Reviews for How Markets Fail : The Logic of Economic Calamities


Booklist Reviews 2009 November #2
Cassidy, economist and journalist, launches a theoretical attack on Milton Friedman and the Chicago school's free market concepts, calling them Utopian Economics, which Cassidy explains in part one. The author describes his replacement theories in part two, which give market failure a central role, calling them Reality-Based Economics. Drawing on both approaches, in part three he explains in detail his analysis of the financial crisis of 2007-2009, indicating that the subprime boom was a failure of capitalism and the financial crisis was the consequence on decisions made by private firms under deregulation. He concludes with suggestions including banks that create and distribute mortgage securities should be forced to keep approximately one-fifth on their books and federal regulators should have oversight responsibility for mortgage bankers and lenders. Everyone will not agree with the author's theories, and although he denies this is a textbook, it will stir controversy within and outside the classroom. However, the challenging material in this book will limit its appeal to many library patrons. Copyright 2009 Booklist Reviews.

----------------------
Kirkus Reviews 2009 October #2
New Yorker and Condé Nast Portfolio contributor Cassidy (Dot.con: The Greatest Story Ever Sold, 2002) presents an elegant, readable treatise on economics, swathed in current headlines."[P]ursuing a policy of easy money plus deregulation doesn't amount to free market economics; it is a form of crony capitalism," writes the author. The decline of 2007 and collapse of 2008 make convenient handles for the narrative, and players such as Alan Greenspan--busy making the absurd claim that the market economy is inherently stable--make fine symbols for the schools of thought that underlie the whole mess. Conventionally, these come down to the free-market types such as Hayek and Friedman on one hand and interventionists such as Keynes and Galbraith on the other. However, Cassidy does a nice job complicating that picture by drawing on the entire history of economic thought and introducing such overlooked figures as William Stanley Jevons and Leon Walras, who, it turns out, had a great deal to say about the overall subject of the book--namely, why economies can collapse so rapidly. In an ideal world, Cassidy writes, a market is a win-win environment: "Markets," he declares by way of introducing the ever-pleasing Pareto equilibrium into the narrative, "facilitate mutually advantageous trading." Ah, but there are wolves out there in possession of secret information, including players of Ponzi schemes (Madoff) and Ponzi economics (Greenspan et al.). In the case of the subprime mortgage problems that precipitated the current catastrophe, "too many mortgage lenders exploited the information advantage they had over their customers." 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.The dismal science coupled with dismal news--it doesn't make a promising premise, but Cassidy writes with terrific clarity and a finely tuned sense of moral outrage, yielding a superb book. Copyright Kirkus 2009 Kirkus/BPI Communications.All rights reserved.

----------------------
Library Journal Reviews 2009 June #2
Classic economic theory notwithstanding, says New Yorker journalist Cassidy, market decisions aren't usually rational; companies and consumers alike are impacted by global mood swings. Lots out there on the current crash, but this one seems to take a larger view. Copyright 2009 Reed Business Information.

----------------------
Publishers Weekly Reviews 2009 October #1

Market disasters--and the cycle of delusions responsible--receive lively, engaging analysis by Cassidy (Dot.con), a journalist at the New Yorker. The author focuses primarily on the rise and fall of free market ideology and the mostly unrealistic ideal of a self-correcting marketplace. An excellent comprehensive history of the economic thought that led to this kind of utopian economics provides a refresher course in Adam Smith, Friedrich August von Hayek, Kenneth Arrow and Hyman Minsky. Both a narrative and a call to arms, the book provides an intellectual and historical context for the string of denial and bad decisions that led to the disastrous "illusion of harmony," the lure of real estate and the Great Crunch of 2008. 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--and a reform-minded move to shove Wall Street in that direction--can pull us out of the mess in which we've found ourselves. (Nov.)

[Page 43]. Copyright 2009 Reed Business Information.

----------------------