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Economics is not widely considered to be one of the sexier sciences. The annual Nobel Prize winner in that field never receives as much publicity as his or her compatriots in peace, literature, or physics. But if such slights are based on the notion that economics is dull, or that economists are concerned only with finance itself, Steven D. Levitt will change some minds. In Freakonomics (written with Stephen J. Dubner), Levitt argues that many apparent mysteries of everyday life don't need to be so mysterious: they could be illuminated and made even more fascinating by asking the right questions and drawing connections. For example, Levitt traces the drop in violent crime rates to a drop in violent criminals and, digging further, to the Roe v. Wade decision that preempted the existence of some people who would be born to poverty and hardship. Elsewhere, by analyzing data gathered from inner-city Chicago drug-dealing gangs, Levitt outlines a corporate structure much like McDonald's, where the top bosses make great money while scores of underlings make something below minimum wage. And in a section that may alarm or relieve worried parents, Levitt argues that parenting methods don't really matter much and that a backyard swimming pool is much more dangerous than a gun. These enlightening chapters are separated by effusive passages from Dubner's 2003 profile of Levitt in The New York Times Magazine, which led to the book being written. In a book filled with bold logic, such back-patting veers Freakonomics, however briefly, away from what Levitt actually has to say. Although maybe there's a good economic reason for that too, and we're just not getting it yet. --John Moe

Steven Levitt and Stephen Dubner Answer The Amazon.com Significant Seven

Steven Levitt and Stephen Dubner, author and co-author of this season's bestselling quirky hit, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, graciously answered the Amazon.com Significant Seven questions that we like to run by every author.

Levitt and Dubner answer the Amazon.com Significant Seven questions

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Reviews (118)

interesting, but not rocket science
Unlike a lot of economics books this book is pretty fair and unbiased. I don't think it is as funny as some readers thought, but the subjects are interesting. Most of it is common sense. Like that teachers cheat to make their students look smarter on standardized tests and real estate agents won't necessarily being doing everything they can to help you. As a graduate student in economics, I find is reasoning for the decline in crime being attributed to abortion highly speculative. Common sense would tell you that "aborting" fetuses that are likely to become criminals will reduce crime, only if that mother doesn't have as many children as she would if abortion were illegal. The author does a good job of staying away from the politics of abortion.

This book is good for the layman but is nothing new to the average economists. I personally think that it has been given too much praise and attention.

Thought provoking but falls a bit short
While Levitt has the propensity to ask many interesting and thought-provoking questions, his data analysis is often suspect to the same tunnel vision which he attributes to many academic studies. Levitt seems so intent on proving the "conventional wisdom" wrong that he immediately accepts data from a single source as long as it provides a sensational conclusion. For instance, just about all of Levitt's conclusions on education and parenting come from a single ECLS study conducted 15 years ago. The early chapters on information and cheating are quite solid and alone may be worth the price of the book. However once Levitt tackles education, crime, and parenting his down-to-earth anecdotal approach becomes insufficient to explain these complex issues. Freakonomics is similar to many other pop-science bestsellers in that it makes its subject more approachable through oversimplified explanations and conclusions.

A Great, Quick Read, Perfect for Summer
I very much have enjoyed reading this book.As a grade school teacher, it doesn't surprise me that teachers cheat on their students' end-of-the-year assessments; what is surprising is that this is rarely talked about and people seem to be shocked and surprised when, on the rare occasion, someone gets caught.With the pressure to have one's students earn high scores coming from both parents and administrators, how could it not happen?Much more is expected of teachers today, and not all are up to the hard work, time and energy.But this book isn't only about teachers--you'll learn about drug dealers and how they organize their gangs quite similar to corporations; you'll be surprised that sumo wrestlers cheat (I actually hadn't thought about them or the game, but there is a way they can cheat), among other topics. Perhaps the most controversial notion is about what brought down crime levels in the 1980s, a time when everyone predicted crime would rise.It's an interesting idea, but Levitt doesn't provide much support, which was disappointing.

Layman's LanguageAnalyses of Various Social Canards
Too often articles or books written by economists are couched in arcane verbiage and statistics.Levitt avoids this, and the result is a very interesting, though-provoking review of several social myths.

He begins by summarizing the status of crime in the mid-1990's - high, and projected to go much higher with the coming "teenager boom."Instead, it began a long, steep decline.The most common "explanations" were "roaring economy," "gun control," and "innovative policing." Levitt then goes on to summarize data that convincingly reture them all.For example, a good economy might decrease economic crimes, but why did violent crimes drop even more?Further, why didn't crime also fall during the booming '60s?As for innovative policing, Levitt reports that the declines began prior to this initiative, and that its prime contribution was through adding policeman (accounting for about 10% of the drop).Similarly he refutes the logic for crediting increased rights of citizens to carry guns, and gun buy-backs, while the drop in crack prices is credited with 15% of the drop.

Levitt then reports the results of Romania's strong anti-abortion posture in the 60s - a large contingent of resented children, many of whom became serious problems when they grew up.Finally, the "shocker" - Levitt presents various data that provide a solid case for concluding that the drop in crime was primarily due to Roe v. Wade making abortions available to lower-income women - many of whom would have had problems raising the unwanted children.

Other topics addressed by Levitt include documenting cheating associated with "high-stakes" (eg. potential job loss, raises, school closure) pupil testing (estimated at about 5% in Chicago Public Schools), documenting and explaining the lack of drug traffic profits for most of those involved (rakeoffs by those at higher levels).Another interesting and useful topic covered is how society often misplaces efforts into low-payoff efforts to protect children (eg. child-resistant packaging, flame-retardant pajamas, avoiding being seated near front-seat airbags, and keeping their children out of homes with guns), instead of the much higher-payoff of keeping children away from homes with swimming pools.

Throughout the book, Levitt carefully summarizes supporting data, while also informing readers of how similar data are often misused.His "bottom-line," so to speak, is for the reader to become more aware of the effect of incentives, and the frequent lack of factual bases for conventional thinking.

An interesting, useful two-hour read.

Revelations?!only if you're the type to wear shades at night
while interesting, the subject matter of this book is not sublime, the questions are not revolutionary and the 'answers' are soooo not comprehensive. though a contribution is likely, to claim that crime went down simply because of abortion is silly. and duh swimming pools are 'more dangerous' if you look at data collected from past incidences. but you cannot claim this to be true of the inherent/accidental potential for danger of a swimming pool compared to a gun. this book seems to ignore that probability is only predictive if circumstances are equal. and that sometimes a name might carry significance beyond where it can get you in life. but perhaps that one is more than what can expected of educated white men. Still... fun reading, great cover. And I'm sure levitt's classes are more intellectually engaging than this book. ah! one more thing: drug dealers live at home because 'Gator boots, with the pimped out gucci suit/ Ain't got no job, but I stay sharp/ Can't pay my rent, cause all my money's spent/ But thats ok, cause I'm still fly/ Got a quarter tank gas in my new e-class/ But that's alright cause I'm gon' ride/ Got everything in my moma's name/ But I'm hood rich da dada dada da' - Still Fly by Big Tymers ... Read more

Book Description

This text remains the only text in the market that presents a balance of financial theory and applications.The authors maintain the same four goals as with the first edition: helping learners to make good financial decisions, providing a solid text for the introductory MBA course, motivating learners by demonstrating finance is relevant and interesting, and presenting the material clearly. ... Read more

Book Description

McConnell-Brue's Economics 15e is the best-selling textbook and has been teaching students in a clear, unbiased way for 40 years. The 14th edition grew market share because of its clear and careful treatment of principles of economics concepts, its balanced coverage, and its patient explanations.More students have learned their principles of Economics from McConnell-Brue than any other text--12 million of them.The 15th edition is a substantial revision that delivers a tighter, modern, Internet-savvy book. ... Read more

Reviews (8)

Excellent Book!
I am pursuing an MBA. I had no economics background, however I found this book to be easy to read, very well structured and most of all, you can find the actual applications of Economics. I highly recommend this book over Economics from Samuelson, he's a brilliant economist but he clearly doesn't explain as good. If you are going to buy only one book of economics, I recommend this one.

Great Book!
I used this textbook in an advanced placement Macroeconomics course. Believe me the textbook itself is more interesting than the class. The text provides well detailed explainations of concepts and even provides a comprehensive glossary for those who might find the language alittle to difficult to understand. An overall great book, I've read other economics texts and this one is absolutely stellar in comparison.

Very good tool !!!
I don't study Economy, but I found that this book is easily understandable for those that have at least some notions on the subject. I liked it, because it includes the main themes on which everybody should know at least something, and it is quite entertaining (for a book on this subject).

Also, at the end of each chapter the authors include some questions that help you to understand it better. There is also a web link that provides you with the answers to those questions (so, if you are like me, and want to be sure you answered correctly, you have the opportunity to find out).

Anyway, I highly recommend this book: it is a thoroughly good introduction to economy!!!!. And last, but not least, it is also of good help in exams, because some basic questions have a tendency to be repeated, and with this book: you have the answers!!!).

Not bad.
This definately wasn't written for the layperson, but for the college level reader/student.

Overall, the book wasn't that bad. However, there were some instances where it just seem to drag on and on, which was a tad annoying. I think the authors could've written some things in a better way to make it more understandable.

Although Economics isn't necessarily an easy subject, this book is considered authoritative in the feild of macro/microeconomics. The authors should've definately made it a little more easier to understand.

Thank you.

Good, in fact very good
As an MBA (with a fair subject background)interested in applied economics I found this to be an impressive piece of writing. The real world examples and colloquial expression can only comfort a reader intimidated by this very complex and volumnous discipline. I was rather srprised to see some of the reviews calling this a very difficult-to-comprehend text. In my opinion even someone relatively new to economics will find his knowledge stacking up as he progresses through the text. Given that the sequencing is not classic with micro followed by macro, I feal the authors have done a good job of going against the conventional and merging the potent interrelationships of these two basic areas-after all one evolves into the other. Also the web-based material was also more than helpful. Finally a book in its fifteenth edition, read over 40 odd years better be good. ... Read more

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In 2000, when The Informant was published, few would’ve imagined that a story about price fixing at Archer Daniels Midland could be as un–put–downable as the best crime fiction. Yet critics—and consumers—agreed: The New York Times reporter Kurt Eichenwald had taken the stuff of dry business reporting and turned it into an unparalleled page–turner. With Conspiracy of Fools, Eichenwald has done it again.

Say the name “Enron” and most people believe they’ve heard all about the story that imperiled a presidency, destroyed a marketplace, and changed Washington and Wall Street forever. But in the hands of Kurt Eichenwald, the players we think we know and the business practices we think have been exposed are transformed into entirely new—and entirely gripping—material. The cast includes but is not limited to George W. Bush, Dick Cheney, Paul O’Neill, Harvey Pitt, Colin Powell, Gray Davis, Arnold Schwarzenegger, Alan Greenspan, Ken Lay, Andy Fastow, Jeff Skilling, Bill Clinton, Rupert Murdoch, and Michael Eisner. Providing a you–are–there glimpse behind closed doors in the executive suites of the Enron Corporation, the Texas governor’s mansion, the Justice Department, and even the Oval Office, Conspiracy of Fools is an all–true financial and political thriller of cinematic proportions.

Reviews (53)

strange brew
This is the book counterpart of a video reconstruction.As best I can tell from the extensive endnotes, the author did a phenomenal research job, and then (from my point of view) turned his work into fiction.Instead of presenting us with the facts (fascinating in themselves) the author presents everything "through the eyes" of the participants, pretenting to be in their thoughts, and using quotation marks with the abandon of a novelist.We all know that this is just plain made up, but by using this form of presentation, the author blurs the distinction between fact and fiction.He DOESN'T know what these people were thinking, and making it up implies that he does; requiring me to search the footnotes at the end of each sentence -- what is true and what is made up? For example, on the first page we follow Ken Lay's thoughts as he is driven to work -- the footnote shows us the source for what kind of car it was -- but of course no reference for Lay's thoughts (and even if Lay had said what he was thinking, we have know knowledge that he told the truth).Accordingly, although the book is entertaining, I demote it to a "2" for horrendously bad journalistic practice.

The End of an Empire
I'm certain that all of us like to read a good book. One filled with intrigue, deceit, back-stabbing, illegal acts, social issues, fear, egos, greed, scandals,etc.

All the ingredients of an interesting novel. Only it's not. It is the true story ofENRON's humble pipeline beginnings to its bankruptcy and the saga of a hidden but eventually disclosed paper trail.

The book---"Conspiracy of Fools" by Kurt Eichenwald.

Notwithstanding the complicated financial transactions involved, it is written in a fast moving manner by a winning New York Times writer

If you get one book this summer, this is it!
Everyone knows the Enron scandal.The directors of the corporation have been depicted as nothing less than caricatures of corporate greed and the company itself a cliche of managers run amok.

This book ends all that.It brings dimension and personality to everyone involved and does justice to the events that transpire in a very evenhanded way.The "fly on the wall" narrative and the incredulous attitude of the author constantly ask the question we all wanted to ask right from the start: "What were they thinking?"Even moreso, a corollary becomes "Why did everyone else just let it happen?"Hard to believe, but the problems of Enron could have been predicted back in the early 90s.

This is a top-notch book and worth every penny.Its not particularly difficult to comprehend (the dialogue and complex schemes are broken down for laymen to understand), and believe it or not, its a quick read. Once it absorbs you, you just won't put it down.

Reads like a thriller
I read this book in three days.I have a two year old to chase around, so that tells you just how much time I devoted to finishing it.COF reads like a thriller.I kept waiting for the bad guys to get caught and became more and more incredulous that it took so long.

COF does an excellent job of showing what a dangerous combination greed, hubris and ignorance is and how prevelant it is in corporate America.Throw in a dash of politics and you have a national scandal.

Eichenwald does a good job of showing us all the nuances of what happened at the executive level of Enron, but I was disapointed that we never got to see any of it from the perspective of the thousands of employees that woke up one morning without jobs or retirement funds.We also never see the impact of Enron's fall on the varous companies and local governments that invested so heavily in them.

My last "complaint" is a silly one.There were no pictures of the principals featured in the book, which is pretty standard for non-fiction stories.I wanted to know what Lay, Skilling and the rest looked like so I could put faces with names.

Overall, well worth the read if you want some suspense and/or an insight into just what went wrong at Enron.

The BEST book I have read in years
I never thought I would like to read an Enron book, but my father really pushed this on me. I LOVED it. This is the best book I have read in years, certainly since A Civil Action. It is thrilling, unbelievable, captivating. I am up late writing this because the book kept me up until 3 and now I am having trouble not thinking about it. Unlike other books of this type, the research is incredible. Anyone who reads it has to thumb through the footnotes, and see all of the documents and other information that Eichenwald pulled together. A fabulous reporter and a spectacular writer all add up to a great book. ... Read more

Book Description

These two highly-respected authors have revised this best-selling book to include more current, modern subject matter and events while maintaining those features that have contributed to its great success. It continues to use stories, graphs, and equations and a unified, logical organization to make economic concepts easy-to-understand and relevant to all readers. Users of this book see the connection between growth, trade, comparative advantage, and the production possibilities frontier. When readers understand how a simple competitive market system works, they are ready to focus on problems of real-world markets. Currency data has been updated through the second quarter of 2003, with coverage of deflation, the effects of the war with Iraq and the war on terrorism, and the wars' impact on the national deficit. A comprehensive overview introducing economics begins the book; subsequent topics include: foundations of microeconomics: consumers and firms; market imperfection and the role of government; concepts and problems in macroeconomics; the goods and money markets; macroeconomic analysis; and the world economy. An excellent desk reference for economists; this book will serve any business owner, as an understanding of basic economics will prove helpful in all ventures.

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Excellent book for economic students in their first year
This book presents and explains both Micro and Macro Theory in a very friendly way.It explains step by step the functions of the micro and macro theory and describes the fuctions of the instituions andorganizations involve in the economy as a whole.It gives historicalbackground, which many students look for in order to understand how? why?who? the study of economics. Besides it explains really well the economicterminology introduce as you read the book.Finally the book presentscurrent event cases through the chapters which are related it to theideaspresented in the reading. ... Read more

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In writing this textbook, Mankiw has tried to put himself in the position of someone seeing economics for the first time. The author's conversational writing style is superb for presenting the politics and science of economic theories to tomorrow's decision-makers.Because Mankiw wrote it for the students, the book stands out among all other principles texts by intriguing students to apply an economic way of thinking in their daily lives.Receiving such a praise as "perhaps the best ever" textbook in economic principles, it's no wonder Mankiw's prize project has quickly become one of the most successful books ever to be published in the college marketplace. ... Read more

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Principles of Macroeconomics
Mankiw (economics, Harvard U.) presents an introduction to macroeconomics that is more devoted to applications and policy than to formal economic theory. Chapters cover international trade, measuring gross domestic product, the cost of living, production and growth, the financial system, the natural rate of unemployment, inflation, and short run economic fluctuations. As is common with many economics textbooks there is little recognition of controversy within the field. ... Read more

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This book is well known for its coverage of modern topics (Game theory, Economics of Information, and Behavioral Economics), clarity of its writing style and graphs, and integrated use of real world examples. The emphasis on relevance and application to both managerial and public-policy decision-making are focused goals of the book. This emphasis is accomplished by including MANY extended examples that cover such topics as the analysis of demand, cost, and market efficiency; the design of pricing strategies; investment and production decisions; and public policy analysis. Economists and strategists looking to stay current with economic information.

Reviews (17)

Unneccessarily Long
This textbook takes microeconomics which can be explained in a technical, exact manner and makes it abstract and foreign.

This textbook's sentences run-on and lose their direction, confusing the reader...If a reader had a firm understanding of economics prior to this textbook, after reading it, it is certain that they will no longer have the understanding of economics, that they did previously.

It is a travestly when a textbook designed to teach the reader about a certain subject, actually makes them less knowledgeable of the subject.

I must also ask why it is being used to teach university students in different years and programs, when it should not be, for example in my university it is being taught in the following programs

IBBA - Year 1
BBA - Year 2
BAS - Year 3
MBA - Year 1

A good book for intermediate level students
Organization of the books is good. Topics are discussed with enough clarity and graphs and illustrations are describing enough. The level of algebra and math is at an intermediate undergraduate level (economics major). I think it is a complete book for anybody who wants to have an understanding of microeconomics. I am a Ph.D. student of economics now and if I am going to teach an undergrad micro course, I will certainly choose this textbook.

Its clearly written, however laughable as an inter. Text
The book is clearly written, however, I found that it is to simple and somewhat weak as a intermediate level text. I agree with most of the other comments that it would be more suitable as an entry level Economics text. This book would probably be better suited for students who are buisness or non-economics majors taking the intermediate course.

translated from klingon?
Perhaps one of the worst written textbooks of all time.The convoluted sentences contain multiple sub clauses and prepositional phrases.The graphs are inadequately labeled and do more to confuse than clarify.Couldn't the publisher at least have hired a Wall Street Journal editor to give it a rewrite?They might as well have printed this in ancient Sumerian.The accompanying study guide reiterates the key topics in plain English, but contains typos.Politically speaking, the book displays a strong libertarian, anti-regulation, anti-worker bias.

Book Review
I found this book to have clarity in the major topics of microeconomics which could help you to understand the basics. However this should only be used as basis reading and other books should be used to cover the various topics in more depth, such as Koutsoyanis and others which give more insight on specific topics. All in all it is a good solid core text book which can give you the basic knowledge needed in microeconomics. ... Read more

Book Description

This market leading text offers proven, comprehensive, applications-oriented approach. Written by authors who are highly regarded in the field, the text provides sound methodological development. The discussion and development of each technique is presented in an application setting, with the statistical results providing insights to decisions and solutions to problems. Statistics for Business and Economics, 9e offers proven accuracy that has led instructors to adopt it simply for its superior examples and exercises alone. ... Read more

Reviews (15)

international economics
This book describes in a very detailed way all the general theories of economics concerning trade. It is very well done as there are many examples and it is optically inspiring. Your eyes won't get tired too quickly, as the layout is done fine. The content of the book is fine, a good book for students of economics, even though it is advisable to read more down the line. But for the overview of a topic it serves allright.

The Undergraduate International Economics Standard
Well, I will start off by saying that the book really probably only deserves somewhere between 4-4.5 stars, but I'll give it 5 to offset some of the questionable reviews below.

No, the book is not perfect. However, it is an academic standard at pretty much any major college or university for teaching undergraduate International Econ/Trade theory, and for good reason. The book makes a clear a concise presentation of basic theory and policy, perhaps in points it is a little too simple. As pointed out, while I'm not sure about the 6th edition, there were some diagrammatical mistakes in the 5th...I bet, however, these were done by a graduate student. A quick bit of reasoning and a second of thought should yield the appropriate picture, however. And yes, I think a bit of Krugman's bias comes through, though its not terribly off-putting.

The book could use a bit more math I think. The real equations and difficult problems are few and far between, and are, for the most part, pretty straight forward. At the very most it would take a basic understanding of calculus, but the majority of the problems and equations can be explained and done without it. I have read a number of undergraduate economics books with far more intensive math. Despite this lack, however, the intentions come across pretty well.

No, this book is not for beginners to economics. At least an undergraduate course or reading in both micro and macro are needed, and really and truly, an intermediate level in each is probably better if one wants to get the most out of the book.

If you find the subject matter within to be terribly math intensive and you cannot get motivated to read the subject matter because it doesn't use "pizza and beer" (and um...I don't think I'd want an imported pizza anyway, but thanks), well I guess the subject and this book are not for you. However, if you are trying to enrich your understanding of economics at a very basic level, this book provides a good way to do so.

And, if you want graduate level book, and like Obstfeld, I recommend he and Rogoff's book.

Not a bad book.... Too bad its a bit baby
Having taken a class on Commodity Flow Theory (Micro) and a seperate class on Int'l Finances (Macro), I can say that I enjoyed the former much more then the latter. I used Krugman's latest edition for the former and thought it was adequatly written for the scope of the class.
I really wish they would make undergraduate Economics more rigirous as I believe many undergrads who have taken 2 or 3 university math courses (up to the linear algebra level) could easily understand most of the mathematics found in "high brow" Economics theory.
Seeing I've only had the pleasure of reading two textbooks on the subject (and different sections of each respective book), I am not in a position where I can make a relative judgment on the quality of the material.
I felt Krugman's writing (I am assuming the majority of the micro section is his writing) was mostly neutral. I found, from my reading, the only section that could have been biased was the section on political economy, but since I am unfamiliar with that field in general I cannot make a more descriptive comment.
Overall, I liked the fact that their was some mathematical indexes at the end of the chapter (something my other int'l economics textbook lacked). I've come to expect the option of a more quantiative treatment in most modern textbooks (both my intermediate macro/micro and econometrics text were layed out in this fashion).
So in conclusion, the text was easy to understand, well organized, and perhaps abit biased.... However, if you are just being introduced to the matter, I doubt you will notice much of the bias since the majority of what he covers in the book are well established models and theories.

Save your money!!!!
This guy is an idiot!!! Either he is confused about economic theory or he trying push some sort of an agenda. He repeatedly contradicts himself in a way that undermines his crediblity. A word of advice Mr. Krugman--STICK TO THE NY TIMES EDITORIALS and stay out of academia.

Save your Money--Get the Caves, Jones, et al World Trade...
Krugman et al constantly contradicts earlier statements throughout the text in the international trade section, it will give you a headache. The finance side is better. If you really want to learn international trade and finance (for undergrad), get the Caves, Jones, Frankel text.... I learned the hard way and had to pay restocking fees (etc) when I wanted to exhange it for Caves et al. Krugman should stick to writing editorials for the NY Times b/c this text needs some serious help!!! ... Read more

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Sequels often disappoint when compared to their predecessors, but author Robert Shiller has proved the exception to the rule with his second edition of Irrational Exuberance. When the original book released in 2000, Shiller's prescient analysis of bubble-like market behavior provided perspective on the painful meltdown of stock-price valuations that subsequently occurred. Five years later, the Yale professor's bearish predictions about real-estate valuations are enough to give any savvy investor or homebuyer pause.

Shiller is one of several well-known economists and pundits who've begun a running dialogue in the last few years around the drawbacks of unchecked free markets. Few writers, though, dissect the phenomenon of bubble behavior as clearly and thoroughly as Shiller does. As with the first edition of his book, Shiller begins this one with reams of quantitative data around the late 1990s stock-market runup. This new edition adds data on real-estate price trends in the early 2000s, and points out the striking parallels between the earlier stock-market boom and bust, and current trends with housing prices in the United States. Shiller actually believes the two phenomena are related; as investors lost confidence in the stock market and moved their money into real estate, one asset class fell while the other rose. According to Shiller's analysis, the pattern is destined to repeat itself.

Aside from the initial data, the real strength of Irrational Exuberance is the straightforward, almost clinical way in which it explains why things happen as they do. The book walks readers through structural reasons for market bubbles, then ventures into "softer" analyses which professional economists less confident than Shiller would be scared to touch. It examines cultural factors behind market bubbles, such as hype-mongering news media, and psychological factors, such as herd behavior.

Another improvement in this latest edition of Shiller's book is his inclusion of more personal commentary, and he mentions the influence that his wife, herself a clinical psychologist, has had on his intellectual development and his view of psychological impacts on economic behavior. Other personal insights from Shiller center on experiences he had while touring and lecturing around the first book, and some of the most interesting passages are those in which he describes common questions or feedback from his audience, and what he thought in reaction--but didn't voice while on his tour.

In the end, Shiller closes his book with an intriguing set of policy proposals. He argues for a revamping of the U.S. social security system, a new system of house-price insurance for homeowners, and risk reduction through portfolio diversification. Fans of the brainy academic will note with approval that Shiller practices what he preaches: he has begun trying to implement some of his ideas in the real world through two private consulting firms he has founded, Macro Securities Research and Macro Financial. The hope is if Shiller's as correct with this second book as he was with his first, readers will all learn something from these new companies. --Peter Han ... Read more

Reviews (62)

Antidote to Stocks for the Long Run
Shiller explains why the incredible 225% increase in the Dow Jones Industrial Average from the beginning of 1994 through the end of 1999 was unsustainable: "as a rule and on average, years with low price-earnings ratios have been followed by high returns, and years with high price-earnings ratios have been followed by low or negative returns." Writing in 2000 when the price-earnings ratio on the S&P500 was nearly 45, compared to a long-run average of about 20, Shiller was preparing us for a bursting of the stock-price bubble. His message was sobering and prescient then as well as good education now. Caution: the reader will have to whack through thickets of details in Chapter 1 such as "The average real return in the stock market (including dividends) was -2.6% a year for the five years following January 1966, -1.8% a year for the next ten years, -0.5% a year for the next fifteen years, and 1.9% a year for the next twenty years."
In Part 3: Psychological Factors, Shiller outlines principles of behavioral finance. For example, past prices and stories help form people's views of the stock market. He reviews classic experiments in psychology, which documented the significance of peer pressure and trust in experts. Shiller's interpretation is that people take uncritically what experts on the stock market offer, presumably that stock prices will continue to rise, which encourages them to be overconfident.
The author puts forth a good explanation of efficient markets theory but applies much criticism. He proclaims: "I see no reason to doubt the thesis that smarter people will, in the long run, tend to do better at investing." Reading and understanding Irrational Exuberance will help put the individual investor in the company of those "smarter people."

I'm puzzled by the y-axis choices in Figure 1.1 (page 6).
I work in statistical data analysis, and I opened this book with high expectations.But then on page 6 I encountered Figure 1.1, titled "Stock Prices and Earnings, 1871-2000", which has a visual design that troubles me.Both lines on the graph are plotted with the same x axis (the years from 1860 to 2020), and I have no problem with that.The Stock Price line is plotted against a y axis that is labeled along the left-hand edge of the graph, and the range chosen for this axis (0 to 1600) seems quite appropriate for the data plotted, which range from about 70 to about 1450.The Stock Earnings line is plotted against its own y axis that is labeled along the right-hand edge of the graph, and I have no problem with the existence of the second y axis.But what troubles me is that the range of this second y axis has been chosen so that the entire range of the data plotted in the earnings line (about 5 to about 40) has been squished into the very bottom of the graph, using a vertical distance that corresponds roughly to the range from 2 to 190 on the y axis for Stock Price.This apparently arbitrary visual juxtaposition of two unrelated y-axis scales leaves me unable to trust any visual trend comparisons I might be tempted to make between the two lines.Can someone explain to me why one of these three alternatives that make more sense to me wasn't chosen?(1) Plot both the Stock Price and the Stock Earnings on the same y-axis scale (from 0 to 1600), or (2) plot the Stock Price on its own y axis as shown but plot the Earnings Price on a y axis that runs from 0 at the bottom of the graph's right-hand edge to about 45 on the graph's right-hand edge, or (3) normalize both graphs to percentages of their values for some year (1871, perhaps).Thanks.Any comments from Edward Tufte ("The Visual Display of Quantitative Information") would be most welcome indeed.

decent, but somewhat disappointing
For those haven't read other behavioral econ articles / books, this is probably worthwhile.However, though the first two articles are well written and informative, the remainder of the book is mostly ponderous unsupported assertions and innuendo.It's nothing new to those who've read a bit about this stuff before.

Regarding the "updated for the real estate bubble" claims:The real estate information is not very well integrated - it looks like it was opportunistically inserted.Ironically, it looks like Shiller and his publishers are trying to "time the market" - rushing a book to market hoping to "catch the top" of another asset class cycle and thus get two data points showing him to be a guru of bubbles.(In addition, his mention of Prop 13 in California is superficial and not informative.)

It also appears at many places that writing has not been updated at all since the first edition.It can make for some confusing reading at times.

Maybe he doesn't want to give away lots of data he's accumulated, but it would be helpful to evaluate his assertions.Without it most of the book does not rise above well informed discussion over a few beers.

indepth analysis on market behavior
In a welcome second edition of the book, Shiller sets up his main theses using the real estate "bubble" (or if you prefer, "boom") example.The first part of the book focuses on a historical analysis of the "bubble" scenarios and uses the recent real estate phenomenon to explain the context of his arguments. He systematically argues against all the reasons cited for the real estate boom (population, construction costs, etc.) In the second part, he focuses on causes for these speculative behaviors of investors and their changing perceptions on risk. His classification of factors into precipitating and amplifying groups is an interesting approach.He then proceeds to explain cultural, political and psychological factors to reason why he thinks investors behave in a "speculative" mode. His attack on the cable TV news media and their "noisy" coverage of business news is an amusing and thought-provoking read.

Any serious investor for the long term (and short term) will find the insights on market behavior very useful in analysing his/her own behavior. The efficient market theory, "greater fool" theory, etc. will also need a more critical look after reading Shiller's comments.

This thought provoking book is an excellent read along with Jeremy Siegel's (one of the authors friends/advisors) book which takes a much more positive perspective on market trends and more importantly, market behavior.

While the strength of the arguments will keep the reader interested, the book is no easy week-end read. It needs to be read in a slow pace to absorb the gravity of the arguments. But that shouldnt deter a serious investor. A must have.

Market psychology with a political ending
This is a chronicle of inverstor perceptions and expectations of themarket both in the late '90s and in other periods, particularly the roaring '20s.Pretty boring stuff.More psychology than finance.

The reason I gave this book one star is that in the final part of the book Shiller makes an political statement that is unrelated to the book's thesis.He campaigns against investing even part of Social Security funds in the stock market.He urges us to reaffirm our group responsibility to the elderly instead.It sounds like something the AARP would have said.

In other parts of the book he talks about what demographic or generational trends may mean for the market or the public perception of the market.When he turns to social security he doesn't mention demographics, however.Of course, demographic trends portend bankruptcy for Social Security as it is currently structured.It's intellectually dishonest to talk about demographics and generational differences in other contexts but omit those factors when it comes to social security.

If he had left out this political lobbying he would have a boring but well researched book.He pulled a bait and switch at the end that detracts from the rest of the book. ... Read more

Book Description

Reviews (694)

An Important Book
The value of Barbara Ehrenreich's troubling, but remarkable investigation of the dearth of opportunity faced by working class Americans, is evident from the gamut of highly emotional reactions it has raised here.

Many readers seem enormously offended simply on the grounds that Ehrenreich was not actually a member of the working class, and only "visited" a life of poverty and toil. These readers take great pains to say that poverty is a serious issue, while discounting the book on the grounds that Ehrenreich - who holds a PhD of all the horrible things! - has no right to raise it. This is a willfully deluded argument which would seem to white wash all kinds of investigative journalism across the board. The attacks on Ehrenreich's credentials appear designed to avoid a discussion of the book itself, a low but familiar critical tactic, shooting the messenger to destroy the message.

It is understandable, however, that people would seek to look away from the experiences that Ehrenreich relates from her sojourns in the waitressing, housekeeping, and retailing industries. The pay is meager, the work is often backbreaking, and the management is consistently exploitative. You may already have suspected this to be the case, but the hard details in Nickel and Dimed - of trying to find housing, of applying for community aid, of unpaid overtime, and a thousand other tiny indignities - confront the reader with the vivid reality of how many of their fellow human beings are forced to live.

Terrific book, terrific writing
I love this book. Some people seem to find it hard to believe that a person can't "get by" on minimum wage, or that people get stuck in low-paying jobs - some claim that "everyone starts at minimum wage in life, but they get promoted and make more", etc. That doesn't always happen, or even happen that often. Ms. Ehrenreich's book shows the struggles she faced in just a short term experiment, but imagine trying to do it for the long haul - there are other crises that occur in the lives of working people - such as, lack of medical insurance - a HUGE problem - and car troubles, to name a couple. In this book, Ms. Ehrenreich was working during the warmer months - God knows what she may have encountered during the winter in Maine or Minnesota!But this terrific book gives a glimpse into the lives of the working poor, even with everyone seemingly going right for Ms. Ehrenreich. By the way, several reviewers have claimed that she has 'contempt' for the poor, and has a snobby, yuppie-ish attitude. Nothing could be further from the truth. I don't know why people make false allegations in a book review, I suspect it's to dissuade others from reading the book and deciding for themselves. Read this book, you'll be glad you did. And pass on a couple copies to your state reps, senators, etc. Teach them a few things. I look forward to future works by Barbara Ehrenreich after reading this - she's wonderful.

The Working Poor of America get a voice
This case study in, as the subtitle says "(Not) Getting by in America" was in many ways surprising. I thought I had a pretty good handle on the fact that there are people in desperate straits out there, that being in desperate straights is awful, and that it would be better if no one had to do it. But some of the problems that are described in this book were things I had never even thought of. One of her main contentions is that many of the working poor are borderline homeless, living, ironically, in expensive motels because they can never get far enough ahead to save the deposit for a real apartment. The lack of medical care and desperate penny-pinching wasn't surprising, but what struck me was that the author, daughter of a union organizer and left wing journalist, was consistently surprised at the importance that her co-workers placed on the jobs they were doing, quite apart from the monetary rewards or managerial incentives.

This struck me as especially tragic, because it just reinforces the fact that most people take satisfaction in doing something well, and it's obvious from the lives these people lead that they aren't in the habit of shirking work. Shouldn't hard, quality work bring you a life with the basics we should all have? A thought provoking, if not especially surprising book.

STAYS with you forever!
I read this book 3 years ago, and I'm STILL experiencing recall and flashbacks to some of its passages. For example: I might be doing nothing much in particular, as I set myself down to dinner at a family style restaurant...and WHAP!!! I will recall a passage from "Nickled and Dimed" concerning the not very pretty or easy plight of many waitresses and cooks who work at such establishments. And "Nickled and Dimed" does it all with a sense of humour, to boot!

Very thought provoking and enlightening for anyone who wants a better understanding the working poor and the flaws in our socio-economic system.

"Nickled and Dimed" should be required reading for every politician and social worker in the United States.

Try Living it for Real
The biggest problem with the "realism" here is the fact that the author knows, throughout all of it, that she will be going back to her 'real' job and some serious money along with her yuppie lifestyle. She doesn't even pretend to want to find out how it feels to live this life for real. Try having $5.00 in your pocket on the 2nd of January to last you the rest of the month, with 2 babies crying because there isn't any heat in your house. And then come to the realization that you REALLY only have $5.00 in your pocket with 2 crying babies and no heat. And try realizing that the reason you are in this situation is because your town was hit by a flash flood that wiped your home away and your insurance company refused to cover the damages because they don't cover "floods." Suddenly you are poor and desperate and nowhere to turn. Try that. Then write your book. The only problem would be finding someone to publish it. The general public still doesn't want to hear about the true struggles of the working poor or what the circumstances were that lead to that poverty... they only want to be entertained and feel "enlightened" because they now "understand the plight of the poor." Sorry... you really don't. Next time you sit down to a full meal, consider there really are people out there eating ketchup on noodles and nothing else. All week... maybe even all month. ... Read more

Book Description

He has been cited by The New York Times Magazine as "probably the most important economist in the world" and by Time as "the world's best-known economist." He has advised an extraordinary range of world leaders and international institutions on the full range of issues related to creating economic success and reducing the world's poverty and misery. Now, at last, he draws on his entire twenty-five-year body of experience to offer a thrilling and inspiring big-picture vision of the keys to economic success in the world today and the steps that are necessary to achieve prosperity for all.

Marrying vivid eyewitness storytelling to his laserlike analysis, Jeffrey Sachs sets the stage by drawing a vivid conceptual map of the world economy and the different categories into which countries fall. Then, in a tour de force of elegance and compression, he explains why, over the past two hundred years, wealth has diverged across the planet in the manner that it has and why the poorest nations have been so markedly unable to escape the cruel vortex of poverty. The groundwork laid, he explains his methods for arriving, like a clinical internist, at a holistic diagnosis of a country's situation and the options it faces. Rather than deliver a worldview to readers from on high, Sachs leads them along the learning path he himself followed, telling the remarkable stories of his own work in Bolivia, Poland, Russia, India, China, and Africa as a way to bring readers to a broad-based understanding of the array of issues countries can face and the way the issues interrelate. He concludes by drawing on everything he has learned to offer an integrated set of solutions to the interwoven economic, political, environmental, and social problems that most frequently hold societies back. In the end, he leaves readers with an understanding, not of how daunting the world's problems are, but how solvable they are-and why making the effort is a matter both of moral obligation and strategic self-interest. A work of profound moral and intellectual vision that grows out of unprecedented real-world experience, The End of Poverty is a road map to a safer, more prosperous future for the world.

From "probably the most important economist in the world" (The New York Times Magazine), legendary for his work around the globe on economies in crisis, a landmark exploration of the roots of economic prosperity and the path out of extreme poverty for the world's poorest citizens. ... Read more

Reviews (14)

Poverty and the Professor's Plan
Jeffrey Sachs, the director of Columbia University's Earth Institute and special advisor to UN Secretary General Kofi Annan, tells us that about 20,000 people die daily due to extreme poverty (that's about 8 million people annually).Extreme poverty is defined as living on less than a dollar a day.About 1 billion people live on less than a dollar a day, one third of which are in sub-Saharan Africa.Thisbook makes us aware of the extent of this tragedy and it offers a global plan to do something about it.

The global plan, of course, requires big money and big debt relief.Sachs has calculated that it would take anywhere from $135 billion to $190 billion per year of donations from rich countriesover the next two decades in order to eliminate extreme poverty by 2025.

Not surprisingly, the conservative critics, such as the economist William Easterly, will disparage this plan as so much utopian social engineering and call instead for a more piecemeal approach (Neoconservatives, however, are different: they have a propensity for lavish spending and risky foreign adventures).

Sachs' plan is not entirely new.The development models of the 1960's and 70's were similar.Huge amounts of money were allocated for building infrastructure and human capital; instead this money ended up in the bank accounts of dictators and corrupt aid officials.The development focus of the 1980's and 90's was more toward ending corruption and state ownership, encouraging deficit spending and free trade.The results have been equally disappointing: still 20,000 die daily.

The Sachs' plan calls for some swift, aggressive, and large-scale "neoliberal" economic interventions.His recommendations on how this $135 to $195 billion should be spent are staggering: it goes from how to plant trees, to soil fertility, to antiviral therapy for Aids, to mosquito nets for malaria, to specially programmed cell phones, to battery charging stations - just to name a few.He proposes that the secretary general of the UN run the overall program (with the requisite oversights), and that this would lift poor countries out of the poverty trap by 2025.This is, admittedly, a tough sell in conservative circles.

It is disingenuous, however, for critics like Easterly and others in this column to call this plan utopian.The goal of ending "extreme" poverty is getting countries to the first rung of the economic ladder so that they can participate in the gobal economy.For example, Sachs considers sweatshop labor a step up from no labor at all - this is hardly a utopian goal.Ending extreme poverty only prepares people and countries for the marketplace, it doesn't make them wealthy.

It is true that an ambitious plan such as Sachs' would have its excesses and unforeseen consequences.One of Sachs' problems is that he accuses people who disagree with him of being uninformed, or, worse yet, in the case of Africa, racist.Surely, someone who became a tenured Harvard professor at aged 28 and saved a handful of countries from economic disaster is not lacking in ego.He would do well to be a little more diplomatic.

From this book one should remember the mission: to save 20,000 lives a day.Instead of labeling proposals left-wing or right-wing, liberal or conservative, we should look deeply within our technocratic selves to end extreme poverty.

Fighting Poverty, says J. Wallis, is a Moral Value.
Sojourners magazine editor Jim Wallis is also an evangelical who has lately been speaking out on the current administration's politics which infer that anything having to do with fighting gay rights or abortion is a moral, Christian thing to do. Wallis says that although he cannot find many references in the Bible regarding abortion or gays, he can find thousands of verses regarding poverty, and fighting poverty is a moral, religious issue folks everywhere should do what they can to end.

Coincidentally--and I don't know whether these gentlemen has ever met--we have another popular economist, Jeff Sachs who is head of Columbia University's Earth Institute--who coincidentally has a hot book out that's causing waves. Causing waves for the end of poverty in our lifetime. Already he's been seen rubbing elbows with Kofi Annan and Bono of U2. He probably would have been a better candidate for the US ambassador to the United Nations...but, I politicize. The main thrust of this work here is that taking into account geography, infrastructure, political leanings, corruption of public officials, and other development issues, we (rich nations) can conceivably end grinding poverty by 2025 in most of the worlds under developed countries. How? By supplying medicine and education in AIDs ravaged areas of Africa and Asia, by aiding production of foodstuffs in these rural area (rather than by putting big thinking growers who tend not to understand the region and the traditions of people), by control of for example mosquitos in South Africa. We will help the poor survive and teach them how to survive.

Sachs says that by taking a pro-active stance, addressing problems that are able to likely be solved with enough appropriate effort, we can improve lives. The Millenium Project Report under the UN is designed to help these areas solve their problems.

The book is about the nature of the world's poverty (in for example Bilar, Pakistan, India, Africa) some of Sach's general observations of the poor and the steps to take to curve poverty.

Why should you read this? Even if you are not a Christian, it seems that as a citizen of this world two of your responsibilities are to feed the hungry and to help the poor. This is a valuable, current day, rational dissertation on a 'zero poverty by 2025' goal. It also teaches that civilization will be judged on how it treats its poor. Let's avoid having a bad report card.

An Exciting Overview
A very exciting book.Professor Sachs describes his round the world adventures in working to solve some of the most severe economic conditions in modern history.Thrilling was his account of making his proposal to an unbathed Eastern European leader into the night (while the leader consumed a bottle of whiskey and smoked an untold number of packs of cigarettes), working through the night to have a written economic strategy proposal by morning and then, months later, watching with fingers crossed the behavior of the economy after his plan was put in place.Jeffrey Sachs is a high stakes player.The well-being of millions is often at stake.Disappointing was his account of how Russian and other world leaders ignored the majority of his proposals to transform the Russian economy.I've read books about Geronimo and Crazy Horse, climbing Everest, and revolutions, and this book was just as exciting.

Thrilling also is that it is possible to, maybe not eliminate, but greatly reduce the number of people living in extreme poverty.Disappointing is the fact that the necessary assistance from the wealthy governments of the world probably will not materialize.

This book is merely an overview of Professor Sachs's plan to eliminate the poorest of the poor.This is about how to give the absolute poorest of people (those living on less than $1 per day) a boost up to the bottom rung of the economic ladder of development.The poorest of the poor, Sachs claims, with no infrastructure, no education and no capital, are often achieving negative per capita economic growth.Sachs claims that, once on the bottom rung of the ladder, these poorest of the poor will then be able to begin climbing.

Professor Sachs suggests using "differential diagnosis" to determine the causes of deep poverty and devise a strategy to alleviate it and begin economic growth.Decades of experience have taught him that different countries and different regions and villages may be impoverished due to different causes.These impediments to growth must be first diagnosed through careful analysis followed by a strategy specifically designed to overcome these impediments.His method is not a one size fits all approach.

This book is not about enhancing development in economies that have are already on the economic ladder and growing.Countries like Bangladesh, although poor, are already on a path to economic growth and, with small accomplishments in read per capita GDP growth every year, will be able to continue to improve standards of living.

Criticism of this book began before the book was even available.It's not surprising that the harshest criticism comes from those who obviously have not read this book.Sachs is often criticized for failing in Russia.The critics never point out, probably because they are not aware, that neither the Russian government nor outside governments and institutions followed his advice.

A popular criticism of this book is that Sachs's solution involves merely throwing money at a problem.This is perhaps the most misguided criticism.Sachs's plan does involve development assistance from wealthy countries; however, the amount he suggests that is needed is no more than countries have already pledged to contribute.Moreover, Sachs is clear that financial aid without a development strategy will produce little results.Sachs proposes an analysis of the impediments to development at the village level followed by a diagnosis and strategy to overcome them.A stable, honest government is essential in carrying out the plan.

Another popular criticism is that aid has shown to be inadequate in addressing the problems of development.Sachs addresses this issue in the book.His argument is that the amount of aid has been so low in the most impoverished countries that it could not possibly have a significant long-term effect.The governments in the United States invest 30% of GDP in public goods - roads, bridges, ports, police and courts, education ($10,000+ per student in many areas) - in order to achieve a growth rate of 2% in real per capita GDP.Should we be surprised that an investment of a few dollars per citizen is ineffective in Africa?

Sachs is also criticized for suggesting that aid be given to corrupt governments where the money will merely end up in an off shore bank account.Sachs is very clear throughout the book that it is imperative that the recipient countries devise and implement a poverty reduction strategy and stick to it.Countries that are not committed to this "need not apply".

In the end, Professor Sachs has made a good proposal that WILL be effective in lifting hundreds of millions of people out of deep poverty and a track record to prove it.Unfortunately, his plan WILL NOT be implemented primarily because of resistance from Washington.

Fascinating look at development economics
Professor Sachs gives a great tour of the world and its economic problems.He gives personal accounts of helping the economies of Bolivia, Poland, India, Russia and to a limited extent China.Most attempts at helping were successful (Russia, which had deeper and more entrenched problems, was a notable exception).Sachs gives sound advice on what works and what doesn't in really really poor countries.He also lays out how little it would take from America and other developed nations to make it all happen.

The one downside is that for Sachs' plan to work, foreign governments have to be willing to cooperate.It's kind of a Catch-22.The US is not willing to donate large amounts of money if it is used poorly, and foreign governments aren't going to be able to spend wisely if they don't have very much. But really - we are spending hundreds of billions fighting the war in Iraq to "help the Iraqi people".But we could help many more people much more efficiently if we just committed to do it.

Overall, one of the most interesting economics books I have ever read (and I have read a few).

A few problems
If there is a more tireless and indefatigable advocate for the poor and downtrodden, and a more vigorous campaigner fighting the evils of poverty in dozens of countries around the world than Mr. Sachs, I don't know who it is. Sach's book provides a sweeping and compelling overview of the dire effects of poverty and the possibilities for aid and assistance, economic reform, and development in third world countries, discussing the successes and failures in many countries and how and why they either failed or succeeded.

Before I get into the rest of my review, I should say something about my own prior and perhaps naive views on foreign aid. Before reading Mr. Sach's book, I believed in helping poor countries as much as possible and putting as much money into it as one could afford. Unfortunately, after reading his book, I was somewhat dismayed to find that so much of what he said could just as easily be used to argue against it. So, like a number of the reviewers here, although I agree that some sort of action is necessary, most of these solutions unfortunately still seem to come down to throwing more money at what in many cases have already turned out to be bottomless pits, lining local dictator's and beaurocrat's pockets and accomplishing very little else in the way of long-term gain. One shudders at the number of countries in Africa where aid is desperately needed and yet so little seems to reach the actual populace, not to mention several former Soviet countries, such as Azerbaijan and Turkmenistan, and countries like Cambodia, that have similar if not worse situations.

One of Mr. Sach's favorite countries, for example, is Ethiopia, one of the world's poorest nations, where less than 1 dollar is spent per year per person on medical aid. However, Ethiopia still has not come to grips with its population problem, and every generation or about 20 years, there is another famine and the world sends vast amounts of food and money to rescue the starving populace.

This happened back in the 60s, and again in the 80s. That one I remember well because of all the TV ads featuring actors/actresses like Sally Struthers, one of the stars from the TV sitcom, All in the Family. While this generosity is commendable, nothing had changed since the 60s, and Ethiopia was again starving as a result of a couple of years of crop failures. Again, the U.S. and the world again sent huge amounts of aid, which did save many lives, but again, it just postpones Ethiopia's need to deal with the population issue in a more realistic and timely way.

Although I learned much about the different circumstances and strengths and weaknesses of many countries around the world in regard to their economic problems and opportunities, sometimes the book tantalizes as much as it explains. For example, Mr. Sachs discusses the amazing progress China has achieved, contrasting that with the failure of many Latin American countries to continue to progress, not to mention the problems of Russia. He attributes the success of China to the development of TVEs (township and village enterprises), which became small but dynamic production and profit centers, as opposed to the inefficient Soviet state operations, and the failure to develop true capitalistic institutions where profits are plowed back into capital spending, growth, and expansion rather than into the new elite industrial leadership's pockets.

However, this doesn't really explain why local village enterprises in China really succeeded over the larger state concerns in Russia. Larger operations enjoy certain advantages such as economies of scale and access to governmental funds for loans. Deciding to follow up on the question, I did a Google search and came up with the following excerpt from the United Nations Industrial Development Organization document number 4536 (I apologize for the long quote but it provides info that Sachs leaves out, and also, I'm going somewhere with all of this):

"China's township and village enterprises (TVE) are rural, collective economic organizations established at the township or village level. They also include the city branches of township enterprises. TVEs had become a major component of the Chinese economy, contributing significantly to GDP, employing large numbers of people and contributing to social development.

The development of TVEs has varied across China's regions and economic sectors. TVEs in some sectors are hi-tech or export oriented, and they face regional and international competition. However, TVEs in the brick, cement, coking and metal-casting sub-sectors were set up primarily to absorb rural labour, to provide essential low cost products, and to contribute to improving livelihoods in a localised area. In these sectors TVEs relied heavily on direct interventions from local governments for access to resources and marketing opportunities. As a result of the limited exposure of TVEs in these sectors to the market and to market forces, development in these sectors was characterized by expansion, without technology and technique development.

Despite their general dynamism and growth, TVEs still have many disadvantages compared to state owned enterprises (SOE). A key one is the shortage of workers having significant professional skills. Another is the lack of access to finance. These gaps are also found between TVEs in Central China and those in the coastal regions.

While the building material, coking and metal casting sectors provide key inputs to China's economic development and have been a major contributor to China's economic growth over the last 20 years (TVE provide more than half of the total output from these sectors), the level of technology in these sectors is low. Accordingly, TVEs in these sectors are characterized by high pollution levels. Notably, these four TVE sectors account for a staggering one sixth of China's total emissions of CO2. Their average relative energy consumption is 30% to 60% higher than state-owned-enterprise sector using currently available technologies. In addition, the low quality of their products leads to additional energy inefficiencies in product use (notably, poor building materials have low insulation levels, leading to heat loss in buildings). TVE are also major contributors to local air and water pollution and health hazards for employees."

Unfortunately, the impression I get from this article in the way of explanation is that this apparent miracle won't last. The most likely explanation to me for the success of the TVEs is that the interior of China was so backward (it consisting mainly of literally of tens of thousands of small and relatively isolated villages) is that almost any improvement in industrial capability and capacity was a big improvement over what had existed before in the region. The same thing happened in the Soviet Union, where initially industrial output increased due to some fairly simple and basic improvements in manufacturing technology and production. Like the TVE's, they also initially seemed a big success, only later peaking and going into decline. However, the interior of both countries was so backward industrially that almost any improvement was likely to succeed in the short term, whether it was more collectivized as in the case of the Soviet Union, or smaller scale, more private enterprise type operations as in the case of TVE's.

My point, unfortunately, is that we still don't know whether TVE's will truly succeed or not in the long run, as much of the profit can also be explained by the low cost of labor. If labor is cheap enough, you can still make a profit not matter how inefficient and low tech and non-competitive your operation is.

So overall, although I applaud Mr. Sach's willingness to be an advocate for eliminating poverty around the world, we still don't really know what we're doing in many cases economically, and the practical problems are still daunting. Development economics is itself a developing academic area (by the way, John Kenneth Galbraith, an advisor to many U.S. presidents, did his Ph.D. dissertation on farm economics, although he became known mainly for his book, The Age of Affluence), and hopefully we will continue to learn more and be able to apply more rational and scientific solutions to the elimination