Extreme Economies – Survival, Failure, Future – Lessons from the World’s Limits
By: Richard Davies – LSE
In search of a fresh perspective on the modern economy, Extreme Economies takes the reader off the beaten path, introducing people living at the world’s margins. From disaster zones and displaced societies to failed states and hidden rainforest communities, the lives of people who inhabit these little-known places tend to be ignored by economists and policy makers. Leading economist Richard Davies argues that this is a mistake, and explains why the world’s overlooked extremes offer a glimpse of the forces that underlie human resilience, help markets to function and cause them to fail, and will come to shape our collective future.
Extreme Economies is a revelation – and a must-read.
Andy Haldane, Chief Economist at the Bank of England
Capitalism, Alone – The Future of the System That Rules the World
By: Branko Milanovic – City University of New York
Milanovic argues that capitalism has triumphed because it works. It delivers prosperity and gratifies human desires for autonomy. But it comes with a moral price, pushing us to treat material success as the ultimate goal. And it offers no guarantee of stability. In the West, liberal capitalism creaks under the strains of inequality and capitalist excess. That model now fights for hearts and minds with political capitalism, exemplified by China, which many claim is more efficient, but which is more vulnerable to corruption and, when growth is slow, social unrest. As for the economic problems of the Global South, Milanovic offers a creative, if controversial, plan for large-scale migration. Looking to the future, he dismisses prophets who proclaim some single outcome to be inevitable, whether worldwide prosperity or robot-driven mass unemployment. Capitalism is a risky system. But it is a human system. Our choices, and how clearly we see them, will determine how it serves us.
The Long Journey of Central Bank Communication
By: Otmar Issing – Goethe University in Frankfurt
In this book, Otmar Issing, himself a former central banker, discusses the journey toward transparency in central bank communication. Issing traces the development of transparency, examining the Bank of England as an example of extreme reticence and European Central Bank’s President Mario Draghi as a practitioner of effective communication. He argues that the ultimate goal of central bank communication is to make monetary policy more effective, and describes the practice and theory of communication as an evolutionary process. For a long time, the Federal Reserve never made its monetary policy decisions public; the European Central Bank, on the other hand, had to adopt a modern communication strategy from the outset.
The Black–Scholes–Merton Model as an Idealization of Discrete-Time Economies
By: David M. Kreps – Stanford University
This book examines whether continuous-time models in frictionless financial economies can be well approximated by discrete-time models. It specifically looks to answer the question: in what sense and to what extent does the famous Black-Scholes-Merton (BSM) continuous-time model of financial markets idealize more realistic discrete-time models of those markets? While it is well known that the BSM model is an idealization of discrete-time economies where the stock price process is driven by a binomial random walk, it is less known that the BSM model idealizes discrete-time economies whose stock price process is driven by more general random walks. Starting with the basic foundations of discrete-time and continuous-time models, David M. Kreps takes the reader through to this important insight with the goal of lowering the entry barrier for many mainstream financial economists, thus bringing less-technical readers to a better understanding of the connections between BSM and nearby discrete-economies.
In this monograph, David M. Kreps studies the question of how well, on economic grounds, classic models of Black, Scholes, and Merton idealize more comprehensible but less tractable discrete-time models. The book is a gold mine of mathematical tools for studying these issues.
Thomas J. Sargent, New York University
