Rational Exuberance: Silencing the Enemies of Growth and Why the Future Is Better Than You Think

by Michael Mandel

Book Overview

Michael J. Mandel, chief economist of BusinessWeek, is the country's most passionate partisan for exuberant economic growth. In the mid-1990s, he was one of the first journalists to use the term New... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0060580496
• ISBN13: 9780060580490
• Release Date: May 2004
• Publisher: HarperBusiness
• Length: 200 Pages
• Weight: 1.05 lbs.
• Dimensions: 1.0" x 6.4" x 9.3"

Customer Reviews

Insightful critique of status quo economics

Agree with the thesis and conclusion or not, this book is a thought-provoking criticism of the modern state of economics. The argument is complete and well-formulated. Economists tend to suffer from a kind of 'group-think' phenomenon, where ideas aren't questioned to the same extent as they are in other fields. This book is a breath of fresh air to anyone weary of the everyday fallacies which plague economist's ideas about growth.

Big Risks Big Rewards

Mandel's thesis is that economic progress and technological innovation are inextricably linked and the U.S. is uniquely positioned to take advantage of it. Like many good ideas the link seems intuitive, but as Mandel shows, many respected economists are skeptical of the contribution of technology to growth. This book clearly defines its case and argues forcefully for a change in the prevailing wisdom.Mandel distinguishes "exuberant growth" exemplified by the internet boom of the last decade from the "cautious" growth of the U.S. in the 1970's or Europe and Japan today. Cautious growth, "suggestion box" growth, is marked by an emphasis on personal savings, fiscal conservatism, and gradualism. This is "capital fundamentalism". But there is little evidence to show that a high savings and investment rate without the jumpstart of technological discovery yields much growth. High savings rates in Japan and Europe have not placed these economies in the vanguard of economic progress. Nor has our historically low savings rate stalled our leadership.Exuberant growth in the U.S. economy is supported by our "high performance" financial markets. The efficient way in which huge sums of capital are directed to new ideas by venture capital firms and the high-yield (junk) bond market make it possible for breakaway developments to bubble up through the economy. Stock options, maligned for their high profile abuse, serve an important funadmental role by securing the allegiance of valuable wage earners and making them partners in a risky enterprise.A "hot" economy is a creative one fostering new technologies and economic progress. It is also a risky economy "pulsating" with the flow of capital to the Next Big Thing which may in the end be nothing more than a bubble. The internet has proven to be a disruptive innovation (Clayton Christensen's evocative phrase) creating jobs and wealth. Our efforts in Space and nuclear power have have been less successful. Areas that Mandel lists for possible breakthroughs include biotechnology, energy (e.g. fuel cells), wireless communications, and nanotechnology.High octane economies make for risky markets. Mandel urges greater corporate transparency and multi-year income tax averaging to soften the tax burden of boom years and to cushion the lean ones. Implicit in all this is the need for a strong commitment to research and development in promising technologies.Without technological innovation job markets stagnate, skill sets become commonplace and vulnerable to the cheapest provider (e.g. "offshoring"). Exuberant growth is not assured. Mandel is not shy about naming the economists he sees impeding the necessary support for technological initiatives that foster growth. For Mandel their blind spot is "the single biggest failure" of modern economics. This is a book intended to stimulate vigorous debate.

Thoughtful and Passionate

This thoughtful and passionate book by Business Week's Chief Economist aims to reshape the U.S. political debate about economic policy. Its central concern is to keep the U.S. economy on a path of "exuberant growth," led by innovation and technology. As Mandel reminds us, from one generation to the next, the prosperity of a nation depends on the rate of growth of its economy. He identifies two unique advantages of the United States in achieving rapid growth: a deep bench of scientific and engineering professionals to identify and commercialize technological breakthroughs, and a venture capital industry that will fund promising new technologies and products. But exuberant, technology-led growth comes at a cost, as it is accompanied by instability in financial markets and the real economy. Mandel worries that too many in public life - economists as well as politicians - see that instability solely as a problem without noticing that it is the natural byproduct of innovation and rapid growth. Taming financial and economic instability, he fears, would condemn the economy to stagnation. He calls on policy-makers instead to embrace exuberant growth by subsidizing science education and R & D, protecting investor confidence in financial markets through increased corporate financial disclosure, and ameliorating the costs of instability with a stronger social safety net. Mandel embraces a cause well worth fighting for, grounds his argument in an insightful analysis of the 21st Century U.S. economy, and provides a detailed policy road map for exuberant growth advocates.

An Important and Timely Book

As we head into the last stages of a presidential campaign where the economy is a top issue, this engaging book is a must-read. Mandel provides a robust critique of economic policy and lays out a road map for regaining exuberant growth. The key he argues lies in making "support for technology...central to economic policy," Yet, such a task is anything but easy. Mandel bemoans the fact that "unfortunately, technology rarely makes an appearance...in Washington economic policy discussions." As a result, while policy makers may talk about technology-driven growth, in Washington it's "the poor step-child, receiving a microscopic amount of time, energy and money from politicians." He's right.Mandel goes on to "out" the enemies of exuberant growth, including naming names of economists who for all their claim to fame, actually neither understand nor support technologically-driven economic growth. Here's a Ph.D. economist saying that the emperor (the economics profession) has no clothes (they don't understand how the 21st century innovation economy works. He goes on to lay out how its not just mainstream economists who don't get it, but that on "both on the left and the right, there is a profound discomfort with technological change." In spite of this, Mandel is optimistic about the future, given America's advantages in financial markets, entrepreneurship, and technology. Mandel got it right (albeit he was a bit premature) when he predicted "The Coming Internet Depression" (who besides Mandel had the foresight to buck conventional wisdom in early 2000 that the Internet economy was going to go through a big correction). I hope he has it right now when he predicts good economic times for the next decade at least. He lays out some interesting and useful policy proposals (although my only complaint with the book was that I wish he had gone into more detail on these) that could help spur growth in the future. All in all a great book and on top of that an enjoyable, "journalistic" read. I only hope economists take the time to read it.

Correction to the First Reviewer

The first reviewer stated "In fact, the NASDAQ had already imploded in the first quarter of 2000" before Mandel's first book "The Coming Internet Depression" was published. Actually the NASDAQ traded above 4000 the month before and then started the real implosion about the time that first book came out.The reviewer also stated that there never was a depression. Mandel was predicting a depression in the Internet and Information Technology industries, not necessarily the entire economy. The subtitle of his book was "Why the High-Tech Boom Will Go Bust, Why the Crash Will Be Worse Than You Think, and How to Prosper Afterwards". I know all about the I.T. industry depression...I lost my job in 2001 and I am still unemployed to this day.