The Great Degeneration: How Institutions Decay and Economies Die.

• Author: Gregg, Samuel
• Position: Book review

The Great Degeneration: How Institutions Decay and Economies Die

By Niall Ferguson

New York: Penguin Press, 2013.

Pp. xi, 176. $26.95 hardcover.

In their search to understand the rise and fall of local, regional, and national economies, economists have in recent decades focused increased attention on the workings and saliency of noneconomic factors such as values and institutions. On one level, this attention marks a growing recognition, at least by some parts (but by no means all) of the economics profession, concerning the limits of approaches based heavily on the mathematics and econometrics that continue to overpopulate so much of contemporary economics literature. But it also reflects many economists' willingness to take into account the insights attained through other disciplines.

In his new book The Great Degeneration, Harvard historian Niall Ferguson draws upon a range of social sciences, including his own field of history, to develop what might be called an extraeconomic explanation for the slowdown in the rate of growth in many economies of North America and Europe. I say extracconomic because economics forms a central part of Ferguson's explanation of the growing sclerosis that manifests itself in the form of phenomena such as aging populations, falling long-term rates of economic growth, and the seemingly insurmountable inability of most Western nations to engage in substantive and lasting reform. Ferguson, however, is very clear that the laws of supply and demand alone do not constitute the only reasons, let alone the primary reasons, for decline. For Ferguson, it is all about institutions and institutional decay. "The Great Recession," he claims, "is merely a symptom of a more profound Great Degeneration" (p. 10).

Though the book is a short one and written for a nonspecialist audience, Ferguson develops a very strong case to illustrate how the hollowing out of the rule of law, the deterioration of representative government into soft despotism, the increasingly crony-capitalist features of today's market economies, and the ongoing implosion of civil society are now costing us dearly. Part of the problem, Ferguson makes clear, is that there is no easy fix to these particular problems. One cannot vote something like rule of law back into existence. A flourishing civil society does not simply spring forth ex nihilio. Unfettering the market from literally tens of thousands of regulations is no easy exercise and cannot be...