Para ve Devlet: Ana Akım İktisadın Eleştirisi

by Robert Skidelsky

Ekonomideki baskın görüşe göre para bir değişim aracından başka bir şey değildir ve ekonomi piyasanın “görünmez el”ine teslim edildiğinde en iyi sonuçlar elde edilir. Paranın “düzensizleşmedikçe” önem taşımadığı ve piyasaya devlet müdahalesinin genellikle işleri daha da kötüleştirdiği varsayımı makroiktisat politikalarında egemen görüş olagelmiştir. Oysa 1929-1932 Büyük Buhranı ortodoks ekonominin varsayımlarını boşa çıkarmıştı. Ardından devlet, işverenler ve sendikalar arasında oluşan istikrarsız güç dengesi, Keynesyen politikaların Batı dünyasının yeni iktisadi paradigması olarak ortaya çıkmasını sağladı. Ne var ki 1970’lerin stagflasyonu Keynesyen politikanın tümden reddine yol açtı. Yaklaşık 30 yıl sonra gerçekleşen 2008 mali çöküşünün yol açtığı küresel dramın başrolünde bu kez para ve devlet varken, iktisat onlara hak ettikleri başrolleri vermekten çok uzak kaldı. 2008’den beri yeni bir “büyük fikir” ortaya çıkmadığı gibi, ortodoks ekonomi bizleri anemik bir küresel ekonomiyle baş başa bırakan cezalandırıcı kemer sıkma politikalarını yasalaştırarak egemenliğini hâlâ sürdürüyor. Günümüzün en seçkin politik iktisatçılarından Robert Skidelsky, okurları Keynes’in “büyük fikir”inin temel unsurlarıyla tanıştırmayı ve iktisadın katı bir bilim olmadığını göstermeyi; ayrıca gelecek nesil iktisatçıları kavramsal hapishanelerinden kurtulmaları ve para ve devlete hak ettikleri rolleri vermeleri için cesaretlendirmeyi amaçlıyor. Makroekonomiyi yeniden bir analiz birimi haline getirerek okurlara 2008-2009 ekonomik çöküşünün Keynesyen çözümlemesini sunan Para ve Devlet, iktisat biliminin geçmişine, geleceğine ve nasıl değişmesi gerektiğine dair eleştirel bir inceleme.

Genres: Economics, Nonfiction, Politics, History, Finance, Money, Business

552 pages, Paperback

First published January 1, 2018

About the author

Lord Skidelsky is Emeritus Professor of Political Economy at the University of Warwick. His three volume biography of the economist John Maynard Keynes (1983, 1992, 2000) received numerous prizes, including the Lionel Gelber Prize for International Relations and the Council on Foreign Relations Prize for International Relations. He is the author of the The World After Communism (1995) (American edition called The Road from Serfdom). He was made a life peer in 1991, and was elected Fellow of the British Academy in 1994. He is chairman of the Govenors of Brighton College

Robert Skidelsky was born on 25 April 1939 in Harbin, Manchuria. His parents were British subjects, but of Russian ancestry. His father worked for the family firm, L. S. Skidelsky, which leased the Mulin coalmine from the Chinese government. When war broke out between Britain and Japan in December 1941, he and his parents were interned first in Manchuria then Japan, but released in exchange for Japanese internees in England.

From 1953 to 1958, he was a boarder at Brighton College (of which he is now chairman of the board of governors). He went on to read history at Jesus College, Oxford, and from 1961 to 1969, he was successively research student, senior student, and research fellow at Nuffield College, Oxford. In 1967, he published his first book, Politicians and the Slump, Labour Government of 1929-31, based on his D.Phil dissertation. The book explores the ways in which British politicians handled the Great Depression.

During a two year research fellowship at the British Academy, he began work in his biography of Sir Oswald Mosley (published in 1975) and published English Progressive Schools (1969). In 1970, he became an Associate Professor at the School of Advanced International Studies, John Hopkins University. But the controversy surrounding the publication of his biography of Sir Oswald Mosley - in which he was felt to have let Mosley off too lightly - led John Hopkins University to refuse him tenure. Oxford University also proved unwilling to give him a permanent post.

In 1978, he was appointed Professor of International Studies at the University of Warwick, where he has since remained, though joining the Economics Department as Professor Political Economy in 1990. He is currently Andrew D. White Professor-at-Large at Cornell University.

The first volume of his biography of John Maynard Keynes, Hopes Betrayed, 1883-1920, was published in 1983. The second volume, The Economist as Saviour, 1920-1937 (1992) won the Wolfson Prize for History. The third volume, Fighting for Britain, 1937-1946 (2000) won the Duff Cooper Prize, the James Tait Black Memorial Prize for Biography, the Lionel Gelber Prize for International Relations and the Arthur Ross Council on Foreign Relations Prize for International Relations.

Since 2003, he has been a non-executive director of the mutual fund manager, Janus Capital and Rusnano Capital; from 2008-10 he sat on the board of Sistema JSC. He is a director of the Moscow School of Political Studies and was the founder and executive secretary of the UK/Russia Round Table. Since 2002, he has been chairman of the Centre for Global Studies. In 2010, he joined the Advisory Board of the Institute of New Economic Thinking.

He writes a monthly column for Project Syndicate, "Against the Current", which is syndicated in newspapers all over the world. His account of the current economic crisis, Keynes: The Return of the Master, was published by Penguin Allen Lane in September 2009. A short history of twentieth-century Britain was published by Random House in the volume A World by Itself: A History of the British Isles edited by Jonathan Clark in January 2010. He is now in the process of writing How Much is Enough? The Economics of the Good Life jointly with his son Edward Skidelsky.

Reviews

[Beauregard Bottomley · Rating 5 out of 5]

Rarely would I sing the praises for a book as I would for this one. The world ignores books of this quality at their own peril. This book does something that I’ve never seen done before. It lays out a narrative in easy to grasp ways for how to think about macro economics, monetary and fiscal policy (money and government), and why it is necessary to understand in order to not be misled intentionally by fallaciously distracting substance free arguments.

The history of economics and its thought is laid out while always making it relevant to what happened in 2008 and what’s going on today. Keynes, Ricardo, Hayek and all the different schools are differentiated from classical to neo-classical, liberal, neo-liberal and post-Keynesian and so on. The real important thing the author states and demonstrates is that in Economics there really has never been a similar shift as there was in cosmology when the paradigm went from Ptolemy to Copernicus because all of the different schools of Economic thought never really start from scratch and never happen in a vacuum and need a proper context in order to understand.

There are expectations and logic built into how we understand our economic systems. He’ll give the examples of Friedman (or it could have been another Economist, I actually forget which one) requiring rational expectations with an efficient market hypothesis in order for their Economic paradigm to work, but then he’ll show that sometimes we see the world as Bayesian. He’ll explain Bayesian in the narrative and I suspect not everyone will be able to follow his details but everyone can understand what he was getting at and why it’s so important for the story he’s telling.

Having read this book I realized an implicit truth the author is getting at. Economics is always searching for an intrinsic truth at its foundation. Say's Law wants it to be supply creates demand, Marx wants all monetary value to come from money as an intrinsic value through amount of work (and exploitation of labor), and the great schools of thought tweak and provide different nuances, but all want to effect change and contribute to overall well being. There is no absolute truth in economics and events and tools come along and make us see the world differently as the world changes and adapts while the Economic schools do the same. In the 70s we ‘were all Keynesians now’, and before the 2008 great recession we tended towards monetarism of Milton Friedman until Alan Greenspan finally made the statement ‘I’m shocked, I can’t believe it bankers lied to me’.

The author clearly wrote the book so as the reader can understand the efficacy of fiscal policy over monetary policy. Austerity is not an efficient road to growth, low inflation or high employment, and monetary policy by itself is probably not sufficient (the author definitely tends towards that, but he never goes beyond what the facts say). Confidence fairies don’t exist (the author explains what that means if it is not obvious to you). Everything the author writes about is always in the mainstream of professional Economic thought with the possible exception of the last hour of the book and that’s only because that’s his personnel thoughts on specific recommendations.

The author never insults his reader and assumes they want to understand. If it takes an equation or four to make his point he’ll do just that. He’ll show how VAR (value at risk) models for determining Tier I capital requirements was an absurd standard (VAR allots capital reserves by taking the minus 3 sigma risk and multiplying it by 3) and how the CRA (credit ratings agency) contributed mightily to the 2008 financial meltdown. The author never gets ahead of the facts and shows the theory in support of the practice. He quoted Ben Bernanke concerning QE (quantitative easing) that ‘it worked in practice but not in theory’. The author probably tended to disagree with that but knows the problems with ceteris paribus and counter factual argumentation thus never really going beyond the known facts.

Most political debates are void of substance since the economic foundations are not understood by most pompous windbags who spew their bilge with no understanding. This book fills those holes by honestly looking at the history of economics, its ontological foundations, its psychological, sociological and political underpinnings, and what happened in 2008 and what is going on today.

Without a doubt I would recommend this book as probably the most significant and relevant book that I’ve read this year. I’m glad I listened to it instead of reading it since it is full of econometric equations and by listening to the book I didn’t dwell on solving the equations; I just mostly concentrated on following the narrative, and the story the author is telling is one I would recommend to everyone today in order to be a well informed person. [I don’t want to take away from this book, but I also would recommend ‘Crashed’ by Adam Tooze. It covers the crash of 2008 in more detail then this book. I think the only thing I really disagreed with this book, ‘Money and Government’, is he tended to blame subprime mortgages more for the crash than Tooze did].

It’s a real pity the world seems to be ignoring this book, because it is a real gem and it’s one of the few books that I would recommend everyone read (or listen to). There are real economic problems lurking around us right now and the overwhelming majority of people trying to solve them or argue their view points are without substance and this book would help them get the real foundation they need in order to bring them coherence and understanding. I realize that not everyone can follow mathematics in an audible format or even on the printed page, but for those people who can’t, I will say the narrative will come through regardless.

[Mustafa Olomi · Rating 4 out of 5]

A good beginner/intermediate macroeconomic history book from a Keynesian perspective.

It does read better than a textbook, but only if you really want to learn more about mainstream modern economists and economic history. I was taking a graduate course in macroeconomics and this book did give me the other side of the theories that my free market professor was teaching.

The author has written numerous books and biographies of John Maynard Keynes and approaches the book from the Keynesian point of view, which dominated most of the interwar and post WW2 periods and shaped modern Western economies until about the 1980s.

The good:
-A birds eye view of economic theories, and how they ebbed & flowed
-An analysis of some of the main macroeconomic thinkers & theories
-Dispels Hayek, Friedman, and micro-oriented macroeconomics
-A descriptive section dedicated to the 2008 financial crisis, proving that it was not merely an external event caused by bad actors, but rather a failure of markets
-Describes quantitative easing in the U.S., UK, and EU.
-Ends with a brief list of things wrong with the economy

The bad:
-Doesn't go into detail on actual fiscal policies
-First world economic problems only from the vantage point of the developed world
-No mention of America only achieving a light version of social democracy whereas Europe achieved a larger post-war welfare state with free education, universal healthcare, or other universally accepted social reforms in the developed world from the fiscal state

The book mainly focuses on Keynes and Friedman

The book acknowledges other important theorists, but only to add historical context and nuance to his main focus of mainstream economists. Smith, Ricardo, the British gold standard, Fisher & Wicksell's quantity theory of money (QTM), Marx’s unemployment and wage theories (in their context to Keynes and Friedman), Hayek's road to serfdom (unsuccessful) challenge to Keynesianism, J. A. Hobson’s under consumption theory (which influenced Lenin & Keynes), and Robert Lucas’s rational expectations theory, to name a few.

The book begins with a brief history of money, then goes on to mercantilism, the debates of 19th century classical economics, the quantity theory of money, Keynes’ breaking from the quantity theory of money and the gold standard, the post war era and the creation the modern state, stagflation and the emergence of Friedman, the turbulent 90’s and 2008 crash, the response to these failures and the experimentation of various economic theses in the post crash period. The author does leave readers with a few headline issues with regards to what is wrong with modern global economics like what the central bank’s role should be, financialization of the post-2008 economy, etc. but it’s more of a laundry list of ailments at the end of the book rather than a major focus, and he doesn't seek to fully explore them or connect them with the rest of his book, although he does leave breadcrumbs for readers to follow afterwards.

In the introduction the author does mention that ideology is influenced by the structure of power and states that “this is the important element of truth in Marx’s claim that the dominant ideas of any epoch are those of its ruling class. The crash of 2008 revealed the power of financial interests.” But he does not incorporate this idea at the heart of his arguments in the book. The author admits that economics reflects the power dynamics outside of the subject at the time, but treats the shifting of economic ideas as varying prescriptions to the economic symptoms of the time.

All in all, despite its limitations I enjoyed this book. It gave me an understanding of modern economic history from a Keynesian lens to balance the mainstream neoclassical economic arguments that are taught in many schools.

[Andrew · Rating 4 out of 5]

Money and Government: The Past and Future of Economics by Robert Skidelsky is a history of political economy and an examination of two schools of economic thought: metalists vs chartilist (put simply). The book examines a history of economic thought within governmnet - mostly focusing on the United Kingdom, where much of modern economics history began, but also looking at the United States, Japan, Germany and France, among others, and how they managed fiscal and monetary policy.

The debate here is interesting - the basic rift between schools of thought seems to split along the lines of how much a government should influence its fiscal and monetary policy. The metalist school of thought, and schools of thought that are based off of it (ie. Austrian), state that a currency should only devolve value from what it is based on. This is obviously based off of the gold or silver standards, which dominated international finance during the age of Imperialism and into the early 20th century. It is a school of thought that promotes fiscal responsibility in times of crisis, and abhors spending ones way out of a crisis. This school of thought is still popular today, with austerity and fiscal prudence - usually attributed to right leaning/conservative politicians. The other school of thought - roughly chartilist, is about deficit spending. Basically, it flows through Keynesian and neo-Keynesian economics. This school roughly considers spending by the government, as well as stronger central banking powers, to be important aspects of managing an economy. Unlike the metalist school of thought, which often promotes prudence and reduced government management, chartilist style economics promotes the opposite. Keynes and his follower (and some would say, disciples) believe in government spending and deficit financing as a means to end economic recessions.

These competing schools are by no means regimented, and each one has its positives and benefits, although Skidelsky shows that often they are politically motivated, over practicality. Too much fiscal prudence can often be cruel to a countries citizens, as governments seek to balance budgets over other important aspects, like feeding people, keeping them employed, and reducing inequality. This can lead to unrest in politics, and disruptive economic forces have seen the collapse of governments, and whole systems of governance, in the past. Fiscal prudence is also accused of short-sightedness, as balancing the budget becomes a means to itself - certainly not the most important thing compared to keeping people from starving or revolting. Fiscal prudence can also lead to stagnation in an economy, as proponents of fiscal prudence often seek to destroy inflation over any other monetary or fiscal consideration. On the other hand, over-spending, although a more medium term solution to problems, can lead to massive amounts of inflation, and as can be seen with the end of Keynesian economics in the 1970's - stagflation. Keynesian economics was proposed as a medium term counterpoint to communist and nationalist forms of economics - a middle road. It promoted some government oversight over economic affairs, while still trying to promote fiscal prudence in some respects. After the fall of communism and nationalism as forms of organization (up until the present, at least) Keynesian economics lost its fighting spirit, and a return to forms of thought largely influenced by the likes of Ricardo, Schumpeter, and other small government economists, became the norm. Even so, this return to fiscal prudence lead to the opposite - rampant deregulation of economic policy globally, and a massive global recession with damaging consequences to economies globally - with effects still present to this day.

Money and Government is essentially an examination of macro-economic policy and the relationship between money, politics and government. Economics, while not the main factor (arguably), is still a very important aspect of government stability, and a key element to the stability of a system of governance or a nation state. The schools of though revolving around this are roughly equivalent to a standard "left-wing" / "right-wing" split, or one that represents people in need vs. one that represents vested interests. Both schools of thought are important, and consideration revolving around democracy, liberalism, humanism, and class struggle are apparent and present within these competing schools. Both sides are also not characterized, necessarily, by black and white style contradictions. Each side can be broken down into various schools of thought, and each school of thought takes elements from others. Economics, it seems, is an idea that has been going through centuries of transformation, but with a core set of ideas that have been considered for many decades - much like politics in general.

Money and Government is an interesting book. It is dense and not necessarily for the layman (a difficult read for me, anyway). It contains descriptors of differing thoughts, as well as the math and statistics to back it up. It is well sourced, well written, and a good intermediate text for those interested in macroeconomic policy, and the relationship between finance, monetary policy, and governance. A good solid read.

[Sorin Hadârcă · Rating 4 out of 5]

În short: in economics nothing works in the long run. Keynesianism worked marvelously in the 50s an 70s until it didn't. Monetarism took the central stage until it was busted by the financial crises. Skidelsky gives a big blow to the sacred cows of austerity and inflation targeting and will probably upset many IMF economists. Governments need to pump investment (by borrowing whenever necessary) and not rely on financial market self-regulation too much. All in one it is not an easy reading. But who needs easy, when the author get things right?

[Aaron L. · Rating 5 out of 5]

Arguably, a masterpiece.

The book, whether it admits it openly or not, is a mix of three things, interwoven from beginning to end:

(1) An exposition of key parts of monetary history

(2) An explanation of core concepts in monetary economics

(3) Skidelsky preaching his own brand of macroeconomic reform

Whether or not you agree with Skidelsky’s views (and he can get quite preachy), you have to credit him for doing (1) and (2) incredibly well.

It’s hard to find books that are able to make monetary history remotely interesting - he does this remarkably well, particularly in the beginning portions of the book. No long drawn discussions of ancient Babylonian whatever - he picks his discussion of history well.

Many, many concepts in monetary economics are presented and explained in laymen terms in the book. He makes an attempt to explain both conventional and alternative views on most of these concepts. I would think that people smarter than I am may find some of his explanations suspect, but it’s hard to find another book that attempts to explain with great clarity, and for a wider audience, the same subject matter.

Some parts of the book get overly draggy with detail, particularly towards the middle, and Skidelsky has no shame in explicitly having a motive that guides both his discussion of history and his explanations. Point (3) is the main aim of his book, with (1) and (2) being welcomed byproducts of his goals.

Overall, this was a rather enjoyable read.

[Malek Atia · Rating 5 out of 5]

‘Fiscal and monetary policy should be coordinated, not separated. The idea that ‘sound money’ is needed to guard against ‘fiscal excess’ comes from the set of ideas that regards government as the problem, never the solution. But if the problem is the natural volatility of the market system, government is a crucial part of the solution.’

[Maxamed Ibrahim · Rating 2 out of 5]

The low ratings should not be seen as bad mark for this book. I think overall Skidelsky does a great job of distilling how economists in the West in the past few hundred years has become little more than hearing the word "markets" and like Nietzsche's madman going "I seek God! I seek God!" but without out the desire for philosophical profundity to lend it any material weight.

My low score is mostly due to the fact that Skidelsky focuses on Western economies (specifically the United States and the United Kingdom) and focuses mostly on Western economists but writes in that voice of Western writers where the specific becomes the universal. I was especially put off by the end where Skidelsky, like most white writers and scholars, seems to misunderstand identity politics. When black, indigenous people, and people of color assert their identity as people of color for themselves (unlike in the past where that identity was non-whites were asserted by whites for them) suddenly identity politics is a problem. But when for the last 600 years of European colonization and white supremacy white Europeans set up entire governments and apartheid systems which legally establish themselves as "for whites"; that's for some reason is not "identity politics". When the majority (or even the minority in the case of Apartheid South Africa) set up a system of governance which benefits the identity of those with power and resources (i.e. white people) its normalized but when the minority or the systemically oppressed asked for those same powers and resources suddenly they claiming entitlements based on their racialized identities.

The other area toward the end that Skidelsky confronts poorly is the issue of globalization. Skidelsky again seems primarily concerned with how globalization has produced right-wing reactionary movements in the West. In fact Skidelsky in few short lines seems to claim that people who apposed the World Trade Organization in Seattle in the 1990s and the system of finance and governance in favor of international corporations pretend to speak for developing countries, while also seemly implying that poor countries are in favor of globalization. A precursor history of Latin American, African, or Asian politics from the anti-colonialism period of 60-70 to now would show that is not that case at all. Free trade is fine and all but its only beneficial for both countries when the are similarly developed. Otherwise the poor country struggles with a declining terms of trade. It's hard to develop your economy if all you have to sell is coffee beans or bananas and the rich market has all these protections for their agriculture and the export market for coffee beans and bananas are controlled by Western transnational corporations.

[Isaac Chan · Rating 5 out of 5]

Skidelsky’s writing was generally excellent, and this book was a page-turner in every sense of the word. Skidelsky did a great job of walking the reader through an enthralling tour of the history of economic thought as pertains to monetary affairs and the role of the state, although he guided his tourists with an iron grip, by unabashedly steering us to the interventionist view of the state. I of course have no issue with this, especially given who Skidelsky is, since I myself prefer travelling with an itinerary with an agenda. I found most of Skidelsky’s economics appendices to be pedestrian and elementary, but that was what I expected.

That being said, I do take some issue with several points.

First of all, it feels like Skidelsky wrote this book just for the sake of writing one. ‘Money and Government’ is an assortment of general economic concepts (explained extremely well, too), instead of one sustained argument. One could say that the blindingly obvious ‘sustained argument’ is the defense of Keynesianism, that radical uncertainty means that money and an interventionist state must be central players in any market economy, however, any ideological slogan could serve the same purpose equally well. Skidelsky’s rehash of the nature and effects of QE, his commentary on inequality, and other piecemeal sections on various economic phenomena are prime examples of how this book reads like a platter of disjointed blog posts.

Secondly, I struggled to sympathize with the strawman that Skidelsky is constructing. Skidelsky’s core claim, that neoclassical Chicago-style economics have an undisputed hegemony in the academy, and neoliberalism has a likewise hegemony in the trenches of policy, is baffling to take seriously, and I seriously suspect that Skidelsky is fully aware of this strawman but found it convenient to write a book around. First of all, modern economic policy seems decidedly Keynesian to me, or else we would not have a strong Fed put bailing out the markets at every hint of stress or negativity. The fact that central banks exist at all, let alone to this level of active interventionism, seems blindingly Keynesian to me, and I deem it telling, that Skidelsky spares little commentary for how developed-world central banks have kept market rates for so low, for so long, to keep the economy running. Secondly, I find it hard to ignore that mainstream economists for many decades have dedicated much of our time to the study of asymmetric information and market failures – hardly cheerleaders for Friedman-style efficient markets! A simple observation of the frequency of key words mentioned in AEA papers documents the markedly shift to left-wing interests. Thirdly, although it is clear that the developed world took a free-market turn under Reagan and Thatcher, I find it concerning that Skidelsky takes no issue with the rapid reversing of these trends of liberalization, and even devotes a good number of pages to the justification of protectionism. Purely anecdotal evidence also suggests that the developed world and their politicians are decidedly post-liberal now, so I personally wonder about the claim of the neoliberal hegemony in politics. Skidelsky isn't arguing against reality, he's arguing against a caricature of neoliberal dominance that no longer exists.

Thirdly, Skidelsky, whether intentionally or not, overwhelmingly quotes heterodox sources – Congdon, DeLong, Borio, even Steve Keen; and only quotes orthodox sources – Cochrane, Rogoff and the like, when he’s trying to argue against them. Needless to say, there were no reference to modern empirical work other than an ideological tirade against it. My view is that if you want to disagree with someone, then you should argue against their own position and find internal inconsistencies in their own system. In other words, to be able to convincingly argue against orthodoxy, while only using orthodox sources, would be considerably more impressive - but that's just me. The economic approach of this book was decidedly classical and philosophical. Skidelsky thinks that his math aversion allows him to focus on the important questions of economics, but I found few of his conclusions to not flow from a set of circular premises, i.e.,

Premise 1: Free markets bad! 😠
Premise 2: Our governments have uniformly embraced free markets! 😠
Premise 3: Look at xxx negative economic statistics! 😠
Conclusion: Free markets bad! 😡😡😡

Fourthly, Skidelsky’s own economic propositions are hardly impressive. He advocates the relinquishment of central bank independence, which stems from the traditional Keynesian view that fiscal policy is superior to monetary policy due to standard liquidity trap diagnoses, and thus monetary policy should only exist to serve fiscal policy, and interest rate control should be firmly within the purview of the government. I find it hard to take this proposal seriously. Skidelsky’s other proposition of ‘public investment banks’, intellectually justified by the crackpot Mariana Mazzucato’s arguments that the state has historically spurred innovation, is equally elementary to me, as if control over such public investment funds would not be laden with abundant corruption problems in practice. I agree that innovation is a public good that the free market cannot provide, but I remain generally skeptical about ideas that suggest that a government can pick winners and losers ex ante. The final nail in the coffin for me regarding Skidelsky’s own policy proposals was when he asserted that such public investment would ‘pay for themselves’ by the productivity growth caused by such investments. And where is the evidence for such a claim (Skidelsky provides none)? I find it hypocritical that Skidelsky (rightfully) criticizes Laffer curve logic and supply-side econ, but immediately reverts to such logic when it comes for his time to justify his expansive-state positions. This lazy reasoning alone makes me wonder whether Skidelsky might be as economically illiterate as the Trump administration.

Overall it was a great pleasure to read this book, and it convinced me that I should find the time to read Skidelsky’s famous and lengthy 3-volume biography of Keynes, even if all I eventually derive from it is a general enjoyment.

[Mehrsa · Rating 5 out of 5]

The book is pretty dry and there were parts of it that were a rehash of other theories, but it's such a great book that every econ-oriented person should read. This book joins a few others in pushing back against a neoliberal ideological capture of the academy/policy circles/and bankers. Skidelsky is a Keynesian, but with an updated twist. The chapters on money creation and central banking are especially important.

[Chelsea · Rating 5 out of 5]

Excellent for two reasons:
1. An approachable introduction to the history of Western economic theory, with enough technical detail to follow the development of ideas without feeling bogged down.
2. Through this history, an evidence-backed challenge to major assumptions of most mainstream economics and their rational man, with a close look at alternative perspectives with particular focus on Keynes.

[Davidveidlitz · Rating 4 out of 5]

One the best books on macro economics. I would give a 4.5 if possible.

[Jakub Lupták · Rating 4 out of 5]

Good overview of history and problems with mainstream economics with some proposed solutions as well, would that reeves and starmer would listen to this peer

[Rhys McKendry · Rating 5 out of 5]

This book is hopefully one of the tools that will be used to create a society (supported by economics) that is more efficient and fairer. It explains in near simple terms why the paradox shift from Keynesian to Monetarist/Neo-Liberalism, due to stagflation, was misguided and heavily influenced by ideology. The fundamentals that gave us the Golden Age are still alive, however, they must be adapted to fit our modern society. They can replace the choices that have given us inequality, low growth, exuberant finance, and consequently, unabashed nationalism.

The book at times can overlook some areas that need Skidelsky to lend more thought and economic backing to (the trade and globalisation section at the end of the book is very vague) - but the general argument is outstanding. As an economist, I can only hope that non-economists can follow the key reasoning in some parts.

[David Jinkins · Rating 2 out of 5]

Brad DeLong’s heavily-qualified blurb on the cover should have warned me off: ‘Likely to be the most valuable economics book you read this year.’ I dove in anyway and read the entire book. For reasons I will get to below, it seems that Skidelsky might have snuck this one through while his editor was on vacation. There is a significant gap between the way the book is sold and the actual content. The book’s subtitle is ‘A challenge to mainstream economics’, but only the last 40 pages deliver on that promise. The other 344 pages are split into a history of macroeconomic thought since the 17th century which manages to be simultaneously breezy and overly detailed, and a conventional breakdown of the Great Recession of 2008.

This is all too bad, because Skidelsky does have much interesting to say. His argument at the end of the book is that macroeconomics should move back toward old Keynesian thought presenting fiscal policy as the primary mechanism for controlling the business cycle, and in particular for keeping the economy at full employment. He argues that the new classical and new Keynesian macroeconomics that has dominated the field for the last forty years is based on an unjustified assumption that money just gets in the way of an underlying barter system, and the singular goal of monetary policy should therefore be to manage inflation. Both money and government are important tools which should be used in managing the economy.

Unfortunately, these provocative arguments are condensed into a short section at the end of his long book. The book would have been more to my taste if Skidelsky had chiseled down the first 344 pages to what is necessary for explaining his more interesting policy suggestions at the end. As I understand, classical economists thought that more money led to higher prices and little else – the quantity theory of money. Keynes deliberately stepped away from this theory as he believed it could not explain the business cycle, and new classical economists slid backward after the 1970’s. Fifty pages or so should have been sufficient to make this point. Then Skidelsky would have had space to elaborate more on his critiques of current macroeconomic thought and policy.

And the chiseling need not to have been overly difficult. I just flipped through a couple of pages to find a typical passage from the first few hundred pages of the book:

The first of the debates came about as the result of the Napoleonic wars. War brought heavy military outlays, at home and abroad. In 1797, the Prime Minister William Pitt authorized the Bank of England to suspend the convertibility of the Bank’s notes into gold, as gold drained out of the country. The exchange rate of the pound against other currencies immediately dropped by 20 per cent. Gold was hoarded, causing the price of gold bullion to rise. The government resorted to printing notes to offset the fall in prices and to pay for ever-enlarging expenditure. The national debt soared to 260 per cent of GDP.
The suspension of convertibility coincided with increases in agricultural prices. The average price for a ‘Winchester quarter’ (eight Winchester bushels, or just under a quarter of a ton) of wheat, for example, rose from 45s 9d in 1780-89 to 106s 2d in 1810-13.

This is too much detail to set the stage for the debate between Ricardo and the Bank of England discussed in the next few pages, and anyway I do not understand why I need to read several pages about a debate between Ricardo and the Bank of England in the first place.

While the history of macroeconomic thought was unnecessarily long, as an economist who knows very little about the origin of economics ideas, I did learn a few things. For example, classical economists like Adam Smith and David Ricardo thought that both workers and industrialists were adding to the economy through labor and investment in capital stocks. The devils of the enlightenment were the landed aristocracy. These aristocrats earned ‘rents’ from their land, and yet did not increase production. That is why the idea of ‘rent-seeking’ has a negative connotation in modern economics.

I always thought it was strange that economists had paid so much attention to the permanent income hypothesis – the idea that people spread windfalls of income across a number of years, rather than consuming them all at once. It seems an obvious idea, and was never clear to me why there were so many pages devoted to it in textbooks and empirical tests of the hypothesis in the literature. It turns out that the permanent income hypothesis was Milton Friedman taking a shot at Keynesianism. If transitory shocks do not affect consumer spending, then the Keynsian ‘multiplier’ which makes fiscal policy attractive disappears. As Kuhn might observe, we only see the ashes of academic debates long after the fire has died out.

As an economic historian, Skidelsky sees more in those ashes than most of us. He believes that there are still some embers which might spark into flames again. I hope that his next book spends more time developing and elaborating on his new ideas, and less parsing the details of past debates.

[Paul · Rating 3 out of 5]

All this books shows is that economics is still at the four humours level of understanding. Maybe in a few hundreds year more someone will manage to achieve science levels of predictive powers.

John Keynes gets all the praise.

[Yoda · Rating 4 out of 5]

A Very Good Overview for Students of the Nexus Between Monetary/Fiscal Thought and History

In the preface of the book the author states that the book was based on a series of lectures he gave to third year economics students. He also states that the book is written with a lay audience in mind. In this reviewer’s opinion this is not the case. The book, to be understood and appreciated, really requires at least a basic knowledge of economic thought with respect to monetary and fiscal theory from the early 1800s (i.e., Ricard, Hume’s gold-species price mechanism, etc.) through today (i.e.., Monetarism, Keynesianism, Rational Expectations, etc.). Those who do not have this background would probably be lost. However, the level of knowledge required is relatively basic. Most economics students who have completed at least a year or two of their major (i.e. completed their sequence of introductory and intermediary micro and macro classes) and have had an economic thought class will have the requisite background.

The book provides a very good nexus between monetary and fiscal thought (mostly monetary theory, as there is more text on monetary than fiscal policy) and economic history. This it does not only by comparing thought and theory, on the one hand, and what really happened but how economic history interacted and influenced thought (and vice versa in terms of policy). Of course, the author being who he is, does present this analysis and discussion through a Keynesian lens. This lens, however, is not very, very Keynesian as he provides a serious critique of that line of thought also.

With respect to a main weakness, the author’s analysis does have a gap. That is in its discussion and analysis of mercantilist (or, more appropriately, neo-mercantilist) thought both in the past and going forward. This is ironic as the title of the book is “Money and Government: The Past and Future of Economics” (at least in the US – in England it is titled “Money and Government: A Challenge to Mainstream Economics”). The author does not go far back enough into history to cover mercantilism theoretically and historically enough (i.e. Venice, Genoa and other Italian city-states of the Renaissance). As there is serious reason to believe that a version of neo-mercantilism, one on methamphetamines, will probably play a very important role (both theoretically and in policy) in the development of many nations in this century, in particular China, this is a glaring hole. Dr Skidelsky needed to remember Winston Churchill’s quote (paraphrasing) “The further one looks into the past the further one can see into the future”.

[Michael · Rating 5 out of 5]

If I were to reflect upon my own understanding of economics, I would generously describe myself as having a layman's understanding with a recent desire and interest in learning more. As a reader of Money and Government, this is an important characterization since the book offers an excellent entry for understanding the predominant political economies since the emergence of capitalism. In the process of explaining this history up through the 2008 Great Recession and its aftermath, the book helped clarify for me our current political debates and economic situation.

Skidelsky traces classical economic theory's emergence from mercantilism and early capitalism by explaining the relationship between money, inflation and employment that make up the monetary policies of different governments during that period (mostly Britain and the United States). For a layperson, this history goes a long way in helping to understand micro-economic theory without an over-reliance on mathematical models that are a part of the professional economist's toolbox. At the same time, by providing the historical context of economics, Skidelsky also describes the role governments played in developing capitalist economies, and how governments responded to capitalism's various crises, including the rise and fall of Keynesian theory from the 1930's to the 1970's as a response to the Great Depression.

With the inflationary spiral that governments in the late 60's and early 70's could not respond to, Skidelsky describes how the eventual solutions of assigning monetary policy to central banks with technocratic mandates free from democratic pressures laid the groundwork for the reigning neoclassical theory of money and economy from the 1980's to the crash of 2007-08. He then shows how the policies of government in loosening the regulatory apparatus of banking combined with the emergence of an international finance system with too few controls and too little citizen representation led to the worldwide crash. He delves into and explains the ways in which the unregulated finance market created lending practices that on paper were secure but in practice were ticking timebombs that nearly destroyed the world economies at the start of the great recession.

From this location, he then explains the limits of different governmental responses such as the EU's many miss-steps due to the punishing self-interest of German dominance of the Union, the schizophrenic responses of the British and American governments, incapable of committing to Keynesian investment or neo-classical austerity, and the power of the banking system to block meaningful reform. Through this, Skidelsky demonstrates how the different solutions that have tried to preserve the reigning monetary theory of low taxes, small government and quasi-laissez-faire economics that has reigned from the 1980's to present have both failed to respond to the severity of the crisis and how they have been in conflict with the potential for rethinking the presuppositions of an international finance system in desperate need of reform.

I enjoyed this book. It offers an excellent entry into political economy that for a lay person was both accessible and enlightening.

[A Ter · Rating 4 out of 5]

Aside from a couple of questionable lines (listed below), this was a very good book. Unavoidably UK-focused, it presents a masterful long-view.

Some lines to quibble with:
1. "practical men... are not producers of ideas." (p 13): Betrays a chauvinistic and historical perspective. Why only "practical men"? The implied notion of the intellectual supremacy of academicians is self-serving, condescending and wrong.
2. "economists have almost always opposed protectionism and monopoly; business has generally been in favor," (p 13): Naive. The kind of reductionist mental model that is more harmful than descriptive or predictive.
3. What's with the weird third-person reference to himself on p 226?
4. "Labour's pact with the Mephistopheles of high finance...," (p 239): Reveals an ideologically-tinged and misplaced disdain for and demonization of the financial sector. A more honest target would be to demonize avarice, arrogance, and the absence of empathy wherever they may appear. (At time they have been associated with the financial sector, but are not confined to it nor universally applicable to it.) He hits at this on p 366 when he talks about changing the culture of Finance -- an important qualification.

[Michael · Rating 5 out of 5]

Excellent book for the technically-minded. A review of economic thought about money, exploring all the different strands of monetarists and Keynesians, providing insightful context to each school of thought. It is interesting to see how government policies that arose out of specific situations in history were then turned into "scientific" theories that ended up being accepted by different elites as the new religion.

And yet, the short of it is that, after centuries of economics, we still don't know what money really is and how it affects the real world. Skidelsky's criticisms are all very relevant and the questions he raises need some answers if we are to avoid an economic catastrophe.

My only criticism of this book is that Skidelsky's passionate defence of Keynes does not convincingly address the two main issues around fiscal policy. Firstly, the incompetence and corruption of the politicians in charge: how can we entrust them with our main weapon against depression and poverty? Secondly, the long-term consequences of ever-expanding massive debts: can we really ignore the consequences of having created the biggest debts in human history? But then, this is exactly why economics is and will remain the dismal science.

[Gabriel Stein]

I know the author and respect him. However, rarely have I made so many annotations in a book to show my disagreement. This is not to say that it is a badly written book -- just that I disagree with many of its main tenets. Crucially, Skidelsky claims that capitalism is incapable of producing full employment except in moments of boom (this was also Keynes' view). But right now (2020) we are in period of full employment and far from a boom. The call, therefore, for a more active state intervention in the economy is flawed from the start -- and this is even without analysing the state's fairly weak record in producing growth and productive employment. The author also claims that fiscal policy is more powerful than monetary policy, a highly doubtful statement; and seems to welcome central banks using their independence. There are those who would agree -- but, once again, this has not shown itself be the path to successful policy in the past. I could go on, but suffice it t say that this is a book that preaches to the converted -- those who approach it from a different perspective will find it interesting, but will not see any reason to change their views.

[Charles Remington · Rating 5 out of 5]

A brilliant and illuminating work which takes a layman like myself right though the history of money, banking, and government fiscal policies. The history was illuminating though parts left me angry at times to read about the mistakes we continue to make and the short sighted government policies which serve only vested interests, leaving the tax payer to pick up the pieces when it all goes wrong. At the end though, I was a little depressed to realise that although Skidelsky’s analysis and proposed solutions are both practicable and feasible it would need a united global effort to put them into practice. So, I am left wondering what the chances of any of his proposals being put into practice actually are.

[Daniel Tan · Rating 5 out of 5]

Focuses on economic orthodoxy Vs Keynesianism, and how each view treated the major economic crises e.g. the Great Depression and the Global Financial Crisis. The beginning can be a bit dry as it deals with the background to the 1920s, while one wishes the end expanded more on alternative(s) to orthodoxy.

Overall a good explanation tying together fiscal and monetary policy, trade balances, wages and inequality, with stark warnings for the post-2008 world which are already playing out.

[John · Rating 5 out of 5]

This is an amazing book. I am trained as an economist and this should have been a required reading in graduate school. Skidelsky is a treasure for his knowledge of Keynes and how to make economics (as an entire field) relevant again. This is a must read for anyone interested in economic history, politics, and political economy.

[Jirapat Saruayjirawat · Rating 4 out of 5]

Its a very insightful book about the political economy and the functions of the old economic models and thought. However, this books uses various technical terms, and some statements or iterations require an already profound understanding of various economic concepts already, so beginners are not recommended for their own good.

[Dalibor Chrápek · Rating 2 out of 5]

50% *
40% **
10% ***

This was not my first economics book. I don't remember reaching for a dictionary once, yet I understood no more than 20% of the book. Thus: who is the target audience? Certainly not lay people like me.

[Nathan Green · Rating 5 out of 5]

A good explanation of why I’ve never understood mainstream macroeconomics. As I expected, it makes no sense to try and deduce macro outcomes from micro constructions, especially when those constructions are based on total abstractions from reality, all but guaranteeing a total malfunction in the aggregate.

[Ietrio · Rating 1 out of 5]

Freedom is toxic. Life and markets should be like his career: kiss your way up on the ladder, than push papers and wait for the government to collect the money for your generous pension.

[David Bradshaw · Rating 5 out of 5]

a plea for a new macro economics as if society mattered

[David Ray · Rating 5 out of 5]

Extremely important and necessary

[Hal]

Recommended by DG