----------------- HES POSTING ----------------- Published by EH.NET (April 2003) Brian Snowdon, _Conversations on Growth, Stability, and Trade: An Historical Perspective_. Cheltenham, UK: Edward Elgar, 2002. xvi + 483 pp. $120 (hardcover), ISBN: 1-84064-995-X. Reviewed for EH.NET by Christopher Hanes, Department of Economics, State University of New York at Binghamton (beginning fall 2003). The first part of this book is a survey of theories of long-run economic growth, business cycles, monetary policy and international trade and capital flows, based on the author's lectures at the Newcastle Business School, Northumbria University (England). The second part is transcripts of the author's interviews with Ben Bernanke, Jagdish Bhagwati, Alan Blinder, Nick Crafts, J. Bradford DeLong, Barry Eichengreen, Kevin Hoover, Charles Jones, Christina Romer and Joseph Stiglitz. Together, the survey and interviews give a clear view of current work in macroeconomics and its intellectual background, guided by a knowledgeable man who appears to have remarkably few axes to grind. Oddly missing is any discussion, beyond a bare mention, of "New Keynesian" theory -- that is, attempts to understand the microfoundations of wage and price rigidity and unemployment, and test implications of the new theories. But there is a lot on growth theory and monetary policy, two fields that have changed a lot in recent years. A particular virtue of the book is its emphasis on the interplay between economic thought, public policy, and economic outcomes. The book's title isn't accurate, as the book actually _doesn't_ give a historical perspective apart from its thorough discussion of the Great Depression and some of the interviews. History comes up hardly at all in the interviews with Bhagwati, Blinder, Hoover, and Stiglitz, for the excellent reason that those men have little to say about it (though they have a lot to say about other things). Mostly, the book guides the reader expertly through macroeconomics right up to the borders of economic history, and stops there. With respect to economic growth, for example, the textbook section explains the Harrod-Domar model, the Solow model, AK models, etc., and the role of free trade and capital flows, leading right into fascinating interviews with Jones and Stiglitz. The reader gets the idea that the important variable is institutions. Jones observes that "it's not at all clear why some countries are able to adopt institutions which encourage people to work hard to produce goods and services rather than to steal from their neighbours, either directly through theft or indirectly through rent seeking and corruption. The important question is how do you change those institutions?" (p. 355). "When we start to ask important questions like why are some countries better at setting up good institutions, certainly it seems that one needs to have a good understanding of the system of incentives that is in place at the start. Maybe it's important to understand where that system came from, in order to understand where it's likely to go" (p. 366). From this point, the author could lead us into the economic history literature and describe a few concrete examples of important or illustrative institutional developments in this or that time and place. But he doesn't. My other complaint about the book is that it appears to have come into print untouched by the hands of editors. There are frequent misspellings and grammatical errors of the kind that result from a careful author revising a manuscript himself, with no one else to read over the drafts. It was an editor's job, left undone, to restrain the author's use of quotes to make statements that do not require specific cites, like this: "As Easterly writes, 'When machines are scarce, the additional output from one more machine will be high. When machines are abundant, additional output from one more machine will be low'" (p. 74). Some sections of the book give the impression that the author made, and just barely lost, a bet that he could write whole paragraphs without using his own words. The staff at Elgar ought to be ashamed of themselves. None of this detracts from the usefulness of the book or Snowdon's achievement in producing it. The first part of the book is meant to set up the issues that will be discussed in the interviews, but it also constitutes an extraordinarily good textbook, explaining important ideas and pointing out connections between them. The interviews reveal the intelligence and humor of their subjects, and hold a few surprises. One might recall a recent flap when Stiglitz seemed to say that some fellow economists in public service were intellectually dishonest shills for Wall Street -- well, he says it again here (p. 396)! Romer's comments on current monetary policy issues go against conventional wisdom in important respects, but are strongly based on practical experience -- the vicarious experience one gains from studying history. This interview, and the ones with Bernanke, Crafts, DeLong and Eichengreen show how much historical knowledge can add to the work of a great economist. While the book won't tell a macroeconomist what he needs to know about economic history, it will tell an economic historian much of what he needs to know about current literature in macroeconomics. I recommend it to graduate students training in either area. It should be in every library. A hundred years from now, it will be an important guide to what leading economists thought they knew, and what they knew they didn't know, as of A.D. 2002. Christopher Hanes is the author of "Nominal Wage Rigidity and Industry Characteristics in the Downturns of 1893, 1929, and 1981," _American Economic Review_, December 2000, and (with John James) "Wage Adjustment under Low Inflation: Evidence from U.S. History," _American Economic Review_, forthcoming. Copyright (c) 2003 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ([log in to unmask]; Telephone: 513-529-2850; Fax: 513-529-3308). Published by EH.Net (April 2003). All EH.Net reviews are archived at http://www.eh.net/BookReview ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]