The Cost of Capitalism
Understanding Market Mayhem and Stabilizing our Economic Future
By: Robert J. Barbera, Ph.D.
Published: April 2009
Format: Hardcover, 240 pages
ISBN-13: 9780071628440
ISBN-10: 0071628444
Publisher: McGraw-Hill Professional
"Market crises are an integral part of our economic system", writes Executive Vice President and Chief Economist at ITG and Economics Department Fellow at Johns Hopkins University Robert J. Barbera, in his insightful and paradigm challenging book The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future. The author supports strong the concept that capitalism is the best economic system, but takes to task mainstream market economists who have embraced the mistaken view that capitalism as infallible.
Robert Barbera presents a solid case that cycles end following excesses in the market, concluding with market upheaval and retrenchment. The author points out that this obvious reality of capitalist markets has been ignored, and even suppressed, by mainstream economists. Robert Barbera applies the important insights of economist Hyman Minsky to his analysis of the current economic crisis. Minsky made the case that stability and economic tranquility led to over confidence that these temporary conditions were permanent features of the economy. As a result, confidence grows leading to the taking of excessive risks, driven by greed and herd instinct. Because many of the investors become over confident, and leverage their investments too heavily, even a very small economic downturn renders large numbers of investors insolvent. Understanding this inherent instability of capitalism, that results in periodic market disruptions, is a crucial element of the book.
Robert J. Barbera (photo left) recognizes that mainstream economists are ill suited to forecasting future economic crises. The author considers their economic theories and forecasting tools to be flawed, in their failure to comprehend that capitalism is prone to cycles. Robert Barbara describes capitalism, when examined in the real world, is inherently unstable. Instead of trending toward equilibrium and a steady state, any widespread belief in permanent stability will cause an increase in risk taking, creating bubbles. Bubbles, by their very nature, discourage careful risk analysis. As a result, even a slightly bursting bubble causes widespread financial ruin. The recent real estate bubble collapse is a clear example of the principle of instability at work, and playing out precisely as Hyman Minsky had forecast.
For me, the power of the book is the authors clear headed analysis of how capitalism really works, and why booms and recessions are a natural feature of capitalism. The denial of conventional economic theory, of the inherent instability of the capitalist economy, causes even dangerous bubbles and more severe recessions than necessary. Robert Barbera believes strongly that capitalism is the best economics system, but also recognizes that capitalism is not infallible, nor has endless growth without interruption. The author's insightful analysis of the economic upheavals of the past decades is essential reading for everyone, whether a professional economist, business person, or average citizen. Acknowledging the obvious flaws in capitalism will help preserve and strengthen the system, while denying these obvious truths could lead to successful attempts to end market capitalism as an economic system.
I highly recommend the important and must read book The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future by Robert J. Barbera, to anyone serious about understanding real world capitalist economics, and its inherent flaws. The author provides a very convincing reassessment of the powerful economic thought of Hyman Minsky, about how bubbles are created and resolved in often disastrous fashion. Through understanding the flaws within the system, more effective policies can be implemented by governments and central banks to prevent the creation of dangerous bubbles, and lessening their impact overall.
Read the essential and illuminating book The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future by Robert J. Barbera, and discover why there is no such thing as a Goldilocks economy, as everything seeming just right, leads inexorably toward higher risk taking and blowing of unstable bubbles. The author provides the vital analysis lacking in most mainstream discussion of the economy. This book deserves a wide audience, and should be read by anyone who supports a capitalist economy, and has a desire to improve its economic effectiveness.
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