Text Books in Context
Text books can be challenging reading, especially in the field of economics. Alright economics text books can be downright dull. Students of economics can put some of the dense verbiage into better context by reading a history or biography on the side.
One such book was written by business and economics columnist and Yale University professor Justin Fox. He may have been too quick to publish his book “The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street.” The U.S. bond and equity markets have dealt investors so many surprises since the book came out in 2009. Nonetheless, Fox’s intensive research into the Efficiency Market Hypothesis can provide students of economics with better understanding of the forces impacting investments.
The Efficient Market Hypothesis originated in the early 1960s at the University of Chicago. The idea is that all free markets are always right and reflect fair value for the investment instruments traded their. Fox shines a light on the evolution of economic research that has slowly but certainly demonstrated that the collective wisdom of investors is anything but wise or rational.
Anyone picking up the book is surely to be entertained. Fox brings to life the economists who have been a part of the debate on market efficiency, providing a glimpse at the idiosyncrasies of some of our most renowned economists. The first chapter is entitled “Irving Fisher Loses His Briefcase, and then His Fortune,” providing an upfront hint that even the Nobel Laureates would be treated with Fox’s lighthearted and fluid style.
Fox chose to cover the efficient market topic from a chronological standpoint. Yet he runs a strong thread through the political and personal influences that have sometimes accelerated and stalled the development of economic theories. Readers are also offered some insight into how economic thinking has influenced policy in Washington, DC.
As a journalist writing about scholars, Justin Fox has been successful in providing students with insight into what can be very complex economic theory. An epilogue entitled “The Anatomy of a Financial Crisis” offers perspective for decision makers attempting to make sense out of unfolding economic events. For those who want more detail, extensive footnotes offer a springboard to further study.