The UK edition is out!

The official publication date was Monday, but as it was out of stock at Amazon.co.uk for the first couple days of the week, it seemed pointless to post about it. Right now it says there are only four copies left in stock, so it may be pointless again soon enough. This is not because the book's a big best-seller (it's currently at 8,865 in the Amazon.co.uk ranking).

But I am not going to whine about it. After having lost my first UK publisher because I took so long to finish, I am thrilled that the nice people at Harriman House have seen fit to print the thing. And eventually I'm sure anybody who wants a copy will get one.

Update: Harriman House is not even remotely to blame for the stocking problems. Amazon.co.uk just runs an insanely lean operation. As best I can tell, they don't like to go into double digits. Right now (Feb. 5) they are again trumpeting that there's "only 1 left in stock." Seriously, Amazon.co.uk, I think I can guarantee sales at least in the dozens. Just order a few more!

Comments

[Allan Walstad]

Dear Mr. Fox,
I don't have an email address for you, but I wanted to offer a few comments on your book. I enjoyed "meeting," as it were, through your book many of the characters in the story of the "efficient market" concept.

I notice on page 22 your statement that prior to the 1929 crash there hadn't been a major panic since 1907. In fact, there was a very sharp recession in 1920-21, in response to which the Fed did nothing, and out of which the country emerged in short order. On page 20 you say that the Fed adopted a stable-money policy in the 1920s, but in fact the Fed engaged in monetary expansion, partly to help prop up the British pound. Prices weren't rising, but that's because increased productivity was making good less expensive in real terms. You also praise aggressive open-market purchases by the Fed in 1927, pursued to prevent a mild recession from worsening, without considering the possibiity that this additional monetary expansion helped inflate the bubble that eventually burst in 1929. You do make reference to Hayek and the Austrian school, but don't take up one of their main contributions to economic theory, namely, showing that monetary intervention leads to instability. The recent housing bubble and bust is a classic example. Some of the modern-day Austrians you might consult include Robert Higgs, Thomas E. Woods, and Robert Murphy. The Fed is the elephant in the room that nobody seems to be talking about except the Austrians; the notion that the Fed can manage the economy may be at least as much a myth as the rational market hypothesis.

On page 255 you refer to the late 90s as a "time when growth reached levels that many economists assumed would spark higher inflation, but for some reason did not." Why should growth spark inflation? Real growth, stemming from higher productivity, should cause prices to fall, not rise--unless somebody is inflating the money supply, in the 90s as in the 20s.

As Fama asserts in your quote on page 104, the primary role of the capital market is the allocation of ownership of the economy's capital stock. We would like the prices to be "right" in the sense that they are reasonably accurate guides to investment in productive capital. But this function of prices can indeed be disrupted when the market is being used as a poker game. I suggest that this speculative game aspect is encouraged by too-easy credit, and again, easy credit ("liquidity") is what politicians and others expect from the Fed. On page 242, where you say stock markets need credit to function--I ask, to function how? As an arena for speculative games? Ok. But actual investment in productive capital comes from savings. Credit based on actual savings may be pricier than credit pumped up by the Fed, sufficiently pricier that you get a smaller ratio of speculative gamesmanship to sober investment. I've read for example that in the bubble leading up to the 1929 crash, people were borrowing scads of money to invest in the rising market because the rate of increase of stock prices was much higher than interest. But don't you suppose that all that borrowing would have driven up the interest rate? Unless somebody was pumping in money sufficiently quickly to frustrate any approach to equilibrium?

Finally, on page 182 you mention something else I've read about before, the idea that in the absence of expensive-to-unearth information or irrationality, there would be no trading and markets would not exist. Not so. Trading doesn't just occur because of asymmetric information, it occurs because different people have different purposes; in fact, the same person has different purposes at different times of life. As an obvious example, you invest in stocks while younger, move towards bonds later on, and start spending your savings in retirement. Young people enter the market, old people leave. People just married may buy stocks to save for their children's education, or they may sell assets to help purchase a home.

Thanks for listening, and best wishes to you.

Allan Walstad