The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future (資本成本主義)

A Street economist's strategy for managing market madness

"The Cost of Capitalism is a must-read and a thoroughly enjoyable one—for those who want to understand the Crisis of 2008 and hammer out a new framework for decision making."
Jared L. Cohon, President, Carnegie Mellon University

"Readers who absorb the lessons of this book will be armed with more than mere technique; they will acquire an attitude that will make them better investors for the rest of their lives."
Paul DeRosa, Principal, Mt. Lucas Management Corp.

"The Cost of Capitalism translates the economic diagnoses and theories of my father, Hyman Minsky. It captures the vivacity of a post dinner conversation not coincidentally my father's favorite forum for elaborating, educating, and entertaining."
Diana Minsky, Art Historian, Bard College

"Lucid, intriguing, brilliant! Barbera combines the uncertainty and speculation of Keynes with Schumpeter's "Creative Destruction" and Hy Minsky's "Deflationary Destruction" into a tasty stew."
James R. Schlesinger, former Director, Central Intelligence Agency

"Long ago, Bob taught me that if you don't know Minsky, you don't know nothing. This work shows the path out of nothingness."
Paul A. McCulley, Chief Investment Officer, Pacific Investment Management Company

"Barbera's recommendations are profound in their simplicity. Let us hope Wall Street, Main Street, Washington, and academia embrace them."
Jack Rivkin, former Chief Investment Officer, Neuberger Berman

"This is truly an extraordinary book that should be of great interest to an extremely wide audience from Wall Street practitioners to economics and finance scholars."
Louis Maccini, Professor of Economics, Johns Hopkins University

From the panic of 1987 to the tech-bubble burst of 2000, the past two decades have witnessed a series of financial crises, each more disruptive than the last. Unfortunately, they all seem like dress rehearsal for today's debacle.

In hindsight, the precipitating factors responsible for each crisis seem clear, yet, in every case, mainstream economists and policy makers were caught off guard.

Why didn't they see it coming? What should they have known but didn't? And, most critically, how must they adjust their thinking going forward?

In the Cost of Capitalism, Robert Barbera provides compelling answers to all these questions. In the process, he offers the most cogent analysis yet of today's crisis and explains how to manage the ever present potential for mayhem intrinsic to free market economies without stunting innovation and growth.

At the core of Barbera's thinking are three assumptions: first, boom and bust cycles have been stoked since 1985 by finance, not inflation; second, Main Street stability paradoxically invites excessive risk taking on Wall Street; and last, these things set the stage for small setbacks to deliver cataclysmic consequences.

Barbera applauds current efforts to unabashedly infuse public money into the global economy. It's the only way, he says, to prevent another Great Depression. And, looking beyond the crisis of the moment, Barbera contends that mainstream thinkers need to form a new economic paradigm by embracing the insights of free market champions like Joseph Schumpeter and the cautionary wisdom of Hyman Minsky.

Financial market mayhem comes with the territory in a free market system. Nonetheless, innovators and their bankers still offer the world the best chance for a prosperous twenty-first century. Economists, policymakers, and investors must begin to redefine their understanding of free market capitalism. The Cost of Capitalism will set them on that course.

Robert J. Barbera, Ph.D., is executive vice
president and chief economist at ITG and
an Economics Department Fellow at Johns
Hopkins University. He has been a noted
Wall Street economist for over 25 years.
Before arriving on Wall Street, Barbera was
a staff economist for Senator Paul Tsongas
and an economist for the Congressional
Budget Offi ce.

Intro
Section I
1. The Market is the Message
2. How Much Risk Is Too Much Risk?
3. Hyman Minsky, A Lefty Who Had It Right
Section II: Asset Market Upheaval: The Cycle Driver for the Past 20 Years
4. Not Iraq and Tanks, Debt and Banks, the 1990 Recession
5: Tulips in Tokyo: The Asset Inflation/Deflation That Consigned Japan to a Lost Decade
6: The Asian Contagion: What Went Up Went Down, With a Vengeance!
7: The 2000 Recession, From Brave New World Boom to Wild Technology Share Price Bust
8: The Spectacular Slide For House Prices, Consumer Purchasing Power, the 2008 Recession
Section III: Concluding Observations
9: Mainstream Economics: A Slavish Devotion To Rational Market Theories
10: The Politics of Economics: Confusing Free Market Triumph with free market infallibility
11: The Punch Line: Embrace Capitalism but don’t forget the seat belts and the air bags