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What Physics, Meteorology, and the Natural Sciences Can Teach Us About Economics

Book - 2013
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Picture an early scene from The Wizard of Oz : Dorothy hurries home as a tornado gathers in what was once a clear Kansas sky. Hurriedly, she seeks shelter in the storm cellar under the house, but, finding it locked, takes cover in her bedroom. We all know how that works out for her.

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

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

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

Publisher: New York : Bloomsbury, c2013.
Edition: 1st U.S. ed.
ISBN: 9781608198511
Branch Call Number: 330 BUC
Characteristics: x, 261 p. : ill. ; 25 cm.

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pm221
Nov 12, 2017

A refreshing and scathing indictment of the current fashion in economics for “ general equilibrium” models. Perhaps we are going to have to wait for a few more funerals of prominent professors of economics before the current paradigm can be overthrown, but Buchanan points to some hopeful signs.

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crm57d
Feb 27, 2014

Excellent demolition of the prevailing economic theories that have refused to investigate, let alone understand, the cause of instability in the economy. Fraud by big banks and others plays some part, as does political incompetence, but willful ignorance by academia influencing policies in government and financial companies is a more pervasive, and harder to fight, root cause.

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StarGladiator
Feb 09, 2014

In January, 2014, once again JPMorgan Chase and Goldman Sachs pay criminal penalties, this time for fixing precious metals rates. That's the reason this is a fundamentally stupid book: every other month for the past twelve years or thereabouts, either JPMorgan Chase, or Goldman Sachs, pays a penalty to the government for some form of financial fraud. According to recent SEC investigations and news releases, the following have been rigged, and affect trillions or potentially hundreds of trillions of dollars' worth of contracts: LIBOR rates, interest rate swap/derivatives rates, FOREX rates, precious metals rates, oil/energy futures, et cetera! This fellow appears not to be aware of all this? ? ? How very perplexing?

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