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How Markets Fail: The Logic of Economic Calamities | [John Cassidy]

How Markets Fail: The Logic of Economic Calamities

Behind the alarming headlines about job losses, bank bailouts, and corporate greed, there is a little-known story of bad ideas. For 50 years or more, economists have been busy developing elegant theories of how markets work - how they facilitate innovation, wealth creation, and an efficient allocation of society's resources. But what about when markets don't work?
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Publisher's Summary

Behind the alarming headlines about job losses, bank bailouts, and corporate greed, there is a little-known story of bad ideas. For 50 years or more, economists have been busy developing elegant theories of how markets work - how they facilitate innovation, wealth creation, and an efficient allocation of society's resources. But what about when markets don't work? What about when they lead to stock-market bubbles, glaring inequality, polluted rivers, real-estate crashes, and credit crunches?

In How Markets Fail, John Cassidy describes the rising influence of what he calls utopian economics, thinking that is blind to how real people act and which denies the many ways an unregulated free market can produce disastrous unintended consequences. He then looks to the leading edge of economic theory - including behavioral economics - to offer a new understanding of the economy, one that casts aside the old assumption that people and firms make decisions purely on the basis of rational self-interest.

Taking the global financial crisis and current recession as his starting point, Cassidy explores a world in which everybody is connected and social contagion is the norm. In such an environment, he shows, individual behavioral biases and kinks - such as overconfidence, envy, copy-cat behavior, and myopia - often give rise to troubling macroeconomic phenomena, such as oil-price spikes, CEO greed cycles, and boom-and-bust waves in housing. These are the inevitable outcomes of what Cassidy refers to as "rational irrationality" - self-serving behavior in a modern market setting.

Combining on-the-ground reporting, clear explanations of esoteric economic theories, and even a little crystal-ball gazing, Cassidy warns that in today's economic crisis, conforming to antiquated orthodoxies isn't just misguided - it's downright dangerous. How Markets Fail offers a new, enlightening way to understand the force of the irrational in our volatile global econ...

©2009 John Cassidy; (P)2009 Blackstone Audio, Inc.

What the Critics Say

"[A]n elegant, readable treatise on economics, swathed in current headlines....Cassidy writes with terrific clarity and a finely tuned sense of moral outrage, yielding a superb book." (Kirkus Reviews)

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  •  
    Timothy 11-28-10
    Timothy 11-28-10 Member Since 2010
    HELPFUL VOTES
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    "Fantastic and Thourough Review of Economics"

    After reading many recent books on economics, this one is the most comprehensive. John takes us through the history of economic theory to the recent play-by-play events of recent world economic events. I am particularly attracted to the suggestions provided at the end of the book regarding what interventions are required in order to prevent economic upheaval for future generations. The Chicago School of Utopian Economics is DEAD. Anyone who subscribes to the unfettered capitalistic model is either a fool or has been in a comma for the past five years. John explains the importance of a hybrid economic system whereby restrictions are implemented by government in a mindful way so as not to hamper the creative energies of the free market. John Maynard Keynes
    has essentially won the day, as it was his thought that Capitalism will undoubtedly fall on its ass and government will need to jump in to save the day. So TRUE. There are aspects of a free market (capitalism) that are great, but to be left on its own is the biggest of mistakes. Rules regarding executive pay and other practical restrictions have yet to be implemented in the US. If they are not implemented, we will face a repeat performance as humans are inclined to extreme greed and selfish, immoral behavior if they can get away with it. This would be an excellent text for a graduate level introduction to economics. I could listen to it 10 times and continue to learn new insights. WELL DONE JOHN CASSIDY. FANTASTIC!!

    4 of 6 people found this review helpful
  •  
    Kenneth LEESBURG, VA, United States 09-14-10
    Kenneth LEESBURG, VA, United States 09-14-10 Member Since 2005

    Old & fat, but strong; American, Chinese, & Indian (sort of); Ph.D. in C.S.; strategy, economics & stability theory; trees & machining.

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    "My Pick for Best Book, 2010"

    The book explains the history of economic though about market stability in significant depth. Like all good histories it is organized around a story, the story of two competing ideas.

    The first idea is Keynesian economics which recognized that some markets possess positive feedback, which is inherently unstable. The Keynesian model suggested that a central role for governments was to intervene in order to partially stabilize these markets. However, this failed in part because market participants could adapt to the government intervention far faster than the government could adapt to market changes. The resulting combination of government intervention and a market that anticipates and accounts for government intervention is even more unstable, and has the added problem that wealth is sucked out of the government, to savvy market players.

    The narrative suggests that the competing idea has been something that I will call ???Friedmonian??? economics, which argued that markets are nearly perfect information machines. This model leads naturally to a policy of extreme government abstention in all economic matters, which, leads to a kind of lawlessness. Perhaps you can???t (yet) bulldoze your competitor???s factories in the dead of night, but the economic equivalent of this is increasingly endorsed. This had led to a series of bubbles, where a savvy few (often in collusion) have bilked and swindled the economy as a whole. These frauds tend to actually destroy wealth, not just transfer it, so the result is decidedly not good for the whole, even in the statistical sense.

    In the shadow of thesub-prime bubble, the two main economics schools are nearly wholly discredited.

    The author is clearly somewhat sympathetic to the Keynesian theory; I???m too young to think of Keynesianisum as truly distinct from astrology. But I think that the idea of market efficiency is at least as silly, and I'm glad he's willing to say so.

    4 of 6 people found this review helpful
  •  
    Howard Austin, TX, United States 07-26-10
    Howard Austin, TX, United States 07-26-10 Member Since 2003
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    "A Superb History of Enonomic Thought"

    This audiobook was a delightful surprise for me. I have read numerous books on economics beginning with Adam Smith's "Wealth of Nations." I remember suffering through Samuelson's classic text - somehow I was uncomfortable with unrestrained free market capitalism without knowing exactly why. Smith's 'Invisible Hand" has never delivered on its promises. Even today economists such as Murray Rothbard of the Austrian School insist that government intervention has always prevented the "hand" from performing its magic.
    Then, we have the Keynesians who recognize the need for some government intervetion to moderate the business and economic cycles. It, too, in its various versions such as the Neokeynesians
    have failed to deliver.
    To lead up to his main argument about the need for regulating banks, Cassidy has written a clear readable summary and history of economic thought. This, by itself, makes the book a must listen for everyone with interest in such things.
    Cassidy goes on to explain why unfettered free market competition in the.financial world cannot work. With the passage of the bloated financial regulatory bill, we'll how things work out. To have some insight into history as it is happening, the book is an essential audit.



    3 of 5 people found this review helpful
  •  
    Nathan OAKLAND, CA, United States 05-15-13
    Nathan OAKLAND, CA, United States 05-15-13 Member Since 2012
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    "The anatomy of a domino effect of bad decisions."
    Any additional comments?

    I liked this book. There was nothing wrong with the narration or the book. It seemed politically neutral, but I could see anyone from the far right or left disagreeing with that statement. I liked that the author poked holes in so many economic philosophies. There was a lot of economic history crammed into this book. I didn't find any concepts hard to understand but there were times I had to re listen to a few things. The only drawback to this book is that it's a little dry, like it lacks emotion. I think this stems from the author's attempt to stay neutral.

    I'm happy that I read this book and I have a better understanding of economics and the US mortgage meltdown because of it.

    0 of 0 people found this review helpful
  •  
    puck st. louis 10-20-12
    puck st. louis 10-20-12 Member Since 2012
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    "very good and in-depth discussion of the meltdown"
    Would you recommend this audiobook to a friend? If so, why?

    bound to make you right wingers uncomfortable, and finally educating you left-wingers if you can it all be educated. Mr. Cassidy does a brief synopsis of all the relevant economic systems.(Keynes Friedman the Austrian school marx) at the beginning of the book. And then goes on to say what happened in depth do have a market meltdown again. It discusses the mortgage process, the leverage and ultimately he blames Alan Greenspan among others. I would like to see him put the blame equally on these rating agencies but all around great book.


    Which character – as performed by Ralph Cosham – was your favorite?

    excellent


    Any additional comments?

    bound to make you right wingers uncomfortable, and finally educating you left-wingers if you can it all be educated. Mr. Cassidy does a brief synopsis of all the relevant economic systems.(Keynes Friedman the Austrian school marx) at the beginning of the book. And then goes on to say what happened in depth do have a market meltdown again. It discusses the mortgage process, the leverage and ultimately he blames Alan Greenspan among others. I would like to see him put the blame equally on these rating agencies but all around great book.

    0 of 0 people found this review helpful
  •  
    Amanda 10-06-12
    Amanda 10-06-12 Member Since 2011
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    "A detailed history"
    Where does How Markets Fail rank among all the audiobooks you’ve listened to so far?

    The book does a nice job of reviewing the history of markets and provides more detail towards the end about the events that occurred within the past couple of years.


    What did you like best about this story?

    The detail within the past couple of years


    What does Ralph Cosham bring to the story that you wouldn’t experience if you just read the book?

    A reminder of what happened and how we have been through this before.


    Was this a book you wanted to listen to all in one sitting?

    No.


    0 of 0 people found this review helpful
  •  
    Sherrie 06-28-12
    Sherrie 06-28-12 Member Since 2012

    Addicted to books in all forms.

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    "I Wish I Had This Book For First Year Economics"

    The reader is dry and a little boring, which is a shame because the book itself was fascinating. Although anyone with any background in economics may find the first two thirds of the book a repeat of economics 101. Having said that I wish I had this for my intro course, because it was much more concise than what I was given to read.

    In the end I would recommend this to anyone who would like to understand what happened but who has no idea about the theories that the policy advisors were using, or why the banks would make some of the choices they did. Those who have that background may want to rethink buying it for as mentioned, it is only the last third (at most) where Cassidy moves beyond giving a background to economic theory and really talks about why and how markets fail.

    0 of 0 people found this review helpful
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    Marcos Caceres 05-08-12 Member Since 2009
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    "Extremely informative"
    What did you love best about How Markets Fail?

    This books provides a great historical view of market failure. It is extremely informative and devastatingly enlightening.


    What did you like best about this story?

    I quite enjoyed the "long view" that this book takes... it shows that only a few people truly understand how the markets work and constantly work towards optimising profits at the expense of others. It also shows that there is a clear role for governments to play in market economics so we don't constantly end up in economic meltdown.


    Was there a moment in the book that particularly moved you?

    The thesis of the book absolutely shatters the illusion of any pure free market capitalism - without proper government regulation, it is unlikely that the capitalist system will survive... it might even be too late to save it, given the current state of Europe.


    Any additional comments?

    Highly recommend this book.

    0 of 0 people found this review helpful
  •  
    Scott EDEN, VT, United States 05-07-12
    Scott EDEN, VT, United States 05-07-12 Member Since 2011

    Say something about yourself!

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    "Economics Easily Explained"
    What made the experience of listening to How Markets Fail the most enjoyable?

    The beauty of this book is that it took the theories of past economic theory and mainstream ecomnomic theories explaining the high points of these theories in a way a
    layperson can can understand.


    What about Ralph Cosham’s performance did you like?

    Easy to follow.


    Any additional comments?

    A must read to understand why our current economic situation is the way it is at this time.

    0 of 0 people found this review helpful
  •  
    Peter Middleton, WI, United States 05-02-12
    Peter Middleton, WI, United States 05-02-12 Member Since 2008

    Tell us about yourself!I am an avid reader but enjoy listening while waking to work, ironing, doing dishes, etc. Listening to novels is an entirely different experience than reading; a well narrated story is a cross between drama and written fiction. Listening to books on Audible has been a wonderful experience.

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    "Lucid"
    Where does How Markets Fail rank among all the audiobooks you’ve listened to so far?

    In the non fiction category, this is one of the best


    What did you like best about this story?

    Cassidy is a lucid writer explaining the many very complicated economic issues over the last 20 years; these culminated in the market crash of 2008, and he does a great job reviewing the background economics and how the conventional thinkers failed to see what was happening. He does this in a straightforward style easy for non economists like me to understand. This is very important stuff for all the rest of us to understand. Great job!


    What does Ralph Cosham bring to the story that you wouldn’t experience if you just read the book?

    Clear voice, well paced


    If you were to make a film of this book, what would be the tag line be?

    N.A.


    Any additional comments?

    This book enlightened me; I anticipate buying the print version to
    have as a reference for future disasters

    0 of 0 people found this review helpful
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