Review of Martin Wolf’s Shifts & the Shocks

Martin Wolf is one of the great economics journalists of our time. His articles are always insightful, relentlessly logical, and well-written. Martin is the first to admit that he could have been an academic. In his journalism this lends his writing an unusual rigor, in his books he tends to be exhaustive. The relentless logic of his one-page FT articles gets somewhat lost here in tables and citations. After reading many important sections, such as that on the Eurocrisis, I struggled to ascertain what he really believes. The result, in contrast to his journalism, is a feeling that one is reading an extremely thorough and intelligent version of conventional opinion. There is little, other than breadth of coverage, that feels novel. By now we are all familiar with received opinion on the causes of the great recession (and it’s not completely convincing). Ditto the Eurocrisis. As for the future: narrow banking? This resembles rear-view mirror policy-making: the next economic challenge almost certainly doesn’t reside in banks.

Although he religiously ticks all the boxes of academic credibility, with endless citation, his open-mindedness is admirable. Few if any academics can bring themselves to give a fair hearing to MMT, von Mises and Lerner. Ironically, it is his treatment of the likes of Bob Lucas and Eugene Fama that borders on the flippant – wrong they may be, but they have legitimate insights.

The most redeeming feature of this book is that Wolf gives a decent airing to the merits of coordinated monetary and fiscal policy. Lord Turner’s advocacy of helicopter drops has put the idea firmly into the mainstream. Martin’s endorsement lends additional credibility, although ironically this section is analytically the weakest.

The Shifts and the Shocks is very thorough, and intelligent. One can pick holes in many of the arguments – Wolf erroneously calls the monetary base “a liability of government”, he ignores the likelihood that technology is re-making banking as we know it, and he underestimates Bernanke (the FOMC transcripts now reveal he was profoundly prescient). But this book would enhance the reading list of any university economics course. If you want direct, scintillating and original analysis, read Martin Wolf in the FT. If a detailed blow-by-blow intellectual account of the crisis and its aftermath is what you seek, this is it.