Central banking is not rocket science, but neither is it a trivial pursuit. Excellent books have continued to be written about the art and craft of central banking, from Walter Bagehot’s Lombard Street in 1873 to Alan Blinder’s Central Banking in Theory and Practice in 1998. Running a central bank is in one way a little bit like flying a plane or sailing a boat: much of the time standard responses and small adjustments will do just fine, but every so often a situation arises in which fundamental understanding, knowledge of history, and good judgment can make the difference between riding out the storm and crashing. There was no such person in charge in 1929, and the result was disaster. There was one in 2008.

In his earlier scholarly life, Ben Bernanke, the chairman of the Federal Reserve Board, had been a careful student of the general interaction between the financial system and the real economy and especially of its working out in the Great Depression of the 1930s. So he had done his homework. His decisive and innovative actions at the Fed saved our economy from free fall with a possibly catastrophic end. I once non-joked that Bernanke was the Captain Kirk of central banking: he had loaned where no man had loaned before. In a life before turning to government service, first as a member of the Federal Reserve Board, then briefly as chairman of the Council of Economic Advisers, and then returning to the Fed as chairman in 2006, Bernanke was a well-known and highly respected academic economist. (The reader should know that I was one of his teachers in graduate school at MIT, and have remained a friend.) My opinion is that, after a briefly hesitant start as Fed chairman, probably still under the considerable aura of Alan Greenspan, Bernanke rose admirably to a difficult occasion and has been generally right in his judgments and his decisions, and in his willingness and his ability to explain both.

In March 2012, George Washington University invited Bernanke to give four lectures as part of a course devoted to the role of the Federal Reserve in the economy. The lectures are now reproduced in book form, apparently from lightly edited transcripts. Each lecture ends with half a dozen questions from anonymous “students” and Bernanke’s answers. Some of the questions are smart, some less so, in which case Bernanke exhibits the professorial skill of seamlessly answering a slightly different question. We are not told anything about the audience. I imagine a lot of people wanted to hear about the Federal Reserve and the financial crisis from the chairman himself. It’s rather like hearing Admiral Nelson reminisce about the battle of Trafalgar.

Bernanke had been a careful student of the Great Depression.

Whoever the listeners were, they were right to come. The lectures are consistently lucid and informal—maybe a little too anecdotal, but illustrated with many clear and informative slides—and above all intelligent and interesting. There are no revelations or recantations; even if Bernanke had any in mind, this would not be the place for them. A short book such as this has no room for a play-by-play account of the crisis. But it would be difficult to find a better short and not very technical account of what went wrong, and of how the Fed (and the Treasury) managed to keep it from getting much worse. Along the way Bernanke touches on a few delicate or unsettled issues having to do with the goals, the assumptions, and the methods of central banking.

In the five or six decades before the financial crisis, policy discussion inside and outside the Fed was largely concerned with monetary policy and the “dual mandate.” It is the statutory obligation of the Federal Reserve to try—using its main instrument, the capacity to influence or control short-term interest rates—to maintain both high employment and stable prices. (Many other central banks are instructed to focus only on price stability.) It is not easy to pursue two targets when you have only one instrument, one lever to pull, in this case the short-term rate of interest. To begin to see why, imagine a situation in which the unemployment rate is high, so the Fed would like to lower interest rates, but prices are rising too rapidly, so the Fed would like to raise interest rates. What helps with one goal hurts with the other. Another tool is needed. Some highly trained economists argue that such contradictory situations are impossible, to which the succinct rejoinder is: maybe on some other planet. Bernanke has no need to go down this road because this kind of contradiction did not arise during the crisis and its depressed aftermath, and the Fed has correctly kept interest rates very low.