How to Understand the Disaster

Susan Walsh/AP Images
Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke at a congressional hearing on oversight of the federal government’s intervention at AIG, Washington, D.C., March 24, 2009
No one can possibly know how long the current recession will last or how deep it will go. That is because the dangerous combination of the “real” recession—the unemployment and idle productive capacity that come from lack of demand—and the financial breakdown, each being both cause and effect of the other, makes the situation more complex, more unstable, more vulnerable to psychological imponderables, and more distant from previous experience. Whenever the US economy returns to some sort of normality, or preferably before then, it will be necessary to improve and extend the oversight and regulation of the financial system. The main goal should be to make another such episode much less likely, and to limit the damage if one occurs.

To make progress in that direction requires some understanding of the origins of the current mess. I once saw a hospital discharge diagnosis that read “sepsis of unknown etiology”; that sort of thing will not help in this case. The need is not only for a clear picture of what happened but for an assessment of the motives and actions of the main players, the causes and consequences of what they did, and the ideas and institutions that encouraged, inhibited, and shaped the outcomes. Richard Posner’s book is intended to fill that need, in clear and understandable language. I think it is at best a partial success; it gets some things right and some things wrong, and the items on both sides of the ledger are important.

More striking than what the book says is who says it. Posner is a judge of the US Court of Appeals for the Seventh Circuit, and so preeminently a lawyer. In addition, he is an apparently inexhaustible writer on…nearly everything. To call him a polymath would be a gross understatement. A partial list of his publications in the past ten years alone includes How Judges Think; Law, Pragmatism and Democracy; Frontiers of Legal Theory; the seventh edition of his Economic Analysis of Law (first published in 1973); the third edition of Law and Literature; three volumes of essays on The Economic Structure of Law; and books on plagiarism, constitutional aspects of national emergencies, the election of 2000, the US domestic intelligence system, countering terrorism, public responses to the risk of catastrophe, the Clinton impeachment, dealing with the AIDS epidemic, and, significantly, Public Intellectuals: A Study of Decline. There is a prehistory of still more books, and many articles in legal and other periodicals.

Judge Posner evidently writes the way other men breathe. I have to say that the prose in this book often reads as if it were written, or maybe dictated, in a great hurry. There is some unnecessary repetition,…

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