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In the wake of the global financial crisis that began in 2007, faith in the rationality of markets has lost ground to a new faith in their irrationality. The problem, Roman Frydman and Michael Goldberg argue, is that both the rational and behavioral theories of the market rest on the same fatal assumption--that markets act mechanically and economic change is fully predictable. In Beyond Mechanical Markets, Frydman and Goldberg show how the failure to abandon this assumption hinders our understanding of how markets work, why price swings help allocate capital to worthy companies, and what role government can and can't play.
The financial crisis, Frydman and Goldberg argue, was made more likely, if not inevitable, by contemporary economic theory, yet its core tenets remain unchanged today. In response, the authors show how imperfect knowledge economics, an approach they pioneered, provides a better understanding of markets and the financial crisis. Frydman and Goldberg deliver a withering critique of the widely accepted view that the boom in equity prices that ended in 2007 was a bubble fueled by herd psychology. They argue, instead, that price swings are driven by individuals' ever-imperfect interpretations of the significance of economic fundamentals for future prices and risk. Because swings are at the heart of a dynamic economy, reforms should aim only to curb their excesses.
Showing why we are being dangerously led astray by thinking of markets as predictably rational or irrational, Beyond Mechanical Markets presents a powerful challenge to conventional economic wisdom that we can't afford to ignore.
From the Back Cover:
"This important book addresses fundamental questions about macroeconomic and financial modeling that too often are sidestepped. It challenges assumptions that are routinely made, both by orthodox theory and by popular 'behavioral' alternatives; still more provocatively, it proposes a way forward, under which economic analysis remains possible, though shorn of some of its pretensions. These are issues with which all students of macroeconomics and finance will have to grapple, and Frydman and Goldberg provide a lively and impassioned opening to what will surely prove one of the crucial debates of our time."--Michael Woodford, author of Interest and Prices
"This is a brilliant, subtle, and powerful book, by far the best work of economic theory that the global financial crisis has yet produced. If any account deserves to rescue formal economics from the dead end that it has reached, and restore the connection between what economists tell you and what actually happens, this is it."--Robert Skidelsky, author of Keynes: Return of the Master
"The economy is not just mechanical; much change is nonroutine. In turn, many important economic decisions are also nonroutine. Based on this insight, Frydman and Goldberg give us a new theory of the business cycle. In market after market, they convincingly argue its realism. What's more, Beyond Mechanical Markets gives us a doctor's prescription for dampening--and possibly even avoiding altogether--the next economic crisis."--George A. Akerlof, Nobel Laureate in Economics
"This book is a milestone. It breaks important new ground in the refoundation that macroeconomics and finance so badly need. The authors' rereading of Keynes will come as a revelation both to Keynesians and behavioralists ."--Edmund S. Phelps, Nobel Laureate in Economics
"The year 2008 saw not only financial failure but the failure of an idea, the economic theory in which financial markets are mechanically determined to settle at equilibrium and economically efficient prices. Roman Frydman and Michael Goldberg demonstrate clearly the fallacy of that idea. Their powerful analysis provides insights which can help us reduce the probability and severity of future crises."--Adair Turner, chairman of Britain's Financial Services Authority
"Beyond Mechanical Markets is a potential turning point in economics. Frydman and Goldberg offer a view that is not only new but almost certainly correct--and that has far-reaching implications. After reading Beyond Mechanical Markets, other economics books seem old-fashioned."--Richard Robb, Columbia University
Title: Beyond Mechanical Markets: Asset Price ...
Publisher: Princeton University Press
Publication Date: 2011
Book Condition: New
Book Description Princeton University Press, Princeton, N.J., 2011. Hardback. Condition: Very Good. xv + 285 pp. dj. Rubber-stamped on top edge. book. Seller Inventory # 32889
Book Description Princeton University Press. Hardcover. Condition: Good. Ex-Library Book - will contain Library Markings. Dust Cover Missing. Book shows minor use. Cover and Binding have minimal wear, and the pages have only minimal creases. Seller Inventory # G0691145776I3N11
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Book Description Princeton University Press, 2011. Hardcover. Condition: Used: Very Good. (NB183 DEC23T7AL) PAPERBACK ARC EDITION, edge/point wear, no underlining or highlighting within. Seller Inventory # 0691145776
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Book Description Princeton University Press, 2011. Hardcover. Condition: Very Good. Seller Inventory # mon0000474733
Book Description Princeton University Press, 2011. Hardcover. Condition: First Edition. Dust Jacket Condition: DJ Very Good. Clean cover. Unmarked clean pages. Attractive copy!. Seller Inventory # 040317007
Book Description Princeton University Press, 2011. Condition: Very Good. Ships from the UK. Former Library book. Great condition for a used book! Minimal wear. Seller Inventory # GRP97303174
Book Description Princeton University Press, 2011. Condition: Good. A+ Customer service! Satisfaction Guaranteed! Book is in Used-Good condition. Pages and cover are clean and intact. Used items may not include supplementary materials such as CDs or access codes. May show signs of minor shelf wear and contain limited notes and highlighting. Seller Inventory # 0691145776-2-4
Book Description Princeton University Press, 2011. Hardcover. Condition: Used: Good. Seller Inventory # SONG0691145776