What do you think?
Rate this book
Political Bubbles: Financial Crises and the Failure of American Democracy
How governmental failure led to the 2008 financial crisis―and what needs to be done to avoid another similar event
Behind every financial crisis lurks a "political bubble"―policy biases that foster market behaviors leading to financial instability. Rather than tilting against risky behavior, political bubbles―arising from a potent combination of beliefs, institutions, and interests―aid, abet, and amplify risk. Demonstrating how political bubbles helped create the real estate-generated financial bubble and the 2008 financial crisis, this book argues that similar government oversights in the aftermath of the crisis undermined Washington's response to the "popped" financial bubble, and shows how such patterns have occurred repeatedly throughout US history.
The authors show that just as financial bubbles are an unfortunate mix of mistaken beliefs, market imperfections, and greed, political bubbles are the product of rigid ideologies, unresponsive and ineffective government institutions, and special interests. Financial market innovations―including adjustable-rate mortgages, mortgage-backed securities, and credit default swaps―become subject to legislated leniency and regulatory failure, increasing hazardous practices. The authors shed important light on the politics that blinds regulators to the economic weaknesses that create the conditions for economic bubbles and recommend simple, focused rules that should help avoid such crises in the future.
The first full accounting of how politics produces financial ruptures, Political Bubbles offers timely lessons that all sectors would do well to heed.
Behind every financial crisis lurks a "political bubble"―policy biases that foster market behaviors leading to financial instability. Rather than tilting against risky behavior, political bubbles―arising from a potent combination of beliefs, institutions, and interests―aid, abet, and amplify risk. Demonstrating how political bubbles helped create the real estate-generated financial bubble and the 2008 financial crisis, this book argues that similar government oversights in the aftermath of the crisis undermined Washington's response to the "popped" financial bubble, and shows how such patterns have occurred repeatedly throughout US history.
The authors show that just as financial bubbles are an unfortunate mix of mistaken beliefs, market imperfections, and greed, political bubbles are the product of rigid ideologies, unresponsive and ineffective government institutions, and special interests. Financial market innovations―including adjustable-rate mortgages, mortgage-backed securities, and credit default swaps―become subject to legislated leniency and regulatory failure, increasing hazardous practices. The authors shed important light on the politics that blinds regulators to the economic weaknesses that create the conditions for economic bubbles and recommend simple, focused rules that should help avoid such crises in the future.
The first full accounting of how politics produces financial ruptures, Political Bubbles offers timely lessons that all sectors would do well to heed.
368 pages, Hardcover
First published May 21, 2013
5 people are currently reading
53 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 - 6 of 6 reviews
August 16, 2013
Reading this today for a discussion on The Scholars' Circle with the authors. They are great political scientists with a lot to contribute for people to understand the political underpinnings of the financial crises. Politics affects everything. So we must learn. If you want to hear the interview with them, please search for it at your station. I know it will air on August 31 on WPRR and WAZU and September 1 on KPFK. I don't remember the schedule of the other stations. And we keep an archive at www.scholarscircle.org.
October 5, 2019
apparently this is often used as a textbook in political science, which is really interesting. I think this is where Thiel gets his whole “government regulation tends to be pro-cyclical when it comes to bubbles”. It was a very good overview of the inherent incentive problems within our political system, and the public choice struggles of regulation. Initially I was anticipating the book to be about cognitive blindspots among public servants, but actually it’s almost entirely about distorted incentives that are captured by special interest. In many ways, the book is a great argument for political decentralization.
March 10, 2018
Not the best book I have ever read. The writers’ personal anger was evident. Some interesting tidbits and acknowledgement around the difficulty of reform. It’s a take it or leave it read. It will not really move the needle for the reader.
December 16, 2013
Assigned for a class. It didn't work out quite as expected because the financial collapse is ancient history for students who have been more exposed to the ACA debate and the debt ceiling-appropriations-shutdown shenanigans of the past 2 years.
April 1, 2016
They start out with a good premise but the book is filled with factual errors and mischaracterizations.
Displaying 1 - 6 of 6 reviews