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How Markets Fail: Book summary and reviews of How Markets Fail by John Cassidy

How Markets Fail

The Logic of Economic Calamities

by John Cassidy

How Markets Fail by John Cassidy X
How Markets Fail by John Cassidy
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Book Summary

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

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Reviews

Media Reviews

"[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

This information about How Markets Fail was first featured in "The BookBrowse Review" - BookBrowse's membership magazine, and in our weekly "Publishing This Week" newsletter. Publication information is for the USA, and (unless stated otherwise) represents the first print edition. The reviews are necessarily limited to those that were available to us ahead of publication. If you are the publisher or author and feel that they do not properly reflect the range of media opinion now available, send us a message with the mainstream reviews that you would like to see added.

Any "Author Information" displayed below reflects the author's biography at the time this particular book was published.

Reader Reviews

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Bank on the Shadows

Deja vu all over again
Cassidy rehashes the events and psychology that led to the bubble that caused the Great Recession. The first half is a somewhat dry summary of well known economists and a plain language summary of their philosophies. Although much is well known, I did learn a few things. For instance, it was ironic that as I was reading I learned the cleanup cost of the Gulf oil spill would be termed a "Pigovian cost".

The second half I found more interesting especially for the reliance on facts and searchable references. It seems that the amount of subprime mortgages issued is well over $1 Trillion, significantly more than the $200B figure that I have seen in so many other books, publications and live interviews.

I am still amazed that after more than 3 years into the subprime crisis there is no general agreement on what happened, the magnitude of the problem, and, most importantly, what caused it. Cassidy gives his opinion gently, but he is not entirely convincing either.

Nevertheless, an interesting read.

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Author Information

John Cassidy

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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