'The Third Pillar'

Raghuram Rajan, Penguin Press, 433 pages, $30. Raghuram Rajan, a University of Chicago professor and former chief economist for the International Monetary Fund, wants his new book to "reintroduce into the debate" the titular and neglected "third pillar" of community alongside the pillars of market and state that dominate modern society. Rajan said he is seeking "the right balance between them so that society prospers." But he lacks the courage of his convictions. What begins as an incisive critique of how economists and policymakers abandoned community ends as a dismaying illustration of the problem. The opening chapters of "The Third Pillar" sparkle with concrete illustrations of how vibrant local communities contribute to human flourishing in ways typically overlooked. Rajan describes how ranchers benefit by handling livestock trespass cooperatively. Small, young firms, he said, tend to get more and better loans when fewer banks are present, perhaps because less competition means a higher likelihood of retaining a firm's business as it grows. These threads, though, dissolve in the hundreds of pages of vaguely sketched economic history that follow. While ably describing how both a growing market and a growing state have eroded the community's relevance and vitality over time, Rajan gradually redefines the third pillar from "communities whose members live in proximity" to merely democracy or the "voting public." An intrinsically valuable and varied local institution congeals into a homogeneous tool for ensuring that the market and state behave.