The Myth of the Rational Market

31 results back to index


pages: 741 words: 179,454

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial independence, financial innovation, financial thriller, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Mikhail Gorbachev, Milgram experiment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, plutocrats, Plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, survivorship bias, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

(1940) Journal of Political Economy. Chapter 8—False Gods, Fake Prophecies 1. Quoted in Justin Fox (2009) The Myth of the Rational Market: A History of Risk, Reward and Delusion on Wall Street, Harper Business, New York: 79. 2. Donald MacKenzie (2008) An Engine, Not a Camera: How Financial Models Shape Markets, MIT Press, Cambridge, Massachusetts: 5. 3. Ibid: 71. 4. Peter Bernstein (2005) Capital Ideas: The Improbable Origins of Modern Wall Street, John Wiley, New Jersey: 60. 5. Ibid: 22. 6. MacKenzie, An Engine, Not a Camera: 62. 7. Quoted in ibid: 50. 8. Quoted in Leonard Silk “The peril behind the takeover boom” (29 December 1985) New York Times. 9. Fox, The Myth of the Rational Market: 98, 99. 10. Johan van Overtveldt (2007) The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionised Economics and Business, Agate Books, Chicago: 271. 11.

John Maynard Keynes (2006) The General Theory of Employment, Interest and Money, Atlantic Books, New Delhi: 140. 29. Alan Greenspan (2007) The Age of Turbulence: Adventures in a New World, Allen Lane, London: 124. 30. Fox, The Myth of the Rational Market: 41. 31. MacKenzie, An Engine, Not a Camera: 95. 32. Ibid: 8–12. 33. van Overtveldt, The Chicago School: 67. 34. Dan Gardner (2008) Risk—The Science and Politics of Fear, Virgin Books, London: 53. 35. van Overtveldt, The Chicago School: 291. 36. Quoted in Greenspan, The Age of Turbulence: 55. 37. Quoted in van Overtveldt, The Chicago School: 172. 38. Quoted in Fox, The Myth of the Rational Market: 269. 39. Daniel Altman “Managing Globalization: Q & A with Joseph Stiglitz” (11 October 2006) The International Herald Tribune. 40. MacKenzie, An Engine, Not a Camera: 24. 41. Kurt Vonnegut Jr (1963) Cat’s Cradle, Holt, Rhinehart & Winston, New York: 75. 42.

Quoted in Peter Watson (2000) A Terrible Beauty: The People and Ideas that Shaped the Modern Minds—A History, Phoenix Press, London: 81. 9. Philip Mirowski (2002) Machine Dreams: Economics Becomes a Cyborg Science, Cambridge University Press, Cambridge: 203, 204. 10. Johan van Overtveldt (2007) The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionised Economics and Business, Agate Books, Chicago: 9. 11. Ibid: 91. 12. Justin Fox (2009) The Myth of the Rational Market: A History of Risk, Reward and Delusion on Wall Street, Harper Business, New York: 252. 13. van Overtveldt, The Chicago School: 85–7. 14. Pierre Bayard (2007) How to Talk About Books You Haven’t Read, Bloomsbury, London. 15. Yergin and Stanislaw, The Commanding Heights: 89. The quote is derived from John Ranelagh’s book, (1991) Thatcher’s People: an insider’s account of the politics, the power, and the personalities, Harper Collins, London.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

"Robert Solow", Alvin Roth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

No one loses face, in this club, for having been wrong.11 Economists were not of a temperament to suffer what they deemed the New Disrespect lying down. Anyhow, it was proving galling to turn the other cheek when reputable news outlets were sneering “What Good Are Economists, Anyway?” (Coy) and “What Went Wrong with Economics?” (Economist), and books from reputable publishers were quick off the mark trumpeting “The Myth of the Rational Market” (Fox) and “A Failure of Capitalism” (Posner). “Is it fair to attack the economics profession? To a large degree, yes.”12 People were of course always welcome to mock at economists in private, which was nothing new, but this seemed to be a different sort of animal. Remonstrants flocked to the talk shows, the newspapers, magazines, and op-ed pages; but beyond that, they also entered the blogosphere in a big way for perhaps the first time.

Foucault, Michel. The Order of Things (New York: Vintage, 1973). Fourcade, Marion. “The Construction of a Global Profession,” American Journal of Sociology 117 (2006): 145–94. Fourcade, Marion. Economists and Societies (Princeton: Princeton University Press, 2009). Foust, Dean, and Aaron Pressman. “Credit Scores: Not So Magic Numbers,” Business Week, February 7, 2008. Fox, Justin. The Myth of the Rational Market (New York: HarperCollins, 2009). Frank, David, and Jay Gabler. Reconstructing the University (Stanford: Stanford University Press, 2006). Frank, Robert. “Flaw in Free Markets: Humans,” New York Times, September 14, 2009. Frank, Thomas. One Market Under God (New York: Anchor, 2000). Frank, Thomas. Pity the Billionaire (New York: Henry Holt, 2012). Frank, Thomas. What’s the Matter with Kansas?

Stiglitz grew more circumspect in outlets that were print-based: see Stiglitz, Freefall . 17 Saskia Sassen, “Too Big to Save,” www.opendemocracy.net, April 1, 2009. 18 www.counterpunch.org/harvey03132009.html. 19 Konzelmann et al., “Governance, Regulation and Financial Market Instability.” 20 For the specifics see Nik-Khah, “Chicago Neoliberalism and the Genesis of the Milton Friedman Institute.” There are some subsequent indications that this fund drive did not go well. 21 Campbell, “Neoliberalism in Crisis.” 22 See, for instance, Callinicos, Bonfire of Illusions; Cassidy, How Markets Fail; Fox, The Myth of the Rational Market; Westbrook, Out of the Crisis; Yves Smith, Econned; Mason, Meltdown; Kaletsky, Capitalism 4.0; Stiglitz, Freefall. 23 The various approaches to social epistemology within the philosophy literature are fascinating; without endorsing any specific position, one can sample the options in Goldman and Whitcomb, Social Epistemology; Kourany, Philosophy of Science after Feminism; Kusch, Knowledge by Agreement; Longino, The Fate of Knowledge; Solomon, Social Empiricism; Fuller, Social Epistemology; Harding, Can Theories Be Refuted?.


Adam Smith: Father of Economics by Jesse Norman

"Robert Solow", active measures, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

Andrei Shleifer, Inefficient Markets, Oxford University Press 2000. A highly readable overview of the history is Justin Fox, The Myth of the Rational Market, Harriman House 2009 Information incentives and efficient markets: see Sanford J. Grossman and Joseph E. Stiglitz, ‘On the Impossibility of Informationally Efficient Markets’, American Economic Review, 70.3, 1980 ‘There is no other proposition in economics which has more solid empirical evidence’: Michael Jensen, ‘Some Anomalous Evidence Regarding Market Efficiency’, Journal of Financial Economics, 6.2–3, 1978. Jensen’s views have since undergone considerable modification; see Fox, The Myth of the Rational Market, Ch. 15 ff. Slave trade and Scotland: the old view that Scotland had little to do with the slave trade has now been exploded.

Riecken and Stanley Schachter, When Prophecy Fails, University of Minnesota Press 1956 Fleischaker, Samuel, On Adam Smith’s Wealth of Nations, Princeton University Press 2004 Folbre, Nancy, Greed, Lust and Gender: A History of Economic Ideas, Oxford University Press 2009 Force, Pierre, Self-Interest before Adam Smith: A Genealogy of Economic Science, Cambridge University Press 2003 Forman-Barzilai, Fonna, Adam Smith and the Circles of Sympathy, Cambridge University Press 2010 Foucault, Michel, The Order of Things: An Archaeology of the Human Sciences, repr. Routledge 2002 Fox, Justin, The Myth of the Rational Market, Harriman House 2009 Friedman, Milton, Essays in Positive Economics, University of Chicago Press 1953 Frydman, Roman and Michael D. Goldberg, Imperfect Knowledge Economics, Princeton University Press 2007 Galbraith, J. K., A History of Economics: The Past as the Present, Penguin 1989 Garber, Peter, Famous First Bubbles: The Fundamentals of Early Manias, MIT Press 2000 Gibbon, Edward, Memoirs of my Life, A.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, bank run, beat the dealer, Benoit Mandelbrot, Black-Scholes formula, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, card file, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discovery of the americas, diversification, diversified portfolio, Edward Glaeser, Edward Thorp, endowment effect, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market design, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, prediction markets, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, stocks for the long run, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

The Myth of the Rational Market A History of Risk, Reward, and Delusion on Wall Street Justin Fox To Allison Contents Introduction: It had been Working So Exceptionally Well Early Days 1. Irving Fisher Loses his Briefcase, and Then his Fortune The first serious try to impose reason and science upon the market comes in the early decades of the twentieth century. It doesn’t work out so well. 2. A Random Walk from Fred Macaulay to Holbrook Working Statistics and mathematics begin to find their way into the economic mainstream in the 1930s, setting the stage for big changes to come. The Rise of the Rational Market 3. Harry Markowitz Brings Statistical Man to the Stock Market The modern quantitative approach to investing is assembled out of equal parts poker strategy and World War II gunnery experience. 4.

In the early years of the twentieth century Fisher outlined a course of rational, scientific behavior for stock market players. In the late 1920s, blinded in part by his own spectacular financial success, he became convinced that America’s masses of speculators and investors (not to mention its central bankers) were in fact following his advice. Nothing, therefore, could go wrong. Irving Fisher had succumbed to the myth of the rational market. It is a myth of great power—one that, much of the time, explains reality pretty well. But it is nonetheless a myth, an oversimplification that, when taken too literally, can lead to all sorts of trouble. Fisher was just the first in a line of distinguished scholars who saw reason and scientific order in the market and made fools of themselves on the basis of this conviction. Most of the others came along much later, though.

Previously an editor and writer at Fortune, he appears regularly on CNN, CNBC, and PBS’s Nightly Business Report. He lives in New York City with his wife and son. Visit www.AuthorTracker.com for exclusive information on your favorite HarperCollins author. Credits Jacket design by Victor Mingovits Jacket illustration: The Stock Exchange by Rougeron-Vignerot, courtesy Bibliotheque des Arts Decoratifs, Paris, France/Archives Charmet/The Bridgeman Art Library Copyright THE MYTH OF THE RATIONAL MARKET. Copyright © 2009 by Justin Fox. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this e-book on-screen. No part of this text may be reproduced, transmitted, down-loaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of HarperCollins e-books.


pages: 505 words: 142,118

A Man for All Markets by Edward O. Thorp

3Com Palm IPO, Albert Einstein, asset allocation, beat the dealer, Bernie Madoff, Black Swan, Black-Scholes formula, Brownian motion, buy and hold, buy low sell high, carried interest, Chuck Templeton: OpenTable:, Claude Shannon: information theory, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Edward Thorp, Erdős number, Eugene Fama: efficient market hypothesis, financial innovation, George Santayana, German hyperinflation, Henri Poincaré, high net worth, High speed trading, index arbitrage, index fund, interest rate swap, invisible hand, Jarndyce and Jarndyce, Jeff Bezos, John Meriwether, John Nash: game theory, Kenneth Arrow, Livingstone, I presume, Long Term Capital Management, Louis Bachelier, margin call, Mason jar, merger arbitrage, Murray Gell-Mann, Myron Scholes, NetJets, Norbert Wiener, passive investing, Paul Erdős, Paul Samuelson, Pluto: dwarf planet, Ponzi scheme, price anchoring, publish or perish, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, RFID, Richard Feynman, risk-adjusted returns, Robert Shiller, Robert Shiller, rolodex, Sharpe ratio, short selling, Silicon Valley, Stanford marshmallow experiment, statistical arbitrage, stem cell, stocks for the long run, survivorship bias, The Myth of the Rational Market, The Predators' Ball, the rule of 72, The Wisdom of Crowds, too big to fail, Upton Sinclair, value at risk, Vanguard fund, Vilfredo Pareto, Works Progress Administration

CHAPTER 25 the US stocks The Vanguard Total Stock Market Index Admiral Shares, ticker symbol VTSAX, does this. Actually, it invests in each stock proportionally to the market value of the so-called float, which is the estimated fraction of freely trading shares, as opposed to shares being held which are not available for trading. The difference in performance between the two methods has been negligible. it first appeared Justin Fox, The Myth of the Rational Market, page 119, reports that Ben Graham, in 1962, pointed out that investment funds as a whole shouldn’t expect to beat the market “because in a significant sense they…are the market.” the clearest exposition Sharpe, William, “The Arithmetic of Active Management,” Financial Analyst’s Journal, Vol. 47, No. 1, pp. 7–9, January/February, 1991. all areas of investing According to Lipper, Inc., Wall Street Journal, July 6, 2009, section R, the average equity mutual fund expense ratio alone was 1.22 percent in 2007, compared to 0.20 percent for Vanguard’s no-load equity index funds.

To get back to $100, $70 has to increase by $30 or 42.6 percent. CHAPTER 26 beat the market This sounds nonsensical at first. What it means is that no one has any information whatsoever that has predictive value. to the contrary They display the well-known characteristic known as cognitive dissonance. and hundreds of books An excellent history of these meanderings is Justin Fox’s book The Myth of the Rational Market. all the future earnings Interpreted as net value paid out or accumulated for the benefit of a sole owner. on inside information As chronicled by James Stewart in Den of Thieves, Connie Bruck in The Predators’ Ball, and others. this type profitably Tobias, Andrew, Money Angles, Simon and Schuster, New York, 1984, pp. 71–72. Often, management would offer to redeem shares at an intermediate price, thus cashing out the dissidents and retaining an asset base of unredeemed shares which they could continue to be paid to manage.

Legends of Blackjack: True Stories of Players Who Crushed the Casinos. Kindle EBook, April 5, 2009. Bogle, John C. Bogle on Mutual Funds: New Perspectives for the Intelligent Investor. Burr Ridge, IL: Irwin, 1994. Edwardothorp.com. View articles written by the author. Feller, William. An Introduction to Probability Theory and Its Applications, Volume I. New York: Wiley, 1957, 1968. Fox, Justin. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. New York: Harper Business, 2009. Griffin, Peter A. Introduction. The Theory of Blackjack: The Compleat Card Counter’s Guide to the Casino Game of 21. Las Vegas, NV: Huntington, 1995, 1999. Gross, William H. Bill Gross on Investing. New York: Wiley, 1998. Ibbotson SBBI 2014 Classic Yearbook: Market Results for Stocks, Bonds, Bills, and Inflation, 1926–2013.


Deep Value by Tobias E. Carlisle

activist fund / activist shareholder / activist investor, Andrei Shleifer, availability heuristic, backtesting, business cycle, buy and hold, corporate governance, corporate raider, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, fixed income, intangible asset, joint-stock company, margin call, passive investing, principal–agent problem, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, Rory Sutherland, shareholder value, Sharpe ratio, South Sea Bubble, statistical model, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tim Cook: Apple

Ibid. 29. Sobel, 1984. 30. Ibid. 31. Benjamin Graham and David Dodd. Security Analysis: The Classic 1934 Edition. (New York: McGraw-Hill) 1996. 32. Ibid. 33. Edward Chancellor. Devil Take the Hindmost: A History of Financial Speculation (New York: Penguin Group) 2000. 34. Ibid. 35. Ibid. 36. Ibid. 37. Sobel, 1984. 38. Ibid. Trading in Glamour: The Conglomerate Era 117 39. Justin Fox. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. (New York: HarperCollins) 2009. 40. John. C. Bogle. “Statement of John C. Bogle to the United States Senate Governmental Affairs Subcommittee,” November 3, 2003. Available at http:// www.vanguard.com/bogle_site/sp20031103.html. 41. J. Lakonishok, A. Shleifer, and R.W. Vishny.“Contrarian Investments, Extrapolation, and Risk.” Journal of Finance, Vol.

., 168 mean regression, 79–80 mean reversion finance and, 80–85 return on invested capital and, 69–74 mean-reverting qualitative elements, 31–33 Means, Gardiner, 4–5, 13, 17 MedImmune, 173 Meehl, Paul, 141 Mennella, Noelle, 186 Mesa Petroleum, 151–160 Miller, Frank J., 97 Mlodinow, Leonard, 110, 117 The Modern Corporation and Private Property, 17 Mohanty, Sunil, 26, 30, 34, 148 The Money Masters, 116 Montier, James, 26–28, 34, 59, 62, 75, 145, 149 Mooradian, Robert M., 186, 214 Munger, Charlie, 35–38, 41–43 Muscarella, Chris J., 168 The Myth of the Rational Market, 117 ownership problems, 22 Oxman, Jeffrey, 26, 30, 34, 148 N National Airlines, 12 net current asset value, 20 net current assets, 15, 189–191 net nets, 21 net operating profit after tax (NOPAT), 72–73 The New Financial Capitalists, 160–161, 168 New Zealand Stocks and Shares, 119–121, 167 Newberg, Bruce, 54, 75 Nicolais, Mike, 154 NOPAT. See net operating profit after tax Noske Limited, 124 Novy-Marx, Robert, 195–196, 198, 214 R R.


pages: 391 words: 102,301

Zero-Sum Future: American Power in an Age of Anxiety by Gideon Rachman

Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, global reserve currency, greed is good, Hernando de Soto, illegal immigration, income inequality, invisible hand, Jeff Bezos, laissez-faire capitalism, Live Aid, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, Nelson Mandela, offshore financial centre, open borders, open economy, Peace of Westphalia, peak oil, pension reform, plutocrats, Plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

PROSPERITY: ALAN GREENSPAN AND THE END OF ECONOMIC HISTORY 1. Bob Woodward, Maestro (New York: Simon & Schuster, 2000). 2. Alan Greenspan, The Age of Turbulence: Adventures in a New World (London: Penguin, 2007), 97. Greenspan tells this story against himself in his autobiography. 3. Ibid., 40. 4. Ibid., 41. 5. Ibid., 52. 6. Ibid., 15. 7. Ibid., 179. 8. Justin Fox, The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street (New York: HarperCollins, 2009), xii. 9. Greenspan, Age of Turbulence, 370. 10. Ibid., 199. 11. Fox, Myth of the Rational Market, xii. 12. Quoted in Gillian Tett, Fool’s Gold (London: Little, Brown, 2009), 36. 13. Greenspan, Age of Turbulence, 372. 14. Simon Johnson, “The Quiet Coup,” Atlantic, May 2009. 15.

Fukuyama’s later disavowal of neoconservatism, America at the Crossroads: Democracy, Power, and the Neoconservative Legacy (Yale, 2006) is also well worth reading. The best thing to read on Alan Greenspan is Greenspan’s own surprisingly compulsive memoir, The Age of Turbulence: Adventures in a New World (Penguin, 2007). There have now been a great many books on the origins of the crash of 2008 and its economic lessons. Two of my favorites are Gillian Tett’s Fool’s Gold (Little, Brown, 2006) and Justin Fox’s The Myth of the Rational Market (HarperCollins, 2009). The defining text capturing the optimism generated by the interplay between the technological revolution and globalization is Thomas Friedman’s The World Is Flat (Penguin, 2005). The optimism about the rise of Asia during this period is caught both by Kishore Mahbubani’s The New Asian Hemisphere: The Irresistible Shift of Global Power to the East (PublicAffairs, 2008) and Martin Jacques’s When China Rules the World: The Rise of the Middle Kingdom and the End of the Western World (Penguin, 2009).


pages: 430 words: 109,064

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bernie Madoff, Bonfire of the Vanities, bonus culture, break the buck, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Gordon Gekko, greed is good, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, sovereign wealth fund, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

Gretchen Morgenson and Andrew Martin, “Citigroup Hires Mr. Inside,” The New York Times, October 10, 2009, available at http://www.nytimes.com/2009/10/11/business/11hohlt.html. 38. Pub. L. 96-221. Interest ceilings on deposit accounts were phased out in Title II. State usury laws were preempted in Title V. 39. Geisst, Wall Street, supra note 33, at 327. 40. On academic finance, see Justin Fox, The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street (New York: Harper Business, 2009); John Cassidy, How Markets Fail: The Logic of Economic Calamities (New York: Farrar, Straus & Giroux, 2009), chapter 7; Peter Bernstein, Capital Ideas: The Improbable Origins of Modern Wall Street (New York: Free Press, 1992); and Peter Bernstein, Capital Ideas Evolving (Hoboken, NJ: Wiley, 2007). 41.

In Fed We Trust: Ben Bernanke’s War on the Great Panic. New York: Crown Business, 2009. Zuckerman, Gregory. The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History. New York: Broadway Business, 2009. Academic Economics and the Financial Crisis Cassidy, John. How Markets Fail: The Logic of Economic Calamities. New York: Farrar, Straus & Giroux, 2009. Fox, Justin. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. New York: Harper Business, 2009. Economic and Policy Analyses Goodman, Peter S. Past Due: The End of Easy Money and the Renewal of the American Economy. New York: Henry Holt, 2009. Hacker, Jacob S., and Paul Pierson. Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class.


pages: 385 words: 101,761

Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire by Bruce Nussbaum

3D printing, Airbnb, Albert Einstein, Berlin Wall, Black Swan, Chuck Templeton: OpenTable:, clean water, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Danny Hillis, declining real wages, demographic dividend, disruptive innovation, Elon Musk, en.wikipedia.org, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, follow your passion, game design, housing crisis, Hyman Minsky, industrial robot, invisible hand, James Dyson, Jane Jacobs, Jeff Bezos, jimmy wales, John Gruber, John Markoff, Joseph Schumpeter, Kickstarter, lone genius, longitudinal study, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, new economy, Paul Graham, Peter Thiel, QR code, race to the bottom, reshoring, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, Tesla Model S, The Chicago School, The Design of Experiments, the High Line, The Myth of the Rational Market, thinkpad, Tim Cook: Apple, too big to fail, tulip mania, We are the 99%, Y Combinator, young professional, Zipcar

Siegel, “Efficient Market Theory and the Crisis,” Wall Street Journal Online, October 27, 2009, accessed September 13, 2012, http://online.wsj.com/article/ SB10001424052748703573604574491261905165886.html. 228 Of course, what was missing: I am indebted to Ben Lee, who received his PhD from the University of Chicago, for highlighting the difference between uncertainty and risk in the economic analysis and theory formation that came out Chicago’s economics department. This distinction forms a major theme in the course we co-teach at Parsons. Ray Ball, “The Global Financial Crisis and the Efficient Market Hypothesis: What Have We Learned?” University of Chicago, Journal of Applied Corporate Finance, vol. 21, no. 4, 2009; Siegel, “Efficient Market Theory and the Crisis”; Roger Lowenstein, “Book Review: The Myth of the Rational Market by Justin Fox,” Washington Post, June 7, 2009, accessed September 13, 2012, http://www.washingtonpost.com/wp-dyn/ content/article/2009/06/05/AR2009060502053.html. 228 “black swans”: Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House, 2007). 228 By excluding uncertainty: Frank H. Knight, Risk, Uncertainty and Profit (New York: Sentry Press, 1921). 229 In the 1960s and 1970s, as EMT: John Cassidy, “The Minsky Moment,” New Yorker, February 4, 2008, accessed September 13, 2012, http://www.newyorker.com/talk/comment/2008/ 02/04/080204taco_talk_cassidy. 229 Charles Kindleberger’s: Charles P.

id=5835269. 232 In a 2010 interview with Martin Wolf: Wolf and Giles, “Transcript: Larry Summers Interview.” 232 Summers was, after all: Stephen Labaton, “Congress Passes Wide-Ranging Bill Easing Bank Laws,” New York Times, November 5, 1999, accessed September 14, 2012, http://www.nytimes.com/1999/11/05/business/ congress-passes-wide-ranging-bill-easing-bank-laws.html; Charles Ferguson, “Larry Summers and the Subversion of Economics,” Chronicle of Higher Economics, October 3, 2010, accessed September 14, 2012, http://chronicle.com/article/Larry-Summersthe/124790/; Rana Foroohar, “Larry Summers: No Regrets on Deregulation,” Time Business, April 12, 2011, accessed September 14, 2012, http://business.time.com/2011/04/12/ larry-summers-no-regrets-on-deregulation/. 232 In 1999, Summers, along with: Cyrus Sanati, “10 Years Later, Looking at Repeal of Glass-Steagall,” DealBook, November 12, 2009, accessed September 14, 2012, http://dealbook.nytimes.com/2009/11/12/10 -years-later-looking-at-repeal-of-glass-steagall/. 232 the Depression-era regulation: Labaton, “Congress Passes Wide-Ranging Bill Easing Bank Laws.” 232 calling the repeal “historic”: Sanati, “10 Years Later.” 232 Perhaps no one believed: Justin Fox, “The Myth of the Rational Market,” Time, June 22, 2009, accessed September 14, 2012, http://www.time.com/time/magazine/ article/0,9171,1904153,00.html. 232 But in October 2008, Greenspan: Edmund L. Andrews, “Greenspan Concedes Error on Regulation,” New York Times, October 23, 2008, accessed September 14, 2012, http://www.nytimes.com/2008/10/24/ business/economy/24panel.html. 232 “Those of us who have looked: Kara Scannell and Sudeep Reddy, “Greenspan Admits Errors to Hostile House Panel,” Wall Street Journal, October 24, 2008, accessed September 14, 2012, http://online.wsj.com/article/ SB122476545437862295.html. 232 Greenspan was criticized: Andrews, “Greenspan Concedes Error on Regulation.” 233 Back in the mid-nineties: Katrina Brooker, “Citi’s Creator, Alone with His Regrets,” New York Times, January 2, 2012, accessed September 13, 2012, http://www.nytimes.com/2010/01/03/ business/economy/03weill.html. 233 On July 25, 2012: “Wall Street Legend Sandy Weill: Break Up the Big Banks,” CNBC Report, July 25, 2012, http://www.cnbc.com/id/48315170, accessed September 13, 2012. 233 from 1977 to 2008: Roger Martin, “The Age of Customer Capitalism,” Harvard Business Review, January 2010, http://hbr.org/2010/01/ the-age-of-customer-capitalism/ar/1. 233 Compare that with: Ibid. 234 In 2009, Michael Mandel: I’ve known and respected Mike Mandel for all the years we worked together at BusinessWeek and the years thereafter.


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

Ibid. 25. Tett, G., 2013, ‘An Interview with Alan Greenspan’, FT Magazine, 25 October. 26. Ramsey, F.P., 1926, ‘Truth and Probability’, in Ramsey, F.P., 1931, The Foundations of Mathematics and Other Logical Essays, ed. Braithwaite, R.B., London, Kegan, Paul, Trench, Trubner & Co. 27. Buffett, W., 1988, Chairman’s Letter to the Shareholders of Berkshire Hathaway Inc. 28. Fox, J., 2009, The Myth of the Rational Market, New York, Harper Business, pp. 86–8. 29. Isaacson, W., 2013, Steve Jobs: The Exclusive Biography, New York, Little Brown. 30. Hair, P.E.H., 1971, ‘Deaths from Violence in Britain: A Tentative Survey’, Population Studies, 25 (1), pp. 5–24. 31. Adams, J., 1995, Risk: The Policy Implications of Risk Compensation and Plural Rationalities, London, Routledge. 32. Geithner, T., 2014, Stress Test, New York, Crown. 33.

Final Report: Oral and Written Evidence, 2011, HC 680 2011–12, Ev 62, 23 November. House of Commons Treasury Committee, Independent Commission on Banking. Financial Times, 2009, ‘Government’s Response Like That of a Rowdy Drinker in a Bar Brawl’, 5 July. Fitzgerald, F.S., 1925, The Great Gatsby, New York, Charles Scribner’s Sons. Flyvberg, B., 2003, Megaprojects and Risk, Cambridge, Cambridge University Press. Fox, J., 2009, The Myth of the Rational Market, New York, Harper Business. Francis, J., 1850, ‘Chronicles and Characters of the Stock Exchange’, The Church of England Quarterly Review, 27 (6), pp. 128–55. Friedman, M., and Friedman, R.D., 1980, Free to Choose, San Diego, CA, Harcourt. Galbraith, J.K., 1954, The Great Crash, Boston, MA, Houghton Mifflin. Galton, F., 1907, ‘Vox Populi (The Wisdom of Crowds)’, Nature, 1949 (75), pp. 450–51.


pages: 261 words: 64,977

Pity the Billionaire: The Unexpected Resurgence of the American Right by Thomas Frank

Affordable Care Act / Obamacare, bank run, big-box store, bonus culture, business cycle, collateralized debt obligation, collective bargaining, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Deng Xiaoping, financial innovation, housing crisis, invisible hand, Kickstarter, money market fund, Naomi Klein, obamacare, payday loans, profit maximization, profit motive, road to serfdom, Robert Bork, Ronald Reagan, shareholder value, strikebreaker, The Chicago School, The Myth of the Rational Market, Thorstein Veblen, too big to fail, union organizing, Washington Consensus, white flight, Works Progress Administration

The collapse “hit economic libertarians in their solar plexus,” he wrote, because it had discredited their free-market philosophy so utterly, so undeniably.6 In 2010, Posner called for the revival of thirties-era banking rules and penned the unthinkable: an homage to John Maynard Keynes, the genius of deficit spending and the bête noire of the free-market crowd. Just as readers of the thirties snapped up books trashing the great capitalists and picking apart classical economics, so did the book-buying public of our own time seem ready to read about the folly of orthodoxy. In 2009, a Time magazine columnist named Justin Fox scored an unlikely hit with The Myth of the Rational Market, a careful takedown of academic economics. Michael Lewis, who had once made heroes of tycoons, now walked readers through the descending levels of the Wall Street ripoff in The Big Short. And there was a sudden mania for Great Depression comparisons: Paul Krugman reissued his 1999 work, The Return of Depression Economics—this time they had truly returned—and a book about the blundering central bankers of the twenties actually made the bestseller list.


pages: 263 words: 75,455

Quantitative Value: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors by Wesley R. Gray, Tobias E. Carlisle

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, Atul Gawande, backtesting, beat the dealer, Black Swan, business cycle, butter production in bangladesh, buy and hold, capital asset pricing model, Checklist Manifesto, cognitive bias, compound rate of return, corporate governance, correlation coefficient, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, Edward Thorp, Eugene Fama: efficient market hypothesis, forensic accounting, hindsight bias, intangible asset, Louis Bachelier, p-value, passive investing, performance metric, quantitative hedge fund, random walk, Richard Thaler, risk-adjusted returns, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, statistical model, survivorship bias, systematic trading, The Myth of the Rational Market, time value of money, transaction costs

Warren Buffett, “The Superinvestors of Graham-and-Doddsville,” Hermes, Columbia Business School alumni magazine, 1984. Available at www7.gsb.columbia.edu/alumni/news/hermes/print-archive/superinvestors. 17. Benjamin Graham, “Should Rich but Losing Corporations Be Liquidated?” Reprinted on Forbes.com, December 27, 1999. Available at http://www.forbes.com/forbes/1999/1227/6415410a.html. 18. Justin Fox, The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street (New York: HarperBusiness, 2009). 19. Ibid. 20. Benjamin Graham, The Intelligent Investor: A Book of Practical Counsel, 4th ed. (New York: Harper & Row, 1986). 21. Warren Buffett, “Shareholder Letter,” Berkshire Hathaway, Inc. Annual Report, 2008. 22. Seth A. Klarman, Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor (New York: HarperCollins, 1991). 23.


pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, buy and hold, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus, zero-sum game

New York: Public Affairs, 2010. The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States. New York: Public Affairs, 2011. Findlay, Ronald, and Kevin H. O’Rourke. Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton: Princeton University Press, 2007. Fox, Justin. The Myth of the Rational Market. New York: HarperCollins, 2009. Friedman, Milton, and Anna Jacobson Schwartz. A Monetary History of the United States, 1867–1960. Princeton: Princeton University Press, 1963. Frydman, Roman, and Michael D. Goldberg. Imperfect Knowledge Economics: Exchange Rates and Risks. Princeton: Princeton University Press, 2007. Gallarotti, Giulio M. The Anatomy of an International Monetary Regime: The Classical Gold Standard, 1880–1914.


pages: 338 words: 106,936

The Physics of Wall Street: A Brief History of Predicting the Unpredictable by James Owen Weatherall

Albert Einstein, algorithmic trading, Antoine Gombaud: Chevalier de Méré, Asian financial crisis, bank run, beat the dealer, Benoit Mandelbrot, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, Brownian motion, business cycle, butterfly effect, buy and hold, capital asset pricing model, Carmen Reinhart, Claude Shannon: information theory, collateralized debt obligation, collective bargaining, dark matter, Edward Lorenz: Chaos theory, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial innovation, fixed income, George Akerlof, Gerolamo Cardano, Henri Poincaré, invisible hand, Isaac Newton, iterative process, John Nash: game theory, Kenneth Rogoff, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, martingale, Myron Scholes, new economy, Paul Lévy, Paul Samuelson, prediction markets, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, statistical arbitrage, statistical model, stochastic process, The Chicago School, The Myth of the Rational Market, tulip mania, Vilfredo Pareto, volatility smile

Forbes, Catherine, Merran Evans, Nicholas Hastings, and Brian Peacock. 2011. Statistical Distributions. 4th ed. Hoboken, NJ: John Wiley and Sons. Forbes magazine. 2011. “The World’s Billionaires 2011.” Available at http://www.forbes.com/lists/2011/10/billionaires_2011.html. Forfar, David O. 2007. “Fischer Black.” Available at http://www.history.mcs.standrews.ac.uk/Biographies/Black_Fischer.html. Fox, Justin. 2009. The Myth of the Rational Market. New York: Harper Business. French, Craig W. 2003. “The Treynor Capital Asset Pricing Model.” Journal of Investment Management 1 (2): 60–72. Galison, Peter. 1997. Image and Logic: A Material Culture of Microphysics. Chicago: University of Chicago Press. — — — . 2003. Einstein’s Clocks, Poincaré’s Maps: Empires of Time. New York: W. W. Norton. Galison, Peter, and Bruce Hevly, eds. 1992.


pages: 405 words: 109,114

Unfinished Business by Tamim Bayoumi

algorithmic trading, Asian financial crisis, bank run, banking crisis, Basel III, battle of ideas, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, buy and hold, capital controls, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, currency peg, Doha Development Round, facts on the ground, Fall of the Berlin Wall, financial deregulation, floating exchange rates, full employment, hiring and firing, housing crisis, inflation targeting, Just-in-time delivery, Kenneth Rogoff, liberal capitalism, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, oil shale / tar sands, oil shock, price stability, prisoner's dilemma, profit maximization, quantitative easing, race to the bottom, random walk, reserve currency, Robert Shiller, Robert Shiller, Rubik’s Cube, savings glut, technology bubble, The Great Moderation, The Myth of the Rational Market, the payments system, The Wisdom of Crowds, too big to fail, trade liberalization, transaction costs, value at risk

Fiordelisi (2009): Franco Fiordelisi, Mergers and Acquisitions in European Banking, Palgrave Macmillan Studies in Banking and Financial Institutions, Palgrave Macmillan, London and New York, 2009. Focarelli and Pozzolo (2001): Dario Focarelli and Alberto Pozzolo, “The Patterns of Cross-Border Bank Mergers and Shareholdings in OECD Countries”, Journal of Banking and Finance, Vol. 25, No. 12 (December 2001), pp. 2305–37. Fox (2009): Justin Fox, The Myth of the Rational Market, Harper Business, New York, 2009. Friedman (2006): Benjamin M. Friedman, The Moral Consequences of Economic Growth, Alfred Knopf, New York, 2006. Gagnon (2012): Joseph Gagnon, “European Monetary Unification: Precocious or Premature?”, Chapter 10 in Jacob Funk Kirkegaard, Nicolas Véron, and Guntram B. Wolff (eds), Transatlantic Economic Challenges in an Era of Growing Multipolarity, Peterson Institute for International Economics, Washington DC, 2012.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

"Robert Solow", accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

Roger Lowenstein, When Genius Failed (New York: Random House, 2000), 126–127. 26. Dowd et al., “How Unlucky Is 25-Sigma,” 5. 27. Andrew Haldane, “Why Banks Failed the Stress Test,” (speech at the Marcus-Evans Conference on Stress-Testing, London, February 9–10, 2009). 28. Three recent books have done a great job of showing us how the ideas that constitute modern finance, its theoretical structure, were a huge part of what went wrong. Justin Fox’s The Myth of the Rational Market (2009), John Cassidy’s How Markets Fail (2009), and John Quiggin’s Zombie Economics (2010) lay out in great detail how the economic theory of the past thirty years was constructed, what it presumed about the world, and why those ideas failed in the 2007–2008 crisis. In what follows, I draw on their work and on my own prior work on the subject. What I stress here, and add to their discussion, is the role that economic theory plays in providing stability, and promoting instability, in the financial system. 29.


pages: 416 words: 118,592

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel

accounting loophole / creative accounting, Albert Einstein, asset allocation, asset-backed security, backtesting, beat the dealer, Bernie Madoff, BRICs, butter production in bangladesh, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, Elliott wave, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial innovation, fixed income, framing effect, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Long Term Capital Management, loss aversion, margin call, market bubble, money market fund, mortgage tax deduction, new economy, Own Your Own Home, passive investing, Paul Samuelson, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, stocks for the long run, survivorship bias, The Myth of the Rational Market, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond

Were professional investment firms such as Bear Stearns and Lehman Brothers making rational assessments of the value of the mortgage-backed securities in their portfolios before the financial crisis that forced both firms into liquidation and threatened to blow up the world economy in 2009? Critics believe that such events stretch the credibility of the efficient-market theory beyond the breaking point. The financial press has been unambiguous in its judgment. The Wall Street Journal opined that the efficient-market theory was a “remarkable error.” BusinessWeek described the theory as a “failure.” Justin Fox of Time, author of The Myth of the Rational Market, claimed that the efficient-market hypothesis (EMH) has deluded investors and played a major role in the worldwide credit crisis of 2008–09. Certainly the behavioral theorists, whose work was described in chapter 10, are highly skeptical that markets are efficient. The behavioralists chide their efficient-market brethren for blindly accepting that the stock market behaves rationally.


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

"Robert Solow", accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, different worldview, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

Paul A. David and Melvin W. Reder. New York: Academic Press. Eggar, Robin. 2009. “You Don’t Need to Sell a Million to Make a Mint.” Sunday Times (London), 8 November. Ehrlich, Paul. 1968. The Population Bomb. New York: Ballantine. Financial Times. 2009. “India Opts for Voluntary Cuts on Emissions.” Fitzgerald, F. Scott. 1925. The Great Gatsby. New York, Scribner’s. Fox, Justin. 2010. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. New York: HarperCollins. Frank, Robert. 1999. Luxury Fever: Money and Happiness in an Era of Excess. New York: Free Press. Frank, Robert. 2007. “Why Not Shift the Burden to Big Spenders?” New York Times, 7 October. Frank, Robert, and Philip Cook. 1995. The Winner Takes All Society. New York: Free Press. Frank, Thomas. 2004.


The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics by Rod Hill, Anthony Myatt

American ideology, Andrei Shleifer, Asian financial crisis, bank run, barriers to entry, Bernie Madoff, business cycle, cognitive dissonance, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, different worldview, endogenous growth, equal pay for equal work, Eugene Fama: efficient market hypothesis, experimental economics, failed state, financial innovation, full employment, gender pay gap, Gini coefficient, Gunnar Myrdal, happiness index / gross national happiness, Home mortgage interest deduction, Howard Zinn, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, liberal capitalism, low skilled workers, market bubble, market clearing, market fundamentalism, Martin Wolf, medical malpractice, minimum wage unemployment, moral hazard, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, positional goods, prediction markets, price discrimination, principal–agent problem, profit maximization, profit motive, publication bias, purchasing power parity, race to the bottom, Ralph Nader, random walk, rent control, rent-seeking, Richard Thaler, Ronald Reagan, shareholder value, The Myth of the Rational Market, the payments system, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, union organizing, working-age population, World Values Survey, Yogi Berra

On his website (www.josephstiglitz.com) you’ll find commentaries on contemporary policy issues, as well as links to his academic articles and a list of his recent books. Of particular interest is his 2003 book, The Roaring Nineties, since this shows the pervasiveness of imperfect information, and how deregulation created the wrong incentive structure that led to the scandals and the bubble economy of the 1990s. The lessons still haven’t been learnt. Justin Fox’s book, The Myth of the Rational Market: A history of risk, reward, and delusion on Wall Street (2009) is an entertaining account of the rise of the efficient market hypothesis and its ultimate failure. Addendum: what about the efficiency of asset markets? One way to summarize the content of mainstream textbooks is this: if all markets existed, and were perfectly competitive, the economy would be in a Pareto optimal situation – it wouldn’t be possible to make anyone better off without making someone else worse off.


pages: 1,073 words: 314,528

Strategy: A History by Lawrence Freedman

Albert Einstein, anti-communist, Anton Chekhov, Ayatollah Khomeini, barriers to entry, battle of ideas, Black Swan, British Empire, business process, butterfly effect, centre right, Charles Lindbergh, circulation of elites, cognitive dissonance, coherent worldview, collective bargaining, complexity theory, conceptual framework, corporate raider, correlation does not imply causation, creative destruction, cuban missile crisis, Daniel Kahneman / Amos Tversky, defense in depth, desegregation, Edward Lorenz: Chaos theory, en.wikipedia.org, endogenous growth, endowment effect, Ford paid five dollars a day, framing effect, Frederick Winslow Taylor, Gordon Gekko, greed is good, information retrieval, interchangeable parts, invisible hand, John Nash: game theory, John von Neumann, Kenneth Arrow, lateral thinking, linear programming, loose coupling, loss aversion, Mahatma Gandhi, means of production, mental accounting, Murray Gell-Mann, mutually assured destruction, Nash equilibrium, Nelson Mandela, Norbert Wiener, Norman Mailer, oil shock, Pareto efficiency, performance metric, Philip Mirowski, prisoner's dilemma, profit maximization, race to the bottom, Ralph Nader, RAND corporation, Richard Thaler, road to serfdom, Ronald Reagan, Rosa Parks, shareholder value, social intelligence, Steven Pinker, strikebreaker, The Chicago School, The Myth of the Rational Market, the scientific method, theory of mind, Thomas Davenport, Thomas Kuhn: the structure of scientific revolutions, Torches of Freedom, Toyota Production System, transaction costs, ultimatum game, unemployed young men, Upton Sinclair, urban sprawl, Vilfredo Pareto, War on Poverty, women in the workforce, Yogi Berra, zero-sum game

Kathleen Eisenhardt, “Agency Theory: An Assessment and Review,” Academy of Management Review 14, no. 1 (1989): 57–74. 2. Justin Fox, The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street (New York: Harper, 2009), 159–162. 3. Michael C. Jensen and William H. Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure,” Journal of Financial Economics 3 (1976): 302–360. 4. Michael C. Jensen, “Organization Theory and Methodology,” The Accounting Review 58, no. 2 (April 1983): 319–339. 5. Jensen, “Takeovers: Folklore and Science,” Harvard Business Review (November–December 1984), 109–121. 6. Cited by Fox, The Myth of the Rational Market, 274. 7. Paul M. Hirsch, Ray Friedman, and Mitchell P. Koza, “Collaboration or Paradigm Shift?: Caveat Emptor and the Risk of Romance with Economic Models for Strategy and Policy Research,” Organization Science 1, no. 1 (1990): 87–97. 8.


pages: 483 words: 141,836

Red-Blooded Risk: The Secret History of Wall Street by Aaron Brown, Eric Kim

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, Asian financial crisis, Atul Gawande, backtesting, Basel III, Bayesian statistics, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Black Swan, business cycle, capital asset pricing model, central bank independence, Checklist Manifesto, corporate governance, creative destruction, credit crunch, Credit Default Swap, disintermediation, distributed generation, diversification, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, experimental subject, financial innovation, illegal immigration, implied volatility, index fund, Long Term Capital Management, loss aversion, margin call, market clearing, market fundamentalism, market microstructure, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, natural language processing, open economy, Pierre-Simon Laplace, pre–internet, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, The Myth of the Rational Market, Thomas Bayes, too big to fail, transaction costs, value at risk, yield curve

For the twentieth and twenty-first centuries we have The New Lombard Street: How the Fed Became the Dealer of Last Resort by Perry Mehrling, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System by Barry Eichengreen, Capital Ideas: The Improbable Origins of Modern Wall Street by Peter Bernstein, The Death of the Banker: The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor by Ron Chernow, The Greed Merchants: How the Investment Banks Played the Free Market Game by Philip Augar, and The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox. The bible of advantage gamblers is James Grosjean’s Beyond Counting: Exploiting Casino Games from Blackjack to Video Poker. Peter Griffin was one of the best mathematician/gamblers. He wrote The Theory of Blackjack: The Compleat Card Counter’s Guide to the Casino Game of 21. For sports betting, Conquering Risk: Attacking Vegas and Wall Street by Elihu Feustel is a good choice.


pages: 500 words: 145,005

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

"Robert Solow", 3Com Palm IPO, Albert Einstein, Alvin Roth, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, Berlin Wall, Bernie Madoff, Black-Scholes formula, business cycle, capital asset pricing model, Cass Sunstein, Checklist Manifesto, choice architecture, clean water, cognitive dissonance, conceptual framework, constrained optimization, Daniel Kahneman / Amos Tversky, delayed gratification, diversification, diversified portfolio, Edward Glaeser, endowment effect, equity premium, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, George Akerlof, hindsight bias, Home mortgage interest deduction, impulse control, index fund, information asymmetry, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, Kenneth Arrow, Kickstarter, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, market clearing, Mason jar, mental accounting, meta analysis, meta-analysis, money market fund, More Guns, Less Crime, mortgage debt, Myron Scholes, Nash equilibrium, Nate Silver, New Journalism, nudge unit, Paul Samuelson, payday loans, Ponzi scheme, presumed consent, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, random walk, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, South Sea Bubble, Stanford marshmallow experiment, statistical model, Steve Jobs, Supply of New York City Cabdrivers, technology bubble, The Chicago School, The Myth of the Rational Market, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, ultimatum game, Vilfredo Pareto, Walter Mischel, zero-sum game

Economics Letters 71, no. 3: 397–404. Fischhoff, Baruch. 1975. “Hindsight ≠ Foresight: The Effect of Outcome Knowledge on Judgment Under Uncertainty.” Journal of Experimental Psychology: Human Perception and Performance 1, no. 3: 288. Fisher, Irving. 1930. The Theory of Interest: As Determined by Impatience to Spend Income and Opportunity to Invest It. New York: MacMillan. Fox, Justin. 2009. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. New York: HarperCollins. Frank, Robert H., Thomas Gilovich, and Dennis T. Regan. 1993. “Does Studying Economics Inhibit Cooperation?” Journal of Economic Perspectives 7, no. 2: 159–71. Frederick, Shane, George Loewenstein, and Ted O’Donoghue. 2002. “Time Discounting and Time Preference: A Critical Review.” Journal of Economic Literature 40, no. 2: 351–401.


Virtual Competition by Ariel Ezrachi, Maurice E. Stucke

Airbnb, Albert Einstein, algorithmic trading, barriers to entry, cloud computing, collaborative economy, commoditize, corporate governance, crony capitalism, crowdsourcing, Daniel Kahneman / Amos Tversky, David Graeber, demand response, disintermediation, disruptive innovation, double helix, Downton Abbey, Erik Brynjolfsson, experimental economics, Firefox, framing effect, Google Chrome, index arbitrage, information asymmetry, interest rate derivative, Internet of things, invisible hand, Jean Tirole, John Markoff, Joseph Schumpeter, Kenneth Arrow, light touch regulation, linked data, loss aversion, Lyft, Mark Zuckerberg, market clearing, market friction, Milgram experiment, multi-sided market, natural language processing, Network effects, new economy, offshore financial centre, pattern recognition, prediction markets, price discrimination, price stability, profit maximization, profit motive, race to the bottom, rent-seeking, Richard Thaler, ride hailing / ride sharing, road to serfdom, Robert Bork, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, smart meter, Snapchat, social graph, Steve Jobs, supply-chain management, telemarketer, The Chicago School, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Travis Kalanick, turn-by-turn navigation, two-sided market, Uber and Lyft, Uber for X, uber lyft, Watson beat the top human players on Jeopardy!, women in the workforce, yield management

Unilateral Conduct Working Group, Report on the Objectives of Unilateral Conduct Laws, Assessment of Dominance/Substantial Market Power, and State-Created Monopolies (Moscow: International Competition Network, May 2007), http://www.internationalcompetitionnetwork.org/uploads /library/doc353.pdf. 8. See, for example, Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (New York: Basic Books, 1978); Richard A. Posner, “The Chicago School of Antitrust Analysis,” University of Pennsylvania Law Review 127 (1978): 925, 933. 9. Posner, “The Chicago School of Antitrust Analysis.” 10. Justin Fox, The Myth of the Rational Market (New York: Harper Business/ HarperCollins, 2009), 89–107. 11. As President Reagan told the nation, “government is not the solution to our problem; government is the problem”; Ronald Reagan, First Inaugural Address (January 20, 1981), http://www.reaganlibrary.com/reagan/speeches /first.asp. 12. Case No. T-79/12, Cisco Systems Inc. v. Commission [December 11, 2013] 612 TJ 0079, para. 69. 13.


pages: 511 words: 132,682

Competition Overdose: How Free Market Mythology Transformed Us From Citizen Kings to Market Servants by Maurice E. Stucke, Ariel Ezrachi

affirmative action, Airbnb, Albert Einstein, Andrei Shleifer, Bernie Sanders, Boeing 737 MAX, Cass Sunstein, choice architecture, cloud computing, commoditize, corporate governance, Corrections Corporation of America, Credit Default Swap, crony capitalism, delayed gratification, Donald Trump, en.wikipedia.org, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Google Chrome, greed is good, hedonic treadmill, income inequality, income per capita, information asymmetry, invisible hand, job satisfaction, labor-force participation, late fees, loss aversion, low skilled workers, Lyft, mandatory minimum, Mark Zuckerberg, market fundamentalism, mass incarceration, Menlo Park, meta analysis, meta-analysis, Milgram experiment, mortgage debt, Network effects, out of africa, payday loans, Ponzi scheme, precariat, price anchoring, price discrimination, profit maximization, profit motive, race to the bottom, Richard Thaler, ride hailing / ride sharing, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Shoshana Zuboff, Silicon Valley, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Stanford prison experiment, Stephen Hawking, The Chicago School, The Market for Lemons, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Davenport, Thorstein Veblen, Tim Cook: Apple, too big to fail, transaction costs, Uber and Lyft, uber lyft, ultimatum game, Vanguard fund, winner-take-all economy

It brings out all that is best; it removes all that is base.” 23.Sanderson v. Culligan International Co., 415 F.3d 620, 623 (7th Cir. 2005). 24.A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396, 1402 (7th Cir. 1989). 25.Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc., 784 F.2d 1325, 1338 (7th Cir. 1986). 26.Kumpf v. Steinhaus, 779 F.2d 1323, 1326 (7th Cir. 1985). 27.Justin Fox, The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street (New York: Harper Business, 2009), 192; Andrei Shleifer, Inefficient Markets: An Introduction to Behavioral Finance (New York: Oxford University Press, 2000), 2–5. 28.Joseph Ratzinger Benedict XVI, “Church and Economy: Responsibility for the Future of the World Economy,” Communio International Catholic Review 13, no. 3 (Fall 1986): 199, 200, https://www.communio-icr.com/files/ratzinger13-3.pdf. 29.Robert H.


pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy, zero-sum game

Financial Stability Board. ‘2013 Update of Group of Global Systemically Important Banks (G-SIBs)’, 2013. https://www.financialstabilityboard.org/publications/r_131111.pdf. Fisher, Irving. ‘The Debt-Deflation Theory of Great Depressions’, Econometrica, vol. 1, no. 4 (October 1933), pp. 337–57. http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf. Forstater, Matthew. Functional Finance and Full Employment: Lessons from Lerner for Today’, Working Paper No. 272, The Jerome Levy Economics Institute, July 1999. Fox, Justin. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street (New York: HarperCollins, 2009). Frank, Robert H. and Philip J. Cook. The Winner-Take-All Society: Why the Few at the Top Get So Much More than the Rest of Us (London and New York: Penguin, 1996). Frydman, Roman and Michael D. Goldberg. Beyond Mechanical Markets: Asset Price Swings, Risk, and the Role of the State (Princeton, NJ: Princeton University Press, 2011).


pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, business cycle, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liberal capitalism, light touch regulation, Long Term Capital Management, Louis Pasteur, low cost airline, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, Mikhail Gorbachev, millennium bug, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, plutocrats, Plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, working poor, zero-sum game, éminence grise

Rickards, ‘The Risks of Financial Modeling: VaR and the Economic Meltdown’, testimony before the Subcommittee on Investigations and Oversight Committee on Science and Technology, US House of Representatives, 10 September 2009. 38 Benoit Mandelbrot (2008) The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin and Reward, Profile Books. For another interesting example of cross-fertilisation, see Didier Sornette (2003) Why Stockmarkets Crash: Critical Events in Complex Financial Systems, Princeton University Press. 39 See Justin Fox (2009) The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, HarperBusiness. 40 The following example is paraphrased from Baseline Scenario: http://baselinescenario.com/2009/10/01/the-economics-of-models/. 41 Gillian Tett (2009) Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe, Little, Brown. 42 Lucien Bebchuk and Jesse Fried (2004) Pay without Performance: The Unfulfilled Promise of Executive Compensation, Harvard University Press. 43 Lucian Bebchuk and Holger Spamann (2009) ‘Regulating Bankers’ Pay’, Harvard Law and Economics Discussion Paper No. 641. 44 Jesse Eisinger, ‘London Banks, Falling Down’, Portfolio, 13 August 2008, at http://www.portfolio.com/views/columns/wall-street/2008/08/13/Problemsin-British-Banking-System/. 45 Philip Augar (2009) Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined the City’s Golden Decade, The Bodley Head. 46 Albert-Laszlo Baraasi (2002) Linked: The New Science of Networks, Basic Books.


pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

"Robert Solow", affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, London Interbank Offered Rate, lone genius, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game

It was perhaps not coincidental that a key member of the Clinton economics team had received a substantial bonus well above the $1 million threshold prior to joining the administration. 36. See Sanford Grossman and J. E. Stiglitz, “Information and Competitive Price Systems,” American Economic Review 66, no. 2 (May 1976): 246–53; and Sanford Grossman and J. E. Stiglitz, “On the Impossibility of Informationally Efficient Markets,” American Economic Review 70, no. 3 (June 1980): 393–408. 37. See Justin Fox, The Myth of the Rational Market (New York: Harper Business, 2009). 38. This was equivalent to a loss of more than a trillion dollars. The stocks of eight major companies in the S&P 500 (including Accenture) fell to one cent per share; the prices of other stocks (including Sotheby’s, Apple, and Hewlett-Packard) increased to over $100,000. Obviously, nothing real could account for such changes. Markets were clearly not being efficient.


pages: 614 words: 174,226

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society by Binyamin Appelbaum

"Robert Solow", airline deregulation, Alvin Roth, Andrei Shleifer, anti-communist, battle of ideas, Benoit Mandelbrot, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, Celtic Tiger, central bank independence, clean water, collective bargaining, Corn Laws, correlation does not imply causation, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, desegregation, Diane Coyle, Donald Trump, ending welfare as we know it, financial deregulation, financial innovation, fixed income, floating exchange rates, full employment, George Akerlof, George Gilder, Gini coefficient, greed is good, Growth in a Time of Debt, income inequality, income per capita, index fund, inflation targeting, invisible hand, Isaac Newton, Jean Tirole, John Markoff, Kenneth Arrow, Kenneth Rogoff, land reform, Long Term Capital Management, low cost airline, manufacturing employment, means of production, Menlo Park, minimum wage unemployment, Mohammed Bouazizi, money market fund, Mont Pelerin Society, Network effects, new economy, oil shock, Paul Samuelson, Philip Mirowski, plutocrats, Plutocrats, price stability, profit motive, Ralph Nader, RAND corporation, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Bork, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Peltzman, Silicon Valley, Simon Kuznets, starchitect, Steve Jobs, supply-chain management, The Chicago School, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, trickle-down economics, ultimatum game, Unsafe at Any Speed, urban renewal, War on Poverty, Washington Consensus

There was a meaningful difference between the views of Greenspan and Rubin. In the words of one aide, “Greenspan was saying we shouldn’t do it. Rubin was saying we couldn’t do it.” For a retrospective on the debate, see Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled the Recovery (New York: Simon and Schuster, 2012). 38. “Over-the-Counter Derivatives,” Senate Committee on Agriculture, Nutrition and Forestry, July 30, 1998. 39. Justin Fox, The Myth of the Rational Market (New York: HarperCollins, 2009), 197. Summers can also claim credit for perhaps the second-best takedown of the efficient markets crowd: a 1984 presentation in which he described finance theory as akin to believing that the ketchup market operated under different rules than the rest of the world. He dubbed this “ketchup economics.” See Lawrence H. Summers, “On Economics and Finance,” Journal of Finance 40, no. 3 (July 1985). 40.


Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Black Swan, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, joint-stock company, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

Many are by journalists, including Gillian Tett, who wrote Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets, and Unleashed a Catastrophe. Andrew Ross Sorkin brought out Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System – and Themselves. Roger Lowenstein authored The End of Wall Street, Justin Fox wrote The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, and Scott Patterson produced The Quants; How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It. The theme of market irrationality is also explored in John Cassidy’s How Markets Fail; The Logic of Economic Calamities. Michael Lewis’s The Big Short: Inside the Doomsday Machine focused on a few individuals who early on realized that there was a bubble in the housing market, and that exceptional profits could be achieved from short-selling mortgage-related securities.


pages: 584 words: 187,436

More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby

Andrei Shleifer, Asian financial crisis, asset-backed security, automated trading system, bank run, barriers to entry, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency peg, Elliott wave, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, full employment, German hyperinflation, High speed trading, index fund, John Meriwether, Kenneth Rogoff, Kickstarter, Long Term Capital Management, margin call, market bubble, market clearing, market fundamentalism, merger arbitrage, money market fund, moral hazard, Myron Scholes, natural language processing, Network effects, new economy, Nikolai Kondratiev, pattern recognition, Paul Samuelson, pre–internet, quantitative hedge fund, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Mercer, rolodex, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, technology bubble, The Great Moderation, The Myth of the Rational Market, the new new thing, too big to fail, transaction costs

“It’s impossible to disseminate information exactly homogeneously,” Steinhardt says of the regulators’ efforts. Steinhardt interview, September 10, 2007. 48. Anise C. Wallace, “Pullback at Block Trading Desks,” New York Times, December 24, 1987, p. D1. 49. Dan Dorfman, “Sabbatical for a Superstar,” Esquire, August 29, 1978, p. 12. CHAPTER THREE: PAUL SAMUELSON’S SECRET 1. Justin Fox, The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, (New York: HarperCollins, 2009), p. 124. 2. Peter L. Bernstein, Capital Ideas Evolving (Hoboken, NJ: John Wiley & Sons, 2007), p. 113. 3. Samuelson explains, “Fama’s theory of the random walk and mine are not the same. Mine is that there are no easy pickings…. If you read the numerous papers I have written on the efficient-market hypothesis, you will realize it is not a dogma.


pages: 1,088 words: 228,743

Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen

Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, Bernie Madoff, Black Swan, Bretton Woods, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, Carmen Reinhart, central bank independence, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, G4S, George Akerlof, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, information asymmetry, interest rate swap, invisible hand, Kenneth Rogoff, laissez-faire capitalism, law of one price, London Interbank Offered Rate, Long Term Capital Management, loss aversion, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, Myron Scholes, negative equity, New Journalism, oil shock, p-value, passive investing, Paul Samuelson, performance metric, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, Robert Shiller, savings glut, selection bias, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, stocks for the long run, survivorship bias, systematic trading, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond, zero-sum game

Figelman, Ilya (2007), “Stock return momentum and reversal,” Journal of Portfolio Management 34(1), 51–67. Figelman, Ilya (2008), “Expected return and risk of covered call strategies,” Journal of Portfolio Management 34(4), 81–97. Foresi, Silverio; and Lauren Wu (2005), “CrashOPhobia: A domestic fear or a worldwide concern?” Journal of Derivatives 13(2), 8–21. Fox, Justin (2009), The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, HarperBusiness. Francis, Jack Clark; and Roger G. Ibbotson (2009), “Contrasting real estate with comparable investments, 1978 to 2008,” Journal of Portfolio Management 36(1), 141–155. Franzoni, Francesco A.; Eric Nowak; and Ludovic Phalippou (2010), “Private equity and liquidity risk,” Swiss Finance Institute working paper.