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Realeconomik: The Hidden Cause of the Great Recession (And How to Avert the Next One)
Realeconomik: The Hidden Cause of the Great Recession (And How to Avert the Next One)
By Mr. Grigory Yavlinsky
Yale University Press, 2011, 192 pp
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Yavlinsky, a reform-minded economist and sometime Russian presidential candidate, offers his take on what caused the financial crisis of 2008, the ensuing Great Recession, and the current weak recovery. He points to a lack of moral guidance for modern capitalism. Every well-functioning society, he argues, follows certain rules of behavior, sometimes embodied in law but often rooted in informal conventions that developed over a long period of time. Neglect of these rules can lead to serious deficiencies in economic mechanisms, above all in the financial sector. He acknowledges the difficulty in proving his case with hard data but offers examples to illustrate his main points, including an interesting discussion of increasing nonproductive rent seeking over intellectual property of dubious social value. The book involves more diagnosis and lamentation than prescriptions, since Yavlinsky is fully aware that moral behavior cannot be built, or rebuilt, with a stroke of the pen. He does not, unfortunately, contemplate the possibility that the main actors in the financial crisis thought that their behavior was above reproach and socially valuable but were badly misled by a flawed antiregulatory doctrine.