Search >>
Pulitzer Prize
Pulitzer Prize for Fiction
Pulitzer Prize for Biography
Pulitzer Prize for History
Pulitzer Prize for Nonfiction
National Book Critics Circle Award
National Book Critics Circle Award for Fiction
National Book Critics Circle Award for Biography
National Book Critics Circle Award for Nonfiction
National Book Award
National Book Award for Fiction
National Book Award for Nonfiction
Man Booker Prize
Man Booker Prize
New York Times Best Books
New York Times Best Fiction Books of the Year
New York Times Best Nonfiction Books of the Year
LA Times Book Prize
LA Times Book Prize for Fiction
TIME Magazine Best Books
TIME Magazine Best Fiction Books of the Year
TIME Magazine Best Nonfiction Books of the Year
Amazon.com Best Books
Amazon.com Best Books of the Year
ALA Notable Books
ALA Notable Books - Fiction
ALA Notable Books - Nonfiction
PEN/Faulkner Award
Pen/Faulkner Award
100 Best Novels
The Novel 100: The 100 Greatest Novels of All Time
Modern Library 100 Best Novels of the Century
FAW Best Books of the Year
Best Books of the Decade
Best Books of 2016
Best Books of 2015
Best Books of 2014
Best Books of 2013
Best Books of 2012
Best Books of 2011
Best Books of 2010
Best Books of 2009
Best Books of 2008
Best Books of 2007
Best Books of 2006
Best Books of 2005
Best Books of 2004
Best Books of 2003
Best Books of 2002
Best Books of 2001
Best Books of 2000
Best Books of 1999
Best Books of 1998
Best Books of 1997
Author Honors
New Yorker 20 Under 40 (2010)
New Yorker Twenty Best Young Fiction Writers in America (1999)
Granta Best of Young American Novelists (2007)
Granta Best of Young American Novelists (1996)
Granta Best of Young British Novelists (2003)
MacArthur Fellows in Fiction
National Book Foundation 5 Under 35

How Markets Fail: The Logic of Economic Calamities
JOHN CASSIDY

How Markets Fail: The Logic of Economic Calamities by John Cassidy
59 reviews (2009) (400p)
Pulitzer Prize for Nonfiction Finalist

Visit this book's Amazon.com page >>


Book Description

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.

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.

A Pulitzer Prize Finalist
A New York Public Library Helen Bernstein Book Award Finalist

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.
“Cassidy clearly knows a great deal of economics, and he tells the story extremely well . . . Many of his chapters—on the development of general equilibrium theory (how everything in the economy systematically depends on everything else), for example, or marginalism (why prices are determined by what we're prepared to pay for the very last item of something we buy, rather than the whole amount is worth to us)—would make useful supplementary reading in an undergraduate economics course."—Benjamin Friedman, The New York Times Book Review

“Cassidy clearly knows a great deal of economics, and he tells the story extremely well . . . Many of his chapters—on the development of general equilibrium theory (how everything in the economy systematically depends on everything else), for example, or marginalism (why prices are determined by what we're prepared to pay for the very last item of something we buy, rather than the whole amount is worth to us)—would make useful supplementary reading in an undergraduate economics course."—Benjamin Friedman, The New York Times Book Review

“[How Markets Fail] is more than just an account of the failures of regulators and the self-deception of bankers and homebuyers, although these are well covered. For Mr. Cassidy, the deeper roots of the crisis lie in the enduring appeal of an idea: that society is always best served when individuals are left to pursue their self-interest in free markets."—The Economist

"Federal Reserve Chairman Ben S. Bernanke delivered the wrong speech this week at the Economic Club of Washington. The correct script appears in How Markets Fail, an admirably lucid account of how “utopian economics" drove us to disaster . . . This is a book about how flawed ideas, and the people who promoted them, tipped us into the worst financial crisis since the Great Depression. It's high time, Cassidy says, for the Fed to repudiate the Greenspan Doctrine, the former Fed chief's argument that modern markets—so efficient, so rational—can be counted on to disperse risk and police themselves. There was no point in trying to prick asset bubbles, Alan Greenspan argued, because they can't be detected until they burst . . . How Markets Fail is three books in one. The first traces the rise of free-market theory, taking us from Adam Smith's invisible hand (and highly visible nose) through Friedrich Hayek's description of price signals as a 'system of telecommunications' and on to Greenspan's bubbles . . . The second explores what Cassidy calls 'reality-based economics.' Humans don't really behave like homo economicus, calculating pros and cons with the speed of a Roadrunner supercomputer. The messiness of life tends to gum up the elegant models of the efficient market hypothesis . . . In the third section of the book, Cassidy shows how rational irrationality pumped up the housing bubble and wrecked the financial system. This is a compelling synthesis that derives most of its narrative energy from the author's clarity of thought and exposition."—James Pressley, Bloomberg.com

"In his ambitious How Markets Fail: The Logic of Economic Calamities, Cassidy, an economics writer for The New Yorker, offers a powerful argument that the current generation of investors and policymakers has been manacled by what he calls the ‘utopian' free-market school of economics. In an effort to debunk that 'ideology,' which he sees as holding sway in academia and among policymakers in recent decades, Cassidy marshals a deep understanding of economic intellectual history, deftly explaining the principal ideas of such towering figures as Adam Smith, Friedrich von Hayek, Léon Walras, Kenneth Arrow, Milton Friedman, and Robert Lucas. This long view allows him to place in context the free marketers' notion that self-interest and competition 'equals nirvana.' In the author's words: 'Between the collapse of communism and the outbreak of the subprime crisis, an understandable and justified respect for market forces mutated into a rigid and unquestioning devotion to a particular, and blatantly unrealistic, adaptation of Adam Smith's invisible hand.' And it was this faith, he goes on to say, that led Alan Greenspan, among others, to turn a blind eye to what was happening in the real world of money and business . . . How Markets Fail is a nuanced book. That's a major attraction in an era when shrill commentators bicker crudely about government vs. markets and liberty vs. socialism. Even the portrait of Greenspan, perhaps the closest figure to a villain in Cassidy's account, is drawn with a measure of empathy. Yet this book can provoke angry questions in the mind of the reader. Why did so many smart economists, including Robert Lucas and Eugene Fama, refrain from protesting as their ideas were hijacked and abused by demagogic politicians and messianic think tanks? The scholars knew the exceptions, the qualifications, and the heroic assumptions that lay behind their market models. Why, then, didn't they take issue with the op-ed and cable-TV table-pounders who twisted their thinking? . . . The author doesn't offer the reader any juicy bits of gossip. There aren't any vivid recreations of tense negotiations over an investment bank's future. Yet he brings ideas alive. More important, the reader comes away persuaded that...


John Cassidy Award Stats
Major Prize* Nominations 1  
Unique Books Nominated for a Major Prize* 1  
Pulitzer Prize Wins 0  
Pulitzer Prize Nominations 1 How Markets Fail: The Logic of Economic Calamities ·  
National Book Critics Circle Award Wins 0  
National Book Critics Circle Award Nominations 0  
National Book Award Wins 0  
National Book Award Nominations 0  
Man Booker Prize Wins 0  
Man Booker Prize Nominations 0  
PEN/Faulkner Award Wins 0  
PEN/Faulkner Award Nominations 0  

*Major Prize = Pulitzer Prize, National Book Critics Circle Award, National Book Award, Man Booker Prize, and PEN/Faulkner Award

BACK

Pulitzer Prize | National Book Critics Circle Award | National Book Award | PEN/Faulkner Award | Man Booker Prize | Contact