Like all of us, though few so visibly, Alan Greenspan was forced by the financial crisis of 2008 to question some fundamental assumptions about risk management and economic forecasting. No one with any meaningful role in economic decision making in the world saw beforehand the storm for what it was. How had our models so utterly failed us?
To answer this question, Alan Greenspan embarked on a rigorous and far-reaching multiyear examination of how Homo economicus predicts the economic future, and how it can predict it better. Economic risk is a fact of life in every realm, from home to business to government at all levels. Whether we’re conscious of it or not, we make wagers on the future virtually every day, one way or another. Very often, however, we’re steering by out-of-date maps, when we’re not driven by factors entirely beyond our conscious control.
The Map and the Territory: Risk, Human Nature, and the Future of Forecasting is nothing less than an effort to update our forecasting conceptual grid. It integrates the history of economic prediction, the new work of behavioral economists, and the fruits of the author’s own remarkable career to offer a thrillingly lucid and empirically based grounding in what we can know about economic forecasting and what we can’t.
The book explores how culture is and isn’t destiny and probes what we can predict about the world’s biggest looming challenges, from debt and the reform of the welfare state to natural disasters in an age of global warming.
No map is the territory, but Greenspan’s approach, grounded in his trademark rigor, wisdom, and unprecedented context, ensures that this particular map will assist in safe journeys down many different roads, traveled by individuals, businesses, and the state.
“The Map and the Territory: Risk, Human Nature, and the Future of Forecasting” is a string of loosely connected musings about the economy, economic forecasting, and the impact of the financial crisis. If you have read an economics book in the last 10 years, you will not find much new here. The jacket advertises the book as the result of “a rigorous and far-reaching multiyear examination of how Homo economicus predicts the economic future, and how it can predict it better.” I am not convinced that is true. The book is simply too generalized and disjointed to be influential in any sense.
Greenspan touches on a number of topics, but there are better books on each subject. For example, his discussion of how growth in government benefits has crowded out private savings is the better handled in Edgar Browning’s, “Stealing From Each Other.” Acharya and Richardson’s “Restoring Financial Stability” and “Regulating Wall Street” are still the best books on the financial crisis and how to prevent another.
I expect “The Map and the Territory” to sell wildly, but most readers will find that it does not live up to the hype. Greenspan most likely has very interesting things to write, but sadly he has not produced them here.
About the Author
Alan Greenspan was born in 1926 and reared in the Washington Heights neighborhood of New York City. After studying the clarinet at Juilliard and working as a professional musician, he earned his B.A., M.A., and Ph.D. in economics from New York University. In 1954, he cofounded the economic consulting firm Townsend-Greenspan & Co. From 1974 to 1977, he served as chair of the Council of Economic Advisors under President Gerald Ford. In 1987, President Ronald Reagan appointed him chairman of the Federal Reserve Board, a position he held until his retirement in 2006. He is the author of the number one New York Times bestseller The Age of Turbulence.