting of American jobs to China as being good. Selling mortgages to poor people who don't understand what they are entering into - good. Big payoffs for the wealthy while wages stagnate for forty years - good.
I assume he supports tax cuts instead of social spending but I wonder how the rest of the last four years sits with him.
July 6, 2018
The best book description I've read of the mortgage crisis of 2008 and its causes. He very much challenges the conventional journalistic version of the crisis, which I've often had a problem with.
Politically I don't align with Conard's policy prescriptions or even worldview, but I think he got this one right. My further review on my website http://www.bankers-anonymous.com/book...
Politically I don't align with Conard's policy prescriptions or even worldview, but I think he got this one right. My further review on my website http://www.bankers-anonymous.com/book...
February 16, 2017
This is a great book about the lead up to the financial crises, the financial crises and policy suggestions for the american economy (spoiler alert, he doesn't like the Dodd Frank regulations). Conrad has a broad and deep understanding of what makes the economy go. I did give the book four stars instead of five because it is a tough read.
May 14, 2018
Risktakers drive innovation, which is our most important asset, taxing them too much slows down innovation. the super rich creats more stability for the productive workers who's careers are too established to transplant. - stuff in teh book
November 15, 2019
Great book and well articulated points. The chief assumption is that growth is needed. After that it’s 100.
September 22, 2017
Very interesting point of view on the crisis. Then it goes on with ideas on inequality and I start to disagree strongly. But overall interesting book!
November 20, 2012
After reading several other books about the Financial Crisis, I found Conard's arguments different from the popular beliefs but quite compelling. He shows the connections between the trade deficit, risk taking, investment, productivity, government policy, and income.
“American know-how and risk taking created companies like Google, Facebook, Microsoft, Intel, Apple, Cisco, Adobe, Oracle, Wikipedia, YouTube, Twitter, Amazon, and eBay. The rest of the world created next to nothing... The top 1% of workers are paid relatively more in the United States, not because the other 99% earn less but because they contribute far more than their counterparts in other countries.”
“Lucky risk taking produces innovation. The greater the payoffs, the greater the willingness of gamblers to take risks. The greater the amount of wagering, the greater the resulting innovation. One need only look at state lotteries to see the power of this effect. As the payoffs rise, wagering increases remarkably, even though the increased jackpots in state lotteries don't increase expected value of the gambler's payoff... The opportunity to obtain extraordinary wealth is so seductive, it renders the odds irrelevant.”
“Money doesn't motivate us as much as status does. Its primal... It's not so much the rewards per se that motivate people, but the lack of status that comes from not having achieved them... Status is not just a powerful motivator for the lucky few who achieve it, but more important, for the millions who fail trying.”
“A 2002 study for the World Bank across a wide sampling of economies, finds strong evidence that 'growth is good for the poor.' It shows that the income of the poorest 20% of an economy tightly correlates to the economy's per-capita income – with an astonishing 88% correlation.”
“Proponents of redistribution believe they hold the moral high ground. Most of them demand more but have no perspective about where more becomes suboptimal. They mistakenly assume that redistribution consumes only incremental consumption of the rich. They don't consider whether payouts for lucky risk taking motivate risk taking. They don't realize that consumers and wage earners capture almost all the value from investment and that GDP only partially captures this value in measures of income. They draw little distinction between the effectiveness of the political allocation process relative to Darwinian survival of the fittest that prevails in private enterprise. They take it for granted that large political interventions will work as planned... Innovation creates so much value that society as a whole would be better off allowing the need for status, and the consumption it demands, to motivate talented employees and successful investors to take the risks necessary to produce it.”
"Offshore investors have been so risk averse that they have predominately invested in government-guaranteed debt... The growing demand for this fixed amount of low-risk government-guaranteed debt has driven down yields... The economy will not reach its full potential if we leave risk-averse capital sitting idle. However, if we put risk-averse short-term capital to work – it exposes the economy to the dangerous risk of panicked withdrawals... One of the only ways to mitigate this risk is to leave short-term capital sitting idle available to fund withdrawals in the event of a panic. In the aftermath of the Financial Crisis, cash now sits idle and unemployment has risen.”
“The value of subprime mortgages was small relative to household net worth – about $3 trillion in 2007 relative to $64 trillion of household net worth. So small, in fact, that as late as the summer of 2007, Frederic Mishkin, a Federal Reserve Board governor, claimed the Fed's financial models of the economy indicated that even if housing prices fell by 20%, the slump would reduce GDP by only a quarter of one percent and add only a tenth of one percent to unemployment.”
“In the Financial Crisis, a 30% drop in real estate prices triggered panicked withdrawals. Withdrawals reached $1.5 trillion, five times estimated lender losses of $320 billion, which non-bank lenders largely suffered. Withdrawals reached this level despite $15 trillion to $20 trillion of explicit government guarantees. Had government guarantees, or capital buffers alone, been smaller, withdrawals would have been larger... Remarkably, the Financial Crisis shows that the value of government guarantees is enormous and that the cost of those guarantees is cheap because the government doesn't have to set aside massive equity reserves to make the guarantees credible... Implicit guarantees failed in the face of a 30% drop in real estate prices despite capital buffers large enough to absorb losses.”
“American know-how and risk taking created companies like Google, Facebook, Microsoft, Intel, Apple, Cisco, Adobe, Oracle, Wikipedia, YouTube, Twitter, Amazon, and eBay. The rest of the world created next to nothing... The top 1% of workers are paid relatively more in the United States, not because the other 99% earn less but because they contribute far more than their counterparts in other countries.”
“Lucky risk taking produces innovation. The greater the payoffs, the greater the willingness of gamblers to take risks. The greater the amount of wagering, the greater the resulting innovation. One need only look at state lotteries to see the power of this effect. As the payoffs rise, wagering increases remarkably, even though the increased jackpots in state lotteries don't increase expected value of the gambler's payoff... The opportunity to obtain extraordinary wealth is so seductive, it renders the odds irrelevant.”
“Money doesn't motivate us as much as status does. Its primal... It's not so much the rewards per se that motivate people, but the lack of status that comes from not having achieved them... Status is not just a powerful motivator for the lucky few who achieve it, but more important, for the millions who fail trying.”
“A 2002 study for the World Bank across a wide sampling of economies, finds strong evidence that 'growth is good for the poor.' It shows that the income of the poorest 20% of an economy tightly correlates to the economy's per-capita income – with an astonishing 88% correlation.”
“Proponents of redistribution believe they hold the moral high ground. Most of them demand more but have no perspective about where more becomes suboptimal. They mistakenly assume that redistribution consumes only incremental consumption of the rich. They don't consider whether payouts for lucky risk taking motivate risk taking. They don't realize that consumers and wage earners capture almost all the value from investment and that GDP only partially captures this value in measures of income. They draw little distinction between the effectiveness of the political allocation process relative to Darwinian survival of the fittest that prevails in private enterprise. They take it for granted that large political interventions will work as planned... Innovation creates so much value that society as a whole would be better off allowing the need for status, and the consumption it demands, to motivate talented employees and successful investors to take the risks necessary to produce it.”
"Offshore investors have been so risk averse that they have predominately invested in government-guaranteed debt... The growing demand for this fixed amount of low-risk government-guaranteed debt has driven down yields... The economy will not reach its full potential if we leave risk-averse capital sitting idle. However, if we put risk-averse short-term capital to work – it exposes the economy to the dangerous risk of panicked withdrawals... One of the only ways to mitigate this risk is to leave short-term capital sitting idle available to fund withdrawals in the event of a panic. In the aftermath of the Financial Crisis, cash now sits idle and unemployment has risen.”
“The value of subprime mortgages was small relative to household net worth – about $3 trillion in 2007 relative to $64 trillion of household net worth. So small, in fact, that as late as the summer of 2007, Frederic Mishkin, a Federal Reserve Board governor, claimed the Fed's financial models of the economy indicated that even if housing prices fell by 20%, the slump would reduce GDP by only a quarter of one percent and add only a tenth of one percent to unemployment.”
“In the Financial Crisis, a 30% drop in real estate prices triggered panicked withdrawals. Withdrawals reached $1.5 trillion, five times estimated lender losses of $320 billion, which non-bank lenders largely suffered. Withdrawals reached this level despite $15 trillion to $20 trillion of explicit government guarantees. Had government guarantees, or capital buffers alone, been smaller, withdrawals would have been larger... Remarkably, the Financial Crisis shows that the value of government guarantees is enormous and that the cost of those guarantees is cheap because the government doesn't have to set aside massive equity reserves to make the guarantees credible... Implicit guarantees failed in the face of a 30% drop in real estate prices despite capital buffers large enough to absorb losses.”
February 22, 2017
This is the BEST book in economics I have ever read, and I have read many. It is certainly not a beginners' book. Mr. Conard follows a very well structured and detailed logic to build his very credible case. A problem I have with other economists (including the Nobel kind) is that they seem to be interested in religious consensus rather than scientific learning. I have too much experience to think that what seems logical on the surface is always the right answer. Many great creations defy common sense or pop-logic. This means that the people who discover these innovative ideas must start not from a cultural point of view but a clear one. Mr. Conard certainly comes across as someone who did not start with the expected answer but with curious exploration. I can't say enough good things about this book and its author. For the expanded review see http://albertoalopez.blogspot.com/201...
September 21, 2012
It's an extremely clever and intellectually stimulating book, although I didn't particularly trust the author's expertise/lack of bias (although he is not politically partisan) on any specific issue.
It reminds me a little of William Graham Sumner's famous essay on the forgotten man: "The next time that you are tempted to subscribe a dollar to a charity, I do not tell you not to do it, because after you have fairly considered the matter, you may think it right to do it, but I do ask you to stop and remember the Forgotten Man and understand that if you put your dollar in the savings bank it will go to swell the capital of the country which is available for division amongst those who, while they earn it, will reproduce it with increase."
I share Conard's view that policy should be biased towards low-time preference agents and behavior, but I wonder how far this logic will go. An obvious reductio ad absurdum of his defense of inequality is that we should redistribute money upwards as much as possible (taking into account labor elasticity, etc.) so as to have as much money as possible concentrated in the hands of a few (how many? I'm not sure.) rich people, which would lead to higher investment than we could otherwise have accomplished.
It reminds me a little of William Graham Sumner's famous essay on the forgotten man: "The next time that you are tempted to subscribe a dollar to a charity, I do not tell you not to do it, because after you have fairly considered the matter, you may think it right to do it, but I do ask you to stop and remember the Forgotten Man and understand that if you put your dollar in the savings bank it will go to swell the capital of the country which is available for division amongst those who, while they earn it, will reproduce it with increase."
I share Conard's view that policy should be biased towards low-time preference agents and behavior, but I wonder how far this logic will go. An obvious reductio ad absurdum of his defense of inequality is that we should redistribute money upwards as much as possible (taking into account labor elasticity, etc.) so as to have as much money as possible concentrated in the hands of a few (how many? I'm not sure.) rich people, which would lead to higher investment than we could otherwise have accomplished.
September 5, 2012
Maybe I just don't know enough about macroeconomics, but I really struggled with this book. I'm eager to learn more about markets and how everything works in the economic sphere, because most of the time I feel like it's running the world and I'm oblivious. This book takes an extreme free-market perspective, which was really interesting (and shocking) to read. I struggled to make sense of much of what Conard discussed, so it's time to go build up my knowledge base and then perhaps I'll try again. I appreciate what Conard is trying to do- shed light on both sides of the economic/ policy debate, but I could have used a bit more of a teaching stance in the text to help me understand how the mechanisms he's writing about actually operate. Not for me right now.
June 13, 2013
The overall message of the book is very interesting. There are things about the economy that didn't have as big of an impact as I initially thought (like the high risk mortgages). Conard also lays out how resilient the American economy is and provides recommendations to unleash it. Interestingly, he makes a strong case that redistribution of income from so called 'rich' to the so called 'poor' (which in America is the middle class and rich compared to the rest of th world) has a longer term negative impact on our economy which he backs up with fact and studies. Often the book was too technical for a layperson and he didn't develop his conclusions as strongly and clearly as he could have. A good read but not very exciting.
Displaying 1 - 30 of 46 reviews