How Markets Fail: The Logic of Economic Calamities Paperback – 26 Aug 2010
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A very good history of economic thought (Economist)
How Markets Fail offers a brilliant intellectual framework . . . fine work (New York Times)
An essential, grittily intellectual, yet compelling guide to the financial debacle of 2009 (Geordie Greig, Evening Standard)
A powerful argument . . . Cassidy makes a compelling case that a return to hands-off economics would be a disaster (BusinessWeek)
This book is a well constructed, thoughtful and cogent account of how capitalism evolved to its current form (Telegraph Books of the Year recommendation)
John Cassidy ... describe[s] that mix of insight and madness that brought the world's system to its knees (FT, Book of the Year recommendation)
Anyone who enjoys a good read can safely embark on this tour with Cassidy as their guide . . . Like his colleague Malcolm Gladwell [at the New Yorker], Cassidy is able to lead us with beguiling lucidity through unfamiliar territory (New Statesman)
About the Author
John Cassidy has covered economics and finance at The New Yorker magazine since 1995, writing on topics ranging from Alan Greenspan to the Iraqi oil industry and English journalism. He is also now a Contributing Editor at Portfolio where he writes the monthly Economics column.
Two of his articles have been nominated for National Magazine Awards: an essay on Karl Marx, which appeared in October, 1997, and an account of the death of the British weapons scientist David Kelly, which was published in December, 2003. He has previously written for Sunday Times in as well as the New York Post, where he edited the Business section and then served as the deputy editor.
In 2002, Cassidy published his first book, Dot.Con. He lives in New York.
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Top Customer Reviews
Cassidy does have a message, eloquently argued: the vast majority of economists, bankers and policy makers of the last three decades have been blindly irresponsible in their wholehearted espousal of the unfettered free market. Indeed, he refers to the ideologies of the Chicago school as "Utopian Economics". His arguments are deep, broad and lucid. He shows, quite irrefutably, how the perfect market, enlightened self interest, full information and other such axioms of the Friedman revolution are disastrously simplistic. The evidence of huge areas of hidden information, beauty contest group psychology and the paradoxical force of game theory outcomes is undeniable. The underlying force of markets, "rational self interest" often or even usually works against the mathematics of supply, demand and perfect information. His analysis of the reality of how bubbles happen and how disturbing they are for traditional economic theories of the market is explosively enlightening.
"How Markets Fail" also looks at the agents behind the disaster of the last two years. Cassidy is especially unforgiving of the once God-like Alan Greenspan. The old Fed Chairman's explanation for his arrogant irresponsibility in allowing - indeed encouraging - two major speculative bubbles (dot-com and sub-prime) to explode unchecked was a pathetic "The problem is..Read more ›
Running through 200 years of economic theory might not enliven the spirits, but it's a measure of Cassidy's achievement that he makes it both informative and entertaining. And it is only through understanding how beliefs about the free market and economic efficiency serve certain interests, and feed into an ideology that uses circular reasoning to justify its relevance, that the contradictions that have imploded so spectacularly can really be understood - and how a theory which emphasises transparency could result in a system that depends on the kind of asymmetries of information and off-balance-sheet accounting that ensures that markets are so opaque and impenetrable that even the bank's own managers don't understand them.
From myths such as the Efficient Market Hypothesis and the rational individual, to the Prisoner's Dilemma (which ensures that we are condemned to act against our own best interests), Cassidy provides a balanced and thought provoking overview of market behaviour, before rounding it off with an explanation of the current crisis.
An essential read for anyone wishing to grasp the fundamental processes at work.
The Free Market and its ideologues
The `free market' ideology (laissez-faire) is an all-compassing way of thinking about the world and about man (the perfect homo aeconomicus) with markets as divine efficient and self-regulating processes.
Its prominent ideologues were A. Smith (the invisible hand of self-interest), F. Hayek (a system of price signals), V. Pareto (an efficient economy), K. Arrow and G. Debreu (the combination of efficiency and social equity), M. Friedman (monetarism), E. Fama (efficient stock markets) and R. Lucas (governmental intervention in the economy is counter-productive).
Criticism (no market nirvana)
For its critics, a free market economy is utopian, based on illusions of stability (bubbles are not aberrations), of rational irrationalities (124 banking crises in the last 40 years) and of predictability (markets don't follow regular patterns).
The prominent critics were J.M. Keynes (governmental intervention is needed in recessions), A. Pigou (no spontaneous coordination of private and social interests), F. Bator (oligo (mono)-polies destroy free markets, no markets for public goods), G. Akerlof and J. Stiglitz (market prices don't reveal all information) and H. Minsky (free market capitalism is inherently unstable).Read more ›
Most Recent Customer Reviews
Very readable, very persuasive; but I'll withhold judgement until I've read Mervyn King's book "The End of Alchemy".Published 4 months ago by William Sellwood
Pretty much what I expected. Solid analysis of radical free market cowboy insanity...but written clearly and calmly.Published 12 months ago by shabidoo
A very thorough, readable, non-technical introduction of economic theory. Highly recommended!Published 12 months ago by Nhi P Nguyen
An important analysis of markets, that realistically exposes how they fail.Published 16 months ago by michael dempsey
Clearly, this book has fake reviewers as it would be inconceviable to give anything but the minimum stars. Read morePublished on 7 Oct. 2012 by THE TRUTH
How Markets Fail by John Cassidy provides a detailed review of economic theories relating to the operations of markets and illustrates the power of ideas; sometimes - bad... Read morePublished on 27 April 2012 by Jean Michel