Rereading Kindleberger - Institutions Matter

 

With a new book by Perry Mehrling, Money and Empire: Charles P. Kindleberger and the Dollar System, the interest in Kindleberger's writing and thinking should increase. Of course, most remember him for his work on speculation, Manias, Panics, and Crashes (1978), but he was deep thinker on economic history and the role institutions to affect policies. In an era of mathematical modeling, Kindleberger was a throwback to a different period when looking at institutional structures provided clarity on how market worked or failed. 

He wrote an important history of the Great Depression which is often lost to other works that attempt cast the Depression through a specific economic model lens. He wrote with clarity about the events leading to the Great Depression without a strong bias. It was not a monetarist or Keynesian problem but one based on the failure of policy, foresight, and institutions. 

Kindleberger wrote about the life cycle of nations and the importance of institutional arrangements for well-functioning markets. This was done through digging into the history and not through model abstractions. 

Of course, we need models, but we also need deep institutional analysis to look beyond models and decipher why market failures may exist. To place Kindleberger in context, institutional arrangements matter whether for panic and crashes or policy success and failure. 

Some great Kindleberger quotes plucked by Mehrling for his book,

“The model for the world should be the integrated financial market of a single country, with one money, [and] free movements of capital at long and short term.”

“When markets don’t work, don’t use markets.”

“Governments propose, markets dispose.”