Review of Flying on One Engine: The Bloomberg Book of Master Market Economists (Hardcover)

A brief excerpt from the Afterword offers an appropriate introduction to my review. According to Peter L. Bernstein, "At its roots, economics is about how and why our society has changed and developed over time. Even deeper, economics is about risk and return. These are the themes that infuse the contributions to this book. Although the keen insights, original diagnoses, and the rare lucidity of the contributors to this volume inform us about the serious problems we face in today's world, that is by no means all they have to tell us. They have shaped their presentations around the primary elements of economic analysis: supply, demand, expectations, the critical role of real investment, foreign trade and finance, monetary theory and policy, and the interplay between the private and the public sectors. The result is economics at its best -- rich in description, searching in analysis, provocative in argument, profound in generalization, and always focused on the key issues. I am much the wiser for having read it."

This is high praise indeed, given the fact that Bernstein is founder and president of a firm which, since 1973, has served as an economic consultant to institutional investors and corporations around the world. He is also the author of a book Iadmire very much, Against the Gods: The Remarkable Story of Risk, which has sold more than 500,000 copiers since it was published by John Wiley & Sons in 1996.

Brilliantly edited by Thomas R. Keene who also wrote the Introduction, what we have here in this volume are indeed "fourteen views on the world economy" but each provides more, far more than a hit-and-run briefing on its given subject. The authors (or in two instances, the co-authors) of the essays also establish a frame-of-reference within which to present their ideas and do so with meticulous care. Make no mistake about it, however: This book is not an easy read. All of the essays offer important insights and are well-written but some are more challenging than others. For example, David Goldman's "Capital Markets and the Economy." Keene wisely recommends that readers review the subjects and then his short introductions to select those articles of greatest interest, perhaps read in combination.

With regard to the title, Keene credits Kenneth S. Rogoff who does not use the phrase in his Introduction to this book. About two years ago in an issue of The Economist (September 18, 2003), there is an article called "Flying on One Engine" in which the phrase is attributed to Lawrence Summers, Treasury secretary under Bill Clinton, who once observed that "The world economy is flying on one engine." The article concludes, "For the past few years, politicians have done little more than hope that the American engine carries on working. But this is no longer good enough. Policy makers need to act to make a crash less likely and avert protectionist threats. A good first step would be to acknowledge the size of the problem." In an essay in this volume, "The Global Labor Arbitrage," Stephen S. Roach assesses the productivity and the information-technology-enabled efficiency of a (not the) future world economy, "impatient with our inability to confront, consider, and to finally come to terms with what lies ahead."

With regard to some of the other essays, John P. Lipsky and James E. Glassman address "the topic of the day, unemployment." Tim O'Neill "destroys" pop-globalization myths and rebuilds a foundation of interdependent trade realitiesof nations and people who are "grounded in a world's timeless need to trade and, perhaps, trade freely." Richard B. Berner "sheds light on American business and its inextricable linkage to the larger economics of the United States and the world." I agree with Keene that David P. Goldman's discussion of "Capital Markets and the Economy" is the most challenging article among the fourteen. It is also among the most rewarding, especially after a second or third reading. In "Europe's Political and Economic Future," Thomas Mayer addresses a limited set of combined fiscal and monetary now made available to an aging Europe. "No rose-colored glasses for this former International Monetary Fund economist."

In the Introduction, Rogoff suggests that "This book may be the first of its kind. Let's hope it is not the last." I agree while commending Keene on having achieved his goals: to allow the contributors to expand in areas of their special expertise, to create a book which "forms a reliable bridge from the dryness of textbook theory to the real-world excitement of applied capital-at-risk economics," and to provide in this single volume "the best in thought-provoking writing on market economics [which will] lead to answers and also to deeper questioning and further study."

Bravo!




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