Book Review by Roger Lott on "GOOD VALUE: REFLECTIONS ON MONEY, MORALITY AND AN UNCERTAIN WORLD"

While he doesn't appear to have liked the book very much, my son Roger's book review starts this way:

Stephen Green, an ordained priest in the Church of England and chairman of the British Bankers' Association, seeks in "Good Value" to use a history-based understanding of globalization to come to terms with the recent financial meltdown. The author ultimately describes the need for a "new world order" in which businesses "must consider value from the perspective not just of investors, but of customers, employees, suppliers, communities and - increasingly - the environment too."

Mr. Green describes a need for a new sort of "capitalism" more compatible with the realities of an economic system in which "all sorts of institutions, large and not so large, can be too interconnected to be allowed simply to fail." He cites Lawrence Summers, chief economic adviser to President Obama, as a "strong defender of free markets" who admits that the belief that the market is inherently self-stabilizing has been "dealt a fatal blow." Mr. Green doesn't understand that the belief that institutions are "too-big-to-fail" is fundamentally incompatible with capitalism, which weeds out weak businesses in a manner akin to natural selection.

Mr. Green seems to think of the modern global economy as consisting of chains whose weakest links must be preserved to prevent the whole thing from coming apart. What he forgets is that bailing out these weak links encourages the creation of more such risky "chains" of questionable strength. The worse it gets, the more bailing out the government would have to do, leading to a vicious cycle until people stop blaming the banks for failing and start blaming the government that's encouraging them to fail despite noble intentions to the contrary. The free market does have a self-regulating mechanism. It's just that the government isn't letting it work. . . .