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Fubarnomics: A Lighthearted, Serious Look at America's Economic Ills Hardcover – August 24, 2010
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About the Author
Robert E. Wright (Sioux Falls, SD) is the Nef Family Chair of Political Economy at Augustana College in Sioux Falls, South Dakota. For many years he taught business, economic, and financial history at New York University’s Stern School of Business. He is also a curator for the Museum of American Finance. He is the coauthor (with David Cowen) of Financial Founding Fathers: The Men who Made America Rich and One Nation under Debt: Hamilton, Jefferson, and the History of What We Owe. His articles have appeared in Barron’s, the Los Angles Times, Forbes.com, Moody’s Economy.com, the Chronicle of Higher Education, and Reason, among others. He has been a guest on NPR, C-SPAN, The Lou Dobbs Show, the BBC, and Larry Kane: Voice of Reason.
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After setting up the general conditions that engender the fubar-nomics (his term for dysfunctional economic systems), Wright treats us to a few delightful examples of Fubarnomics hard at work, ranging from construction work on spec and the US housing debacle of the early twenty-first century to out-of-control healthcare expenditures and the vexing problem of fixing (higher) education for the better (this last one, which, alas, oftens ends up worse off after each successive fix). Readers can be forgiven if they choose to read selectively from the book. Each chapter pretty much stands alone, and one can cherry-pick with ease- even within the chapters themselves- and read about only those topics that will slake (or is it foment!?!) whatever axe one has to grind. For me, my personal pet peeve was the housing mess, and Wright carefully laid out the historical precedent for this protracted debacle, showing how the formation of the American Republic had its roots in a housing mess (indeed, one may even be able to venture that the dissolution of the American Republic will have its roots, in part, in the housing mess).
An otherwise very readable and at many points very enjoyable book (truly shocking, that, and for an econ book no less), the author did drop the ball on a few occasions, only one of which I will relay. In laying out the very real risks of leverage and how it played a part in the housing mess on pages 48-50, he presents a very mis-leading table (one of a precious few in the book) showing the returns to be had with leverage. The numbers did not look correct, and after much ruminating (and running the correct calculations myself), I found the problem: he presented both the return of equity capital and the return on the same equity capital in a single percentage figure. The numbers looked wrong because the wrong perspective was brought to bear. Generally speaking, when we speak of either investment or speculation, we are chiefly concerned with the return on our capital and not necessarily the return of our capital (though in truth, we should be more concerned about this than anything else). A correct and more appropriate way to present the evils of leverage would have been to present not one, but two tables- one of which showing the gains expressed two ways, as returns on invested capital (with invested capital being the combination of equity and debt) and returns on equity, and the other showing the losses expressed in the two ways- when operating with leverage. This would have been highly instructive to readers.
The above and a few other fumbles throughout the book ultimately made the book a satisfactory, but not a stellar read. Of special note, is his final chapter, titled Fighting Fubar, which had a few interesting things to say about the principal economic ills of our time, and how to fix them.
Overall, I enjoyed reading the book, and do recommend it for light- and selective- casual reading.
Wright's (well documented) belief is that far from the name calling on the left and right, the current state of F'ed up (Google: FUBAR) economics is the fault of both aisles of government, combined with an ample dollop of corporate interference that has created a climate where laws work at odds with one another to create a systemic problem deeply rooted in our economy of today.
A typical example of this Fubar-state would be in the field of agriculture, where government pays subsidies to farmers for lost crop yields while at the same time destroying crop surpluses to keep prices shored up. Wright casts a wide swath as he examines problems related to everything from Social Security, to the home mortgage business, to custom home construction to health care, all the while systematically explaining how we got into the conundrums of today and, in his final chapter, how we might best get out of the ditch.
No field is left unscathed as Wright's analysis goes back hundreds of years to shed light on both current day malaises as well as primary examples from the past (slavery, the Civil War, the Great Depression) to illustrate to the reader how competing interests can subvert systems to the point where few if any are realizing the goods intended within these programs and organizations. By examining institutionalized problems from grade inflation on campus to the failure of government bailouts, Wright comes across a tight list of symptoms (perverse incentives, asymmetric information, regulatory arbitrage) that create most of these problems today.
Wright's analysis is too broad and too exacting to go into more detail here, but suffice to say, the author tells it as it really is, with no spin left or right, in a time when this information is more desperately needed than in a long time. We hope the author has enough success to spawn a second volume, as there is certainly much more ground to cover (perhaps, the military, next time?) In the meanwhile, this book should be everywhere.
While I disagree with some of his proposals (e.g. I don't think making patients pay more out of pocket for health care is a good idea), I nonetheless learned a lot from Fubarnomics and highly recommend it to liberals and conservatives alike.