Catalogue

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Political bubbles : financial crises and the failure of American democracy /
Nolan McCarty, Princeton University, Keith T. Poole, University of Georgia, Howard Rosenthal, New York University.
imprint
Princeton : Princeton University Press, [2013], c2013
description
x, 356 p.
ISBN
0691145016 (cloth : alk. paper), 9780691145013 (cloth : alk. paper)
format(s)
Book
Holdings
More Details
imprint
Princeton : Princeton University Press, [2013], c2013
isbn
0691145016 (cloth : alk. paper)
9780691145013 (cloth : alk. paper)
contents note
Bubble expectations -- Ideology -- The interests -- Institutions -- The political bubble of the crisis of 2008 -- Historical lessons of the responses to pops -- The pop of 2008 -- "Pop"ulism -- How to waste a crisis.
catalogue key
8941290
 
Includes bibliographical references (p. 305-326) and indexes.
A Look Inside
Excerpts
Flap Copy
"If you thought that the financial crisis was just about finance and the alphabet soup of financial products, think again. With style and eloquence, McCarty, Poole, and Rosenthal show it's all about politics--the Faustian bargains that our politicians have made, their ideological biases, and more. This is essential reading for understanding how we got into the current mess and how we are likely to get into many more unless we rethink our politics."--Daron Acemoglu, Massachusetts Institute of Technology and coauthor of Why Nations Fail "McCarty, Poole, and Rosenthal are the most incisive analysts of America's political economy. In Political Bubbles , their penetrating gaze offers the clearest definitive political economic explanation for the recent financial crisis."--James Robinson, coauthor of Why Nations Fail "This wise book offers an incisive evaluation of the politics of economic crisis. Persuasively insisting on the need for a new public philosophy, its elegant account at the juncture of political economy and policy analysis artfully connects conceptual argumentation about ideology, interests, and institutions to inventive and illuminating analyses of data."--Ira Katznelson, Columbia University "This extremely interesting book subtly argues that political bubbles are an important dimension of financial bubbles. Financial bubbles are caused by exuberant expectations and greed, but political bubbles are about how institutions channel ideology and interest into outcomes. The authors make clear how polarization produces gridlock and leads reformers to prefer regulation over legislation--with attendant problems."--James Alt, Harvard University "This innovative and compelling book demonstrates how financial bubbles and political bubbles go hand in hand, producing periodic meltdowns that deeply affect the lives of ordinary citizens. Synthesizing political science with economics and finance, the book explains not only how the most recent financial crisis relates to previous episodes in American history, but also why responses to the crisis have fallen short of what many had hoped for in terms of fundamental reforms."--Gregory Wawro, Columbia University
Flap Copy
"If you thought that the financial crisis was just about finance and the alphabet soup of financial products, think again. With style and eloquence, McCarty, Poole, and Rosenthal show it's all about politics--the Faustian bargains that our politicians have made, their ideological biases, and more. This is essential reading for understanding how we got into the current mess and how we are likely to get into many more unless we rethink our politics."-- Daron Acemoglu, Massachusetts Institute of Technology and coauthor of Why Nations Fail "McCarty, Poole, and Rosenthal are the most incisive analysts of America's political economy. In Political Bubbles , their penetrating gaze offers the clearest definitive political economic explanation for the recent financial crisis."-- James Robinson, Harvard University and coauthor of Why Nations Fail "This wise book offers an incisive evaluation of the politics of economic crisis. Persuasively insisting on the need for a new public philosophy, its elegant account at the juncture of political economy and policy analysis artfully connects conceptual argumentation about ideology, interests, and institutions to inventive and illuminating analyses of data."-- Ira Katznelson, Columbia University "This extremely interesting book subtly argues that political bubbles are an important dimension of financial bubbles. Financial bubbles are caused by exuberant expectations and greed, but political bubbles are about how institutions channel ideology and interest into outcomes. The authors make clear how polarization produces gridlock and leads reformers to prefer regulation over legislation--with attendant problems."-- James Alt, Harvard University "This innovative and compelling book demonstrates how financial bubbles and political bubbles go hand in hand, producing periodic meltdowns that deeply affect the lives of ordinary citizens. Synthesizing political science with economics and finance, the book explains not only how the most recent financial crisis relates to previous episodes in American history, but also why responses to the crisis have fallen short of what many had hoped for in terms of fundamental reforms."-- Gregory Wawro, Columbia University
Flap Copy
"This extremely interesting book subtly argues that political bubbles are an important dimension of financial bubbles. Financial bubbles are caused by exuberant expectations and greed, but political bubbles are about how institutions channel ideology and interest into outcomes. The authors make clear how polarization produces gridlock and leads reformers to prefer regulation over legislation--with attendant problems."--James Alt, Harvard University "This innovative and compelling book demonstrates how financial bubbles and political bubbles go hand in hand, producing periodic meltdowns that deeply affect the lives of ordinary citizens. Synthesizing political science with economics and finance, the book explains not only how the most recent financial crisis relates to previous episodes in American history, but also why responses to the crisis have fallen short of what many had hoped for in terms of fundamental reforms."--Gregory Wawro, Columbia University
Flap Copy
"This wise book offers an incisive evaluation of the politics of economic crisis. Persuasively insisting on the need for a new public philosophy, its elegant account at the juncture of political economy and policy analysis artfully connects conceptual argumentation about ideology, interests, and institutions to inventive and illuminating analyses of data."--Ira Katznelson, Columbia University "This extremely interesting book subtly argues that political bubbles are an important dimension of financial bubbles. Financial bubbles are caused by exuberant expectations and greed, but political bubbles are about how institutions channel ideology and interest into outcomes. The authors make clear how polarization produces gridlock and leads reformers to prefer regulation over legislation--with attendant problems."--James Alt, Harvard University "This innovative and compelling book demonstrates how financial bubbles and political bubbles go hand in hand, producing periodic meltdowns that deeply affect the lives of ordinary citizens. Synthesizing political science with economics and finance, the book explains not only how the most recent financial crisis relates to previous episodes in American history, but also why responses to the crisis have fallen short of what many had hoped for in terms of fundamental reforms."--Gregory Wawro, Columbia University
Full Text Reviews
Appeared in Publishers Weekly on 2013-02-11:
As pundits debate the causes of the 2008 economic crisis, the authors contend that financial crises have inherently political dimensions. McCarty, Poole, and Rosenthal (political scientists at Princeton University, the University of Georgia, and New York University, respectively) argue persuasively that political bubbles ("policy biases that foster market behaviors leading to financial instability") and market bubbles are highly similar, with policy biases contributing to and amplifying market behavior. Even if Americans prefer a divided government, the cost of diffused power includes policy delays and resistance to amending "ineffectual and outdated" programs. The authors provide an exhaustive review of structural problems that they believe impede effective government response to new catastrophic economic developments. Their arguments transcend the academic to include historical precedents and specifics on Wall Street machinations. While Wall Street is the main culprit in the crisis, no player is exempt. The authors criticize conservatives and liberals for drawing self-serving lessons from the crisis, and the administration for failing to pursue systemic reforms. Meanwhile, the "too big to fail" firms have become even bigger. The authors call for a "strong set of simple rules." While this is a justified addition to literature about the recent crash, readers may balk at the assertion that, amid the crisis, American democracy failed the citizenry. (Jun.) (c) Copyright PWxyz, LLC. All rights reserved.
Reviews
Review Quotes
As pundits debate the causes of the 2008 economic crisis, the authors contend that financial crises have inherently political dimensions. McCarty, Poole, and Rosenthal argue persuasively that political bubbles and market bubbles are highly similar, with policy biases contributing to and amplifying market behavior. . . . The authors provide an exhaustive review of structural problems that they believe impede effective government response to new catastrophic economic developments. Their arguments transcend the academic to include historical precedents and specifics on Wall Street machinations.
This item was reviewed in:
Publishers Weekly, February 2013
To find out how to look for other reviews, please see our guides to finding book reviews in the Sciences or Social Sciences and Humanities.
Summaries
Main Description
Behind every financial crisis lurks a "political bubble"--policy biases that foster market behaviors leading to financial instability. Rather than tilting against risky behavior, political bubbles--arising from a potent combination of beliefs, institutions, and interests--aid, abet, and amplify risk. Demonstrating how political bubbles helped create the real estate-generated financial bubble and the 2008 financial crisis, this book argues that similar government oversights in the aftermath of the crisis undermined Washington's response to the "popped" financial bubble, and shows how such patterns have occurred repeatedly throughout US history. The authors show that just as financial bubbles are an unfortunate mix of mistaken beliefs, market imperfections, and greed, political bubbles are the product of rigid ideologies, unresponsive and ineffective government institutions, and special interests. Financial market innovations--including adjustable-rate mortgages, mortgage-backed securities, and credit default swaps--become subject to legislated leniency and regulatory failure, increasing hazardous practices. The authors shed important light on the politics that blinds regulators to the economic weaknesses that create the conditions for economic bubbles and recommend simple, focused rules that should help avoid such crises in the future. The first full accounting of how politics produces financial ruptures, Political Bubbles offers timely lessons that all sectors would do well to heed.
Table of Contents
Acknowledgmentsp. vii
Introductionp. 1
The Political Bubble Why Washington Allows Financial Crises to Occur
Bubble Expectationsp. 31
Ideologyp. 38
Interestsp. 71
Institutionsp. 90
The Political Bubble of the Crisis of 2008p. 117
Pops Why Washington Delays in Solving Financial Crises
Historical Lessons of the Responses to Popsp. 153
The Pop of 2008p. 184
"Pop" ulismp. 228
How to Waste a Crisisp. 251
Epiloguep. 275
Notesp. 283
Bibliographyp. 305
Name Indexp. 327
Subject Indexp. 333
Table of Contents provided by Ingram. All Rights Reserved.

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