FOOLPROOF

Societies and economies “are not inherently stable,” writes Wall Street Journal chief economics commentator Ip (The Little Book of Economics: How the Economy Works in the Real World, 2010) in this eye-opening book about risk-taking and crisis.

The author contends that our successful quest for safety and stability is constantly undermined by increased risk-taking and greater dangers, and he believes “we are going to have to re-examine” the premises as well as their results. Miami's growth as a population center, like the buildup of the Jersey shore, has increased the dangers associated with storms, but governments continue to justify their existence and claim to deliver both economic and political stability. Ip insists that as progress occurs, there is also “an equally irrepressible drive to make things bigger and more complicated.” In addition to discussing finance and economics, the author references natural disasters and efforts to make what we do safer—e.g., effects of anti-lock brakes and hard helmets for footballers. For him, there is a trade-off between the benefits and their unintended consequences, and the author discerns a pattern: the safer we feel at any time, the closer we may be to greater risk and danger (see how the widespread use of antibiotics has reduced their effectiveness). Ip argues for a nonideological approach employing prudence and carefulness, and he explains what he identifies as a dichotomy between “engineers” and “ecologists.” Engineers believe man will find solutions to any problem. Ecologists, like those who thought forest fires should be allowed to burn themselves out, think things should be left alone. Ip locates similar tensions within government, economics, and finance. He wisely advocates taking “the best of both” while exercising restraint “and not ask[ing] too much of them.”

A provocative challenge to the tendency to elevate ideology over thoughtfulness. The author amply shows how “stability is blissful, but it may also be illusory, hiding the buildup of hidden risks or nurturing behavior that will bring the stability to an end.”