Beyond mechanical markets: Asset price swings, risk and the role of the state / Roman Frydman and Michael D. Goldberg
Princeton: Princeton University Press, 2011. 285 p.

The year 2008 saw not only financial failure but the failure of an idea, the economic theory in which financial markets are mechanically determined to settle at equilibrium and economically efficient prices. So why did standard models in financial economics not see the crisis coming? What can be done to keep a repeat of this crisis from happening? These are the questions at the heart of Roman Frydman and Michael D. Goldberg’s book. The authors not only show the insufficiency of current theory, they also present an alternative, “Imperfect Knowledge Economics”, that aims to address these issues and give very different policy recommendations from the ones considered en vogue now. What’s more, Beyond Mechanical Markets gives us a doctor’s prescription for dampening – and possible even avoiding altogether – the next economic crisis.

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