My wife was recently going through old boxes when she came across a trove of artifacts of mine that my parents collected over the years. Among them were the results from a PSAT test I took in the eighth grade that included — along with the dismal score I earned — my self-reported grade point average and preferred career.
I was not surprised to see that I was a C+ student, but I had entirely forgotten that my apparent ambition was to become an economist. In retrospect, I seemed to have achieved that ambition; financial journalism is probably the best way for a C+ economist to make a living.
This is a way of saying that as I was reading Alan Blinder's book, "A Monetary and Fiscal History of the United States, 1961-2021," I would occasionally look up from the book, rub my eyes, look out the window and contemplate the undeniable fact that I was out of my depth.
But the story that the book tells — about how economic and political policy and strategy have evolved since the Kennedy administration — is a captivating and gripping walk through the funhouse mirrors of history, scary equations notwithstanding.
Blinder, who served in the Clinton White House's Council of Economic Advisers and later as vice chair of the Federal Reserve, tells the story by turns as a spectator and participant, both in academia and policy circles. But the book is refreshingly not a memoir; rather it is a firsthand account of how economic theory and politics intertwined and evolved over the course of half a century.
To appreciate how dramatic that evolution has been, consider the following: When John F. Kennedy took office in 1961, he proposed cutting taxes and fiscal conservatives had to be convinced that it was a good idea.
That's because the conventional wisdom of the time dictated that tax cuts were dramatic interventions reserved only for recessions or other emergencies. The budget was already running a deficit and the economy was picking up in 1961; the prudent thing to do would be not to forgo revenue when times were good.
Put another way, there was a time not so long ago when Congress viewed fiscal policy as the primary steering wheel of the economy, and guarded it jealously. Monetary policy, by contrast, was almost an afterthought.
Kennedy's gambit — for which he deserves authorship, even though the cuts were passed after his death — was the first triumph of Keynesian economic theory over the stodgy political economic orthodoxy, and it emboldened politicians to take economists more seriously.
In the broadest conceivable strokes, what happened over the next several decades was a gradual shift of monetary policy from passive secondary concern to the economy to a far more active role.
That evolution occurred in part out of necessity; fiscal deficits rose with the Vietnam war and eventually faded as a primary concern for lawmakers, while a series of acute economic shocks and the onset of stagflation compelled the Fed to wield its might. What was borne of necessity gradually hardened into a pervasive ambivalence about fiscal policy in Congress — an ambivalence that further deteriorated Congress' willingness and apparent ability to pass almost any meaningful legislation of any kind.
The Fed's triumph over stagflation and deft maneuvering of the 1990s led to broad public confidence in the institution to set it and forget it when it came to price stability and unemployment. That confidence was spectacularly dashed with the mortgage meltdown in 2008, an event that paradoxically coincided with a broad swath of new regulatory powers and new monetary policy tools for the central bank.
But if the evolution of monetary and fiscal policy is the destination in Blinder's book, the real joy comes from accompanying him on the journey. Each economic obstacle that the reader encounters is overcome through a complex interplay between political and academic actors who arrive at solutions that contain the seeds of the next economic obstacle. Economic policy, in other words, is always at least partially improvised, and those improvisations gradually accrete over time into stalactites of conventional wisdom that eventually must give way to new realities, often violently.
At times as I was reading this book I found myself wondering who it was for. Certainly it is an invaluable text for graduate students and economics nerds who can follow Blinder as he effortlessly explains bygone economic fashions like rational expectations theory. For those of us who get a little nervous when they see the Greek alphabet, I fear the importance of those lessons might get lost. What might have been a breezy page-turner in other hands is instead a comprehensive and exhaustive journey through a lifetime of economic events.
But then it occurred to me that what Blinder, who is currently an economics professor at Princeton University, has done here is download everything he knows and experienced in his illustrious career into a single volume, and that is no small accomplishment, especially since the era to which the book is confined leads us up to the present day.
The value is not in reading the book and putting it on the shelf, but in reaching for it again and again. This book belongs in the office, close at hand for repeated reference — not at the beach.
But then again, what do I know? I'm just a C+ economist.
