Forecast

December 3, 2012
Time to grapple with the stormy realities of an unbalanced marketplace, argues this scathing critique of economics-as-usual. Physicist and journalist Buchanan (The Social Atom) attacks what he thinks are the unrealistic assumptions of modern economics: that financial markets efficiently process all information; that humans make perfectly rational decisions; that market economies reliably find a placid equilibrium when freed from regulation. To understand the real economy of irrational mortgage bubbles, prolonged recessions, and split-second stock-market crashes, he contends, we must look to other sciences—meteorology, physics, cognitive psychology—for insights into the intrinsic instabilities of complex systems like the market. Buchanan’s case against mainstream free market economics, which takes aim at Nobel luminaries like Milton Friedman, Robert Lucas, and Gary Becker is a lucid, cogent one that reveals the shaky foundations of much overconfident theorizing and ill-conceived deregulatory policies. His brief for a new economics of nonequilibrium dynamics is less incisive; he does a good job explaining some conceptual underpinnings of the science of complexity, but since that approach relies on modeling chaotic markets with mysterious black-box computer simulations, it lacks the analytical clarity and catchiness of neoclassical economics’ simplistic theories. Still, Buchanan offers a compelling outsiders’ take on the hubris and failures of reigning economic orthodoxies. Agent: Lisa Adams, the Garamond Agency.