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)

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.

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.

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.

great economic book

while most books abound financial markets only focus on the tools and systems, this book covers everything from statistics through behavioural economics, monetary policy, etc...

Good perspective on the 2009 recession.

This audiobook gives a good detailing overview on the 2009 recession. Though the author gave a more socialistic fix to prevent future calamities, I agree with some. Though I enjoyed the ideas and point of view I also believe it is imperative a journalist uphold “journalistic integrity” by giving the series of events in an unbiased view point then putting in the conclusion the point of view.

Good explanation of the financial crisis

I approached this book skeptically. Having read the references to "utopian economics," I feared he would set up a strawman version of free market economists. However, first third of the book was an honest attempt to make the arguments of famous free market economists. The rest of the book isn't an attempt to say they were wrong so much as to show that their models were incomplete.

Cassidy shows that the crisis was not a result of criminal actions, but rather the result of private actors responding to the incentives intrinsic to financial regulations and lack thereof.

He shows how a succession of Republican and Democratic administrations deregulated financial markets, allowing a number of "heads I win, tails you lose" incentive structures to develop which encouraged market players to take systemic risks. Each year, financial markets became more unstable, but - since only low probability events would show the intrinsic instability - the government remained oblivious.

The one economist he is hard on is Alan Greenspan who refused to prick the dot com and housing bubbles by allowing interest rates to rise.

Cassidy is also tough on the mathematically-inclined macroeconomics taught in graduate school in the years leading up to the financial crisis which he says was motivated by solving aesthetic puzzles rather than a desire to understand how the economy works under times of stress and financial instability. Having gone to graduate school in the early 2000s, I largely concur with his assessment.

He shows that once the crisis developed, even conservative economists were relieved to see the government step in to prevent a new great depression, flooding the financial system with cheap loans, injecting taxpayer money into banks, and making a commitment not to allow a repeat of the Lehman collapse.

His fear seems prescient that, as memories of the September 2008 fade, revisionism and disaster myopia would become increasingly common. Many will say the blip wasn't so bad after all, downplaying the massive government intervention that prevented a much much worse outcome. Indeed, many of the 2016 Republican primary candidates demonized the Dodd-Frank regulations enacted to prevent a repeat of the crisis. The 2018 bipartisan reform of Dodd-Frank was fortunately more sensible than full repeal, but financial regulation is still a target of financial sector lobbyists.

Great read on Economics

Does a tremendous job of condensing over 150 years of Economic Theory and how each of those theories can be seen in the 2008-2010 Financial Crisis.

Good comprehensive overview

I thought the author did a great job taking a huge amount of information - about the history of economics all the way from Adam Smith to the recent financial crisis - and put it into one overarching context. It is quite clear from his word choices ("Utopian Economics" vs. "Reality-based economics") which side he is going to come down on, but this is a subject that warrants an opinion rather than dry analysis.

What I liked most about the book was that it answered some of the stray questions that I've had when reading other accounts of what happened during the financial crisis, while putting it all into context.

Excellent book

As an unabashed supporter of free markets, I have looked everywhere for a book to provide an argument for alternatives. This is the first book I’ve encountered that provides an intellectually solid and potent argument in favor of limited government interventions where markets have arguably failed to provide optimal solutions, if any at all.

In and of itself, this is a great feat and the reason why everybody should read this book. However, the book does not offer any solution for times when government interventions have gone wrong. In my view, that is a core weakness.

Government policies can arguably influence markets to provide good solutions, even perhaps, for a long time. The issue has always been, once they’re no longer useful, it’s hard to overturn those policies. Constituencies have formed that benefit from them at the expense of general public and fiercely resist any change. Nevertheless, the book is a fun listen and has a great narration. I highly recommend it.

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.