How Markets Fail

The Logic of Economic Calamities

By: John Cassidy

Narrated by: Ralph Cosham

Length: 13 hrs and 15 mins

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.

Critic reviews

"[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)

gets better towards the end

early on there is a lot of economic theory so the beginning part is a little slow. later on you get more storyline which is nice.

Crystal clear explanations of hidden forces

I loved this book. Did I think a book about the recent financial crisis and markets in general, written by an economist, would be riveting? No - but (and don't laugh) this is. It held my attention better than most fiction, and clarified for me (a non-economist for sure) all the forces that led, step by step, to the economic meltdown and the mortgage crisis. I thought I understood, and I did, on a surface level, but after listening to this book I'm much better able to articulate what went wrong. In fact I'm going to start the book over from the beginning to really cement the information in my mind. The narrator is excellent by the way. Not every voice or delivery would have been appropriate to the subject, without being dull. I really recommend this audio recording.

Makes a compelling argument

Smarter people than may extract more cohesive insights from the book however I thought it read more like a textbook rather than a conceptual debate. However, I still do appreciate the content and it has widened my horizons a bit on free markets.

A great review of bubbles and their causes

Takes a while to get through, but well structured and despite covering a lot of ground all of the information is necessary to connect his primary arguement together.

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Three books in one.

Both this book and Alan Greenspan's book "Age of Turbulence" have some stories that blend economics with politics. However, this author and Alan have different economic views. If you are new to economics then I recommend reading or listening to Alan's book first since it is an easier read. Both books touch on Adam Smith's "invisible hand" and John Maynard Keynes' idea of government spending during recessions.

This book is like reading three books in one. The first four hours covers some economists and how their ideas have influenced economic thinking. The next four hours covers examples like spillovers, the prisoner's dilemma, the market for lemons, and Keynes beauty contest. The rest covers musical chairs, the Millennium Bridge, and some of the major events that surround the current housing bubble. For me, I found the middle to be the most enlightening.

Our government has run between the extremes of de-regulation of the airline industry and the "nationalization" of Fannie Mae and Freddie Mac. This book is not a history of bubbles and crashes. While the latest crash is not in tulip bulbs, the ability of governments since then to smooth out the bubbles and crashes appears to be limited.

Best on the fallacies of economic thought

This book is simply the best work I have read (heard) on economic thought and the problems inherent in the basic premises regarding how people behave. This book is best read (heard) after Mark Skousen's "The Making of Modern Economics". This latter book is a thorough introduction to the glory of free-market thinking from Adam Smith up through Milton Friedman. "How Markets Fail" is the antidote to the smugness with which free-marketers often address the rest of us. These two books together should provide the thoughtful person with a great basis for understanding how we come to be where we are today.

Good explanation of economics

Was very pleased to find this audio book very comprehensive on economics. Going forward from where we are today: This book also makes a valuable point very well - Stop the risky financial behaviors of the past... Make more use of our very knowledgeable economic regulators and ramp-up our overseeing of financial instruments and institution dealings on a much wider scope and in more depth, (a more wise moving forward from our recent financial troubled times). I some how feel this audio book may not be popular with many financial institutions.... (if there were to be many more banking and stock market security regulations created).

Really Excellent

John Cassidy's writing is, here and in The New Yorker, almost always exceptionally clear and concise, even when explaining semi-complex mathematical and economic propositions, analyses, hypotheses. And it's very helpful the way he develops his critique from basic premises to historical antecedents to the recent housing bubble and credit crunch as case studies. One wishes that he might have compared the response in the US to that of Europe, but no matter. There are other authors and journalists who have examined that topic.

Good, Solid, Wish it was more encompassing

Wish it was a little broader reaching and touched more types of modern failures. Initially discusses a few historical theories and their creators, touches some smaller points as context for his examples, then focuses, towards the end of the book, on economic failures in only climate change and the housing boom of the early 2000’s. Very clear to understand and apply the principles he discusses. Conclusion was downright preachy.