Synopses & Reviews
Picture an early scene from The Wizard of Oz: Dorothy hurries home as a tornado gathers in what was once a clear Kansas sky. Hurriedly, she seeks shelter in the storm cellar under the house, but, finding it locked, takes cover in her bedroom. We all know how that works out for her.
Many investors these days are a bit like Dorothy, putting their faith in something as solid and trustworthy as a house (or, say, real estate). But market disruptions--storms--seem to arrive without warning, leaving us little time to react. Why are we so often blindsided by these things, left outdoors with nothing but our little dogs? More to the point: how did Kansas go from blue skies to tornadoes in such a short time?
In this deeply researched and piercingly intelligent book, physicist Mark Buchanan shows how a simple feedback loop can lead to major consequences, the kind predictable by mathematical models but hard for most people to anticipate. From his unique perspective, Buchanan argues that our basic assumptions about economic markets--that they are for the most part stable, with occasional interruptions--are simply wrong. Markets really act more like the weather: a brief heat wave can become a massive storm in a matter of a few days, or even hours.
The Physics of Finance reimagines the basics of how economics, with consequences that affect everyone.
Review
"The 2008 crash created not just a crisis in the economy, but also a crisis in economic thinking. Ideas of market stability and efficiency lost their value faster than a sub-prime mortgage. In this compelling and lively account, Mark Buchanan tells the story of the new ideas that are revolutionizing the field. We may not be able to perfectly forecast the economic weather, but we can be better prepared for storms to come."—
Eric Beinhocker, Executive Director of the Institute for New Economic Thinking at Oxford University and author of The Origin of Wealth"A lucid, absorbing story"—New Scientist “The author's stimulating deconstruction of contemporary economic theory parallels a treatment of major positive developments in physical sciences and pays due respect to the functions of government and law.”—Kirkus Reviews
Synopsis
Picture an early scene from The Wizard of Oz: Dorothy hurries home as a tornado gathers in what was once a clear Kansas sky. Hurriedly, she seeks shelter in the storm cellar under the house, but, finding it locked, takes cover in her bedroom. We all know how that works out for her.Many investors these days are a bit like Dorothy, putting their faith in something as solid and trustworthy as a house (or, say, real estate). But market disruptions--storms--seem to arrive without warning, leaving us little time to react. Why are we so often blindsided by these things, left outdoors with nothing but our little dogs? More to the point: how did Kansas go from blue skies to tornadoes in such a short time?In this deeply researched and piercingly intelligent book, physicist Mark Buchanan shows how a simple feedback loop can lead to major consequences, the kind predictable by mathematical models but hard for most people to anticipate. From his unique perspective, Buchanan argues that our basic assumptions about economic markets--that they are for the most part stable, with occasional interruptions--are simply wrong. Markets really act more like the weather: a brief heat wave can become a massive storm in a matter of a few days, or even hours.The Physics of Finance reimagines the basics of how economics, with consequences that affect everyone.
Synopsis
A groundbreaking book that uses physics to show how instability is inherent in economic markets, just as thunderstorms are a part of weather.
Synopsis
Positive feedback—when A produces B, which in turn produces even more A—drives not only abrupt climate changes, but also the most important and disruptive events in economics and finance, from asset bubbles to debt crises, bank runs, even corporate corruption. But economists, with few exceptions, have ignored this reality for fifty years, holding onto the unreasonable belief in the wisdom of the market. Its past time to be asking how do markets really work? Can we replace economic magical thinking with a better means of predicting what the financial future holds, in order to prepare for, or even avoid the next extreme economic event?
In Forecast, physicist and acclaimed science writer Mark Buchanan answers these questions and more in building a new model for economics, one that accepts that markets act much like the weather does. While centuries of classical financial thought has trained us to understand “the market” as something that always returns to equilibrium, economies work more like our atmosphere—a loose surface balance riding on a deeper torrent of fluctuation. Market instability is as natural—and dangerous—as a prairie twister. With Buchanans help, we can better govern the markets and weather their storms.
About the Author
Mark Buchanan is a physicist and science writer. He is the author of three previous books, Ubiquity, Nexus, and The Social Atom, and has been an editor of the science journal Nature as well as New Scientist. His articles have appeared in Science, Wired, the New York Times, the Independent, and the Harvard Business Review. He currently writes columns for Bloomberg View, as well as for Nature Physics. He lives in Dorset, England, with his wife and two dogs.