How Markets Fail The Logic Of Economic Calamities, By...

In How Markets Fail: the Logic of Economic Calamities, the author, John Cassidy, details the growth of the free market ideology. This ideology, he argues, has become an over idealized utopian notion of a self-regulating market has been expanded upon over decades to become common rhetoric that influenced policy. This driving theory became accepted into global, but specifically the American context, and led to the financial collapse of 2008 due to lax policies which encouraged risky behaviour in the belief the market would simply sort itself out, which in the end it did not. Cassidy argues that the self-regulating market in essence is a fallacy and the solution to prevent further market failures can only be obtained through a hybrid of free-market and government supervision. Cassidy effectively argues his point by detailing the historical development of the self market theory which provides a framework to later explain the market failure of 2008. Convincingly, he argues that there should be a focus on rational economics which have existed for decades but have been pushed aside in favour of the utopian self regulating market. From the beginning of his book Cassidy comes to the conclusion that the financial collapse of 2008 was not an inescapable fate. Rather, it was the result of the general ignorance of warning signs from leading economists and Alan Greenspan, the chairman of the Federal Reserve for the United States, which resulted in the collapse due to theirShow MoreRelatedLack of Regulation in Banking Industry4801 Words   |  20 Pageseconomy could face a systemic failure. This deregulation started the creation of new bubble. Deregulated banks lending money to sub-prime – under the Community Reinvestment Act which encouraged financial institutions to grant loans to sub-prime market banks began to give loans to people with poorer credit rating. The mortgages initially were not just given up to the value of the property but in many cases the amount of loan was far greater than the value of the real estate behind that loan. These