Economyths: Ten Ways that Economics Get it WrongFrom the inability of wealth to make us happier, to our catastrophic blindness to the credit crunch, "Economyths" reveals ten ways in which economics has failed us all. Forecasters predicted a prosperous year in 2008 for financial markets - in one influential survey the average prediction was for an eleven per cent gain. But by the end of the year, the Standard and Poor's 500 index - a key economic barometer - was down 38 per cent, and major economies were plunging into recession. Even the Queen asked - Why did no one see it coming? An even bigger casualty was the credibility of economics, which for decades has claimed that the economy is a rational, stable, efficient machine, governed by well-understood laws. Mathematician David Orrell traces the history of this idea from its roots in ancient Greece to the financial centres of London and New York, shows how it is mistaken, and proposes new alternatives. "Economyths" explains how the economy is the result of complex and unpredictable processes; how risk models go astray; why the economy is not rational or fair; why no woman (until 2009) had ever won the Nobel Prize for economics; why financial crashes are less Black Swans than part of the landscape; and, finally, how new ideas in mathematics, psychology, and environmentalism are helping to reinvent economics. |
Contents
Introduction | 1 |
The anarchic economy | 9 |
The connected economy | 28 |
Copyright | |
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According agent-based models Arrow-Debreu model atoms banks behaviour billion CDOs cent Chapter companies complex countries crash credit crunch credit default swaps crisis default dynamics ecological economic theory efficient market hypothesis energy engineering equilibrium Eugene Fama example Figure financial markets financial system forecasting fractal Friedman future global Goldman Sachs growth happiness hedge fund Heterodox Economics house prices human idea increased individual inequality institutions investment investors irrational Jevons kind London Madoff mainstream economics mathematical mortgage Nassim neoclassical economics neoclassical economists nomics normal distribution Pareto physics predict price changes price is right problem Pythagorean random rational regulation risk models scientists September 2009 shows social society stable subprime supply and demand symmetry Taleb things tion trading triangle University Press utility Wall Street Walras wealth William Stanley William Stanley Jevons women world economy York