My review [scroll down] of Robert Shiller’s Finance and the Good Society is out in the latest issue of Regulation. A highlight about the finance portion:

On the issue of crises, the main financial crisis in our future is likely to be paying the huge commitments governments have made to government workers, Social Security recipients, and people on Medicare. Shiller does not challenge the idea that these people have a right to some level of support in their old age. But he does suggest having the government give the support in a way that takes account of the burden imposed on those who pay. He writes, “The right to a standard of living in old age is framed in an absolute manner, and so the provision of pension benefits becomes stuck in an ancient system.” His solution? “Government pensions,” writes Shiller, “should instead be indexed to some indicator of taxpayer ability to pay, such as GDP.” So, for example–I’m building on what Shiller suggests–the government could allocate x percent of the budget to Social Security and y percent to Medicare and then adjust payments and benefits annually based on those percentages.

An excerpt in which Shiller minimizes the evil of communism:

Where Shiller’s book is most dissatisfying is in his treatment of government. First, he often understates the evil of government. Second, and related to the first, he treats government as if it is mainly a group of people working for the common good.

Consider his discussion of one of the main atrocities of government in the 20th century: Soviet collectivization of agriculture. Millions of farmers starved because of Stalin’s actions, a fact that Shiller’s Yale colleague, historian Timothy Snyder, recently documented in the blood-curdling book Bloodlands. It’s not that Shiller minimizes the harm. He writes that 11 million people died in the famine of 1932-1933, which, if anything, is probably somewhat of an overestimate, and that the famine was due to collectivization. So what’s the problem? Shiller minimizes the evil intent behind the harm. The deaths, he writes, “reflect government error.” In other words, he sees the deaths as a policy mistake instead of intentional malevolence. In fact, what happened was that Stalin forcibly took grain from millions of Ukrainian farmers, knowing full well that the result would be starvation. Snyder highlights a Soviet government poster that read, “We will destroy the kulaks [Ukrainian farmers] as a class.” The word “error” doesn’t quite describe what happened.