Economics After the Crisis: Objectives and Means

Those who find the ”dismal science” just too dismal will relish this thoughtful book. Turner, chairman of Britain’s Financial Services Authority and author of Just Capital: The Liberal Economy, raises trenchant questions about the why and wherefore of economics, arguing that recent “warnings of economic apocalypse turn out to have been overstated,” and suggesting that simplistic thinking and easy assumptions about what policies to implement and how to do so form the crux of the problem. His ideas certainly topple some idols; for example, he suggests that, after certain levels of development are reached, growth in average per capita GDP will not necessarily produce more average happiness or well-being. Moreover, as society gets wealthier, the conventions used to calculate GDP become more arbitrary. Turner examines the growth in the financial sector in recent decades and asks “whether we can distinguish between beneficial elements and harmful elements,” and how to avoid the “destructive instability” witnessed of late. Perhaps the most significant challenge is to the concept of economic man beloved by Economics 101 teachers: “human decision making cannot be seen as an entirely rational process, but is at times inherently instinctive.” The presumption that financial markets will always work in a rational way must now be seen as a religious-like creed. (Apr.)