How the Economy Works
Confidence, Crashes and Self-Fulfilling Prophecies
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- USD 12.99
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- USD 12.99
Descripción editorial
"Of all the economic bubbles that have been pricked," the editors of The Economist recently observed, "few have burst more spectacularly than the reputation of economics itself." Indeed, the financial crisis that crested in 2008 destroyed the credibility of the economic thinking that had guided policymakers for a generation. But what will take its place?
In How the Economy Works, one of our leading economists provides a jargon-free exploration of the current crisis, offering a powerful argument for how economics must change to get us out of it. Roger E. A. Farmer traces the swings between classical and Keynesian economics since the early twentieth century, gracefully explaining the elements of both theories. During the Great Depression, Keynes challenged the longstanding idea that an economy was a self-correcting mechanism; but his school gave way to a resurgence of classical economics in the 1970s-a rise that ended with the current crisis. Rather than simply allowing the pendulum to swing back, Farmer writes, we must synthesize the two. From classical economics, he takes the idea that a sound theory must explain how individuals behave-how our collective choices shape the economy. From Keynesian economics, he adopts the principle that markets do not always work well, that capitalism needs some guidance. The goal, he writes, is to correct the excesses of a free-market economy without stifling entrepreneurship and instituting central planning.
Recent events have shown that we cannot afford to treat economics as an ivory-tower abstraction. It has a direct impact on our lives by guiding regulators and policymakers as they make decisions with far-reaching practical consequences. Written in clear, accessible language, How the Economy Works makes an argument that no one should ignore.
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Farmer, professor and chair of the economics department at UCLA, offers a detailed explanation of macroeconomics, showing how unemployment, inflation, and interest rates are connected and how they are influenced by government monetary and fiscal policy. Attempting to speak to the layperson as well as the academic (with mixed results; Farmer's real audience might be the latter), he wades into the difference between classical and Keynesian economics and shows how they have influenced recent policy debates. He shows how central banks influence individual lives, why unemployment persists, and why the stock market matters to everyone. Farmer also ponders if there will be another Great Depression and puts forth a solution for solving and preventing financial crises. Along the way, he provides an abbreviated history of economic thought from Revolutionary days to the present. Readers with a serious interest in this subject will find this timely book informative, but those looking for a gentler introduction will need to look elsewhere.