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A Failure of Capitalism: The Crisis of '08 and the Descent into Depression unknown Edition

3.7 out of 5 stars 43 customer reviews
ISBN-13: 978-0674060395
ISBN-10: 0674060393
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Editorial Reviews

From Publishers Weekly

Posner (How Judges Think) is uncharacteristically dry in this dense book that states flatly that we are in a recession only because we are too frightened to call it a depression. He makes a near-heroic attempt to delve into the roots of the current crisis, citing some of the harder questions: how did it happen? why was it not anticipated? how is the government responding? A great deal of ground is covered, and the book takes the form of a high-altitude survey, assessing all the major points without getting bogged down in detail. Quickie explanations of subprime mortgages and the credit crunch orient the reader, and Posner addresses the takeaway lessons about capitalism and government, the puzzling lack of foresight from the economist community, the apportioning of blame and the resulting future of conservatism. All good topics, thoroughly and thoughtfully presented, but much of Posner's material is already woefully out of date. This book will make a serviceable study of the current crisis, but it does not serve its intended audience well in the meantime. (May)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. --This text refers to the Hardcover edition.

Review

Lively, readable, and plainspoken...Posner has an extraordinarily sharp mind. (Robert M. Solow New York Review of Books 2009-05-14)

Posner has managed to write a compelling book on the crash...The book has numerous worthwhile insights, including a surprisingly Keynesian analysis of the dynamics of depressions. (Robert Kuttner American Prospect 2009-05-01)

A surprising volume that explains what happened to the banking system and economy in terms the lay reader can easily understand...[Posner's] critique is bracing, all the more so because it comes from a right-leaning thinker normally hostile to the ministrations of government bureaucrats. (Paul M. Barrett Washington Post Book World 2009-05-03)

Before seeking political asylum in free-market Hong Kong, consider reading a new book that critiques what went wrong with capitalism, written in order to save it. Judge Richard Posner's A Failure of Capitalism: The Crisis of '08 and the Descent into Depression is noteworthy. As a longtime University of Chicago professor and father of the free-market-based law-and-economics movement, Judge Posner makes an unlikely critic of capitalism. But as author of some 40 books and as the most frequently cited federal appeals court jurist, he is also one of our most original and clearheaded thinkers. (L. Gordon Crovitz Wall Street Journal 2009-05-05)

It comes as something of a surprise that Posner, a doyen of the market-oriented law-and-economics movement, should deliver a roundhouse punch to the proposition that markets are self-correcting. It might also seem odd that a federal appellate judge (and University of Chicago law lecturer) would be among the first out of the gate with a comprehensive book on the financial crisis--if, that is, the judge were any other judge. But Posner is the late Daniel Patrick Moynihan's successor as the country's most omnivorous and independent-minded public intellectual. By now, his dozens of books just about fill their own wing in the Library of Congress...Compact and bracingly lucid...By the last page, not a single lazy generalization has survived Posner's merciless scrutiny, not one populist cliché remains standing. A Failure of Capitalism clears away whole forests of cant but leaves readers at a loss as to where to go from here. In other words, it is only a starting point--but an indispensable one. (Jonathan Rauch New York Times Book Review 2009-05-17)

[Posner] has the rare kind of mind that is a pure pleasure to watch in action, regardless of the subject and the argument being made. (John Lanchester New Yorker 2009-06-01)

Richard Posner is one of America's most prominent and prolific public intellectuals...With his concise, jargon-free analysis of the current economic crisis, Posner has cast his lot with those who believe that the "depression" (given the steep reduction in consumption, credit and production, the term, he insists, is appropriate) was the result "not of intrusive, heavy-handed regulation of housing and finance, but of deregulation, hostility to taxation and to government in general." (Glenn C. Altschuler Jerusalem Post 2009-06-19)

Richard Posner is a phenomenon...He provides a very competent account of the events which led to the current crisis, with an emphasis on the political and ideological context. (John Kay Financial Times 2009-07-31)

[Posner] is the quintessential U.S. economic-conservative intellectual...So an excoriating attack by Posner on modern financial market practices is news. A Failure of Capitalism is precisely that. There are still U.S. conservatives who think the crisis was overdone, that the policy response has been too great, that this was merely a crisis of confidence and liquidity, and that the banking system was not insolvent, merely illiquid. That is not Posner's view. His judgment is that the banking system is insolvent and the crisis that took place in 2008 transformed a recession in the US into a depression...In his preface, Posner emphasizes that he has written the book in medias res, a lawyer's way of saying "in the thick of it," with the implication that he has yet fully to make up his mind. He has, however, offered a thought-provoking interim analysis of what went wrong. (Warwick Lightfoot Financial World 2009-07-01)

The best book describing this malaise is Richard Posner's A Failure of Capitalism. The distinctiveness of his case is that he is a prominent conservative thinker with the intellectual acuity to argue that the crisis is not to do with the traditional enemy of conservatism, big government, but is a consequence of decisions taken by private firms. The ill-effects of those decisions were worsened by deregulation of banking. (Oliver Kamm The Times 2009-12-05)

[A] compelling read...Notable for [its] high seriousness and sophistication. (Robert Teitelman Huffington Post 2010-12-23)

[Posner's] bracing and intellectually admirable A Failure of Capitalism demands attention. (Jonathan Kirshner Boston Review 2011-01-01)
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Product Details

  • Paperback: 368 pages
  • Publisher: Harvard University Press; unknown edition (May 31, 2011)
  • Language: English
  • ISBN-10: 0674060393
  • ISBN-13: 978-0674060395
  • Product Dimensions: 4.2 x 1 x 6.8 inches
  • Shipping Weight: 11.2 ounces (View shipping rates and policies)
  • Average Customer Review: 3.7 out of 5 stars  See all reviews (43 customer reviews)
  • Amazon Best Sellers Rank: #407,081 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

Format: Hardcover Verified Purchase
This is the fifth book by Richard Posner (law professor at the University of Chicago and a long-time judge on the 7th Circuit Court of Appeals) that I've read, in addition to many legal opinions. There is no question that he's brilliant and an excellent, clear, and precise writer. There is also no question about his credentials as a libertarian-leaning conservative.

Until now, that is. "A Failure of Capitalism" departs consciously from the prevailing libertarian take on the current recession (or, as Judge Posner argues it should be called, "depression"). In short, he believes that the depression was not mainly caused by government meddling. Rather, it is a "market failure" -- i.e., a crisis that market forces alone could not have prevented. And, given the size of this market failure, government should instead have used regulations to prevent it.

Before I got the book, I had read some indications that Judge Posner was taking this line. But in the book itself, he is crystal clear about his view that deregulation in the financial industry was a major culprit, and his recognition that he is going against the conventional wisdom of both libertarians and conservatives.

The book is well argued and much more thorough than I can convey here. One of the great things about Judge Posner's style is that he anticipates all of the reader's objections and tries to address them in good faith. Whether you agree or disagree, he is always worth reading.

The book also includes a narrative of how the depression developed, descriptions of the systemic problems in the financial industry that made the depression possible, and recommendations for government action.

Although the material may be a little difficult for those with no knowledge of finance, it has been intentionally written with non-specialists in mind. As always, Judge Posner repays the attentive reader.
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Format: Hardcover
Judge Posner was appointed to a Federal Appeals Court position by President Reagan, and has sometimes also been mentioned as a Supreme Court candidate. During his legal career he has pioneered the inclusion of economic perspectives in interpreting law and now regularly writes a blog on economics. In "A Failure of Capitalism" he focuses his combined talents on our current economic downturn, and reaches a surprising (for a conservative, "Chicago-school" proponent) verdict. Those most guilty of contributing to the downturn are Alan Greenspan and George W. Bush - Greenspan for keeping interest rates low, fueling the surge in home prices, and Bush for accelerating deregulation of financial markets and then doing little while the economy began crumbling. (Posner also includes the monies China invested in T-bills as a factor holding American interest rates low.)

At the same time, home buyers and their willing enabler mortgage brokers knew they were getting in over their heads. Wall Street, seeing a great opportunity, then leveraged these new mortgages to extreme levels. Thus, both mortgage-takers and Wall Street were in over their heads. (Posner believes home-buyers' failure to save was part of the problem - reality, however, is that they thought they were saving big time through home appreciation.)

Posner's Prescription: More EFFECTIVE government regulation, not just expanding the hodge-podge of overlapping partial management spread over myriad state and federal agencies. This should include limits on leverage, changing how credit-rating agencies operate and are compensated, requiring CDS be fully collateralized, limiting payday loans, etc. Posner also worries about the impact of enormous bailout monies on the value of our currency.

Why the title "A Failure of Capitalism?
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I love reading Posner for the same reason I love reading Nietzsche - he's bold, witty, bitterly funny, and sincere - even when sincerity is a bit irresponsible. When Posner's in prime form, he's willing to think dangerous thoughts in his search for a working version of "the truth." But this book has little of his trademark edgeiness.

More importantly, Posner has aimed this book at the layperson...and missed. Even though he has tried "assiduously to suppress the extraneous," he presumes a post-grad readership with a large and specialized vocabulary. One wonders, with amusement, when Posner last spoke to a "layperson" (and whether that person was a circuit-level judicial clerk).

He does a very good job of explaining the economic mechanisms involved in recent events, and if you're looking for that you'll do no better than this book. But, in my view, the Posner "brand" stands for fearless, airtight polemics - the kind of thing that makes you think "that can't possibly be right" and then spend the next 6 months thinking about it. When he lobs a couple of grenades at his own team (e.g. attributing the crisis to market failure, criticizing executive compensation) there is a glimmer of the classic Dick. But for the most part this is a dry, neutral primer on the economics of depression.

Which is not to say it's bad. It's excellent, in the way that some of the spicier textbooks are excellent. It's reliable and has little of the rushed-to-market sloppiness that characterizes contemporary law-and-econ (Cass Sunstein). As a Fed-junkie, I was bored by it, but I'm giving it to my friends and family members.
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