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Published Nov 2009
400 pages
Genre: History, Current Affairs and Religion
Publication Information
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
"[A] lively, engaging analysis.... Using psychology and behavioral economics, Cassidy presents an excellent argument that the market is not in fact self-correcting, and that only a return to reality-based economics...can pull us out of the mess in which we've found ourselves." - Publishers Weekly
"Starred Review. An elegant, readable treatise on economics, swathed in current headlines ... Cassidy delivers on the promise of his title. [He] writes with terrific clarity and a finely tuned sense of moral outrage, yielding a superb book." - Kirkus Reviews
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Any "Author Information" displayed below reflects the author's biography at the time this particular book was published.
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. He lives in New York City.
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