Laurence Ball argues that the Federal Reserve (the Fed) could—and should—have bailed out Lehman Brothers so that it did not have to declare bankruptcy. He presents compelling evidence that it could have. I argue that the view that the Fed should not bail out Lehman is reasonable under the circumstances the Fed was in at the time. The Lehman bankruptcy is a case study in bailouts and the attendant moral hazard problem that expectations of bailouts create. The lessons learned imply a clear case for appropriate regulatory intervention to solve the problems created when governments cannot commit themselves to not undertake bailouts.

Anand V. Swamy of Williams College reviews “India Is Broken: A People Betrayed, Independence to Today” by Ashoka Mody. The Econlit abstract of this book begins: “Presents a narrative of the modern history of India from the perspectives of successive Indian leaders, chronicling the erosion of social norms and decay of political accountability from 1947 to 2021 that have detrimentally affected the country's economy and political system.”

This study is part of a larger project that was originally conceived to examine the communications function of economics journals for the period since 1890. Research was begun in 1967 and was continued intermittently in the intervening years. The materialfocusing on the periods 1961-64 and 1970-71 was drafted in preliminary form in 1972 and in final form in early 1974. Work dealing with the earlier years remains still in progress. I wish to give my thanks to the several persons whose research assistance was indispensible over the many years of the project. They include Lawrence Cavanagh, Frederick Garzino, Shirley Chiou, Roslind Diamond, and Robert McDougal. I am especially grateful to the editors and reviewers for their comments on the manuscript. The views expressed are those of the author and not of the Federal Reserve Bank of New York.

Households “sort” across neighborhoods according to their wealth and their preferences for public goods, social characteristics, and commuting opportunities. The aggregation of these individual choices in markets and in other institutions influences the supply of amenities and local public goods. Pollution, congestion, and the quality of public education are examples. Over the past decade, advances in economic models of this sorting process have led to a new framework that promises to alter the ways we conceptualize the policy evaluation process in the future. These “equilibrium sorting” models use the properties of market equilibria, together with information on household behavior, to infer structural parameters that characterize preference heterogeneity. The results can be used to develop theoretically consistent predictions for the welfare implications of future policy changes. Analysis is not confined to marginal effects or a partial equilibrium setting. Nor is it limited to prices and quantities. Sorting models can integrate descriptions of how nonmarket goods are generated, estimate how they affect decision making, and, in turn, predict how they will be affected by future policies targeting prices or quantities. Conversely, sorting models can predict how equilibrium prices and quantities will be affected by policies that target product quality, information, or amenities generated by the sorting process. These capabilities are just beginning to be understood and used in applied research. This survey article aims to synthesize the state of knowledge on equilibrium sorting, the new possibilities for policy analysis, and the conceptual and empirical challenges that define the frontiers of the literature.

Dania V. Francis of University of Massachusetts Boston reviews “The Black Tax: 150 Years of Theft, Exploitation, and Dispossession in America” by Andrew W. Kahrl. The Econlit abstract of this book begins: “Discusses the history of racialized tax structures and the predatory practices that flourished within them in the United States, tracing these structures and practices from the Reconstruction through the first two decades of the twenty-first century.”

Rakesh V. Vohra of University of Pennsylvania reviews, “Jane Austen, Game Theorist” by Michael Suk-Young Chwe. The Econlit abstract of this book begins: “Explores the ways in which the core ideas of game theory appear in Jane Austen's novels. Discusses the argument; game theory in context; folk tales and human rights; game theory in Flossie and the Fox; Austen's six novels; Austen's foundations of game theory; Austen's competing models; Austen on what strategic thinking is not; Austen's innovations; Austen on strategic thinking's disadvantages; Austen's intentions; Austen on cluelessness; and real-world cluelessness. Chwe is Associate Professor of Political Science at the University of California, Los Angeles.”

Ran Abramitzky's book, The Mystery of the Kibbutz: Egalitarian Principles in a Capitalist World, tries to answer the questions of why the communal kibbutz worked so well in Israel's formative years and what limits its current success in modern Israel. Initial ideological commitment and the special circumstances of Israel's founding led to unusual success when combined with well-thought-out rules on behavior and entry. Over time, the commitment to socialistic income sharing has not worked so well, given modern technology and global commerce. The author links up these ideas to the broader issue of organizational structure but misses out on some opportunities to test the ideas further.