Ben Bernanke's The Courage to Act : A Review Essay

Abstract

Basically, Bernanke wants the world to understand why he did what he did, and in order to understand we have to know everything. And the book succeeds. Those who are willing to wade through 600 pages of history, and who know something about the economic theories and the political actors involved, will come away from this book thinking that Ben Bernanke is a good guy who did a good job in a tight spot. But along the way, the book reveals a lot more than that. The most interesting lessons of The Courage to Act are not about Bernanke himself, but about the system in which he operated. The key revelation is that the way that the U.S. deals with macroeconomic challenges, and with monetary policy, is fundamentally flawed. In both academia and in politics, old ideas and prejudices are firmly entrenched, and not even the disasters of crisis and depression were enough to dislodge them. After eight years of poor economic performance, we remain in the dark on all the big questions. What causes financial crises, recessions and stagnations? How are the three related? And what, if anything, should the government do about them? The crisis should have changed minds on these issues more than it did.