How Markets Fail: The Logic of Economic Calamities
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How Markets Fail: The Logic of Economic Calamities

4.03 of 5 stars 4.03  ·  rating details  ·  956 ratings  ·  101 reviews
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 whe...more
ebook, 400 pages
Published November 10th 2009 by Farrar, Straus and Giroux (first published 2009)
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This is a timely, lucid, well-structured and well-argued book, perhaps the best of the half-dozen or so economically- and financially-themed tomes that I have read over the past several months. Cassidy, by structuring his work into three distinct parts, opted for what, in my opinion, served best to channel the disparate and historically deep, but quite relevantly interrelated, streams of analysis he has undertaken within. The crux of the entirety is the economic crisis of 2008, an example of dra...more
Rajesh Gajra
Mar 21, 2010 Rajesh Gajra rated it 5 of 5 stars  ·  review of another edition
Recommends it for: everyone
The 2007 and 2008 crisis in world economics and financial markets have spawned many books. This is one book that talks about the same crisis but perhaps in a much more insightful way than any other. Dwelling on the interplay between economic policies and financial markets this book is difficult to put down once you realise the enormous promise it holds when you read the 12 pages of the 'Introduction' chapter. That promise is not belied although John Cassidy, the author, could have been clearer a...more
This is another excellent addition to a library of very good books that came about after the official end of free-market capitalism on 9/18/08.

The mathematics of economics are the most surprising part at the beginning of this book, and you get the sense that John Cassidy introduces them to show he's serious; he's read the texts, he's examined the models; he has a much better grasp on the subject than the average CNBC viewer.

His basic thesis is that the last 30 of years economics have been a wast...more
Tiffoknee the 3rd Conner
This is officially the fourth book I've read about the market crises of 2008. I can probably tell you more about CDOS, ABS, MBS, and CDSs than you'd ever want to know and I'm not even an economics major. This particular book is a fantastic, insightful examination of the general, underlying theories of the efficient market hypothesis and how they have failed on many, many levels as was evidenced by the events of the last few years. Cassidy's writing is accessible, but not dumbed down.
Randa Allam
Brilliant analysis of how we stick to limited theories(Utopian Economics) and repeat our mistakes ... we should allow ourselves to research and study all different Economic theories.
I started reading this a while back as an audiobook almost on a whim on a particularly bad traffic day on I-90. I'm finally done and I think I got what I was expecting to get out of the book. Perhaps my biases on economic philosophies line up with the author's, it was very interesting. I'd recommend this book as a way to get a broad view on the various school of economics. Broadly speaking, the first part of the book talks about what the author calls "Utopian view of Economics" and builds up the...more
“How Markets Fail” or what I learned whilst getting my economics degree. While billed as an explanatory review of the ongoing economic correction that began when the housing bubble began to seriously leak in 2006, John Cassidy’s book can be better understood as a somewhat in-depth treatise of economic thought from the late 1700’s to the day Bear Sterns died. Cassidy spends much of the book trotting out graduate school level depictions of all the economic biggies from Adam Smith to John Maynard K...more
Paul Eckert
Every once in awhile, a book comes along and changes the way you think. John Cassidy’s How Markets Fail is one of those books.

Though I stake no claims in the American political partisan system, I have always believed in the free market. It’s what I was taught in college. Other theories and models of our economy were presented, but usually as an historical context, as if to say “These models worked sometimes, but now they have been discredited.” In other words, the free market model was God, and...more
The first half of the book is a fairly detailed historic review of economic theory relating to perspectives of lassie faire vs. intervention economics. He puts efficient market hypothesis under the microscope. He then lays out the series of events of the last economic debacle, concluding the EMH was proven wrong. He goes on to make a strong case that government intervention was essential, stating that even most conservatives with an understanding of economics would recognize that some level of g...more
Ruth Charchian
Great book. Well researched and historical describing how our free market economic policies have lead us through generations of bubbles, crisis, and other financial crisis. He reviews Adam Smith, Hayek, Milton Friedman and others. Cassidy is a journalist and economist who writes for the New Yorker. He contends that economics has evolved into an almost pure quantitative field that fails to consider how out of touch with reality the field has become. Flawed markets do not always generate good outc...more
George Bradford
This brilliant book explains our economic collapse. In painstaking detail John Cassidy articulates the history of economic thought, academic theories, marketplace realities and government failures that lead to the financial disasters of 2007 - 2009 (and continue to cripple our economy). Anyone interested in how we got into this mess should read "How Markets Fail" by John Cassidy.

It is not an easy read. The author does an excellent job of simplifying economic theories and financial models. But he...more
Anugerah Erlaut
The book starts by introducing the history of economic thoughts. Several names were referred to explain the journey of the economic thought we have today. In the beginning, it was easy to keep tab of the relation between the thoughts and names. With each turn of the page though, it becomes harder and harder.

Once one has passed the thick jungle of names and ideas, the book starts to explain the flaws in the current thoughts in economy. This includes introducing the famous game theory, and terms r...more
Bowing and scraping before the altar of orthodox Keynesianism to an embarassing degree does not make you wrong. Nor does it make you right. It simply makes you irritating. Especially when the facts muddy your nifty theory, as when the author ignores several commentators who ALSO predicted a housing bubble and who think Keynesian economics is nothing but nonsense. (Peter Schiff, anyone? Michael Shedlock?) His work lost a LOT of credibility, at least in my eyes, by making an oversight I can only c...more
This book is about the ideas and ideology that ultimately led to the current financial crisis. I would call the first two parts good summaries of econ classes I have taken, minus the fact that I don’t think he gave free market theory a fair shake. By pitting “Utopian Economics” against “Reality-Based Economics,” he sort of ends up pitting free-market economics against regulation (at least in presentation). I realize he obviously has a much more nuanced understanding of economics than that (which...more
JS Found
I am glad I did not major in economics. Four, six or eight years of economics study and I would have been taught erroneous information like the efficiency of the invisible hand and equilibrium theory. This book is about a major blindspot economists had: the theory that the market would work all the time, making everyone prosperous. When the Great Recession hit, this turned out to be not the case. Cassidy not only gives an engaging and informed history of the that calamity but guides us through a...more
There are books out there on the Great Recession that are daring tales of people who challenged the conventional wisdom and made a killing, or those who got greedy and arrogant and lost huge treasures. This book isn't one of those.

In this book, Cassidy explains—perhaps more clearly than most anyone else—how we got into this mess in the first place. It was, at its root, a problem of perverse incentives and a powerful belief in the self-regulating, self-healing properties of the market. People lik...more
Gordon Howard
The next time a tea-partier friend of yours claims that the current financial mess was caused by ACORN, Jimmy Carter, and Fannie Mae, direct them to this book. Not that the Community Reinvestment Act had NO impact on the real estate bubble, but it was minor compared to other factors. The first two sections of the book present very understandable economic theories from the "classics" (Adam Smith) through Milton Friedman, and then on to the skeptics of the dominant free market economic paradigm. T...more
If you know nothing at all about economics or the 2008 crash, then you will get a lot of useful information out of this book.

I found it to be very tedious. Establishing that classical economics/efficient market theory is nonsense should not take multiple chapters. The author does do a good job toward the end of laying out the evidence for the culpability of Big Finance in creating the subprime meltdown. But it took too long to get to this part and the amount of detail was so great that the fore...more
Paul Bard
I had rather hoped to find anything other than an argument for socialism here. Unfortunately, that's not the case.

Note Bator's taxonomy of market failure, an interesting classification of errors.

Also, Hyman Minsky's theory that capital markets inherently return to unstable states of disequilibrium is an exciting tease, because while we understand that already to some degree, we wish to draw out the significance of instability and study the factors behind stability if possible, which does not see...more
This book should enter "book for every student of economics in the world" database. a 'must read' and great for anyone who wants to understand how the financial system work and its relation to politics. A really good book
Feb 22, 2010 Arithmomaniac rated it 5 of 5 stars  ·  review of another edition
Recommends it for: Economics and current-affairs buffs
Recommended to Arithmomaniac by: The Economist
It seems like it's going to be a dense read, but this almost gripping book is surprisingly comprehensive yet completely relevant. If he gave a little more attention to his opponents, this book would be perfect.
For authors who write for the general public: brevity and presenting complex ideas in simple ways are a virtue. This author hadn't those virtues. Had to give up half way in.
Really enjoyed this one. Very good basic intro to assumptions of neoclassical econ theory and the basic critiques of that theory. easy to follow
Very interesting (considering the subject). Easy to read and understand. I now have a general understanding of credit derivative swaps!
Martin von Haller Groenbaek
Mindchanging expose of the roots of the financial crisis and tour de force of the underlying economic theories.
Pito Salas
Best economics book i read in a while. I havent read many actually.
Rich Biggs
An articulate defense of regulation and intervention.
This book was great in places and painful in others.

On the one hand, I think he does do some wonderful things in the way of reviewing history and certain distortions that have lead to crisis. Part 2 of the book of is fairly accurate.

On the other hand, in his search to put everything on Alan Greenspans doorstep, he left out some very important details. Further he also just got parts of finance, particularly the parts that are important to this crisis, just plain wrong. I can't get too mad at him,...more
John Boettcher
Cassidy was right on some points and wrong on others. Basically, he understands that government intervention into the market makes fluctuations that cannot be pre-determined with any certainty, but that they will happen.

However, he seems to think that Facebook is a monopoly(does that mean he would consider Goodreads as a monopoly of the online book community?). How is Facebook a monopoly? It only has market share until people find something else they like better. Just like every other product o...more
How Markets Fail promotes a view that I think ought to be common sense to Americans, but seems to get lost in today's climate of mindless, media-fueled political hysteria: that free markets, while they provide many benefits that can't be achieved through central planning, will malfunction without rules and external guidance. The 2008 housing crisis and subsequent market collapse was nothing less than a textbook failure of government to step in stop lenders and banks from playing a game that ever...more
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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.
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