In the Long Run we are all Dead: A Macroeconomics murder mystery
The US economy faces a deep recession, raging inflation and an impending run on the dollar. President Wedik likes economics as much as a fish likes land. Should he listen to the Keynesians, who favour government intervention or the Monetarists, who favour market fundamentalism?
Unable to decide, he delegates the tough decision to his Chief of Staff, Admiral Harcourt Green. Green laboriously goes through the process of coming up with an economic policy package...only to be mysteriously murdered on D-day. Details of the economic package dies with him...
Something has to be done soon to avoid an economic collapse. What? How?
Who committed the murder? And why?
The murder story could probably have been constructed better but the crux of the book is economics! Recommend it to those looking for a light read on macroeconomics without running the risk of drowning in jargon.
In this delightfully light read, Wolfson & Buranelli, weave macroeconomics lessons around a murder mystery. One is led through the age-old tussle between Keynesians and Monetarists, but the writers manage to engage the reader's interest amid the backdrop of the mysterious murder. The authors beautifully present the contradictions and trade-offs that perennially confront economic policy makers. The key take-aways are that policy-makers often are in no better position than market participants to predict the future path of an economy, and there is a large reflexive element at work in economies that, sadly, economists choose to ignore. Should policy makers listen to short-run focused Keynesians or long-run focused Monetarists? How does one strike a balance between the short and the long-run? Indeed, what is the short-run and long-run? Life is full of trade-offs. What's good for the short-run may not be for the long-run and vice versa.
Economic policy decision making is akin to steering a ship. Ever so often one gets caught in a storm and the ship wobbles as it hits wave troughs and crests. If the skipper steers forcefully in the opposite direction as the ship wobbles to one side, he runs the risk of over-steering if the wobble is temporary. On the other hand, if he does nothing and the wobble lasts longer, he runs the risk of imperiling the ship with his inaction.
Economic policy setting is a scientific art and achieving equilibrium is an Utopian dream. A dynamically evolving system calls for flexible policies that frequently set off unintended effects. Indeed, certain policy actions have damaging and long-lasting effects on the economy. The period of adjustment that the economy has to subsequently go through to undo the damage is painful (think Japan). Finally, fortune and randomness play a bigger role than anyone is willing to allow or admit.