I went into this book thinking that it would read like most books on economics: intellectually stimulating, but really bland. I was pleasantly surprised that it was actually extremely well written and a fascinating read. It details how mainly conservative economists convinced politicians to utilize their ideas in everything from the ending the draft to deregulation of financial markets. Some ended well, some ended not so well. There are many big personalities discussed and many stories shared that will entertain as well as inform. If you want a firm understanding of what influence the economics profession has had on the world, this is well worth a read.

Binyamin Applebaum’s new book opens with a tone-setting quote from John Kenneth Gailbraith: “what is called sound economics is very often what mirrors the needs of the respectably affluent,” and from there moves to tracing the recent history of some of the most pernicious and influential economic ideas that have created the world we now inhabit, a world where a turn towards unfettered free markets has not delivered promised prosperity but instead resulted in slowing growth for each decade that followed, as he notes, from 3.13 percent a year in the 60s to .94 percent per year in the 2000s, adjusted for population and inflation.

Though Applebaum takes pains to note that “economists are a diverse group. Any reasonable roster includes both Milton Friedman and Karl Marx, which is to say that membership cannot be defined in terms of support for any particular set of policies…. (and) some economists vigorously opposed each of the changes described in this book,” you will not find that diversity of perspectives represented here. Applebaum instead focuses on those whose “narrow portion of the ideological spectrum” came to define some of our most impactful, and many cases, noxious policies.

Binyamin Applebaum made his career reporting on the economic meltdown of the late aughties for the Charlotte Observer (the hometown paper on the front lines of Bank of America, Wachovia, Countrywide Financial, and the Beazers Homes scandal), and his long-time reporting on the economy moved from there to the Boston Globe and in this decade, to the New York Times, where he covers economic policy in Washington. His clear-eyed reporting on how policies make impact is long established, and his study here shows how ideological obsessions can become mainstream policies. Why did the fed come to see its job only as maintaining inflation targets of 2-3% a year? How was this a woefully inadequate objective in the face of the financial crisis and its aftermath? Applebaum traces this, and other ideas, from inception to conclusion.

The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society is a standard-ish work of economic history, but a sweeping one, covering some 70 years of the big players from Friedman to Volker to Greenspan, their ideas, and the outcomes of the rise to power of the wonks with a deep dive into archives for juicy quotes and tidbits. It is important work for the historical record, bridging the gap between Robert Heilbroner’s The Worldly Philosophers and now.

THE ECONOMISTS’ HOUR

In the marketplace of economic ideas, capitalism reigns supreme. While the fall of the Berlin Wall and the eventual collapse of the Soviet Union are often associated with the triumph of liberal democracy over the alternatives, they likewise signaled capitalism’s dominance on the world stage. Decades later, as evidenced by the world’s financial centers as well as Silicon Valley, the poster child for free-wheeling capitalism, the primacy of free markets has undoubtedly become economic orthodoxy.

In that sense, it’s ironic that a system whose strength lies in allowing competition to thrive no longer has a worthy competitor. That irony isn’t lost on Binyamin Appelbaum, who examines how that orthodoxy became the orthodoxy in The Economists’ Hour. “Capitalism became a self-satisfied monopolist in the marketplace of ideas, with predictable consequences,” he writes. “In the absence of alternatives, it was difficult to muster the will to deal with its evident shortcomings.”

From his account, we have been dealing with its shortcomings for at least the better part of four decades.

The Economists’ Hour derives its title from Thomas McCraw’s Prophets of Regulation, an examination of the evolving economic regulatory environment in the United States. Inspired by this work, Appelbaum came to realize that the four decades between 1969 to 2008 was also a metaphorical economists’ hour: a period when free market economics held unparalleled influence among the policy elite. He thus explores the personalities and historical antecedents for how this situation came to be.

There’s certainly a lot to unpack in The Economists’ Hour, but the result is nonetheless a fascinating deep dive into the way that economic theory can inform government policy (or the lack thereof) and the way that some economists can have an outsize influence on politicians even on matters that are not principally economic in nature. Ultimately, Appelbaum is scathing in his criticism, opining that “[t]he experience of recent decades is a reminder that just as surely as bad rules can damage markets, and society, so too can the absence of rules and enforcement.” That “experience,” of course, can refer to any of numerous examples such as the Federal Reserve’s management of the money supply during the stagflation years of the mid- to late seventies, or the reluctant exit from the Bretton-Woods system of fixed exchange rates, or the regulatory capture that turned anti-trust policy on its head, as well as the financial crisis of 2008.

The problem, one might infer, is the lack of evidence-based assessments of the impact that free-market policies have. By Appelbaum’s account, the most influential economic thinkers of the time—Milton Friedman most prominent among them—advocated for minimal to nonexistent government interference in economic affairs on principle without necessarily assessing the impact of such posturing. Thus, it might be said that free market capitalism hadn’t simply become the orthodoxy; in a very real sense, it had become an ideological pursuit.

Appelbaum readily highlights the failings of the free market ideal, which by extension belies his assessment that government could have and should have done more. Yet for all the “damage” that free market ideology may have wrought, one is nonetheless left to question whether the alternative would have been any better. History, after all, is rife with examples of economic interventionism gone wrong; the collapse of planned economies around the world attests to this. Or to paraphrase the economist Larry Summers, given that markets can screw things up in defined ways when left to their own devices while people can screw things up in myriad undefined ways despite their best intentions, better to trust in imperfect markets rather than imperfect regulation.

Certainly, the perspective that “markets are the least worst option” will not persuade everyone. Yet for so long as economists and policymakers never lose sight of the fact that markets should serve human ends, there remains hope that we might one day strike the right political economic balance between giving markets the freedom to operate and enacting policies to regulate or enhance them. On that score, Appelbaum offers the following hopeful note by the end of The Economists’ Hour: “Markets are constructed by people, for purposes chosen by people—and they can be changed and rebuilt by people.”

The Economist's Hour: The Rise of a Discipline, the Failures of Globalization, and the Road to Nationalism by Binyamin Appelbaum is the study of post World War II economics centered on the United States.  Appelbaum is the lead writer on business and economics for the Editorial Board of The New York Times. He joined the board in March 2019. He was previously a Washington correspondent for the Times, covering the Federal Reserve and other aspects of economic policy.

For most of the history of the United States, economists had little to do with the practical aspects of economic policy.  Hidden away in basements and never in positions of power, in fact, in 1972 George Schultz became the first economist to serve as the Secretary of the Treasury.  The recovery of Europe and Japan (and Asia in general) from World War II ended the US reign as the global producer and with it an economic turndown.  Economic battles began to emerge as Keynesian policy began to show cracks and fail.  

Appelbaum examines several areas of the economy or economic issues in this book.  One of the first issues addressed in this book is the draft.  Today the all volunteer military is easily seen as superior to conscription.  Life in the military is hard enough with people who want to be there, let alone people put there against their will.  The question becomes, is it more cost effective? That became the struggle. 

The cost of human life is another issue for economists.  There are the insurance aspects of that cost but it also plays a role in regulation.  For example, if a safety feature on a car can save a certain amount of lives and costs a certain amount of dollars where does the cost in saved lives exceed the cost of the feature.   Adding $50 to a cost of a car to save 1000 lives a year is easily worth it.  Adding $1,000 to the cost of a car to save five lives a year would probably not be worth the cost.  

The Economist's Hour gives the reader an easy to understand study of contemporary economics and its history.  It is not a Friedman versus Marx book, but Friedman versus Keynes.  It is a practical application of (capitalist) economics and history. -- from interest rates to antitrust.  Appelbaum demonstrates to the reader the reach of economics in our everyday life and recent past.

A Readable Look at How Economists Shaped the World

When the economy was booming after WWII, economists were found primarily in academia, but as the economy slowed and solutions were sought, the economists came out of hiding. Starting with Milton Friedman, economists entered the political arena, and their ideas began to shape the economy not just of the United States, but of the world.

The author tells the story of how these economists came to the forefront of political thought with their belief that the economy given the impetus of free markets would bring prosperity and did not need so much government intervention. The author tells the stories of Walter Oi, whose calculations persuaded President Nixon to end conscription, and Thomas Shelling who made value assessments of human life to underpin his suggested policies.

This book is very readable. It focuses on the stories of individual economists, their ideas, and how the ideas impacted the lives of people. I enjoyed the book very much. It tells you a lot about policy and economics, but isn’t preachy or dry. The author uses his focus on individuals and episodes in their lives to bring this rather deep discipline to life. I highly recommend it.

I received this book from Net Galley for this review.

I was very kindly provided an advance review copy of this book, which will hit the bookstores next week. It can be ordered through Amazon right now, though, so no need to wait. This book is an entertaining romp through recent economic history, and how it has affected policy decisions. Before the 1960s, and this might be very hard to believe by today's standards, economics was not a topic politicians paid attention to. Economists were not respected advisors, much less the arbiters of policy that they've become. The Fed Chief was not a celebrity whose name was known to the entire country. Presidents weren't overly concerned with economic theory. Economics was seen as the soft science that it really is, instead of the hard science people believe it is today.

That changed in the sixties. A new breed of economist arrived on stage. Believers in free markets and less government intervention, they started advising presidents, first in the US, then globally. Their policy advice affected activities as far reaching as conscription. Nixon ended the draft on the recommendation of one such economist, and against the advice of almost everyone else involved in government.

Binyamin's book takes these economists to task, blaming them for the out of control growth of corporations to the detriment of society, the widening gap between the rich and the poor, the imbalances between countries, and many other presumed ills. I have to admit that I'm not a fan of any opponent of free markets. Could things be better? Certainly. But we haven't ever managed to build a system that performs better than capitalism and free markets. In fact, all the others that have been tried have been worse. Much worse.

However, this book is a fascinating history lesson focused on economics and economists. The author also doesn't lay it on too thick. This is not a communist manifesto or anything of the sort. The author lets you come to your own conclusions, even though he interjects a bit of bias throughout. Besides, it's very accurate and full of lessons on today's economic principles and theories.

And this is where the book shines. As a trader, the more I understand about what makes the economy tick, the more I understand the market. The market doesn't always react rationally, but it often does. And that's when understanding how the economy operates, for good or ill, can give you a solid and profitable edge when trading. This book is a low key but powerful primer on real Fundamental Analysis.

Thanks to Netgalley I got offered a pre-publication copy: it comes out on September 3rd so I at least managed to finish reading it in time. I was abit worried I wouldn't since the ebook reader still thinks I'm about halfway through. That is because the second half is all the footnotes. This book is indeed well researched even if it is not academic. The author is not himself an economist but a New York Times editorial writer - and this is his first book. There is no doubt he can write. The text flows along nicely - just as long as you leave the footnotes till later.

For me much of the content is very familiar because I lived through all of it. Perhaps not in the front lines but I was certainly impacted and I did follow economic policy very closely. For three years I was actually an Economic Adviser to the British Government, during the Thatcher era, which was the reason I left and came to Canada - where I was surprised to find that Thatcherism followed me here.

I started doing economics in grammar school and wanted to do it as a joint honours degree - but Nottingham would not agree. So I have a politics degree but spent at least a third of my time studying economics, and specialised in the economics of transport and public sector enterprises. I also went to the London School of Economics so my masters degree is an MSc Econ but in planning studies - which, of course, was a lot of economics too. So much so that that RTPI (the UK Planners Institute) doesn't recognise the qualification because it isn't all about design.

So it also needs to be understood that there is no Economists Institute - so lots of people can call themselves economists even though they have very little formal economic education but usually some very hard and fast political opinions.

I wasn't surprised by anything that I read in this book, although it did refresh my memory. And I was not at all as well informed about American economists - even though my Nottingham degree did include American Studies - and some of the names were unfamiliar to me. But the policies, of course, only too familiar.

The book can be summarised as setting out the case against unregulated free markets. What we know for a certainty is that the predictions made by people like Milton Friedman have turned out to be wrong. And that should come as no surprise since the Great Crash of 1929 - and all the ones since which got more carefully nuanced titles - was caused by the unregulated market.

The last crash was in 2008 - and since then policies have changed a bit, but not nearly enough, and no-one seems to have come up with a generally accepted formula for how markets ought to be regulated - and what should happen to those who break the rules. In the United States no-one of any significance served any kind of sentence - the only trials were of underlings and foot soldiers. The great fear was that of the banksters were punished effectively, the banks would close and a lot of people would lose their jobs, which is not what you want to happen in a depression. It makes matters worse.

What is missing in this book is the whole area that economics has done so poorly. "Externalities" are things that are very difficult to price, and even harder to police. So, far too often, they get ignored. The result is what we see today - a world which is heating up rapidly, due to human activities, driven by greed and willful ignorance, where not just human civilisation but all life on the planet is now at risk. The collapse of civilisations is nothing new, and we have studied them extensively but refused to heed of the lessons. And the current "winners" are all convinced of their own rightness.

So not only do we not have an economic prescription at the end of the book to show the way that we need to move, but the whole issue of "the environment" - which so many people still view as separate from and in some cases in opposition to - the economy is just ignored. Maybe there will be a second edition that tackles that, or perhaps another book that goes through the scientific consensus on anthropogenic climate change and comes up with some economic policy proposals that might help.

Not that the current generation of politicians are likely to pay the slightest bit of attention. As Applebaum notes after every market collapse the fascists emerge from the woodwork and look around for some minorities to blame. The current occupants of the White House, 10 Downing Street and even 24 Sussex Drive are all unlikely to change their policies. And there may be even worse to come. I wish I could say I feel optimistic about that, and nothing I read in this book manages to raise my spirits.

I think this is a necessary book for younger people than me - and will be valuable for those who have not been paying attention to economic policy until it hits them hard. The people who most need to read it, won't. And there's no point in trying to argue with people who prefer ignorance.

I really enjoyed this economic history presented by Binyamin Applebaum. So well-researched and informative. I really like I came away with a fantastic amount of knowledge about the history and current perspectives of economics.

This is a VERY long and thorough analysis of the U.S. economy since World War 2 and the economists that were responsible for government economic policy. Applebaum finally sums it all up saying that the U.S. is the definitive market society and "the defining feature of a market is the freedom to walk away. Our problem is too many markets, and too much walking away." He states that markets "can be changed and rebuilt by people." Finally he proposes that "the measure of a society is the quality of life at the bottom of the pyramid, not the top."
I would have rated this book much higher if he had spent less time on why we are here and more time on what to do about it. Maybe in his next book?

The Economists’ Hour by Binyamin Appelbaum – 5 Stars
Publisher: Little, Brown and Company
ISBN: 9780316512329

This was like an interesting page-reader novel. Just when, after decades of investing and studying the economy, my world turns around. My heroes are no longer quite the heroes as I imagined and my enemies gained some credibility. It is so easy to believe the so-called gurus on TV for every comment they make, particularly when other TV personalities start quoting the same errors. Along comes this book with footnotes and references galore that fairly presents the history of the economy and the players, recognized economists, presidents, and world money managers that affected the world and U.S. economy.

Keynes was one of the most accepted economists of old whose ideology was followed by the world – in general, the velocity of money governed the economy. But Milton Friedman presented strong enough theories himself that instead it was the volume of money or monetarism that was the key control of the economy. Just when these two certainly not entirely correct economists, others insisted that tax cuts were the key to influencing the economy. President Reagan had captained that premise way back in the 50’s and it didn’t catch hold by economists, even Friedman, until the boat sailed back and forth through the limitations of the other ideologies. Reagan wasn’t the first to lower taxes, though his Reagonmics is highly touted.

Who did what when and their successes and failures are covered in this fine book. In my opinion after reading this and in the process of rereading it, all contributed something, started something, and messed up something else. But, read this to learn what they did do and didn’t. It appears each had less success than failure, no one had demonstrated a theory and practice that worked entirely and as expected, and each struggled for decades with the government for some level of implementation. Which presidents stood in the way, which ones built administrations to erect hurdles? Where do Volker, Greenspan, Benanke, Yellen, Laffer and Schultz excel or fail? Who are all the players and manipulators of the economy? Was Reganomics implemented and as easily and successfully as we’re constantly reminded?

I like a summary statement by the author in its Conclusion: “If you have taken anything away from this book, I hope it is the knowledge markets are constructed by people, for purposes chosen by people – and they can be changed and rebuilt by people.” Believe me, you’ll gain a lot of history and how people influenced the economy that should be helpful to understand how to invest both short-term and long-term. The names in past now mean something to me and I now possess the knowledge of their actions and struggles. Kudos to Mr. Appelbaum for an excellent book.

Reviewer: Rich

I would never intentionally read a book written about economic theory, but I received this as a Netgalley e-review copy.

Reading this is an eye-opener, demonstrating how economists' theories can have a huge influence on government policy and how this can affect our daily lives in unexpected ways. This may not sound sexy but it sure is eye-opening.