Nobelist Robert Solow reviews John Cassidy's new book on "utopian economics" versus "real-world economics," sort of an overview of efficient markets theory and market failures for nonspecialists, with an application to the recent financial panic. A few weeks back, I wrote on Cassidy's piece in the New Yorker on the Chicago school, which I thought was a little too "light-versus-dark," to use some of Solow's terminology.
Solow points out on the last page of his review that some of the very interesting questions raised by recent events go unasked and unanswered. These include why it is that the "real-world" argument seems to have lost out to the "utopian" view even though it's almost by definition more true. "Are we for some reason more receptive to simple answers than to complex ones? Is it that, in the nature of the case, there is more money backing one side than the other? Perhaps the long postwar prosperity provided good growing conditions for conservative political and economic ideology." All interesting food for thought.
