Reviews of How the Economy Works
Bringing new research to life in guiding policy in the aftermath of the financial crisis, Roger Farmer takes the economic ball up the middle between Hayek and Keynes. With an emphasis on swings in confidence and wealth, Farmer's criticisms of fiscal stimulus and interesting prescriptions for monetary policy should be essential reading for anyone trying to understand what happened, especially for economists and policymakers focused on recovery. Non-specialists will find the book full of fascinating stories; economists will see some surprising new twists. --Glenn Hubbard, Dean of the Columbia Business School, Columbia University, former Chairman of the Council of Economic Advisers
This is an important policy proposal from a top thinker. Farmer balances the traditions of Hayek and Keynes to formulate a new way to stabilize the economy-and to solidify society's confidence about its future prospects. He returns us to first principles and builds a clear, succinct argument in language that is easy to follow. No policymakers are rushing to adopt Farmer's approach; but the same was true for Keynes in the 1930s. Let's hope we don't need to experience another Great Depression before our economic leaders are seriously willing to rethink everything. --Simon Johnson, Ronald A. Kurtz (1954) Professor of Entrepreneurship at the MIT Sloan School of Management, former chief economist at the International Monetary Fund
Farmer provides an excellent discussion of what went wrong with modern economics in the run up to the recent crisis. And to deal with the effects of the financial crisis, boosting investment and employment in the short and the long run, he provides a policy plan to induce a rapid and sustainable recovery through direct intervention in the stock market. If he is right it would improve things quickly, and if he is wrong the tax payer ends up receiving dividends through the Central Bank investment portfolio. It is worth a try.--Ray Barrell, Director of Macroeconomic Research and Forecasting, National Institute of Economic and Social Research, UK