How Markets Fail: The Logic of Economic Calamities by John Cassidy. John is a staff writer at The New Yorker and teaches at the Institute for New Economic Thinking. This book was a 2010 Pulitzer Prize Finalist in General Nonfiction.
John has certainly written a very well structured book on economic markets divided into three parts: Utopian Economics, Reality-Based Economics, and The Great Crunch. This provides necessary insights to the very long history of economics. In addition, John shows how they have repeatedly failed from the 1700s to the the 2008 economic crisis.
I certainly enjoyed John sharing multiple points of historic economic failures via the insights of all economic experts at the time.
Utopian Economics
John places part one into a Utopian view. He reveals how attempts to link the macro and micro divisions of the economic model result in errors. At the same time it may not really apply across today’s COVID, gig economy.
Repeatedly the economic experts in the 1800s were very wrong. This view really cannot translate today across the globalized world. He also views the economic crisis of 2008 as a drastic market failure. The development and repair were excluded by the systems of the dominant economic paradigm of the past three decades.” John certainly illustrates how utopians believed in the infallible invisible hand of the market via Adam Smith, David Ricardo, and John Stuart Mill.
Part 2: Reality-based Economics
Comparatively, would it be surprising to see an economic focus regarding The Stern Review on the Economics of Climate Change? This 700-page report was released for the UK Government by economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. This is followed up by a heavy dose of Arthur Cecil Pigou (1877–1959) who dominated British economics but faded after a clash with John Maynard Keynes.
Part 3: The Great Crunch
The closing section of the book is a deep look leading up to the Crash of 2008. Andrew Ross Sorkin’s Too Big to Fail, serves as another excellent read. John details and documents all aspects of the 2008 Crash from the lead-up, to exactly how the crash unfolded. He also reveals how Utopians would have no clue to high speed trading, monopolies, and how loose regulators had evolved to allow this to happen.
In conclusion, How Markets Fail is certainly an excellent book. I would instantly recommend this for readers who are seek to learn about the long complicated (and biased) history of economics. Perhaps it became very clear to me during my read that in the 1800s leading economists could not take into account a global gig economy with widespread mobile phone adoption. This makes many of those early authors simply obsolete.