the myth of the rational market

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The Myth Of The Rational Market

Author : Justin Fox
ISBN : 9780060599034
Genre : Business & Economics
File Size : 59. 71 MB
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The financial crisis of 2008 and subsequent Great Recession demolished many cherished beliefs—most significantly, the theory that financial markets always get things right. Justin Fox's The Myth of the Rational Market explains where that idea came from, and where it went wrong. As much an intellectual whodunit as a cultural history of the perils and possibilities of risk, it also brings to life the people and ideas that forged modern finance and investing—from the formative days of Wall Street through the Great Depression and into the financial calamities of today. It's a tale featuring professors who made and lost fortunes, battled fiercely over ideas, beat the house at blackjack, wrote bestselling books, and played major roles on the world stage. It's also a story of free-market capitalism's war with itself.

The Myth Of The Rational Market

Author : Justin Fox
ISBN : 9780061885709
Genre : Business & Economics
File Size : 59. 45 MB
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“Do we really need yet another book about the financial crisis? Yes, we do—because this one is different….A must-read for anyone who wants to understand the mess we’re in.” —Paul Krugman, New York Times Book Review “Fox makes business history thrilling.” —St. Louis Post-Dispatch A lively history of ideas, The Myth of the Rational Market by former Time Magazine economics columnist Justin Fox, describes with insight and wit the rise and fall of the world’s most influential investing idea: the efficient markets theory. Both a New York Times bestseller and Notable Book of the Year—longlisted for the Financial Times Business Book of the Year Award and named one of Library Journal Best Business Books of the Year—The Myth of the Rational Market carries readers from the earliest days of Wall Street to the current financial crisis, debunking the long-held myth that the stock market is always right in the process while intelligently exploring the replacement theory of behavioral economics.

The Myth Of The Rational Market

Author : Justin Fox
ISBN : 9780857191045
Genre : Business & Economics
File Size : 84. 54 MB
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Chronicling the rise and fall of the efficient market theory and the century-long making of the modern financial industry, Justin Fox's "The Myth of the Rational Market" is as much an intellectual whodunit as a cultural history of the perils and possibilities of risk. The book brings to life the people and ideas that forged modern finance and investing, from the formative days of Wall Street through the Great Depression and into the financial calamity of today. It's a tale that features professors who made and lost fortunes, battled fiercely over ideas, beat the house in blackjack, wrote bestselling books, and played major roles on the world stage. It's also a tale of Wall Street's evolution, the power of the market to generate wealth and wreak havoc, and free market capitalism's war with itself. The efficient market hypothesis - long part of academic folklore but codified in the 1960s at the University of Chicago - has evolved into a powerful myth. It has been the maker and loser of fortunes, the driver of trillions of dollars, the inspiration for index funds and vast new derivatives markets, and the guidepost for thousands of careers. The theory holds that the market is always right, and that the decisions of millions of rational investors, all acting on information to outsmart one another, always provide the best judge of a stock's value. That myth is crumbling. Celebrated journalist and columnist Fox introduces a new wave of economists and scholars who no longer teach that investors are rational or that the markets are always right. Many of them now agree with Yale professor Robert Shiller that the efficient markets theory "represents one of the most remarkable errors in the history of economic thought." Today the theory has given way to counterintuitive hypotheses about human behavior, psychological models of decision making, and the irrationality of the markets. Investors overreact, underreact, and make irrational decisions based on imperfect data. In his landmark treatment of the history of the world's markets, Fox uncovers the new ideas that may come to drive the market in the century ahead.

The Myth Of The Rational Voter

Author : Bryan Caplan
ISBN : 9781400828821
Genre : Political Science
File Size : 82. 27 MB
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The greatest obstacle to sound economic policy is not entrenched special interests or rampant lobbying, but the popular misconceptions, irrational beliefs, and personal biases held by ordinary voters. This is economist Bryan Caplan's sobering assessment in this provocative and eye-opening book. Caplan argues that voters continually elect politicians who either share their biases or else pretend to, resulting in bad policies winning again and again by popular demand. Boldly calling into question our most basic assumptions about American politics, Caplan contends that democracy fails precisely because it does what voters want. Through an analysis of Americans' voting behavior and opinions on a range of economic issues, he makes the convincing case that noneconomists suffer from four prevailing biases: they underestimate the wisdom of the market mechanism, distrust foreigners, undervalue the benefits of conserving labor, and pessimistically believe the economy is going from bad to worse. Caplan lays out several bold ways to make democratic government work better--for example, urging economic educators to focus on correcting popular misconceptions and recommending that democracies do less and let markets take up the slack. The Myth of the Rational Voter takes an unflinching look at how people who vote under the influence of false beliefs ultimately end up with government that delivers lousy results. With the upcoming presidential election season drawing nearer, this thought-provoking book is sure to spark a long-overdue reappraisal of our elective system.

The Myth Of The Free Market

Author : Mark Anthony Martinez
ISBN : 9781565492677
Genre : Business & Economics
File Size : 45. 32 MB
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* Explains how the 2008 financial meltdown came about and how to revitalize global and domestic economies * Shows how capitalist economies developed and why the state matters in their functioning Free market purists claim that the state is an inefficient institution that does little for society beyond providing stability and protection. The activities related to distributing resources and economic growth, they say, are better left to the invisible hand of the marketplace. These notions now seem tragically misguided in the wake of the 2008 market collapse and bailout. Mark Martinez describes how the flawed myth of the "invisible hand" distorted our understanding of how modern capitalist markets developed and actually work. Martinez draws from history to illustrate that political processes and the state are not only instrumental in making capitalist markets work but that there would be no capitalist markets or wealth creation without state intervention. He brings his story up to the present day to show how the seeds of an unprecedented government intervention in the financial markets were sown in past actions. The Myth of the Free Market is a fascinating and accessible introduction to comparative economic systems as well as an incisive refutation of the standard mantras of neoclassical free market economic theory.

The Myth Of Democratic Failure

Author : Donald A. Wittman
ISBN : 0226904237
Genre : Political Science
File Size : 43. 3 MB
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This book refutes one of the cornerstone beliefs of economics and political science: that economic markets are more efficient than the processes and institutions of democratic government. Wittman first considers the characteristic of efficient markets—informed, rational participants competing for well-defined and easily transferred property rights—and explains how they operate in democratic politics. He then analyzes how specific political institutions are organized to operate efficiently. "Markets" such as the the Congress in the United States, bureaucracies, and pressure groups, he demonstrates, contribute to efficient political outcomes. He also provides a theory of institutional design to explain how these political "markets" arise. Finally, Wittman addresses the methodological shortcomings of analyses of political market failure, and offers his own suggestions for a more effective research strategy. Ultimately, he demonstrates that nearly all of the arguments claiming that economic markets are efficient apply equally well to democratic political markets; and, conversely, that economic models of political failure are not more valid than the analogous arguments for economic market failure.

The Myth Of The Closed Mind

Author : Ray Scott Percival
ISBN : 9780812697957
Genre : Philosophy
File Size : 30. 17 MB
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“It’s like talking to a brick wall” and “We’ll have to agree to disagree” are popular sayings referring to the frustrating experience of discussing issues with people who seem to be beyond the reach of argument. It’s often claimed that some people—fundamentalists or fanatics—are indeed sealed off from rational criticism. And every month new pop psychology books appear, describing the dumb ways ordinary people make decisions, as revealed by psychological experiments. The conclusion is that all or most people are fundamentally irrational. Ray Scott Percival sets out to demolish the whole notion of the closed mind and of human irrationality. There is a difference between making mistakes and being irrational. Though humans are prone to mistakes, they remain rational. In fact, making mistakes is a sign of rationality: a totally non-rational entity could not make a mistake. Rationality does not mean absence of error; it means the possibility of correcting error in the light of criticism. In this sense, all human beliefs are rational: they are all vulnerable to being abandoned when shown to be faulty. Percival agrees that people cling stubbornly to their beliefs, but he maintains that not being too ready to abandon one’s beliefs is rational.

Black Monday

Author : Tim Metz
ISBN : 1587982145
Genre : Business & Economics
File Size : 21. 27 MB
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Detailed reading about the events and factors involved in the devastating stock market crash of October 19, 1987.

Adaptive Markets

Author : Andrew W. Lo
ISBN : 9781400887767
Genre : Business & Economics
File Size : 61. 99 MB
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A new, evolutionary explanation of markets and investor behavior Half of all Americans have money in the stock market, yet economists can't agree on whether investors and markets are rational and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists believe—and as financial bubbles, crashes, and crises suggest. This is one of the biggest debates in economics and the value or futility of investment management and financial regulation hang on the outcome. In this groundbreaking book, Andrew Lo cuts through this debate with a new framework, the Adaptive Markets Hypothesis, in which rationality and irrationality coexist. Drawing on psychology, evolutionary biology, neuroscience, artificial intelligence, and other fields, Adaptive Markets shows that the theory of market efficiency isn't wrong but merely incomplete. When markets are unstable, investors react instinctively, creating inefficiencies for others to exploit. Lo's new paradigm explains how financial evolution shapes behavior and markets at the speed of thought—a fact revealed by swings between stability and crisis, profit and loss, and innovation and regulation. A fascinating intellectual journey filled with compelling stories, Adaptive Markets starts with the origins of market efficiency and its failures, turns to the foundations of investor behavior, and concludes with practical implications—including how hedge funds have become the Galápagos Islands of finance, what really happened in the 2008 meltdown, and how we might avoid future crises. An ambitious new answer to fundamental questions in economics, Adaptive Markets is essential reading for anyone who wants to know how markets really work.

The Rise And Fall Of Homo Economicus

Author : Yannis Papadogiannis
ISBN : 1499646674
Genre : Business & Economics
File Size : 61. 57 MB
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For financial journalist Yannis Papadogiannis, the problem with the economic science that failed to predict the financial crisis that began unfolding in 2007 is clear. While modern economic theory relies on rational humans, The Rise and Fall of Homo Economicus busts the myth of the rational human wide open, demonstrating how, in the real world, Homo sapiens are far from fully rational creatures. Papadogiannis walks readers through the history of modern economics and reveals a consistent pattern of certainty and the illusion of control among economists leading into every crisis since the seventeenth century. He presents findings from disciplines such as neuroscience, psychology, and sociology that overturn the economist's idealized view of human nature, revealing that rationality is but one quality ruling behavior. In terms that anyone can understand, and drawing from a vast bibliography of well-known references, the book contrasts the imaginary universe of modern economics with the complex, dynamic, chaotic reality that more accurately describes our existence. A stinging indictment of economic science for its role in creating the crisis of 2007, The Rise and Fall of Homo Economicus is a must-read for anyone interested in understanding how our society functions or exploring ways to make economic science better serve us.

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