How Markets Fail: The Logic of Economic Calamities

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Macmillan, Nov 10, 2009 - Business & Economics - 400 pages
27 Reviews

Behind the alarming headlines about job losses, bank bailouts, and corporate greed is a little-known story of bad ideas. For fifty 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 that 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--overconfidence, envy, copycat behavior, and myopia--often give rise to troubling macroeconomic phenomena, such as oil price spikes, CEO greed cycles, and boom-and-bust waves in the housing market. 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 economy.


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Review: How Markets Fail: The Logic of Economic Calamities

User Review  - Balhau - Goodreads

I usually don't give five stars to a book. This is an exception. The book is, simply put, an amazing one. The writer is a very knowledgeable one in terms of economic affairs he is also a very lucid ... Read full review

Review: How Markets Fail: The Logic of Economic Calamities

User Review  - John McDonald - Goodreads

John Cassidy, writes for the New Yorker magazine where treats he treats his readers to a multiplicity of subjects, but is best when he addresses economic, finance, and business issues. An graduate of ... Read full review

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About the author (2009)

John Cassidy is a journalist at The New Yorker and a frequent contributor to The New York Review of Books. He is the author of Dot.con: How America Lost Its Mind and

Money in the Internet Era and lives in New York City.

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