Arguing for a system free of omniscient financiers
A Call for Judgment:
Sensible Finance for a Dynamic Economy
by Amar Bhidé
Oxford University Press, USA
$29.95 List Price
The decades-long boom in financial services has created tremendous wealth for a handful of people. The once-stodgy banking sector became a Xanadu for the quantitatively gifted, attracting talent that might have once been drawn to industry or academia. But has this transformation contributed to the growth of the real economy? In A Call for Judgment, economist Amar Bhidé argues that it has not. Rather, it has undermined the foundations of free-market capitalism by encouraging a dangerous centralization of financial decision making.
Unlike Simon Johnson and Joseph Stiglitz, economists who've also been sharply critical of the US financial system, Bhidé is an unapologetic classical liberal. In his 2008 book, The Venturesome Economy, he offered a brilliant critique of "techno-nationalism"—the view that innovation is driven by large public and corporate investments in research and development. Rather, Bhidé argued, the most important kind of innovation in a modern economy is the incremental, ground-level kind that's driven by consumers and the entrepreneurs who serve them. Yet as Bhidé writes in his new book, this dynamism—this perpetual cycle of economic reinvention—must rest on a financial system founded on the principles of forward-looking, case-by-case judgment. Decades of misregulation have, in his view, given us instead what he calls a system of "robotic finance," and the consequences have been nothing short of catastrophic.
To make his case, Bhidé draws on the work of Friedrich Hayek and the lesser-known Frank Knight, both of whom were central to the midcentury revival of