Gary Gorton’s Slapped in the Face by the Invisible Hand is insightful but not nearly as lively as its title, Eric Falkenstein says:
Alas, most people will find Gorton a bit too dry, too many references, too much math (there are a handful of algebraic equations). Michael Lewis, in contrast, takes the Gladwellian approach to big problems, which is always well received. Indeed, I have seen him an on TV with several different interviewers discussing his latest book, The Big Short.[I expect Russ Roberts at econtalk to interview him and totally agree, notwithstanding the 5 other authors with orthogonal diagnoses he also totally agreed with.]
Lewis is considered an expert because he worked on Wall street for 2 years and wrote Liar’s Poker, an insider’s view of the bluster of rich young men. As anyone who has worked in an industry for a couple decades knows, the impressions of a kid right out of college has after 2 years in a business, no matter how smart and eloquent the sojourner, are invariably quite mistaken. Indeed, Lewis’s main thesis in Liar’s Poker remains a theme in his latest book, The Big Short: finance is mainly an irrelevant Rube’s Goldberg device for paying greedy, selfish people too much money.
He notes that banks actually were shorting some products they were promoting, as if there was a big conspiracy, ignoring the fact that a market requires sellers, and increasing liquidity is a good thing because if every asset must be held to maturity, costs of financing would be much higher, etc.. Further, large financial institutions have many departments, and the fact they have different opinions is about as strange as the fact that America is full of people who disagree on whether tax rates are too high or too low. Ultimately Lewis blames everyone, but especially greedy bankers, and so in a banal sense he is correct.
But Lewis will most assuredly sell more books than Gorton, part of the reason these crises are endogenous.