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A Study of the World Economy Just Before the Great Crisis

by James K. Galbraith

Pub Date: March 30th, 2012
ISBN: 978-0-19-985565-0
Publisher: Oxford Univ.

A new approach to economic analysis based on the idea that “you can't actually study economic inequality without measuring it.”

Galbraith (Public Affairs, Government and Business Relations/Univ. of Texas; The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, 2008, etc.) directs both a team at the University of Texas Inequality Project and a group of international experts; their collaborative work resulted in this book. The author presents the results as a new approach to answering two critical questions: How has inequality in a given place changed over time? To what extent is inequality in one area greater than another? Finding appropriate solutions required new methods and new sources of evidence. His team members cross-checked both domestic and international data on earnings, employment and population, and they processed the data using a modern refinement of older econometrics methods, which allowed them to compare global, regional, national and subnational aggregations. Combining macroeconomics and econometrics, they were able to view economic data through a framework that included the effects of financial governance and financial instability. Applying this potentially groundbreaking new methodology, Galbraith discredits a number of shibboleths of the economics profession—e.g., the notion that unemployment in Europe is the result of labor rigidities and social expenditures. He compares economic disparities within Europe to the United States and shows that inequalities in Europe are actually greater. County-level data identifies increasing U.S. inequality as a function of financial markets, with income effects restricted to just 15 counties nationwide. In this rich study, the author brings both transparency and a fresh approach to a profession where a shake-up seems more than overdue.

Economics specialists will enjoy this book, but so too will general readers disenchanted with current economic orthodoxies.