 Softcover edition | |
| Author | John Cassidy |
|---|---|
| Country | United States |
| Language | English |
| Subject | Economic theory |
| Genre | Nonfiction |
| Publisher | FSG |
Publication date | 2009 |
| Media type | Print (hardback & paperback) |
| Pages | 400 pp. |
| ISBN | 978-0-374-17320-3 |
| Preceded by | Dot.con: The Greatest Story Ever Sold |
How Markets Fail: The Logic of Economic Calamities is a book by economist and journalist John Cassidy. The book was published in 2009 by Farrar, Straus and Giroux.
The book examines the history of economic theory and attempts to diagnose the recent rise and fall of markets, particularly the housing bubble and credit crisis (2007–2009). [1]
How Markets Fail argues against unfettered free-market ideology and supports government regulation in the financial industry. [2]
Kirkus, giving it a starred review, remarked, "Cassidy delivers on the promise of his title, but he also offers a clear-eyed look at economic thinking over the last three centuries, from Adam Smith to Ben Bernanke, and shows how the major theories have played out in practice, often not well." [3] Robert M. Solow of The New Republic said Cassidy lays out well how a competitive market economy in equilibrium will achieve efficient resource allocation. He said that How Markets Fail "should confer on a thoughtful reader a lasting immunity to erroneous free-market sloganeering, whether simpleminded or devious, while still conveying some feeling for what a well-functioning market system can actually do. Both ideas are important." [4]
Robert Pollin of Monthly Review described How Markets Fail as "a work of considerable scope, offering fresh perspectives on a wide range of topics". He said the first two sections summarizing freshwater and saltwater economics "are not dry and intimidating [...] Cassidy’s writing in these chapters is clear and lively." Pollin also credited Cassidy as "the first widely read commentator to give the great financial macroeconomist Hyman Minsky and [...] Monthly Review founding coeditor Paul Sweezy their due, as two of a tiny handful of people who recognized and warned about the patterns". However, Pollin also says the journalist "never focuses seriously on how we might translate the insights of reality-based economics into a workable set of policies and institutions". [5]
Bob Frick recommended it as the best book about the causes of the Great Recession and referred to it as "a damning story of how economics drives government policies that promote bubbles [...] You should read this excellent book". [6] Ivan Fallon of The Independent stated, "He writes more as the economic historian which he is at heart than as the journalist he is in practice, with a cool and authoritative perception of the key elements which caused the huge boom and the even bigger bust of the past decade." [7]
The Globe and Mail 's Janice Gross Stein wrote, "What John Cassidy teaches us in his fluent and lucid narrative of how markets fail is that there is no silver bullet, no single coherent set of ideas that can 'fix' the global economy. [...] Markets have always needed regulation and societies have always needed dynamic, innovative markets." [8] Richard N. Cooper of Foreign Affairs praised it as "highly readable [...] a clear and occasionally colorful exposition of the evolution of relevant economic thought in a way that is accessible to non-economists." [9]
The Economist praised the book, noting that its critique of "free market idolatry" was, in the wake of the 2008 financial crisis, "firmly in the mainstream". [10] The Daily Telegraph 's Jeff Randall called it "excellent", saying Cassidy "is blessed with a rare combination of writing skills and intellectual hinterland, and has produced a fresh and engaging explanation of the calamity [...] His book combines thorough research with scholarly insights and the classy prose that has become his hallmark". Randall said that the author's explanation for how markets fail is as follows: "Presented with what looks like money for nothing, the crowd goes mad." [11]
The Financial Times review by Gillian Tett likewise praised the book as "compelling and persuasive", praising the book's criticism of government's excessive trust in free market principles, and its account of how the "modern economics profession" had "lost its way". [12] Peter Clarke of New Statesman called it "engaging" and wrote that "Cassidy is able to lead us with beguiling lucidity through unfamiliar territory." He argued that the book "does not claim to have all the answers, but it deftly illuminates some crucial problems in the light of our recent experiences." [13] Paul M. Barrett of The New York Times , in a review of both How Markets Fail and Andrew Ross Sorkin's Too Big to Fail, said that the former "offers a brilliant intellectual framework" for Sorkin's narrative. [14] Robert P. Murphy criticized statements Cassidy made against free-market economics in an NPR interview promoting the book, arguing that Cassidy "caricatures the case for free markets" and that the "proper way to avoid bankrupting the taxpayers is to stop bailing out big banks." [15]
Joseph Eugene Stiglitz is an American economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is a former senior vice president and chief economist of the World Bank and is a former member and chairman of the Council of Economic Advisers. He is known for his support of Georgist public finance theory and for his critical view of the management of globalization, of laissez-faire economists, and of international institutions such as the International Monetary Fund and the World Bank.
George Arthur Akerlof is an American economist who is a university professor at the McCourt School of Public Policy at Georgetown University and Koshland Professor of Economics Emeritus at the University of California, Berkeley. Akerlof was awarded 2001 Nobel Memorial Prize in Economic Sciences, jointly with Michael Spence and Joseph Stiglitz, "for their analyses of markets with asymmetric information."
Robert Merton Solow, GCIH is an American economist whose work on the theory of economic growth culminated in the exogenous growth model named after him. He is currently Emeritus Institute Professor of Economics at the Massachusetts Institute of Technology, where he has been a professor since 1949. He was awarded the John Bates Clark Medal in 1961, the Nobel Memorial Prize in Economic Sciences in 1987, and the Presidential Medal of Freedom in 2014. Four of his PhD students, George Akerlof, Joseph Stiglitz, Peter Diamond and William Nordhaus later received Nobel Memorial Prizes in Economic Sciences in their own right.
Paul Anthony Samuelson was an American economist, who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he "has done more than any other contemporary economist to raise the level of scientific analysis in economic theory". Economic historian Randall E. Parker has called him the "Father of Modern Economics", and The New York Times considers him to be the "foremost academic economist of the 20th century".
Capital intensity is the amount of fixed or real capital present in relation to other factors of production, especially labor. At the level of either a production process or the aggregate economy, it may be estimated by the capital to labor ratio, such as from the points along a capital/labor isoquant.
Timothy Douglas Harford is an English economist, broadcaster and journalist who lives in Oxford.
Hyman Philip Minsky was an American economist, a professor of economics at Washington University in St. Louis, and a distinguished scholar at the Levy Economics Institute of Bard College. His research attempted to provide an understanding and explanation of the characteristics of financial crises, which he attributed to swings in a potentially fragile financial system. Minsky is sometimes described as a post-Keynesian economist because, in the Keynesian tradition, he supported some government intervention in financial markets, opposed some of the financial deregulation of the 1980s, stressed the importance of the Federal Reserve as a lender of last resort and argued against the over-accumulation of private debt in the financial markets.
Dean Baker is an American macroeconomist who co-founded the Center for Economic and Policy Research (CEPR) with Mark Weisbrot. Baker has been credited as one of the first economists to have identified the 2007–08 United States housing bubble.
Robert Pollin is an American economist. He is a professor of economics at the University of Massachusetts Amherst and founding co-director of its Political Economy Research Institute (PERI). He has been described as a leftist economist and is a supporter of egalitarianism.
John Joseph Cassidy is an American journalist and British expatriate who is a staff writer at The New Yorker. He is a contributor to The New York Review of Books, and previously, an editor at The Sunday Times of London and a deputy editor at the New York Post. He received his undergraduate degree from University College, Oxford, studied at Harvard University on a Harkness Fellowship, and received a master's degree in journalism from Columbia University and a master's in economics from New York University.
Robert James Shiller is an American economist, academic, and best-selling author. As of 2019, he serves as a Sterling Professor of Economics at Yale University and is a fellow at the Yale School of Management's International Center for Finance. Shiller has been a research associate of the National Bureau of Economic Research (NBER) since 1980, was vice president of the American Economic Association in 2005, its president-elect for 2016, and president of the Eastern Economic Association for 2006–2007. He is also the co‑founder and chief economist of the investment management firm MacroMarkets LLC.
Bonds securitizing mortgages are usually treated as a separate class, termed residential mortgage-backed security (RMBS). In that sense, making reference to the general package of financial agreements that typically represents cash yields that are paid to investors and that are supported by cash payments received from homeowners who pay interest and principal according to terms agreed to with their lenders; it is a funding instrument created by the "originator" or "sponsor" of the mortgage loan; without cross-collateralizing individual loans and mortgages, it is a funding instrument that pools the cash flow received from individuals and pays these cash receipts out with waterfall priorities that enable investors to become comfortable with the certainty of receipt of cash at any point in time.
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