Two questions predominate in this year's slew of books on economics. The first is the most obvious: how do we get out of this mess? It's a question that has set authors along many roads but they all lead to the same destination: a bigger role for the state and the need for renewed international co-operation. This must have made fine reading on the bedside tables at Brussels and Cannes, as states teetered on the edge of bankruptcy and politicians destroyed what was left of co-operation.

Jeffrey Sachs, in The Price of Civilization: Economics and Ethics After the Fall (Bodley Head, £20), leads the field among those calling for a nicer global capitalism. Sachs portrays an America in which "market institutions run wild over public values", and where the mismanagement of the challenges posed by globalisation have led to massive wealth and power inequalities. He argues for a "revitalisation of civic virtue" and  explicitly, in a way even the centre left has refrained from  a return to government provision of health, education and welfare. The book's rebuttal of America's dominant philosophy  libertarianism  is stinging and direct: its biggest error, Sachs argues, is its starting point, "that individuals can truly find happiness by being left alone". Sachs rains down blow after blow on America's anti-federal lobby, showing that the state and taxation are the price we pay for civilisation. The book was published just two months before Congress forced President Obama into a $4 trillion spending cut and removed his power to raise taxes.

With much of southern Europe in the process of being handed over to "technocrats", as democracy fails to balance the books, a study from Manchester-based research centre CRESC has proved timely. In After the Great Complacence: Financial Crisis and the Politics of Reform (OUP, £25), Ewald Engelen et al argue the global financial crisis was neither an accident born of complexity, nor a fiasco attributable to misregulation, but what they call an "elite debacle". The book is as much about knowledge as it is about economics and concludes that the entire anti-crisis strategy of the global elite has been marked by "technocratic hubris", and has therefore failed. In this context their short, masterly hatchet job on the "30-year experiment" in credit-fuelled growth in Britain should be read by every policy-maker currently engaged in the rhetoric of "rebalancing". It shows how difficult rebalancing will be, in particular because the same financial and political elite that created the debacle remains substantively in charge.

The second big question that has begun to haunt the left and right alike is more fundamental. It may be reduced to the problem: what is money? Debt: The First 5,000 Years (Melville House, £21.99) by Goldsmiths College anthropologist David Graeber has become one of the year's most influential books. Graeber situates the emergence of credit within the rise of class society, the destruction of societies based on "webs of mutual commitment" and the constantly implied threat of physical violence that lies behind all social relations based on money. His fascinating account of Sumerian debt amnesties shows how societies in which debt became unmanageable routinely resorted to general write-downs: he points out that the word for wiping the slate clean meant "to declare freedom" and was etymologically derived from "return to mother". Graeber's account of Mesopotamia has begun to shape thinking among corporations and policymakers. In September the influential Boston Consulting Group modelled a global, systematic write-down of sovereign, consumer and corporate debt, concluding that, without it "we risk the situation spinning out of control".

On the right, too, there is a new fascination with the philosophical and moral basis of money. Detlev Schlichter's Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown (John Wiley, £26.99) outlines what is becoming the new orthodox remedy of the free-market right: a return to the gold standard, the end of "fiat money" and of fractional reserve banking. Schlichter is frank about what this means: a return to regular sharp crises caused by a shortage of credit, to low consumption economies and to perennial deflation. He, too, argues that the current system has benefited elites: banks, bureaucrats  for paper money allows the state to enrich itself in any circumstance  and professional politicians. Schlichter's book, like Graeber's, is a signal that the debate on post-crisis economics is approaching the fundamental question: the dark, deep, Orc-filled dungeon of economics, namely what is capital and why does it exist?

This was of course the question Karl Marx asked. This year David Harvey, the influential Marxist and renowned geographer, produced a revised and updated edition of The Enigma of Capital (Profile, £8.99). It remains the most complete Marxist attempt to situate the global crisis in the context of the irresolvable tensions of a system based on "self-expanding money": "The troubles that have beset the world this last 30 years," Harvey writes, "signal that a limit is looming to continuous capital accumulation that cannot be transcended except by creating fictions that cannot last."

 Paul Mason's Rare Earth will be published in January by OR Books.

 Which economics books would you give?

This is the latest in a spate of books provoked by the world economic crisis and one of the best. Jeffrey Sachs calls himself a "clinical economist". In The End of Poverty he applied his clinician's skills to the distempers of Africa; in this book he turns them to the hubristic and wasteful habits of America. The details of the Fall  if by that he means the collapse of the American banking system in 2008  do not concern him; it is what the Fall tells us about contemporary American capitalism.

In structure, the book is a bit like a medical treatise: the symptoms are identified, their causes diagnosed, the cures prescribed. However, the science is a bit of a veneer. Sachs is a very political doctor. This does not mean he has written a bad book. He is a fine economist and statistician, and if you want to stockpile facts and arguments for radical advocacy, this is the book for you. I had hoped, though, for something more arresting than a millennium manifesto for the Democratic party.

It is also a very American book. This is not just because it is exclusively about the United States  with the existence of a few European countries acknowledged occasionally as reference points; it is suffused with classic American optimism. The "American people" are good, but policy has been captured by the "interests". Dethrone the interests and the goodness of the people will assert itself. American conservatives and radicals both sing to this hymn sheet, differing only about the source of the evil: for the Tea Party it is "big government", for Democrats such as Sachs it is big business. Both find difficulty in explaining why the good people are so often duped by one or the other.

Sachs's list of American diseases is familiar: no jobs or bad jobs for those with poor education; decaying infrastructure; collapse of saving; lagging educational standards; increasing inequality; soaring healthcare costs; rampant corporate dishonesty. The diagnostician traces the source of these evils to the "free market fallacy" leading to "Washington's retreat from public purpose"; to the "new globalisation" which cost jobs, lowered wages, and skewed rewards to the very rich; to social and ethnic fragmentation; and to the domination of politics by "corporate lobbies" and "spin masters of the media", who have distracted the American people with the "relentless drumbeat of consumerism".

Chapter eight, on the techniques of mass persuasion, is full of fascinating details. Did you know that Edward Bernays, the pioneer of public relations and techniques of hidden persuasion, was Freud's nephew? Or that the average American "consumes" information for 11 hours, 48 minutes a day? Or that the internet rewires our neural networks, making us less able to concentrate, and monitors our tastes, giving advertisers unrivalled opportunities to target their messages to its users? All of which should, as they say, give grounds for concern.

Having diagnosed the diseases, our clinical economist writes out his prescriptions. These aim to replace the "distracted" society with the "mindful" society. "Mindfulness", we learn, comes in eight dimensions, and is conveyed along three paths: cognitive, meditative, and practical. These paths lead to eight economic goals for the next 10 years  to "raise employment and quality of work life", "improve the quality of and access to education", "reduce poverty", "avoid environmental catastrophe", "balance the federal budget", "improve governance", "national security", and "raise America's happiness and life satisfaction". The social reform goals can be reconciled with the balanced budget requirement only through a heavy increase in taxes on the rich. Sachs calls for an end to the Bush tax cuts for those with incomes over $250,000, and an increase in the top rate of income tax to 40%, a wealth tax, closing of tax loopholes, tightening tax compliance, and increased taxes on oil and fossil fuels, as well as substantial cuts in defence spending.

Implementation of these ambitious reforms calls for "seven habits of highly effective government". (I can just imagine Sachs and his multi-disciplinary, multi-tasked team jogging down Riverside Drive in New York.) Government must set clear goals and benchmarks, mobilise expertise, make multi-year plans, pay attention to the far future, emasculate the power of the business lobbies, rebuild public management of public projects, and decentralise operational control of programmes to the states, while retaining central tax collection. An idea worth extracting from this mind-numbing regimen is that presidential state of the union speeches should always contain a section describing the implications of actions today for an average American 40 years hence.

Extrication of American politics from the clutches of the "corporatocracy" will require the provision of public money for campaign financing, free media time, a ban on campaign contributions from lobbying firms, and a stop to the "revolving door" between lobbying firms and federal employment. However, Sachs doubts whether effective government can be achieved without the rise of a "credible third party" to break the corrupted Republican-Democratic duopoly. He cites John Anderson in 1980, Ross Perot in 1992 and 1996, and Ralph Nader in 2000 and 2004 as precedents, but prudently omits George Wallace, the racist governor of Alabama, who, in 1968, was the last independent presidential candidate to achieve any votes in the electoral college. Theodore Roosevelt in 1912 would have served his purpose better.

There are at least two omissions from the doctor's diagnosis. The first is that he ignores the role of inadequate demand in causing the current high level of unemployment and unwanted part-time employment, treating it purely as a supply-side problem. Thus, while aiming to reduce unemployment from 9.4% to 5% by 2015, he rejects "macroeconomic measures to boost aggregate demand, including more fiscal stimulus and quantitative easing by the Fed". Instead he offers various supply-side reforms, such as putting "millions of young people currently unemployed" back in school or college, increased job sharing, and job retraining schemes. But current unemployment is both a supply-side and a demand-side problem. Sachs's dislike of Bush-era budget deficits, which combined huge increases in military spending with tax cuts for the rich, is understandable, but to suppose that supply-side measures alone will halve unemployment in four years' time is pie in the sky.

Second, Sachs's diagnosis of America's ills understates the deleterious effect of globalisation. He doesn't question the economics or morality of offshoring American production abroad, regardless of its consequences for American jobs or real wages, simply saying that the winners should compensate the losers. Not only has this not happened, but it is increasingly unlikely to happen, because globalisation has greatly increased the political clout of the winners. Since the 1980s owners of capital have enjoyed not just a big rise in pre-tax earnings, but a substantial cut in tax rates, taking inequality back to levels last seen before the first world war. This has made the task of social democrats like himself that much more difficult. The United States of the 1950s and 60s, which Sachs looks back to as a golden age, did not transfer production abroad, protected itself against imports, and had stringent immigration controls. The wealthy were less rich and less powerful, and there was strong "countervailing" power in the trade unions. All this was swept away by globalisation. But Sachs fails to draw the pretty obvious lesson that globalisation actually destroyed the basis of the plural American society he admires, leaving the "American people" impotent to affect political outcomes.

Finally, Sachs, in my view, has an inadequate grasp of social health or "wellbeing". He identifies the good society with the happy society, praises the King of Bhutan for making "Gross Domestic Happiness" his goal, and faults Americans only for their deluded belief that happiness can be achieved by ever "higher take-home pay and consumption of goods". But there are two problems with making happiness the ultimate goal of economic activity. First of all, we don't actually know enough about what makes people happy. Perhaps everyone living to 90 will increase the sum of "life satisfaction", perhaps not. Second, happiness is not the same as "wellbeing", still less is it the same as "goodness". The ancient Greek concept of eudaimonia, loosely translated as "happiness", is an admirable and desirable state of being, not a subjective state of mind. So "clinical economics" cannot tell you either how to be happy, or why being happy is good. For the latter one needs a philosophy of the good life, which the good doctor lacks.

Robert Skidelsky is professor of political economy at Warwick University.