Thursday, December 31, 2009

Some things that enhanced my life this year

Everyone makes list this time of year, right? Here are a few pieces of technology that changed how I operate:

1. Nokia e63 Smartphone. I bought it unlocked straight from Europe via Amazon.com after calling and talking to a nice sales rep for under $200. It's not an iPhone, but those are much more expensive. It literally never leaves my side. Whether reading my Bible online at church or reading blogs while I watch NewsHour, or using it to calm my son by playing Elmo's Song on YouTube...the Smartphone is a powerful ally.
I'm the dork who walks around with a phone that isn't a phone because I don't have a sim card in it because we only use one pre-paid cell phone. Most people can't understand that. I don't understand paying for a data plan from AT&T or Verizon because wi-fi is pretty much everywhere and free. Whether I'm sitting in class or at home I can always keep up with what's happening.

Favorite uses this year:
1. Being able to see my sister-in-law tweet pictures of my son while I was walking around downtown Istanbul.

2. Being able to keep the doppler radar in my hand while waiting on a tornado bearing down on Bolivar.

Wish list: A touch-screen phone with larger keypad option and more apps (in other words iPhone or Android). Nokia still has 38% of the world market, but that will diminish quickly.

2. As a result of Google's meddling with my former beloved NewsGator FeedDemon, I needed a way to quickly share articles with students via RSS. Enter Delicious.com. Install the Delicious plug-in for your browser and you can instantly bookmark websites through them, tag them for sorting, and then publish them on your own RSS feed. Every article you want to bookmark all in one place, with the ability to add comments. You can also see how many others bookmarked the same article and easily search what others are bookmarking by tag. I put over 100 articles out for my Money & Banking class in the course of the semester, mostly from just reading the newspapers and studying blogs throughout my day.

I love Delicious so much and found it so useful for teaching that I'm conducting a faculty seminar on it in January--teaching other faculty how to use it. That will be no small task, so prayers are in order.

3. Twitter.com and Tweetdeck. Yes, I had several "why I hate twitter" posts, and I did think it was stupid. As more people got on Twitter, the less stupid it became. It's now the best way to receive breaking news--that's my primary use for it. It's also a good way to communicate with people that you might not have access to otherwise... maybe they would never be your Facebook friend. I won a hat on Twitter. It allows people to communicate short bits that would be too cumbersome with a blog platform (and too difficult to read with standard RSS reader).

A few people whose thoughts I read on Twitter:
John Piper and Rick Warren. And daily quotes from C.S. Lewis.
UK WR/RB/QB Randall Cobb, John Calipari, and a few other athletes/coaches.
Several conservative politicians, including those who represent my district.
A whole slew of journalists, particularly ones on TV since that's my odd obsession. When they tweet on the scene or between takes you feel like you're right there with them.

I've only encountered 4 students at SBU who use Twitter, and only a few faculty. College students spend 99% of their time on Facebook.

My biggest problem right now is that it's tough to do Twitter with a Smartphone. Cumbersome to click someone's link to an article and not be able to note that article for later viewing on a real computer (Delicious doesn't work with Smartphones).

This post was way longer than I anticipated. Happy New Year!

Book Review (#20 of 2009)

New Ideas from Dead Economists: An Introduction to Modern Economic Thought by Todd G. Buchholz (1990 edition, not the revised 2007 edition).


I learned an amazing amount from this book which will translate immediately into me teaching an amazing amount in a Jan term course on economic and financial thought in a few weeks.

Buchholz's history of economic thought is very readable with his witty humor. It definitely helps to have at least had some principles classes to completely understand the thoughts he explains, but he uses some simple explanations that are easy to follow. The history is great.

I now understand the syntheses of the economic schools more completely. My favorite line in the book is that "it is no longer possible to separate (modern, mainstream) economists into Keynesian and Monetarist camps." Both sides have learned from the other.

Buchholz pretty obviously has Keynesian readings (at least it was obvious to me) as he knocks a little too hard on the Monetarists and the Rational Expectations schools. But he's mostly fair (if not too simplistic) in his arguments.

This edition doesn't cover Behaviorialists or Austrians (although he mentions Hayek a few times). I assume the 2007 edition would include them and fix the typos I found.

In all, I give it 4 stars out of 5.

I bought this book for $1 several years ago and should have read it several years ago. That's been a recurring theme this year. :-(

Results of this Year

I thought I'd note some significant changes and progress from this year, what I learned and how I changed. I would say my blog title lived up to be the theme of this year. My goal has been to make all of my activities ones that I perceive as adding value, particularly the value of knowledge (I esteem knowledge as extremely valuable). It has been about exposing my deficiencies and confronting them head-on.

Some examples:

1. Confronting my math deficiencies.
I have my current job because several others turned me down for lack of strong math background. There is a fairly low glass ceiling for people with business econ degrees without a demonstration of high math competency. You can't avoid it.

I have always struggled with math while developing a greater admiration for it in recent years. So, I enrolled in Calculus 2 in the fall and earned an A. This is the first time since junior year of high school that I haven't had to repeat a math course. It required a lot of late nights, early mornings, and long hours in the library working problems. A tough 5 hour class added to my on-campus workload. I plan on enrolling in Calc 3 in the spring and continuing onward as long as I get to take 1 class for free every semester (employee perk).

2. Confronting my physical deficiencies.
My wife and I made a conscious effort to confront them together. I've shed some pounds and am closer to my college weight than I have been since '02, but am in much better physical shape overall. And I'm still pushing forward.

3. Confronting intellectual deficiencies.
That's sort of the theme of my life-- learning is about the only thing I really enjoy doing and a day where I don't learn new things is a wasted day for me. As a college instructor, I'm always under pressure to know and understand things that I don't currently and I'm always humbled by how much I don't know. 2008-2009 were busy years in the economy, so it was difficult making sense of all the policies being implemented, the theories behind the policies, and figuring out where I stand on them. And then teaching deciphering it all for undergrads. My Money & Banking course was the best example of it, I pushed the students hard to learn (a lot on their own) and most did far beyond their own expectations and I was quite pleased and proud.

Some changes:
Being busy with 1, 2, and 3 and a fun family means other things had to be cut out. In evaluating what to cut out, I simply asked "What value does this add?" Sometimes it boiled down to "Will this activity help me get a job later, or not?" Sometimes it was "Am I going to be a committed contributor--adding value to this activity for others--or not? If not, then I'd be better off not engaging in the activity." Lately, it's been reduced to "Does this activity make me stronger, faster, or smarter?"

It meant cutting back on a lot of watching and developing emotional attachment to sports. I'm still struggling with the morality of most college sports programs and the lack of what I perceive to be value added by professional sports (and I find most Christian friends and pastors unwilling to engage in that conversation with me). NASCAR offends me the least and the winners are basically good scientists and engineers, so I like seeing smart people get rewarded. I consider college football to be my vice-- I have trouble justifying my love for it. I don't love basketball nearly as much as I used to.

My thoughts on church are constantly evolving under the value added framework. If God calls us Christians to "be perfect as He is perfect" then why don't we push our institutions and programs to also be perfect from a NT standpoint? Why don't our churches look like the NT and why do so many of our resources go to once-a-week "smorgasboard-style" flagship services? I find myself rejecting the models of most of the SBC's flagship churches and mission programs as either incorrect biblically or unsustainable economically. Again, shouldn't we strive for absolutely optimal churches and agencies? Shouldn't we strive for optimum efficiency?

This has also meant a re-evaluation of my own budget and habits. I feel we're pretty good at budgeting, and I enjoy teaching it to students every spring. My wife gets 99% of the credit for this. However, could there be improvements? For example, if helping widows and orphans is "pure and undefiled religion" as James says, then shouldn't I be doing more of that? Do I need to rearrange my schedule to intentionally engage in more of that? Apparently I do, or else my conscience wouldn't bother me about it.

That's a long enough summary of thoughts over the last year. I wonder how many years will go by before I look back and cringe at them.

Sunday, December 27, 2009

Commercial of the Year

Our ISP here (Windstream, with a local monopoly) subscribes to ESPN 360 which means we can watch pretty much any ESPN selection free online. Every single online commercial break features the same Dos Equis commercial with The Most Interesting Man in the World. Even after 100 times that same commercial is great. It's a mix of Ron Burgundy with those snazzy Old Spice commercials. I'd never seen any others until writing this post.

Here is a YouTube montage of all of the Dos Equis commercials with The Most Interesting Man in the World. The commercial I've seen 100 times is the last of the bunch. Enjoy!

Friday, December 25, 2009

Book Review (#19 of 2009)

Your investment manager or stock broker probably believes he can beat the market-- ie: do a better job investing your money than simply putting your money in an index fund. And he is wrong. Anyone who says "I can beat the market" is a liar. "Buy and hold" is a better strategy for the investor than actively trading. As Nobel laureate Eugene Fama recently pointed out (again) using data from 1984-2006:
Even before expenses, the overall portfolio of active mutual funds shows no evidence that active managers can enhance returns. After costs, fund investors in aggregate simply lose the fees and expenses imposed on them.

As more players enter the capital markets, the markets become more strongly efficient. This is why I have a problem teaching finance-- I see too many students graduate who think they are somehow smarter than the market. Granted, one aspect of Efficient Markets Hypothesis may not hold to be true -- the underlying price may not always be right (and see my review of Taleb's Fooled by Randomness or Mandelbrot's The (Mis)Behavior of Markets) and risk may be grossly misassessed due to false assumptions of normality.
But people who are able to see mispriced assets or missassessed risk either don't exist or are too far and between. Bill Miller became a legend for managing a fund that beat the S&P 500 for 15 consecutive years (the only one to do so). Now his fund is the worst performing of its class and he's lost tens of billions of dollars.
This is also why I don't want to be an investment manager or try to sell someone the idea that I could pick the best mutual funds for them, because the data say that active management is ludicrous. All I could do is match their risk tolerance to the stated risk of the fund, like selling them the color car they want to drive.



Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein is a classic history of modern finance. How academic economists and mathematicians revolutionized finance, and how the investment services industry fiercely resists their ideas. From determining the fair price of an option to designing the optimally diversified portfolio, Bernstein tells the story of how it all took place from Bachelier to Rubinstein.

Last summer, I read Bernstein's Against the Gods (my review here), which told the history of risk and is a good prelude to this book. What Taleb and Mandelbrot argue is that the tools used in Bernstein's book are folly for risk management because of the models' underlying assumptions--the world is not normally distributed. 1987 is an "aberration" Bernstein glosses over, and 2008 made Taleb and Mandelbrot rock stars (Taleb calls for every Nobel economics winner in Capital Ideas to be stripped of their awards).

As far as comprehensive history, this book is tough to beat. It has been required for our Jan term class for the last several years, which is why I needed to read it (although I'm not requiring it). After the dot-com crash of the 1990s, Bernstein wrote a sequel "defense" of his "heroes" which I would like to read.

4 stars out of 5.

Thursday, December 24, 2009

On this Christmas Eve

Dr. Rodney Reeves, Dean of the College of Theology and Ministry at SBU, has a great blog post entitled "The Dark Side of Christmas." It's Christmas from Joseph, Mary, and Jesus' perspective. Fantastic reminder, it really hits home. An excerpt:

"Listening to his family relive the circumstances of his birth, Jesus knew what he was born for. Redeemed by poor parents with a turtledove instead of a lamb, Jesus was destined to be good news for those who have nothing. He knew he was heaven’s gift of the poor to the poor. The lowly are exalted, the humble honored because the Messiah was born in David’s hometown to poor pilgrims from Nazareth."

Book Review (#18 of 2009)

In 2007, David Brooks interviewed candidate Obama and almost randomly asked him if he'd ever heard of Reinhold Niebuhr. Obama replied "I love him," and proceeded to give him a detailed summation of Niebuhrian thought. This was rehashed again in January when NPR's Speaking of Faith hosted a forum on the subject. You can download the discussion and other Niebuhr-related info.

I was apparently oblivious to all of this at the time. When Obama gave his Nobel acceptance speech, the media pundits all noted its Niebuhrian themes and that piqued my curiousity. The Irony of American History by Reinhold Niebuhr seems to be the book most often referred to when speaking on the philosopher/theologian.

To quote Obama via Brooks:

“I take away,” Obama answered in a rush of words, “the compelling idea that there’s serious evil in the world, and hardship and pain. And we should be humble and modest in our belief we can eliminate those things. But we shouldn’t use that as an excuse for cynicism and inaction. I take away ... the sense we have to make these efforts knowing they are hard, and not swinging from na├»ve idealism to bitter realism.”
This is a good summary. In short, Irony is about the ways America grew from post-colonial free-market isolationism to a reluctant superpower. Published in 1952 at the beginning of the Cold War, I find Niebuhr to be quite prescient. He is also very informed about microeconomic principles, which I found impressive. Either everyone was back then (as opposed to now), or Niebuhr is just special.

Here are points that stick out to me:

1. Americans tout their higher standard of living as a sign of their superiority over Communism, while Marxists tout that high standard as evidence of their guilt. Marxists/Communists assume that property rights are the cause of all economic ills and that if a nation has rich people they only became rich on the backs of the poor.

2. Americans have always been pragmatic about government. While personal liberty has always been the predominant goal of our society, we're pragmatic about the limits of it. Hence, we are always balancing growth with regulation.

3. Calvinists (Puritans) and Jeffersonians both (at least eventually) saw prosperity as evidence of God's favor. The prosperity of America makes it somewhat prideful in the eyes of the world, something useful to be mindful of.

4. America as the "Arsenal of Democracy" is one of the ultimate Niebuhrian ironies. We have to maintain a military force but beware of the dangers of the "military-industrial complex" as Eisenhower would soon note.

5. Newly independent, developing nations are poor simply because their economies aren't developed and their land not yet productive. These countries need Western support but mostly time. But Marxists point to these countries as evidence of Western exploitation. The gap between poor and rich is always seen as a result of the rich exploiting the poor.

6. Communist countries uphold justice for the poor as the ultimate ideal, and yet their oligarchy oppresses the poor and always make them always worse off--another irony.

7. We can't export democracy or eradicate all evil in the world through it. Many countries just don't have the culture or mindset for it to flourish.

8. From #7, Niebuhr would have opposed the 2003 Iraq war while probably supporting the Persian Gulf war of 1991.

9. Niebuhr feared that America would engage in a fatal "preemptive war" against Communism that would destroy the world rather than simply wait for history to take its toll on Communism. Glad he was not proved right here.

10. Niebuhr looks down on "American Exceptionalism," the idea that America has a unique, world-enlightening role to play in history. He points out that most countries & civilizations have a history of that same belief. Obama has also stated that he does not believe in American Exceptionalism any differently then the French believe in French Exceptionalism, etc.

David Brooks argues that Niebuhr (and Obama) are wrong on this point, as would most conservatives I know.

In all, I give the book 3.5 stars out of 5. Having read it, I feel a little more caught up with other "bourgeois" people.

Wednesday, December 23, 2009

Book Review (#17 of 2009)

Velvet Elvis: Repainting the Christian Faith by Rob Bell. (This book has nothing on its cover, so no picture posted).

I should note that here are two critical reviews of the book written by pastors that I have also read this week (PDFs):
http://www.sohmer.net/Velvet_Elvis.pdf
and
http://www.relationalconcepts.org/long%20topics/Velvet%20Elvis%20Review.pdf

I don't always see Bell saying what the critics accuse him of saying in this book. Which is important because most conservatives I know accuse him of being a "heretic," a "false teacher," "dangerous," and a "deceiver."

Bell is heavily influenced by Ray Vanderlaan, whose video series I once reviewed here. I have since found a more recent and very good critique of Vanderlaan that makes Bell's use of Vanderlaan very problematic.

But Bell has raised a question that I am working on answering in my own mind, something I've wrestled with in my mind for a few years:

Orthodox doctrine ("sola scriptura" or "scripture alone") says that the Bible is:
1. Perspicuous (or clear) such that anyone can read it and understand the one true meaning of the text; the meaning intended by the author upon writing.
2. Sufficient such that Scripture alone is all that is needed to understand scripture.

Also, 3. the mind of man is the same everywhere, so that anyone in any culture/context can read the text and find the same meaning.

Bell takes issue with this, saying "Scripture alone just isn't true." He contends that:
1. It's impossible to understand what the author meant in all passages without understanding the context they were written in and the context of the audience they were written to. Scripture alone isn't sufficient because it doesn't always give that context (for example, see my post about VanderLaan's look at John's letter to the 7 churches).

2. It is impossible for anyone to get the author's intended meaning, the one true interpretation, of the text because we all approach things from our own biases, culture, mores, etc. Moreover, our Bible has been translated into English such that some things get lost in translation.

The entire scholarship of post-modernism begins with linguistics. Certain European philosophers contended that the ideas behind language are different in different cultures, so things don't translate well--ie: we think differently. The doctrine that all men are of the same mind conflicts with this more modern view.

I go back and forth on whether or not I believe #3. I've intensely studied four different languages from four different language families. There are ideas in some cultures that are very difficult to convey in others.

I struggle with #1, and #2. For example, in 1 Corinthians 11 Paul commands the women not to pray without head coverings. The reason given from the pulpit of churches I've been a member of for this not applying today is that it had to do with the culture of Corinth. However, that cultural context is not given explicitly in Scripture and so that knowledge is an extra-biblical source used to apply the text today. How does that not violate the doctrine of "Scripture alone?"

Anyway, while I work on that with help from others (feel free to chime in!) I take issue with a couple other things in Bell's book, but not nearly as much as others.

Bell gives the caveat on the back cover:
"Test it. Probe it. Do that to this book. Don't swallow it uncritically. Think about it. Wrestle with it. Just because I'm a Christian...doesn't mean I've got it nailed."

I cannot really rate this book that I'm not sure about. It definitely made me think and go back to try and illuminate what was good and what was possibly heresy.

Sunday, December 20, 2009

On the marginal costs of health care reform

A few weeks ago a federal advisory panel created an uproar when it recommended women put off regular mammograms until age 50. The network news led with the story for a few days. Congressional representatives took to the floor to decry the "rationing of health care." One congresswoman (I don't recall who) stated something like "We will not ration health care on the basis scientific of research!" which I think is the dumbest statement ever spoken in Washington.

Richard Thaler, whose unrelated book I just bought, wrote on this touchy subject for the Economic View column of the NY Times yesterday. He's simply trying to explain to people about what happens when the costs outweigh the benefits.

What the advisory panel was saying was that the marginal cost of a mammogram for a woman under 50 outweighed the marginal benefit, partly due to the number of false positives. It costs a lot of money to screen people and the number of lives saved didn't make it worth it. Thaler does a great job of showing a math example, click the graphic on the left. In his example using the real fact that 10% of mammograms for women in their 40s produce false positive results, only 9 out of 1008 women who tested positive would have cancer. So, while 1008 would test positive and receive expensive treatments, you're only potentially helping 9 women (and creating other stress and problems for the rest). We could eliminate all 1008 of the mammograms and save millions of dollars. The 9 with cancer would likely detect it some other way or later. Maybe some would die, but is saving those few lives worth all the millions of dollars spent testing everyone? How about when it's taxpayer money? Thaler also looks at some different aspects, so read him first.

My sister-in-law posted in a comment a while back "How can anyone measure the value of a human life?" Insurance companies and the government do this every day. What's the optimal amount to spend on prevention? You spend until the marginal cost is equal to the marginal benefit. We cover this in the Insurance and Risk Management class I taught for the first time this semester. Observe the following exam question:

XYZ Railroad transports toxic chemicals long distances. If a derailment and spill occurs, the estimated damages to the environment and cleanup cost is $10 million. The chart below shows the possible safety expenditures for XYZ and the probability of a derailment and spill for each level of safety expenditure.


Calculate the optimal level of safety spending for XYZ railroad.

Note that the railroad company can NEVER eliminate the chance of a loss. Similarly, we could spend trillions and there would still be a few uninsured people out there. We can never eliminate the uninsured completely. Rational people think at the margin, so you have to think "How much does it cost to get that next uninsured person insured and what would be the dollar amound of benefit generated?" The CBO does that with every bill written.

Unfortunately, politicians aren't always rational. We also see this in church where a congregation has spent a lot of money on a program and will say "If just one person gets saved, it's all been worth it!" The problem is that ignores opportunity costs-- that money could have been used much more effectively some other way.

The correct answer to the problem above is $100,000. If the company spends nothing on prevention then its expected loss is $300,000 ($10 million x .03). By spending $100,000 on prevention (the marginal cost) the expected loss falls to $200,000--ie: the marginal benefit is $100,000. The optimal amount of spending is where marginal cost = marginal benefit.

What if the company spent an additional $50,000? Its expected loss would be reduced by only $40,000. The cost outweighs the benefit, so this is not a wise decision for a firm.

The problem is that if XYZ has a train wreck causing $10 million in damages people in Congress will subpoena the CEO and ask "Why didn't you spend more on safety??" If he answers that he was behaving rationally he'll be excoriated by Congress and the national media.

Saturday, December 19, 2009

Good intentions and health care reform

The Senate just reached their compromise, it's been scored by the CBO, and now it will move forward against an entrenched Republican opposition.

One provision of the bill rather frightens me:
Under the proposal from Senate Democratic leader Harry Reid, health insurance plans for large groups would have to spend at least 85 cents out of every dollar on medical costs. That means just 15 cents could go toward overhead and executive salaries, among other things. Small groups or individual plans would have to spend at least 80 cents on the dollar for care. That proportion of spending, known as a "medical loss ratio," has a major impact on how much profit companies can make and is closely eyed by Wall Street. Consumer groups and other critics have long argued that insurers aim to trim medical spending and raise customer costs to boost profits and please shareholders, a charge the industry has denied, saying premium increases mirror rising healthcare costs overall.

What frightens me about this (other than the obvious government price control)? Textbook analysis: An insurance company calculates a "fair premium" by calculating the probable loss on the policy. If it expects to pay out $1,000 in losses on your policy, then the least it can charge is $1,000 (this is the "fair premium").
Besides charging you extra (called "loading") to cover administration, marketing, and make a profit, insurance companies charge extra in order to have a larger capital cushion in the event of large losses. When assets > liabilities, a company becomes insolvent.
By limiting the amount of loading that insurance companies can charge, Congress is increasing the chances of them going bankrupt.

In most cases if your insurer goes bankrupt your state will pick up the tab in the event of a loss (with a limit). But that's putting even more taxpayer money at risk.

Sunday, December 13, 2009

David Brooks has been to Sunday school?

David Brooks' Friday column tells the Hannukah story, with perhaps a modern-day allusion in the last sentence (read it yourself). The only part I found odd was this one:

"Generations of Sunday school teachers have turned Hanukkah into the story of unified Jewish bravery against an anti-Semitic Hellenic empire. Settlers in the West Bank tell it as a story of how the Jewish hard-core defeated the corrupt, assimilated Jewish masses. Rabbis later added the lamp miracle to give God at least a bit part in the proceedings."
What Sunday school has David Brooks been to that the teacher even mentions Hannukah? Is that what goes on in mainstream denominations (Lutheran, Episcopalian, etc.)? Brooks' summary of the Hannukah story taught me more than I knew, and I'd bet $10 it's more than any Sunday school teacher I've ever had ever knew about Hannukah. Which is probably a shame.

Something I learned today

This time of year means Lottie Moon Christmas Offering for the IMB in all Southern Baptist churches. It's a push to raise funds that go solely to IMB work rather than through the general fund filtering process.

We watched a video in church from Jerry Rankin, congratulating FBC Bolivar for being the #4 largest giver to the Lottie Moon fund last year. I was stunned. The church averages less than 800 in attendance, yet they're the #4 giver in America? (This was going to look like a different blog post at that point).

The pastor later recounted the cool story: Edna Wright was a long-time church member and cook at the SBU cafeteria. She saved money in a retirement account, didn't touch any of it, and lived to be 99. By the time she died, her account had accumulated a hefty sum which she left in her will for the furthering of God's kingdom.

That meant a sum of over $500,000 from her estate to the IMB last year as part of the church's offering. Wow! Just thought I'd share it as a reminder that you can't take it with you but it can still do great things after you're gone.

Friday, December 04, 2009

Must-see TV

Made a pledge to our local PBS station tonight. Mostly because of my love for PBS NewHour (note their new format and website). Jim Lehrer closed with a stirring reading of what he calls the "Principles of MacNeil-Lehrer Journalism." He ended it with an emphatic "And I am not in the entertainment business!" That made all the difference, I literally almost ran to the computer to pledge money to my local station.

If you're not watching NewsHour then you don't know what the news really is (unless you have BBC on your satellite ...but even then it's not as fantastic).

We've also taken a liking to Curious George, maybe moreso than our 18 month old has (although he's interested). William H. Macey narrates it, it's executive produced by Ron Howard, it's great.

Tuesday, December 01, 2009

Book Review (#16 of 2009)

In Fed We Trust: Ben Bernanke's War on the Great Panic (How the Federal Reserve Became the Fourth Branch of Government) by David Wessel.

This is probably the first complete look at the Fed and Treasury's handling of the financial crisis. I've enjoyed getting greater detail on those events which I followed with much interest (and my students are writing a wiki about). I enjoy Wessel's columns and tweets.

Economists like Scott Sumner have been critical of the Fed's lack of aggressiveness in the crisis. While Bernanke thought "outside the box" it hasn't been enough for Dr. Sumner, who I respect a great deal. Wessel's book showed that many of the Fed presidents and FOMC members feared anything unorthodox. They would never relent to an inflation target, would never think of CREATING higher inflation as a way to combat the liquidity trap. I found that really sad, but I am glad to know what the political realities of Fed life are.

My criticism of Wessel's book is that he glosses over Lehman Brothers' collapse, focusing only on how its collapse affected other things. I suppose he left it to other books and the documentaries PBS Frontline did to tell the Lehman story, but glossing over that event and focusing on all the others seems a little bit of an odd choice.

Bernanke lashed out at Fed critics over the weekend. Rightly so, politicians are critical of him and others of doing too much when previously they were concerned that too little was done (ignoring that so much meddling by politicians helped fuel the housing boom in the first place). "You get no kudos for what might have been," Hank Paulson is quoted. Bernanke comes across as a good guy and national hero to Wessel, someone who did whatever it took when given few legal options.

I give the book 3.5 stars out of 5. It's good, but I look forward to more in-depth books on the crisis in the years (decades) to come.

Book Review (#15 of 2009)

The Victory of Reason: How Christianity Led to Freedom, Capitalism, and Western Success by Rodney Stark.
Stark sets out to challenge anthropologists like Jared Diamond who contend that Europeans rose to prominence mainly out of geographic factors in their favor. Stark's hypothesis is that Christian thinking-- forward looking thought towards progress and in favor of basic equality and property rights-- led to European development. That while the decline of the Roman Empire is something historians have lamented in centuries past, it was precisely the catalyst that freed up individuals to become entrepreneurs. Stark makes the point that Max Weber's protestant work ethic hypothesis is a myth--capitalism existed long before protestantism.

In short, Stark thinks like an economic historian and shows that it's the incentives that matter. I thought Ferguson's Ascent of Money (my review) did a good job of showing the development of basic finance and economic thought. But Stark goes further back then Ferguson did, and does a much better job. Ferguson's book was a bestseller and got a PBS special. Stark's book won't.

The problem I have with Stark's book is that the links he makes to Christianity being a catalyst for economic development come across rather weakly. Early church fathers frowned on lending and commercial activity. There was a long period where the Catholic church looked more favorably on these activities, and then after the Protestant Reformation the Catholic church reverted back to opposing those activities and preserving its sovereignty. So, the church has played it both ways.

But if you can link Christian thinking to equality-- no king has any more right to your property than you because God shows no favoritism-- then you have the basis for property rights, which is the basis for capitalism.

This book was recommended to me by my dean, and then someone referred me to Horizon Community Church in Cincinnati, where the pastor was preaching a sermon series supposedly inspired by the book. So, it was a must-read. I'm requiring it for the Winterfest course I'm teaching on the history of economic and financial thought.

In all, I give this book 3.5 stars out of 5. Namely because I'd bet that someone has some good arguments to oppose Stark. But the book is an easy read and is quite entertaining and informative. I am humbled by how much I learned from it.