How Markets Fail

The Logic of Economic Calamities

De: John Cassidy

Narrado por: Ralph Cosham

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.

Reseñas de la Crítica

"[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)

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.

Must-read for everyone interested in economics

A clarifying explanation of how Adam Smith's early, simple economic model is dangerous when applied to scaled, inter-obligated, highly-leveraged modern real-life economies influenced by human psychology.

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.

Way more than I expected

I bought this book thinking it would be another book on the current financial crisis; after all, there are so many. I was pleasantly surprised when after a few chapters I realized that this was not at all what the book was about. It does not chronicle the crisis or even how markets have failed catastrophically in the past. Rather it articulates various ways in which free markets can fail to produce efficient outcomes. If you want a history of the current crisis, read "Too Big to Fail" by Andrew Ross Sorkin. It's essentially a blow by blow chronology and a comprehensive one at that. It's worth reading. But this book very skillfully presents a case for how markets are not always the best solution to economic problems. I've learned more from this book than I have from anything I've read in quite a while. I plan to purchase a physical copy and read it again at least once.

Great audiobook: story and narrator.

Very interesting facts and insights. The explanations of the why and how are very clever and mostly easy to understand. The narrator is a plus.