Paul Krugman calls 'Myth of the Rational Market' a 'Must-Read' in NYT Book Review

It's been a long wait, but the New York Times Book Review has come through in a big way, with a review by Paul Krugman. The crucial bits:

... Justin Fox’s “Myth of the Rational Market” brilliantly tells the story of how that edifice was built — and why so few were willing to acknowledge that it was a house built on sand.

Do we really need yet another book about the financial crisis? Yes, we do — because this one is different. Instead of focusing on the errors and abuses of the bankers, Fox ... tells the story of the professors who enabled those abuses under the banner of the financial theory known as the efficient-market hypothesis. Fox’s book is not an idle exercise in intellectual history, which makes it a must-read for anyone who wants to understand the mess we’re in. ...

One of the great things about Fox’s writing is that he brings to it a real understanding of the sociology of the academic world. Above all, he gets the way in which one’s career, reputation, even sense of self-worth can end up being defined by a particular intellectual approach, so that supporters of the approach start to resemble fervent political activists — or members of a cult. ...

Comments

[Ping Chen, CCER at Peking University]

Justin Fox did a great job in documenting a series of intellectual failures in a recent book on the myth of rational markets. He laments the lack of any alternative "grand new theory" and finds that the debate has resulted in a "muddle."
However, Fox’s complaint is not quite true. His bounded knowledge is a good example of incomplete information or even distorted information in the mainstream media.
There are viable alternatives which are developing for more than two decades.
They are known only within a small community of economic complexity or evolutionary economics.
But their ideas are rarely heard among mainstream literature and university textbooks.
Even Paul Krugman, a mainstream dissident, had very limited knowledge of the emerging science of complexity and evolutionary economic dynamics.

Please see Ping Chen’s Comment on Lucas defense of the dismal science
(The Economist, August 6, 2009)at:
http://www.economist.com/businessfinance/displaystory.cfm?story_id=14165405&mode=comment&intent=readBottom

[Justin Fox]

Thanks for the comment, Prof. Chen. I actually do devote several pages near the end of the book to nonlinear, evolutionary economic models, and speculate that they may be where financial market theory is headed. I didn't give them more play simply because I was writing an intellectual history of modern financial economics, not a treatise on where I think economics ought to go.