Forecast: What Physics, Meteorology, and the Natural Sciences Can Teach Us About Economics - Hardcover

Buchanan, Mark

Hardcover

ISBN 10: 1608198510 ISBN 13: 9781608198511

Publisher: Bloomsbury USA, 2013

Synopsis

Picture an early scene from The Wizard of Oz: Dorothy hurries home as a tornado gathers in what was once a clear Kansas sky. Hurriedly, she seeks shelter in the storm cellar under the house, but, finding it locked, takes cover in her bedroom. We all know how that works out for her.

Many investors these days are a bit like Dorothy, putting their faith in something as solid and trustworthy as a house (or, say, real estate). But market disruptions--storms--seem to arrive without warning, leaving us little time to react. Why are we so often blindsided by these things, left outdoors with nothing but our little dogs? More to the point: how did Kansas go from blue skies to tornadoes in such a short time?

In this deeply researched and piercingly intelligent book, physicist Mark Buchanan shows how a simple feedback loop can lead to major consequences, the kind predictable by mathematical models but hard for most people to anticipate. From his unique perspective, Buchanan argues that our basic assumptions about economic markets--that they are for the most part stable, with occasional interruptions--are simply wrong. Markets really act more like the weather: a brief heat wave can become a massive storm in a matter of a few days, or even hours.

The Physics of Finance reimagines the basics of how economics, with consequences that affect everyone.

About this title

About the Author:

Mark Buchanan is a physicist and science writer. He is the author of three previous books, Ubiquity, Nexus, and The Social Atom, and has been an editor of the science journal Nature as well as New Scientist. His articles have appeared in Science, Wired, the New York Times, the Independent, and the Harvard Business Review. He currently writes monthly columns for the financial media outlet Bloomberg View, as well as for Nature Physics. He lives in Dorset, England, with his wife and two dogs.

From Booklist:

Buchanan, physicist and science writer, argues that scientific models of positive feedbacks can be used in economics and finance to predict what is likely and to warn of specific dangers. Positive feedbacks are . . . the process by which small variations in a given system can become increasingly large . . . accelerating how fast things get bigger and leading to consequences far beyond our expectations. We learn most economists continue to believe in the concept of equilibrium—economic systems are inherently stable and self-regulating, tending toward balance; the author urges adopting disequilibrium thinking, which has shown us that ongoing fluctuations in economic and financial systems are quite normal. Buchanan argues that financial crises of all kinds, from short shocks to global economic meltdowns, are like storms in the atmosphere that weather forecasters not only understand . . . but also predict well enough to make a big difference. The use of this scientific approach began after the 2008 financial crisis. This challenging book will appeal to students and library patrons with a background in economics and finance. --Mary Whaley

About this edition

• Publisher: Bloomsbury USA
• Publication date: 2013
• ISBN 10: 1608198510
• ISBN 13: 9781608198511
• Binding: Hardcover
• Edition number: 1
• Number of pages: 272